Hungarian Services and Outsourcing Association. The evolution of the SSCs - transition from the multinational totheglobalbusiness model-

Transcription

1 Hungarian Services and Outsourcing Association The evolution of the SSCs - transition from the multinational totheglobalbusiness model- 1

2 Agenda 1. About the Hungarian Services and Outsourcing Association (HOA) 2. Why Shared Services? (drivers and benefits) 3. Synergy and scale implications 4. Services includes in SSC operations 5. Governance structure and implementation 6. Recommendations 2

3 About HOA Established in members, (40% multinationals, 60% SMEs), 27 Shared Services Centre, HOA's mission is to promote the country's economic development by supporting the business services sector, through spreading opportunities to increase efficiency offered by organizational innovation and in particular through uptaking the concept of outsourcing. Goals: Improve the operational enviroment for the sector such as legal, labor market, education, financial and tax conditions; Promote the possibilities and benefits of services sector and outsourcing; To support the expand of the Hungarian service industry share in the international market. "Recognition of Knowledge Intensive Business Services (KIBS) Sector as one of Hungary s strategic priority industries" 3

4 Trainings for skilled workforce Hungarian Services and Outsourcing Association (HOA) HOA Training Centre (SZTMK) Hungarian Academy of Sciences Services sciences education, SSME higher education + Workforce modernisation, improve employeability, skills development trainings vocational trainings 4

5 New choices in workforce organisation The globally integrated enterprise will require fundamentally different approaches to production, distribution, and work-force deployment.new kinds of managerial skills are also needed. The Globally Integrated Enterprise Foreign Affairs magazine, Sam Palmisano, former CEO and Chairman of IBM. 5

6 Evolution of the Globally Integrated Enterprises International Multinational HQ in one country Sell in many Export/Import Replicate operations in many countries (HQ, R&D, Manu, etc.) C 19th C 20th Globally Integrated Draw on global skills and global delivery. Tasks performed in one location for customers in many C 21st 6

7 Global integration Global Resources Global Production Enabling Culture and Legal Systems Global Infrastructure 7

8 What are Shared Services? The key is the idea of 'sharing' within an organization or group Shared Services involves taking repetitive common processes out of the Business Units and moving them into a Shared Services Centre (SSC), freeing up the Business Units to spend more time performing higher-value-added tasks. This allows the SSC to achieve improved efficiencies and economies of scale while providing a high level of service to the enterprise. Shared services are more than just centralization or consolidation of similar activities in one location. Shared services can mean running these service activities like a business and delivering services to internal customers at a cost, quality and timeliness that is competitive with alternatives. Types of functions that may be key candidates for SSCs include: High Volume, Routine Processing Specialized Skills Enterprise-wide information 8 8

9 Shared Services can help to address critical business issues External Factors: Competitive Pressures Speed of innovation Industry changes/consolidation The rise of the global customer Technology Advances Liberalisation of trading blocks Global investors Implications for organisations: Support revenue growth (organic and/or acquired) Need to reduce cost Enterprise wide control and information transparency Increase fraud safety Organise to service global customers Manage value across organisation Focus on core competence Speed/adaptability Typical reasons companies are adopting shared services: More flexible/scalable model to support growth Reduces cost/leverages economies of scale Vehicle to standardise processes/data and improve service quality Supports one face to the customer and accommodates local requirements Leverages best practice/leverages technology Releases businesses to focus on core business Adaptability to changing needs 9 9

10 Shared services combines the benefits of both centralised and decentralised operations Decentralised Shared Centralised Variable Standards Different Control Environments Higher Costs Duplication of Effort Business Unit Maintains Control of Decisions Lean, Flat,organisation Independent of Business Responsive to Client Needs Synergies Dissemination of Best Practices Common Systems & Support Consistent Standards & Controls Economies of Scale Remote from Business Unresponsive No Business Unit Control of Central Overhead Inflexible to Business Unit Needs 10

11 Shared services benefits go beyond cost reduction Pre-Shared Services Tangible: Increased productivity Economies of scale Leveraged technology Improved spans of control Working capital improvements Leverage purchasing from consolidated vendors Reduced tax burden Intangible: Adaptability/scalability Enhanced customer services Standardized processes & pooled resources One-company approach More rapid transition by focusing on added value More effective maintenance of master data Improved accuracy and consistency of information Better leverage of learning curve Post-Shared Services 11

12 However, Shared Service Centers have very different characteristics from a normal Support function Key Design Principles Run like a business & customer focused Mainly newly recruited staff - no bad habits Flat organization reflecting minimal management layers General management leadership skills rather than functional One leader for all shared services Special reward and recognition programs to drive behaviors Service Level Agreement maintained between provider and customer 12

13 There are 3 major transition approaches Option 1 - Transformation first then process migration to SSC- FIX & SHIFT First implement all process improvement and new technology and then transition new processes to SSC. This option is driven by transformation projects and SSC migration needs to be fully aligned with this plan. This option cannot utilise labour cost savings (if moved to a lower labour cost location) in advance. Option 2 -Transformation in parallel with process migration to SSC SSCBIG BANG This option is very complex and very rare in demanding business environment. Doing both process transformation and migration together creates significant risk of failure Option 3 -Migration first to SSC then process transformation -LIFT & SHIFT This option enables to utilise labour cost savings quickly (if moved to a lower labour cost location). This is quite common option due to smaller upfront investment, limited risk and lower demand of resources needed from an organisation 13

