HOW WORLD-CLASS ORGANIZATIONS DELIVER MORE VALUE. Presented to: National Consortium for Continuous Improvement in Higher Education

Transcription

1 HOW WORLD-CLASS ORGANIZATIONS DELIVER MORE VALUE Presented to: National Consortium for Continuous Improvement in Higher Education Tom Willman The Hackett Group July 9, 2011

2 Statement of Confidentiality and Usage Restrictions This document contains trade secrets and other information that is company sensitive, proprietary, and confidential, the disclosure of which would provide a competitive advantage to others. As a result, the reproduction, copying, or redistribution of this document or the contents contained herein, in whole or in part, for any purpose is strictly prohibited without the prior written consent of The Hackett Group. Copyright 2011 The Hackett Group, Inc. All rights reserved. World-Class Defined and Enabled.

3 Agenda Introduction to Hackett and World-Class Methodology Issues Facing Higher Education Key Characteristics of World-Class Organizations Closing Thoughts and Q&A

4 The Hackett Group difference: intellectual capital and implementation expertise that accelerates the time to sustainable benefit realization We are the global leader in operations improvement strategies, implementation know-how, and SG&A agility We address both efficiency and effectiveness improvements to enable strategic business objectives Hackett Value Grid Our insights are fact based, from over 5,000 benchmark studies and consulting engagements Our Best Practices Intelligence Center is a significant differentiator and enabler. It contains: 20,000+ performance metrics updated annually 1,500+ best practices across 95 business processes 1,000+ best practice-based process maps, requirements and configuration guides 1,000+ case studies, implementation examples and research We deliver results through a global team of senior practitioners using a consistent methodology and best practice-based toolset Hackett defines and enables sustainable world-class performance NCCI Conference - July 9,

5 We know how the best do it, where they do it, and the benefit of doing it. 97% of the Dow Jones Industrials 80% of the Fortune % of the Dow Jones Global Titans 80% of the DAX 30 49% 35% of the of the NCCI FTSE Conference July CAC 9,

6 Our insight is rapidly expanding into higher education and the public sector as well NCCI Conference - July 9,

7 Efficiency Expected Effectiveness COST SERVICE VALUE Desired World Class performers enable their organizations through decisive action, improved service execution and reduced costs Value Contribution Value Generators STRATEGIC ENABLEMENT STRATEGIC MARKET INTELLIGENCE AGILITY TO RESPOND ORGANIZATION CAPABILITY OPERATIONAL EXCELLENCE RESPONSE TIME ERROR RATE DECISION SUPPORT COMPLEXITY REDUCTION STANDARDIZATION CONSOLIDATION AUTOMATION NCCI Conference - July 9,

8 COST SERVICE VALUE Efficiency Effectiveness Hackett analyzes efficiency and effectiveness performance drivers to assist clients in determining their journeys to World-Class Strategic Enablement Operational Excellence Complexity Reduction EFFECTIVENESS Agility / Scalability Alignment with business Supplier leverage Economic return Quality Access to information Working Capital EFFICIENCY Cost Cycle time Productivity Staffing Technology leverage Hackett Value Grid NCCI Conference - July 9,

9 Hackett s Activity-based View of SG&A 8 functions, 95 processes used to define and measure performance Sales, General and Administrative Function Scope Finance Cash Disbursements Accounts Payable Travel and Expenses Revenue Cycle Credit Customer Billing Dispute Management Collections Cash Application Accounting and External Reporting Fixed Assets Intercompany accounting General ledger accounting Cost Accounting External Reporting Tax Management Treasury Management Cash Management Capital & Risk Management Compliance Management Planning & Performance Mgmt Business Analysis Function Management Human Resources Total Rewards Administration Payroll Services Data Mgmt, Reporting & Compliance Staffing Services Labor Relations Workforce Development Services Organizational Effectiveness Total Rewards Planning Strategic Workforce Planning Function Management Procurement Supply Data Management Requisition and PO Processing Supplier Scheduling Receipt Processing Compliance Management Customer Management Sourcing Execution Supplier Management and Development Function Strategy and Performance Management Sourcing & Supply Base Strategy Function Management Information Technology Technology Infrastructure Infrastructure Management End User Support Infrastructure Development Application Management Application Maintenance Application Development & Implement. Planning & Strategy Quality Assurance Risk Management IT Business Planning Enterprise Architecture Planning Emerging Technologies Function Management Executive and Corporate Services* General Administration Management Travel and Transportation Services Real Estate & Facilities Management Government Affairs Legal Quality Management Risk and Security Management Corporate Communications Planning and Strategy Executive Office Sales* Sales Execution Sales Operations Planning and Strategy Function Management Service* Order and Contract Management Service Execution Service Operations Planning and Strategy Function Management Marketing* Marketing Communication Brand and Product Management Planning and Strategy Market Research and Analytics Function Management Hackett s taxonomy ensures an apples-to-apples comparison NCCI Conference - July 9,

