Benchmarking in HR/ HR Balanced Scorecard /SEM

SAP AG HCM EMEA

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Agenda

Benchmarking Balanced Scorecard

SAP AG 2002, The HR Balanced Scorecard, Dr. Martina Schuh, Page 2

Agenda

Benchmarking Balanced Scorecard

SAP AG 2002, The HR Balanced Scorecard, Dr. Martina Schuh, Page 3

Benchmarking Definition

Benchmarking is the comparison of similar processes across organizations, companies and industries to identify best practices and develop improvement plans and actions
(Score Research)

[ Learn from the best by enterprise comparison!!! ]

[ Learn from each other by enterprise comparison!!! ]

SAP AG 2002, The HR Balanced Scorecard, Dr. Martina Schuh, Page 4

Integration with Benchmark Provider: Data Flow

Payroll

Benchmark Provider
SEM Measure Catalog (HR Measures)
0100010101 1011001010 1101001010 1010100011 1010100101 1011010101 1001010101

Administration

XML

Time Management Business Content

HR Benchmarks Benchmarks from Provider

0100010101 1011001010 1101001010 1010100011 1010100101 1011010101 1001010101

XML

Developments BW Rel. 3.0 HR InfoCube for external Benchmarking

SAP AG 2002, The HR Balanced Scorecard, Dr. Martina Schuh, Page 5

Measures: Data Flow

SAP SEM
Objective/Measure Actual Plan B.mark Develop key skills Strategic skills available 17 26 25,5 Employee retention 73 70 68 Improve corporate culture Employee satisfaction 9,1 8,5 9,0

Measure Builder
Measure definition

Balanced Scorecard
MEASURES are defined from a purely business point of view in SAP SEM using the Measure Builder The definition contains the possible data sources, for example BW queries, that could be used to determine the value of a measure For each measure in a scorecard, VALUES like Actual, Plan, and Benchmark can be used for evaluations For each value, a specific source of data in BW has to be chosen from the possible sources specified in the measure definition
SAP AG 2002, The HR Balanced Scorecard, Dr. Martina Schuh, Page 6

Queries InfoCubes

SAP BW

HR Benchmarks

Extractor
Employee Survey

mySAP HR
HR Database

Business Content in the Measure Catalog

SAP SEM Measure Builder
Customer Measure Catalog Human Resources 0HR_HRMC_0001 C_HR_002 - FTE

The Measure Builder

Tool for maintaining the Measure Catalog Delivered with a predefined SAP Measure Catalog

The Measure Catalog

Measure management from a business point of view Contains predefined measures, which can easily be activated (92 predefined HR Measures) Provides standard measures

Activated from SAP Measure Catalog

Customer Measures
Activated from predefined measures Mapped from predefined or provider measures Customer-defined

Human Resources 0HR_HRMC_0001

SAP AG 2002, The HR Balanced Scorecard, Dr. Martina Schuh, Page 7

mySAP HR Benchmarks (Delivered with BW 3.0A)

Basic Measures
Total Full-Time Equivalents, Total HR Full-Time Equivalents, Total Employee Initiated Terminations, Total Headcount, Total External Recruits, Total Terminations, Total Internal Recruits, Total Work Days, Total Training Hours, Total Payroll FTEs, Total HR Terminations, Total HR Headcount, Total Training FTEs

Personnel Planning
Full Time/Part Time Staff Ratio, Average Length of Service, Average Age of Employees, Net Entry Rate, Turnover Rate, Involuntary Turnover Rate, Voluntary Turnover Rate, HR Separation Ratio

SAP AG 2002, The HR Balanced Scorecard, Dr. Martina Schuh, Page 8

mySAP HR Benchmarks (Delivered with BW 3.0A)

Recruitment
External Recruitment Ratio, Net Recruitment Ratio, Internal Recruitment Ratio, Recruitment Source Ratio

Training
Training Hours per FTE, Training Staffing Factor

Personnel Management
HR Staffing Factor, Payroll Staffing Factor

Time Management
Absence Rate per Employee (Non-Exempt)

SAP AG 2002, The HR Balanced Scorecard, Dr. Martina Schuh, Page 9

Fundamental Advantages
Measure Definitions
Unified definition for all participants - compare apples with apples

Process Analysis
Identify process gaps and weaknesses Optimize processes according to best practices Make improvements in HR management practices measurable

Integration
Completely automated Benchmarking process

Strategic Alignment of Human Resources

Evaluate own performance and market position and plan future targets Develop an improvement and strategy-oriented culture within the HR function Focus on national and international competitive performance as employer Make the HR functions contribution to the organizations success directly measurable Position the HR function as a business partner of the Board

SAP AG 2002, The HR Balanced Scorecard, Dr. Martina Schuh, Page 10

Conclusion: Different Level of Software

Do the right things!
Strategies

Analytical Applications

SAP SEM

Information

Data Warehouse

SAP BW

Transaction

Enterprise Resource Planning

SAP R/3

Do the things right!

