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Does Your Company View You as an Expense to Be Minimized?

by David Ludlow | SAPinsider

January 1, 2003

by David Ludlow, Vice President, Product Management SAP Human Capital Management GBU SAPinsider - 2003 (Volume 4), January (Issue 1)

Q: How about it? Do most companies view employees as an “expense”?

When we’re talking about traditional HR solutions — those dedicated to administrative tasks such as payroll, benefits, and time management — there is a good deal of truth to this statement. One key goal has historically been to minimize the cost of the underlying transactions associated with maintaining a workforce. And that is a worthy goal, one that is essential to keeping costs in check, particularly in today’s economic climate, and one that has sold a lot of mySAP HR licenses!

But HR organizations are no longer performing just these perfunctory administrative tasks. Human Capital Management (HCM) has come of age. HCM, true to its name, refers to HR processes that treat employees as strategic assets to be optimized, not just expenses to be minimized. Many SAP customers are now actively pursuing this strategy and implementing IT processes that support the notion that people are crucial competitive resources that can ensure a sustainable, competitive advantage.

Q: What does it mean to treat employees as “strategic assets,” and how can IT processes be expected to do this?

Treating employees like strategic assets means recognizing that, like other company assets, continual investment in the workforce and the solutions that support them is necessary to keep the business moving forward. These investments include solutions and strategies to identify the skills and potentials of your people, understand what they need to increase their contribution to business success, and implement behavioral influencers to ensure that company goals are met and exceeded. Leveraging the technologies that are available today can provide companies with insight on how best to invest in these assets.

What does this mean at the process level? Ultimately, you need to know what you have and how to influence behavior to achieve the desired output. Managing employees as strategic assets means linking multiple processes together to effectively influence an employee’s behavior and drive results. Here, we create an end-to-end process by integrating performance management, which links corporate goal setting to individual objectives, appraisals, which provide the feedback, and compensation management (incentives, bonuses, merit raises, and stock options), which provide the reward. Recruitment, organizational management, and career and succession planning are also initiatives that can be bolstered by processes — the kind embodied by mySAP HR (see sidebar on the next page). These processes can be used to continually and systematically align employees with corporate goals and objectives, provide managers with a clear and effective means to motivate behavior accordingly, and then continually monitor the results and metrics of how well they’ve married the two.

A good example of such a process is what I call “people budgeting,” the integration of workforce cost planning with the overall corporate budgeting process. An effective budgeting process includes headcount planning based on business needs and available budget. To account for the multiple workforce costs that go beyond salaries (training expenses, travel, benefits, etc.), you can simulate different headcount levels and integrate the costs associated with them. This enables much more effective planning by providing a more comprehensive view of overall workforce costs which, in turn, enables better headcount planning and more accurate budget plans. Over time, as environments change, decision makers and line management will have ongoing access to both analysis tools, in order to monitor adherence to the budget, and simulation tools to make adjustments.

Or from a project management and product life-cycle management point of view — again, you can look at integrating the kinds of projects you need to accomplish with the kinds of people you have to accomplish them. Do you have the people to staff these projects? Do you have the necessary knowledge within the organization?

At SAP, we define Human Capital Management as the aggregation of multiple process areas, each supporting the people within the organization (see Figure 1). Each process area is integrated and extends throughout the organization, and is comprised of individual components corresponding to strategic HCM business processes. These processes build a comprehensive strategy that enables the company to maximize the contribution of its people.

Process Area Contribution to HCM Components
Employee Transaction Management mySAP HR supports and integrates all the employee transactions necessary to run the business, contributing to a lower overall cost of ownership.

