Public Sector Workforce Management: ERP Extension vs. Best-of-Breed

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1 White Paper Public Sector Workforce Management: ERP Extension vs. Best-of-Breed Investment can deliver key functionality and cost savings Christine Carmichael

2 Enterprise Resource Planning (ERP) systems play an integral role in the business of government and education. They integrate critical operational and transactional information across the enterprise, and they facilitate the flow of information between internal business departments. They also serve to manage important connections and communications to outside stakeholders such as taxpayers, parents, and students. Despite the fact that public sector organizations have successfully used ERP systems for more than 20 years, it s common to hear complaints about the need for better reporting from these systems. Perhaps nowhere do these reporting deficiencies surface more than in human resources departments. In the public sector, labor costs comprise the largest portion of budgets and the greatest opportunity for cost savings. When government and education organizations have insufficient predictive and decision-support mechanisms in areas such as overtime, leave, labor law compliance, and scheduling, it puts the organization, its employees, and its budgets in jeopardy. Poor workforce management reporting also creates opportunities for waste and fraud, and as many public sector organizations can attest, nothing gets taxpayers and parents more upset than a costly labor lawsuit played out in the media during a budget crisis. Evaluating alternatives to ERPs Government and education organizations have millions of dollars and thousands of man-hours invested in ERPs, so it s understandable that they feel they should be able to use one system to meet all their needs. But when it comes to workforce management support systems for the public sector, ERPs have a number of shortcomings, including workforce automation, scheduling, leave management, activities tracking, timekeeping attestation, and labor law compliance. Another challenge is that ERP systems work best when the workforce they are tracking is a homogenous one, made up primarily of exempt employees, consistent payroll policies, simple work rules, and few collective bargaining units. But the public sector s workforce is at the opposite end of this spectrum. Public sector workers are the most highly unionized of any industry, have local work rules, are managed under strict federal and state labor laws, have complex scheduling requirements, and frequently face unique reporting requirements such as tracking labor costs to grants, programs, and government reimbursement. And since labor is the public sector s greatest operational expense, getting access to granular labor information is important for budget preparation when the next fiscal planning cycle rolls around. While ERP systems can usually handle certain complex pay rules and policies, these requirements can involve significant, costly customization. Customization increases the funding required to deploy an ERP solution, and it makes upgrades

3 difficult and expensive to manage. As a result, many public sector organizations opt out of ERP upgrades when they ve had to do expensive customizations, missing opportunities to use the most updated technology available. The need for a granular reporting approach to workforce management can lead public sector organizations to explore a best-of-breed workforce management solution. With a best-of-breed solution, ERP investments are extended as the two enterprise systems are integrated into a single, fully functional platform. A best-of-breed approach delivers a completely automated and configurable solution with features such as alerts, analysis, and trending without costly customization. This approach also puts government and education organizations on a faster path to controlling labor costs, with faster implementation, greater and measurable ROI, and more flexible options for deployment, purchasing, and maintenance. Given the promise of a best-of-breed approach to workforce management, what will decision makers find when they start writing requirements and exploring options for information processing, data collection and validation, customization, and deployment? Batch processing: costly reporting and missed opportunities Despite increasing functionality in ERP solutions, there will continue to be a need for third-party solutions. Time and labor is one root cause of many implementation problems if data validation is not forced at the point of entry. This causes downstream issues with payroll. 1 If payroll was easily captured by an ERP system, reporting would be a breeze, but the fact is that the source data required to create a perfect paycheck is decentralized in public sector organizations. The challenge is exacerbated by the ERP s reliance on batch processing and downstream workflow approval processes that aren t synchronized. Because data validation occurs only after the batch Time Administration is run in an ERP, critical information such as a sick day notification important for the operational side of the organization is already out of date by the time management sees it and must make decisions with it. Think about supervisors with responsibilities for busing and transportation in K-12. How can they know whether they have enough drivers for the morning run if they re unable to see in real time absenteeism information for their drivers for the day? In another example, since exceptions are reported by day and don t produce visual alerts or supporting detail, it s impossible for public works managers to adequately schedule workers for an impromptu storm cleanup when they can t see edits, employee requests, and other changes made to the system within the previous 24 hours. By comparison, real-time data processing gives decision makers the most current information to drive decision making, resulting in less work for managers. As employees punch in and out, exceptions are reported to managers with visual cues and in full detail, so validation errors are identified and corrected at the 1 Massimilliano Claps and Ivy I. Anderson, Trends in Statewide ERP Implementations (Gartner, Inc., 2009), 16.