11 Higher Education is under significant pressure to utilize resources more efficiently and effectively State and federal budget crises are impacting funding for public higher education and won t be resolved anytime soon Demand for higher education continues to increase Business models for delivering higher education are changing and evolving to meet new demands Administrative functions must adapt to support new business models and optimize their use of resources so more can be allocated to the core mission of teaching, research and public service NCCI Conference - July 9,

12 Administrative functions in higher education share many common characteristics with the private sector Common Characteristics Provide support for multiple businesses Provide financial management services transactional to strategic Manage human capital resources through the employee life-cycle Procure goods and services Deliver and support IT infrastructure to enable processes Subject to regulatory compliance requirements Key Differences Mission-driven vs. profit-driven Funding model a at Shared governance a at Degree of public oversight from state legislatures NCCI Conference - July 9,

13 Drivers of high cost and inefficiency in higher education administrative functions Inherent complexity in business operations requiring support Self-imposed complexity in administrative functions Decentralized delivery and high degrees of autonomy Lack of standardization in business processes and enabling technology Limited automation / high degrees of manual effort Alignment (or lack thereof) around priorities and reward structures Lack of trust in centrally supported administrative functions NCCI Conference - July 9,

15 Higher education peers have significant cost (or investment) opportunities relative to World-Class organizations 60% 1% 40% 79% Higher Ed Median World-Class Higher Ed Median World-Class Higher Ed Median World-Class Higher Ed Median World-Class 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 Source: Hackett 2011 Functional Benchmarks NCCI Conference - July 9,

16 In addition, a much greater percentage of resources are devoted to Transaction / Run oriented activities 20% 52% 47% 61% 22% 56% 33% 52% 80% 48% 53% 39% 78% 44% 67% 48% Higher Ed Median World-Class Higher Ed Median World-Class Higher Ed Median World-Class Higher Ed Median World-Class Finance FTE Allocation HR FTE Allocation Procurement FTE Allocation IT FTE Allocation Transactional / Run Decision Support / Strategy Source: Hackett 2011 Functional Benchmarks NCCI Conference - July 9,

17 The Journey to World-Class Performance is consistent but the speed of execution and importance of the outcome has increased 6 Move towards World-Class performance levels IT enablement for lowest service delivery cost 4 Self-Service Portals Outsource Centers (BPO) Strategic Alignment 1 Eliminate Determine services needed, and delivery/management model to support strategic objectives 2 Simplify Reduce complexity & implement Best Practices across enterprise Standardize people process enablers Automate 3 technology Reduce manual effort and errors Leveraged Delivery Centers of Scale (SSC) Centers of Skill (COE) Specialized BU Delivery Corporate Deliver standard services through best service points 5 NCCI Conference - July 9,

18 Enterprise 1. Strategic Alignment Start with Value Proposition and Service Mix BEFORE defining performance metrics, targets, and needed capabilities Function Value Proposition Value Service Value What do we aspire to be? which becomes What to execute? Information Governance & Organization Service Placement Requirements (and investments) Skills & Talent Performance: Recalibrate Service Execution What is the level of performance for both efficiency and effectiveness? Enabling Technology Service Delivery Process Design Process Sourcing Capability: Redevelop Service Capability What capabilities do we have today or need to acquire to change? NCCI Conference - July 9,

19 +VALUE 1. Strategic Alignment Procurement example value proposition definition and evolution Value Proposition of Procurement Services Role of Supply Base Role of Procurement Increase business value derived from spend Value Mgmt. Innovative / Flexible Trusted business advisor and change agent Reduce demand activity, complexity and variability Demand Management Aligned / Loyal Spend/ budget consultant & relationship manager Shift from lowest price to Total Cost of Ownership Total Cost of Ownership Operationally Excellent Supply expert (SCM, SPM, etc.), team leader, project manager Right goods and services AND at the right price Price Priced Fairly Negotiator Right goods /services at the right time & place Supply Assurance Reliable, Solvent Buyer / Planner Every Major Service you Perform has a Value Evolution! NCCI Conference - July 9,

