Positive Working Climate as the means to lead to success!

Merja Fischer, Wärtsilä Corporation

27.5.2010

WÄRTSILÄ CORPORATION

WÄRTSILÄ CORPORATION

This is Wärtsilä

SHIPPOWER

POWERPLANTS

SERVICES

3 © Wärtsilä WÄRTSILÄ CORPORATION

Wärtsilä – Global coverage

70 countries > 160 locations > 18’000 people

WE SUPPORT OUR CUSTOMERS THROUGHOUTTHE LIFECYCLE OF THEIR INSTALLATIONS BY OPTIMIZING EFFICIENCY AND PERFORMANCE

We provide the broadest portfolio and best services in the industry for both ship power and power plants. We offer expertise, proximity and responsiveness for all customers regardless of their equipment make in the most environmentally sound way.

WÄRTSILÄ CORPORATION

Financial highlights

MEUR 2009 2008 2007 2006

Order intake 3 291 5 573 5 663 4 621

Order book at the end of the period 4 491 *) 6 883 6 308 4 439

Net sales 5 260 4 612 3 763 3 190Operating result before nonrecurring

restructuring items 638 525 380 263% of net sales 12.1 11.4 10.1 8.2

Operating result 592% of net sales 11.2

Profit before taxes 558 516 372 255

Earnings/share, EUR 4.30 1) 3.88 2.74 2.03

Cash flow from operating activities 349 278 431 302

Gross capital expenditure 152 366 231 193

1) Earnings per share excluding nonrecurring items (EPS including nonrecurring items total EUR 3.94).*) Cancellations amounting to EUR 410 million have been eliminated from the order book during the review period January-December 2009.

5 © Wärtsilä

WÄRTSILÄ CORPORATION

Improved profitability

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6 © Wärtsilä

Topics of discussion

• Translating values and vision into operations

• Cycles of Chaos and Order

• Building productivity through well-being of the people

• How to guide Business by pricing of services

• End-to-end procurement e-invoicing

• National eInvoice project in Finland

• The long and the short of it: what really worked in practice?

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8 © Wärtsilä

Sept 2004 / 18 personsJune 2007 / 83 persOctober 2010 / 78 pers / 26 languages

Wärtsilä Shared Service Center Journey March 2004 - Today

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9 © Wärtsilä

What has driven us?

To ensure operational excellence by providing innovative, high quality

and cost efficient globally optimized services through highly skilled and

motivated personnel.

We share process

optimization expertise

within Wärtsilä.

VisionMission Values

Respect

Trus

t

OpennessMeasure&

ImproveAutomate

Innovate

Motivate

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10 © Wärtsilä

WSSC Operations Vaasa – Performance

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Achievements 2005-2009:

• Employee turnover < 10 % (only internal)

• Employyee satisfaction one of the highest 2006-2009

• Customer satisfaction high 3,8-4,2 / in 5 scale

• Den Norske Veritas prosess audit 4/5

• Process efficiency improvements 40-70%

• Suppliers have given credit for fast processing of invoices

• From Regional to one Global Unit in Vaasa (Europe+Americas+Asia, except for Shanghai)

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11 © Wärtsilä

What has made this happen ?

Clear StrategyPeople are the most important assetCourage and fast movesTrust and respect in every level

Performance measurements:• Employee turnover, sick days, motivation &

satisfaction, happiness• Customer satisfaction • Transaction per person• Cost per transaction• Benchmarking

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12 © Wärtsilä

Dr. Feel Good Happiness Index

WSSC Operations Vaasa

Jan.0

8

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9

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Unhappy

Not so good

OK

Good

Happy

People make it happen -even in Scorecard !

13 © Wärtsilä

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Bold journey with “cycles“ from “chaos to order” –respecting individuals and listening customers

WSSC opportunity assessment phase started

In November10.6.2004 info went out that RegionalWSSC for Europe is to be established

In Vaasa.

The Detailed desgn phase wasConducted 1.3.2004-31.5.2006

17.2.2004 the WSSC strategy was approved

1.9.2004 WSSC Operation started with WFI, WHQ, Modigen and WDFS and

Preparations for the EuropeanMigrations, hand in hand with WE

(transactions: Pur.inv: 140k and travel:24k

In September WSSC took over the handling of

payment process.

