building a business case for hr...
TRANSCRIPT
L O C K T O N C O M P A N I E S
Building a Business Case for HR Technology
March 24, 2015
L O C K T O N C O M P A N I E S
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Please note
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L O C K T O N C O M P A N I E S
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Questions
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Please wait until we near the end of the presentation—or leave the topic to which your question pertains—before submitting the question.
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Recertification
This presentation has been pre-approved for 1 general recertification credit hour toward PHR, SPHR, and GPHR recertification through the HR Certification Institute (HRCI). The program ID number will be announced at the end of the presentation. Recertification credit toward SHRM-CP and SHRM-SCP through the Society for Human Resource Management (SHRM) is pending. To be eligible to receive credit, you must log on individually so that your attendance may be verified.
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Stacie Engelmann, SPHR, SHRM-SCP HR Consultant Lockton Benefits Company—Kansas City
Introduction
Wendy Dayton Operations Manager, HR Technology & Outsourcing Practice Lockton Benefit Group—Kansas City
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What’s Trending These Days?
BE GREEN!
BENEFITS
ADMINISTRATION
LEAVE
ADMINISTRATION
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It’s a Mobile World
79% OF SMARTPHONE USERS HAVE THEIR PHONE ON OR NEAR THEM FOR ALL BUT
http://www.adweek.com/socialtimes/smartphones/480485
Connectedness
BYOD
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Generations
Traditionalists Major trait: loyalty
World War II, Cold War, Korean War, rise of suburbs
Sacrifice, loyalty, discipline, respect for authority
Fax machine
Baby Boomers Major trait: competition
Watergate, women’s rights, Woodstock, JFK assassination
Competitive, sandwiched generation, hard work, long hours
Personal computer
Generation X Major trait: self-reliance
MTV, AIDS, Gulf War, 1987 stock market crash, fall of Berlin Wall
Eclecticism, self-reliance, free agents, work-life balance, independence
Mobile phone
Millennials/Gen Y Major trait: immediacy
Google, Facebook, 9/11 terrorist attacks, election of Barack Obama
Community service, cyber-literacy, tolerance, diversity, confidence
Google and Facebook
Generation 2020/ Gen Z Major trait: hyper-connectedness
Social games, Iraq War, Great Recession
Mobility, media savvy, life online starting in preschool, reading books on e-readers
iPhone apps
Source: The 2020 Workplace
GENERATION MAJOR
INFLUENCES
BROAD TRAITS DEFINING
INTERVENTION
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What is HRIS
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Talent Management
Succession
Compensation
Learning
Recruiting/ Applicant Tracking
Performance
ACA
Compliance Reporting
Workforce Management
Benefits Administration
HR/Payroll
Time & Attendance
Tax Services
Real-Time Processing
Dashboard/ Analytics
Global
Mobile Capabilities
Biometric, PC Based,
Swipe Cards
Info & Data Integration
Call Center
Dashboards /Analytics
Carrier Feed/Billing
Reconciliation
Decision Support
Eligibility/ Tracking
New Hire/ Life Event Processing
Scheduling
What Gives
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The Who
HUMAN RESOURCES
PROFESSIONALS
Reporting and
compliance
Payroll and
compensation analysis
Benefits administration
Applicant tracking,
skills inventory
FUNCTIONAL
MANAGERS
Performance
management and
appraisal
Recruitment and
resume processing
Team and project
management
Training and skills
testing
Management
development
INDIVIDUAL
EMPLOYEES
Self-service benefit
options
Career planning
Training and
development
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Workforce Analytics
Global Human Capital Trends 2015, Deloitte
2%
2%
3%
0%
1%
1%
2%
1%
53%
51%
59%
62%
61%
62%
69%
66%
36%
39%
33%
31%
33%
29%
25%
26%
9%
8%
5%
7%
5%
8%
4%
7%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
2015
2014
2015
2014
2015
2014
2015
2014
Utiliz
ing H
R
and t
ale
nt
opera
tional
report
ing a
nd
score
card
s
Conduct
ing
multi-year
work
forc
e
pla
nnin
g
Corr
ela
ting
HR d
ata
to
busi
ness
perf
orm
ance
Usi
ng H
R d
ata
to p
redic
tw
ork
forc
e
perf
orm
ance
and
impro
vem
ent
Not applicable
Weak
Adequate
Excellent
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Today’s Landscape
It’s a jungle out there
FMLA
Legal time off requirements for certain states
ACA compliance
Impacts almost 19% of the entire U.S. economy
Offering affordable coverage?
Managing 30 hour-per-week threshold
46% of mid-sized employers feel they are prepared for ACA reporting
51% of large employers feel they are prepared for ACA reporting
To obtain more information on ACA technology requirements, contact JoAnne Pettijohn [email protected]
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Investing in an HRIS and the Impact to Your HR Department Structure
―We are overworked‖ is not meaningful
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Gathering Information
What is the business problem?
