A BUSINESS VALUE ASSESSMENT: mySAP™ HUMAN …fm.sap.com/pdf/5149/CS_TransAlta.pdf · As TransAlta looks to the future, SAP will help enable the way in which employees interact with

A BUSINESS VALUE ASSESSMENT:mySAP™ HUMAN RESOURCESAT TRANSALTA

SAP Case Study

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Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5Study Objectives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5Industry Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6Company Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

TransAlta’s HR Direction: Shifting from Transactional to Strategic . . . . . . . . . . . . . . . . . 7

The Impact of mySAP HR on TransAlta’s Business Processes . . . . . . . . . . . . . . . . . . . . . . . 8Business Process: Salary Planning . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8– Before mySAP HR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8– After mySAP HR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9– Impact of mySAP HR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

Business Process: Employee Data Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12– Before Implementing mySAP HR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12– After Implementing mySAP HR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13– Impact of mySAP HR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

Business Process: Training Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14– Before Implementing mySAP HR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14– After mySAP HR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

Business Process: Training Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16– Before Implementing mySAP HR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16– After Implementing mySAP HR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17– Impact of mySAP HR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

Business Process: Time Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19– Before Implementing mySAP HR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19– After Implementing mySAP HR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19– Impact of mySAP HR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

Business Process: IT Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

CONTENTS

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Summary of Business Process Findings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21ROI and Payback Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22– Calculation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22– ROI and Payback Period Range . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

Conclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

Contact Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

Methodology. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24Questionnaire Design . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24Data Collection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24Data Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

Appendix – Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25– Annual Savings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25– Ten-Year Savings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25– ROI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25– Payback Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

TransAlta Corporation (TransAlta) was facing pressures due to the deregulation of the Canadian utilities industry. Thisderegulation prompted many companies to enter the utilitiesmarket, creating increased competition and cost pressures.TransAlta Corporation, a major North American utilities play-er, responded to these commodity cost pressures by imple-menting mySAP™ Human Resources (mySAP™ HR), to helprealize both its near-term strategic goal of maintaining low-costgeneration plants in the commodity-based utilities market andits long-term strategic goal of aligning human capital to sup-port a brand image grounded in economic, environmental, and social sustainability.

This study focuses on the return on investment (ROI) ofmySAP HR. mySAP HR enabled TransAlta to refocus its HRefforts on adding strategic value, such as:

• Hiring and retaining quality workforce

• Enhancing its long-term brand initiative through an emphasis on human capital management (HCM)

• Accurately forecasting salary budgeting

• Eliminating numerous manual processes to reduce HR operational costs

• Reducing business process cycle times

• Reducing manual tasks by moving to an automated environment

• Improving government compliance

The ROI calculated from the data collected at TransAltawas 102%. The payback period was 4.9 years, with a 10-yearannual savings of CAD$31 million.

Overall, TransAlta was able to realize significant cost and timesavings through the implementation of mySAP HR. The mostsignificant savings and the largest contributor to the overallROI was within the salary planning business process. The driv-ing forces for these significant cost savings were the accuracy in reporting and data, and a reduction in cycle time, leading to the reallocation of HR staff. Although reasonable businessefforts were utilized to uncover an exhaustive list of the finan-cial benefits associated with mySAP HR, it is unreasonable tosuggest that all benefits have been identified; therefore, this ROI should be considered a conservative viewpoint.

STUDY OBJECTIVES

The case study is based on Gartner Consulting’s ROI methodol-ogy, which evalutates explicit cost savings or revenue-enhancingbenefits associated with human resources business processes.The objectives were to showcase progressive organizationswhose HR teams have demonstrated thought leadership, a positive impact on the business, and potential quantifiablefinancial savings as the result of a mySAP HR implementation.

This case study was based on an ROI methodology researchedand designed by Gartner. Gartner’s methodology and its use bySAP should not be deemed to be an endorsement of any SAPproduct or service, data, or sales technique. Gartner expresslydisclaims all warranties, expressed or implied, of the fitness of its methodology for a particular purpose. Gartner does notendorse the findings of this case study, and the model resultsmay vary from published Gartner research.

EXECUTIVE SUMMARY

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INDUSTRY BACKGROUND

The North American utilities industry has moved from a regu-lated to deregulated market. Deregulation has caused an over-abundance of unexpected entrants into the marketplace and, asa result, has created an aggregate oversupply of surplus powerwithin the utilities industry. Oversupply by utilities producershas led to an increased commodity-based pressures to be thelowest cost provider. By definition, a commodity is a product or service that is differentiated only by price.

COMPANY BACKGROUND

TransAlta has determined that it can differentiate itself by creating a brand presence that not only emphasizes low-costpower generation, but also focuses on environmental and socialresponsibility. Human capital is the enabler behind TransAlta’sdifferentiation strategy.

