Relevance Regained Performance Management in Shared Service Centres..pptx

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					Relevance Regained?
Performance Management in Shared Service Centres

School of Business and Economics – Research project funded by CIMA
                                                                     1
       Relevance Lost, Johnson & Kaplan - 1987

•   Described a number of cases where changes in organisational 
    form and business practices had resulted in innovations in 
    performance management & measurement.

•   Emerging theme - performance management systems must

     ‘be consistent with the technology of the organization,
    its product strategy, and its organizational structure’
    (J&K, 1987 pg. 261)

•   These ideas were extended by Kaplan & Norton  into a 
    framework for performance management…
    The Balanced Scorecard (1992).



                                                                   2
              25 years on – relevance regained?


•   Globalisation, technology and economic pressures are driving organisational 
    change

•   Proactive performance management is increasingly important and underlying 
    organisational structures are changing

•   Leading-edge companies are adopting the Shared Service model
    to drive performance improvement

              How is performance managed in Shared Service Centres?



                                                                               3
                      The Kaplan & Norton view

Objectives


                                        
                                        
                                                                Measures


             Mechanisms: Balanced Scorecard & Strategy Maps                       

      “Measurement is as fundamental to managers as it was for scientists”   4
                               SSM as a ‘new’ organisational form



                                      Head Office




           Business
             unit 1
                                       Business
                                         unit 2
                                                                  Business
                                                                    unit 3
                                                                                                         Shared service centre structure

                                                                                                                  Head Office
     Service      Operating     Service       Operating    Service       Operating
   departments      units     departments       units     department       units




                                                                                              Business unit 1   Business unit 2   Business unit 3

Conventional Divisional structure
(support services embedded) 
                                                                                              Operating units   Operating units   Operating units




                                                                                Shared 
                                                                             service centre
                                                                                                                                                    5
6
               Why Shared Service Centres?

•   Growing in popularity
•   Classic management problems
     – Internal resource allocation/transfer pricing
     – Overhead allocation
     – Measuring performance in service functions
•   SSC’s potential to cut across the hierarchy
•   The place where strategic alignment happens
•   Specific issues of people management (engagement)

SSC’s - ‘new’ organisational form driven by customers is a catalyst for change,
   maintains service levels and forces ongoing mutual adjustment



                                                                              7
      …. the challenge is still implementation!

Our matrix structure has not worked very well, so we have changed it
to (guess what?) a new matrix structure. This and group under-
performance is forcing the pace for performance improvement.
Senior Manager in one of the UK’s largest companies, May 2011


Like the 19th century African cartographers, we actually know less
about what happens inside companies than we did 40 years ago.
To remedy this knowledge gap, more business school scholars,
particularly in accounting, need to shift away from coastline studies,
conducted on computer terminals in their offices, and begin to explore
the interior of leading-edge company practices.
Kaplan, Harvard Business Review, May 2011


                                                                         8
 The Case Companies
                            Key Findings
• Shared Service Centres present an opportunity for organisations to 
   reconfigure their processes to deliver both improved customer service and significant 
   cost saving

    Clearly articulated strategies communicated through
         • formal management presentations;
         • information located on the company intranet; and
         • prominent visual displays in the workspace.

    Strategies included:
         • process excellence;
         • standardisation; and 
         • continuous improvement.

                                                                                            10
            Continuous improvement
    “Every single person in the [SSC] has got a continuous improvement
      objective of at least one. They must come up with one continuous
                                          
       improvement objective that generates 14 hours worth of savings
                                during this year.”
                                Rolls-Royce PLC
 
 



        “I think the best way to answer that is to say that the world is
          changing, rapidly in some aspects and we use an array of
        measures in a flexible manner to deliver a coherent strategic
                                  response.”
                            Royal Dutch Shell PLC
     
     




                                                                           11
          Benchmarking and networking
        “…. the best thing about going out to other service centres is that
                        you see their weaknesses as well”.
                                          

                                Rolls-Royce PLC
 
 




        “… what we’ve also done is look at best practice across the industry
        as to where we’d want to get to after transformation and we have an
                                           
                  undertaking that we’ll try to get to those levels.”
                                      MyCSP
     




                                                                              12
                                  Leadership
               “It’s an environment of trust”.
                               
                      Rolls-Royce PLC
                              
     

                  “... one thing I truly believe in is [that] shared services is
             predominantly a people business. The processes are not operated
                                                  
                                     by systems but people.”
                              RCUK Shared Services Centre Ltd
         .