What has a successful case looked like?
Consider the reading audience.
Consider the approvers’ perspective.
Who could be a champion?
Who are the implementation resources?
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What level of detail does the organization (i.e., deciders) need?
Understand company objectives.
Understand impacted business processes.
When will the major costs be incurred?
Gathering Information (Continued)
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Now what?
What if you’re reviewing a project that has already started . . .
Sunk cost - already-incurred cost that cannot be recovered
Cost savings – an action resulting in the decrease of costs in the current year
Cost avoidance – an action resulting in future spending reductions
Strategy of cost avoidance = fewer dollars for investment
What do we do with the information we have assembled?
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What Does a Successful Business Case Look Like?
SUCCESSFUL BUS INESS CASE
Clearly outlines the problem
Outlines considerations for going forward, including no action
Does not mean you get a ―Yes‖ to proceed
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Executive Summary
1
Structuring the Business Case
Business Plan
2
IRR / ROI
3
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Background and Opportunity 2
Objectives and Goals 5
Duration 7
In-Scope 7
Out-of-Scope 9
Project Phases, Activities and Deliverables 10
Project Schedule and Milestones 12
Costs 13
Internal Implementation Effort 13
Initial Software and Services Expenses 14
Initial Hardware Expenses 14
Total Cost of Ownership 14
Project Resource Requirements 15
Appendix A—Total Cost of Ownership 23
Example Table of Contents
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1 2 3 Business Case Structure
Executive Summary 1
Statement of the problem
Objectives and goals
Financial objectives
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1 2 3 Business Case Structure
Example Problem Statements
Client’s benefits administration, employee information and recruiting database are operating on an early
generation HRIS system. This server-based product is no longer sold by Vendor 1, and support services are
becoming more limited. We also have a server-based version of Vendor 1’s payroll system which is at least
two versions behind current Vendor 1 technology for server-based systems. Our time and attendance system
is so antiquated that support and maintenance have been discontinued entirely.
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1 2 3 Business Case Structure (Continued)
Example Problem Statements
Client currently utilizes Vendor for US Payroll and HR needs, and 6-7 other bolt-on systems in the US and internationally to maintain employee data and provide information needed to the appropriate recipients. The systems were implemented between 1998 and 2008 with interfacing technology, and have not been upgraded to the most recent platform. In fact, Client was notified by the vendor that the systems were being retired by June 2015, and it was necessary for them to move to a more current platform. The current system functionality is limited; it requires duplicate manual entries, significant manual intervention to generate standard reports, lacks workflow, lacks true integration of data, and does not effectively support the changing global business environment.
The current Human Resources headcount requires 22 full-time US and 5-6 internationally-based employees to support. The current system infrastructure does not allow for ease in mobile capabilities, nor does it have on-boarding, robust learning management, career development, succession planning, compensation planning, health and safety, disciplinary action management, robust reporting. As a result:
Duplicate data entry and lack of system functionality
Current processes will not scale to support business objectives
Managers and HR lack visibility into enterprise talent pools
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1 2 3 Business Case Structure (Continued)
Example of Objectives
Client has the ability to limit redundancies in data stored in multiple places and provide employees with tools to manage their information and careers.
The new technology would allow managers real-time access to their employee information, such as hours worked, salary history, organization charts, etc. The increased visibility of employee information to managers along with reduced paperwork is expected to relieve the Manager’s administrative burden.
