1. Building a World-Class Organization
World-Class Defined
Building a World-Class Organization
NASC National Conference – Denver Colorado
By: Penny Weller, Senior Director
The Hackett Group March 2008

2. Agenda World-Class Defined and The Hackett Group
Role of Shared Services – why so many organizations have gone this way
Trends in Shared Services

3. World-Class Defined

4. Hackett Value Grid™ − the foundation for how Hackett defines world-class performance
Hackett Value Grid™ (Finance example)
EFFECTIVENESS
Industry relative total excess return
Operating profit volatility
Cost of capital
Days sales outstanding
Days payables outstanding
Days Inventory on-hand
Quality metrics
Accuracy of forecasts and analysis
Functional role in strategic decision making
Percent of time analytic focus in on proactive decision making
EFFICIENCY
Overall function cost as a % of revenue
Process cost as a % of revenue
Technology cost per function FTE
Staffing levels by process
Cycle times and iterations
Unit cost of transactions
Utilization of self-service for inquiry
Application complexity
Automation of transactions
Reliance on spreadsheets
Percent of business reports distributed electronically

5. Unique process taxonomy spans SG&A multiple functions across 59 process groups
Procurement
Supply Data Management
Requisition & PO Processing
Supplier Scheduling
Receipt Processing
Compliance Management
Customer Management
Sourcing Execution
Supplier Management & Development
Function Strategy & Performance Management
Sourcing & Supply Base Strategy
Function Management
Finance
Cash disbursements
Revenue cycle
Accounting and external reporting
Tax management
Treasury management
Compliance Management
Planning & Performance Management
Business Analysis
Function Management
Human Resources
Total Rewards Administration
Payroll Services
Data Management, Reporting & Compliance
Staffing Services
Workforce Development Services
Organizational Effectiveness
Total Rewards Planning
Strategic Workforce Planning
Function Management
Information Technology
Infrastructure Management
End User Support
Infrastructure Development
Application Maintenance
Application Development & Implementation
Quality Assurance
Risk Management
IT Business Planning
Enterprise Architecture Planning
Emerging Technologies
Function Management
Hackett’s taxonomy ensures an apples-to-apples comparison

6. Hackett insights are based on work with 2,700 of the world’s leading companies
97% of the Dow Jones Industrials
73% of the Fortune 100
88% of the Dow Jones Global Titans
73% of the DAX 30
45% of the FTSE 100

7. Does being World-class matter?
$6.3 million in savings per $1 billion of revenue
$1.7 million in savings per 10,000 employees
$1.9 million in cost savings per $1 billion of spend
World-class are investing more in IT
Median
1.24%
51%
Median
1,995 9%
Median
0.82%
23% 5%
$9,198 WC
$8,701
Median WC
1,822 WC
0.63% WC
0.61%
Overall Finance cost
as a % of revenue
Overall HR cost
per employee
Overall Procurement cost as a % of spend
Overall IT cost
per end user
AND IS THERE A DIFFERENCE IN THE PERFORMANCE OF WORLD CLASS FIRMS VS THE AVERAGE COMPANY – YOU BET THERE IS
COSTS RANGE FROM 13 – 45% LOWER AT THESE FIRMS
WITH THE EXCEPTION OF IT – WHERE WE FIND WORLD CLASS FIRMS ACTUALLY SPENDING SLIGHTLY MORE
AND KEEP IN MIND – THESE ARE WORLD CLASS FIRMS WHICH MEANS THEY DIDN’T GET HERE ON COST ALONE – THEY HAD TO BE PERFORMING AT THE UPPER QUARTILE ON EFFECTIVENESS AS WELL
SO WHAT DOES THIS MEAN – WHAT WE SEE IS THAT WC FIRMS ARE SPENDING PRODUCTIVELY IN TECHNOLOGY WHICH IS ENABLING THEM TO DRIVE PERFORMANCE ACROSS THEIR OTHER FUNCTIONS
Hackett 2007 Functional Performance Data - Select SG&A Functions
What are your performance improvement opportunities?
2007 Finance Benchmark

