In this morning’s discussion, we focus on how ESS 2.0 drives significant cost savings relating to the shared services /support HR help desk environment.

Shared Services – Manual vs. ESS 1.0 vs. ESS 2.0
Now it’s time to drill down on the costs associated with traditional HR business process support. So, we take a look at the support issue from a ‘bottoms-up’ approach starting with thinking about the specific business processes or transactions that an employee or manager would initiate and complete. From a support perspective, this transaction takes on a couple of unique characteristics in addition to the previous discussion like the frequency of the transaction (e.g. hourly, daily, weekly, monthly, quarterly, annually); the complexity of the transaction (e.g. time approval vs. pay increase approval; system processing such as read/write data - workflow); and the involvement of other employees and associated salaries/overhead, in the transaction (e.g. managers, employees, HR analysts, developers, support personnel). The additional critical characteristics here are the percentage of transactions requiring internal/external support and the cost of that support (per hour basis).

Again, to help our understanding of the business value of HCM self service delivery, we’ll continue to use our example, ABC Corporation, a fictitious 30,000 person organization that we refer to throughout our mini-series. In the case of ABC Corporation, we have 26K employees and 4K managers that make up the workforce. To help us get a handle on how ESS 2.0 helps to mitigate costly shared services support we will take a look at transaction frequency by modeling high, medium and low frequency employee/manager self service transactions and the percentage of said transactions requiring support.

So let’s focus on the employee self service side of the support equation and zero in on a high frequency employee transaction, say ‘time entry’, which is a process executed by employees on a nearly daily basis. In the 2.0 world, the corporate portal is up on the employee desktop all day and that employee remains signed in to the system throughout the work day. Each and every day – the employee can quickly click on the time entry app, enter the time and cost centers for their activities without logging into completely separate systems to accomplish the task. Corporate Time Entry policies can be immediately posted to this screen making quick dissemination of new information easy, accurate and very targeted to the specific employee use case. Now compare this to the ‘1.0 World’ and you can immediately see that by having to deal with separate systems, log ins, and processes, while considering the potential issues that you incur in dealing with these complexities and therefore the need for additional support, you can rationalize the fact that with ESS 2.0 you would experience less self-service transactions (e.g. 4% of ESS transactions) requiring third party support as you would experience in an ESS 1.0 environment (e.g. 8% of ESS transactions). In this example illustrating only high frequency transactions ESS 2.0’s impact on shared services savings delivers over $850,000 in combined annualized savings for both employee & manager shared support savings dropping directly to the bottom line.

Now we can look at a sample medium frequency manager transaction, say ‘Onboard a New Hire’, a process probably executed on a monthly or quarterly basis (certainly slower in these economically challenging times) to further illustrate the support savings with ESS 2.0. So we get the same advantage as the high frequency (e.g. single environment advantage of the 2.0 world) but we are also now dealing with the process knowledge support factor as we now further into transaction complexity. Since this is more infrequent a manager probably loses context of how the transaction ‘works’. Therefore, a significant increase in support calls, online chats with shared service centers and face to face handholding. Leveraging ESS 2.0 integration technologies, the structured processes now are merged with unstructured support information (e.g. knowledgebase, policy documentation, training videos) whereby the manager can quickly ‘relearn’ the process and quickly & accurately complete said task thus rationalizing in our ABC Corporation example a 40-50% reduction in number of service request per transaction.

This same principle holds true for low frequency manager transactions, those that a manager may execute on a semi-annual or annual basis (e.g. promote an employee). The familiarity with transaction processing is very low, thus the ability of the ESS 2.0 environment to merge learning tools, supporting policies and help documentation, ease of use, single log in and links to external tools (e.g. Industry Wage Standards Calculators) accelerates transaction completion time and accuracy thus freeing the manager to do more critical work (e.g. talent management, strategic planning). And in the case of support calls, dramatically reduces the number of queries this manager must make to the support center. Again, we can estimate a conservative 40-50% reduction in shared services support transactions with the ESS 2.0 environment.

