How a CFO can use Global Business Services (GBS) in order to increase efficiency and effectiveness Lars Hölzer thyssenkrupp Global Shared

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1 How a CFO can use Global Business Services (GBS) in order to increase efficiency and effectiveness Lars Hölzer

2 Agenda thyssenkrupp at a Glance Global Shared Services at thyssenkrupp - Organizational Model and Suitable Functions Stakeholder Management and Transformation Approach Limitations of Shared Services Shared Services Trends in Major Companies How a CFO can use Global Business Services (GBS) in order to increase efficiency and effectiveness

3 Agenda thyssenkrupp at a Glance Global Shared Services at thyssenkrupp - Organizational Model and Suitable Functions Stakeholder Management and Transformation Approach Limitations of Shared Services Shared Services Trends in Major Companies How a CFO can use Global Business Services (GBS) in order to increase efficiency and effectiveness

4 Working for our customers Mastering challenges together Sector examples Energy Aerospace Chemicals Minerals & Mining Automotive How a CFO can use Global Business Services (GBS) in order to increase efficiency and effectiveness Construction

5 thyssenkrupp in figures Fiscal 2014/15 in a year-on-year comparison 2013/ /2015 Change Order intake [ mn] 41,376 41,318 0% 1 Sales [ mn] 41,212 42,778 4% 1 Adjusted EBIT [ mn] 1,329 1,676 26% Number of employees 162, ,906-5% 1. Change on a comparable basis (without divestment & currency effects): Order intake -5%; Sales -2% How a CFO can use Global Business Services (GBS) in order to increase efficiency and effectiveness

6 Diversified Industrial Company: Our Business Areas Key indicators fiscal 2014/2015 Components Technology Elevator Technology Industrial Solutions Materials Services Steel Americas Steel Europe Sales [ mn] 1 6,753 7,208 6,256 14,254 1,773 8,697 EBIT [ mn] Employees 3 29,627 51,335 19,388 20,226 3,725 27, Before consolidation 2. Before consolidation/corporate 3. Before Corporate How a CFO can use Global Business Services (GBS) in order to increase efficiency and effectiveness

7 Regions Business Areas Service Units Corporate Functions thyssenkrupp Schedule of Responsibilities As of 15 th October 2015 Executive Board Hiesinger CEO Burkhard CHRO Kaufmann Legal and Compliance Kerkhoff CFO Internal Auditing Communications Strategy, Markets &Development Technology, Innovation & Sustainability Göbel Wilke Feldhaus Achatz Human Resources Strategy People Development & Executives Management Dollhausen Hunsdiek Compliance Legal Klahold Wittig Controlling, Accounting & Risk Corporate Finance Investor Relations Group Processes & Information Technology Merger & Acquisitions Gesing Empelmann Ehrenbeck Hölz/ Mühleck Dinstuhl Procurement & Supply Management Holzer Taxes & Customs Brödel Regional Services Germany Hachmann Global Shared Services Hölzer Corporate Services Hachmann Components Technology Kroos (CEO) Ney Kroos 1 / Evers 2 Evers Elevator Technology Schierenbeck (CEO) Sons Sons 1,2 Keles Industrial Solutions Wegmann (CEO) / Atzpodien Hilbig Wegmann 2 / Atzpodien 1 Schönewolf Materials Services Limberg (CEO) / Hoß Bistram Limberg 1 / Keysberg 2 Keysberg Steel Europe Goss (CEO) / Eichelkraut / Fischer Schlenz Goss 1 / Desai 2 Desai Steel Americas Goss (CEO) / Eichelkraut / Fischer Goss Goss 1 / Desai 2 Desai Asia-Pacific Greater China Schmitt Quink Germany, Austria, Switzerland, Liechtenstein Middle East & Africa India SMD Nazikkol Thiemann North America (NAFTA) Western Europe Bass SMD Central-/Eastern Europe Commonwealth of Independent States South America SMD SMD Höllermann 1. Functional responsibility for Legal 2. Functional responsibility for Compliance Joint P&L responsibility How a CFO can use Global Business Services (GBS) in order to increase efficiency and effectiveness

