sson benchmarking yes you can - the hackett group penny weller - october 2014v4

| 1© 2014 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.

Presented to:

BENCHMARKING: YES YOU CAN!

Presented to SSON

October 2014


• Research, key insights, and advisory

services Global Business Services /

Shared Services

• 30 year Shared Services executive with

Pfizer (formerly Pharmacia)

• Director of Performance Management

• Six Sigma Motorola-certified Black Belt

• Global Director, Institute of

Management Accountants

Penny Weller, PhD, CMA

Global Business Services Advisory,

North America Practice Leader

[email protected]

Phone: 269.345.7240

mailto:[email protected]


Contents

Introduction of Hackett

Why measurement matters

How and what to measure

Hackett metrics

Questions

Opportunity to obtain additional Hackett resources


The Hackett Group difference: Intellectual capital and implementation expertise

Accelerating the

time to sustainable

benefit realization

Profile

The Hackett Group is an IP-based consultancy focusing on enabling world-

class performance improvement by leveraging our intellectual capital, based

on over 8,500 benchmarks and performance studies

More than 20,000 performance metrics

More than 1,900 best practices

Best practice process flows, capability maturity models, and

configuration guides

Enterprise and Functional Service Delivery Model Frameworks

Approach

We help clients measure performance compared to World-class performance

We identify opportunities and an actionable roadmap

We implement our recommendations which result in accelerated benefit

Results

Sustainable performance improvement leading to an agile enterprise with

lower costs and improved service levels

The Hackett Group

Value Grid

Hackett defines, designs, and delivers sustainable World-Class performance


Hackett Group Solution Offerings

▪ Library of 2,500+ Best Practice Research Perspectives, Books of Numbers, and Hackett

Certified Best Practices through the Best Practice Intelligence Center

▪ Unlimited inquiry access for members to Hackett experts for transformation steering

▪ Peer-to-Leader 1-2-1 Best Practices sharing, and Best Practices networking events

▪ Enterprise, functional and process-based performance studies & value accelerators

▪ “Gold Standard” Benchmark – over 8,500 conducted, the empirical backbone for your

transformation at the SG&A Enterprise, Functional, Shared Services, Global Business Services.

▪ World-Class, Peer, and Custom Peer comparative metrics and best practices

▪ Ability to provide multiyear World-Class Program view of performance over time

▪ Hackett Performance Exchange (automatic accumulation of performance data from Oracle or SAP)

Finance

Human Resources

Information Technology

Procurement

Supply Chain and Operations

Membership

Advisory &

Research (Provides insights into

World Class Performance)

Benchmarking(Defines World Class

Performance)Hackett Perspective on World-Class Finance – Accelerating GBS | 9

Peer Group World Class

The World-Class Advantage – FinanceWorld-Class organizations always find a way to get there

IT Cost (per end user Equivalent)

Procurement Cost (% of spend)


23%

$1.7K$2.2K

HR Cost (per employee)


19%

0.59%0.73%$6.0K

22%

2014 Cost of Finance by Process Category (as a % of revenue)

Finance Cost (% of revenue)


1.12% 46%

-59%-46%

-23%

0.60%$7.7K

0.39%

0.21% 0.23%

0.16%0.11%

0.17%

Transacting Control & Risk Planning & Strategy

Practice or

Outcome

Process

Taxonomy

Vision

Dimension

SDM

Component

Capability /

Enabler 1 - Lagging 2 - Achieving 3 - Exceeding 4 - Leading

Current

State

Assessment

PriorityFuture State

TargetAverage Gap

Practice

Sourcing and

Supply Base

Strategy

Supply

Assurance

Process

Design

Degree to which a

sourcing strategy

exists

Sourcing strategy is ad hoc or

nonexistent.

Sourcing strategies reflect and are

aligned with overall business

strategy and objectives, including

high level risk requirements.

Historical spend analyses are

regularly and routinely conducted

by market and across markets -

i.e. by specific commodity, service,

location and business.

Commodity management and

sourcing strategies define

appropriate purchasing and

payment processes and tools.

Contract terms, lengths, and

conditions are defined to drive

optimal benefits to the enterprise;

in terms of total life-cycle cost,

service, and quality.