8. Key Focus Areas for Finance

9. World-class Finance organizations continue to differentiate themselves from the peer group
Finance cost as a percent of revenue
ERP implementation
Beginnings of shared services
Shift from mainframe to client server
Refinement of shared services
Advent of web and self service
Data warehousing increasing
Maturing shared services
Globalization
Increasing focus on planning and analysis
Sarbanes-Oxley
2007 Finance Benchmark

10. Finance is being transformed…..
Traditional Finance
Emerging Finance
Transactional services
Analytical
services
Analytical
services
Process & Technology Enablers
Traditional Shared Services
Transactional
services
Focus – Managing The Numbers
Focus – Managing The Business

11. With decision support processes being added to the mix, a new chapter is being written in the history of shared services
Historically, the shared services story has essentially been the consolidation of transactional processes
That story is changing; increasing numbers of companies are moving higher-value finance processes, such as performance reporting and business analysis, into shared services organizations
Moving activities performed in shared services further up the value chain is a core element of the emerging finance delivery model
2007 BOOK OF NUMBERS™ Research Series: Performance Metrics and Practices of World-Class Finance Organizations

12. Finance Shared Services12

13. “The secret of world-class companies’ success—basically, their ability to do more with less—lies in getting the mix right: streamlining processes, embedding controls within the processes, reducing or eliminating manual handoffs, and leveraging the functionality of technology are essential to driving lower error rates and lower overall costs.”
Profile of World-Class Finance

14. What is Shared Services? (Definition)
Shared Services is an approach (operating model) used by companies around the globe to organize and deliver internal support services more efficiently and effectively. It generally involves removing work activities from business units, and standardizing & consolidating the way in which those services are delivered to provide value to the business units in the form of reduced overall G&A costs and increased service performance. 14

15. World-Class Finance Shared Services
Customers
Employees
Business Units
Suppliers
Strategic Alignment/ Partnering
People/Organization
Shared Services Operations
Customer to
Cash
Hire
to Retire
Account to Report
Procure To
Pay
Process
Technology
Technology Leverage

16. Process Management & Technology Leverage Offshoring Outsourcing
Many have achieved initial success - what’s next – expanding scope & geographies -- how to be ‘virtual’ – process, technology or sourcing
Expanding scope of services
Expanding geographies
Global hubs
Regional centers
Competency centers
World-Class
Next Quantum Leap?
Quantum Leap Forward
Virtualization
‘location neutral’
Process Management & Technology Leverage
Offshoring Outsourcing
Standardize
Centralize

17. Key shared services’ operating principles
Benefits primarily from “economies of scale” and standardization
Shares resources and costs across business units
Provides process or knowledge-based services
Operates with a “business mentality”
Uses contractual arrangements (SLAs) to define service level and responsibilities
Embraces metrics to sustain contribution; typically including internal charging to drive desired performance
Uses an end-to-end approach to ensure the entire process is optimized

18. Shared Services Combines the Benefits of Both Centralized and Decentralized Operations
Lean, Flat Organization
Remote from Business
Variable Standards
Independent of Business
Common Systems & Support
Business Unit Maintains Control of Decisions
Unresponsive
Different Control Environments
Synergies
Consistent Standards & Controls
No Business Unit Control of Central Overhead
Responsive to Client Needs
Higher Costs
Economies of Scale
Greater Visibility
Inflexible to Business Unit Needs
Duplication of Effort
Dissemination of Best Practices
Companies impacted by regulations like Sarbanes Oxley see many benefits from shared services

19. Shared Services so much more than “centralization”…
Business Unit – Corporate Centralized Processing
Shared Services
Supplier/Partner
Business
Value
Service Provider
Allegiance to Customers
Pooled Resources
Economies of Scale
Shared Measures and Rewards
“How Can I Help?”
Accountability
Two-way Responsibility
Metric-Centric
Passion for Process Management
Staff
Cost Center
Controls
Functional Specialist
Allegiance to Departments
Functional Organization Boxes
Bureaucracy
“My Job Performance”
“Not My Job”
Entitlement
Up the Ladder
One-way Feedback
Maturity

20. World-class organizations use shared services to a greater extent in many processes
Shared service utilization
Source: Hackett SG&A Benchmark Population 2007 20

