Building a Business Case for an Automated Time and Attendance Solution. Jim Manfield Product Marketing Manager

Transcription

1 Building a Business Case for an Automated Time and Attendance Solution Jim Manfield Product Marketing Manager 1

2 The Workforce Institute at Kronos Survey Majority of employees believe their employers had violated overtime rules Employees are aware of the rules Overtime is very common High numbers of hourly employees are required to work overtime 2

3 The Workforce Institute at Kronos Survey Seeing that significant numbers of employees around the world believe their employers have violated overtime laws should serve as a wake-up call to employers everywhere. If your employees perceive that you are out of compliance, you are at risk for a wage-and-hour lawsuit which can be incredibly costly even if you are ultimately found to be in compliance. Investment in wage and hour compliance should be seen as part of risk management for any smart business. - Paul DeCamp, national chair, wage and hour practice, Jackson Lewis LLP, and former Administrator of the U.S. Department of Labor s Wage and Hour Division 3

4 The Workforce Institute at Kronos Survey If employees perceive that their employer is out of compliance, that employer is at risk. A key way for an organization to protect itself from wage and hour lawsuits is to have an automated way to keep track of time worked. - Joyce Maroney, director of the Workforce Institute, Kronos 4

5 What is a Business Case? KRONOS FOR SERVICES & DISTRIBUTION 5

6 A Business Case A business case is a decision support and planning tool that projects the likely financial results and other business consequences of an action. - Marty J. Schmidt, The Business Case Guide A Business Case Needs to Show: Financial benefits to your organization Business problems that will be solved, including nonquantifiable business improvements 6

7 Core Components of a Business Case Discovery Conduct a business review Thorough understanding of your organization and the impact of your current processes and systems Uncover organizational pain points Approach Mapping of your current processes, systems, business issues and needs Identify gaps between your current state and desired end state Assessed value of approach Defines and quantifies the financial and business value Roadmap Determines the best way to implement your solution Identify all costs involved 7

8 Build the Business Case KRONOS FOR SERVICES & DISTRIBUTION 8

9 Main Areas of Focus Subject What are you investigating? What is the main component, process, or system being examined? What action needs to be taken? Business issues What are the driving factors, issues and objectives? Objectives What business opportunities could the organization take advantage of by going forward with the project? What threats could be eliminated or mitigated? This section must convincingly answer the question: Why should the organization spend its time and money investigating and implementing the proposed solution? 9

10 Business Driver Checklist What do you see in your organization? Increase compliance and control Reduce payroll error Reduce costs Eliminate missing or late timesheets and punches Manage absenteeism and tardiness Promote employee satisfaction with consistent attendance policy enforcement Improve business visibility through labor reporting Boost productivity 10

11 How to Build your Team? KRONOS FOR SERVICES & DISTRIBUTION 11

12 Identify Key Stakeholders Sponsor Typically an executive within the functional organization who is driving the case for change CFO, CHRO or CIO is often the sponsor Business owner(s) Bears the highest accountability for demonstrating and selling the business case Director/VP of payroll and/or Director/VP of HR Steering committee Typically 3 to 6 participants Should be well-known and respected Project team Will build the business case 12

13 Assess the Scope KRONOS FOR SERVICES & DISTRIBUTION 13

14 Scope Considerations Functions and processes: what to automate? Timekeeping Payroll Time and labor reporting Labor and contingent labor expense management Labor expense allocation Labor utilization Machines and equipment Productivity analysis Vacation and paid time off (PTO) management Leave management Accrual management 14

15 Scope Considerations Organizational units: who benefits? Relatively straightforward if you operate out of a limited number of facilities or within a narrowly defined geographic area More complex organizations need to identify which areas you wish to target in the business case Enterprise wide initiatives can demonstrate greater benefits, it s not unusual to being with a pilot to demonstrate success and take advantage of quick wins Time horizon: when will you realize benefits? how will they be measured? Accurately define the timeframe Returns should be measured over a minimum 3 year period Permits you to realize full value and yields more favorable results 15

