Philips 2013 Annual Report Download - page 18

18 Annual Report 2013
In 2011, Philips embarked on a comprehensive program to significantly
increase the efficiency of its overhead structure: those activities which
take place mainly above the level of operational businesses and
market organizations. Since then, real progress has been made – with
more work to be done over the coming years.
The Accelerate! productivity program looked first to
benchmarks – to what was currently industry best-in-
class – and subsequently leveraged this insight to re-
engineer the company’s overhead activities such as IT,
Finance, Human Resources and Real Estate. The
objective was to deliver improved service levels to
internal customers in a faster, simpler, easier-to-
experience way – at lower cost.
The focus of the program was on the operating model –
how the function was set up to deliver its services.
These ‘smarter functions’ looked to pool services into
Centers of Expertise which then provide high-quality,
24/7 support to a wide range of businesses and
geographies from a single hub. Equally impactful was
the increased use of ‘output-based delivery’, swapping
contract workers brought into Philips to support
initiatives for clear output-based contracts with the 3rd-
party suppliers. Last, but by no means least, was the
reduction in managerial layers and subsequent
increase in span of control of individual managers; this
has led to less bureaucracy and faster decision making
across the company.
Finance is a good example. Traditionally, finance
professionals were spread widely across Philips, each
supporting business management in everything from
basic bookkeeping to analysis of upcoming Asian
competition. As of 2013, we have re-engineered the
operating model of our Finance activity, pooling
knowledge into efficient, dedicated Centers of
Expertise – one focused on fundamental bookkeeping
and internal control, another on financial planning and
analysis of business performance, yet another on
expert company-wide advice on specific topics ranging
from foreign exchange to pensions. This has led to a
simpler, leaner, more eective operating model which,
critically, is able to deliver faster, better services to its
internal customers. Similar transformations in the other
functions – and indeed more broadly in business
management – have, collectively, allowed us to
substantially improve the efficiency and eectiveness
of our overhead structure and – in the process – report
a gross cost reduction of over EUR 1 billion through the
end of 2013.
Fewer layers, faster and better
services