 “I don’t think anybody is embarrassed to go to S…. And say ‘This is a
problem. I’d like to do that better.” we do take it for granted that we can
                                        
                         actually speak our minds.”
                                   MyCSP
 
 



                                                                               13
       Performance management as a set of relationships between 
             performance measures, people and processes

Clearly important 
World class Hackett measures
      cost per £ billion turnover               Performance Measures
      cost per employee 
                                                                                Managing employee’s 
                                                                                beliefs and organisational 
                                                                                identity




                                    Processes                          People




 Need for continuous 
 improvement demands
 “a change in mind-set and a
 change in the way you work”                                                                        14
                   The Performance Management Mix

Managing through the people               Managing by the numbers




     Leadership                                      Measures




                              Shared                  Requisite 
   Communication              Service                  variety
                              Centre



   Empowerment                                      Benchmarking
Case Background


Company Values


FSS Vision & Operating model

                               16
         Network Rail established in 2002 to manage 
                   Britain’s rail network. 
     The company owns, maintains and                  The company:
        operates;                                        spends £14million per day on operating, 
          •  20,000 miles of track                          maintaining and regenerating the 
                                                            rail network
          • 8,200 commercial properties                  Has 35,000 employees
          •  18 major stations                           Revenue £5,712 million in 2011, £5,408 
          • 2,500 other stations of which                   million from franchised track access 
            several are leased or part-leased to            and grant income, £244 million 
            train operators                                 from property rental income, and 
          • 90 maintenance depots                           43 million from freight income 
                                                            (Network Rail, 2011). 
          • 40,000 bridges and tunnel, 
                                                         Franchised track access income is 
          • 9,000 level crossings, and                      invoiced to Train operating 
          • connections to more than 1,000                  companies on the basis of 
            freight terminals                               agreements finalised with the 
     (The Hackett Group, 2011; Network Rail, 2011).         Department for Transport.


Network Rail is regulated by the Office of Rail Regulation (ORR) and is subject to detailed 
operating requirements which are set out in “Control Period Delivery Plans”, the latest of which 
(number 4) covers a five year period from 2009 to 2014.
There are also periodic reviews, including the recent Department for Transport and ORR 
                                                                                             17
commissioned value of money study chaired by Sir Ray McNulty. 
  Network Rail Values…


Pride - Determination - Respect - Teamwork -




                                        18
FSS Vision & Operating Model…


 World Class Service Provider




                                19
                       Process Measures

Cash                                  Cycle time reduction
                                                        • Efficiency
• Effectiveness




                  World Class FSS
                       with
                  Engaged Staff
  Compliance                              Customer Service
  • SLAs and quality                        • Business Partnering


                                                                       20
             Cash                         Cycle time reduction




                                                                                      C
     ld




                                                                                          la
             • Treat it wisely            • Do it in time

    r
    o




                                                                                           ss
             • Lower transactional cost   • Reduce defects
W
             • Decrease corporate         • Eliminate waste (Lean & 6σ)
             costs                        • Achieve improvements
             • Improve cash flow




             Compliance                   Customer service
r
e




                                                                                                   S
             • Follow the rules           • Provide the service they require
    id




                                                                                               e
                                                                                          rv
             • Get it right               • Build trust meet expectations
     v




             • Be vigilant and aware      • Understand customers’ needs
         o




                                                                                     ic
         r




             • Learn from mistakes        • Succeed by doing, not just talking   e                     21
         P
                  Analysis: Does it Work?

• Benchmarking processes

   – “Q12” an employee engagement survey administered throughout the 
     company – FSS scores more highly than the Network Rail average on 
     16 of the 17 items (average > 4 on a 1-5 scale). 

   – Investors in People – Bronze status in February 2011 and Silver status 
     in September 2011

   – Hackett classed Network Rail FSC as “world class” (2011)




                                                                           22
                How does it work?

• The World Class Board 



• Signal Stations



• Leadership 

                                    23
              The World Class Board

•   The vision
•   The operating model – the 4Cs
•   Projects
•   Benchmarks
•   Funding targets
•   Visitors letters



                                      24
Signal Stations




                  25
             Tentative Conclusions
• One way to achieve control and strategic alignment is through 
  the strategy-performance measurement – information flow – 
  rewards model
• In the case of Network Rail the FSS reports hundreds of KPIs and 
  the role these play in strategic alignment is not at all clear.
• What is clear is the significance of the alignment of belief 
  systems and organisational identities achieved with the “4Cs” 
  mantra




                                                              26
                   The Performance Management Mix

Managing through the people               Managing by the numbers




     Leadership                                      Measures




                              Shared                  Requisite 
   Communication              Service                  variety
                              Centre



   Empowerment                                      Benchmarking

				
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