The Bottom Line?

We may now model estimated shared service savings associated with ESS/MSS transactions at ABC Corporation since we have the necessary inputs to calculate total transactions and percentages of said transactions requiring support (e.g. # of employees – 30K; time associated with various transaction types; frequency of example transactions; estimated average salary and overhead for the majority of our employees; estimated average salary and overhead for the support personnel; and percentages of transactions requiring support in the ESS 1.0 environment as compared to the ESS 2.0 environment). In terms of shared services savings for employee and manager self service transaction of all frequencies, we can conservatively estimate over $1.7M per year in savings for ABC Corporation associated with ESS 2.0 self service delivery for HCM.

This Afternoon “How ESS 2.0 Drives Significant Savings in Employee and Manager Self Service Training”

The vast majority of companies still gauge their overall performance using systems that measure internal financial results – systems based on metrics that don’t take sufficient notice of the real engines of wealth creation today: the knowledge, relationships, reputations, and other intangibles created by talented people and represented by investments in such activities as R&D, marketing, and training. (Bryan 2007) In fact this author points out “the opportunities to increase profit per employee are unprecedented in a digital economy, where intangible assets are a rich source of value. On the other hand, opportunities to improve ROIC (return on invested capital) to an equal extent are hardly as plentiful.”

So taking a look at one key labor resource, knowledge workers, which represents the fastest growing talent pool in most organizations; they too, have their own demands and peculiarities. By one estimate, 48 million of the 137 million workers in the United States alone can be classified in this group. (Bryan 2007) This study states that organizations should focus on providing essential knowledge tools, resources, and corporate intelligence to the right employee at the right time.

Why? Or better yet – “SO WHAT?”

Try this on for size - Greater productivity drives greater profit per employee. Greater profit per employee drives a greater return on shareholder value and overall positively effects the company’s market capitalization.

So what is ESS2.0?
With the advent of SharePoint as a corporate standard for a unified portal strategy and the concept of self-service applications, such as online banking, being widely accepted by consumers, the opportunity is now present for employees to maintain their records via online tools (and to do so in a quick, easy and efficient manner) thus eliminating the need for HR to manage this task. Let’s refer to this as “ESS 2.0” which is all about the integration of structured data (in our case SAP HCM business processes) and unstructured data / other business applications via the SharePoint portal environment.

So how does 2.0 compare to ESS 1.0 you might ask? ESS 1.0 was all about a ‘stand-alone’ systems approach to self service offering delivery – meaning, your ESS/MSS application would be available in a completely distinct application environment while your other business processes and related corporate knowledgebase, documentation and other sundry items would operate in their own non-integrated systems environment. In three words ESS 1.0 is about – “silos of information” – a confusing array of approaches to viewing and updating critical information related to your Human Capital Management environment.
So you are probably saying “ESS 2.0” sounds like a good idea but how can this be monetized or better yet what is the ROI for this?

For the next few days, I am going to be blogging about the business value associated with human capital management and how it is impacted by the deployment of employee self service solutions… using REAL dollars and sense! We are going to start by taking a look at productivity associated with employee/manager self service and we’re going to drill down on the types of transactions that impact employees and managers daily, weekly, monthly, quarterly, semi-annually and once a year. Then we’ll dive into how support personnel, shared services and the corporate help desk are impacted from a total cost perspective related to employee self service. Other factors that we’ll explore include training costs, initial and ongoing development costs and what it takes to deploy and of course, maintain and support the application. A final discussion will center upon user acceptance and the critical role of usability / user experience in the fulfillment of the ‘dream’ (e.g. actualized ROI).

So get ready for some fun and some thought provoking exchanges coming up in the next few days.

Tomorrow: Unlocking Employee Productivity with ESS 2.0
Bryan, L. (2007). “The new metrics of corporate performance: Profit per employee.” McKinsey Quarterly 1: 56.