Sourcing strategy is reviewed and

updated annually (or more

frequently) to reflect direct linkage

to the company's strategic growth

plans, market changes and

product innovations, production

plans and business

M&A/ventures.

2 - Achieving 2 - Medium 3 - Exceeding 1.00

Practice

Sourcing and

Supply Base

Strategy

Supply

Assurance

Process

Design

Breadth of supplier

universe

Supplier selection is based on

historical or personal

relationships; suppliers often

selected prior to Procurement’s

involvement in a project.

Projects are initiated to limit the

total number of suppliers and

bundle the spend volume.

Procurement is involved in the

supplier selection process.

Suppliers are often considered on

a regional or compartmentalized

basis.

Supplier universe is considered

by major commodity or service

area rather than in aggregate.

Suppliers are considered for

bundled and/or extended services

that may extend to multiple areas

of competency.

Supply universe is global and not

limited to traditional commodity

suppliers.

1 - Lagging 2 - Medium 2 - Achieving 1.00

Practice

Sourcing and

Supply Base

Strategy

Supply

Assurance

Process

Design

Degree to which

supplier risk is

measured and

managed within the

sourcing process

Risk not considered as part of

sourcing decisions or supplier

management.

Supply risk is considered as part

of category-specific sourcing

efforts and supplier performance

management processes.

Supply base risk is explicitly

factored into broader business

continuity objectives. Supplier

risk is considered beyond the

specific good or service being

sourced.

Procurement works with other risk

management staff, ensuring

alignment between internal

risk/return preferences, business

objectives, and both general and

specific supply market risks.

3 - Exceeding 3 - High 4 - Leading 0.90

Practice

Sourcing and

Supply Base

Strategy

Supply

Assurance

Process

Design

Degree of

contingency

planning performed

to assure supply

No supply contingency planning

exists.

Contingency plan exists in case of

supply shortage; alternate

suppliers and alternate locations

identified.

Alternative supply sources are

developed in conjunction with

current suppliers for key

purchases.

Back-up suppliers are required for

critical or strategic categories and

items, including formalized

contingency plans to ensure

seamless supplier transition and

application of penalties and

liabilities with supplier(s) at fault.

3 - Exceeding 2 - Medium 3 - Exceeding -0.55

Practice

Sourcing and

Supply Base

Strategy

Supply

Assurance

Process

Design

Degree of supplier

qualification in

place

No formal supplier qualification

process.

Simple processes in place to

register suppliers and inspect

supplier qualifications at time of

registration or category review.

Established supplier training

program on enablement

strategies and buyer’s

technologies. Formal program

exists to identify key qualification

metrics with stratification based

on category criticality and supply

alternatives.

Annual review of at risk suppliers

and suppliers of key categories.2 - Achieving 2 - Medium 2 - Achieving 0.37

Practice

Sourcing and

Supply Base

Strategy

Supply

Assurance

Process

Design

Degree of

effectiveness and

efficiency of price

refresh process

Quoting and price refresh process

is undefined and performed

manually and on an ad hoc basis.

Quoting and price refresh process

is defined and audited manually.

Quoting and price refresh

processes are structured to

minimize enterprise financial

impact to all parties.

Quoting and price refresh

processes are automated, nearly

error-proof,, with appropriate

controls in place..

2 - Achieving 2 - Medium 2 - Achieving 0.46

Practice

Sourcing and

Supply Base

Strategy

Purchased

Cost

Reduction

Process

Design

Level of

rationalization of

supply base size

Large number of suppliers due to

short-term, “one-off” relationships.

Organization has identified the

need to rationalize the number of

suppliers in order to create

leverage.

Supply base rationalization is

complete. Few new suppliers are

needed and an added supplier

typically results in a removed

supplier (equilibrium). Strong

relationships developed with

current suppliers focusing on JPI

in critical or large dollar spend

areas.

Structured process is in place that

benchmarks the marketplace and

ensures continual supply base

assessment.


Practice

Sourcing and

Supply Base

Strategy

Purchased

Cost

Reduction

Process

Design

Maturity of use of

supply market

intelligence

Supply market knowledge is ad

hoc and incomplete.

Process, tools, and sources

established to gather and

organize data on most categories.

Supply market intelligence /

knowledge captured to identify

when a supply strategy needs to

be re-visited.

Supply market intelligence /

knowledge captured, modeled,

and utilized for pro-forma

simulations done during strategic

planning, design, sales, etc.