Canada’s largest, nonregulated electric generation and market-ing (energy trading) company, TransAlta strives to achieve twomain objectives:

• Operate low-cost power generation plants at high availabilityrates

• Enhance returns through profitable growth

The company has 2,500 employees in operations throughoutCanada, the United States, and Mexico. In 2002, it posted cashflows from operations of CAD$437.7 million, revenues ofCAD$1,723 million, and earnings per share (EPS) of CAD$1.12.

“Our key differentiator is quality people –

they are absolutely fundamental to our

business. We know if we consistently

produce low-cost power, we can suc-

ceed. It is having the brightest people

that can produce results that makes

all the difference.”

Mike Williams, VP of Human Resources, TransAlta

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Historically, TransAlta’s HR department focused on highlymanual, paper-based transactional tasks that required substan-tial human interactions. In 1996, mySAP HR was implementedas an enabling tool to reduce these transactional HR activitiesand decrease operational costs. The goal of Phase 1 was todecrease costs in HR and strengthen TransAlta’s low-cost competitive position within the increasingly commoditizedutilities market.

In 2001, TransAlta began implementing Phase 2, which served as a mechanism to shift HR’s focus to value-adding, strategicactivities that enhance the long-term brand image of the firm. TransAlta began an extensive search for a portal productto replace its existing portal and provide a robust, scalable, and user-friendly environment that could support key busi-ness processes. There were numerous reasons why mySAP™Enterprise Portal was selected, including:

• Integration with the rest of mySAP™ Business Suite

• Ease of content uploading and delivery through predefinedmechanisms in SAP’s technology

• Reduction in development effort due to built-in iViews

• Impact on core TransAlta business processes through aneasy-to-use front-end portal, with a robust back-end database

TransAlta used the employee self-service (ESS) and managerself-service (MSS) capabilities found within mySAP EnterprisePortal as the user interfaces for time management, training andevents, and salary planning. This functionality has empoweredthe managers and employees and enabled TransAlta’s HRorganization to allow mySAP HR to handle the large majorityof transactional activities, giving its people time to focus onmore strategic activities, such as HCM, for the business.

As TransAlta looks to the future, SAP will help enable the wayin which employees interact with the business workflow andwith HR. For example, business workflows will be delivered toemployees via a wired or wireless device in real time. The em-ployee will then have the option to interact with HR-specificbusiness processes via this same wired or wireless device.TransAlta believes that it can create a more agile and flexibleorganization through the use of intelligent process workflowsdelivered from the portal. In addition, TransAlta plans toimplement the e-recruiting and performance managementcapabilities of mySAP HR, as well as SAP® Business InformationWarehouse (SAP® BW), which provides data warehousing func-tionality.

TRANSALTA’S HR DIRECTION: SHIFTING FROM TRANSACTIONAL TO STRATEGIC

“Enterprises must shift their focus from

human resources (HR; the provision

of traditional transactional support,

such as benefits, personnel, and pay-

roll services) to HCM as a strategy

for workforce planning, acquisition,

management, and optimization.”

Jim Holincheck, Gartner Analyst

Figure 1: TransAlta’s Move from Transactional to Strategic

Short-Term Strategic GoalPhase 1

Long-Term Strategic GoalPhases 2 & 3

Maintain low-cost generation plants in the commodity-based

utilities market

Align human capital to support a brand image grounded in eco-

nomic, environmental, and social sustainability

mySAP HR reduces transactional activities

(time management, employee data transactions,

organizational management)

mySAP HR enables strategic activities (salary planning,

e-recruiting, business warehouse, portal)

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Figure 2: Salary Planning – “Before” Scenario

Approved

NotApproved

Approved

NotApproved

Manual Process Automated Process

HR – COMPENSATIONANALYST

Creates Excel salarytemplate and sends to

administrator

ADMINISTRATOR

Revises and confirmssalary information

ADMINISTRATOR

Sends to line ofbusiness managers

LOB MANAGER

Manipulates salaryinformation for each

employee

MANAGERS

Meet as a group torationalize salary plan

MANAGER

Creates final salary planfor business unit

MANAGER

Sends to CEO/Directorsfor review/approval

MANAGER

Sends to HR for coding into SAP system

MANAGER

Reviews with employees

The ROI calculations undertaken as part of this ROI study tooka 10-year useful life period into consideration. Direct and indi-rect cost-saving benefits associated with five business processesand IT operations were evaluated:

• Salary planning

• Employee data transactions

• Training and development

• Training compliance

• Time management

• IT operations

BUSINESS PROCESS: SALARY PLANNING

Before mySAP HRPrior to mySAP HR, the salary planning process began when a compensation analyst downloaded static compensation datainto a spreadsheet and then sent the master salary spreadsheetto an administrator in each business unit. The administratorthen revised and confirmed the information. Next, the spread-sheet was sent to the line of business (LOB) managers to fill inthe new salary plan. At this point, managers met in a group to rationalize salary decisions. Executive management then

THE IMPACT OF mySAP HR ON TRANSALTA’S BUSINESS PROCESSES

9

reviewed the aggregated employee salary data for accuracy andconsistency. Once approved, the manager sent a change-of-salary form (accompanied by the completed document) to HRfor manual upload to the legacy system. Finally, managers metwith employees and updated the spreadsheet to reflectcompensation changes.

