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Managing cost and realising benefits from your SAP HCM or other HR system

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Conference presentation: clear process to clean up the investment portfolio from any HRIS (HR information system) using SAP HCM as an example. How to reduce cost and maximise benefits from IT in HR.

Conference presentation: clear process to clean up the investment portfolio from any HRIS (HR information system) using SAP HCM as an example. How to reduce cost and maximise benefits from IT in HR.

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  • 1. Strategies for Assessing the Costs and Realizing the Benefits of Your HR Technology Investments Mr. Sven Ringling iProCon © 2010 Wellesley Information Services. All rights reserved.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 1 1
  • 2. 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 2The Crisis Is Over — So, Why Bother? Crisis years triggered emergency action only •  Short-term cost cutting •  Projects just postponed or cancelled •  Resource reduction without real changes – often at cost of maintenance & quality •  Doing less with less Sustainable efficiency improvement required •  Crisis no longer an excuse for low service level, but stay below former level •  Doing more with less •  Outsourcing as a long-term option Business benefits expected •  To start spending on HRIS again, business leaders need to be convinced by clear business benefits 3 2
  • 3. 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 * 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. 4What Drives Overspend Overspend Delivery Problems Prioritization “How” “What” Project scope Requirements Benefits Stakeholder mis- wrong or unclear or priorities not understood unclear intangible addressedInappropriate/ Lack of Budget spent Benefits not lack of HRIS stakeholder for the sake of realized strategy involvement spending it 5 3
  • 4. The Portfolio Review Process Clarify Preparation objectives Categorize Benefits HR-IT spend realization Define Identify benefits opportunities Clean up portfolio 6What 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 7 4
  • 5. 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 8Result of Step 1•  We know why Clarify we are doing objectives the review and how Categorize Benefits HR-IT spend we can realization deliver business benefit Identify Define benefits opportunities Clean up portfolio 9 5
  • 6. 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 10Structure of the Portfolio Creating Business Value Exploration (e.g., e-recruitment, BW for (e.g., Web 2.0 integration, line managers, learning e-learning content in solution, performance virtual reality) management) SAP ERP HCM Investment Portfolio Driving Efficiency Must Have (e.g., ESS applications, leave (e.g., correct payroll and request workflow, report benefits, e-filing, EEO automation, user interface reporting, data privacy) optimisation) 11 6
  • 7. Result of Step 2•  You know Clarify how your objectives HR-IT budget is spread Categorize Benefits HR-IT spend over the realization four categories Identify Define benefits opportunities Clean up portfolio 12What 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 13 7
  • 8. 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 14SAP ERP HCM Is a Deliverable, Not a Business Benefit Delivering a Changing a Always aim at System can process can business never be the never be the benefits! aim! aim! 15 8
  • 9. “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 16Prioritization Stakeholder Power Low Medium High • Print EEO data • Colour print into paper forms Low on pay slip provided (CEO) (local council) Importance to Stakeholder • Quick and Medium • Improved usability transparent decision in Self-Service • Improve customer process for hiring (union) service (line managers) (candidates) • New set of employee data • Easy to use • Speed up in e-filing (tax authority) Recruitment site High money transfer • Improve sales per (candidates) (union) employee • Expand to Russia (line managers) (Executive Board) 17 9
  • 10. “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 18“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! 19 10
  • 11. “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 20Result of Step 3•  For each project Clarify or work stream, objectives the business benefit they Categorize Benefits HR-IT spend deliver is realization clear Identify Define benefits opportunities Clean up portfolio 21 11
  • 12. How to Allocate Creating Business Value Exploration Growth Growth, mid/long term Innovation SAP ERP HCM long term Investment Always do the Portfolio Cost cutting minimum short/mid term Must Have Driving Efficiency 22Cleaning 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 23 12
  • 13. Result of Step 4•  Resources are allocated Clarify according to business objectives priorities Categorize•  Initiatives with Benefits HR-IT spend no clear realization business benefit are scrapped, even if this leaves budget Identify Define benefits unused opportunities•  Moment of truth for Clean up change management! portfolio 24New 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 25 13
  • 14. Result of Step 5•  Funds freed Clarify up in the previous objectives step are reassigned Categorize Benefits HR-IT spend to more realization value-adding activities•  Where no value Identify Define benefits adding activities opportunities can be found, Clean up these funds need portfolio to be given back 26What 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 27 14
