managing cost and realising benefits from your sap hcm or other hr system

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Strategies for Assessing the Costs and Realizing the Benefits of Your HR Technology Investments

Mr. Sven Ringling iProCon

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In This Session ...

•  We’ll introduce a process for an HR-IT Portfolio Review, helping you to: !  Fully understand the nature and benefits of spending on SAP

ERP HCM and other HR systems in your organization !  Increase efficiency and reduce cost !  Focus investment on where it delivers the highest business

benefit !  Follow through on planned results to realize benefits

•  You’ll learn to use simple tools to help you through the process •  You’ll understand the change management issues bespoke to this

process and learn how to tackle them •  We’ll demonstrate the benefits of Portfolio Review using real

world examples – with a focus on cost reduction

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What We’ll Cover …

•  HR-IT portfolio review: Purpose and process •  Setting the scene: Business objectives and planned spending •  The analysis: Understanding benefits and cleaning the portfolio •  The results: Realizing benefits •  Making it happen: Change management issues •  Wrap-up

The Crisis Is Over — So, Why Bother?

•  Short-term cost cutting •  Projects just postponed or cancelled •  Resource reduction without real changes – often at cost of maintenance &

quality •  Doing less with less

Crisis years triggered emergency action only

•  Crisis no longer an excuse for low service level, but stay below former level •  Doing more with less •  Outsourcing as a long-term option

Sustainable efficiency improvement required

•  To start spending on HRIS again, business leaders need to be convinced by clear business benefits

Business benefits expected

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Some Data

•  10% to 25% of IT investment is wasted * •  iProCon research **

!  30% over budget !  4.3 months late !  61% fail to meet expectations !  Indicates decreasing quality of

HRIS projects

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* CIO Executive Board Annual IT Budget and Spending Survey, 2008

** Survey of HR Directors, Chief Information Officers and Programme Leaders from SMEs to FTSE/NYSE listed organizations regarding the effectiveness of their HRIS projects. Averaged results shown.

What Drives Overspend

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Requirements wrong or unclear

Project scope mis-

understood

Inappropriate/lack of HRIS

strategy

Lack of stakeholder involvement

Benefits unclear or intangible

Stakeholder priorities not addressed

Budget spent for the sake of

spending it

Benefits not realized

Delivery Problems “How”

Prioritization “What”

Overspend

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The Portfolio Review Process

Clarify objectives

Categorize HR-IT spend

Define benefits

Clean up portfolio

Identify opportunities

Benefits realization

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Preparation

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Define the Objectives of the Portfolio Review

•  In general, the objective always is to align HR-IT spending with strategic requirements

•  Main focus can be on: !  Refocus existing spend on business priorities !  Keep cost low

•  With a focus on cost, observe the following parameters: !  Time horizon for savings

!  Post-crisis, the objective usually isn’t short-term cash flow improvement, but keeping a sustainably low cost base

!  What needs to be ring fenced, because !  It clearly supports strategic objectives !  It’s based on statutory requirements

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Result of Step 1

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Clarify objectives


Define benefits

Clean up portfolio



•  We know why we are doing the review and how we can deliver business benefit

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Understand the Nature of HR-IT Spending

•  Spending on SAP ERP HCM can serve a variety of purposes !  Implementing a new process to improve the effectiveness of

people management in the organization !  Making a process more efficient !  Complying with statutory requirements !  Learning about new potentially very useful technologies !  Making something look nicer !  Using up the budget

•  Understanding what category a project belongs to helps to understand what results can be expected and where saving opportunities might be found

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Structure of the Portfolio

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Creating Business Value (e.g., e-recruitment, BW for

line managers, learning solution, performance

management)

Exploration (e.g., Web 2.0 integration,

e-learning content in virtual reality)

Must Have (e.g., correct payroll and benefits, e-filing, EEO reporting, data privacy)

Driving Efficiency (e.g., ESS applications, leave

request workflow, report automation, user interface

optimisation)

SAP ERP HCM Investment

Portfolio

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Result of Step 2

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Clarify objectives


Define benefits

Clean up portfolio



•  You know how your HR-IT budget is spread over the four categories

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Bespoke Approaches to Understanding Benefits

•  For each box of the portfolio you need a bespoke approach to understand the benefits !  “Creating Business Value”: Which stakeholder requirements

are satisfied? !  “Exploration”: What could be extremely important tomorrow? !  “Must Have”: What exactly is it that is legally required or

otherwise mandatory? !  “Driving Efficiency”: What exactly are the expected savings and

how are they realized? By when will they be realized? •  Benefits are often vague

!  It is not always possible to put a ! sign onto each project !  However, always ask for the clear link between the project and

the benefit

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SAP ERP HCM Is a Deliverable, Not a Business Benefit

Delivering a System can never be the

aim!