4 time of entry without the manager needing to step in. If an employee forgets to punch in or out or has an unexcused absence, managers explore why and accurately record the time. But instead of having to sign paper timesheets and exception reports, managers can view all of their employees in one spot and make corrections as needed throughout the pay period. Understanding absence in real time Absenteeism produces major cost gaps for many government and education organizations. Costs associated with nonproductive time such as unscheduled absences, vacation time, family medical leave, late arrivals, and early departures can account for up to 35 percent of an organization s total payroll expense. 2 In an ERP, the absence management interface starts when the absence conversation process is run and the results are made available to the ERP s payroll. After the process is complete, the absence data resides in something called the Paysheet Load Holding Record ; paysheets containing absence payouts must be manually calculated and confirmed via the normal payroll process. And because self-service does not reflect requests that have not yet been processed by payroll, it s impossible for employees and managers to see forecasted leave balances. With a best-of-breed workforce management solution, time, labor, scheduling, and absence management are all prebuilt functionality that does not require table sharing or batch processing in order to register updates to the employee record. No absence conversation process is required to make data available to the payroll system. Because a best-of-breed application works in real time, when an employee requests time off and the manager approves the request, the time is automatically and immediately deducted from the employee s accrual bank. Any information sent to the ERP s time and labor system is done so that the employee s payroll can process without intervention and the information can be posted to the general ledger. Real-time systems also allow you to accommodate future leave requests, so employees and managers can make requests and see exactly what accrued leave balances are at all times. The cost savings is upfront for us, because we have more statistical support and have experienced a big increase in productivity because information is real-time. Payroll staff no longer has to wait a day to capture data and input it manually. Using an automated solution has cut two days off payroll processing time and is freeing up staff for other tasks. 3 Lisa Adames, CIBER consultant and ISD systems engineer Newark School District, Newark, New Jersey For many public sector organizations, accurate leave reporting has become problematic. Because leave can be rolled forward from year to year, large leave balances can complicate layoffs and pending retirements. It s not uncommon for public servants to leave their organizations with months or even years of accrued leave, and the inability to accurately predict and report these balances puts current and future budgets at risk. Accrued leave balances also factor into pension calculations, another looming concern for government and education entities. 2 Mercer, Survey on the Total Financial Impact of Employee Absences (Mercer, 2010), Kronos Incorporated, Newark School District Gives Kronos Top Grades in Controlling Labor Costs and Reducing Compliance Risk (Kronos Incorporated, 2009), 2.

5 Real-time data collection and validation control labor costs Labor is the public sector s largest operational expense, and because a significant portion of the workforce is made up of hourly workers, the opportunity to save critical budget dollars that are allocated to labor is great. There are four significant ways to control labor costs in the public sector, and automated workforce management solutions offer advantages for each: Reducing overpayments Eliminating manual processes and associated staffing Reducing overscheduling Gaining workforce visibility and control Reducing overpayments Because ERPs do not have native data collection devices, they either pull HTML data from paper timesheets or web clocks or they rely on third-party terminals to send data to servers. In an environment heavily or even partially dependent on manual intervention, overpayments frequently occur due to: Transcription error. Third-party studies comparing actual time worked with recorded time show transcription errors occur with regularity, often resulting in overpayments. Nucleus Research found that payroll errors caused organizations to overpay employees by an average of 1.2 percent. 4 Interpretation error. Pay rules are very complex for the public sector, and when laws pertaining to holiday pay, shift differentials, premium pay, and rounding rules are left to interpretation, the rules are often applied inconsistently. Payroll errors caused organizations to overpay employees by an average of 1.2 percent. Intentional error. Manual and semi-automated time and attendance depend on the honor system, so logging in early or logging out late to accrue unauthorized overtime can occur, as can buddy punching. Logging in early or out late to get paid for time never worked puts the organization at risk as well. Best-of-breed workforce management systems give government and education organizations the ability to collect time once at the source without ever having to touch the data again. Time is collected through web-based applications, desktops, and time clocks, or via the telephone or other mobile devices. By deploying pay policies in a single, centralized environment, best-of-breed workforce management solutions can ensure pay rule policies are consistently applied across the entire organization. Intentional errors are reduced, because the time collection devices can prevent employees from clocking in and out at unauthorized times. Biometric technology can ensure that the authorized employee is the one doing the punch. 4 Nucleus Research, Assessing the Value of Kronos in Government (Nucleus Research, 2011), 2.

