balancing local & global with a hybrid approach to shared services

Balancing Local & Global With a Hybrid Approach to Shared Services

IQPC SSO Week - May 10th, 2011Michele Gray, Sr. Director, Global Consulting,ADP

©2011 Global HR studio, Inc. Proprietary and Confidential

A little bit about Michele

28 years in HR - Industry and ConsultingADP Global Consulting for 11 yearsInvolved in setting up Avaya (Convergys) Hybrid Model EMEA90% of time spent on advising multi-national companies on how ADP’s outsourcing services can support their HR & Payroll SSC models at design & pre-contract stage■

HR■

HR + Payroll■

Payroll Only

2©2011 Global HR studio, Inc. Proprietary and Confidential

And now a bit about you?

Do you:■

A) Have an HR SSC and already outsource Payroll■

B) Have HR SSC + in-house Payroll■

C) Planning to move to model A■

D) Planning to move to model B■

E) Other


Growing Demand for Global HR and Payroll

Multinational companies’ HR Depts. strategic stakes:

■

Aligning with the organization’s business objectives and adopting common HR policies;

■

Focusing on core business and end-users satisfaction and free local operations from administrative tasks;

■

Reducing day-to-day operating costs related to the management and maintenance of various platforms and vendors;

■

Increasing reporting capabilities through process standardization;

■

Reducing risks related to compliance obligations with local legislation and international finance standards (Sarbanes-Oxley).

©2011 Global HR studio, Inc. Proprietary and Confidential 4


Business Drivers for SSC and Outsourcing Combined Approach

Company

ComplianceCorporate Governance Sarbanes OxleyPayroll complexity and rate of changeStandardization, efficient processesService Level Agreement, KPIsRisk management

Growth

Technology

GlobalizationMergers and acquisitionEmerging businessShared Service CentersCost effectiveness & value to businessIncrease flexibility and scalability

Decrease interfaces maintenance/ payroll platformsIncrease use of ESS/MSSDecrease risks on system availability, systems upgradesDevelop controls (disaster recovery plans, data protection)Increase flexibility

What’s driving you most?

What is your primary driver for shared services

a. Reduced Costb. Compliance Assurancec. Improved Data Visibility d. Spend Controle. Functional Controlf. Leveraging suppliers technologyg. Other



Benefits Executives are wanting from Outsourcing (Source: NelsonHall 2010)

Mid-market / National

1) Cost reduction and control

2) Become strategic partner / Stop doing

transactional work

3) Compliance / Risk management

4) Improved technology

5) Lack of resources

6) Reduced risk

7) Better payroll data and service

8) Process improvement

9) Dissatisfied current provider

10) Bad experience with internal payroll

Large / Multi-national

1) Cost reduction and control

2) Global / multi-country service using single vendor and platform

3) Improved payroll data and service

4) Process improvement

5) Improved technology

6) Become strategic partner

7) Compliance / Risk management

8) Bad experience with internal payroll

9) Lack of resources

Why Could a Hybrid Model be attractive?

Cost

Control

Compliance

Service Improvement



Client Example: Cost Driven

1 - SituationInitial scope Europe only Big supplier to Automotive sector –

hit by recession6,259 employees in 10 European Countries –14 payroll engines “Payroll”

included Time Management & HR (OM/PA)Current TCO €342 PEPY

2 - ObjectivesIdentify $300 -

$500 of ongoing savings part of global cost savings initiativeMove fixed cost to variable

3 - Challenges & ResultsOpen in-house team with lots of base dataExtrapolated for smaller countries -

but key base data available Projected 18% saving( $547K) on As-Is Reduced fixed costs from 93% of TCO down to 38%Projected 23% ($705K) if leverage SSC in lower cost country Regional To Be TCO €264-€282

Increased future TCO to €336 & reduced savings to $150K Corporately used saving from one region to offset investment in other regions

• Expanded scope to Americas & China• Increased HR functionality


Electronics Co. Consider SSC in Low cost Country

Electronics Co ‐

MS with SSC Comparison Current Vs Future Costs

Europe CurrentFuture

In CountryFuture

SSC in Low Cost

Total Headcount/employees 6,259 6,259 6,259

Total FTE's involved in Payroll processes 17.92 7.84 7.84

Total Transactions per annum 120,876 120,876 120,876

Europe CurrentFuture

In CountryFuture

SSC in Low Cost

Payroll Staff Compensation & Social costs €

1,065,163 €

490,930 €

381,975

Outsourced Services €

159,967 €

1,092,625 €

1,092,625

Payroll IT Costs [Payroll Systems Related costs plus IT Staff Expense] €

333,123 €

64,000 €

64,000

Time Costs €

250,046 €

91,366 €

91,366

Additional Company Payroll Costs ( SOX) €

308,000 € 0 € 0

Postage Costs €

24,266 €

24,266 €

24,266

Total Cost of Ownership €

2,140,564 €

1,763,187 €

1,654,231

Euro Saving €

377,377 €

486,333

% 18% 23%

USD Saving ( at 1:1.45) $ 547,197 $705,183

TCO Metrics CurrentFuture

In CountryFuture

SSC in Low Cost

Payroll:FTE Ratio 349 799 799

Cost per Employee €

342 €

282 €

264

Cost per transaction €

17.71 €

14.59 €

13.69

Organize and Synchronize an SSC with the Deployment of an International HR Project


Carefully Defined Roles for the SSC & Supplier


Ensure Process Workflow is clear and agreed



Defining Future Positions within the SSC and at the Local Level

Don’t forget to…

Be clear on your business drivers – why are you doing this?Start measuring now so that you can estimate benefits and measure achievement laterSeek Stakeholder buy in – resistance costs, time, money and careers!!Take time to understand what is available from the supplier marketNetwork with others and dig out the truthPlan after Go-Live …SSC is for life not just a projectCome back and tell us how you get on
