ROI ANALYSIS: BUILDING THE FINANCIAL CASE FOR HR TECHNOLOGY INVESTMENT. Ceridian Corporation. All rights reserved.

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1 ROI ANALYSIS: BUILDING THE FINANCIAL CASE FOR HR TECHNOLOGY INVESTMENT

2 Jayson Saba VP Strategy and Industry Relations, Ceridian Joined Ceridian in September 2011 from Aberdeen Group; published more than 100 research reports Contributed to various industry publications including The Economist, HR Executive, HRO Today, PayTech, Talent Management and Workforce Management Bachelor s degree in business administration from the University of New Hampshire; MBA from the McCallum Graduate School at Bentley College

3 Agenda Why CFOs care about ROI What to look for when conducting ROI analysis How peers have successfully used ROI tools to build the business case for CFOs ROI tools examples

4 Poll 1 For which types of HR technology are you trying to develop a business case? (choose all that apply): - Benefits management/enrollment - Workforce management - Talent management/recruiting - Payroll - EAP or wellness programs

5 What is Human Capital Management (HCM)? Human capital management (HCM) is a set of practices related to people resource management. These practices are focused on the organizational need to provide specific competencies and are implemented in three categories: 1) workforce acquisition 2) workforce management 3) workforce optimization The applications that help to enable human capital management include: Core administrative support Personnel administration Benefits administration Payroll Portal/employee self-service Service center Strategic HCM support Workforce planning Competency management Performance management Compensation planning and strategy Time and expense management Learning (education and training) Recruitment (hiring and recruitment) On-boarding Contingent workforce management Other HCM Reporting Analytics Workflow

6 A Little History Enterprise Resource Planning (ERP) systems began gaining traction. Powerful highly customized in-house installations that integrated HR and finance still on mainframes. On-premise HR software installs (most are windows-based) began gaining traction in the mid-market. This period also saw the rise of Application Service Providers (ASPs) that started hosting ERP/HRMS systems. 1960s-1970s 1980s Late 1980s mid 1990s: Mid 1990s early 2000s Today Large companies who needed to centralize personnel management began writing their own programs on internal mainframe computers. Client-server architectures became prevalent and gained popularity (C-S allows for multiple smaller computers to be networked and don t require users to be signed on to mainframes at all times - only when transactions needed processing). SaaS is the new norm. Single Tenant (hosted) and Multi- Tenant (true SaaS) are showing aggressive traction and growth.

7 Technology Advancements! Help waiting in line at the DMV/RMV far more enjoyable!

8 Why Do We Buy Things? Source: Nucleus Research I can make money transporting freight." "I want a Ferrari 458." Financial Emotional "I hate public transportation." Painful Obligatory Grow up, get a car and get this bike out of the living room you slacker.

9 Why Should Financial Executives Care About HCM Tools? The workforce is in most cases the organization s TEXT largest asset and most controllable expense The CFO has a responsibility to help maximize the productivity of the company s assets and control expenses $ This extends to investing in the tools and programs to develop and manage human capital assets

10 Poll 2 When it comes to HR/Payroll technology, who is the most difficult stakeholder to build the business case for? (select one) - Head of HR - Head of Finance/CFO - CEO - CIO

11 Where Does ROI come from? Current State How inefficient are our existing processes? Breadth How many people will the application affect? Repeatability How often will they use it?

12 The Believable Business Case Direct savings > Reduction in cost Semi-direct savings > Expected reduction in cost Believability Indirect savings > Increase in worker productivity Very indirect savings > Increase manager productivity 1 st Order 2 nd Order 3 rd Order 4 th Order Direct Indirect Source: Nucleus Research

13 Poll 3 What are your biggest challenges when trying to build a case for finance? (choose all that apply) - Understanding what finance wants to see - Knowing what data/metrics make most sense - Obtaining internal resources - Pulling the data & creating the presentation - Getting movement after the presentation

14 BUSINESS BENEFIT EXAMPLES

15 Example #1 - Scenario: Month End Reporting CEO asked: What were each departments labor costs? Payroll Manager s reaction Not again! Every month end I spend inordinate amounts of time creating different versions of one report to distribute payroll information to accounting, finance and division and department leaders. Multiple data sources must be combined and then reformatted prior to sending it out. The reality Data resides in several different places Use external tools to consolidate information All report requests go to a few key resources Delays in how quickly information can be sent Decisions are made without understanding the data Information is not perceived as entirely reliable 15

16 Example #1 = We can realize $17k in annual savings Building the case for an automated HR/Payroll solution Month-End Budget Analysis Create one report and grant access Managers access their employees payroll information to monitor and prevent budget overruns Process Time Savings Before = 24 hours New tool =.25 hours Savings = hours/2days No more disparate systems New tool Calculated Savings Built in Security Company, Division, Department levels # of Times and Average Rate Savings Produced 12 times/year Average Hourly Rate = $ hrs x 12 times x $60 rate $17,100 annual savings