Business

Transformation(Transforms

Performance into World

Class)

Service

Delivery

Components

Information

Service

Placement /

Scope

Process

Sourcing /

Location

Strategy

Process

Design

Enabling

Technology

Skills &

Talent

Governance

&Organization

Enterprise Performance Management

Shared Services, Global Business Services & Outsourcing

Merger Integration

Working Capital Management

Oracle EPM (Platinum Partner)

SAP ERP (Gold Partner)

Hyperion

Kronos

Workforce Management

Application Managed Services

– Functional Application Support

– Technical Application Support

– Cloud and Hosting

– Remote Development

Best Practice

Technology

Enablement(Implements Technology

to enable World Class)

In

-h

ou

se

Co

mp

le

te

O

utso

urc

in

g

Colo

catio

n

CustomerResponsibility

ProviderResponsibility

Sa

aS

A

pp

lic

atio

ns


Scope of Benchmarking

Finance Executive & Corporate Services

Human Resources Sales

Information Technology Service

Procurement Marketing

G&A or SG&A

Finance

Human Resources

Information Technology

Procurement

Function

Accounts Payable Cash Application

Fixed Assets Intercompany Accounting

Contact Center Time & Attendance

Travel Expense Payroll

Credit Order Management

Processes

within Shared

Services/GBS


Contents




Hackett metrics

Questions



• Quantify performance

consistently across

enterprise

• “Size the prize”

• Benchmark

results

• Prioritize & focus

• Root cause

analysis

• Establish targets for

high impact metrics

• Build consensus for

change

• Prioritize

initiatives

• Develop roadmap

• Drive change

• Communicate

progress to goals

• Measure process

stabilization

• Realize benefits

Benchmarking Model

• It is a Journey,

keep going

Establish

Baseline

Analyze

Results

Set

TargetsExecute

Track

ImprovementsPerformance

Improvement

Platform


Drivers Objectives

Assess / Improve

Service Delivery

Effectiveness

Comprehensively evaluate the Service Delivery Model

Establish a baseline for current level of performance

Gain insight into how leading functions are organized and staffed

Determine gaps to World-Class performance in terms of cost,

staffing, service delivery, and practices

Determine the right metrics to use going forward

Identify /prioritize short- and long-term improvement opportunities

Board Mandate or

Executive Compulsion

to Rationalize Cost

Understand where costs are out of line

Understand key cost drivers

Provide cost visibility to the business

Assess the level of centralization/decentralization

Establish Validate a

Business Case (e.g.,

BPO, Global Business

Services, ERP, etc.)

Determine current efficiency and effectiveness of processes

Understand opportunities for improvement

Establish best practices to be implemented which will determine

how to implement new automation

Determine if existing skill sets are adequate

Common Motivations to Benchmark


Common Motivations to Benchmark (continued)

Drivers Objectives

Evaluate Benefits of

Global Business

Services/Consolidation

Determine where processes and costs are distributed in a complex

organization compared to World-Class organizations

Evaluate labor cost differences in various corporate BUs/locations

Determine cost savings opportunities available with consolidation

Determine work required to standardize processes and systems

Build the business case for standardization/establishment of shared services

Evaluate the

Opportunity around

Outsourcing/off-shoring

Evaluate business case and throughput expectations (arbitrage)

Determine the cause of excessive costs – labor, poor practices, automation

Determine the opportunity for cost savings available with higher performance

Determine strategy of Lift & Shift vs. Transform and Shift

Commit to a Culture of

Continuous

Improvement /

Journey to World-Class

For companies who have previously completed a benchmark…

Understand progress gained from the last performance improvement project

Assess efficiency and effectiveness compared to World-Class companies

Determine areas of focus for next set of performance improvement initiatives

Establish the metrics and goals for performance improvement


Hackett Performance Exchange– establishes the total Finance opportunity baseline and operational “root cause” metrics