6 Positive pay is another area where overpayments can occur, since ERPs are typically unable to support the practice. Positive pay is when a nonexempt hourly employee is paid for the actual hours worked. The majority of public sector employees, however, are paid using exception pay, where it s assumed that the employee worked 80 hours for each pay period. For example, overtime and differentials are usually not calculated using a system, but are self-reported by the employee. With a workforce management system, you can pay employees for actual hours worked. Benefits include: When an employee calls in sick, the manager can immediately record this information on the employee s timecard, ensuring the time is recorded and the leave bank is adjusted. Employees request vacation time in advance, so the time is recorded accurately and the system can verify that there is enough time in the vacation balance. This eliminates an employee s ability to game the system by submitting his or her paper time-off sheet after the accruals have posted. All policies and rules are configured so the employee does not have to try to figure out how to report shift or equipment differentials manually on a paper timesheet. This takes the guesswork out of how to interpret very complex pay policies. Eliminating manual processes and associated staffing Best-of-breed solutions eliminate manual processes and the need for staff to maintain them. Public sector organizations with manual time and attendance systems require many full-time equivalent (FTE) positions to transcribe data, check for and correct errors, produce reports, and audit results. It s not uncommon for various departments in government and education to be assigned their own payroll staff. These administrative workers can be time clerks in operations, payroll clerks in HR, or HR/IT people responsible for feeding data into the ERP systems. A best-of-breed workforce management system takes away the chore of manual work, allowing employers to either eliminate FTEs altogether or repurpose them to higher-value work. The city and county of Denver, for example, was able to repurpose 45 payroll positions following the implementation of its automated workforce management system, saving $1.5 million annually. 5 Reducing overscheduling When you consider the primary missions of government and education organizations, the ability to properly schedule the workforce is extremely important. Campus safety officers have to be at the right place at the right time and in the right location in order to ensure student safety. Parks and recreation officers have to be scheduled properly in order to keep our parks clean and safe, but their schedules must also be flexible in order to accommodate special community events. Police officers and firefighters have particularly challenging scheduling requirements in areas such as shift bidding and scheduling resources to assets. The city and county of Denver was able to repurpose 45 payroll positions following the implementation of its automated workforce management system, saving $1.5 million annually. 5 Kronos Incorporated, City and County of Denver Realizes Millions in Labor Cost Savings with Kronos Solution (Kronos Incorporated, 2010), 1.

7 When operating in an ERP environment, public sector organizations often resort to overscheduling employees, in part because forecasts for resource demand are unreliable and too simplistic. Rather than being caught shorthanded, supervisors will intentionally schedule more people than are needed for adequate coverage, and the extra labor goes unchecked. Resources can go unchecked as well, because it is natural to turn to the most reliable and flexible employees when faced with unexpected demand. The problem is that the most flexible and reliable employees are usually also the most expensive employees. Not only are the fill-in employees costly, but downstream effects are magnified when workers are pushed into premium pay or overtime. Best-of-breed workforce management solutions optimize scheduling and minimize overscheduling with sophisticated, proven forecasting algorithms that are integrated into their core time and attendance applications. Gaining workforce visibility and control Visibility and transparency are major themes in the current budget crisis, and what public sector leaders can t see, taxpayers and the press will certainly uncover. In ERP environments, senior managers lack access to critical information and reports at the level they need for precise decision making. By comparison, a best-of-breed system offers preconfigured dashboards, views, and alerts for critical workforce-related performance indicators. This gives managers timely, high-quality information that mitigates budget drain from tardiness, absenteeism, overtime expense, early start/late leave punches, and nonproductive time. Customization vs. complete automation Many complexities surround the management of the public sector workforce, and drive organizations using ERP systems to resort to costly, time-consuming, and error-prone custom coding. Even developing simple reports in an ERP is a complicated process that generally requires a super user. The management of time and attendance, scheduling, and absence are all handled in separate components that must be specifically configured to talk with one another. And because ERPs do not have significant focus and experience in the workforce management market and cannot deliver a fully configurable solution, the end result is a system that is more expensive and time-consuming to implement and more prone to errors and compliance risks. When workforce management business processes are fully automated, labor costs are controlled, compliance risk is minimized, and workforce productivity is greatly improved. With automated best-of-breed solutions, public sector leaders can: Schedule effectively. From one central location, schedules can be created that satisfy the needs of both the employee and the organization. Workloads

