Finance & HR Shared Services in Tennessee

1. Finance & HR Shared Services in Tennessee

2. Carol White – Executive Director, TN Shared Services Solutions •  Early career experience in fiscal • U.S. Office of Management & Budget • U.S. Congressional Budget Office • Metro Nashville Budget Office • State of Tennessee for 21 years • Director of 2 small state agencies with extensive interagency collaborations • Executive Director, TN State Planning • Founding Executive Director, Volunteer Tennessee, 1994-2007 Founding Director, TN Shared Services Solutions, March 2007

3. Webcast Agenda • Organization Overview • Need for Shared Services • Key Design Issues • Our Approach • Best Practices • Current Status • Lessons Learned • Questions/Discussion

4. Tennessee Profile • Population 6 m; 16th in U.S. • Annual budget $27.5 billion • 54,000 state employees • 20 depts and 30+ other agencies • Centralized control of state government administrative functions • Single accounting system • Decentralized implementation

5. Background • TN ranks 48th for state & local tax burden; efficiency and accountability focus critical • Turnover and retirements • Average of 11% turnover • 35% eligible for retirement • Major ERP implementation in Finance, HR • PeopleSoft 8.9 – July 2008 for HR, Payroll, & Benefits – phased approach starting October 2008 for financials • Hackett Benchmark study, 2006

6. State of Tennessee is very decentralized… Finance FTEs by Agency (1,753 FTEs) IT FTEs by Agency (1,828 FTEs) Other agencies, 1,341 FTEs Other agencies, 1,672 FTEs Finance & Administration, 81.4 FTEs OIR, 486 FTEs Human Resources FTEs by Agency (706 FTEs) Procurement FTEs by Agency (445 FTEs) General Services, 35 FTEs Other agencies, 645 FTEs Other agencies, 410 FTEs Dept of Personnel, 61 FTEs

7. State of Tennessee’s staffing is higher… IT staffing Finance staffing 2,148 1,834 1,753 1,315 1,236 1,229 Procurement staffing HR staffing 706 1,187 620 906 525 445

8. The ERP Risk • ERP risk assessment/mitigation planning • Identified risk with small state agencies (26 small independent business units with <100 employees) • Specialized independent missions • Strong, vocal independent power bases • Limited finance/HR capacity • Multiple new ERP modules to learn is heavy demand • Separate Office of Shared Technology Services

9. Small Agency Challenges • Administrative tasks often viewed as time-consuming distraction from core mission • Difficult to attract and retain qualified staff, especially accounting • Low volume on complex transactions can mean higher errors • Audit issues for some agencies • Small administrative staff means: • Limited back-up for illness, leave • Increased risk of fraud from inadequate segregation of duties • Tough to stay current on policies and systems technologies in multiple functional areas • Less chance for career development, resulting in higher turnover • Crisis when key staff leaves unexpectedly • Potential ERP (Project Edison) transition training overload

10. Shared Services as a Strategy • Researched use of Shared Services • Other states • Internal consulting • Metro Nashville • Outside vendor information • The Hackett Group • Began providing services to 2 small agencies who hit crisis points before our shared services unit was formed

11. Key Issues • Funding – self-supporting or subsidized • How are first year charges determined? • When do you implement? (before/startup/after ERP) • Cost Savings and Improvement in Quality • Governance/ Admin Attachment • Choice vs. Mandate

12. Our Approach • Start-up funding with goal of self-sufficiency through customer chargebacks • First year charges based on benchmark costs • Implement before ERP as “safety net” • Corporate placement within the Department of Finance & Administration

13. Our Approach: Choice • First year focus is quality service • Customer-heavy governing board • Customer-focused leadership shared between strategic and operations directors • Sought input from small agencies on charter, services, performance measures, cost allocation • Staffing: experienced, flexible, entrepreneurial • Began with 2 customer agencies to prove the concept • Cut-rate “test drive” opportunities: Risk and control assessments Key staff back-up “insurance”

14. Current Status • Operational – 7/1/07 • 2 full service client agencies • 6 agencies now “test driving” • Authorized for 10 staff • Authorized budget $862,000 • Staff as of 3/08 is 6 FTE • Marketing to new client agencies

15. 2007 Hackett Performance Study TN 4 months operation; Study avg 4 yrs Hackett Value Grid™ 1Q High World-Class Shared Service 1Q Effectiveness Low High Efficiency Overall State of TN, Dept of Finance & Administration

16. Hackett Best Practices • Formal Governance Model • Service Level Agreements • Metrics program in place for performance • Internal billing aligned with desired customer behaviors • At least annual stakeholder satisfaction surveys • Individual employee development plans align with mission, goals, objectives • Focus on customer view of process to best understand service delivery results

17. Charter

18. Charter: Mission and Vision • Mission: We deliver quality fiscal, human resource and procurement solutions for small state agencies with big missions. • Vision: Shared Services Solutions delivers quality service and value to every customer, every time, becoming the provider of choice for small state agencies and a valued partner with central administrative agencies.

19. Shared Services Organization

20. Governance • Governing Board: • Sets strategy and objectives, approves budget and cost allocation plan, monitors performance, and ensures continuous improvement • Provides executive sponsorship and facilitates organizational buy-in • Customer Council: • Staff level advisory group for multi-agency process improvement • Helps support: policy change, customer service improvements, budget and cost reductions, SLA process, and general business issue resolution

21. Accomplishments to Date • Established governance system, KPI’s, model SLA’s and cost allocation system • Hired staff, built team of 6, set up shop • Signed SLA’s and transitioned service delivery for first 2 customer agencies • Identified needs of potential customer agencies • Secured 6 “test-drive” contracts and SLA’s • First two quarter customer satisfaction surveys and performance reports strong • Establishing new lines of service to meet other needs (imaging, internal audit)

22. Lessons Learned • Full year of planning was beneficial • Hackett consulting very useful • Start-up funding critical • Customer consultation critical • Individual customer decisions not always what we expected

23. Looking Ahead • ERP go-live • Leadership change • Economic change • Peer networking

24. Finance & HR Shared Services in Tennessee