HR isn't a revenue-producing department, and the return on investment in this area isn't easy to measure. HR leaders have to take into account many elements, requirements and categories while creating their plans, e.g. salary allocation, capitalised labour, transfers between departments or companies approval, budget versus forecast and what-if analysis. Fast growth in one's own company – or at competitors – and rapidly changing market conditions put pressure on HR managers.
Nowadays, simulating multiple business scenarios and accurately preparing forecasts on a monthly basis are highly recommended or even required. The ability to react quickly to economic and regulatory changes, and to support planning process driven by internal initiatives such as new business line or product, or a new acquisition is a must. HR leaders should be ready to provide a management team with often detailed reports on headcount reporting, average salary cost (on a quarterly, monthly or daily basis), existing-roster planning by individual and new hires/reductions by individual. And they are often asked to prepare roll-forward monthly forecast or budget vs. actual vs. forecast comparison.
The most carefully prepared HR plan can be affected by internal conditions. The HR plan’s quality is challenged by high volume of data and its accuracy, approval flow, resources allocation... Human errors often occur because of floods of spreadsheet files all needing manual work and edits.
Now, since employee expenditure is a significant part of organisation expenses, it is ripe for optimisation and offers a chance for significant savings. Streamlined HR planning allows for analysis of personnel costs and budget vs. actual variances in detail from different angles, giving managers the chance to identify a risk of loss when human resources are not being utilised effectively.
Technology can help firms achieve optimisation in HR planning. Good software can help manage employee movement (hires, terminations, transfers – with or without approval, status variations) – by single employee and budget position. Such a tool will allow you to work with HR costs with different levels of detail, from a simplified model based on standard cost parameters, through projecting actual costs on the basis of the employee movements plan, to a complex one – detailing every single payroll line to the same level of a given payroll subsystem.
A professional tool also allows for real-time planning information, scalable planning horizons, simulations and what-if analysis, reporting capabilities covering planning and actual needs, and enabling comparison. Moreover, it will offer enhanced visibility of the allocations, customised approval policy, as well as security and data confidentiality policy. A good HR planning tool should cover all the HR financial planning and analysis processes, moving beyond a classical budget towards a continuous rolling forecast, automatically projecting into a reviewed budget and the strategic plan. Planning can be perceived as a collaborative process which enables decentralising responsibility and data validation, desirable within international organisations especially.
HR planning process issues can be fully covered by a corporate performance management (CPM) system, which is a set of management and analytic processes that enables the management of performance in such a way to achieve measurable goals. CPM applications allow key people in the organisation to make decisions about the direction of business development, based on real data and the prepared scenarios of financial and operational forecasts.
An example of successful implementation of CPM tool in the area of HR planning and budgeting is BAS Trucks case. A fast-growing, international group of companies which sells new and used vehicles as well as financing, leasing and after-sales services. Due to the group’s business model, personnel expenses were accounted for 70% of its total operating expenses. To further improve its profit margin, the company needed a more effective way to plan and manage employees costs. To gain more insight on the origins and development of these expenses, BAS Trucks decided to deploy a new solution for HR planning. The project, which took three months, covered multiple phases, from identifying requirements, designing the scope of work and schedule, building the application to data loading and testing, training users and providing go-live support. Thanks to the built-in application’s functionality, BAS Trucks can define top-down business targets and compare them with bottom-up budgets from the individual companies in the whole group. It allows managers to measure planned workforce and business demand, as well as to match it by modifying the type or number of employees, salaries and other factors such as the billable rate, efficiency or sick-leave. Implementing this solution, provided BAS Trucks with an efficient and effective budgeting and forecasting process, which results in faster closing and having budget on the lowest level. And as operational planning is linked to financial planning, cost/price analysis on the employee level can be performed easier and quicker. With this solution for performance and financial management in place, BAS Trucks has a single point of truth for all reporting and analysis. “The speed of implementation and the results achieved with the HR planning solution reconfirm our decision to select CCH Tagetik as our future performance management tool” says Harm Verhagen, financial director at BAS Trucks.
CCH Tagetik company’s mission is to understand the complex challenges that face the finance office and translate that knowledge into intuitive, enterprise-scale performance management software solutions that drive business results. CCH Tagetik solution handles the following broadly defined processes (in the cloud or on premise ): budgeting, planning and forecasting, management and statutory consolidation, cash-flow planning, disclosure management and reporting.