After mySAP HRToday, managers access mySAP HR with the salary-planningtool through the MSS interface in mySAP Enterprise Portal.The salary-planning tool in mySAP HR already has historicalsalary and imported performance data. The managers thenaccess a Web-enabled spreadsheet delivered via the MSS func-

tionality. Managers are capable of running salary scenarios,such as increasing an individual’s salary by 3% to 4% or makingfinal salary selections. There are business rules built into thesystem that ensure that all salaries comply with the forecastedsalary budgets and performance criteria. Managers simply clickan on-screen button and the information is easily routed to the next approving manager, if required via workflow. At aspecified time, the executive management committee pulls thesalary reports from mySAP HR for review and approval. Onceapproved and activated, the data flows directly to mySAP HRthrough its integrated payroll function, and the employeereceives a compensation adjustment, if applicable.

Figure 3: Salary Planning – “After” Scenario

Approved

NotApproved

MANAGER

Enters into MSS and pulls up salary planning

information in mySAP HR

MANAGER

Manipulates and makessalary decisions and

submits

MANAGER

Automatically routed toapproving manager

EXECUTIVECOMMITTEE

Pulls aggregated reportsfor reconciliation

LINE MANAGER

Has conversation withemployee

SAP

Automatically uploaded into mySAP HR payroll

function


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Impact of mySAP HRHistorically, TransAlta underestimated its salary budget by 1%,which translated, on average, to CAD$1.6 million in unneces-sary costs annually. By leveraging the compensation manage-ment functionality of mySAP HR, TransAlta has been able toaccurately meet payroll requirements in a timelier manner.

This cost savings is due primarily to a more accurate, dynamiccash position. By accurately isolating the payroll cash outflows,TransAlta has been able to avoid the costs associated with manip-ulating the corporate debt/equity structure, taking on last-minute immediate loans, realizing cash shortages, and poten-tially liquidating or issuing bonds or marketable securities.

TransAlta considers the salary-planning function in mySAP HRto be a tool that allows TransAlta to do a better job at hiringand retaining employees who are strategically aligned with theoverall corporate vision. mySAP HR has helped TransAlta toaccurately and appropriately compensate its employees. Afterentering the MSS interface, not only can managers view histor-ical employee salary and performance data – they can alsoaccess competitive market wages for the same job descriptions.

This gives management a tool that can help it increase ordecrease compensation packages that enable the following:

• Retain employees who are dedicated to the short-term, cost-cutting goals and/or aligned with the long-term brandimage grounded in economic, environmental, and social sustainability.

• Reduce overpayment of less-than-satisfactory performers, by allowing managers to make salary decisions that aregrounded in metrics rather than the negotiation skills of the manager.

• Attract new hires with slightly above-market wages that havethe intellectual capital and skills to improve the financial and brand position of the company. This includes hiringemployees that exhibit knowledge in emerging technologies,such as wind power and any other next-generation, environ-mentally friendly power sources that could positively impactTransAlta’s long-term vision.

• Reduce overpayment of new hires through the comparativemarket salary database linked to the mySAP HR salary-plan-ning tool. The ability of mySAP HR to enable managers toaccess this salary information helps TransAlta control thecosts associated with overpaying new hires.

The automation of salary planning via MSS has reduced thetotal cycle of the salary planning process time from 226 to 141total person days (see Table 1), which translates into a cost savings of CAD$58,000 annually. Cycle-time reduction wasmeasured by the ability to relinquish manually intensive tasksfrom HR’s objectives.

“The value-add of mySAP HR and its

compensation management functions

is that the salary planning mechanism

is able to really give us insight into our

business, enabling us to better plan,

forecast, and manage human capital

against the needs of our company.”

Mike Williams, VP of Human Resources, TransAlta“The way we can maintain a low-cost

environment and differentiate TransAlta

from the competition is by hiring and

retaining the right resources that can

be more creative and smarter than the

competition.”