21. Shared Services enables world-class performance
60% Less Transactional Processing Staff
63% Fewer Errors in Billing
38% More Training
Error Rates
Transaction Processing Staff
Hours of Training
Finance
5% More Technology Investment
100% More Mature Balanced Scorecard Programs
Peer group
World-class
Technology Spend
Balanced Scorecard

22. Shared services decisions
“Functional Analysis”
How am I performing compared to peers? Develop the business case well enough to achieve executive and business unit support
“Location Assessment”
What location best meets my organization today and into the future?
“Insource or Outsource”
Should I implement a shared services strategy with my internal team or partner with an outside organization?
“Size of the Prize”
How big is the Opportunity from Shared Services?
“Process Transformation”
How do I design my processes to take advantage of best practices? How to measure success? KPIs, Scorecards

23. World-Class Finance Shared Services How to transition more easily…five key areas

24. Tools with the Highest Optimization Effect
2007 Finance Shared Services Performance Study

25. Finance Shared Services – Savings without a formal continuous improvement process and culture in place
Planned
Achieved
Percentage represent overall companies (101 companies)
69% of SSOs plan to save 20% or more costs
46% of SSOs have saved 20% or more costs
>60%
41 to 60%
21 to 40%
11 to 20%
1 to 10%
No Change

26. Finance Shared Services – Savings with formal continuous improvement process and culture in place
Planned
Achieved
Percentage represent overall companies (101 companies)
77% of SSOs plan to save 20% or more costs
81% of SSOs have saved 20% or more costs
>60%
41 to 60%
21 to 40%
11 to 20%
1 to 10%
No Change

27. World-class shared services
Leadership support and execution
Passion around process
Customer respect
Sourcing and technology
People-driven culture

28. 1. Leadership support and execution
Project plan accepted at the top
Walk the talk
don’t “back down”
acknowledge as a key initiative
Build “tension” – stretch goals
Performance gaps
Make the “tough” decisions
Sense of urgency
Assign “stars” – transformation team, global process owners

29. 2. Passion around process
Metric-centric: (scorecards, strategy maps)
Quality, Cost, Delivery
Benchmark externally
End-to-end process design
Value ideas and creativity
Quick wins!
Continuous improvement
6 Sigma, LEAN, Baldrige
Activity based management
Directionally correct?
Quality
In addition, almost 250 members have leveraged Hackett Advisors for continuous advice in their improvement initiatives. These clients are members of our Business Advisory Services, receiving monthly research, Advisor Inquiry and participation in Peer Learning events.
Time

30. With Quality Program - Lower Accounts Payable Cost
Process Cost per invoice
$4.30
38%
$2.68
Without Quality
Program
With Quality
Program
Source Hackett Process Benchmark Research

31. Achieve greater cost savings and quality improvements
Achieve 40% or greater reduction in process cost
Achieve 40% or greater improvement in quality output
24.0%
20.0%
51%
37%
12.6%
11.8%
Without Quality
Program
With Quality
Program
Without Quality
Program
With Quality
Program
Source Hackett Process Benchmark Research

32. End-to-end process design
Organization appoints global end-to-end process owners within shared services who have responsibility for process standardization and process direction on a global basis
develop targets
accountable for process
measure success

33. 3. Customer respect – internal partnerships
Market the center – clear messaging
Connections – integrate with other initiatives and teams, customer councils, governance
Invite self and promote contributions
Alignment of functional priorities with business
Customer surveys – leader involvement
Complaints are gift
In addition, almost 250 members have leveraged Hackett Advisors for continuous advice in their improvement initiatives. These clients are members of our Business Advisory Services, receiving monthly research, Advisor Inquiry and participation in Peer Learning events.
Voice of the Customer

34. Organizations utilizing Service Level Agreements (SLAs) have lower costs per transaction
Accounts Payable
Cost per invoice
(1st Quartile)
Travel Expense
Cost per record (1st Quartile)
$6.03
$1.56
72%
$1.68
44%
$.87
REMOVED “IN AP AND TRAVEL EXPENSE”
<20% SLA Utilization
>60% SLA
Utilization
<20% SLA Utilization
>60% SLA
Utilization
Source Hackett Process Benchmark Research 34

35. 4. Sourcing and technology
Focus on reducing business complexity
Alignment of functional priorities with business
Leveraging ROI on technology for both transaction processing as well as information access
In addition, almost 250 members have leveraged Hackett Advisors for continuous advice in their improvement initiatives. These clients are members of our Business Advisory Services, receiving monthly research, Advisor Inquiry and participation in Peer Learning events.

