STREAMLINING SHARED SERVICES FOR OPTIMAL PERFORMANCE

1. STREAMLINING SHARED SERVICES FOR OPTIMAL PERFORMANCE Ms Thami Sithole Group Shared Services Executive 2nd ANNUAL PROVINCIAL PUBLIC SECTOR HUMAN RESOURCES MANAGEMENT CONVENTION2007

2. Theme Transforming Human Resources Management in the Public Sector: From transactional management to strategic boardroom partnerships.

3. FOCUS AREAS • Shared services as an efficiency leveraging approach • Efficiency leveraging (economies and savings) • Service delivery • Business process streamlining and optimisation for operational efficiency • faster, better, focused • Efficiency building blocks and value drivers for measuring performance • Culture and mindset • Transition and stabilisation: change management • Building and enabling for enduring success

4. Board Breakaway Session – 14th March 2007 What does our universe look like? IFRS ISO Audits/SABS CIDB DWAF & Stakeholders FICA Auditor General Financial Market Local /Foreign Communities in Area of Supply King II Rating Agencies PFMA COSA Rand Water NEMA Local Govt and Provinces G30 PAIA SAAWU & other industry bodies External Audit FSC PAJA Organised Labour SARB/NT Service Providers Contractors Sect.78 WA & WSA

5. Board Breakaway Session – 14th March 2007 Strategic Issues facing RW Raw Water Quality & Pricing IFRS NEMA CIDB Restructuring of Institutional Arrangements & Sector Collaboration ASGISA NEPAD FICA Demarcation of Water Services Authorities Establishment of Catchment Management Agencies King II G30 Culture, Competencies and Staffing COSA Rand Water Sect.78 Cross Border Initiatives Creation of a National Water Resources Agency Subsidiary and Secondary Activities Regional Electricity Distributors FSC PAIA PAJA Black Economic Empowerment Initiatives Skills Shortage Remuneration at State Owned Enterprises Chemical & Energy Costs Corporate Social Responsibility PFMA WA & WSA

6. PROBLEM STATEMENT • Support services are fragmented across the business with each site responsible for and providing its own support service • Overlapping responsibilities and low spans of control • It is inherently difficult to co-ordinate, to differentiate between policy and guidelines with execution responsibilities • Support service cannot take full accountability for their functions • Imbalance in the levels of support enjoyed by each site

7. PROBLEM STATEMENT • Site managers are operating as “silos” being responsible for the entire spectrum of business operations and support leading to lack of focus and/or undue pressure • Duplication of processes • High cost of doing business • Repeated services with no standards set • No value add to the services provided • Under leveraged technology – ERP platform and scattered IT infrastructure

8. DELIVERING ON MISSION Strategy - 2004 • Creating an Operating Model for Optimal Efficiency and Cost Effectiveness: • Consolidate, streamline, align and focus commonly shared services and business processes to realise operating efficiencies and deliver cost effectiveness • Package these shared services and processes within an organisational structure that is designed to promote efficiency, generate value, realise cost savings, and deliver improved service for the internal customers.

9. WHAT IS SHARED SERVICES? • “is as a strategic instrument to promote innovation, growth and service quality and to respond faster to the market” • “is an efficiency leveraging approach” (service and cost effectiveness) • “only marketing and innovation produces profits”

10. WHY THIS OPERATING MODEL • Strategic responsibility over nature and quality of support services • Focus on economies of scale and scope • Cost effectiveness and efficiency • Process streamlining and optimisation • Creation of service excellence and culture • Ability to leverage vendor's existing skills, methods, technology, and infrastructure • Ability to leverage skills across the organisation and share the successes • Platform to build common values

11. WHY THIS OPERATING MODEL • Consolidation of transactional and administrative work, includes professional and advisory services • Platform for standardised compliance • Objective is to: • Balance the service scope • Reduce costs through economies of scale • Standardise and optimise processes • Improve service standards and quality across RW • Enhance stakeholder service experience • Enables for agility and services delivery • Speed of delivery • Response to market & customer demands • Response to environment • Eliminate “fruitless and wasteful” expenditure

12. MULTIFUNCTIONAL SS BUSINESS PROCESS OPTIMISATION AND TECHNOLOGY LEVERAGING GROUP SHARED SERVICES EXEC IT & KNOWLEDGE MNGT COMMUNICATIONS LEGAL ENTERPRISE RISK SERVISES SUPPLY CHAIN FACILITIES FINANCE AND HR Relationship Mgt, People Development and Continuous Improvement PORTFOLIO SUPPORT (Reporting, Customer & Service Mgt, Communications)

13. Service Orientated Architecture

14. GOVERNANCE FRAMEWORK Governance Framework Minister of WA & F Rand Water BOARD Audit & Risk Committee Finance & Treasury Committee Capital Investment Committee Human Resources Committee Farm Committee CBF/PCP Portfolio Integrating Committee Portfolio MANCO’s Transformation Forums OPCO PRC Procurement EE Committee Wellness Committee Risk Forum

15. OPERATING PRINCIPLES • Customer centric organisation • Seamless value chain driven organisation • Best fit technology enablement • Zero tolerance for poor performance • All investment decisions are business case driven • Provide one stop service and do it right the first time