Changing a process can never be the

aim!

Always aim at business benefits!

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“Creating Business Value”

•  Anything allegedly creating business value must satisfy the requirement of a stakeholder. Examples include: !  User friendly e-recruiting platform makes candidates happy !  Line managers need an intuitive headcount reporting tool !  The Sales Director needs a quick and efficient way to train the

sales force in new products !  Peter S. might fancy the pay slip sent to his iPhone

•  The value is determined by two factors: !  How important is that stakeholder? !  How important is the requirement for this stakeholder?

•  These questions cannot be answered generically, but only when put into the context of your organization

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Prioritization

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Stakeholder Power

Impo

rtan

ce to

Sta

keho

lder

Low

M

ediu

m

Hig

h

Low Medium High

• Print EEO data into paper forms

provided (local council)

• Colour print on pay slip

(CEO)

• Improved usability in Self-Service

(union) • Improve customer

service (line managers)

• Quick and transparent decision

process for hiring (candidates)

• Speed up money transfer

(union)

• New set of employee data

in e-filing (tax authority) • Improve sales per

employee (line managers)

• Easy to use Recruitment site

(candidates) • Expand to Russia (Executive Board)

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“Exploration”

•  Projects in this box do not deliver value immediately, but may or may not do so in the future

•  They are necessary to be able to master a potentially very important task in the future

•  How important they are depends on three factors: !  What is the value they are able to create, if they succeed? !  How likely is it that they succeed? !  How important is it to take the lead rather than waiting for

others to master the technology and just follow •  Examples:

!  If you are selling complex products with a short product life cycle in tight competition, being the first to use the latest e-learning technology for sales force training can give you a strong advantage over your competitors

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“Must Have”

•  This category comprises items that cannot be argued about because they are required by law or otherwise indispensible

•  However, it tends to be overused, because: !  Legally required processes are over-delivered on !  Big chunks of the budget are ring fenced, even if only a small

part of it is really based on statutory requirements: !  E.g., While core payroll is legally required not every !

invested in a payroll system is really serving mandatory tasks !  HR shies away from discussions with the authorities when they

ask for more than the law entitles them to !  It’s just an easy excuse for spending and requires no rigorous

business case •  Challenge projects allegedly sitting in this box!

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“Driving Efficiencies”

•  This is about saving money •  While this sounds straight forward, these kind of projects very

often fail to deliver !  Savings are defined vaguely !  Savings are spread out too thin to be tracked !  Nobody is responsible for making the savings happen

•  “500 assistants across the organization will save 1 hour per week” is something nobody can prove and rarely leads to real savings

•  Short-term payback usually comes from this category only

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Result of Step 3

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Clarify objectives


Define benefits

Clean up portfolio



•  For each project or work stream, the business benefit they deliver is clear

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How to Allocate

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Creating Business Value

Exploration

Must Have

Driving Efficiency

SAP ERP HCM Investment

Portfolio

Growth mid/long term

Growth, Innovation long term

Always do the minimum

Cost cutting short/mid

term

Cleaning Up

•  Focus on the strategic objectives of the review •  Eliminate projects, which

!  Don’t show a clear line of sight from the investment to the business benefit

!  Don’t provide benefits fitting the strategic objectives and timeframe

!  Nobody takes responsibility to deliver the benefits

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Result of Step 4

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Clarify objectives


Define benefits

Clean up portfolio



•  Resources are allocated according to business priorities

•  Initiatives with no clear business benefit are scrapped, even if this leaves budget unused

•  Moment of truth for change management!

New Opportunities

•  Reallocate funds saved !  To opportunities promising better benefit !  But only if this new opportunity fits the objectives (e.g., short-

term cost reduction) !  Never reallocate funds just because they are there

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Result of Step 5

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Clarify objectives


Define benefits

Clean up portfolio



•  Funds freed up in the previous step are reassigned to more value-adding activities

•  Where no value adding activities can be found, these funds need to be given back

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Move Benefits from Paper into Real Life!