14 Shared Service Centers transforming to a Center of Excellence Centre of excellence means To be recognized internally & externally as an exceptionally strong and highly reliable function This can be achieved with: Delivering great service to all customers internally and externally Being a trusted & integrated business partner providing valuable insight Being highly efficient, ensuring economies of scale in delivery of all our processes Providing a quality service at a cost the business chooses to afford Becoming a great place to work 14

15 SSC becoming Centre of Excellence going through an evolution Phase I. Setup Phase II. Growth Phase II. Expansion Phase II. Mature All SSC s follow similar life-cycle model No SSC-specific targets, strategies, measures set Simple mass transactions Business processes not standardized, harmonized or automated Multiple systems are used, no standardization of ERP platform Some SSC-specific targets, strategies, measures set Simple mass transactions and some expert services Business processes mainly standardized and harmonized Partly standardized ERP platform SSC-specific targets, strategies, measures set Simple mass transactions and expert services Optimization and automation of business processes Extensive deployment of workflow systems Standardized ERP platform SSC-specific targets, strategies, measures set Total services in terms of holistic processes Optimization across the organization Organization-wide workflow systems Optimized, modular ERP systems 15

16 The benefits of establishing a Shared Service Centre go beyond cost reduction.. They can build a platform for driving operational excellence and best practice Sources of Savings and Qualitative Benefits Headcount reduction (25-40% is common) Operating cost reduction (20-30% is common with more in low cost locations) Faster processing Future cost avoidance (scalable operations forfuture expansion / changes e.g. acquisitions /divestitures, easier systems upgradeenvironment, easier to introduce internal andexternal changes e.g. policy change). Cost Impact of Shared Services Implementation Platform to drive operational excellence Mechanism to drive standardized approach Improved data quality (fewer errors, consistent information across BUs) Enhanced service levels to the business (bestpractice processes, enhanced technology / automation) Frees up business management to focus on the business Frees up functional management to focus onadding value to the business 16

17 Implementing shared services in global organizations presents many challenges Typical Global or Cross-Border Challenges Multiple legal entities and tax jurisdictions Traditional/national systems solutions Varying legislative requirements - document retention, sales tax, customs etc. Language/communications challenges Cultural resistance Multiplicity of systems Multiple currencies Chart of account variations and bridges to legislated accounting formats Varying remuneration packages Workers council/union relations Restrictive and varying legislation over reductions-in-force Lack of infrastructure Risk due to political/social instability and/or acts of God 17

18 Corporate controlling activities Supplier sourcing strategy Customer contract strategy Period-end closing Inventory accounting Fixed assets Bank accounting Tax and statutory accounting Vendor Master Data Travel & Expenses Accounts Payable Contact center Purchase order Cash applications Collections Dispute management Customer billing Contract and loan management Typical scope of finance and procurement services in an SSC moving towards more value added services Overall Finance strategy General ledger accounting Cash journal accounting Credit risk management Accrual accounting High Complexity of Interaction Low High 18 Value Added Low Data &Transaction Services Accounting Services Corporate Governance Services Purchase-to-pay Order-to-cash Record-to-report Majority of SSCscover finance and procurement transactional services

19 SSC Governance Definition Global Enterprise-wide oversight structure ensuring shared services operate with appropriate mandate and direction Providing strategic direction / priorities Setting / enforcing performance targets Identifying / approving necessary investments Operational Organization of shared service centres ensuring services delivered as promised to customers Managing SSC facilities and associates Developing / managing contracts with customers Performing services in accordance with SLAs Driving cost and performance improvement Tactical Mechanisms ensuring effective day-to-day interface between customers and shared service centres Maintaining on-going contact with customers Responding to specific customer requests / inquiries Managing resolution of issues 19

20 Subject MSymantecer Experts SSC Operational Governance A comprehensive governance framework includes structure, processes, tools and metrics. Governance Model Service Delivery Model SSC Organization Executive Team Exists in 40% of SSCs SS Governance Board Shared Services Executive Shared Services Support Team Businesses Dedicated resources from TMOC Functional Service Line e.g. Finance Process Process Group Group e.g. e.g. Accounting Finance Operations Systems Could also be organised regionally CoE e.g. Tax Functional Service Line e.g. Procurement Process Group e.g. Payroll Functional Service Line e.g. HR Process CoE CoE Group e.g. e.g. e.g. Recruit- Training Benefits ment Admin. Reporting Lines Reporting structure Roles and responsibilities Alignment with Functional Units Service Delivery Demand Management Escalation/Issue resolution Service Level Agreements SSC Organization Shared Services Director Support Staff Operational Management Executive Steering Committee Customer Council Strategic Initiatives Council Committee Structure Strategic direction & decisions Alignment with business strategy Customer representation Performance Measurement Service level reporting Performance Measurement Tools SSC Processes Relationship management Financial management Contract administration Performance management 20

21 Key recommendations and lessons Get top management mandate Implement Governance Model Define clear scope and priorities Know your customers and your business Implement training and coaching Use project management and a dedicated owner Build KPI reporting structure, utilize scorecards Discipline and time Do not underestimate change management, communication 21

22 Thank you for your kind attention! Attila Suhajda Web: Tel: Address: 1065 Budapest, Andrássy u