WDE, WCH, WOMFI, WPNL andWPNO joined Regional WSSC Europe

Transactions: Pur Inv. 280k andTravel: 40k

In January preparation for implementing WE SAP

Workflow started.

In the end of September WSSC European Region moved to new facilities and started

the team building and team development project.

In December WSSC strategy forIndia, Singapore, USA and Canada

was approved.

1st of September Go-live of WSSC North America Region in Houston

1st of April Go-live of WSSCIndian Region in Mumbai.

WIT, CMPL-IT, WFR, WNO, WSE,WNL, WDK, WES, WGB, WIE joined

Regional WSSC Europe. Transactions:Pur. Inv: 460k and Travel: 60k

1st of September WSSC operations celebrated its 2 years achievements

Main projects: TOPP, Payment accuracy, Workflow optimization,

G/L accounts harmonization, more invoices directly to WSSC

Decision to transfer all companies except for Shanghai to Vaasa

Shanghai office was established to support Wärtsilä owned

Chinese companeis

Further optimization of End to end processes; especially

Global Supplier pmt terms

Promotion of electronicInvoices

In April WSSC implemented WE SAP Workflow for purchaseinvoice handling (1st invoice was parked on 5.4.2005 – WOMFI).

WSSC customer satisfaction surveyconducted in January indicated

positive and encouraging results from WSSC customer.

2003 2004 2005 2006 2007

Central American companiesTo be included in regional

WSSC in Houston

Asset accounting Processing globally

from Vaasa

2008

Payment Handlingefficiency

optimization

IG process Global

Monitoring

Focus on Finance

competenceCreation

All new SAP Companies to

Vaasa

Asian Companies

migratedto Vaasa

Travel cost analyses globally

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15 © Wärtsilä © Life Works Consulting Oy

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Together we can

Sharing/ InnovatingEmotions/ Moods

Learning/ Developing

Collaboration

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Self organizing teams, to foster Organizational Learning

Means:• Learning agreements• Self organizing teams• Readings • Development ideas• Cross team meeting

Drivers:• Commitment• Values• Theories into practice • Working community is important• Sharing of knowledge

18 © Wärtsilä

PositiveClimate

PositiveCommunication

PositiveMeaning

PositiveRelationship

Foster compassionFoster forgivenessFoster gratitude

Build energy networksReinforce strengths

Obtain best-self feedbackUse supportive communication

Affect Human well-beingConnect to personal valuesHighlight extended impactBuild community

Cameron K. S. p.14 (2008)

Four Leadership Strategies to enable Positive Deviance

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19 © Wärtsilä

Productivity is build by and between people

Burn-out Low motivation Energetic, insprired, positive

”DARK” ”GREY” ”COLOURFUL”

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How to guide business by pricing of the services

• Cost per transaction is the advanced model – more effective than agreed FTE.

• Example:– paper invoice w/o PO 2 EUR– paper invoice with PO invoice 1 EUR– E-invoice 0.5 EUR

similar model can be setup for billing invoice, cash collection, Master Data or contracts setup / maintenance and other processes.

This is fair to the business –pays for real activities and it motivates them to use 21st century technology (e-invoices, PO etc.).

20 © Wärtsilä

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Process quality and efficiency is a joint effort

21 © Wärtsilä

WÄRTSILÄ case examplesLocal Company Vendor Sourcing Purchasing

Goods reception

Accounts booking Invoice handling

Payment handling

Year end closing Archiving

Receiving of purchase invoices from local company to WSSC takes too long. Example 1: Invoice number 145/ payment terms 60 days net, invoice dated 24.3.2006, invoice stamped in local company on 5.6.2006, WSSC sent the invoice to purchaser for checking on 14.6.2006.Example 2: Invoice numbers 22198, 22274 & 22445/ payment terms 30 days net, invoices dated 5.10.2005, 13.10.2005 and 1.11.2005, invoices received in WSSC on 31.8.2006.

For more example cases please see the latest copy of invoices received at WSSC on week 36! 500 invoices received, all overdue before arriving (including "critical" vendors like Gadelius).

ERROR:Initiator: Invoices are sent

too late to WSSC.

