Sharing SABIC Business Transformation Project Experience

2. Sharing SABIC Business Transformation Project Experience Mansour Saleh Al-Kharboush Shared Sevice Vice President, SABIC March 20th 2007

3. Sharing SABIC Business Transformation Project Experience • Table of Contents: • Introduction • SABIC Business Transformation Project (Fanar) • Fanar Change Management Program • Lessons learned

4. Sharing SABIC Business Transformation Project Experience • Table of Contents: • Introduction • Why Change? • How does the new Environment look like? • SABIC Business Transformation Project (Fanar) • Fanar Change Management Program • Lessons learned

5. SABIC organizations were compartmentalized by SBU, Affiliate and function. “Islands of Excellence” were highly valued and not to be shared. Customer Service Human Resources Supply Management SBUs Marketing Affiliates Production planning & Maintenance Sales offices IT Customers and Vendors

6. Other Drivers behind the Change • Competitive Challenge • Globalization • Improve Operational Efficiency

7. The Competitive Challenge • SABIC's eroding cost advantage • Other Major players create even greater economies of scale through mergers • Customers expect more from us

8. Globalization • SABIC must operate as a single coordinated unit in world marketplace • Corporate, SBUs, International Offices & Affiliates will all share common data • SBUs will be able to manage products & customers globally. • Management information will be on-line & real-time for faster decisions

9. Improving Operational Efficiency World-class business processes will streamline SABIC efficiency / productivity: • Integrated supply chain can yield big cost savings • Predictive plant maintenance • Supplier managed inventory

10. In the new environment, the SABIC organizational structure has changed to be fully integrated, with single face to customers and vendors. IT Customer Services SBUs Marketing Shared Services with Common Processes and a single data base Supply Management Human Resources Affiliates Production planning & Maintenance Affiliates Sales offices Customers and Vendors

11. Sharing SABIC Business Transformation Project Experience • Table of Contents: • Introduction • SABIC Business Transformation Project (Fanar) • Fanar Change Management Program • Lessons learned

12. Fanar project Encompasses ERP/SAP Implementation, Shared Services Initiative, and supported by a major Change Management Program Shared Services ERP/ SAP Change Mnagement

13. ERP ( SAP ) solution consists of eight fully integrated business processes: • Finance • Human Resources • Production Planning • Procurement • Superior Customer Services ( Sales ) • Total Logistics Systems • Plant Maintenance • Project Systems Note: Approach was to use Standard SAP, Customization only for legal reasons

14. Shared Services Initiative covers the following Business Processes and Support Functions: • Accounting Services • Employee Services • Engineering & Project Management • Supply Management • Information Technology Services • Facilities Management ( General Services )

15. Strategic leadership • Shared vision and values • Control • Capital • Capabilities Corporate Core Strategic Guidance Service Corporate Policy Results Shared Service* Outsourced Service Request Natural Business Units Manage Service • Focus on customer value creation • Improve operating effectiveness • Manage the product/technology portfolio • Develop talent • Provide cost-effective client driven services • Manage outsourcing relationships Shared Services is part of a new business model adopted by SABIC to drive focus and step-change improvement in performance

16. Typical Shared Services Dimension Centralization Shared Services board sets policy and direction Governance Senior functional managers set policy and direction Accountability to Customers Accountability Accountability to corporate Customers set priorities on quantity and quality of services required Customer Focus Corporate functions decide on service offerings and delivery Services are tailored to address Customers requirements Service Orientation Services standardized Flexibility to source from external providers is permitted Use of internal services is mandated Flexibility Performance monitored against internal targets and external best practices Performance monitored against internal targets Performance Monitoring Customers are charged based on actual usage of service Business units are charged based on allocations Chargebacks Located wherever it makes sense from a customer interaction standpoint Often physically located at corporate headquarters Location Shared Services is not centralization

17. Sharing SABIC Business Transformation Project Experience • Table of Contents: • Introduction • SABIC Business Transformation Project (Fanar) • Fanar Change Management Program • Lessons learned

18. Well Managed Change H DurationofPerformanceDisruption Poorly Managed Change Performance Unmanaged Change Depth of Performance Disruption L Time Well-managed change shortens and lessens performance disruptions

19. Change management aligns people, processes and technology Change Management CurrentState People Process DesiredState Technology