36. 5. People-driven culture
Clear purpose and mission
Engagement
Create the culture
Encourage risk taking
Celebrate success
Formal change management
Formal process management
Metrics that focus on desired behaviors – performance
Commitment to invest in people
In addition, almost 250 members have leveraged Hackett Advisors for continuous advice in their improvement initiatives. These clients are members of our Business Advisory Services, receiving monthly research, Advisor Inquiry and participation in Peer Learning events.

37. Change management
Formal change management process in place to include activities like ensuring major process changes agreed to with customers before implementation
Too often, an SSC thinks they know what their customers want or how best to provide services.

38. Change management 26,667 12.0 8.83 26% 79% 5,461 Without Change
Travel Expense Reports per FTE
(1st Quartile)
Span of Control
Accounts Payable (Median)
26,667
12.0
8.83
26%
79%
5,461
Without Change
Management
Program
With Change
Management
Program
Without Change
Management
Program
With Change
Management
Program
Source Hackett Process Benchmark Research

39. Hackett Finance Shared Service Advisory Members
Services provided
                                                                                                                                                                                                                        
2007 Finance Advisory Membership 39

40. Hackett Finance Shared Services Advisory Members
Services provided
                                                                                                                                                                                                                        
2007 Finance Advisory Membership 40

41. 2007 Finance Shared Services Performance Results41

42. The Hackett Value GridTM
Although this is a sample, each dot on The Hackett Value Grid will represent organizations that participated in the 2007 Performance Study. The star will represent your organization and indicate how it compares in the areas of efficiency and effectiveness to the other participants.
EFFECTIVENESS
Partnership
Quality
Talent Management
EFFICIENCY
Cost
Cycle Time
Technology Enablement
Complexity
Governance

43. Executive Summary
No surprises that the survey shows that Finance Shared Services are well established and are delivering benefits
What we have found is:
Increasing value add within SSOs – 25% of world-class SSOs already have business analysis in their SSO with 75% intending to within the next three to five years
Increasing focus on talent – world-class SSOs make a higher investment in staff training and benefit from a markedly lower turnover of staff compared the peer group (42% have staff turnover below 5% compared with only 16% of the peer group)
And there are still some basic ways to improve SSOs:
Governance – 16% of SSOs are still operating without SLAs
Addressing activity drivers – 33% of world-class SSOs are now explicitly pricing to change behavior

44. The 2007 Finance Shared Services Performance Study Included 167 Organizations Across Various Industries and Geographies – The Following is a Partial List
Alcoa, Inc.
Alfred McAlpine Infrastructure Services Ltd.
Avis Rent a Car System, LLC
BAE Systems PLC
Basell Polyolefins UK Ltd
British American Tobacco p.l.c.
The British Council
Cargill, Incorporated
The Caterpillar, Inc.
Citibank, NA
The Coca-Cola Company
COLT
Deutsche Lufthansa AG
Diageo plc
DPD GeoPost (Deutschland) GmbH & Co Kg
Global Hyatt Corporation
Gold Fields Shared Service (Pty) Ltd
H.B. Fuller Company
H.J. Heinz Company
Infineon Technologies AG
InterContinental Hotels Group PLC
International Paper Company
Marriott International, Inc.
Metso Shared Services Oy
NetworkRail
NHS Shared Business Services
Novo Nordisk A/S
Pitney Bowes Inc.
RWE Systems AG
Sappi Fine Paper
Seagate Technology LLC
Siemens AG
Sprint Nextel Corporation
State of Tennessee
Tetra Pak International
Viacom Inc.

