Post Office’s approach to Benefits forecastingSujai Jayaram and Sara HollingsbeeBravoConnect 2014

• In June 2011, the Postal Services Act was passed into law enabling Royal Mail to be partially privatised while retaining Post Office in state ownership

• Started a process of separation into two independent companies, which is now nearly completed

• All shared services to be separated, starting with Procurement

• Fully independent Procurement team, working to complete the set up of independent support functions to complete separation

• Investment approved to replace e-Sourcing platform

Post Office is undergoing significant change…

• Previously a small part of a bigger group, with a solution to fit group needs

• Desire to reduce administrative burden on procurement• Revised RACI model working with Finance for validation

and tracking of delivery against actuals• Switch in focus from controlling the benefits forecasts (line

approvals for every change) to managing risks which affect benefit delivery

…which gave us an opportunity to do things differently

• Each initiative is tracked through Programme Manager• We use system to harvest this information through Project

Form, as well as risk flags (to timing and value) and general project updates.

• Phases of an initiative • Scoping• In Progress• Contracted

• Once contracted, benefits are validated and handed over to a dedicated performance management team within Finance for tracking against actuals

We use Programme Manager to capture and validate benefits forecasts

We capture Information from the Project Form (1)• Mandatory fields

• Forecast in-year benefits (£)• Benefits type (Budgeted, Non-budgeted,

Revenue generation)• One-off/Recurring• Expected signature date• Risk to value of benefits over contract

duration (On-track, At risk but recoverable, At risk, non-recoverable)

• Risk to timing of benefits realisation (On-track, At risk but recoverable, At risk, non-recoverable)

• Enable us to calculate and manage targeted benefits metrics including a full-year-forecast

• Risks in timing or magnitude of savings are captured against achieving the full-year-forecast

&

We capture information in the Project Form (2)

• Non-mandatory fields• Comments field as free-text• #FTE days required to complete

• Simple check for category lead to check status for any projects not showing ‘On Track’ for either value or timing of benefits

• Succinct way for category lead to decide on best course of action

• Effort required to complete allows category lead to discontinue initiative if effort can be better deployed elsewhere

…which feeds into a weekly reporting dashboard• Tabular format showing project

status for on-going projects• Summary tables for benefits

delivery by category team and then overall procurement totals by benefits type, both delivered and full-year-forecast

• We expect targets to change annually to reflect the financial priorities of the business

• We expect to balance cost-out objectives with non-financial objectives as we approach full maturity as an organisation

Benefits validation

• Dedicated Finance Performance Management (FPM) team which validates benefit forecasts (not just Procurement)

• Budgets adjusted at contract signature

• Data used to validate benefits:• 3 months of relevant historic spend

data (12 months if highly seasonal)• Split by G/L code and cost centre• Excel calculation of forecast benefit

against this baseline (documenting any assumptions)

• Discussions with managers of main affected cost centres

This works for us because…

• Simple company structure, single business unit and single country

• Devolution of accountability for adherence to budget to cost centre managers

• Ability to adjust budgets within year to ‘lock-in’ contracted benefits, with buy-in at cost centre manager level

• Shared recognition between Cost Centre managers, Procurement and Finance for identifying, contracting and delivering benefits to the business