16 Discovery: Conduct the Business Review KRONOS FOR SERVICES & DISTRIBUTION 16

17 Things to Think About Policies, processes, systems, and technical infrastructure Issues, constraints, opportunities, and business threats Alignment with strategic and corporate goals Alignment with departmental and operational goals Attainment of operational performance metrics Cost of operations and variance from budget Cost of operations and variance from industry benchmarks Critical, organization-wide business issues 17

18 Things to Gather Existing documentation: policies, processes, systems, management reports Interviews with representatives from all primary areas involved in your time and attendance process Process review and analysis Demographic and financial data Operational metrics and reports Process and compliance audits Industry operational benchmark statistics 18

19 Current State Interviews All levels of management Individuals involved in administering each functional process Individuals responsible for creating the policies Essential elements Documentation review and analysis Interviews Process review and analysis Data review and analysis Operational metrics and reports Process and compliance audits Industry operational benchmark statistics 19

20 Documentation Review and Analysis Policy Work rules, pay rules, leave rules, bargaining unit agreements Execution Work management: changes to schedules, shifts, jobs, lines Timekeeping and payroll management: punch to payroll Payroll: manual checks and prior period adjustments PTO: requests, approvals, accruals Leaves: requests, approval, accruals Attendance: absence, tardiness, long breaks, early departures Systems infrastructure Current applications (if automated at all): functions, features, requirements, interfaces Current technical infrastructure: primary architectural platform and systems Management reporting Who is or isn t on premises as scheduled? Missed punches and punch control 20

21 Interviews Executives, then payroll and HR, then operations Better understanding of corporate objectives and issues Things to think about Labor management issues Timekeeping and pay practices: Attendance and absence management practices Management reporting 21

22 Process Review and Analysis Document graphically if possible All players involved in each process All steps involved in each process All costs involved within the scope under review 22

23 Data Review and Analysis Absenteeism rate Average salary and wage dollars Contingent labor expense dollars Employee and bargaining unit grievances Employee counts Leaves of absence Overtime dollars Paper timesheet costs Payroll dollars Payroll error rate Payroll manual checks 23

24 Operational Metrics and Reports Within each functional area, look for: High labor expense High variance from budget High levels of overtime High contract labor expense These represent good targets for an automated time and attendance solution 24

25 Process and Compliance Audits Review any previous audits Previous formal compliance investigations by Department of Labor or other regulatory body What was the direct cost of restitution of back pay, penalties, and fines? What was indirect cost of administering or responding to the complaint? What were legal fees associated with defending the case? 25

26 Industry Operational Benchmark Statistics Compare your organization s operating performance with that of others in your industry Labor expenses Total wages as a percentage of total revenue Operating expenses Earnings before interest, tax, depreciation, amortization (EBITDA) 26

27 What Are Your Cost-Savings Opportunities? KRONOS FOR SERVICES & DISTRIBUTION 27

28 Direct and indirect cost savings, defined Direct cost savings Immediate and tangible impact on the bottom line Reduce expenses, such as payroll or overtime dollars for hourly workers Most persuasive part of business case Indirect cost savings Typically derive from salaried exempt employees Productivity savings by controlling excess paid time off Lead to increased available capacity and productivity 28

29 Cost Savings Opportunities Reducing payroll error (4 to 15% of timesheets) Reducing payroll inquiries Reducing compliance exposure Reducing hourly payroll inflation associated with lack of controls and overpayment for time not worked Reducing absenteeism Reducing agency, contract and temporary labor (10 to 15% can be expected) Reducing process-time costs of manual checks Reducing process-time costs of prior-period payroll adjustments Reducing controllable overtime (10 to 25% can be expected) Reducing payroll, HR and manager administrative processing time Eliminating paper timecards (cost of printing, distributing, handling, storing) Reducing excess unrecorded time off Increasing the productivity of salaried employees 29

