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Business Consulting, Facilitation, Strategic Planning, Leadership Development, Training

Arvato Services North America


Human Resources Transformation Case Study

How many times have you heard a CEO or business leader state that people are the most important asset? At the same time, how many CEOs or business leaders go to HR for help with creating a strategy or building competitive advantage?

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Executive Summary
Arvato Services North America (ASNA) is a business unit of Bertelsmann AG, a Global 500 enterprise and the third largest media company in the world. ASNA provides supply chain management and customer resource management solutions to clients such as Microsoft, HewlettPackard, Intuit, Air France, and Lufthansa. As outlined by the Vice President, the HR team created a vision to transform the function of human resources into a leading-edge work team that delivers measurable value to the business and shareholders. The emphasis of the vision was on strategy execution and enabling the business to create sustainable competitive advantage. To do so, they needed to address the following challenges:

Loss of key talent in core areas that directly impacted the financial performance Inability to attract top talent HR systems that were not supportive of a flexible solution being offered to the client Too many HR initiatives that didnt link to the organizational strategy Lack of employee development opportunities that were aligned with the strategic ..objectives Lack of credibility of the HR function as perceived by the Executive Team Unable to effectively develop managers, which resulted in a sink or swim culture

To help the HR team examine and implement solutions to address these challenges, ASNAs VP of HR, Susan Velez, sought a Balanced Scorecard approach that would align and link the activities of the team to the firms objectives. We looked at numerous options for creating and implementing an HR plan. We needed strategic consulting expertise to help the team understand and embrace the scorecard system, explained Susan. ASNA selected Prana Business to help develop and implement this new HR plan, which follows the System Strategy Execution System (SES) for Human Resources. Since implementing the new system, Arvatos HR team has seen: Improved accountability within the entire HR team to deliver superior value Greater reporting and data transparency, which resulted in improved performance of key ..measures Streamlined and more effective business reviews Vastly improved knowledge of the business operations within the HR team, which has ..enhanced the credibility of the team Improved retention and acquisition of key talent within the entire business Greater capacity to provide targeted, specific, and accelerated learning opportunities to ..critical talent Enhanced ability to measure HRs impact on the overall strategic objectives of the ..enterprise

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Company Background Arvato Services employs more than 23,000 individuals with 9 locations in the US alone. Arvato boasts a global infrastructure with millions of square feet of total warehouse space. The company uses cutting-edge supply chain technology to deliver customized solutions to select clients. Creating and delivering specific services that solve the clients outsourcing problems is the firms main focus. Arvato is a growing business unit that has had great success over the past 10 years. The company plans to continue aggressive revenue growth while maintaining consistent EBIT performance during the next several years. The Human Resource Challenge As a result of the companys success in recent years, Susan Velez, VP of HR, saw many opportunities to transform the HR function and improve the line-of-sight to the customer, business unit leaders, and shareholders.

Arvato Services NA Locations

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Arvato has seen rapid growth and expansion that has resulted in some difficult growing pains. These growing pains include: a shortage of qualified and experienced managers, difficulty in creating consistent HR systems across multiple locations, lackluster merger and integration efforts, as well as non-existent or non-specific training opportunities. In essence, Arvato was one company running like multiple companies without the benefits of scale. Susans vision was to create an HR work team that enabled the corporate vision of creating one company. Achieving this vision would be no small feat due to the complexity of the enterprise. The Solution Susan and the HR team needed a strategy and plan to ensure the success of the transformation. We began by clarifying the vision and crafting an HR strategy map.