Mike Williams, VP of Human Resources, TransAlta

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HISTORICAL STATE

Activity Time Today

256.75Total person days

337.5 hrsConversations with employees

600 hrsExecutive assistants compile data and preparepackages for meetings with senior executives

330 hrsCreate change forms to implement salary plans

750 hrsSupervisors determine salary, attend salary planning meetings

5 daysHR creates matrix template

CURRENT STATE

Activity Time

140.75Total person days

337.5 hrsConversations with employees

40 hrsOne person compiles dates and prepares package for meetings with senior executives

2 hrsImplement salary plans

750 hrsSupervisors determine salary, attend salary planning meetings

Not required

SAVINGS

116 days

No change

70 days

41 days

No change

5 days

Category Description mySAP HR Quantitative Impact Total Annual Savings

CAD$2.1 million per yearTotal AnnualSavings

CAD$1 million per yearThe ability to greatly reduce themanual tasks involved in salaryplanning has allowed TransAlta to reallocate HR personnel.

HR headcountreallocation

CAD$58,000 per year The cycle-time reduction enabledby mySAP HR contributed to thereduction in burden on the HRstaff, allowing for HR reallocation.

Cycle-timereduction

CAD$1.6 million per yearmySAP HR helped TransAlta toaccurately forecast salary budgeting.The implications of poorly budgetedsalary planning negatively impactedthe free cash flows.

Improved salaryplanning accuracy

Table 1: Cycle-Time Reduction to Salary Planning Process

Table 2 summarizes the financial benefits of mySAP HR on the salary planning business process.

Table 2: Quantitative Impact of mySAP HR

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BUSINESS PROCESS: EMPLOYEE DATA TRANSACTIONS

Before Implementing mySAP HRChanging employee data at TransAlta has historically been a highly manual and paper-intensive process. To initiate theprocess, an employee contacted an HR representative to obtainthe appropriate form. Next, the HR representative sent theform, through interoffice mail, back to the employee. After

manually completing the form, the employee sent the com-pleted document back to an HR representative, who determinedif all required information was correctly populated. If the infor-mation was incorrect, the employee was notified via phone,interoffice mail, or e-mail. Once the information was verified,the HR representative hand coded the employee change datainto the legacy system.

Figure 4: Maintaining Employee Information – “Before” Scenario

Requiredinformation

No

Yes

EMPLOYEE

Employee contacts HR toobtain paper employee

data change form

HR

HR sends paper formto employee

INTEROFFICE

Paper form is sent toemployee via

interoffice mail

EMPLOYEE

Employee makeschanges and sends

paper form back to HR

EMPLOYEE

Paper form sent back to

employee for correction

INTEROFFICE

Paper form sent to HRvia interoffice mail

HR

HR codes the informationinto the legacy system


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After Implementing mySAP HRThe implementation of the ESS capabilities of mySAP HR hassignificantly simplified the employee data transaction process.Today, employees complete personal data changes through theESS mechanism in mySAP Enterprise Portal. Changes are madeelectronically, and, once submitted, updates are made almostimmediately to the back-end SAP® R/3® database. Employee datachanges can be tracked, audited, and viewed in real time.

EMPLOYEE

Employee logs into mySAP HR,

using the solution’s ESS

functionality andaccesses onlineemployee data

form

EMPLOYEE

Employeecompletes

employee dataform andsubmits

electronically

SAP

mySAP HR is updated

with employeechanges

Impact of mySAP HROn an average annual basis, TransAlta has approximately 2,000employee data transactions that occur via the ESS functionality.These transactions include permanent address changes, person-nel data changes, and emergency contact information updates.The automation of the employee data transaction process has reduced the cycle time of this process from 35 minutes to 5 minutes, which translates into a cost savings of approximatelyCAD$65,000 annually.

Figure 5: Maintaining Employee Information – “After” Scenario

Employee Data Transaction Total Time to Business Process Complete Transaction

30 minutes Total time savings per transaction

5 minutes After mySAP HR

35 minutes Before mySAP HR


CAD$1.65 million per yearTotal AnnualSavings

CAD$1 million per year The ability to greatly reduce themanual tasks involved in personneldata change has allowed TransAltato reallocate HR personnel.


CAD$65,000 per yearEmployee data transactions via the ESS functionality have reducedthe cycle time per transaction by 30 minutes. The typical number of transactions per year is 2,000.

Cycle-timereduction

Table 3: Cycle-Time Reduction for Employee Data Transaction Process

In addition, mySAP HR has transformed this paper-based manu-al process into one that is highly automated, thereby allowingHR to focus on more strategic activities that contribute to theoverall direction and vision of the company.

Table 4 summarizes the financial benefits of mySAP HR on the employee data transaction business process.

“This cycle-time reduction allows

for HR to spend less time completing

administrative tasks and more time

focusing on strategic activities that

are core to TransAlta’s business.”

Shandra Russell, Director of Human Resources, TransAlta

Table 4: Quantitative Impact of mySAP HR


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BUSINESS PROCESSES: TRAINING DEVELOPMENT

Before Implementing mySAP HRHistorically, training and development at TransAlta varied bylocation. In some cases, training was not tracked. For employ-ees, training was mapped to the requirements of the job level.