Objectives
The primary objectives of the project are to:
Develop a more scalable infrastructure to manage growth and minimize business risk/exposure
Implement an integrated HRIS and Payroll technology solution to support Client’s business objectives and strategies
Gain process efficiencies in the employee life cycle (recruitment, onboarding, payroll administration, benefit administration, performance management, employment law compliance, and termination
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1 2 3 Business Case Structure (Continued)
Example of Objectives
Client Business Alignment
Improve operating costs
Improve productivity through increased employee satisfaction/engagement
Consistent employee experience-hire to retire—full life cycle
Guaranteed service levels with fees at risk
Process improvement opportunities
Country/Federal/State compliance of payroll standards
Minimize risk; reduce/avoid costs
Liability: tax, wage attachments, FMLA, overpayments, HR compliance, hours of service
Functional Area: Human Resources
Leverage new technologies/streamline process
Reduce operating costs
Formalized audit and control processes
Better access to data and reporting metrics
Maximize data integrity
Minimize change management impact or disruption to employee/user experience
Cost effective solution, adherence to fiscal strategy
Scalable solution—allows for business growth
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1 2 3
―Hard Cost‖ Savings
Savings from current contracts
Back-office savings via transaction automation and HR/payroll productivity
Improved accountability with headcount tracking visible to process participants
―Optimization Savings‖
Increased visibility and accountability for compliance through reporting and system capabilities
Reduced time and dollar costs in implementing business process improvements
Productivity driven by improved employee and manager self-service
―Soft Cost‖ Productivity Savings
Improved recruiting efficiencies
Improved communications to employees regarding Client benefits and compensation
Improved employee development capabilities
Improved access to secured data anytime, anywhere, with mobile functionality
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1 2 3
Business Plan 2
Business Plan
Problem statement
Stakeholders
In-scope definition
Out-of-scope definition
Desired system attributes
Rough timeline
Implementation strategy
Risks
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1 2 3
Example Problem Statements
Client Frustrations With Current Solution/Vendor
―Our biggest frustration with vendor is we do not have a dedicated person to call when we have questions. Since we do not have a specific person who knows us, we get different answers when we call in.‖
―In October, we received a letter from vendor, stating that local exemptions would no longer display on an employees pay stub if local exemptions are not used in the calculation of their income tax. The vendor deleted all the local exemptions for Non Residents even though the exemptions are used in the calculation. I called them a few times on this and was given different answers. One person told us to put a hold on our payroll, and then she would make the correction and release the payroll. The correction did not work and the payroll was never released. This caused a problem since we needed the payroll early due to the payroll manager being out of town on Thursday and Friday. On January 6th, Vendor 1 finally said it was their error but it was going to take 1 -2 weeks to correct their system. We’ve had to manually calculate one employee’s check for the first two pays in 2010.‖
―We also have a lot of issues with the general ledger. Back in August of 2009, our custom settings setup was deleted. In September, our ETS to us flag was turned off. The accrual days for January 2010 were calculated incorrectly. We will manually have to make the adjustments for this. The vendor cannot explain why these happened on their end.‖
Business Plan
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1 2 3
Stakeholders Example
Business Plan
VENDOR SELECTION, MEETINGS, AND PROJECT TEAM Project Team Name Client SVP, Human Resources
Name Client Division Head
Name Client Manager, Payroll
Name Client Manager, Benefits
Name Client Manager, Compensation
Name Client Human Resources Admin II
Name Client Payroll Assistant Manager
Name Client Manager IV
Name Client Controller
Name Client Director of Tax/Reg. Reporting
Name Client Supervisor
Name Client Manager IV
Name Client Manager III
Name Vendor Consultant
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1 2 3
Example In-Scope Definition The following activities are in scope for the project:
HR
HR System Implementation
HR System Initial Conversion—defining program
HR System History Conversion
HR System Interfaces
Employee Self Service
Manager Self Service
Payroll
Payroll System (integrated with HR)
Payroll Processing
Tax Filing
Learning Management
Learning Management Functionality
Learning Management Interfaces
Time & Attendance
Time & Attendance System
Time & Attendance Initial Conversion
Time & Attendance Interfaces
Health & Welfare
Web Enrollment
Initial Conversion
H&W History Conversion
Other
SaaS Solution
Total Comp Statements
Single Sign On
Reporting
Business Plan
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1 2 3
Example Out-of-Scope Definition The following activities are out-of-scope for the project:
Leave of Absence Management—Performed by outside third party
LOA Initial Conversion
LOA History Conversion
LOA Interfaces
QMCSO Qualification
Unemployment Compensation Services—Performed by outside third party
Paper Fulfillment—Web enrollment will be utilized
FSA Administration—Performed by third party
Call Center—Employees are supported by internal Benefits group
Historical benefits and payroll data prior to 1 year—Difficult to convert; will ensure data is available electronically
Business Plan
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1 2 3
Example Desired Systems Attributes
Data Integrity
Ability to pull reporting across HCM business process functions (HR, Payroll, Benefits, PTO)
Decision-ready analytical tools for organization insight and benchmarking
Enhanced Benefit Administration Solution integrated with Payroll providing eligibility, status tracking, enrollment and flexible reporting
Mitigate Risk/ACA Compliance
Built in conformity based on Health Care Reform/ACA Regulations to ensure compliance
Provide PTO visibility to employees for accurate point in time balances, earned projections, and corporate liability reporting
Audit trails to minimize risk exposure
Tighter Integration to Eliminate Leakage and Redundancies
Single HCM vendor to minimize internal IT resource burden (i.e., no longer managing interfaces to third-party Benefit vendors and maintaining PTO accrual calculations)
Managed real-time data integration across HR, PR, Benefits, PTO, and Leave to ensure integrity and streamline processes
Proper controls for tracking and calculation to avoid costly unforeseen PTO liabilities
HR, Benefits & Payroll staff efficiency gains with investment in automated processes and integrated technology
Business Plan
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1 2 3
Example Implementation Strategy
The start date of the project implementation is January 2013. The overall project duration is expected to be approximately 8 months, with a targeted cutover and ―go live‖ for the first phase by June 1, 2014.
