1. Human Capital Management Part I (Function, Structure, and Master Data) EGN 5622 Enterprise Systems Integration Spring, 2012 Human Capital Management Part I (Function, Structure, and Master Data) EGN 5622 Enterprise Systems Integration Spring, 2012

2. Human Capital Management Part I (Function, Structure, and Master Data) Concepts & Theories Human Capital Management Part I (Function, Structure, and Master Data) Concepts & Theories

3. Human Resources Management Manage requirements for human resources to support company current needs and future growth, including: ◦Planning, ◦Hiring/assigning, ◦Training, and ◦Evaluating employees

4. Human Resources Management Typical HR Functions: Planning and job analysis, Recruitment and selection, Training and development, Performance management, Compensation and benefits, and Employee and labor relations.

5. HCM Process in the Employee Lifecycle

6. Leveraging HCM for Organizational Performance Improvement

7. Organizational structure 1. Functional Organization Structure 2. Projectized Organization Structure 3. Matrix Organization Structure

8. Functional Organization Structure FIGURE 3.1

9. Projectized Organization Structure FIGURE 3.3

10. Dedicated Project Team FIGURE 3.2

11. Matrix Organization Structure FIGURE 3.4

12. 3–12 Different Matrix Forms Weak Form ◦The authority of the functional manager predominates and the project manager has indirect authority. Balanced Form ◦The project manager sets the overall plan and the functional manager determines how work to be done. Strong Form ◦The project manager has broader control and functional departments act as subcontractors to the project.

13. Organization Layers Corporation (Conglomerate) Company ◦Division  Plant (Directorate) ◦ Department  Section Group

14. Notes on Resources structure All resources should be organized in a hierarchical structure All resources should be organized along with the HR structure The system should allow the use to specify the number of organization layers and re-configure as often as required. Committees is handled as a virtual org. unit Each unit allows for a generic and proper name. Each unit is assigned with a rank and may be assigned to a parent unit. Each unit may has multiple roles and each role can have multiple positions.

15. Role designation within a unit Generic role designations ◦Head ◦Assistant head ◦Member ◦Executive assistant ◦Staff Additional roles ◦For example, the member role may further classified into senior member, member, and junior member. Communications between units are channeled to unit heads.

16. Positions for each role Each role may have multiple positions; each has an ID. Each role has at least one position. Each employee is assigned to a position to play a role in the unit. An employee may take more than one position, play more than one role in multiple units. In such a case, rules are required for assessing resource capacity for each unit.

17. Organization unit classification On system privilege ◦Administrative (viewing) ◦Specialist (execution) ◦None On accounting/controlling designation ◦Profit center ◦Cost center ◦Sub-cost center

18. Performance and accountability concerns Profit center ◦usually set at the company/division level; employees share the bonus within the same division, Cost center ◦usually set at the department or directory level; for settling expenses between departments Non-cost center unit (sub-cost center) ◦at the unit lower than the cost center, for performance evaluation of resources and work (orders).

19. Privileges & security control System privileges are controlled with ◦User’s ID ◦User’s position ◦User’s role ◦User’s unit (group) ◦Function  Which may be assigned to a specific user or by role/unit

20. Mapping work structure to resources structure Principles ◦Corporate decisions are made at three managerial layers: strategic, tactic, and operational. ◦Work orders are planned and carried out at the operational level. ◦Change of capacity (unplanned overtime and outsourcing) requires a tactic decision. ◦Operation manager is expected to create a good fit between the work structure and the resource structure at the operational layer.

21. Mapping work structure to resources structure Principles ◦A task should not be assigned to more than one unit. However, a task and its sub-task may be assigned to the same unit. ◦Performance is assessed, based on the objective(s) assigned to the unit. For example, optimal resource utilization is not an objective for a work group in a push system.