When training was required, the line managers sent employeesto training, and, once completed, the certification was filed at the location. There was no process in place to alert HR ofrequired training.

MANAGER OR HR

Maintains files on training requirements

for all positions

MANAGER OR HR

Constantly comparestraining requirements to the current levels

of staff

MANAGER OR HR

Notifies employee oftraining needs

EMPLOYEE

Receives certificationafter training

MANAGER OR HR

Update records inmultiple locations

MANAGER OR HR

Paper certification document sent to

line manager or HR

Figure 6: Training Tracking – “Before” Scenario


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After mySAP HRToday, TransAlta tracks training through the training andevents management capabilities of mySAP HR. Employees enterinto the ESS and pull up their file, which automatically mapstraining needs against their job requirements. The employeesubmits an application for the training, which sends an auto-

mated e-mail to the approving manager. By utilizing MSS, the employee’s management can either approve or disapprovethe training. If and when a yes decision is initiated via MSS, the employee receives an electronic notification routed directlyto their attention.

EMPLOYEE

Views training needs and submits training

request via ESS

MANAGER

Makes decision on training and submits

electronically

EMPLOYEE

Employee attendstraining and is certified

SAP

Updated

CERTIFICATION

Paper certification sent for filing

EMPLOYEE

Receives decision viaESS window

Figure 7: Training Tracking via ESS – “After” Scenario


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BUSINESS PROCESS: TRAINING COMPLIANCE

Before Implementing mySAP HRIn the event of a government compliance audit, HR wasrequired to provide paper documents of appropriate trainingcompletion upon request. In some cases, HR searched throughmultiple files in numerous locations for compliance certification.

After obtaining the documents, an HR person consolidated the training records. Then, the line-of-business (LOB) manageremployee and government agent were contacted, and, if possi-ble, they were provided with the documentation. On average,this occurred at least one time per month and required thetime of three to four HR resources.

Found Found

Not Found

Found Found

Not Found

DocumentFound

DocumentNot Found

GOVERNMENTAGENCY

Requests HR to providetraining certification

HR

Conducts time-consumingsearch for info

GOVERNMENT AGENCY

Supplied to personrequesting document

HR

HR contactsmanager

EMPLOYEE

Employee contacted

AGENCY

ComplianceAgency/Internal

Compliance Group notified of

noncompliance. In some cases, training is redone. Minimum fine

CAD$60,000.

Figure 8: Training Compliance Before mySAP HR


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After Implementing mySAP HRIn the event of a government compliance audit, one HR repre-sentative goes into mySAP HR and pulls an aggregated report.There are no manual processes related to obtaining this infor-mation.

Impact of mySAP HR mySAP HR fundamentally changed the way that TransAltatracked training and compliance. This strategic change not onlyled to significant cost savings, but also helped the firm align itstraining needs against the brand image of the company.

Through the improved tracking found in mySAP HR, TransAltais able to plan more targeted training mapped directly to jobrequirements, which can translate into a reduction in note-worthy accidents. Noteworthy accidents, both physical andindustrial, lead to costly financial payouts and, if not managedcarefully, have the potential to tarnish the brand image and sustainability of the company. Since the implementation ofmySAP HR, TransAlta has embarked on a campaign to measurethe cost savings realized by reducing the incident frequency rate(IFR). TransAlta is focusing on the following IFR reduction costsavings:

• Government-mandated plant shutdowns

• Medicinal expenses due to accidents

• Litigation related to accidents

• Insurance premiums

• Lost employee productivity due to injuries

In addition, mySAP HR provides a mechanism through whichTransAlta can more readily adhere to Canadian governmentcompliance mandates. If TransAlta is unable to provide appro-priate documentation during an audit, they are fined CAD$60,000.TransAlta is also in the process of identifying the differential inthe reduction in the number of compliance violations.

GOVERNMENTAGENCY

Requests HR toprovide training

certification

HR

Pulls report viamySAP HR

GOVERNMENTAGENCY

Supplied to person

requesting doc

Figure 9: Training Compliance via ESS – “After” Scenario


18

A corollary benefit of using mySAP HR to track training is thealleviation of several manually intensive tasks, which decreasescycle time per transaction. On an annual basis, TransAlta hasapproximately 650 transactions occurring in the ESS function-ality for training tracking. The automation of training trackingvia ESS has reduced the cycle time for this process from 5 hoursto 40 minutes (see Table 5), which translates into a cost savingsof CAD$176,000 annually. Cycle-time reduction is measured by the ability to relinquish manually intensive tasks from HR’sobjectives.

