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Annual ABSL Czech Republic Conference | 1© 2016 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.

World-Class Global Business ServicesKey Insights from The Hackett Group on Trends in GBS

Prague, September, 2016

Presented at the

Annual ABSL Conference Czech Rep.

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 © 2016 The Hackett Group, Inc. All rights reserved. World-Class Defined and Enabled.


The Hackett GroupHackett Value Grid™

The Hackett Group defines and enables world-class performance

A global strategic business advisory and

operations improvement firm

We help companies establish and implement

sustainable business performance

improvements

• SG&A benchmarking “gold standard” since

1992

• We start with “why not”, fact-based, research

& intellectual capital

• Senior practitioner model, results focused

• Assist our clients in designing and

implementing World-class Service Delivery

execution capabilities

• Long term transformation journey assistance

through executive advisory membership

• Partnership with the Chartered Institute of

Management Accountants (CIMA) to provide

GBS training, professional certification and

lifelong learning as the Certified GBS

Professionals Program

93%of Dow Jones

Industrials

86%of Fortune 100

87%of DAX

52%of FTSE 100

48%of CAC 40


7.78%

4.82%

Peer Group World Class

38%

SG&A Cost

(% of revenue)

SG&A FTE’s

(per Billion in

Revenue)

404

228

Peer Group World Class

44%

World-class organizations outperform in costs and productivity levels across SG&A

Source: Hackett Functional Benchmark 2016


Improvement of SG&A as percentage of revenue, 2011 - 2014

-5.0% -3.0% -1.0% 1.0% 3.0% 5.0%

Global

1000

49%

Global

1000

51%

Low agility High agility

2.0%

% Size = % Companies


World-class GBS outperform peer in delivering cost, quality and productivity improvements

5%

6%

8%

8%

3%

3%

5%

4%

QualityImprovement

Customer ServiceImprovement

Operating Cost

ProductivityImprovement

Peer

3% 3% 3%

Stage 1 Stage 2 Stage 3

Year-on-year performance improvements

Average % improvement peer vs World-

class4% 4% 9%

5% 6% 8%

3% 3% 5%

Source: The Hackett Group’s Global Business Services (GBS) performance study, 2016


Continuous Improvement in GBS can produce significant results

Capability GapPerformance Gap

Annual effectiveness

improvement of CI initiatives

(against baseline performance)

Top performers: 12%–20%

Peer: 7% - 9%

Annual efficiency

improvement of CI initiatives

(against baseline performance)


Peer: 6%-7%

Percentage of top performing

programs exceeding

business expectations


Peer: 0%-8%

CI program staff as a percentage

of total GBS program staff

Top performers: 1.8%

Peer: 1.3%

Percentage of GBS staff

trained in CI

methodology

Top performers: 62%

Peer: 42%

Average Age (years) of top

performing CI Programs

Top performers: 4.9

Peer: 2.6

# CI methodologiesadopted (out of 9)

Top performers: 7.2

Peer: 3.3

# CI tools with high adoption rate

and effectiveness (out of 19)

Top performers: 6

Peer: 2

Critical Success Factors with high capability gap:

Top performer: # 1 Culture

Peer: # 1 Executive support, #2 CI Resource competency, #3

adequate staffing levels, #4 sustaining improvement

implementation challenges with high capability level gap

(out of 4 max):

Top performer: # 1 Data quality

Peer: # 1 Process standardization #2 Data quality


The Hackett Group GBS Value Evolution Model - Value focus expands as the GBS organization matures

Stage

3

Stage

2

Stage

1

Multi-function integration

Single function

consolidation

Functionally focused & owned platform

Transactional standardization

Regional Shared Services consolidation

Transactional automation

Cost reduction focus

Multi-function Global Business Services org

End-to-end process orientation

Global Process Ownership

Integrated, infrastructure, or hybrid center model

Service management implementation

Enterprise standards driven

Performance technology improvement

Knowledge centers of excellence

BPO & managed services outsourcing

Service effectiveness focus

Service-oriented Integrated Business Services stand-alone entity

Commercial performance profile

Service catalog centric

Beginning-to-end service orientation

Revenue-enabling knowledge centers of excellence

Innovation contributors

Total business value focus

Ma

turi

ty S

tag

e

Integrated services

operations 8%

35%

57%

Focus

N%Indicates % of Shared Services /

GBS organizations at that Stage

Today 2020F

14%

48%

38%

Source: Annual Hackett Global Business Services (GBS) Performance Study


World-class GBS offshore less activities in Finance value-add process indicating that it is uncertain as yet that offshoring these activities delivers value

Offshored

Outsourced

Finance Transactional Control & Risk Management Planning & Strategy

20% 26%

Peer World-class

36% 29%

Peer World-class

8% 6%

Peer World-class

14%7%

Peer World-class

6%2%

Peer World-class

11%6%

Peer World-class

Finance Function Sourcing Strategy



Branding the GBS organization to support the value proposition is used by most GBS organizations

Branding focused on:

31%

29%

14%

25%

43%

15%

43%

Peer World-class

Objectives of GBS Branding

GBS mission and its connection tobusiness strategy

GBS as destination of choice todevelop professionally

GBS as a good place to work

Source: The Hackett Group’s

Global Business Services (GBS)

performance study, 2016


Managing process cycle time and cost are the strongest capabilities in the Process perspective but overall performance is surprisingly weak

Source: The Hackett Group’s Global Business Services (GBS) performance study, 2016

