Driving Global Vision of World Class Finance Management

DR Médiathèque Lafarge

World Leaderin Building Materials

World Leaderin Building Materials

SSON: Shared Services Week May 25th 2010

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Agenda :« Finance Transformation:

Driving a Global Vision of World Class Finance Management »

1- LAFARGE

2- What Strategic Objectives for Shared Services ?

3- What Scope for Finance Transformation ?

4- What Delivery Model for Efficiency & Value Added ?

5- How to combine Service to Costs improvements andValue Added ?

6- Summary of Key Success Factors….

7- Questions / Answers

SSON Finance Transformation May 25th 2010

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1- World leader in building materials (1/4)

Leadership positions in all our Businesses

World leader in Cement

No. 2 worldwide in Aggregates & Concrete

No. 3 worldwide in Gypsum

Operating in 78 countries

Employing 78,000 people

2,013 industrial sites worldwide

15.9 billion euros in Sales in 2009

753 millions of Current Operating Income

Listed on Euronext Paris stock exchange (CAC 40)


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1- A worldwide presenceto benefit from different markets’ opportunities (2/4)

57,3%

34,5%

8,0%0,2%

CementAggregates & ConcreteGypsumOthers

31.6%

22.4%8.5%

9.2%

5.1%

12.5%

10.7%

Western Europe

North America

Middle East

Central and Eastern Europe

Latin America

Africa

Asia

Sales bybusiness line

Sales bygeographic area


in 2009 Revenues in emerging markets were > 50% of total Sales

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1- Cultural diversity to enrich the Group’s skills (3/4)

About 40% in developed markets / 60% in emerging markets

Making diversity an asset… for a common performance culture

for sharing knowledge and know-how

for targeting excellence everywhere

for applying our values

10,0%

11,5%

10,3%

9,5%

5,2%

25,0%

17,0%

11,5%

France

Rest of Western Europe

North America

Mediterranean Basin

Central and Eastern Europe

Africa

Latin America

Asia

Split ofemployeesby region

%


66 6SSON Finance Transformation May 25th 2010

(4/4)

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2- Strategic Objectives for Finance Transformation ?

Low

High

High

1Q

1Q

Peers

Eff

ecti

ven

ess

Efficiency

WorldWorld--ClassClass

Company X

1 - Cost reduction strategy

2-

Valu

eA

dd

ed

str

ate

gy

Transformation’s Strategies :

1- Costs reduction only:

Process optimisation only maydeliver up to 20% savings

SSC & Offshoring may deliver> 30% additional savings

2- Value Added development only:

Skills upgrades only may deliverValue Added to offset some Costs

3- Competitive Costs &Value Added :

National SSC to deliver contract’sGovernance (BU & Reg. SSC) &Compliance with local needs (datareliability for decision…) &regulations (statutory, social…)

Regional SSC to deliver savings &End to End Process Optimisation,

Local Business Functions todeliver Value Added through LocalDecision support & PerformanceMonitoring

Group Functions to monitorStrategy, Performance, Resources...

3-Com

petiti

veCost

s

&V. A

ddedst

rate

gy

We target to be Competitive in term of Services Costs& to deliver Value Added to the Group & the Businesses


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VALUEADDED

Todevelop

Todevelop

Todevelop

FULLY LOADED COSTS

Research &Development

Strategy& Performance

Monitoring

Sales &Marketing

DecisionSupport

Legal & Tax

Employee’sHire to Retire

Production& Logistics Sourcing

Infrastructure’sInstall to Support

Company’sRecord to Report

Customer’sOrder to Cash

<<<1

>>>1

Finance.

VAFLC

VAFLC

Supplier’sPurchase to Pay

HumanResources

IS

Strategic Activities are in Businesses/Functions (Strategy, Decision Support &Performance monitoring) and End to End Data & Processes Activities are in GlobalShared Services (Alignment, Management of Transactions & Contracts….)

ServiceGovernance

3- What Scope for Finance Transformation ?(1/2)


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4- What Service Delivery Model : a Distributed Model (1/3)

“Distributed model” to deliver competitive cost & value-added services:

1. Group/Division/BU Finance functions focused on core expertise such as:

Group Budgeting & Controlling, Tax Planning, Treasury & Insurance

Division & BU Budgeting & Controlling in order to provide Decisionsupport (Investment, M&A) and Performance monitoring (Action Plans)

Global SSC & FPO for Data reliability & end to end Process efficiency

2. A Global Shared Services function at Group level ensuring :

SSC Development & Performance Monitoring and Optimization

Data & Process standardization through Business Process & MDM functions

National SSC as front-offices ensuring :

Governance (SLA’s accountability vs. BU and offshore delegated transactions)

Compliance services (e.g. regulation compliance, GL, statutory andmanagement reporting, tax filing, relationship with auditors and administration )

Multi-country back-office SSCs for transactions (e.g. Payables, Expense reports,Intercompany, Receivables, …) with an objective of :

Leveraging cost arbitrage & mitigating the risk of operating too manycountries from one location.


