Case Study

 

How One Organization Effectively Managed Their Time and Labor Challenges

Executive Summary

This case study discusses the challenges that many companies face when managing Time and Labor expenses for their large, geographically-dispersed workforce and highlights a solution that enables organizations to successfully address these challenges using EPAY’s proprietary time and labor solution (Blueforce).

Labor ranks as one of the most significant costs for most organizations. Accurately capturing and managing the time that people work has the potential to significantly impact an organizations bottom line and companies that implement technology-based solutions typically see a reduction in expenses that average over three percent of total payroll costs. Further, actively managing the Time and Labor process reduces administration costs by eliminating errors and corresponding re-work and decreases compliance risk saving huge sums of litigation-related expenses.

To demonstrate these points, this case study looks at a 30,000 employee healthcare company with more than 3000 locations (that we’ll call the ABC Company) that utilized antiquated, manual, and faulty time collection methods frequently leading to a variety of payroll errors. Workforce management processes were applied inconsistently across locations leading to further re-work and additional administrative costs. Compounding this problem, a lack of automation around payroll stub distribution caused the company to incur additional costs of more than $500,000 annually to manually print and distribute pay stubs.

Ultimately, the ABC Company realized that a centralized, standardized system and methodology needed to be put in place to improve the results they were seeing and they spent significant time and effort to create the vision for what they needed going forward. They then went through a thorough analysis of the organizations that had the resources to deliver a solution that matched their vision.

The centralized HR organization at the ABC Company is responsible for crafting the direction that the process takes throughout the organization. Field operations begin the payroll process by collecting and approving time. Once this step is complete, local managers send their payroll into the corporate processing organization who review and edit to ensure quality before sending it off to the outsourced payroll provider for processing.

Historically, workforce management at the ABC Company consisted predominantly of time and attendance activities such as collecting hours using Excel and paper timesheets, collecting exception hours by category, and reporting gross hours for payroll purposes. This approach forced the site manager to spend as many as eight hours processing payroll every Sunday. Over time, workforce management functions expanded beyond basic aspects of time and attendance to include balance tracking, attendance tracking, and other complex rules-based functions which proved to be an administrative burden. Unfortunately, as the complexities of the payroll process became greater, the Company continued to rely on a mostly regional approach with no common technology platform or processes.

In 2006, the ABC Company began looking closely at its labor costs and workforce management capabilities. Time and attendance ranked as the most significant cost in the company’s end-to-end payroll process. Yet the process was plagued by frequent errors caused mostly by inaccuracies in time collection and reporting. Given how much effort it took to resolve payroll errors and how many people were affected, it was clear that making improvements in this area could yield significant benefit. At the same time, other workforce management functions(e.g. employee scheduling, accruals, overtime equalization, attendance management, pay and labor reporting, analytics)were not integrated with time collection and reporting, resulting in lost value due to duplicate data entry, an inability to achieve economies of scale within the workforce management system, and a lack of control over IT standards and compliance.

The workforce management process was fragmented and inconsistent between different divisions and locations. At some locations, supervisors were actively involved with timecard approvals, edits, and closeouts. They were using manual time and attendance practices to process payroll with minimal administrative intervention prior to the export of data to the centralized HR team. At other locations, supervisors were involved to a certain extent, but they generally spent their time on the payroll approval process. Instead, payroll administrators at the corporate offices were taking on the responsibility of correcting time rather than having it completed by front-line managers.

The technology challenge was complex. The Company had more than 3000 locations and operated in all 50 states. They struggled to find a single system that could handle the pay complexities that might be unique to each state. Equally challenging was the task of automating a process that had been manual for over 20 years and wondering whether they had the IT resources to automate the process for the entire organization.

Finally, because of the geographically-dispersed nature of their business, individual sites often created their own solutions for managing a host of issues. This caused a number of compliance-related challenges and made it difficult to adopt corporate policies at the individual sites.

Establishing a Workforce Management Strategy

The ABC Company’s Finance and HR Executives had one main goal in mind when they decided to develop and execute a new workforce management strategy; they wanted to make processes as simple and standard as possible. To accomplish this, they centralized many common administrative processes and found ways to automate those processes in a shared services environment.

Additionally, they identified opportunities to leverage the functional and technical support for the various applications that supported the payroll function. By standardizing more of the work within the HR organization, they created greater transparency into the people-side of the business.

Within the HR and payroll organization, Leadership chose to focus first on the time and attendance function and, specifically, on employee scheduling and exception-based time administration. The new vision incorporated the following goals:

• Move hourly employees to automated time collection and pay them based on actual time worked instead of time scheduled.
• Automate time and attendance in a way that encourages the use of employee and manager self-service and requires fewer manual calculations.
• Use technology to move the company toward greater use of real-time data and analytics.
• Ensure seamless interfaces between the company’s corporate HR, payroll, work order and general ledger systems.

The development and outcome of this visioning exercise coincided with a broader corporate HR transformation initiative. By automating time and attendance, field managers would no longer need to occupy their weekends working on payroll duties. The payroll processing time at the location level was reduced from up to 8 hours down to 20 minutes. This not only put time back into their personal lives, it allowed them to focus their attention on the company’s major objective which was serving customers and gaining new accounts.

Implementing the Solution

In 2009, the ABC Company’s Leadership agreed to deploy a common, integrated time and attendance/workforce management application in the United States. Strategy validation and application vendor selection were conducted and within a year of the time that the decision was made to execute the strategy, implementation of the project began.

In the first implementation phase(which took approximately one year), the objective was to deploy core functionality to multiple pilot locations that represented a cross-section of the ABC Company’s business while also replacing many of the Company’s legacy time and attendance practices. A secondary objective of this first phase was to learn enough from the pilot that the team would be able to accelerate the rollout for the rest of the organization and benefit from all the information learned in the initial phase of the project.