Testing/training will occur during the month prior to ―go live.‖
Full details of project plan and milestones to be provided by contracted vendor/Project Manager once confirmed/finalized.
Business Plan
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1 2 3
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1 2 3
Risks Example
The vendor is rolling out a new version of the software one month after go-live
The project manager is scheduled to be out of the office unavoidably for two months of the implementation
Full details of the project plan are not available until the consultant is hired
Business Plan
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Internal Rate of Return (IRR) Return on Investment (ROI)
Both risk assessment rates help determine whether to undertake project
IRR – focused on risk compared to outside market or internal projects
ROI – is the project effort is worth its cost?
Gains / Savings and Costs are used in both rate calculations
Gains / Savings Difference between existing contract and anticipated contract
Reduced hours from current processes
Reduced headcount
Cost Cost of application and hardware
Implementation hours for vendor and internal resources
IRR, ROI 3
1 2 3
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IRR
Example
1 2 3
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IRR
Example
3 2 1
Cost, Savings Per
Yr Calculation
Initial expense ($8,365,062.00)
Savings year 1 $3,032,166.00
Savings year 2 $3,032,166.00
Savings year 3 $3,032,166.00
Internal Rate of Return 4.31133% =IRR(e24:e27,5%)
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Internal Rate of Return (IRR) Return on Investment (ROI)
Both risk assessment rates help determine whether to undertake project
IRR – focused on risk compared to outside market, internal projects.
ROI – is the project effort / investment worth its cost?
Return on Investment = ((gain from investment – cost of investment)/cost of investment) x 100
1 2 3
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Cost Implications Avoided Expense/
Savings Impact of Risk
Benefit Leakage: Untimely & disconnection in data exchange between Enrollment Tools and Carrier’s employer’s experience ―cost leakage.‖ Benchmark Data: 5% average benefit leakage.
5% of benefit cost
TBD
ACA Penalties: Penalties can range from $100/day for noncompliance to $2,000 penalty per employee for not offering appropriate coverage or $3,000 for each employee receiving a subsidy at an Exchange.
TBD
Workload/Staffing Consideration: ACA regulatory requirement burdens will add workload to HR for tracking look-back periods, research IRS penalties, potential audits, set up and manage reporting for DOL and Exchanges. Estimate one FTE fully burdened-$60,000.
$60,000
Leave Management: Companies that do not automate leave management grant their employees an average of 1.25 extra unearned days off per year, costing approximately $125,000 for every 500 employees The average cost to defend an FMLA lawsuit is $78,000, regardless of outcome; The average verdict for wrongful termination in FMLA cases is approximately $335,000.
$1.6M
1 2 3 ROI
Example
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2 ROI
Return on Investment:
Our project would appear to have a positive Net Present Value (NPV) when the savings from automating Time & Attendance are factored in. Full details of two independent studies are included in Appendix A that conservatively point to an estimated annual cost avoidance and cost reduction of ~$547,000. Compared to the costs, it would appear this project would provide a quick return on investment.
Reduced Payroll Error = $251,256.00
Reduced Payroll Inflation = $265,757.00
Increased Process Efficiency = $25,730.00
Annual Savings = $540,723.00
Savings expected over 5 years* = $2,575,953.00
See Appendix A for additional details and assumptions behind these calculations
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Example
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Example
Increased Process Efficiency
Improved Productivity—Because the selected vendor’s solution integrates time and attendance recording with payroll systems, managers and payroll accountants no longer need to collect, check, authorize and transfer data from employees’ time sheets or time cards. Current staff effort to handle time collection, time cards, and the re-work associated with missing data, etc. is 16 hours every 2 weeks.
16 hours x 26 pay periods = 416 hours that can be saved. If a $20 per hour wage estimate is used this cost savings would be $8,320.
Paperless Payroll/Reduced Paper costs—savings on the W-2’s (available through self-service), paper checks, timecards, etc. At least 8 hours has been identified by the HR team as currently being invested each pay period in paper management activities that would be eliminated including sorting and mailing paper pay advices.
Again, if we use the $20 per hour wage, we are looking at a cost reduction of $4,160.
We would no longer provide paper pay vouchers or W-2’s saving $13, 250
ROI 1 2 3
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Thank you for attending.
Questions?
Wendy Dayton - [email protected]
Stacie Engelmann - [email protected]
g\lbg\2015\hr tech and outsourcing practice\webinar.pptx\#5400
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Our Mission
To be the worldwide value and service leader in insurance brokerage, employee benefits, and risk management
Our Goal
To be the best place to do business and to work
www.lockton.com
© 2015 Lockton, Inc. All rights reserved.
Images © 2015 Thinkstock. All rights reserved.