•  Project success is not defined, when: !  All the budget has been consumed !  SAP ERP HCM “implemented” in time and in budget !  The system test has been successful !  Pilot users use the new process in SAP ERP HCM !  All users use the new process in SAP ERP HCM

•  The only measures of the success of a project are: !  Whether the benefits have actually materialized !  Whether this was achieved in time and in budget

•  Somebody needs to be responsible for the benefits !  IT usually cannot take the lead on this !  In most cases HR must be responsible with IT in a support role

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Tracking Benefits Realization

Benefit Description Measurement Responsible Cut FTE in leave data maintenance

Volume of manual work in leave data is reduced by 95% so that 1 FTE can be saved

One FTE less in transactional HR

Manager “HR Administration & Payroll”

Train sales stuff faster in new products

Availability and monitoring of e-trainings for sales staff allows them to learn features and sales scripts for new products twice as fast

95% of sales staff are trained in every new product within 1 month of release of 1st specimen of the product

Each Regional Sales Director

Reduce time to hire Selection process is speeded up

Time to hire for vacancies reduced from 3 months to 2 months in the UK and from 5 months to 3 months in France & Germany

HR Director Hiring managers

…

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The Benefits Network

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What are the required changes to improve

the processes?

What are the precise benefits we are

seeking?

What infrastructure changes are required

to support the IT?

What IT support will be required to support

these changes?

Which processes will deliver the identified

benefits?

Infra-structure

IT Appli-

cations

Business Change Process Benefits

Strategic Purpose

Example for Benefits Network

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Advertise expat positions on

internal platform

E-recruiting platform Attraction

Expats for Russia identified

quickly

Provide quality staff for Russia

quickly

IT Applications

Business Change Process Benefits Strategic

Purpose

Attract best candidates worldwide

Selection

Expat Management

Corporate database of

potential expats

Provide easy-to- use global

talent portal

Advertise all jobs on

talent portal

Simultaneous access to appl. by managers

Offer pre-arranged slots for interviews

Best fit for expats

Attract many Russian

candidates fast

Improved employer brand

(Russia and globally)

Reduce decision time

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Process Changes Required

•  Which process changes are required to deliver the benefit?

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Process As is To be Selection • Applications are directed only to line

managers of departments candidate explicitly asked for

• Screening by line managers is sequential

• Rarely transferred between countries • Unsolicited applications are not pre-

screened until position is available •  Interview arrangements take a long

time due to difficulty to arrange with line managers

• All applications are pre-screened and assessed by HR immediately

• Several line managers can check one application at the same time

• Hiring line managers offer slots for interviews, when they send a requisition. When candidates apply for a position they have already been asked which of these slots they would prefer to interview for.

…

…

Tasks to Deliver Process Changes

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Task Actions Issues Deliverable Define and implement process to pre-arrange interview times

• Discuss process with choice of line managers, assistants, and recruiters

• Provide respective screen to capture the data in requisition and application

• Explain advantage to applicants online

• Provide integration with Microsoft Outlook

• Advertise new process with line managers and assistants

• Train assistants •  Adapt process documentation

• Line managers may not commit to time slots

• Assistants may feel disempowered

• Process may seem too complicated for candidates

• SAP solution has to be enhanced

• MS Outlook integration is technologically challenging

• System available to pre-arrange time slots for interviews and staff trained and ready to use it

…

…

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Result of Step 6

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Clarify objectives


Define benefits

Clean up portfolio



•  You can demonstrate which initiatives delivered which business benefits

•  Progress is tracked and benefits realization is actively managed from a programme management level, if necessary

When to Celebrate Project Success?

•  Celebrating successes !  Is important for employee engagement !  Sets a clear sign, what the real objectives are

•  Celebrate the go-live of a system? !  Yes, because it is an important achievement and provides

timely reward !  However, it must be clear that it is just one milestone

!  Celebrate it like other milestones (e.g., blueprint approval) •  When does the project end?

!  The project only ends once the benefits have been delivered !  Keep it on the portfolio, track it, and hold the project manager

accountable until this is achieved !  Have a big project-success party!