8 can be reviewed, schedules can be adjusted, employee availability can be analyzed, and skill levels can be examined. By matching labor to volume, overscheduling is eliminated and excessive overtime and the supplemental labor that goes with it are reduced. Manage by exception. With an exception-based approach, managers and supervisors can quickly identify employees who require attention. From a central location, missed punches can be highlighted and corrected, time-off requests processed, and overtime identified and approved. One simple click notifies payroll that it s okay to pay the employee. And because best-of-breed workforce management systems operate in real time, changes are processed instantly and the result can be seen in the application. There is no waiting for batch processes to run or reports to print to verify entries. Eliminate errors with intelligent data collection and a single database. Collecting accurate, timely data at the source is an important component of a best-of-breed workforce management approach. Fully automated time collection controls overtime, minimizes compliance risk, and ensures correct information is entered by the right employee. It also automates the organization s workforce management processes on a single platform and database, so common transactions such as vacation requests are immediately posted for pay purposes. Passwords and security files are also managed from a central location. Manage employee absence. Best-of-breed workforce management solutions offer comprehensive tools for managing all aspects of employee absence. Users can calculate real-time accrual balances, determine time-off eligibility, administer FMLA, and automatically send out mobile open-shift alerts when management needs to find a replacement. Engage employees and managers through self-service. The work of a public servant is tough, and their pay is important to them. Fully automated workforce management systems allow managers and employees to access accrual balances, request time off, update availability, request schedule changes, review timecard data, and view earnings history conveniently from a PC. The advantage of a best-of-breed approach Nucleus Research recently conducted a study of organizations using ERPs for workforce management versus organizations adopting a best-of-breed, fully automated approach. Nucleus found that 82 percent of PeopleSoft customers achieved positive ROI in an average of 2.7 years. 6 By comparison, 75 percent of organizations adopting a fully automated solution achieved ROI above 250 percent with payback in an average of five months. 7 82% of PeopleSoft customers achieved positive ROI in an average of 2.7 years.by comparison, 75% of organizations adopting a fully automated solution achieved ROI above 250% with a payback in an average of five months Percent of PeopleSoft Customers Achieve a Positive ROI in 2.7 Years, Nucleus Research, accessed July 20, 2011, 7 Nucleus Research, ROI Evaluation Report Kronos Workforce Timekeeper (Nucleus Research, 2006), 2.

9 Panorama Consulting Group recently released its 2010 study on ERP systems and found that 67.5 percent of organizations surveyed failed to realize at least half of the business benefits they expected from their ERP systems. 8 In the context of one of the worst budget crises in recent history and significant pressure for organizations to control labor costs, workforce management automation is perhaps one of the wisest investments a public sector organization can make. Further Reading 67.5% of organizations surveyed failed to realize at least half of the business benefits they expected from their ERP systems. Maximizing Government Workforce Management with Best-of-Breed Solutions, Thom Rubel, IDC Insights Extend the Value of Oracle to Labor Management, Nucleus Research Extend the Value of SAP to Labor Management, Nucleus Research About the Author Christine Carmichael is the marketing director of the Public Sector Practice at Kronos Incorporated, and she has a widely accomplished sales and marketing background in the government, higher education, and K-12 sectors. With more than 20 years of experience in the high-tech industry, Carmichael has a proven record of managing sales forces and cultivating marketing and strategic business plans for public sector business units. She has spent most of her career in sales and was a director of SAS Institute s public sector and education verticals for over a decade. Upon joining the Kronos team in early 2008, Carmichael was charged with developing business plans and strategies to formally launch the public sector practice at Kronos and to expand the nearly $100 million in annual sales the company is realizing in the public sector vertical. Carmichael graduated from North Carolina State University in 1987 with degrees in both business management and economics. In 1992 she received her master s degree in business administration from Meredith College. 8 Panorama Consulting Group, 2010 ERP Report (Panorama Consulting Group, 2010), 4. Kronos Incorporated 297 Billerica Road Chelmsford, MA More information about Kronos customer success stories may be found at , Kronos Incorporated. Kronos and the Kronos logo are registered trademarks of Kronos Incorporated or a related company. All other product and company names are used for identification purposes only and may be the trademarks of their respective owners. All specifications are subject to change. All rights reserved PS0017-US

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