8 Agenda thyssenkrupp at a Glance Global Shared Services at thyssenkrupp - Organizational Model and Suitable Functions Stakeholder Management and Transformation Approach Limitations of Shared Services Shared Services Trends in Major Companies How a CFO can use Global Business Services (GBS) in order to increase efficiency and effectiveness

9 Global Shared Services GSS locates administrative operations and functions anywhere in the world based on the right cost, the right skills, and the right business environment High specialization Bundling of administrative operations Automation and integration Global Shared Services Standardization of processes Customer & service orientation Operational excellence How a CFO can use Global Business Services (GBS) in order to increase efficiency and effectiveness

10 Benefits of Shared Services Shared Services streamline administrative functions and focus company resources allocated to value-creating activities Cost Cycletime Quality Transparency Focus Data consistency, Compliance Continuous improvement Processdocumentation SLA und KPI Reporting Scale and labor arbitrage effects Synergies through bundling Bundling of complementary activities Focus on core business (at internal customer) How a CFO can use Global Business Services (GBS) in order to increase efficiency and effectiveness

11 Shared Service cornerstones for detailing the concept for a GSS organization Will there be a pooling of services in several functions? Scope for decision Set-up Single-functional Multi-functional Ownership Who will provide the services (dependent on make or buy decision)? Captive Outsourced Organizational integration How will Shared Services be integrated into the organization? As part of corporate function As part of BA/ Region Own organization Solid reporting line Who is the Global Head of Shared Services reporting to? to CEO to CFO to CHRO to CCLO/ CXO How will the service portfolio be provided globally? Geographical set-up One Global Hub Hub & Spoke Regional focus Shared Services Level 2 Functional Governance Ownership for process optimization What is the criteria for organization level 2? How will Shared Services be steered within functions? How will the process optimization be steered/prioritized? Geographie/ Region Function Corporate functions with ind. reporting line from SSC Customer Process chain Dedicated Center of Excellence in Shared Services Global Hybrid Regional Defined cornerstones for GSS at thyssenkrupp Alternative cornerstones How a CFO can use Global Business Services (GBS) in order to increase efficiency and effectiveness

12 GSS project at thyssenkrupp at a glance Establish Global Shared Services for Accounting, HR, IT, Real Estate within TK Support ACT Targets Focus resources in BAs, BUs, OUs on value-creating activities Streamline and professionalize indirect functions Efficiency and effectiveness improvements by cost reduction and quality enhancement Global shared service center set-up with worldwide locations for Accounting, HR, IT and Real Estate Use of on-site, onshore, near shore and offshore locations Established service culture in the TK group Combination of captive and outsourcing where appropriate Deliverables Global Shared Services Board of Management BAs (CEOs, CFOs, CHROs, CIOs) Local Management Corporate functions Employees Co-determination Unions Project set-up Stakeholder Set-up of GSS organization (reporting line) Target picture Business Case Alignment with co-determination To-be processes developed and documented Transformation planning Set-up of worldwide SSC locations Pilot Milestones How a CFO can use Global Business Services (GBS) in order to increase efficiency and effectiveness

13 GSS processes in scope at thyssenkrupp Generic overview based on a case by case analysis, additional processes possible F+A HR RE IT Master Data Payroll Services * Construction Management Global Service Operations Accounts Payable HR Administration Facility Management Global Application Services Accounts Receivable Recruiting & Staffing Transaction Management Global Security Services Payments Transactions Expert Services Global Contract Services Asset Accounting General Ledger Reporting (int. & ext.) Travel Expenses * * Captive services in Germany and outsourced services outside Germany How a CFO can use Global Business Services (GBS) in order to increase efficiency and effectiveness

14 Overview SSC locations GSS SSCs in Essen, Bochum, Gdansk, Porto Alegre, Thane, and China for F+A, HR, IT, and RE functions in ramp-up regional GSS support will be established additionally Bochum Capacity ~250 Essen Capacity ~580 Gdansk Capacity ~700 China Capacity ~190 Thane Capacity ~600 Porto Alegre Capacity ~220 SSC location planned site Service-Center How a CFO can use Global Business Services (GBS) in order to increase efficiency and effectiveness