ERP

HackettConnector

Internet

browser

Simple connection to the ERP

consolidates data in a consistent fashion

and eliminates manual data collection

Quickly delivers initial Finance cost and

cash performance assessment

Provides operational metrics,

root cause analysis, and ongoing

benefits realization tracking

across the O2C, P2P and A2R

end to end processes

Limited time commitment and no manual data collection required


Highest Correlation to Top Performance

0.35

0.39

0.47

0.53

0.53

0.54

0.55

0.60

0.61

0.65

0.68

0.69

0.73

Client Contact Center Management

Supplier Management

Knowledge Management

Service Migration Management

Service Portfolio Management

Change Management

Infrastructure Management

Service Demand Management

Service Catalogue Management

Quality Improvement

Service Continuity Management

Supply Management

Financial Management

Correlation coefficient

Strongest

contribution

Weakest

contribution

Source: The Hackett Group’s Service Management Performance Study, 2012


Contents




Hackett metrics

Questions




What’s important

to your key

stakeholders?

How do you

know you are

doing a good

job?



Start small; ‘what’s stopping you from being effective?’

Start tall; ‘external benchmark’ -- Pharmacia Example


Benchmarking: Cost Analysis

Based on 20xx data, there is a $5 million savings

opportunity in transaction processing!

Key Financial Processes Total CostCost per

BillionQuartile

1st Quartile

Cost/Billion

$ Savings

Opportunity

Transaction Processing $12,955 $ 4,093 3rd $2,431 $ 5,262

Control & Risk Mgt. 5,523 1,745 3rd 959 2,488

Decision Support 3,793 1,198 3rd 607 1,871

Finance Management 1,772 560 3rd 408 481

Systems 7,660 2,420 2nd 1,760 2,090

Overhead 6,561 2,072 2nd 1,275 2,523

Total Finance $38,264 $12,088 3rd $7,440 $14,715

( in 000’s)



Quality

Cost

Delivery

Customers / Employees

Best Practices

Value

• Defect-free processing

• First-pass yield;% errors

• Process cost

• Transactions per FTE

• Cycle time (days to close)

• % automated transactions

• Customer satisfaction

• Employee engagement

• % suggestions

• Process steps – add value

• Organizational alignment

• % of G&A in Shared Services

• Speed to add new product or

acquisition


Final Close

Preliminary

Close

Prepare

Special

Ledger

Adjusting

Entries

Financial Close Process

Run

Assessment

Process

Entry into

Hyperion

Run

Consolidation

jobs

Reverse

Assessment

Process

Run Final

Assessment

Process

Best Practices – every activity adds value

#1 CI Tool over 90%


The Audience Will Impact The Content Of Your KPIs

Senior business leaders Key stakeholders Operations

Source: The Hackett Group


Contents




Hackett metrics

Questions



Put teeth behind performance

goals – align incentives

Accountability and visibility

drive results

Start with a firm baseline leads

for better outcomes

What gets measured gets improved

63% of organizations

completing formal business

cases with cost and benefits

realize better results

3X productivity levels in

organizations which routinely

measure transactions per FTE

100% of top performers cite

global visibility of customer

information and business

volumes as very important to

realizing the strategy

64% of top performers link

incentive compensation with

achievement of key improvement

objectives

Global execution requires

global data

Source: The Hackett Group’s Functional Benchmarks, 2014



The World-Class AdvantageHigher effectiveness levels to the business delivered at lower cost

Hackett Value Grid™

EFFICIENCY

Lower total costs

Faster cycle times

Higher productivity levels

Better staffing utilization

Higher transaction automation levels

EFFECTIVENESS

Access to the right information at the right time

More engaged, more agile workforce

Value-added supplier leverage

Greater tax effectiveness

Better alignment to the needs of the business

Optimized use of working capital





1.12% 46%

0.60%


$6.0K$7.7K

22% 19%

0.59%0.73%



23%

$1.7K$2.2K




The World-Class Advantage – Finance ExampleWorld-Class organizations always find a way to get there




23%

$1.7K$2.2K



19%

0.59%0.73%$6.0K

22%

2014 Cost of Finance by Process Category (as a % of revenue)



1.12% 46%

-59%-46%

-23%

0.60%$7.7K

0.39%

0.21% 0.23%

0.16%0.11%

0.17%

Transacting Control & Risk Planning & Strategy



World Class GBS organizations continue to evolve generate savings; effectively balancing cost and service

