Finding the Right HR IT System Using Six Sigma Methodology

1. Finding the Right HR IT SystemUsing Six Sigma Methodology Paul Rains. MIPPM HR Systems Project Manager - RAC

2. What is Six Sigma? ‘Six Sigma is a goal for process improvement that forces us to put our vision of quality in numerical terms’

3. Why Does it Work? It measures the VARIATION in a process. Brought about by Poor Process Design Brought about by People Brought about by Skills and Behaviours Brought about by Different Systems Brought about by Measurement Systems

4. Define the Initial Business Proposal. What’s wrong and what do you want to achieve? Problem Statement There is currently a high degree of manual intervention required to perform day to day HR and Payroll administrative activities. On average this results in ‘X’ hours per month being spent manually calculating employees company sick pay entitlement and ‘Y’ hours keying in overtime claims. In addition ‘Z’ hours are spent checking this work each month. Goal Statement To select a new HR IT System that will reduce the non-value added activities ‘X’, ‘Y’ and ‘Z’ in HR and Payroll departments by 95% to deliver a ROI in ‘X’ years

5. Analyse your Queries (What do they tell you?)

6. Identification & Types of Costs of Poor Quality (COPQ) Appraisal This refers to any process, system or procedure that exists only to look for problems. How often do you do something then immediately check it? Prevention This refers to systems and procedures that are designed to prevent things going wrong. Whilst beneficial they should be included in the COPQ Internal Failure Problems that occur ‘within’ the business that may not impact the customer directly External Failure Cost of any error that reaches the customer. These failures can become very significant

7. All these activities add Cost but which add Value? Testing a new Statutory Software release? Checking payroll input? Expediting the non-payment of Overtime? Applying a software fix? Printing a P45 for a leaver? Chasing up missing documentation for new starters? Issuing a copy P60?

8. Value Added Analysis THREE TESTS • Would the customer be interested or care about this activity or being willing to pay for it? • Does the activity physically change the output or is it a necessary pre-requisite to doing so? • Is the activity carried out ‘right first time’?

9. High Level Process Mapping (SIPOC) Issue List of Salaries to be reviewed Calculate increase and authorise Apply Increase Issue Salary Review Letter Pay New salary and record costs

10. Detailed Process Mapping Calculate Increase & authorise Issue List of salaries Apply Increase Has increase been applied in last 6 mths? N N N Has Employee now left? Appraisal Completed ? Y Will increase exceed budget? 5% 5% 5% 30% One of the most common purposes of process mapping is to help identify the re-work loops in a process.

11. Measure your Current Performance Use KPI’s (Here are a few examples) • The number of incorrect sickness calculations in any month. • The number of documents received after the deadline for each department each month. • The number of Payslip errors each pay period for each department • The time taken to calculate and pay arrears of Salary and associated payments (e.g. O/T) following a retrospective Pay review. • Thetime taken to fix a software fault

12. Process Diagrams (Operational Definition) User Reports Fault KP1- Time taken to fix fault KP2- Percentage Of Faults not Fixed First Time Helpdesk Diagnose Fault Inform Software Developers KP1 KP2 Fault Fixed? N Y Inform User

13. Having Base lined and measured your Performance now Define Your Requirements System Requirement Specification Technical Requirement Specification Consider the Voice of the Customer (VOC) Consider the Cost of Poor Quality (COPQ) Understand the Volumes involved

14. Example SRS

15. Technical Considerations Platform / Operating Software / Database / Security / Fat / Thin Client Telecommunication Infrastructure / bandwidth Workflow Capability / Self Service Cost / Time of System Implementation and maintenance cost / time Sizing / Capacity / System Response Times / Number of Concurrent users Business Intelligence strategy Interfaces (in and out)

16. Example TRS

17. What Do Your Customers Want? (VOC)

18. Critical to Quality Tree (CTQ) Underpayment VOC DELIVERY Identify the error Fix the issue Easy to report To be kept updated Issue a payment to the employee No cost Quick Fixed right Fixed 1st time The aim of a CTQ tree is to provide clarity around the aspects of the Voice of the Customer, in this case resolving an underpayment.

19. Volumes

20. The Selection Process Evaluate Market Draw up Long List Pre Tender Questionnaire Software Evaluation Evaluate and Short List ITT Clarification Evaluate and Select preferred supplier(s) Legal and Contract Negotiations

21. Tips and Hints Avoid pressure from existing internal system owners Best of breed products may deliver better and longer term business benefits. Think global! Solutions should ideally be web based Think about your long term HR strategy Don’t get taken in by the sexy bits! Think about flexibility and adaptability

22. Pre Tender Questionnaire Ideally Select at least 8 suppliers (2 – 4 weeks) • Check for Financial Stability / Business Profile • Define any recognised quality standards that the software should initially meet • Carry out user Software Evaluation Testing • Focus mainly on a Match to your Requirements • Get verbal references from other ‘users’ of the software in your Industry sector • Consider Capital and Revenue Costs ofsoftware • Use Evaluation Scorecards / Consider weighting factors

23. Example SRS Scorecard The figures above show a possible weighting factor to apply, the lower the score the better the match to your requirements

24. Bespoke Software v Manual Process (CSP)

25. The ITT Ideally Short list at least 4 suppliers (4 – 5 weeks) • Focus on Capability, Process Improvement & Quality • Consider the software suppliers customer support track record to date. • Consider Return on Investment • Seek Clarification on responses to questions • Use Evaluation Scorecard to avoid emotional decisions / Consider weighting factors

26. Example ITT Scorecard Keep rating simple e.g. 1 = Strong, 2 = Moderate, 3 = Poor The lower the overall score the stronger the solution, the optimum score being 1

27. The Contract Ideally keep 2 suppliers in mind at this stage Tie responses to the ITT to the Contract Consider length of contract / Watch out for restrictions on use / consider technology refresh Consider Software Support / Error resolution times RPI / CEL / AEI Index linking? Intellectual Property Rights (IPR) / Escrow Exit strategy

28. In Summary When Selecting a New HR IT System Consider • Your System / Technical and Customers Requirements • The volumes and the number of transactions you process • Your Current Business Processes • How you are going to connect to the application • The Headcount to maintain and support application • The Life Cycle of the application • Technology refresh and your Exit strategy • The Cost of application and the Return on Investment (ROI) period

29. Cost Benefit Analysis for sign off Prepare Cost Benefit Analysis (CBA) showing: - Return on Investment (ROI) Reduction in Non valued added activities / COPQ Reduction Costs / Headcount Use Discounted Cash Flow (DCF) model Include any ‘Soft’ benefits

30. Example of DCF Model

31. Any Questions? Telephone 07767 392043 Email: pdrains@rac.co.uk www.rac.co.uk