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Forces of Change and Resistance

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Supporting change

Resisting change

Status quo

Intransparency

Ego

Fear

Pressure on cost

Reason

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The Irresistible Power of a Clear Line of Sight

•  Insights provided: !  Having gone through the exercise of assigning all projects to

the four boxes clearly shows benefits (or lack of them) !  The benefits network makes clear which changes are required

to achieve business results !  To set the scene, everybody needs to understand what the

overall strategic objectives are •  These discussions usually lead to the required change naturally,

while getting a maximum amount of commitment •  However:

!  A big chunk of the change is about killing projects, which is always very painful

!  The strongest resistance will occur in the very beginning to stop you from starting the process

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The Importance of Being Frank

•  You must promote open communication about: !  The status of running projects !  The real benefit that can be expected !  Concerns about the value of projects !  Risks

•  Some ways you can do this !  Leadership team in HR and IT come forward with mistakes

they made !  Use facilitation tools like the “six thinking hats”

!  You can adjust it to have five hats, each arguing for one of the boxes and one arguing for no benefit at all

!  In the long run: Promote a culture of open and pro-active communication

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Reduce the Risk for Sinners to Convert

•  You can expect many projects hiding in the “Driving Efficiencies” box, where a certain savings is projected, but not clear how it can be tracked

•  It is important that you get these doubtful “investments” off your portfolio

•  A proven change management trick: !  Explain how you expect savings to be tracked and proven !  Give project owners two weeks to revisit their business cases

and adjust projected savings – no questions asked !  Make it clear that after these two weeks they will be measured

against their projections !  You’ll probably get some adjusted business cases and be able

to take some initiatives off your portfolio based on the new numbers

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Zero-Based Budgeting

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Spend less this year

Get reduced budget next

year

Get blamed for blowing new budget

•  If the new budget is always a percentage of the budget used last year, those who don’t spend all of it are punished !  Set budgets based on the future, not based on history !  Encourage managers to give budget back that they don’t need

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Base Your Culture on Business Value

•  Changes made through policies, objectives, budgets, etc. don’t last, unless !  The new way becomes “how we do things around here” !  Basic assumptions and mindsets are changed about

!  What makes us successful? !  What is dangerous and what is feasible?

•  In IT teams you often find a culture valuing !  State of the art technology, perfect systems, … !  Maybe even project success, new processes, happy users

•  However, core values should comprise: !  Delivering a tangible benefit for the business !  Creating shareholder value and satisfying other stakeholders

•  This is a long shot! 42

Forces of Change and Resistance

Supporting change

Resisting change

Understanding of business benefits

Culture

Budgets based on future needs

Transparency & openness

Ego

Fear

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What Can Be Achieved

•  Example: A manufacturer with 5,000 employees and an SAP ERP HCM budget of 420.000 ! (internal IT + consultants) !  Objective: Cost reduction on short term !  Portfolio review:

!  1 week intervention + 1 day review after 1 month (approximately 15k)

!  Developed portfolio in four categories and set up benefits tracking tool

!  Got buy-in from stakeholders !  Set up as an ongoing process

!  Results in year one: !  Savings of 60.000 ! from initiatives killed !  100.000 ! of postponed investment as not delivering timely

benefits. Up for review in 2 years. 44

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Resources

•  HR Expert – April 2009 !  Kieren Beltrame and Sven Ringling, “Structured Portfolio

Review Reduces SAP ERP HCM Costs and Increases Returns” (HR Expert, April, 2009).

•  The Six Thinking Hats method: !  http://en.wikipedia.org/wiki/Six_Thinking_Hats

•  iProCon HCM Insight newsletter: !  www.iprocon.co.uk/nl

•  John Ward and Elizabeth Daniel, Benefits Management: Delivering Value from IS & IT Investments (John Wiley & Sons, 2005).

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7 Key Points to Take Home

•  Benefits of HR-IT spending are often unclear •  A rigorous portfolio review usually saves a significant amount

without losing important benefits •  Before you start the review, you must be absolutely clear about

the strategic objectives •  Sorting all HR-IT spending into four categories helps to

understand the intended benefits and identify saving opportunities

•  The category of “Driving Efficiencies” is often abused, as projects have explicit saving objectives, but they are never really followed through

•  Make the delivery of tangible benefits your paramount priority – it is not about delivering systems or changing processes

•  Such a review is threatening for some people, so you need good change management to implement it

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Your Turn!

How to contact me: Sven Ringling

[email protected]

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