Average initial savings over

baseline costs realized by

world-class GBS

Peer = 19%

35% Average annual recurring

savings realized by world-class

GBS

Peer = 6%

10%

Average annual rate of

customer service improvement

achieved by GBS organizations

7% Average annual rate of quality

improvement achieved by GBS

organizations

7%

Percentage of world-class

GBS rated as “highly

effective” in enterprise agility

Peer = 11%

60%

75% Percentage of Fortune 500

companies with GBS/Shared

Services

Source: The Hackett Group’s annual Global Business Services (GBS) Performance Study, 2013


Selected key attributes of World-class GBS

Source: 2014 GBS Performance Study

54%World-class GBS organizations are aligned and

contribute to enterprise agility

Improved migration of services, speed to enter new

market or launch products, and acquisitions

7%

56%

Service Placement across Finance, HR, IT, and

Procurement within GBS

World-class organizations deliver more services

through their GBS organization than Peers35%

83%Use of skill assessment

World-class GBS have learned that it pays to

acquire, train, and develop the right talent

31%

World-class Peer Group



Transactional Finance activities increasingly performed inside GBS, while leading organizations target more knowledge-centric areas

Median Service Placement – Finance processes


0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Strategic Business Planning Support

Annual Planning

Capital and Risk Management

Enterprise Consolidation

Business Analysis

Tax Management

External Reporting

Function Management

Forecasting

Compliance Management

Cash Management

Cost Accounting

Customer Billing

Dispute Management

Intercompany Accounting

General Ledger

Collections

Credit

Fixed Assets

Cash Application

Travel and Expense

Accounts Payable

GBS Corporate Center BU

Wave 1

Leverage

Process

Candidates

Wave 2

Leverage

Process

Candidates

Wave 3

Leverage

Process

Candidates


Contents




Hackett metrics

Questions



Questions

Penny Weller


Contents




Hackett metrics

Questions



Global Business Services:

Trends in Measurement and

Performance Improvement

You can’t manage what you don’t measureOne of the most common obstacles to moving up the GBS maturity model to strategic

business enablement is getting the right information. Process monitoring and

performance management at all three levels – executive, stakeholder; and operations

– is an area that separates world-class GBS organization from the rest of the pack


Measuring HR Effectiveness & Impact 13th Annual

Global Business Services Performance Study

The GBS Performance Study defines and captures how World-class

performing organizations are organized, governed, and their savings

potential compared to their Peers. The study covers key concepts

including service management, governance, performance achievements,

technology, and

Participants in the study will learn:• How your organization compares with World-class performance

• Learn how GBS/shared services can enhance the enterprise value it delivers

• Receive a report with key research findings and an assessment of your

GBS/shared services’ performance

• Have a one-on-one session with Hackett’s GBS Advisors to review your

performance

• Participate in our research studies by registering at www.thehackettgroup.com

or contact Penny at [email protected] Click in the 2015 study by

clicking on the link below or copy/paste to your browser:

• https://thehackettgroup.co1.qualtrics.com/SE/?SID=SV_emR3kcmYPn0bLgx&fn=2&elq=~~eloqu

a..type--emailfield..syntax--recipientid~~&elqCampaignId=~~eloqua..type--

campaign..campaignid--0..fieldname--id~~

GBS

Free

Study

OpensOctober 28

Participation open until December 24, 2014 - click here

Global Shared Services/Shared Services : Is your organization keeping

pace or getting left behind?

http://www.thehackettgroup.com/

mailto:[email protected]

https://thehackettgroup.co1.qualtrics.com/SE/?SID=SV_emR3kcmYPn0bLgx&fn=2&elq=~~eloqua..type--emailfield..syntax--recipientid~~&elqCampaignId=~~eloqua..type--campaign..campaignid--0..fieldname--id~~

https://thehackettgroup.co1.qualtrics.com/SE/?SID=SV_emR3kcmYPn0bLgx&fn=2&elq=~~eloqua..type--emailfield..syntax--recipientid~~&elqCampaignId=~~eloqua..type--campaign..campaignid--0..fieldname--id~~


In summary, benchmarking provides

A baseline and for

improvement

An opportunity to establish /

improve relationships with the

businesses you serve

An opportunity to showcase

performance to your leadership

Eliminate emotions from

implementing changes


Benchmarking also depends on metrics…

Start Measuring

Yes you Can!


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Miami | New York | Paris | Philadelphia | San Francisco | Sydney

Hackett Research/Studies: www.thehackettgroup.com

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