A successful pilot would prove that the new Time and Labor Management process would be adopted across the enterprise and that the selected technology was capable of handling the complexity and nuances of the Company’s different union contracts while also being simple for a wide variety of potential field users. The functional scope of the project spanned Employee Scheduling, Time Collection and Approval, Accruals and Balance Management, Time-Off Requests, Attendance Control, Labor Distribution, Prior Period Adjustments, Single Sign On, and Reporting.

Work performed in the pilot project incorporated planning for all US requirements, process design and blueprinting, and other infrastructure items, which provided a foundation for subsequent phases of the implementation. The plan was to invest time and resources into this pilot, prove the concept that had been communicated to Leadership, and then accelerate the rollout phase of the project.

Feedback from the workforce management pilot indicated that the new application was a significant improvement over existing systems. Results indicated that the system would reduce total labor costs by over 3% and the costs to distribute paystubs were also completely eliminated. The results exceeded the objectives the ABC Company had developed when they decided to undertake the pilot program. Further, by eliminating their manual processes, the risk to operations was significantly reduced.

In the second phase, nearly identical functionality was provided to the field but overtime equalization and an advanced form of vacation scheduling were added to the solution. Ultimately, the new application was rolled out to over 2000 locations. While a number of these locations haven’t been fully operational for very long, the overall results are tracking very well with the cost savings identified in the pilot program.

Results and Benefits

The workforce management transformation completed by the ABC Company has brought numerous benefits due to the introduction of automated approaches for tracking employee time and attendance. Some of the key benefits are described below.

Technology Leverage

With the replacement of manual time and attendance solutions, many benefits were realized:

• Reduced risk through the elimination of manual processes.
• Elimination of monthly labor costs for manual time entry and approval.
• Reduction in labor costs through successfully eliminating human error and time theft.
• Elimination of third party distribution costs associated with distributing payroll.

Improved Workforce Management

The introduction of a single workforce management solution ensured that the ABC Company adopted more standardized approaches for time collection, approval, and payroll processing. Specifically, the new solution:

• Automates all pay-rule calculations based on employee punches, holidays, absences, and other events. This is an improvement over competitive systems; most competitors did not cover 100% of complex union rules without additional significant customization.
• Automates all accruals and balance tracking based on collective bargaining agreement contracts. Again, this improves on the company’s legacy applications, not all of which tracked such information.
• Automates all attendance tracking and links violations with a workflow-based notification system which informs HR of violations for possible disciplinary action.
• Ensures that front-line managers approve timesheets.
• Ensures that gross hour exports follow a defined and controlled process with safeguards in place prior to receipt in the payroll system.

Increased Efficiency and Effectiveness

Additionally, the ABC company introduced a common support structure, controlled and coordinated by the company's finance and HR departments.

• Enables centralized monitoring and control of pay rules, accrual policies, and other business logic.
• Helps HR administrators and supervisors be more productive because of the way in which attendance policies are automated. Previously, this group depended on payroll data to drive their records, but this information was neither indicative of actual hours worked nor integrated with other important information such as holidays and employee schedules.
• In addition to addressing the administrative needs identified above, the project positions HR to further leverage its shared, centralized administrative support resources. With everyone on a common application, more work can be done centrally. The common application will also help with HR’s effort to standardize and improve local workforce management processes. The elimination of manual work is expected to reduce the incidence of pay errors and overpayments once users are fully trained and comfortable with the application. And finally, progress made to-date will serve as the first step in deploying additional functionality and employee and manager self-service.

Since the time this project began, the ABC Company has been able to reduce full-time equivalents that focused on the time and attendance management function by 60%. Additionally, further reductions are anticipated in the future.

Key Take Aways

• Workforce management covers a broad range of activities and impacts a number of functional areas ranging from senior management to employees on the facilities floor. Thus, this work impacts a wide range of employees every day. In many organizations, the hourly workforce is the group most affected by workforce management (and specifically payroll) issues due to things like schedule rotations and the likelihood that these employees are geographically dispersed. By focusing on the core functionality of the attendance/workforce management application that was selected, the Company’s objective was proven to be achievable.
• In certain businesses (including the ABC Company), standardizing operations and processes at multiple locations can be very difficult. From an HR standpoint, the company needed to be aligned to the operations of the business and supported from the CEO on down.
• A change management effort to ensure strong organizational alignment proved to be essential given the organization’s national footprint and business complexity.
• A shared vision was necessary to guide the actions of everyone involved.
• A change management process including training and communication was crucial to the success of this project. It would have been a mistake to cut corners in this effort to reduce project timeframes.
• A well-defined and communicated project plan with clearly defined roles and responsibilities enabled the ABC Company to adhere to their timelines and milestones.
• Ensuring proper system functionality necessitated detailed and diligent requirements-gathering and validation, with interactive, iterative functional testing.
• Today’s time and attendance applications are capable of meeting most of an organizations standard needs, but out-of-the-box functionality often must be customized for a companies’ unique requirements. The ABC Company recognized that unnecessary customization would quickly eat away at the benefits of a common system, and the ROI of the project.
• In the ABC Company’s case, deployment of the time and attendance system might have been more challenging had the field operations team not been aligned properly with the CEO’s vision. Having the field operations team involved from the early stages of the project ensured that they would work towards a common set of objectives with their counterparts in finance despite the challenges of a very complex environment.

Organizational alignment and understanding the importance of how each part of the project connects with broader HR initiatives (especially as they related to hourly employees) was critical to the success of this project.