45. Finance Shared Services General Demographics
Size of Companies in Study
Employee Size in Study
Industry Distribution in Study
WC demographics. Bar chart complexity??
The median company is at $9 Billion in revenue
The median company is at 26,000 employees
We have a good mix of industries participating in the study
2007 Finance Shared Services Performance Study

46. Finance Shared Services Demographics
$12B
< $1B
$1B - $5B
$5B - $10B
$10B - $25B
> $25B
42K
< 10K
10K – 20K
20K – 45K
45K - 75K
> 75K 2 1 2
3 - 4
> 4 12 1
2 - 5
6 - 16
> 16
World-Class
World-Class Range
2007 Finance Shared Services Performance Study

47. Reasons for Selecting the SSC Location
2007 Finance Shared Services Performance Study

48. Scope of Finance Shared Services – People
2007 Finance Shared Services Performance Study

49. Benefits from Business Support in Finance Shared Services
Degree of Process Standardization
2007 Finance Shared Services Performance Study

50. Percent of Annual Voluntary Employee Turnover
2007 Finance Shared Services Performance Study

51. Degreed and Certified Shared Services’ Employees

52. Number of Annual Training Hours Per Service Center Employee
2007 Finance Shared Services Performance Study

53. Finance Shared Services – Level of Success in Targeted Benefits
Corporate Strategy
Improve Service, Quality, Accuracy and Timeliness
Group Similar Tasks and Expertise for a Critical Mass
High
Medium
Low
None
World-Class
Reduce Redundant Tasks
Reduce Administration Costs
Reduce Headcount and Salary/Wages
Percentage represent overall companies (101 companies). Add wc dot
2007 Finance Shared Services Performance Study

54. Finance Shared Services – Level of Success in Targeted Benefits (cont
Reduce Infrastructure Costs
Improve Working Capital
High
Medium
Low
None
World-Class
Standardize Services
Simplify Roll-out and IT System Support
Percentage represent overall companies (101 companies)
2007 Finance Shared Services Performance Study

55. Finance Shared Services – Savings
Planned
Achieved
Percentage represent overall companies (101 companies)
73% of SSOs plan to save 20% or more costs
65% of SSOs have saved 20% or more costs
>60%
41 to 60%
21 to 40%
11 to 20%
1 to 10%
No Change
World-Class
2007 Finance Shared Services Performance Study

56. Result of SSO Implementation
Productivity
Quality
Customer Service
Percentage represent overall companies (101 companies)
89% of companies saw more than 10% of productivity improvement
82% of companies saw more than 10% of quality improvement
79% of companies saw more than 10% of customer service improvement
>60%
41 to 60%
21 to 40%
11 to 20%
1 to 10%
No Change
Negative Impact
World-Class
2007 Finance Shared Services Performance Study

57. Number of ERP Systems Utilized by Your Staff
ERP Utilization
Percent of Countries or Business Units that are Using Standardized Processes
Number of ERP Systems Utilized by Your Staff
World-Class
Peer Group
2007 Finance Shared Services Performance Study

58. Finance Shared Services – Future Plans
Rank order
2007 Finance Shared Services Performance Study

59. Finance Shared Services – Moving Up The Value Chain
Strategy
Decision Support
Transactions
Eliminate Automate Offshore
Shared Service Organizations are eliminating work as they deliver benefits, and are taking on additional responsibility for decision support activities

60. Scope of Finance Shared Services – Decision Support
Today
Future
2007 Finance Shared Services Performance Study

61. Finance Shared Services
Trends in Shared Services – Outsourcing - Offshoring

62. On-going Research – Business Process Sourcing -
Decentralized
Centralized / shared services – onshore within the country or region being serviced
Centralized / shared services – offshore at a lower labor cost location outside the country or region being serviced
Outsourced onshore or offshore – to a third party
Fully automated – manual intervention is minimal

63. Finance – Overall – 2005 through 2010
In three years
2007 Finance Business Process Sourcing Study Performance Study

64. Finance – Overall – Focus on 2007 Actual Compared to Planned
2007 Finance Business Process Sourcing Study Performance Study

65. Contact Information 
Penny Weller, PhD, CMA
Finance Shared Services and Account to Report Advisory Programs
The Hackett Group
1117 Perimeter Center West, Suite N-500
Atlanta, GA