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January 30, 2012

As Companies look to Transform HR using ERP, What are they Missing?

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Joint Post by
Catherine Toriello, Principal, Management Consulting Services, Infosys 
&
Reese Dunbar, Human Capital Management Practice Leader, Management Consulting Services, Infosys

We recently held a series of meetings with members of a global SAP HR planning and implementation team representing a European client. In discussions about goals, the overwhelming response from business and IT members alike was:  "simplify processes, standardize the system, and improve data quality." The larger goal, however, was to transform HR organization from a traditionally transaction-oriented operation to a more strategic one.

Neither set of goals came as a surprise.  Over the past five years, we have seen a marked increase in the number of clients seeking to shift HR away from transaction processing, become more flexible, and focus on developing and retaining top talent. In most cases, the means to these ends was to leverage ERP technology to automate day-to-day processes. 

Often, however, we have seen that achieving technology goals does not result in meeting the business goals. Although the reasons for such planning and outcome disconnects can vary according to the company and the circumstances, a few common causes invariably appear, typically after the investment was approved and the money spent. 

The question then, is how can the enterprise ensure that real business value is a direct result of the HR ERP implementation?  Leadership must plan for business value realization early on, ensure that key stakeholders agree with the program goals, and embed value-based metrics throughout the course of the implementation.  Once the implementation is complete, project success should be measured through these metrics.  This is easier said than done and gaps in this process may result in business value slipping away.

In this blog, we will explore current trends and opportunities in HR, discuss how to realize value through HCM ERP transformations, and share specific insights gained through client engagements.  We look forward to reader comments and to making this blog a true on-line conversation.

January 13, 2012

Business Value and IT - Is it Time to Get More Involved?

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Having spent nearly half my life in IT, I occasionally fall into the "been there, done that" trap. After all, when you're old enough to remember time-share and service bureaus, the case for cloud seems old hat.  Still, I often wonder about "Big Picture IT" questions, such as: After years of spending billions of dollars on technology, why are companies struggling to measure and maximize the business value of their IT-enabled investments?  After all, it's been an area of concern and an occasional source of controversy for years.

The last big kerfuffle about IT and ROI was in 2003 with the publication in the Harvard Business Review of IT Doesn't Matter by Nicholas Carr (actually, there are HBR articles on IT value going back to the 1990s).  However, in spite of the attention and controversy generated by the Carr piece, IT spending continued to grow apace; right up until the global recession, when corporations froze or reduced technology spending.

Even with some sectors recovering and global economic activity increasing, IT budgets remain under the microscope. However, unlike past downturn - recovery cycles, the microscope is not just focused on  cost savings that accompanies periods of business uncertainty. There is an added emphasis on realizing business value from technology investments.

Picking up on the trend, analysts and the industry described how leading corporations were leveraging IT to increase the efficiency of supply chains, increase customer loyalty, penetrate new markets, and grow revenues. At the same time, the same channels released research findings indicating that most companies struggling to translate IT spending into measurable business outcomes.

This dichotomy was highlighted in a May, 2011 article in CIO.com entitled, Value Is Dead, Long Live Business Value, which stated on one hand that, "Business outcomes are the real and only measure of IT worth," while simultaneously acknowledging that "Calculating technology value using business terms is an evolving art."

So, why do companies continue to struggle?  One reason is that in spite of years of research, commentary, discussion about, and attempts at value realization, many CIOs and business stakeholders were merely paying lip service to the idea. Getting IT investment right wasn't top of mind. Then, too, IT success was measured - and continues to be measured -- by whether or not projects were "on-time" and "on-budget," not "on-value."

The difference between then and now, however, is making the right spending choices is essential to business success. Or, as one interviewee quoted in the CIO.com article noted, "People really mean it now."

How about you?  Is it time for your company to focus even more on realizing business value from IT?  Do you have the resources, the methods, the metrics, the executive support and stakeholder buy-in, and the follow-through necessary to achieve the goal?  As we share our experiences and perspectives, my fellow bloggers and I want to know what you think.

 

How can HR Deliver Strategic Value through Sourcing Programs for Clients with Captive Operations?

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In the past 6 months I have worked with a handful of clients interested in selling their captive offshore operations. Throughout the due diligence processes, I discovered that the operations in question shared a number of HR challenges that, in my experience, are characteristic of captive operations in general. This discovery led me to to conclude that the captive model does not support the economies of scale required to deliver competitive strategic advantages, especially where HR is concerned. Allow me to explain.

Captive resource levels tend to be relatively flat. They have long lead times to hire and train additional employees. Conversely, reducing headcount is a painful exercise that often results in a loss of knowledge. Sourcing providers, on the other hand, maintain a bench of highly qualified resources and continuously train and retool them on the latest technologies. This allows for rapid ramp up of resources when demand increases, or when requirements for skills mix changes. Moreover, resources can just as easily be reassigned when business slows down, even if temporary, thus enabling better knowledge retention. Captives, on the other hand, are simply not able to respond this quickly to rapidly changing market conditions.