Employee Data Transaction Total Time to Complete Business Process One Transaction

4 hours, 20 minutes Total time savings per transaction

40 minutes After mySAP HR

5 hours Before mySAP HR


CAD$376,000 per yearTotal AnnualSavings

CAD$200,000 per yearThe ability to greatly reduce themanual tasks involved in trainingprograms has allowed TransAlta to reallocate HR personnel.


CAD$176,000 per yearA shorter duration to review coursematerial and register online.

Reduction intraining cycletime

CAD$600,000 for everyreduction in the numberof violations.

A by-product of a reduction in IFR is that there will be a reductionin compliance penalties due tountrained employees working inareas outside of their skill base.

Reduction in compliancepenalties

No metrics available atthis time. Will securefor future use.

Having better-trained people meansfewer accidents due to human error or employees dealing withunfamiliar tasks.

Decrease in IFR

Table 5: Cycle-Time Reduction for Training Development Process

Table 6: Qualitative Impact of mySAP HR

Table 6 summarizes the financial benefits of mySAP HR on thetraining tracking and compliance business process.

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BUSINESS PROCESS: TIME MANAGEMENT

Before Implementing mySAP HRPrior to mySAP HR, time management consisted of a semi-automated, time-consuming set of tasks and input systems.The systems varied from a VAX based on TTS at the headoffice, while the plants and transmission groups utilizedspreadsheets and paper respectively.

Since many hourly employees worked in the field or on theplant floor, they needed to leave their work areas to access acomputer that allowed them to enter time. Given that many of the employees were not frequent users, it was common tohave password-related spikes in the number of calls to the helpdesk on or around the day that employees submitted their time reports. After finally getting into the time managementsystem, employees found it challenging and time consuming to maneuver through multiple pages. For each employee, theuploading process could take up to 3 minutes (excluding thetime it took to locate a computer). In addition, HR personnelwere required to constantly process the time information,which took up to one week.

After Implementing mySAP HRToday, approximately 1,750 employees sign into a readily available portal by using their employee identification number.Employees enter data via a kiosk or personal computer.

Once the employee types in his or her ID number, an easilyidentifiable, personalized icon appears on the screen. Next, the employee clicks on the icon and the current week’s blanktime grid appears. After populating a cell for each day of theweek and clicking the “submit” button, the time is uploadedinto mySAP HR through the time management function. The entire process takes approximately 45 seconds. In additionto the time saved per employee, HR was able to automate the process of payroll notification and report generation.

Manual

Electronic

Tim

e D

urat

ion

3 M

inut

es

Find system that accommodates time management functions

Log into Unix System.(cumbersome passwords caused problems)

Find Time Entry Location System

Enter Time

Manual

Electronic

Tim

e D

urat

ion

45 S

econ

ds

Easily find portal

Click to mySAP HR, then to Time Management

Enter Time

Electronic

Figure 10: Time Management with mySAP HR – “Before” Scenario

Figure 11: Time Management with mySAP HR – “After” Scenario



20

BUSINESS PROCESS: IT OPERATIONS

The use of the ESS and MSS capabilities of mySAP HR hasenabled TransAlta to reduce developer time through the use of iViews. TransAlta is given a catalog of iViews that allowsdevelopers to pick functionality from a “shopping list,” ratherthan hand coding this functionality into the system.

In addition to developer reduction time, the use of mySAP HRhas enabled improved integration of business-unit businessprocesses. For example, built-in functionality enables financeand HR to be linked together.

“The ease of integration and user-

friendliness that SAP gives through its

iViews gives us the ability to basically

turn on or turn off business processes,

which saves our developers at least

50% of coding time.”

Paul Kurchina, Program Manager, TransAlta

Impact of mySAP HRmySAP HR and its time management capabilities enablesTransAlta to collect and use key data in a highly mobile, decentralized, and often distributed environment, by providingtracking, monitoring, record keeping, and analysis of time-related data. By supporting complex pay policies, includingincentive wage routines, time off and allowed policies, and shift planning, mySAP HR helps to minimize the administrativeburden of time reporting while distributing accurate timeinformation.

Since mySAP HR relieved TransAlta’s HR staff of many of thetime-consuming, manual tasks involved in time management,the company was able to reallocate some of the staff to morestrategic activities. TransAlta estimates that the ability to reallo-cate a portion of the staff saved the company approximatelyCAD$1.6 million.

In addition to the cost savings and strategic benefits of mySAPHR, TransAlta was also able to realize a productivity benefit.Integration functionality within mySAP HR helped reduce the cycle time by approximately 2 minutes and 15 seconds peremployee, thereby creating 3,412 hours of extra productivityper year. Not quantified, but still noteworthy, was the additionalhelp-desk productivity due to the reduction in password-relatedphone calls as a result of the ability to use the employee identi-fication number.