20. Fanar Share Holders • Subic's and Affiliates’ management • Joint Venture partners • Customers & Suppliers • Subic's & Affiliates’ employees • Shared Service in-scope employees • SABIC and Consultants project team members • ERP (SAP) System Integrator and Shared Services Consultants

21. Key Processes • Common Human Resource Processes – country specific requirements. • Common Sales Processes: • Profit-based customer management • Global availability to promise • Immediate order commitment and scheduling • Common Logistics approach • Common Maintenance Process and Design • Common project management tracking approach

22. Key Processes (Continues…..) • Common Budgeting approach • Common Global Chart of Accounts and a Global Asset System • Common Cash Management processes • Profitability analyses by Affiliate, SBU, Region, Product families, Product • Common Employee master, Material Master, Vendor Master and Customer Master with central update

23. SABIC Business Transformation Project was supported by six Organization Change Programs • Transition Management • Change Readiness Assessment • Change Advocacy (Change Leadership) • Organization Design • Job Design • End User Training

24. Transition Management Program focuses on implementing approaches to manage risks • How will the organization create and maintain a high performance project team? • What needs to be communicated, when, and by whom? • How will stakeholders be encouraged to support and promote changes? • Are the right people participating to create acceptance for change? • How will the organization know if it’s making progress? • Are all the change initiatives aligned and properly paced?

25. Change Readiness Program assesses the critical implementation issues and is the basis for Transition Management • What types of change risk is the organization experiencing or likely to encounter? • Do sponsors, leaders and line managers understand the impacts ERP & SS will have on their organization? • To what extent is the organization willing and able to change to new ways of working? • Which are the critical things to be planned and managed to avoid unnecessary resistance?

26. Change Leadership Program develops skills, commitment, and sponsorship required for a successful implementation • What leadership roles are needed? • Who needs to play a leadership role? • How will leadership capabilities be strengthened? • How will measurements be used by leaders to ensure progress against the business goal? • What is the plan for critical leadership actions?

27. Organization Design Program addresses the structure, behaviors, and enablers needed to support the new business model • Which components of the organization need to be redesigned? • What is the risk/value of doing so? • What design points/principles need to be accommodated? • What design implementation projects need to be incorporated into the overall transition plan?

28. Job Design Program addresses skills, gaps, measurements, rewards, and responsibilities • Which role and jobs are changing? • What are the responsibilities and accountabilities of the new job? • What performance measures will align people with the new business goals? • What security profiles will be required to match the new roles? • What skills do people require versus the skills they have?

29. End- users Training Requirements provide the basis for end-user training strategy • What are the training requirements for all affected end-users? • What are the business benefits of alternate training approaches? • What activities, responsibilities, and timelines need to be considered in an effective training solution design?

30. Other important & Critical Change Management Programs (Tools) • Business case by Affiliate (Customer) • Service Level Agreement • SS Staff Selection Process • Non- selected staff Redeployment

31. Sharing SABIC Business Transformation Project Experience • Table of Contents: • Introduction • SABIC Business Transformation Project (Fanar) • Fanar Change Management Program • Lessons learned

32. Lessons Learned - Transformation will take time... • Transformation Projects affect virtually every employee • Change, irrespective of its magnitude, is always very difficult • Everyone must understand the absolute business necessity of successfully going through the change • It is critical that all Senior and Middle Managers support such strategic effort

33. Lessons Learned - Why Large Projects Fail • Lack top executive support • Uncommitted sponsors • Inexperienced project management • Lack of business involvement and ownership • Unwillingness to commit resources • Underestimating the importance and the need for an organizational change management Program • Underestimated data conversion requirements • Oversold, unrealistic expectations

34. Lessons Learned – Change Management • Make sure concept is understood by everyone: management, project team, affiliates, and end-users. • Get a professional help: • Set up Change Mgmt. Program objectives, plans, tools, & resources • Design surveys and conduct analysis • Schedule and deliver training • Conduct risk assessment • Develop communicate program • Ensure site readiness: organization and end-users • Allocate enough budget and staff. It’s not an area you want to make saving.

35. Lessons Learned – Communication • Use all available tools and be creative: • Periodical messages from company CEO • Website for the project • News letter, Brochures, leaflets, & booklets • Group meetings • Celebration of major mile stones • Surveys • Q & A • Weekly questions & prizes for winners • Promotional Gifts • Communicate. Communicate, Communicate, …It’s never enough.

36. Lessons Learned – Watch for… • Competing initiatives • Customization, Data cleansing, Authorization, Operation and Management reports