Resource productivity is another common problem that captive operations face. They typically have more people than needed compared to what IT service industry leaders require to produce the same outcomes. Our experience shows that we can take on more work without increasing headcount.

The third common problem that captive operations share is a top heavy workforce distribution. Resources in the more compensated and more experienced categories account for a high percentage of their total workforce population.  At first glance, this may seem like an advantage. However, junior resources not only are less expensive, they often bring knowledge of newer technologies and contribute to better succession planning. Therefore, it is important to have an employee ecosystem where the base of the pyramid is constantly refreshed. Unfortunately, captives struggle to achieve a balance by serving a single client. Service providers, however, have more opportunities to reshuffle resources between accounts over time to maintain the desired workforce distribution.

Finally, captives suffer higher attrition rates than the IT service industry average. By serving a single client, captive employees have limited opportunities for career progression. Such a lack results in stagnant skills, deterioration of productivity and ultimately loss of knowledge through attrition. By serving multiple clients, service providers offer more growth and development potential and enjoy lower attrition rates.

Captives are generally set up primarily to take advantage of labor arbitrage. However companies often fail to realize the strategic value of HR and under estimate what it takes to manage a successful offshore operation. Many have sold or are looking to sell their operations to local service providers in order to achieve greater value. What has your experience been? Have you seen similar issues with your captive?

Social media leads draw attention; with 100,000 followers, what will experts pay for a next generation lead?

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Most of the clients I work with clearly understand the potential of social media-based lead generation.  After all, they are spending millions of dollars to extract leads and demographic information from third party lead sources and house them in marketing data bases. What the majority of carrier marketing and lead managers don't know about, however, are the operational aspects and benefits of securing and maintaining a social lead.

A social lead is active and grows virally (it is accumulating new information and providing it dynamically to the lead generation system without human intervention), whereas a purchased lead is "flat" and represents a "snap shot" in time, each day more dated and less valuable.

In breadth, the purchased lead is a sparse row in a database that was filtered on certain demographic traits at a point in time.  Unlike any previously available lead, the social lead comes with on average of more than 72 dynamic fields of data which are subject to change and augmentation every time the lead accesses the internet; it is a lead that is ever growing, with instant refresh for the carrier lead management system and information pipeline utilities such as Facebook Connect(TM).

In addition, a single social lead may be an "influencer" within a social or technological ecosystem where product preference is driven by "trusted networks" representing thousands of ultimate "connections".

MY OPINION: The social lead is worth a premium over traditional static leads.

WHAT DO YOU THINK?
I'd like to hear your opinion.  What is a Social Media lead worth?  What if it costs less than a database lead?  Do you see any ethical considerations in following a specific lead for an ongoing period of time, even though they are not an insured or applicant?

Social Business Models - Where's the ROI?

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During the height of the dot-com era, I worked at two startups where I experienced the euphoria and excitement of the "New Economy." Like me, most of you probably remember the accepted wisdom of that heady time, which stated that - capturing "eyeballs" was more important than earning revenues and achieving profitability. But, as everyone learned, what really matters is having a solid business model and products and services that customers want.

The current excitement about social networking reminds me of that period. Just like developing a web presence, corporations are scrambling to develop or increase their social presences because they know that their competitors are too. This time, however, business stakeholders, and not a few IT executives, are asking themselves, what is the return on this investment for the company, its customers and its shareholders? However, many find that question difficult to answer.

Is there something unique about social models that makes it impossible to identify the value provided by the model in question using the same yardstick?  I believe when looking at social business models, corporations should address certain basic questions: what service should we provide; why should we provide this service; who will consume these services and
how should we go about executing these services in light of our existing investments?

Further, corporations' should ask themselves some of these questions to tease out the ROI from their social investments:

1. Is this just the cost of doing business? Customers are demanding it and competitors are providing it. Is there a way to articulate the value provided by looking at what would happen if you did not provide this function?

2. Do some business functions adapt easier to social models? Certain corporations have had good success with crowdsourcing their customer service and product innovation, but have struggled with social marketing. I attribute this to the approach used to open up these functions to external stakeholders: It's easier to have your customers help each other to solve their service issues or identify newer product features with limited involvement but it requires more involvement to build relationships and trust using social channels. Currently most corporations use the same 'batch and blast' approach to social channels as for traditional marketing channels.

3. Should all industries invest in social models? Some industries can more naturally move from opening internal functions to customers and partners than others. Social channels are a natural fit for industries with high customer touch-points such as retail, consumer packaged goods, retail banks, and entertainment owing to the nature of their customer relationships. However, industries such as manufacturing or energy, too, can use social business models/channels.
 
 4. How can corporations use social models internally? Most corporations see social as a 'time sink' and are blocking employee access to social websites at work. Market leaders, on the other hand, see social channels as a way to foster collaboration and increase knowledge sharing amongst employees and external partners as well.

Over the next few posts, I'll be taking on these questions and raising new ones while sharing my views and insights and I look forward to those of others.

Note: Now that you've read my perspective, check out what Jack Keen has to say in his blog, Should Social Media Investments Get a Free ROI Pass?


 

Can the dance of corporate planning be made more meaningful?

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There is general consensus that between 60% and 85% of the time, corporate strategies and plans fail to achieve their results. Amongst many, the key reasons for such failures are recognizable: Gaps between planning and execution creep in without being noticed. Planning processes become disconnected from execution and results on the ground. Goals are set without sufficient attention being paid to changes taking place in the organization. Finally, there is frequently a lack of feedback from execution back to planning.

The causes of these and other business planning shortcomings can be traced back not only to the planning process but also to strategy execution practices. Businesses set goals and define strategies and initiatives to achieve them. They then develop financial business cases to justify the supporting initiatives. However, the effects of such initiatives on operations and their ultimate impact on goals are usually not well understood. The result is planning / execution gaps. Moreover, once the initiatives are approved, the business cases are typically forgotten and there is little if any follow-up.

Brian Quinn of Dartmouth University once said "A good deal of corporate planning ... is like a ritual rain dance. It has no effect on the weather that follows, but those who engage in it think it does. ... Moreover, much of the advice related to corporate planning is directed at improving the dancing, not the weather."

To make business planning less of a rain dance and more of a GPS with traffic & weather conditions, the entire process from planning to execution and completion should take place with rigorous value realization practices i.e., structured activities designed to create a feedback loop to identify, measure, monitor and track the impact of initiatives on key business performance measures. Such practices provide an understanding of the impact that initiatives have on key business measures which help business planning become more effective.

Even when applied at the fringes of a large initiative, focusing on value realization can help close the gaps between planning/execution and goals/measurable outcomes. For example, in a recent client engagement, the project sponsor wanted to justify continued investment in a project that had been approved and was already under way. Using value realization practices developed and trademarked by Infosys, my colleagues and I identified sources of potential value within the client initiative, the KPIs and metrics impacted by the initiative and more importantly, the degree of impact the program had on the business performance measures. 

In one instance, we identified that the initiative would deliver a 20% reduction in customer service call volume (by type) and a 10% reduction in customer complaints (by type). As the company was in the midst of its planning period, we shared our findings with the client's customer services planning team. We helped them create a feedback loop to track and measure the impact of the overall initiative on their call management capacity and customer service representative recruitment planning.

Of course, the above example represents just a small part of what focusing on value can achieve. In the weeks ahead, I will be delving into other value realization activities, tools  methods and examples to stimulate conversation and knowledge sharing.  I look forward to your comments and suggestions.

Should Social Media Investments Get a Free ROI Pass?

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How about the social media advocates!  On some days I think they are absorbing more digital news pixels than all other technologies put together. And if that isn't enough, the Twitter, Facebook, LinkedIn, et al., proponents are now starting to demand noticeable investment bucks from the enterprise capital funding bowl. These soothsayers proclaim - You haven't seen anything yet!

What's interesting is that many "Give me the money" requestors are expecting a free pass on ROI justifications. "Social media is different!" they assert. "It's too fuzzy for value quantification. It's too new for understanding its ultimate payback. We can't wait. We need the money now, before competition eats our lunch."

While heartfelt, their "no more ROI" proclamations are deja vu all over again. Roll backward a few decades and you'll recall similar, plaintive "ROI doesn't apply" exclamations for funding requests related to personal computers, and local area networks, and servers, and data analytics, and smartphones, and more. Somehow, someway, rationale cost-benefit justifications were developed for major investments in these now commonplace resources. Should it be any different for social media?

Here's the deal - like it or not - the execs holding the purse strings for fulfilling Big Buck investment requests for social media won't approve ROI-free projects, no matter how "irresistible" they may seem. These senior leaders have a fiduciary responsibility to shareholders that scarce capital must be wisely spent. To them, "wisely" means someone needs to devote enough thinking to figure why, when and how the enterprise will get more value back from their investment, than any other use of the funds.

What to do about this "ROI or not" confrontation? Here's some quick guidance:
1.) Ask for a "Free ROI" pass to well-conceived pilot and skunk works projects, if the money needed is less than five percent of the available investment fund.
2.) If your investment request is a couple of hundred thousand dollars, or more, don't fight city hall. Put together your cost-benefit analysis, and get it to the execs charged with guarding the funding spigot.
3.) When being asked for a "ROI justification", make it bullet proof by including both hard money quantifications (e.g. labor saved from eliminated wasted efforts) and soft money/intangible declarations (e.g. improving a firm's marketplace image). True business value is the sum total of both.

In future blogs I'll discuss ways to ferret out social media investment value that others might have missed. In the meantime, let me know what you think about this Free ROI issue.

NOTE: Now that you have read my perspective on social media ROI, check out what Ash Joshi has to say in his blog, Social Business Models - Where's the ROI?