20 2. Eliminate / Simplify / Standardize Drive self-imposed complexity out of the administrative functions How standardized are your FN/HR/IT/PR functions? Current In 2-3 Years Policy/strategy standards 15% 39% 54% Policy/strategy standards 40% 27% 67% Supporting technology platform 20% 26% 46% Supporting technology platform 46% 20% 66% Function management 19% 22% 41% Function management 33% 17% 50% Process design and build 14% 25% 39% Process design and build 32% 30% 62% Centers of excellence 12% 19% 31% Centers of excellence 19% 19% 38% Operations/process execution 11% 19% 30% Operations/process execution 24% 22% 46% Management of talent 16% 14% 30% Management of talent 29% 19% 48% Maximum standard level achievable (over 80%) Predominantly standard (51%-80%) Organizations intend to rapidly move toward standard operating models during the next 2 years NCCI Conference - July 9,

21 2. Eliminate / Simplify / Standardize Finance example policy & procedure / technology platforms Percent of companies with high level of standardization of policies and procedures Total number of Finance Applications per $1B Revenue 66% 81% 55% 69% 36% 81% 43% 62% Accounts Payable Customer Billing General Accounting and External Reporting Tax Management Peer Group World-Class Peer Group World-Class NCCI Conference - July 9,

22 3 and 4. Automation extending to Self Service Finance example supplier & customer invoices, budgeting & reporting AP invoice error rate Electronic supplier invoices 17% 54% Peer Group World Class % of time spent collecting/compiling data Automated customer invoices Total number of Finance Applications per $1B Revenue 12.9 Ops mgrs using online budgeting tool 2.7 Customer invoice error rate Peer Group World-Class Ops mgrs w/online access to mgmt reporting application Budget cycle time (days) NCCI Conference - July 9,

23 3 and 4. Automation extending to Self Service HR example automation across numerous processes Percentage of transactions fully automated Staffing Services Health & Welfare Administration 27% 29% 85% 85% Time & Attendance 52% 80% Compensation Administration 20% 75% Payroll Services 60% 50% World-class Peer Group NCCI Conference - July 9,

24 5. Deliver Standard Services from Best Service Points Four key findings from Hackett s 2011 GBS performance study Global Business Services Performance Study 2011 The number of World-class Global Business Services (GBS) organizations reporting savings over 20% 2/3...and the number of World-class Global Business Services (GBS) organizations reporting savings over 40% 1/3 The percentage of Multi-functional GBS organizations (up from 65% last year) The percentage of World-class GBS organizations that exceeded expectations in delivering: 72% Improved service delivery quality Ability to group activities for critical mass Improved controls & compliance 78% 76% 60% NCCI Conference - July 9,

25 5. Deliver Standard Services from Best Service Points Finance Example Finance - Function level Finance - Process level 37% 9% 24% 30% Accounts Payable Travel and Expense Fixed Assets Cash Application Payroll Inter-company Collections Time and Attendance Cash Accounting General Accounting Dispute Management Credit Customer Billing Tax Filing and Reporting Cash Management Treasury Order Entry External Reporting Inventory Accounting Business Performance Reporting Cost Analysis Business Performance Analysis Budgeting Outlook Interim Reporting 0% 20% 40% 60% 80% 100% Source: Hackett GBS Study, 2011 GBS - Transactional GBS - Outsourced GBS - Knowledge-centric Outside the GBS organization NCCI Conference - July 9,

26 5. Deliver Standard Services from Best Service Points HR Example Function level Learning And Development HR Reporting Recruiting and Staffing Health and Welfare Administration Employee Data Management Payroll Administration Compensation Administration Pension and Savings Administration Process level 37% 16% 26% 21% Exit Process Compensation Planning Leadership Gap Assessment Benefits Planning Time and Attendance Labor Relations Administration Compliance Management Organizational Design and Measurement Employee Relations Workforce Gap Assessment Career Planning 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% GBS - Transactional GBS - Outsourced GBS - Knowledge-centric Outside the GBS organization NCCI Conference - July 9,

27 5. Deliver Standard Services from Best Service Points IT Example Function level Process level 32% 19% 28% 21% Disaster Recovery Planning Operations Management AM - Application Support Quality Assurance - Change Management Risk Management - Audit and compliance AM - Enhancement Delivery AM - Upgrade Execution End User Training ID - Planning ID - Implement ID - Construct Help Desk Emerging Technologies - Evaluation AD & I - Construct AD & I - Implement AD & I - Planning Enterprise Architecture Planning - Standards Enterprise Architecture Planning - Governance Security Management IT Business Planning - Project Prioritization IT Business Planning - Alignment IT Business Planning - Communication 0% 10%20%30%40%50%60%70%80%90%100% AD & I - Application Development and Implementation AM Application Maintenance ID - Infrastructure Development GBS - Transactional GBS - Outsourced GBS - Knowledge-centric Outside the GBS organization NCCI Conference - July 9,