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Transactional processes

Data entries, Accounts Payable, Expense Reports accounting, AccountsReceivable (Cash application), Fixed Assets, Intercompany reconciliations…

Additional administrative activities

Governance & Compliance

Data analysis for Decision support

Working Capital Contribution

Cash Collection

Statutory reporting & Tax Filing

General Accounting

Transactions control vs General Ledger

Finance Strategy

& Management

Performance monitoring

Decision support

Budget & Forecasting

Tax Planning

Treasury

Credit

Management Reporting

Delegated Transactions

Multi-Country SSC

Value-Added Services

National SSC

Group /Division /

Business Unit

Finance Strategy & Management


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Multi-Country SSC operating low costs transactions for several countries . Locations determined according tocapacities, time zones and languages. Multi Country SSC are interacting with National SSC.

National Shared Services Centers ensuring Front Office Governance vs all Customers (including on delegatedtransactions to Regional SSC) and Compliance activities such as General Accounting, Statutory reporting, Tax filing …

Global SSC Management team covering Global governance and relationship with Group and Business Divisions,in charge of all SSC developments, Finance, HR, Continuous Improvement Process, IS/IT.



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Unit Prices : To reinforce Governance :

• Professional Services Billing Transparency vs. Management Fees• Switch to Outputs instead of contemplating Means (FTE)

To offer Flexibility to Business & keep the Challenge inside Shared Services :• Move from previous Fixed Costs to Variable Prices for Business Units• Implementation of flexible means and innovation within SSC

To encourage Continuous Process Improvements :• Business invoiced according to complexity : automation/standardization rewarded• Unit Prices easily Benchmarked with peers : CIP a permanent challenge

Value Added : To balance Cost reduction and Downsizing attraction :

• Upgrading Skills and Competencies within SSC and Outside• Allowing personal and professional developments to all employees

To contribute to Profitable Growth and Working Capital Initiatives :• Beyond delivering Services to Costs Commitments• Expertise sold to the Business Units or the Corporation allowing Exposure

To maintain Customers Intimacy and Proximity :• Difficulty to build confidence from Offshore SSC• Value Added could come from regular Relations to capture Issues, Objectives…

5- How to combine Service to Costs improvements & Value Added:Taking Commitments on Unit Prices and Value Added Delivery ?


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Data Reliability as part of End to End Process Efficiency : + Consolidation of Process Ownership :

• Order to Cash including Customer’s, Sales Articles Master Data• Purchase to Pay including Suppliers, Purchased Articles Master Data• Record to Report including Chart of Accounts, Business Structures Master Data• Hire to Retire including Employees Master Data

- Data may be used to support Process Delivery :• Process Owner may use data to solve downstream needs instead of either pushing

back demands or addressing it at the right level• E.g. Data duplications generated by lack of IS Contract management

• As a consequence Data redundancies may generate burden for Decision support• E.g. Customer’s and/or Supplier’s Business Consolidation

Data Reliability independent from End to End Process Efficiency : + Master Data Administration for unique, reliable and shared data :

• Master Data Management at same level than Process Owners• Potential synergies between Customer’s & Suppliers Administration• Specific Data Cleaning and Upgrades independently from Process Roll Out• Transversal team integrating Group, Business Unit and Functions expectations• Specific KPI on MDM to fuel Strategic Decisions on Business Developments

- Potential objectives divergence between Process and Data Owners :• But specific Organizations and Objectives doesn't means no transparency nor

cooperation between MDM and Process teams !

5- How to combine Service to Costs improvements & Value Added:

In Reinforcing Data Reliability vs Process Efficiency ?


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Decide on your Strategic Objectives:

Costs Reductions and/or Value Added

Competency or Expertise gaps

Build the Business Case matching objectives and culture:

Balance between Social and Economic

Speed of Change accepted by Sponsors

Design the appropriate Service Delivery Model:

Global vs Regional vs National vs Local contributions

Design the Framework of SLA and KPI supporting Change

Select your Transformation Model: Simplification,Standardization, Automation, Offshoring….:

Sequential or Parallel

Invest in Productivity Tools and not only in ERP

Invest on Data to enhance Decision Support

Deliver the Business Case:

ASAP to move up in the VA Chain and expand the scope

Communicate with all Stakeholders and beyond !

6- Summary : Key Success Factors for Finance Transformation


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Questions / Answers ?


Driving Global Vision of World Class Finance Management

Business

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