Balancing Traditional ROI with HCM Strategy Support

D.J. Chhabra
VP Strategy, Human Capital
Management, Oracle
In the past, the decision whether to implement employee self-service (ESS) HR systems was influenced by technology considerations and cultural impact. Today, the critical factor in the decision process is determining how to evaluate the return on investment (ROI) once the system is implemented.

Empirical ROI is one good measure of success, but it doesn't tell the whole story. For example, one of our HR customers in the financial services industry has achieved $128 million in direct savings from employee self-service. While this customer is among our most successful ESS implementations, I submit that its derived benefits are not fully captured in its ROI figure. It is insufficient to measure the project's success against the prevailing methods that gauge how much paper waste or administrative costs have been cut.

I argue that it is better to gauge ROI in employee self-service according to how well it supports the overall human capital management (HCM) strategy and the company's strategic business objectives. To measure value against static cost-reduction efforts is worthwhile, but it does not promote HR's advancement from cost center to business enabler. Today, we are seeing self-service being used as a valuable and effective human capital management strategy. For example, critical data collected through self-service is helping to drive strategic initiatives, such as reducing employer benefits costs or determining how much training would be needed to be successful at launching a new product.

Another important consideration of a company's overall HCM strategy is that self-service functionality should be included in the first phase of any implementation. By deploying these applications from the start, HR capabilities are accessible to remote and global employees, eliminating many obstacles of managing a distributed workforce. Self-service systems also enable employees to be more productive and improve the integrity and accuracy of data for better reporting. Finally, a self-service system is strategic to the HR provider because it eliminates tasks that can be better managed at the source.

Overall, evaluating self-service ROI based purely on immediate cost savings is undervaluing the true potential of self-service. Companies need to consider new initiatives that can be supported. They need to think about the confidence they will have in their workforce-related decisions, which come from having reliable data available to them. Evaluations based on these types of criteria will better serve the advancement of HCM.

Nancy Hemry
Director, HRMS, QUALCOMM
Often companies must look beyond return on investment (ROI) when assessing the value of ESS initiatives. At QUALCOMM, speed, productivity, and innovation are the key ingredients to our success in the marketplace. QUALCOMM relies extensively on the intellectual property produced by its knowledge workers. As such, the ESS programs that support them must be powerful, seamless, effective and extremely easy to use.

Our ESS vision to support the needs of our employees was to create one location, called MySource, on the Intranet for employee information access, paperless transactions, and automated workflows. We did not perform a formal ROI evaluation. Instead, we developed prototypes early to demonstrate concepts and built the system incrementally, using low-cost components, and focused first on areas that had high value and obvious ROI (such as open enrollment). As the system evolved, we incrementally built new components that could provide immediate value to the employees. 

This approach worked for us because we gained early support from key executive sponsors who saw the value and understood the advantages we could gain. We developed the system internally so we would be free to innovate and create a system specifically tailored to QUALCOMM's needs. The application was designed from the ground up taking the employee's perspective rather than organizing the information by vertical corporate function. Employees quickly accepted the new way of working and often gave their input as to what enhancements would benefit them.

With ESS both hard and soft ROI can be realized. Through the MySource initiative, we have automated 26 forms; processed more than 41,000 automated transactions, reduced cycle times from weeks to hours, redefined data ownership, streamlined processes and increased our overall data integrity. With a 99 percent user satisfaction rating, MySource is now embedded in the culture of the company and is the first place employees go when they are looking for information or performing HR-related transactions.

Mark Lange
VP of Human Capital Management, SAP
Remember the Gary Larson cartoon in which, after elaborate calculations, a wild-haired Einstein discovers that time is actually money? The time you believe you can save through self-services must translate into direct cost savings in labor and materials in order to win over your C-level executives. Our customers are seeing direct cost savings ranging from 45 to 73 percent. Here are five steps we recommend for evaluating ROI and making the case for self-service technology:

1. Identify recurring costs related to HR transactions that can be eliminated through self-service. Evaluate the time, paper and postage spent on manual processes and the percentage of staff that can enhance their roles with ESS. Conduct an accuracy audit of projects managed by spreadsheets or by hand. Look for the scale and savings associated with moving to a shared-services model.
2. Look outside the organization for savings in payments to third parties. Reduce fees to recruiting agencies by driving candidate traffic to your own talent portal. Evaluate benefits election software that can reduce rising healthcare costs. We support analytics-based programs that help manage high-cost employee populations, ensure efficient rates for coverage, and encourage more efficient use of healthcare resources.
3. Develop a conservative estimate of the potential savings of giving employees direct access to their transactions and decisions. Bring on board an analyst from the CFO's office to engage and vest them in the outcome.
4. Conduct follow-up analysis and reporting to ensure the savings benchmark is actually realized. Track the profit and loss numbers each quarter and advise the CFO of any variances and how the organization will address them. Publicize successes as often as possible!
5. Work closely with technology and service providers; they are critical business partners. Update vendors on your evolving goals, provide feedback to vendors on their progress, and discuss areas needing improvement. They only succeed when their clients succeed.

Sondra Newkirk
VP Channel Marketing,
ADP Benefits Services
There are many tools available today to help companies determine the true return on investment (ROI) of ESS. First, companies should review research from third-party organizations that address the cost savings afforded by automating HR and benefits transactions. Getting grounded in this information is a good starting point.

Next, ADP recommends companies look at their own processes and review their program based on a total cost of ownership (TCO) model. This end-to-end review quantifies the total cost of performing administrative processes in a company's current benefits environment, and provides a point of comparison for a potential ESS investment. A company can recognize where hidden costs lie and can isolate expenses, including the following:

• Staffing costs, such as salary, benefits and training.
• Non-labor cost, such as facilities, corporate overhead, printing, and telephone.
• System costs, such as implementation, ongoing maintenance, and upgrades.

These same cost drivers can be analyzed in the ESS environment. Cost savings from fewer telephone inquiries, elimination of data entry, reduction in printing and postage, and less time spent correcting manual mistakes begin to emerge. Numbers that are derived from the same analysis process make the final comparison easy and objective.

In addition, for those companies who choose to partner with a service provider, the ROI and TCO of IT expenditures can be more easily determined, as the provider bears the responsibility of implementation, upgrades and equipment costs. 

Lastly, while the TCO model can determine the economic value of an ESS program, the value of an enhanced employee experience should not be underestimated. Surveying employees about their satisfaction provides an additional baseline from which growth can be measured as processes change.