Step 2. Vendor complains about overdue payment. Vendor relationship suffers.

Vendor relations suffer because of late payments, possible problems to delivery accuracy.

Step 3. Purchaser does not know why the payment is late, contacts WSSC to find out.

Possibly no cost taken during the correct month (if no valuated GR done for the PO or if no accrual exists).

Step 1. When invoice is received at WSSC the payment date is already due. Step 4. WSSC receives calls from vendors and purchasers trying to explains the situation.

Cross-company ordering. Example: PO 2500003193 WIT purchaser has created a PO using the company code/PO number serie for WFI-CMPLIT instead of Wärtsilä Italia. In this case the goods receipt is done under WIT but the invoice will be sent to WFI-CMPLIT. This will cause extra work in Purchasing, Goods reception, Invoice & Payment handling.

Step 1. Vendor sends the material to WIT but the invoice sent is addressed to WFI-CMPLIT.

ERROR:Initiator: Purchaser uses the wrong

company code/wrong purchase order number serie when creating a

purchase order.Step 5. Purchaser creates a credit

invoice and sends to WSSC to correct the wrong invoice. A new PO has to be done with the right company code. Statistics of the POs done for WIT / CMPL are

wrong.

Step 2. Material is received into WIT Warehouse. Goods reception is done which means that the goods are reported under WIT inventory/costs, but WFI-CMPLIT receives the invoice. If goods are already reported, GR has to be reversed if only possible. A new PO has to be opened and GR to be done again. This needs to be investigated in more details to clarify what is the excat procedure in these cases.

Step 3. Costs are booked/Inventory value increased under the wrong company. Possible differences in the GR/IR account.

Step 4. Invoice can not be processed because the PO number used belongs to WFI-CMPLIT but the rest of the information in the PO is for WIT. Additionally the invoice is addressed to WFI-CMPLIT. Purchaser is contacted for corrections.Step 6. WSSC processes the credit invoice made by purchaser.

Step 7: Reports do not match (Warehouse inventories do not match). Possible differences in the GR/IR account.

This is one of the most occuring and time consuming errors. GR (Goods reception) is required for the below mentioned POs. Purchaser releases the invoice for payment even though the GR is not done yet.Examples:PO 4500208993,PO 4500203228,PO 4500207730,PO 4500199592.

Local company might have the goods physically in the stock but GR is reported too late (cost taken too late).

Step 10. Vendor complains about overdue payment.

Vendor relations suffer because of late payments, possible problems to delivery accuracy.

ERROR:Step 2. Initiator: Purchaser approves the invoice without

checking if GR is done or not ==> Invoice goes to MRBR list (payment

block list). Purchaser informs WSSC that GR is done and invoice

can be completed.Step 5. Purchaser contacts GR department to clarify the case.Step 7. In case A: Purchaser

releases the invoice from the MRBR list and informs WSSC that the

invoice is ready to be completed. In case B: Purchaser has to wait until GR is done (for all positions in the

PO) and after that purchaser has to release the invoice from the MRBR

list (often not done) and inform WSSC that the invoice is now ready

to be completed.

Step 6. Two options:A) Goods are received but GR is not done = might be due to heavy workload, unefficient process flow, unefficient way of working. GR dpt informs the purchaser that now GR is done.B) Goods are not delivered or delivered partly. GR dpt informs the purchaser..

Costs are not taken during the correct month.

Step 1. Invoice is received before goods are delivered/goods reception done. When system is matching the invoice with the PO the Vendor invoice administrator notices that GR is missing. Vendor invoice administrator sends the invoice to purchaser for checking.Step 3. Vendor invoice administrator can not complete the invoice because it is in the MRBR list. Step 4. Vendor invoice administrator informs the purchaser that the invoice can not be completed because GR is not done (there are POs where GR is done for 1 position but the rest of the positions are without GR).Step 9. Invoice is completed for payment, most likely too late and the invoice is overdue.

Costs are taken during wrong months.

