Improving business performance through the recession: Are your HR systems fit for the future?

Improving business performance
through the recession:
Are your systems fit for the future?
Chris Murray
Andrew Knight
13 October 2009



Agenda

• What HR systems do you need to deliver your business strategy both
during and after recession?

• Where is your organisation today and what should you be doing to get
ready to gain competitive advantage as you exit the recession?

• How do you maximise the return on your technology investment as you
implement improvements?

We will explore these themes across three key areas of HR:

• Talent management
• Access to management information
• Payroll effectiveness

PricewaterhouseCoopers LLP

HR technology: the business context

• CEOs believe access to talent is the most critical component of their long
term business strategy (PwC CEO Survey 2009)

• Only 30% of CEO’s say they have adequate employee information (PwC CEO
Survey 2009)

• HR functions spend 70% of their time on traditional HR tasks and
transactions, record keeping and delivery services (PwC Saratoga)

• Typically, HR accounts for 0.3% of business costs; people costs are 20%-
50% (PwC Saratoga)

“Most CEOs stress the need to balance the immediate drive to cut costs
and to reduce headcount against the retention of key talent that will help
the business capitalise on the recovery when it comes”

Are your systems fit for the future October 2009
PricewaterhouseCoopers LLP Slide 3

Role of HR in the delivering the business strategy

Life & Organisation
Organisation & Events Technology is critical in
Management managing Compliance
improving Efficiency
Termination Strategic providing Insight.
Planning

Technology plays a
Time & Recruitment role in improving the
Attend & Selection dialogue between
HR and the Board.
Evidence based
Training & Hire &
Induction conversations deliver
Development impact on the
strategy.
Performance Compensation
Management & Benefits Current State
Are your systems fit for the future Desired State October 2009

HR technology: key challenges

Compliance and Control
• How do we make sure we have one way of doing things?
• What are the biggest risks to my HR technology and transformation projects?
• How can technology ensure compliance with HMRC / FSA regulation?
Efficiency
• How do I compare to my industry benchmark?
• What is the right mix of technology investment and process improvement?
• Is ‘Software as a Service’ right for my business?
• How do we provide an optimum and accurate payroll service?
Insight and Strategy
• What do organisations like us do? How do we compare?
• How can I get the information I need in the format I need, and when I need it?
• How productive are our people?
• How do I track international talent / high performers?

Managing HR costs in the downturn:
shifting focus from survival to longer-term success
High
Magnitude of change

Transform
• Align target operating
model to business
Redesign strategy

• Conduct activity • Re-engineer HR
analysis and simplify processes under new
Reduce process, leveraging service delivery model.
best practice. • Re-designed HR
• Demand management
• Rationalise organisation,
(e.g. leverage
duplicate/redundant leveraging shared-
ESS/MSS)
systems services and/or
• Rationalise existing outsourcing of non-
projects • Review opportunities core services.
for outsourcing current
Low

• Review existing non-core process to
supplier contracts remove cost

Low Scale of benefit / time to implement High

Talent management


Talent is a critical driver of long-term success

Access to and retention of key talent
Ability to adapt to change
Strength of your brand and reputation
High quality customer service
Customer / market intelligence
Technological innovation
Efficient sourcing / SCM
Access to Capital
Business partnerships success
Corporate responsibility
Access to affordable
natural resources


What people strategies are organisations focused on for long-
term success?

Over 50% of CEOs cited the following measures as important:
• Creating a more flexible working environment
• Redeploying pivotal employees within the organisation
• Creating opportunities for employees to engage in socially responsible
activities
• Collaborating with networks of external specialists to attract talent
• Working with universities to tailor learning to your needs
• Hiring and developing talent from a more diverse pool (e.g., retirees,
former employees, females etc)
• Outsourcing business functions


How do organisations define talent management?

• Talent management covers an integrated set of HR functions including:
- workforce planning
- talent acquisition (e-recruitment and contingent workforce management)
- performance management
- career development
- succession planning
- learning
- compensation planning
• Talent is referred to under different groupings including:
- all staff
- top x% as defined by potential, grade, or performance
- graduates

Reviewing the talent pipeline
Market Leaders
UKFD
High performance
Business Leaders
Client Service
High potential
DirectorDelivery Technical Leaders

Senior Manager

People & Networking/
Process Relationship
Leadership Building
Manager
Performance

Business GRP
Leader
1st 5 years

Potential
Market Tech
Leader Leader
Market/
Industry Technical
Understanding Excellence


What are the implications for systems?
Strategy Solutions Accelerators
Succession
HR Business Planning & Talent
Resourcing Knowledge
Strategy Alignment management campaign

Employee
Talent
Individual Centric
CWS Assessment Learning Org design Job design
development Value
tool
propositions

Generation Performance Global Virtual Social Reward
Benchmarks
Differentiation Management Talent pool workplace networks remodelling

Total Global
Leadership
Reward Mobility

Infrastructure
HR Service Culture Corporate
Change Communication Brand Diversity
delivery Chemistry responsibility


What are the key steps to success?

1. Determine the parameters
- Talent for what?
- What is ‘Talent Management’ in your organisation?
2. Test the underlying data quality
- Consistency – applies across systems, geographies, and business units
- Existence – appropriate competency structures in place
- Relevance – personal development plan (PDP) ratings stored at a level of detail
that can be utilised
- Accuracy – top rated performers are actually the top performers
3. Evaluate talent
- Plot talent performance and talent potential and timeframe
- Review HR talent for organisation
- Communicate to relevant audience
4. Manage talent
- Performance conversations
- Succession planning

Talent management: technology considerations

Short-term survival Longer-term success
• Have you enabled unused • Is there a defined talent
ESS/MSS features to reduce management strategy aligned with
administration costs? business strategy?
• What are the opportunities for • What does this strategy imply for
aligning systems to reduce cost your system road map (e.g. social
(e.g. rationalising federated networking, succession planning)?
performance management
systems)?
• Can you access the relevant data
(who, what, where)?


Payroll effectiveness


Changing times for payroll

• 31% of companies do not know how many of their employees are impacted
by the £150,000 total taxable income limit. Do you?

• Are you ready for the 2010 changes in tax legislation relating to the
requirements to account for PAYE accurately on a monthly basis?

• Are your payroll processes complicated and hard to manage?

• Are you paying your staff accurately and on time ?

• Can you easily get the information you need to make decisions to be best
prepared for recovery from the recession?

• Do you know the real cost of your payroll function?


Payroll effectiveness

Common Risks
• Overpayments not recovered
• Non-compliance with FSA or other regulator
• Cost of service is higher than industry benchmark
• Real cost of payroll function is not transparent
• Quality of service delivery leads to unhappy employees

Why act now?
• Budget changes effective 2010
• Senior Accounting Officer legislation
• Out of date technology / contract
- When is it up for renewal?
- What are you doing to be prepared for it?


Example key findings: payroll costs, volume and
benchmarking

Payroll Administration * Lehman's Financial Services Sample
Read on a line-by-line basis Result 25th 50th 75th

Headcount per Payroll Administration FTE 1,140 1,156 1,614 2,021
Payroll Administration Costs per Head (£) 65.7 36.1 40.1 60.0
Outsourced Payroll Admin Costs per Head (£) 14.9 0.0 6.7 15.9
Payroll Admin Outsource Rate (%) 22.7 0.0 18.2 28.1

Number of non-base pay elements administered 43 108 146 412
Number of Payrolls in the organisation 10 4 5 12

Payslip Error Rate (%) 0.03 0.06 0.13 0.20
% of over-payments recovered 61.1 45.2 90.0 91.9
Number of different currencies on the payroll (No.) 1 1 1 1


Payroll: gaining a competitive advantage

Compliance Efficiency
1. Form 42 1. Complexity
2. Expatriates 2. Insight
3. Salary sacrifice & flex arrangements 3. Accuracy
4. Terminations 4. Consolidation
5. Senior Accounting Officer

Benefits
• Improve payroll service and hence staff morale
• Reduce payroll costs by addressing overpayment causes
• Improve payroll accuracy
• Ensure compliance
• Raise payroll efficiency


Payroll effectiveness: technology considerations

• Have you put plans in place to meet • Have you completed an activity
2010 compliance obligations? analysis to identify performance
• Do you know your current cost per
improvements?
payslip and how this compares with • What are the opportunities to
your peers? review organisation, sourcing and
• Have you reviewed existing supplier
system arrangements to reduce
terms to identify potential cost costs and improve service levels?
savings?
• What is your payslip error rate and
overpayment value?


Management information


The CEO’s perspective: the information gap

100% Critical
90%
80%
70%
60% Information
50%
gap
40%
30%
20%
Comprehensive
10%
Supply
0% Customers Risks Benchmarking Brand Employees Financials R&D Chain Climate


Linking metrics to strategies


Management information: gaining a competitive advantage

Getting the basics right
• Data accuracy, completeness, and cleanliness
• Single point of entry for each data item
• Reporting on the right information

Management reporting
• Live reports or Excel wonders?
• Dashboards
• Interpreting and understanding the information
• Benchmarking against peers/competitors
• Forecasting


Start small and build for sustained success
Scope of typical analytics project can be too narrow

Define metrics Define analytics Define and
strategy and systems execute
analytics requirements operating and
requirements and build distribution plan
• Stakeholder assessment • Business and • Analytics team
• Business alignment functional organisation design and
• Dashboard and report
requirements implementation
pack definition • Build, test and pilot • Distribution channel
• Standards • Implement strategy and
implementation / data • Sustain and implementation
dictionary improve • Governance strategy and
• Data and systems implementation
validation/assessment • Training,
• Proof of concept communications and
change management

Management information: technology considerations

• How do we get the information to • What are the people metrics that
report on how much our people cost we should focus on to create long-
by region, by business unit, or by term competitive advantage?
performance? • Can we use predictive modelling to
• Do we have consistent standards improve our business planning?
for people information? • Can we unlock our ERP data or
• How do we leverage existing should we consider third party
information sources most efficiently warehouse solutions?
to reduce the cost of generating
meaningful MI?


Maximising returns on your HR Technology investment


Maximising returns in HR technology investment

Not just about the implementation itself, but ‘making change stick’:

• Are the business benefits clearly defined and are all your decisions based
on these?
• Is there the right level of executive sponsorship?
• Are there compelling reasons for stakeholders to change?
• Is there a clear distinction between global and local?
• Are you applying an approach and style that has worked for other
successful projects?
• Have you tested your readiness for implementation?


Adopting a sustainable approach to change


Lessons learned from other organisations…

• “The benefit of implementing large technology platforms in small countries
or business units is not always clear”
• “Consider how a common platform can be supported by common HR
shared services for IS processes.”
• “Have an informed view on outsourcing HR”
• “Develop a clear global governance model for HR IT investment and
strategy”
• “Assess the effectiveness of your HR organisation and determine whether
technology alone will address the issues raised”
• “Your HR IT strategy should consider niche applications”
• “It’s about information not just enabling HR and self service transactions”


Summary

• Organisations are shifting focus from the short-term cost savings to longer-
term competitive advantage in order to be ‘fit for the future’. Areas include:
- Appropriate talent retention is vital to enable acceleration out of the
recession
- Short-term compliance can be used as an opportunity for creating long-
term efficiencies (e.g. payroll)
- Measurement of the right HR metrics is critical for longer-term decision
making
• HR technology implementation should be considered in the broader
context of transformational change to create sustained success.


Questions?

Chris Murray christian.murray@uk.pwc.com
Andrew Knight andrew.r.knight@uk.pwc.com

This publication has been prepared for general guidance on matters of interest only, and does not constitute
professional advice. You should not act upon the information contained in this publication without obtaining specific
professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness
of the information contained in this publication, and, to the extent permitted by law, PricewaterhouseCoopers LLP,
its members, employees and agents do not accept or assume any liability, responsibility or duty of care for any
consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this
publication or for any decision based on it.

© 2009 PricewaterhouseCoopers LLP. All rights reserved. 'PricewaterhouseCoopers' refers to
PricewaterhouseCoopers LLP (a limited liability partnership in the United Kingdom) or, as the context requires, the
PricewaterhouseCoopers global network or other member firms of the network, each of which is a separate and
independent legal entity.


Improving business performance through the recession: Are your HR systems fit for the future?

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Improving business performance through the recession: Are your HR systems fit for the future?