28 5. Deliver Standard Services from Best Service Points Procurement Example Function level Process level Supply Data Management Supplier Management & Development Function Strategy Requisition & Purchase Order Processing 40% 30% Compliance Management Sourcing & Supply Base Strategy Customer Management 10% 20% Sourcing Execution Supplier Scheduling Receipt Processing 0% 10% 20% 30% 40% 50% 60% 70% 80% 90%100% GBS - Transactional GBS - Outsourced GBS - Knowledge-centric Outside the GBS organization NCCI Conference - July 9,

29 IT HR Finance Procurement 5. Deliver Standard Services from Best Service Points Client example cross functional service placement model Units University-Wide Business Services Transactional Analytical Central Support 3 rd Party Requisitioning Supplier Scheduling Receipt Processing Supplier Data Management Requisition & PO Processing Compliance Reporting Customer Management Sourcing Execution Supplier Management Sourcing& Supply Base Strategy Compliance Management Function Management TBD Budgeting Forecasting Business Analysis Cash Disbursements Revenue Cycle General Accounting Standard and ad-hoc performance reporting Data management Finance IT Support Tax Management Treasury Management Compliance Management Functional Management Talent Management Employee Relations Total Rewards Admin Time & Attendance Admin Data Management, Reporting & Compliance Payroll Staffing Services Workforce Development Services Total Rewards Planning Strategic Workforce Planning Organization Effectiveness Services Function Management Application Management (Unit-Specific) Infrastructure Management Application Management End User Support Emerging Technologies Client Example Infrastructure Development Application Development and Implementation QA, Risk Management IT Business Planning Enterprise Architecture Planning Function Management NCCI Conference - July 9,

31 Environmental Drivers Enterprise Strategy Designing and executing an optimized Service Delivery Model The key to World-Class performance Enterprise Service Delivery Strategy A strategy for what work is executed where, by whom, and its business benefit Strategic Alignment Service Delivery Model Service Delivery Transformation Organizational Capabilities Governance & Organization Information Service Placement Organizational Acceptance Performance Goals Skills & Talent Service Delivery Process Sourcing Execution Capabilities Design & Operating Principles Enabling Technology Process Design Implementation Roadmap Performance Outcomes Risk Growth Agility Cost NCCI Conference - July 9,

32 Typical High Value Opportunities in Higher Education Finance Simplification and standardization of key Finance work processes Consolidation of Finance systems and full leverage of automation opportunities Implementation of new tools to enable budgeting and reporting Consolidation of work into Shared Services IT Simplification and standardization of key IT work processes Demand management for application development Rationalization and standardization of IT infrastructure and application environments Consolidation of work into Shared Services Selective outsourcing of key processes (e.g., application management, support HR Simplification and standardization of key HR work processes Consolidation of HR systems and full leverage of automation opportunities Implementation of new MSS / ESS tools Consolidation of work into Shared Services Selective outsourcing of key processes (e.g., payroll, benefits admin) Procurement Simplification and standardization of key Procurement work processes Consolidation of spend to better leverage buying power Negotiate contracts with strategic suppliers and track / enforce compliance Implementation of E-procurement platforms Consolidation of work into Shared Services NCCI Conference - July 9,

33 As you consider your own transformation journeys, keep in mind some important lessons learned from others 1. Don t underestimate the cultural inertia of your organization 2. Get the right transformation leaders on board prior to starting 3. Establish a performance baseline and articulate your vision and ambitions for transformation upfront take emotion out of the argument! 4. Build a balanced business case don t ignore effectiveness 5. Technology alone will not lead you to the promised land 6. Design holistically for organization-wide leverage, implement according to a prioritized, sequenced roadmap of initiatives 7. Capability development is critical to ensure sustainable cost reduction which requires fundamental changes in how we work and interact with others 8. Communicate, communicate and communicate again! What you are doing, why you are doing it, when you are doing it, etc. 9. Measure and communicate progress towards achieving benefits, at least annually 10. Keep in mind >>> incremental effort in = incremental results NCCI Conference - July 9,

34 The Hackett Group Suite Abernathy Road NW Atlanta, GA Phone: Martin House 5 Martin Lane London EC4R 0DP Phone: Tom Willman Principal Finance Advisory Practice Leader Phone: twillman@thehackettgroup.com Torhaus Westhafen Speicherstrasse Frankfurt am Main, Germany Phone: , rue de Port Mahon Paris, France Phone: Strawinskylaan 3051G, 1077 ZX Amsterdam, The Netherlands Phone: