Areas like employee effectiveness, optimizing workforce utilization and compliance risk is core today for HR professionals
HR leaders today need to move in to doing what is core,and that should be the opertaional area for HR
In an exclusive interview with James Thomas, Country Head of Kronos, People Matters explores what it takes to be operationally efficient and how the COO and the CHRO need to work in sync to make this happen.
When it comes to technology in the People Management space, there are many different products targeting different requirements from companies. What are the differences between HRIS System and a Workforce Management System?
This is an interesting question: workforce management systems cater to the operational side of Human Resources and gives you a real time picture while HRIS can only give a historical and static view. Workforce management systems touch businesses day in and day out, and provides day-in-the-life scenario for every employee in three dimensions: Time, absence and schedules. That is, the time that an employee can work, the time that he is absent and the challenge of getting the right person for the right job at the right time; these are dimensions that need to be integrated in real time proactively. HRIS cannot capture these dimensions in real time in an integrated manner. HRIS, however big or small, cover only the historical point of view of an employee lifecycle information (like core employee data, compensation, career development, training etc, which are of course important. But they do not capture the real time view of what people are doing for the organization in running the business operations and how effective they are in real time or near real time.
What are the benefits of Workforce Management Systems?
Here are the main benefits:
It is an essential tool when it comes to business planning on labor. If we look at business cycles in every industry, manpower planning plays a very important role to complement business planning for higher revenues and better profits. The first step is forecasting demand for manpower requirements: An organization decides the required number of people for a given year, month, week, day, shift, etc. based on the demand drivers of that industry for a particular time window. A workforce management system can help in manpower planning on the basis of these demand drivers, forecast labor plans, and then automatically support in allocating optimal workforce against such plans. Once allocated WFM systems then help track and analyze workforce performance and practices to manage labor costs, minimize compliance risks and enhance people effectiveness. On a global average, systems like Kronos provide at least 3 – 5% savings on payroll costs, per third party research into customers who actively utilize such solutions.
Can you elaborate on how companies can tackle this leakage problem in payroll?
Pay for every employee is based on the real time inter play of the three dimensions which I mentioned above: time, absence and schedule – which gets translated to a combination of work rules and pay rules at an operational level. It is this integrated real time inter-play between time, absence and schedule that determines how accurately you pay an employee. It is not about whether you pay someone less or more. It is about paying ‘right’.
Let’s take an example of how does it impact organizations today. Absence Management is a largely unaddressed area in India when it comes to inclusive solutions right across the organization; most companies do not even measure the financial impact of absenteeism, or alternatively buffer it into their business models resulting in higher input costs for their customers. There are some direct and indirect costs involved here. Unexcused absence is really high in India, which is not surprising considering how young a working population we have. Taking a leave is supposed to happen only when approved. But in India when a leave is applied for, people tend to assume that it is granted, or worse, people just don’t turn up even without applying for leave, though scheduled for work. Global Research shows that in a typical organization, each employee tends to take 1 to 1.5 days of extra leave per annum unaccounted. This translates to something like 0.25 to 0.5 percent of the payroll. The numbers may look small in isolation. But if the organization is a Rs.100 crore payroll organization then 0.5% of payroll is 50 lakh, which is not a small amount, especially when it comes to the bottom line, just on that one line item of leakage.
We distinctly see three types of errors that creep into payroll in an organization that is not fully automated with a robust integrated workforce management solution - transcriptional, translational & intentional errors. When the process of reconciling data before every payroll run is done, manually or semi automated/automated with manual interventions/reconciliations, this leads to errors derived from data accuracy, absent data, data collection from different sources, manual mistakes et al. Despite the time taken for this process (which also has a financial implication), the number of errors can be significant.
Then there is the translational error. Time office/Payroll teams in an organization can do incorrect translations or interpretations of various work rule and pay rule combinations when being input into the system or how it applies to different employees when doing it manually or in a semi automated fashion. Some element of subjectivity could creep into these allocations. Though on the face of it, this could look small, but these can again be significant in absolute values as a leakage on payroll.
Finally, there are the intentional errors. These are the cases where employees are consciously causing leakages to payroll. For example, employees covering-up for each other by punching on behalf of another colleague, more famously known as ‘buddy-punching’. This is again something very difficult to track if systems are not in place and again, it goes unnoticed.
What is the solution for these leakages?
Workforce automation can provide very effective shields that can prevent these leakages:
Firstly, enabling workforce effectiveness, this means having the right people at the right place at the right time at optimal labor costs. As an HR head, it is important to place people correctly in the organization. Most organizations are sub-optimal when it comes to making the best use of the current workforce that they have. Secondly, focusing on workforce visibility; which means, tracking real time which employee is performing which activity and where is he/she located. And finally, minimizing compliance risk; and this is increasingly important in India, companies need to be able to track the compliance requirements of workforce in every geographical location in a systematic manner. These aspects are taken care of in a systemic manner once you deploy a workforce management system.
Do you think the downturn has helped companies understand the importance of cost efficiencies and accuracy of cost? Now that the times of growth are back, is that the philosophy to stay?
In our 31 years history, we’ve done exceptionally well in every recessionary cycle. We are relevant to organizations all the time, but a recessionary cycle just aggravates the need for the kind of solutions that we offer. The reason is that we have an inward looking application which helps organization optimize labor costs and enhance workforce effectiveness. Labor cost is one of the single largest controllable operating expense for any company. In a recessionary phase, when the top line remains flat or headed southwards with tremendous pressure to stay profitable or reduce losses, downsizing is the easiest way to reduce immediate pressure on bottom line. Kronos steps in at these times to eliminate unwanted payroll inflation, and optimally manage labor costs for maximum workforce efficiency. This time around while we are getting back to heightened economic activity, we are seeing lot more stickiness around staying focused on such cost control aspects while on the path to recovery and growth. Normally memories are short and we get back to the old profligate ways when the economy bounces back to growth. These are surely signs of a maturing market.
How should HR partner with business as a champion of Organizational Effectiveness? What are the changes that need to happen from the CEO, COO and HR Perspective for this partnership to happen?
The way I see it, HR functional heads need to become more transformational in today’s age of the ‘Knowledge Economy’. If markets like India are going to emerge as bulwarks of the global economy and be in the forefront in the years to come, the people function needs to become more transformational to business by placing the right people at the right place at the right time to get the best value from their deployment. Over scheduling or under scheduling of people will only harm organizations in the long run with either a cost issue or a quality issue. HR leaders today are seen to abdicate their responsibility around lot of these aspects to business, and are happy to be playing an administrative second fiddle with the routine chores of recruitment, performance appraisals and payroll, or should we say that they just do not find the time to play a constructive business impact role of a different magnitude. Workforce inclusivity, integrated workforce visibility & minimizing compliance risks, workforce effectiveness in real time for proactive HR interventions to business, is where the new age HR leader should transform himself to be a change agent in driving operational efficiencies along with the CEO & COO.