TransAlta’s key productivity measure of the ratio of the num-ber of HR staff to employees has improved from 1:46 to 1:119, or158%. Absolute total costs of HR employees have also improvedby 45%, even without inflation.

Time Management Total Time to CompleteOne Transaction

2 minutes, 15 seconds Total time savings per transaction

45 seconds After mySAP HR

3 minutesBefore mySAP HR

Table 7: Cycle-Time Reduction for Time Management

Category Description mySAP HR Quantitative Impact

3,412 additional hours ofemployee productivity.

The time required to upload timeby 70%of the 2,500 employees wasreduced from 3 minutes per week to 45 seconds.

Productivityincrease

Based on the portion of the day HR worked on timemanagement prior to mySAPHR vs. now, it is estimatedthat the cost savings isCAD$1.5 million per year.

Reduction in time-consumingmanual tasks involved with timemanagement.

HeadcountReallocation

Table 8: Quantitative Impact of Time Management

21

Overall, TransAlta was able to realize significant cost and timesavings through the implementation of mySAP HR. The mostsignificant savings and the largest contributor to the overallROI on an annual basis within the salary-planning-via-MSSbusiness process. Cost savings were also obtained from otherbusiness processes, including training compliance, training anddevelopment, time management, and employee change form.

In addition to the quantifiable benefits realized after the intro-duction of mySAP HR, TransAlta was able to refocus its HRefforts on adding strategic value. These projects focused on hiring and retaining quality personnel. Since the introductionof mySAP HR, TransAlta has been able to hire and retain manyof the noteworthy forward thinkers within the electricity-generating industry. This strategic focus on human capitalvisionaries is the backbone of what TransAlta believes is a necessary step in developing a long-term brand initiative based on economic, environmental, and social sustainability.

SUMMARY OF BUSINESS PROCESS FINDINGS

Business Annual Annual 10-Year 10-Year Commitment to Commitment to Process Savings Total Savings Total Short-Term Cost Brand Development Initiatives

Contribution in CAD$ Contribution in CAD$ Savings

31 million100%5.8 million100%Total

Hire forward thinkers at competitive rates;retain top performers.

Accurate salary planning alleviates 1%swing per year; headcount reduction.

11.8 million37.9%2.7 million46.6%Salary planning

Better-trained people devoted to safety andcompliance.

Reduction in IFR costs, complianceissues, headcount.

2.0 million6.4%367,0006.6%TrainingDevelopmentandCompliance

Reduction in transactional activities, allowing HR to focus on strategic activitiesaligned to brand strategy.

Cycle-time reduction, leading to reduced headcount.

1.9 million6.1%1.1 million18.7%Employee datatransaction

Reduction in transactional activities, allowing HR to focus on strategic activitiesaligned to brand strategy.

Elimination of manual processes allows for reallocation of HR staff.

15.4 million49.6%1.6 million28.1%Time management

Table 9: Summary of Business Process Findings

22

ROI AND PAYBACK PERIOD

CalculationROI entails isolating and adding the net present value (NPV)cost-reducing and revenue-enhancing benefits introduced bymySAP HR, and then dividing this sum by the present value of the total investment. Though there are definitely revenue-enhancing benefits associated with HR automation, because of the nature of the HR function, we are not able to isolate anyof these benefits with the same confidence level as the cost-reducing benefits.

For the purposes of this study, the time period investigated was a 10-year useful life period. Although there are industrydiscrepancies regarding anticipated useful life periods, becauseof the nature of enterprise software and the expectations ofcustomers, this period proved to be the most useful life periodto be used in the calculation of the ROI and payback period.

The payback period is essentially a ratio-and-proportion cal-culation that compares all of the financial benefits realized in 10 years to the time it would take to have that investmentreturned (for example, financial benefits/1 year = investment/Xyears, then solve for X).

The investment estimate includes all of the costs involved inlicensing, deploying, debugging, and maintaining mySAP HRsoftware and services, although this estimate does not includeany indirect, soft, or overhead costs. In most cases, the indirectand soft costs would either be negligible or too difficult toquantify, while the overhead costs would be consistent regard-less of the HR automation strategy implemented.

ROI and Payback Period RangeThe ROI calculated from the data collected at TransAltawas 102%. The payback period was 4.9 years, with a 10-year savings of CAD$31 million.

Overall, both the ROI and payback periods calculated aboverepresent very positive and realistic numbers. Although reason-able business efforts were utilized to uncover an exhaustive listof the financial benefits associated with mySAP HR softwareand services, it is unreasonable to suggest that all benefits havebeen identified. Therefore, it is reasonable to assume that thereare additional benefits that have not been identified in thecourse of this study; hence, the ROI and payback period couldbe even more favorable than illustrated here.