17. EFFICIENCY LEVERAGING • Skills – streamline structure • Technology – enterprise wide platform • Processes – end2end align and streamline • Services – consolidate • Scale – strategic sourcing (buy better)

18. FI Financial Accounting SD Sales & Distribution MM Materials Mgmt. CO Controlling PPProduction Planning R/3 AM Fixed Assets Mgmt. Client / Server ABAP/4 QM Quality Manage-ment PS Project System WF Workflow PM Plant Maintenance IS Industry Solutions HR Human Resources TECHNOLOGY LEVERAGING SAP R/3 Modules Logistics Accounting Human Resources Cross Application

19. PROCESS ALIGNMENT People are key in implementing new processes Supporting tools for processes and people Process innovation & redesign linked to corporate strategy The three critical aspects to a process improvement project are people, process and technology

20. Definition: Models that represent the business on value chain level Model type: Value added chain diagram (VACD) VALUE CHAIN LEVEL (VCL) L1 Definition: Models that represent the business on process level Model type: Value added chain diagram (VACD) PROCESS LEVEL (PL) L2 Definition: Models that represent the business on sub process level Model type: Value added chain diagram (VACD) Note: Multiple layers are used to model complex processes SUB PROCESS LEVEL (SPL) L3 ACTIVITY LEVEL (AL) L4 Definition: Models that represent the business on the activity level Model type: Event driven process chain eEpc and for each activity the assigned Function Allocation Diagram (FAD) is modelled.

21. CONSOLIDATE SERVICES

22. ECONOMIES OF SCALE • The secret to lower costs, improved profits and a more competitive operation lies in the supply chain. Strategic Sourcing is a procurement process that continuously improves and re-evaluates the purchasing activities of the company. It is one component of supply chain management. • The steps in a strategic sourcing process are: • Assessment of a company's current spend (what is bought where?) • Assessment of the supply market (who offers what)? • Development of a sourcing strategy (where to buy what, while minimizing risk and costs) • Identification of suitable suppliers • Negotiation with suppliers (products, prices) • Implementation of new supply structure • Track results and restart assessment (continuous cycle) • Outsourcing and Managed Solutions is a method that can be employed as part of the overall sourcing strategy for services..

23. STRATEGIC SOURCING Here are five ways strategic sourcing is different: • 1. Total Cost, Not Just Purchase Price: From storage to repairs to disposal costs, there is more to a product or service than its sticker price. • 2. Consolidating Purchasing Power • 3. Tighter Supplier Relationships: By narrowing the number of suppliers used in the business, "partnering" in alliances and entering into mutually beneficial contracts, suppliers can work together with a strategic sourcing business to achieve standardization and improvements in cost, quality and time. • 4. Realigned Business Processes, Work And Information Flow: Strategic sourcing redesigns work and information flow to eliminate redundancies and non-value-added work. Strategic sourcing can also help reduce the frequency of purchasing orders and inventory costs. • 5. Improved Teamwork And Purchasing Skills: Creating cross-functional teams that can include suppliers, a business can overcome organizational barriers and inspire collaboration.

24. SHARED CULTURE • Service-Profit Chain: Leveraging Corporate Performance Through Linking and Satisfying Your Employees and Customers • The service-profit chain is a powerful phenomenon that stresses the importance of people – both employees and customers – and how linking them can leverage corporate performance. • The service-profit chain is an equation that establishes the relationship between corporate policies, employee satisfaction, value creation, customer loyalty, and profitability

25. SHARED CULTURE • It is estimated that two-thirds of customers who defect do so because of poor service. In order for customer service to drive profits, every link in your service-profit chain – employee capability, job satisfaction, productivity, employee loyalty and customer satisfaction – must be strong • To achieve success, you must make superior service second nature of your organization.

26. Service level agreements • Knowledge, resource sharing • Competitive pricing • Pooling of key competencies • Knowledge sharing • Revenue generation potential Shared Service Charge out units Centre of excellence • Shared risk • Leverages partner resources • Customer responsiveness Joint Ventures Decentralised services Potential Outsourcing • Economies of scale • Standards and architecture control • Contractual relationship • Predictable costs • Reduces capital outlays Centralised Control combine a number of these options for different services. COLLABORATION MECHANISM

27. PERFORMANCE SCORECARD • Base line • Cost efficiency • service delivery costs are the lowest • cost per service provided is the lowest • service transaction costs are the lowest • Service efficiency • service levels are the best by customer experience • Faults are eliminated/repeat jobs

28. PERFORMANCE SCORECARD • Process efficiency • Turnaround times are the shortest • comply with local and international financial practices and standards • accurate and meaningful management information on a real time basis • Doing it better every time

29. PERFORMANCE SCORECARD • strongest customer share of mind • product range and attributes is optimal • customers are billed in the shortest period with zero errors • lowest debtors days • lowest cost of revenue collection • lowest total cost of ownership • lowest total logistical costs

30. PERFORMANCE SCORECARD • best price, quality and service from service providers • people enjoy the best working conditions • contribution per employee is the highest • spend the highest Rand per employee to develop competencies • Maximum self-service is undertaken by employees

31. Thank You