30 Non-quantifiable Business Benefits Greater employee satisfaction Reduced employee turnover Increased customer satisfaction Higher revenue from increased customer satisfaction Improved labor negotiation position Operational process improvement Better cost accounting and margin analysis More accurate cost allocation and staffing projections 30

31 Recommendations and Investment Requirements KRONOS FOR SERVICES & DISTRIBUTION 31

32 Document Future State Workflow and Benefits Future state processes should be diagrammed Contain all major steps and components Decisions made at each step Indicate where all manual and redundant steps will be eliminated Prioritized feature/function requirements list 32

33 Investment Cost Breakdown Checklist Solution Software license fee Hardware expense Implementation resources Internal project resources Software provider Implementation consultants Change management Communication Training Recurring expenses Software maintenance Ongoing operational maintenance 33

34 Speak Your CIO s Language Understand the deployment and maintenance options In-house Hosted internally, managed internally IT infrastructure investments needed Hosted solutions Hosted externally, managed internally No IT infrastructure investments needed Managed solutions Hosted internally/externally, managed externally Reduced burden on IT for upgrades and system monitoring Cloud solutions / Software as a Service (SaaS) Licensed or subscription based Pay per employee, per month Lower / minimal capital expenditures 34

35 Speak Your CFO s Language Cash flow Difference between cost of investment and gain/loss of investment over a specified period (normally 3 years) Net present value Cumulative sum of cash flows for specific period, discounted to reflect the time value of that money Return on investment ([Net year 1 + Net year 2 + Net year 3]/3) / investment cost X 100 Payback period How long it will take to recover the amount of initial investment from cumulative net cash flows over time 35

36 Assemble the Financial Model Model to be used: NPV, ROI, Payback Period? Evaluation period: 3 years, 5 years, other? Pre-tax or after-tax values? Effective corporate tax rate? Discount rate: cost of capital? Depreciation schedule for software, if depreciated over time: (3 years, 5 years, 10 years, other)? Allowable cost savings: direct, indirect, avoiding increases in future costs? Financial treatment of non-quantifiable business benefits? 36

37 Package and Present Your Findings KRONOS FOR SERVICES & DISTRIBUTION 37

38 Reach Consensus Before Stating Your Case Executive summary Methodology highlights Major findings Recommendations Financial value analysis Next steps Supporting documentation and appendices 38

39 Executive Summary CEO Shareholder value, Earnings per share (EPS), increased revenue, customer loyalty, employee satisfaction CFO Shareholder value, EPS, margin, control, compliance, auditability COO Safety, quality, productivity, margins, labor optimization, expense control CHRO CIO Compliance, employee satisfaction, employee retention/reduced turnover expense IT resource availability, business intelligence strategy, IT direction (cloud/in-house), infrastructure costs/deployment options, auditability, compliance 39

40 Executive Summary Subject of the business case Business issues Methodology Major findings Recommendation Expected results and benefits; financial and nonfinancial Next steps 40

41 Methodology Highlights Summary of how the business case is structured and how the analysis was conducted Should include: Project team Project timeline Scope Interviewees Overview of the data collected. Used to establish credibility and validate your approach 41

42 Major Findings Summary Critical process issues Critical business issues Key observations and quotes from the interviewees Documentation review Current state of affairs Outlined and prioritized significant areas of exposure and opportunities for improvement 42

43 Recommendations Proposed solution Prioritizes the recommendations Outlines the actions necessary System functionality Current state to future state Scope Variables considered Roadmap How proposed solution will be implemented, and when 43

44 Financial Value Analysis Results of financial analysis model Assumptions Sensitivity to changes in assumptions Risk Prediction What will happen if nothing changes? 44

45 Next Steps Requested action from executive team Type and quantity of resources needed Next steps Project team Evaluation of solution providers 45

46 Supporting Documentation and Appendices Summarized versions of all pertinent materials used Discovery Major reports Analysis findings Detailed financial analysis spreadsheets and models 46

47 Questions? Call and find out how Kronos can help your team identify the ROI potential for your project today! 47