  • 15. 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 28 Tracking Benefits RealizationBenefit Description Measurement ResponsibleCut FTE in leave data Volume of manual work in One FTE less in Manager “HRmaintenance leave data is reduced by transactional HR Administration & Payroll” 95% so that 1 FTE can be savedTrain sales stuff faster in Availability and 95% of sales staff are Each Regional Salesnew products monitoring of e-trainings trained in every new Director for sales staff allows them product within 1 month of to learn features and release of 1st specimen sales scripts for new of the product products twice as fastReduce time to hire Selection process is Time to hire for vacancies HR Director speeded up reduced from 3 months to Hiring managers 2 months in the UK and from 5 months to 3 months in France & Germany… 29 15
  • 16. The Benefits Network What infrastructure What are the required What are the precise changes are required changes to improve benefits we are to support the IT? the processes? seeking? IT Infra- Business Strategic Appli- Process Benefits Purpose structure Change cations What IT support will Which processes will be required to support deliver the identified these changes? benefits? 30 Example for Benefits Network IT Business Strategic Process BenefitsApplications Change Purpose Advertise expat Expats for positions on Russia identified internal platform Expat quickly Management Corporate Best fit for database of expats Provide quality potential expats staff for Russia quickly Provide easy-to- Attract many use global RussianE-recruiting talent portal candidates fast platform Attraction Advertise all Improved jobs on employer brand talent portal (Russia and globally) Attract best Simultaneous candidates access to appl. worldwide by managers Reduce decision Selection time Offer pre- arranged slots for interviews 31 16
  • 17. Process Changes Required •  Which process changes are required to deliver the benefit? Process As is To be Selection •  Applications are directed only to line •  All applications are pre-screened and managers of departments candidate assessed by HR immediately explicitly asked for •  Several line managers can check one •  Screening by line managers is application at the same time sequential •  Hiring line managers offer slots for •  Rarely transferred between countries interviews, when they send a •  Unsolicited applications are not pre- requisition. When candidates apply for a screened until position is available position they have already been asked •  Interview arrangements take a long which of these slots they would prefer to time due to difficulty to arrange with interview for. line managers … … 32 Tasks to Deliver Process ChangesTask Actions Issues DeliverableDefine and implement •  Discuss process with choice •  Line managers may not •  System available toprocess to pre-arrange of line managers, assistants, commit to time slots pre-arrange timeinterview times and recruiters •  Assistants may feel slots for interviews •  Provide respective screen to disempowered and staff trained capture the data in requisition •  Process may seem too and ready to use it and application complicated for •  Explain advantage to candidates applicants online •  SAP solution has to be •  Provide integration with enhanced Microsoft Outlook •  MS Outlook integration •  Advertise new process with is technologically line managers and assistants challenging •  Train assistants •  Adapt process documentation…… 33 17
  • 18. Result of Step 6•  You can demonstrate Clarify which initiatives objectives delivered which Categorize Benefits HR-IT spend business realization benefits•  Progress is tracked and Identify Define benefits benefits realization opportunities is actively managed Clean up from a programme portfolio management level, if necessary 34When 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! 35 18
  • 19. 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 36Forces of Change and Resistance Supporting Resisting change change Fear Ego Reason Intransparency Pressure on cost Status quo 37 19
  • 20. 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 38The 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 39 20
  • 21. 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 40Zero-Based Budgeting Get reduced Get blamed Spend less budget next for blowing this year year 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 41 21
  • 22. 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! 42Forces of Change and Resistance Supporting Resisting change change Transparency & openness Budgets based on future needs Fear Culture Ego Understanding of business benefits 43 22
  • 23. 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. 44What 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 45 23
  • 24. 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). 467 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 47 24
  • 25. Your Turn! How to contact me: Sven Ringling s.ringling@iprocon.co.uk 48DisclaimerSAP, R/3, mySAP, mySAP.com, SAP NetWeaver®, Duet®, PartnerEdge, and other SAP products and services mentioned herein as well as theirrespective logos are trademarks or registered trademarks of SAP AG in Germany and in several other countries all over the world. All other productand service names mentioned are the trademarks of their respective companies. Wellesley Information Services is neither owned nor controlled bySAP. 49 25

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