15 GSS Organization Target Operating Model Management Structure Governance Corp. Funct. Delivery Global Shared Services Head of GSS Location Essen 1 Location Bochum Location Gdansk Location India Location China Location Porto Alegre GSS IT GSS Servicemanagement GSS Finance & Controlling AC GPO AC GSS- HR 2 SM AC HR RE SM AC HR RE SM AC HR RE SM AC HR RE SM AC HR RE SM AC HR RE distributed Responsibility for Transition Management Outsourcing Projects and BPO steering Responsibility for Controlling Accounting Project Controlling HR GPO HR Process Management RE 3 GPO RE IT 4 GPO IT Services Demand GPO = Global process owner SM = Servicemanagement 1 Functional GSS-Lead for AC, HR, RE 2 Supervisor for GSS HR topics 3 Additionally regionally located RE service centers + external providers 4 Additionally a location in Alpharetta + external providers Corporate TK CT TK ET TK IS TK MX TK SE How a CFO can use Global Business Services (GBS) in order to increase efficiency and effectiveness TK AM

16 Role of a CFO in Global Shared Services (GSS) and operative business units (BUs) While the core areas of operation of a CFO do not differ, there are differences in the content based characteristics of each area of operation CFO core areas of operation GSS Exemplary illustrations BU Controlling Focus on process costs Focus on production costs Accounting / Finance Only business specific accounting input (role model function: e.g. guidelines for operative business) Entire accounting and finance responsibility for operative business Procurement Business Process Outsourcing Direct / indirect materials IT none Functional responsibility How a CFO can use Global Business Services (GBS) in order to increase efficiency and effectiveness

17 Agenda thyssenkrupp at a Glance Global Shared Services at thyssenkrupp - Organizational Model and Suitable Functions Stakeholder Management and Transformation Approach Limitations of Shared Services Shared Services Trends in Major Companies How a CFO can use Global Business Services (GBS) in order to increase efficiency and effectiveness

18 Stakeholder management Alignment with BA s, regions, and corporate functions GSS implementation requires extensive stakeholder management GSS: expertise in transition, assessment suitability of processes for GSS, definition overall target picture and location concept BA / entities BA: expertise of business, relation to entities and dedicated people to support the project Corporate function: process expertise, global process ownership Corp. Function Region Region: expertise of local specifics How a CFO can use Global Business Services (GBS) in order to increase efficiency and effectiveness

19 GSS transition methodology [exemplary for F+A transitions] P Preparation T Transition S Stabilization 1 Analyze transition readiness of the local entity 5 6 Staffing at gss based on process split specifics Controlled ramp-up at SSC underlying permanent risk controlling 2 3 Modelling all as-is processes Align final process split and identify employees affected by transfer of activities Preparation of change management instruments and change plan Agreements regarding alternatives between local management and personnel concerned Reconciliation of interests 7 8 Set up of IT enabler and workflow tools between local entity and SSC Knowledge transfer through work shadowing 9 KPI definition, measurement and alignment with GC for ISA preparation Finalization of activity cutover and handover to gss 0 ~ 8 weeks 4 ~ 8 weeks ~ 4-8 weeks 10 Start Communication w/ employees/work council Transition kick-off on site Start of cutover Project closing & ISA How a CFO can use Global Business Services (GBS) in order to increase efficiency and effectiveness n Project milestones

20 Agenda thyssenkrupp at a Glance Global Shared Services at thyssenkrupp - Organizational Model and Suitable Functions Stakeholder Management and Transformation Approach Limitations of Shared Services Shared Services Trends in Major Companies How a CFO can use Global Business Services (GBS) in order to increase efficiency and effectiveness

21 Only support processes that meet defined criteria can be transferred to the GSS organization COs BAs BUs OUs GCs Core processes Core processes Core processes Core processes Core processes Support processes HR F&A IT RE Support processes HR F&A IT RE Support processes HR F&A IT RE Support processes HR F&A IT RE Support processes HR F&A IT RE Requirements for support processes to be applicable for GSS Activities are performed routine-based Global standardization possible Services can be provided locationindependent Availability of all required information 100% recordable Global Shared Services How a CFO can use Global Business Services (GBS) in order to increase efficiency and effectiveness