SAP AG 2002, The HR Balanced Scorecard, Dr. Martina Schuh, Page 11

Agenda

Benchmarking Balanced Scorecard

SAP AG 2002, The HR Balanced Scorecard, Dr. Martina Schuh, Page 12

Balanced Scorecard - Introduction

The Balanced Scorecard is a framework to translate an organizations strategy into terms that can be understood, communicated, and acted upon. It is therefore not a Management Control System, but a Strategic Management System.
David P. Norton, SAP White Paper on Balanced Scorecard, 1999

SAP AG 2002, The HR Balanced Scorecard, Dr. Martina Schuh, Page 13

The HR Analytics Lifecycle

Plan
Balanced Scorecard
KPIs HR Benchmarking

Measure
Turnover Analysis KPIs

Corporate Vision Goals and Strategies

Execute
Operational Planning and Simulation Performance Management
SAP AG 2002, The HR Balanced Scorecard, Dr. Martina Schuh, Page 14

Balanced Scorecard: The Business Perspective

The Corporate Challenges:

Implementing Business Strategy

Strategy execution throughout the enterprise: Translate Strategy into action Understand the enterprise strategy Derive and implement an HR strategy Ensure that HR activities are in the interest of the whole enterprise Make results measurable Demonstrate the HR contribution to added value
SAP AG 2002, The HR Balanced Scorecard, Dr. Martina Schuh, Page 15

Value Proposition: The HR Perspective

Understand the enterprise strategy Derive and implement an HR strategy Ensure that HR activities are in the interest of the whole enterprise Make results measurable Demonstrate the HR contribution to added value

Improve HR positioning
SAP AG 2002, The HR Balanced Scorecard, Dr. Martina Schuh, Page 16

Background
The Corporate Challenge:

Implementing Business Strategy

Less than 10% of strategies effectively formulated are effectively executed

Fortune
The Burning Issue in Business Today

SAP AG 2002, The HR Balanced Scorecard, Dr. Martina Schuh, Page 17

Four Barriers to Strategy Implementation

The Vision Barrier
Only 5% of the workforce understand the strategy

The People Barrier Only 25% of managers have incentives linked to strategy

9 of 10 companies fail to execute strategy

The Management Barrier

85% of executive teams spend less than one hour per month discussing strategy

60% of organizations do not link budgets to strategy

The Resource Barrier

80% of HR organizations lack a strategic planning process by which to align their spending programs with enterprise strategy. Aberdeen .... concludes that 20% or less of HCM effort is spent on strategic activities.
Sources: The Balanced Scorecard Collaborative 1999/2001, Aberdeen Research 2001
SAP AG 2002, The HR Balanced Scorecard, Dr. Martina Schuh, Page 18

Visions, Strategies, and Operative Goals

Formulate Enterprise Goals

Visions Mission Statement

Overall Strategy
Strategy I Strategy II Strategy III

What are our core competencies? What market position are we striving for? What products do we want to offer? Identify Critical Success Factors --> Formulation of strategic goals --> Grouping into strategies

Which Paths Lead to Success? --> Formulate initiatives

Initiatives and Key Figures for Each Strategic Goal

New Training Program Participations Qualifications Actual xxx xxx Plan xxx xxx

--> Assign key figures --> Set target values --> Assign resources --> Name people responsible

SAP AG 2002, The HR Balanced Scorecard, Dr. Martina Schuh, Page 19

Strategic Alignment of the Enterprise

Visions Enterprise Goals

Enterprise Strategy

Area Goals

Departmental and Team Goals

Departmental and Team Goals

SAP AG 2002, The HR Balanced Scorecard, Dr. Martina Schuh, Page 20

HR Benchmarking: The Big Picture

SAP SEM
Balanced Scorecard
0100010101 1011001010 1101001010 1010100011 1010100101 1011010101 1001010101

Measure Catalog (HR Key Figures)

XML

Benchmark Provider

SAP BW

SAP SAP R/3 R/3

SAP SAP R/2 R/2

File File

Legacy Legacy

SAP AG 2002, The HR Balanced Scorecard, Dr. Martina Schuh, Page 21

HR Balanced Scorecard Perspectives

SAP AG 2002, The HR Balanced Scorecard, Dr. Martina Schuh, Page 22

Balanced Scorecard - Key Elements

Key Performance Indicators
Objective/Measure Actual Plan B.mark Develop key skills Strategic skills available 17 26 25,5 Employee retention 73 70 68 Improve corporate culture Employee satisfaction 9,1 8,5 9,0

Perspectives

Initiative
Set Set Up Up New New Training Training Program Program Duration Duration Owner Owner Budget Budget
Develop Key Skills

1/1999 1/1999 to to 6/2000 6/2000 Anne Anne Miller Miller $ $ 300 300 000 000

Objective

SAP AG 2002, The HR Balanced Scorecard, Dr. Martina Schuh, Page 23

HR Balanced Scorecard: Cause-Effect Chain

SAP AG 2002, The HR Balanced Scorecard, Dr. Martina Schuh, Page 24

HR Balanced Scorecard: Analysis

SAP AG 2002, The HR Balanced Scorecard, Dr. Martina Schuh, Page 25

HR Balanced Scorecard: Graph

SAP AG 2002, The HR Balanced Scorecard, Dr. Martina Schuh, Page 26

Analyst Quotes on HR Analytics

By YE03, 60% of G2000 organizations will include workforce analytics...

Meta 2002

Traditional administrative functions are no longer the key drivers of HR aplication sales and companies are becoming more and more interested in the strategic nature of HR
Gartner 2002

SAP, with its workforce analytics - though not packaged as a separate offering - goes beyond other vendors in supporting guided root-cause analysis and one-way integration from headcount planning to enterprise budgeting
Meta 2002

SAP AG 2002, The HR Balanced Scorecard, Dr. Martina Schuh, Page 27

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SAP AG 2002, The HR Balanced Scorecard, Dr. Martina Schuh, Page 29