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22 © Wärtsilä

Scanning Center Invoice Handling Invoice Handling Payment Handling

Fill the basic data

Send for the approval

e-Invoicing Benefits in B-to-B Context

Business Unit

Supplier

Send the invoice Open the mail

Assort the invoices

Scan the invoices

Fill the basic data

Send for the approval

Check the invoice

Approve the invoice

Check the invoice

Transfer the invoice

Pay the invoice

WSSC (Wärtsilä)

Paper Invoice

Send the invoice Open the mail

Assort the invoices

Scan the invoices

Check the invoice

Approve the invoice

Check the invoice

Transfer the invoice

Pay the invoice

e-Invoice

Supplier

Purchase invoice handling process

•Faster and high quality invoice processing and booking•Improving payment accuracy

•Maximizing early payment discount utilization•Enabling better cash flow predictability and planning

•Transparent and real time audit trail

e-Invoicing Target

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23 © Wärtsilä

Finance Process Optimization is a joint and continuous effort!

Xxxxxxxxxxxxxx

Cost transaction Open the mail

Scan the invoices

Assort the invoices Send for the approval

Fill the basic data

Approve the invoices

Check the invoices

Transfer the invoices

Check the invoices Process outcome

FICO - Core Teams(Divisions, Group, Company repr. WSSC, IM)

Out-Box thinking“un-traditional”

TARGET: AUTOMATED PROCESSING

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”Testing Service-Profit Chain Concept by Linking Employee and Customer Satisfaction Data” Licentiate Thesis.Copyright Merja Fischer (HUT)© September 2009

Support our Customer’s value by co-creation process(i.e., productivity and employee wellbeing):

Efficient, electronic and automated processing, less cost, better quality , faster reporting and closingsCreate opportunities for Finance People to have better knowledge and skills (organizational learning) Facilitate development initiatives that benefits all e.g., eInvoicing, automated accounting, streamlined processes.

Customers have to understand their active role in the process

“ It takes TWO to Tango”Together We Can

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25 © Wärtsilä

National eInvoice project in Finland

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Deliverables of the National eInvoice Project by 2/2009

1. Two main national eInvoice standards harmonized (FINVOICE vs. TEAPPS)

2. Minimum and Maximum eInvoice data requirements fields defined by business category

3. eInvoicing instructions and guidelines have been updated.

4. Requirements of eTesting portal has been defined.

5. Improvement and development requirements of eInvoice address portalhas been defined.

6. Based on analysis on eInvoice contractual agreements– Conflicts with different contracts have been identified and preferable

practices are defined – An optimal tender model will be created to ease the take off and

comparability of different services/solutions of service providers

7. An eInvoice portal will be created to improve and fasten the utilization of e-Invoicing within small and medium size enterprises.

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eInvoicing: Business Model- A Holistic view

Suppliers Customers Public Sector Households Nation

Relationalcapital Cost efficiency Productivity No paper/ trash Competitiveness

Increased Integrationwithcustomers

“Less routinework“

ProductivityServing thehouseholds

Smooth payment processes

Productivity atworkplace

Profitability Quality and Transparency

Document archiving

Good image as a Nation

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Denmark 1.2.2005Nordea Bank 1.10.2006Tampere 1.7.2007Singapore 1.5.2008Italy 1.7.2008Lindström 1.9.2008IBM, HP 1.2.2009OpusCapita 1.4.2009Aditro 1.5.2009Tieto 1.6.2009UPM 1.7.2009Rautaruukki 1.8.2009Helsinki 30.9.2009Kesko 1.10.2009Hansel 1.10.2009Spain 1.11.2009Finland 31.12.2009

Swedish municipalities 2009Kone 1.1.2010Aaltoyliopisto 1.1.2010FKL 1.1.2010Turku 1.6.2010Elisa 1.4.2010Basware 1.5.2010Deloitte 30.6.2010Espoo 30.6.2010Bank of Finland 30.6.2010Nokia 2010Oulu? 2010Tampere Chamber 31.12.2010Wärtsilä 31.12.2010Brazil 2010Greece 31.12.2010PwC 31.12.2010

This is a national interest => Increases productivity and

competitiveness

Deadlines for incoming paper invoices & PDF:

Source: Bo Harald/ Tieto

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Crystal clear mindset:

Paper invoices have NO futurein EU

EC Expert Group on e-Invoicing

2010-03-0729

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Thank U all !

Together we are more