22 The suitability of a process to be provided as a Shared Service is best described by its maturity SSC process maturity grid low Level of process maturity high GSS Organization Process/ location Local Retained Onshore SSC Near shore SCC Offshore SSC Link to Business Strong link to business Point of contact for business partners No/poor direct contact to business partners No contact to business partners No contact to business partners Type of Function Core functions Support functions Support functions Support functions Support functions Complexity High complexity Medium/high complexity High complexity Medium complexity Low complexity Communication Requirements Information exchange personally Information exchange personally Information exchange through ERP-systems, by , workflow tool Information exchange through ERP-systems, by , workflow tool Information exchange through ERP-systems, by , workflow tool Language Requirements Language dependent Language dependent Language dependent Language independent Language independent Decision Making Non-routine decision making Experience based processing of data Rule based decisions, standardized data input Rule based decisions, standardized data input Highly standardized data input How a CFO can use Global Business Services (GBS) in order to increase efficiency and effectiveness

23 Examples SSC process maturity grid Examples per function low GSS Organization Level of process maturity high Process/ location Local Retained Onshore SSC Near shore SCC Offshore SSC F&A Financial Statements Closing activities consolidated group companies Accounts payable, accounts receivable, asset accounting, general ledger Accounts payable, accounts receivable, asset accounting Invoice recording, master data vendors HR Executive management admin/support Payroll for management (e.g. benefits) Global payroll in non-erp systems Global payroll in ERP-systems Master data change of address IT IT strategy Demand management with business partners Information exchange with provider Information collection 1st level support for English speaking countries RE Complex rental relationships Information exchange on rental with higher complexity Change of contracts, preparation of new contracts commercial rental Change of contracts, preparation of new contracts private rental Data input new rental How a CFO can use Global Business Services (GBS) in order to increase efficiency and effectiveness

24 Agenda thyssenkrupp at a Glance Global Shared Services at thyssenkrupp - Organizational Model and Suitable Functions Stakeholder Management and Transformation Approach Limitations of Shared Services Shared Services Trends in Major Companies How a CFO can use Global Business Services (GBS) in order to increase efficiency and effectiveness

25 Shared Services pushing towards new governance frameworks and organizational set-ups The largest enterprises have already reaped the benefits from standardizing of processes by using outsourced and offshore service providers or shared services to consolidate processes, gain quality delivery, and save costs To what extent do finance professionals agree / disagree with a following statements: 1 1 Shared Services 2 Cycle Labor arbitrage / single functions Multitower / GSS Automation and robotics Enterprises that embrace digital transformation across business functions will gain more ground than their competitors in the next couple of years Successful digital transformation impacts the whole service experience for end customers and internal employees, by integrating the front, mid and back office processes 35% 32% 49% 50% 13% 16% 61% of companies standardized processes after moving to a shared service center The new wave of digital technologies is fundamentally changing the way that the finance function operates 23% 53% 16% 7% Finance professionals who embrace digital technologies will experience faster career progression Service providers that fail to embed more digital capabilities within their F&A operations will see their value proposition fade away 25% 28% 51% 46% 19% 18% Agree Strongly Agree Somewhat Neutral Disagree Somewhat Disagree Strongly 4% 6% year average payback period year average payback period Digital it s cloud, mobility and smart devices, that s quite limited for finance today Delivery of management information systems and financial analysis through mobility is the new way to greater productivity gains Use of technology enables to act faster, more efficiently, and with greater insight Source: 2015 Global Shared Services Survey, Deloitte, Feb Since 1999, 311 shared service organizations have been surveyed. Finance in the Digital Age, HfS Research, Apr Since Dec. 2015, 160 enterprises, 130 service providers, 90 advisors have been surveyed How a CFO can use Global Business Services (GBS) in order to increase efficiency and effectiveness

26 Thank you for your attention How a CFO can use Global Business Services (GBS) in order to increase efficiency and effectiveness