ASNA HR Strategy Map

The Solution, Continued The HR team determined that an HR strategy map and scorecard would help them drive the changes they sought, as it would enable the team to: Communicate strategy to the entire HR group at all levels Ensure resources were applied to the highest priority initiatives across divisions Align efforts to the strategic needs of each division Create visibility into metrics, problem areas, and project status reports Conduct effective business reviews with each division to ensure accountability and results Link HR activities to the competitive advantage Enable HR to contribute toward creating customer value

The strategy map was created during a two-day workshop in which Prana Business consultants walked the team through a process of linking cause and effect relationships. Prior to attending the workshop, the team was required to identify the overall companys strategy. Essentially, they gathered information on how the firm creates customer value, competes against other players in the industry, and provides value to the shareholders (in this case the shareholders are Bertelsmann AG board members). During the workshop, the team began to identify and clarify how they create value from four perspectives: financial, customer, internal process, and learning & growth. The team drilled-down on the specifics of how they contribute to each perspective. For example, they identified that in order to ensure the company achieved its organic growth targets, they would have to meet and exceed their internal customers demands of retaining and developing talent. Since ASNA competed by providing customized solutions to clients, the HR systems had to be flexible and client-centric. Each client was outsourcing critical business processes to ASNA. Therefore, ASNA had to replicate their processes, corporate culture, and management systems under one roof. Once the strategy map was finalized, a scorecard was created that provided a measurement for each objective. For example, in the strategy map, an objective of Client-Centric Talent Development was identified. This meant the HR team wanted to develop the employees based on the needs of each individual client. The measurement appeared in the scorecard as Average Speed to Competency. This is defined as the amount of time it takes for a new recruit to achieve a specific level of contribution to the division or department. In a call center environment, say for the Air France client, competency is reached when a certain service level is attained, such as first-time call resolution. The idea behind this objective in the map was to accelerate the time it took ASNA to create an outsourced business process that was seamless to the client. In other words, the HR team wanted the new recruit to feel like they were working for the client and were as skilled as an employee who was working directly for the client company. Prior to creating the HR strategy map and scorecard, new recruits were not given specific enough training and mentoring, and as a result their time to competency was 6 months or more. Once the HR team began to apply resources to this objective, the time was reduced to less than 3 months. Additionally, the added benefit of less stress on the recruit contributed to lower turnover.

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Human Resource Transformation The HR team developed a robust communications plan to roll out the framework, plus a very individualized approach toward training the entire HR group at all levels on the new scorecard methodology. In addition to solid communication, another key to the success has been the implementation of scorecard-based business reviews. These reviews allowed for a much more productive discussion of performance than ever before, as well as a higher degree of accountability within the HR functional groups. For example, one of the HR functional managers found - while reviewing his scorecard during a business review - that though his area was consistently below target in a strategic measure for recruiting, he had no projects or initiatives to improve the measure. His staff knew this was a strategic focus area, but nobody truly owned it. By implementing scorecards and reviewing them regularly, this gap became more apparent. Improvement initiatives were soon put in place, and progress was monitored during subsequent business reviews. The functional group is now on track to meet target levels in this strategic measure. By focusing on the scorecards and utilizing the knowledge gained during the consulting phases of the project, similar results have been achieved in other HR indicators.

The scorecard highlights the measure of Average Time or Speed to Competency

Average Time to Competency


120 Service Level as % 100 80 2005 60 2006 40 20 0 Month 1 Month 2 Month 3 Month 4 Month 5 Month 6
The chart shows the improvement in the Key Performance Indicator titled: Average Time to Competency

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New Levels of Clarity and Focus within Human Resources In addition to creating a strategy map and HR scorecard and holding business reviews with each divisional head, the HR team has created a Strategy Execution User Group. This group meets quarterly with key business leaders to discuss HRs role in enterprise-wide strategy implementation. This user group continues to update the scorecards to ensure continued alignment between the HR strategic plan and the overall financial goals of the organization. The HR Director, Blanca Banuelos, explained that Performance results have never been as transparent as they are today; the scorecards are accessible to leaders, and we are well prepared for public reporting. The focus of the entire HR work team has shifted to become more strategic, narrowing down the number of initiatives within the group to the ones that will have the biggest impact on moving the measures to achieve the companys strategy and, ultimately, the vision. Susan Velez went on to acknowledge that the process is a long-term journey. It has taken a lot of effort and created some tension within the group as it transforms, but the knowledge gained through this process is enabling Arvato Services North America to be a best-in-class outsourcing solution.

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