23

mySAP HR is helping TransAlta deal with the very challengingtask of moving upstream from a commodity-based product to one that is differentiated in the marketplace. By reducing the many manual tasks within the HR and payroll functions,TransAlta has reduced operational costs, allowing the companyto compete against newer, low-cost entrants. mySAP HR hasalso freed up TransAlta’s HR staff to focus on high-level strate-gic activities, such as recruiting and retaining key employees.

Given this backdrop, enterprises must take into account the sig-nificant ROI and fast payback of SAP solutions and services priorto making their HR automation buying decision. Enterprisesshould invest in an HR automation strategy aggressively,because of the increasing need to cut costs and retain andrecruit scarce, qualified intellectual capital.

mySAP Human Resourceswww.sap.com/hr

Gartner Consulting – Market and Business Strategieswww.gartner.com/3_consulting_services/practice/mbs.jsp

CONCLUSIONS CONTACT INFORMATION

24

QUESTIONNAIRE DESIGN

The figure below depicts the review of secondary research fromvarious sources, which formed the foundation for designing thequestionnaire. Included in the questionnaire were underlyinghypotheses around the specific business processes within thetarget firm. The objective of the questionnaire was to test thebusiness-process hypotheses and isolate measurable qualitativeand quantitative benefits.

DATA COLLECTION

The questionnaire was administered to collect data from the following two scenarios:

• Before a company deployed the technology

• After a company deployed the technology

Onsite interviews were conducted at the target firm. The goalwas to have an interactive session enabling the identification ofqualitative and quantitative benefits for each business process.We interviewed various constituents including representativesfrom HR, finance, line management, information technologyand employees of the firm. The HR representative interviewedhas specific responsibilities for the business processes isolated inthis case study. In a few instances, respondents were unable orunwilling to answer some questions because they did not actu-ally know the answer or they thought they would be divulgingproprietary information.

DATA ANALYSIS

Upon completion of data collection, the information wasreviewed for accuracy and consistency. Spreadsheets were created to separate the qualitative and quantitative data andcategorize it into the before and after scenarios. The qualitativedata was examined to extract the overarching nonquantitativebenefits. The quantitative data was then analyzed for cost andrevenue changes realized after the introduction of the tech-nology.

WORLD WIDE WEB

ANNUAL REPORTS

RESEARCH

COMPANY PRESSRELEASES

TRADE MAGAZINES

I-BANK REPORTS QUESTIONNAIRE

ANALYSTS

CONSULTANTS

FOUNDATION

Figure 12: Questionnaire Design Process

METHODOLOGY

25

The case studies were based on Gartner Consulting’s ROImethodology and definitions, which evaluate explicit cost savings or revenue-enhancing benefits associated with HR-related business processes.

Annual Savings Assessing the savings for the first year that the technology component is operational.

Ten-Year Savings For the purposes of this study, the time period investigated wasa 10-year useful life period. Due to the nature of HR-specificenterprise software and the expectations of customers, thisperiod proved to be the most useful life period for the calcu-lation of the ROI and payback period for this study.

In many cases, the financial benefits are introduced at differentperiods of time. Measuring the total cost savings over the 10-yearuseful period of the product can provide additional visibilityinto cost savings. One cannot simply multiply the annualizedcost savings by 10. But rather, one must take into account thestaggered introduction of products and various growth rates ofeach benefit. Cash flows are corrected for present value finan-cial accuracy. Again, in the end, total cost savings will be far different than multiplying any of the annual cost savings by 10(The useful life period).

ROIThe present value of the net financial gain or loss expressed as a percentage of the present value of the funds invested to gen-erate that gain or loss. In other words, NPV of the cash inflowsdivided by the present value of the cash outflows. The cashinflows are usually in the form of cost decreases or revenueenhancements. Cash outflows are usually in the form of licens-ing fees, upgrade costs, maintenance, debug, hardware, and soon. Once the time period of each cash inflow and outflow areunderstood, these flows can be put in present value by usingthe prevailing debt rate. Taking the present value ensures thatthe value of a currency today is corrected for future considera-tion.

In most cases, cash inflows (cost savings and revenue enhance-ments) are estimated to grow (or decline) with the anticipatedgrowth rate of the company. Since growth rates are difficult to estimate, or as in some cases it is considered proprietaryinformation, it is financially sound to assume that cash inflowremains constant (zero growth) throughout the useful lifeperiod of the product.

Payback PeriodThe length of time required recovering the cost of an invest-ment. This is calculated as the cost of project/solution dividedby the annual cash flows. All other things being equal, the better investment is one with the shorter payback period.

APPENDIX – DEFINITIONS

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A BUSINESS VALUE ASSESSMENT: mySAP™ HUMAN …fm.sap.com/pdf/5149/CS_TransAlta.pdf · As TransAlta looks to the future, SAP will help enable the way in which employees interact with