• Payroll
• Benefits
• Time Management
• HR Administration
• Global Employee Management
• Legal Reporting
• Analytics

Employee Lifecycle Management mySAP HR supports all the phases of the employee lifecycle — attract/hire, deploy, develop, influence, and retain — to ensure that the business can maximize and leverage its human capital. •Recruitment and Talent Management
•Performance Management
•Compensation Management
•Training and Event Management
•Career Planning
Employee Relationship Management mySAP HR leverages multiple technologies and delivers collaborative solutions that enable employees to build relationships, leading to increased employee efficiency and productivity throughout the business. SAP Employee Productivity Suite
• Manager Services (team management, change requests, monitoring, etc.)
• Employee Services (life and work events, collaboration tools, travel and expenses, etc.)
Workforce Planning and Analytics mySAP HR delivers planning, simulation, and measurement solutions to help the business plan for workforce needs and measure workforce successes based on strategic corporate goals and objectives. • Balanced Scorecard
• Benchmarking and Analytics
• Succession Planning
• Organizational Management
• Workforce Cost Planning and Budgeting
Figure 1 mySAP HR Processes

Q: Function by function, process by process, mySAP HR’s offerings don’t look all that different than the offerings of your leading competitor. What’s the difference?

There are two key differences. The first is on the transaction side. From a feature/functionality point of view, we offer payroll, benefits, and HR administration for 50 different countries. And we include any kind of reporting that’s necessary. Nobody can match us on either count. And that’s just for starters. In terms of country functionality we don’t deliver just a collection of taxation rules. We have built solutions that reflect a thorough and effective understanding of each country, not only with regard to compliance of rules, but also embodying local best practices. The ROI of having country-specific functionality is immense. It means global customers — of which we have many — don’t have to develop country-specific solutions themselves or pay a third-party to do it. It means that it all runs on an SAP platform, and it means that it is all maintained by SAP. One-stop shopping means a global company realizes a much lower cost of ownership.

The second difference is the degree of integration between mySAP HR and your other SAP processes. From a strategic point of view, you will have access to employee data from all the different enterprise processes that you manage — processes such as Finance, Supply Chain Management (SCM), Product Lifecycle Management (PLM), Customer Relationship Management (CRM), and especially things like consulting, deployment, and schedule optimization. That’s where the real strategic value comes in. You don’t have to build these interfaces. Integration is built into the product. Moreover, you can view it in real time. If you need to make a personnel decision concerning your supply chain processes, you have immediate access to it with this interface. In this way, mySAP HR functionality can ultimately drive business value by connecting people with enterprise business processes and by tightening up the entire value chain of the organization.

Overall, nobody can exceed the functionality we offer today. We deliver Human Capital Management for your business — the integration of people and people processes into business strategy and business processes. So that as you do strategic planning and execute operations, the people management pieces are completely integrated with how you run the business.

Q: What advice can you offer IT teams as they start to support HCM-driven initiatives?

People are very dynamic assets. They’re multidimensional, with skills and abilities, experience, personality, behavior, past performance, and aspirations. HR organizations are now looking for a much more refined and targeted set of solutions to effectively manage these workforce dimensions. Further, HCM solutions and services are unique in that they touch every member of the workforce.

Taken together, these needs make technology a crucial part of implementing and enabling effective HCM strategies throughout the business. The key to successful delivery of these solutions and services is to understand that, across the organization, different people will have different expectations of system functionality and may have different needs for system access. Employees and managers need very intuitive, easy-to-use transactions, where HR professionals demand more functionality and information. Workforce roles may drive the need for multiple access channels, so browser, mobile, and voice technology will be critical to engaging everyone in the organization.

IT plays a key role in this landscape, leveraging Internet-based and multiple communication tools to enable HCM. Partnering with HR can enable both groups to jointly provide better strategic management of the workforce and effectively drive company goals and results.


Human Capital Management for the Business Is All About Driving Real Business Results

by Deborah Schmidt, Vice President, HCM Global Initiative, SAP AG

Human Capital Management is a critical component of any organization’s success. Today companies are focusing on creating value and sustaining competitive advantage. In most organizations, that will be done through intangible assets: investment in research and development, brand equity, and the innovation, knowledge, talent, and skills of their workforce. With limited headcount, organizations must develop superior ways to understand the talent pool available to them and deploy them most effectively. People produce results, ultimately determining the difference between success and failure.

SAP is excited to announce that we are affirming our commitment to HCM by launching a global initiative. The HCM Global Initiative is modeled after SAP’s successful global initiatives in the key strategic areas of CRM and SCM. The initiative team will coordinate the efforts of SAP’s field, development, and marketing/communications organizations to maximize success and ensure that SAP continues to be the premier provider of HCM solutions today and in the future. Watch for more information in the coming year at

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