17 Example #2: Benefit Reconciliation Process Monthly benefit invoices arrived and Benefits/Finance cannot reconcile the totals Benefits & Finance Management reaction Not again! Every month between us, we have to: print register totals pages data enter the deductions totals into excel double check data entry consolidate the totals hope they tie to the vendor invoices The reality Company offers many benefit plans across one company or many companies; each with unique deductions Multiple steps needed to bring benefit deduction data together, make calculations and re-format so information is usable Complete the same steps for each month-end reconciliation Seeing delays in new benefit deductions appearing on reports 17

18 Example #2 = We can see $28k in annual savings Building the Case for a new benefits enrollment and admin tool Benefit Reconciliation Create one report inclusive of all benefit plan deduction information Human Resources can spend time analyzing your benefit plan participation levels Process Time Savings Before = 8 hours New tool=.25 hours Savings = 7.75 hours/1 day Increase efficiency New tool Calculated Savings New deduction information is real time # of Times and Average Rate Savings 5 reports/month Average Hourly Rate = $ hrs x 5 reports x 12 mths x $60 rate $27,900 annual savings

19 Example #3: Hire, Term, Change EE Info Store Manager hires a new employee, changes info or terminates an employee Store Manager reaction Not all this manual paperwork! I need to focus on ensuring the employee is learning our stuff! Every time I hire a new employee I have to: o have the employee complete 5 forms o scan/ to Head Office o notify IT, Facilities, Operations, HR, & Payroll o track the hours manually until entered into POS HR Manager reaction Not all this manual paperwork! Every employee package from the stores I have to: o enter the data into the HR system o chase the Manager & employee for missed forms o notify Payroll Payroll Admin reaction Not all this manual paperwork! Every employee package from HR, I have to: o enter the data into the Payroll system 19 o chase HR, Manager & employee for missed forms

20 Example #3: Hire, Term, Change EE Info Store Manager hires a new employee, changes info or terminates an employee Store Manager reaction HR Manager reaction Payroll Admin reaction The reality Company has a separate system for HR and Payroll and Time & Attendance (+ a POS system) Store Managers don t have system access other than POS Multiple data sources holding employee data Manual manipulation of several files to be imported every pay cycle Duplication of data input A lot of wasted time 20

21 Example #3 = We can get $154k in annual savings Building the Case for a single system for HR/Payroll/Recruiting/WFM Wasted cost due to lack of integration/manual processes Initiate the hire/change/term at the store Employee & Manager Self Service + Workflow for all departments data entered once Process Time Savings Store Mgr= 36 hrs/yr or 4.8 days Admin = 98 hrs/yr or 13 days One application New tool Calculated Savings New Employee, Change, Term Guided Process # of Times and Average Rate Savings Store Mgr=.75 hrs/wk x 150 Mgrs Average Hourly Rate = $25 Admin: 2 hrs/wk x 5 FTEs Average Hourly Rate = $30 Store Mgr = $137,813 Admin = $16,000 Total = $153,813

22 Don t Forget to Consider All Current Costs Hardware IT resources Courier/Postage fees - If not doing on-line pay statements - If not doing annual W-2 Turnover/Recruiting Admin staff Maintenance fees Check stock Bank fees Consulting fees Multi-vendor support Etc.

23 THIRD-PARTY BUSINESS CASE SUPPORT

24 Who is Nucleus? A technology research firm specializing in value-based research Founded in 2000, based in Boston Similar to other firms but value is the foundation of the research approach Hundreds of published ROI case studies Standard, consistent, globally understood research methodology Registered with NASBA (National Association of State Boards of Accountancy)

25 Nucleus Research Analyst Findings When Nucleus Research analysts investigated organizations that have selected Ceridian for human capital management solutions they found organizations were able to: simplify payroll processing reduce payroll errors increase productivity for management and employees In addition to processing benefits, benefits from a centralized data store resulted in efficiencies in reporting, auditing, risk management, and regulatory compliance The software-as-a-service delivery model also provided benefits to organizations in reduced up-front costs, significantly reduced ongoing technology support costs, and the ability to rapidly support remote offices and locations with full payroll and HR services.

26 Example 500 employee company All full-time 250 hourly 10 managers / supervisors 4 locations all in US Current total annual costs $25k for payroll $10k for time and attendance Current process Two time & attendance systems (one organic, one installed on-premise) Gross payroll is entered into a webbased system of an outsourcing vendor oweekly for the hourly population obi-weekly for salaried population Organic HR database Benefits enrollment is manual formbased, every other year is active enrollment 1 FTE for payroll.25 FTE for benefits.25 FTE for recruiting 1.5 FTE for HR

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33 Consolidated Results & Assumptions

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