1. C suite priorities shifted from cost focus to value focus
I want end-to-end process optimization
I need to drive down operational cost
I want cost effective flexible service
I want seamless brand and experiences
I want to drive product/services innovation
I want to tackle emerging markets
I want seamless integration of acquisitions
I want business agility
I want to access good quality data
I want real-time data driven insights
Strategic
Priorities

2. CFOs top priorities for 2017
EARNINGS PERFORMANCE
Need for better business performance and strategic planning and desire for a single, real- time version of the truth
CASH MANAGEMENT EFFECTIVENESS
Knowing existing and changing cash positions
PROFITABILITY
Cutting costs and favoring healthy profit margins over increased market share
OPEXis the common denominator impacting all 3 financial performance elements
SOURCE: CFO Magazine, A Division of Argyle Executive Forum

3. The greatest obstacle
“The single greatest barrier to profitability and cost management is lack of understating of the true costs associated with business operations.”
Accelerating Profitability
By Alan Lund

4. Workforce costs as a percentage of operating expense
52%
50%
33%
22%
18%
HEALTHCARE
PROFESSIONAL SERVICES & SOFTWARE DEVELOPMENT
AIRWAYS
CONSTRUCTION, MINING AND ENERGY
RETAIL AND WHOLESALE TRADE
SOURCE: CFO Magazine, A Division of Argyle Executive Forum

5. Total Cost of Workforce (TCOW)
VISIBLE COSTS
Direct Compensation
Indirect Compensation
Deferred Compensation
Mobility
Contingent Workforce
HIDDEN COSTS
Untrained Employees
Disengagement
Absence
Under-performance
Cost of Voluntary Turnover
Cost of Vacancy
Cost of Hire
Time to Proficiency Cost

6. Visible cost of workforce3% 1%
100% 3% 4% 5% 7%
12%
14%
26%
25%
CONTINGENT WORKFORCE
BASE PAY
ALLOWANCES
VARIABLE PAY AND BONUSES
LONG TERM INCENTIVES
LEAVE PAY
TAXES AND RETIREMENT
HEALTH BENEFITS AND INSURANCES
MOBILITY
EMPLOYEE DEVELOPMENT

7. Vicious cycle of hidden workforce costs
UNTRAINED EMPLOYEES
DISENGAGEMENT1
ABSENCE2
TIME TO PROFICIENCY6
COST OF HIRE
COST OF VACANCY5
VOLUNTARY TURNOVER4
UNDER-PERFORMANCE3
Hidden Costs
Lost production time, inefficiencies, missed deadlines, poor customer retention, rework, and injuries
Engaged employees are 54% more likely to quit when they
work with an
actively disengaged employee
The average cost of absence is equivalent to 35% of the base
Average employee take 28 weeks to reach optimum productivity
The logistical cost of replacing an employee, as well as invested time such as interviewing
Replacement cost in addition to opportunity cost
The cost of losing an employee can range from 25% to 200% of the base
The difference between an employee in the
top 5% and one
in the bottom 5%
equals twice their
annual base salary
SOURCES:
Toxic Employees in the Workplace report - Cornerstone OnDemand, 2015
Financial Impact of Employee Absences survey - Mercer, 2010
The cost of employee under-performance - Dr Nikos Bozionelos
Keeping the People Who Keep You in Business book - Leigh Branham, 2001
The cost of replacing an employee book - Likert, 1985
Financial impact of staff turnover survey - Oxford Economics, 2014

8. Main levers for driving cost reduction
Generally, these fields affect savings the most
100 %
8 %
9 %
11 %
16 %
20 %
25 %
Organisational
People and
Delivery model
Technology
Infrastructure
Vendors and
Products and
Client
Overall
Design
Processes
3rd Party Cost
Service
Management
identified
Portfolio
and
saving
Segmentation
opportunities
6 %
5 %
- Elimination of redundant support functions in Operations,
e.g. centralised procurement
Consolidation of support functions, e.g. HR, Finance
Span of control
Effective workforce planning to aligned to the key processes
Strategic Workforce Planning
Offshoring (often to India) or outsourcing of non-core activities (e.g. back office, reporting)
Consideration
of captive near- shore location
Assessment of IT delivery models
Introduction of shard services
Platform consolidation
Vendor management
Leverage of market power (Terms and conditions)
Budget adjustment
Consolidation of IT infrastructure, application landscape
Termination of subsidiary and consolidation of reporting
Production site analysis and identification of cost saving opportunities
Contract renewal and vendor
rationalisation
Usage of synergies to improve negotiation power
Negotiation of new framework agreements
Adjustment of existing contracts to actual needs (e.g. SLA)
Reduction of transport costs (business travel, company cars)
Reduction of adminstrative efforts
Performance measurement
Close examination of service portfolios and
product ranges
Reduction of customer
contacts with low margin customer groups
Push e-Channel
Improve sales performance and usage of contact centers
Source: Deloitte project results

9. Leveraging Operating model building blocks to drive cost reduction
Drives operating model design
Processes
People
Organization & Governance
Strategy
Sub-elements
Corporate and BU strategy
Function, Department, Division
L1 – End-to-end
L3 - Sub-process
L2 – Core process
L4 – Activity/procedure
Strategic Workforce Planning People capabilities
Levers
Centralization or Outsourcing
Layers & Span of control
Roles
Technical skills
Behavioral skills
Rewards
Culture
Value chain
Sequencing
Automation/Technology
Note: Technology Enablement is out of scope

10. Operational efficiency improvement framework
Reduce resource requirement
Boost productivity
Effort per transaction
Process automation
Process simplification
Centralization (redundant capacity)
Resource utilization
Org. redesign (span of control)
Performance culture
Outsourcing/insourcing
Strategic Workforce Planning
Reduce demand
SLA/controls simplification
Product rationalization A
Process Efficiency
Org. and performance management B C
Demand management