51%

38%

26%

28%

37%

30%

13%

17%

23%

26%

20%

20%

15%

19%

21%

15%

11%

17%

21%

26%

30%

31%

31%

33%

Process automation level

Business continuity (disruptions,…

Compliance

Process quality

Process cost

Process cycle time

Process perspective - indicators to manage GBS performance

None Measured Targeted Managed

27% 37% 100%

23% 37% 100%

20% 42% 100%

20% 39% 100%

14% 32% 100%

% Managed by GBS maturity stage

23% 11% 67%

Stage 1 Stage 2 Stage 3

Managed - KPIs defined, targets set; major initiatives defined

Targeted - KPIs defined, targets set; no major initiatives defined

Measured - KPIs defined, no targets set, no major initiatives

defined

None - limited or no KPIs defined


Robotics Impact on individual jobs (Oxford University)


Accountant Example


Attracting and retaining qualified personnel leads the list of external factors impacting GBS performance

External risk factors Ranking

Ability to attract and retain qualified personnel

Introduction or expansion of cloud-based IT solutions

Introduction or expansion of 'big data' analytical IT solutions

Increased data privacy risk

Introduction or expansion of mobile IT solutions

Introduction or upgrade of ERP platform

Offshore wage rate increase

Exchange rate volatility in BPO/ITO contracts

Increased political risk

Increased natural disaster risk

1-No impact 2-Low impact 3-Medium impact 4-High impact

3.2

2.8

2.7

2.7

2.7

2.6

2.3

2.2

2.0

1.9

External risk factors and the relationship with GBS maturity


Talent

Technology


Stage 2Stage 1 Stage 3

15% 42% 83%

28% 50% 83%

5% 35% 83%

10% 35% 67%

23% 46% 83%

15% 42% 67%

13% 31% 83%

13% 42% 50%

World-class GBS focus on integrated Talent Management for the GBS to deliver high quality services

GBS Talent Management practices(% used to a high extent)


60%

67%

70%

78%

78%

78%

80%

90%

21%

19%

23%

31%

16%

15%

34%

21%

Job rotation…

Competency…

Career planning

Skill assessment

Succession…

High-potential…

Employee…

Non-monetary…

Peer

| 16© 2016 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.

Talent management in GBS supports employee top performance which drives better company performance

Demand management – GBS workforce needs to be

flexible and knowledgeable to meet varying customer

demand for services and the challenges of the job

Recruitment – Having an attractive value proposition

provides an edge in competitive GBS locations

Training – Is valued by employees, increases

competencies, improves morale and productivity and

the ability to add value to business customers

Retention – effective talent management reduces

uncontrolled attrition, lowers costs and provides more

consistency in customer service

Career development – active preparation for career

development to move people from role to role and

business to shared services and vice versa

Skills – Skills and competencies over and above

technical skills are essential to successfully manage

interactions with clients and deliver customer excellence

efficiently

GBS

Talent

Management

48% higher

Return on Equity (ROE)

13% higher

Net Profit Margin

17% higher

13% higher

Return on Assets (ROA)

EBITDA

Company

Top Performance

Talent

Management


27%

13%

8%

14%

17%

15%

12%

11%

22%

15%

12%

11%

14%

9%

6%

42%

25%

17%

31%

41%

46%

39%

49%

35%

38%

35%

25%

16%

19%

14%

O P T I MI Z E S A L E S A N D MA R K E T I N G S T R A T E G Y

R A T I O N A L I Z E P R O D U C T / S E R V I C E P O R T F O L I O

C H A N G E B R A N D S T R A T E G Y

D E V E L O P A N D E XE C U T E A " D I G I T A L B U S I N E S S …

O P T I MI Z E O R G A N I Z A T I O N S T R U C T U R E

I MP R O V E E N T E R P R I S E T A L E N T MA N A G E ME N T …

A U T O MA T E I N T E R N A L B U S I N E S S P R O C E S S E S

E N H A N C E D A T A MA N A G E ME N T , B I A N D A N A L Y T I C S …

R E D U C E S G & A C O S T

R E D U C E C O S T O F G O O D S S O L D

R E D U C E U S A G E O F W O R KI N G C A P I T A L

C R E A T E A MO R E V A R I A B L E C O S T S T R U C T U R E

R E D E S I G N G L O B A L S U P P L Y C H A I N

E XP A N D G L O B A L O P E R A T I N G L O C A T I O N S

C O N S O L I D A T E G L O B A L O P E R A T I N G L O C A T I O N S

Top priority initiative Major initiative

Commercial

Business

Services

Financial

Operations

Source: Key Issues Study, The Hackett Group, 2015

Intersecting >>>

Intersecting >>>

Tactics and initiatives to achieve strategic business objectivesGBS Talent management is the second most important initiative


World-class GBS organizations place a major emphasis on training and education

GBS Briefing | 19© 2015 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.

World-Class GBS spend more, and more efficiently, on training & education

Source: 2015 GBS Performance study


Multi-functional GBS is the model of today and the model of the future – effective

governance is the task2.

Hybrid sourcing and progressive placement are becoming the norm3.

Multi-dimensional is the holistic view of today: cost, cash, risk and spend4.

Maturity of GBS increases and requires re-balancing of efficiency and effectiveness

and a new focus on business value1.

The journey is about using all available technology to eliminate work – higher

productivity requires higher standardization as prerequisite5.

The remaining work will need to be performed by fewer people with upgraded skills

– Talent management is top of the agenda6.

Main take-aways as summary...

Questions?

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