22. Human Capital Management SAP Implementation Human Capital Management SAP Implementation

23. R/3 SAP Module View Integrated Solution Client / Server Open Systems Financial Accounting Controlling Fixed Assets Mgmt. Project System Workflow Industry Solutions Production Planning Sales & Distribution Materials Mgmt. Plant Management Quality Maintenance Human Resources

24. HCM Modules in SAP Quarles: Flya Kite Introduction24

25. Human Capital Management Human Capital Management (HCM) modules in SAP R/3 incorporates HCM concepts and practices, enabling managers to perform transactions pertaining to the HRM cycle of events. HR modules in SAP R/3: Organizational management Personnel management, Payroll Time management Training and event management, Travel management, Manager’s desktop Environment, health and safety

26. Organizational Management It provides the basis for structuring personnel planning and development processes, and is necessary for personnel administration. Using this application, an organizational structure, including departments, jobs, positions, and tasks, can be created. Work is further defined and described through the process of job analysis: the cornerstone of HRM.

27. Organizational Management Quarles: Flya Kite Introduction27

28. Organization Management Organizational Plan Expert mode Info system Tool Setting

29. Personnel Management Personnel administration Recruitment Personnel development Benefits Compensation management Personnel cost planning Management of global employees

30. Personnel Management Module in SAP Quarles: Flya Kite Introduction30

31. Personal Administration Facilitates the management of HR master data, personnel files, and relational data bases. Maintaining accurate and confidential employee records is critical to this function.

32. Personnel Administration HR master data ◦Personnel actions ◦Personnel files Info system ◦Report  Employee  Organizational entity (Headcount changes, headcount development, salary accounting to seniority, assignment to wage level)  Age/gender Setting ◦Define organizational unit ◦Define positions ◦Define jobs

33. Recruitment and Selection Transactions enable the advertising of position vacancies, the identification of recruitment sources, and the hiring of employees. Additionally, qualifications required of vacant positions can be matched with the qualifications of applicants to facilitate decision making in the selection process. This functionality in SAP R/3 relates to recruitment and selection in HCM.

34. Personal Development Pertains to performance appraisals, career and succession planning, and career development. Performance appraisals help facilitate decisions regarding promotions, merit pay, and terminations. Transactions in SAP R/3 relate to the typical HCM practices associated with performance management systems.

35. Benefits Benefits pertains to flexible spending accounts, 401(k) plans, health care accounts, as well as mechanisms to track costs of benefits. SAP R/3 extend far beyond the typical benefits required by law.

36. Compensation Management It is essential in promoting internal equity and external competitiveness. Features of this application include job pricing, reviewing salary surveys, and creating policies and budgets.

37. January 2007 (v1.0) © 2007 by SAP AG. All rights reserved. SAP University Alliance. The Rushmore Group, LLC37 HCM Process: Compensation & Benefits Compensation is not the cut-and-dry subject it once was ◦Past – consisted of an employee's base salary or, at most, a base salary and commission. ◦Today - looked at as compensation packages; including:  salaries, stock options  employee stock ownership plans  pay-for-performance plans  bonuses, profit sharing  commissions, non-cash rewards  variable pay, and much more.

38. January 2007 (v1.0) © 2007 by SAP AG. All rights reserved. SAP University Alliance. The Rushmore Group, LLC38 HCM Process: Compensation Management The balancing of company interests to operate within the company's fiscal budget and fairly paying employees ◦key component of attracting, developing, retaining, and rewarding high quality staff through wages and salaries which are competitive in the labor markets Compensation Management is comprised of the following components: ◦Job Pricing ◦Budgeting ◦Compensation Administration ◦Long-term Incentives

39. January 2007 (v1.0) © 2007 by SAP AG. All rights reserved. SAP University Alliance. The Rushmore Group, LLC39 HCM Process: Benefits Administration benefits today are offered as a part of an employees overall compensation package this component allows a company great flexibility in creating and maintaining individual packages for your employees ◦Six international Plan Categories Allows for detailed company reporting ◦Benefit Plan Participation ◦Health Plan Costs ◦Employee Demographics ◦Benefits Election Analysis Country Specific Settings available ◦FSA, COBRA (US examples)  HIPPA Certificates

40. Payroll Release payroll Start payroll process Check payroll Correction Simulation Follow up Tax Overpayment recovery Bank transfer

41. Payroll 41

42. January 2007 (v1.0) © 2007 by SAP AG. All rights reserved. SAP University Alliance. The Rushmore Group, LLC42 HCM Process: Payroll Administration SAP contains an international payroll driver that is modified for each country payroll is released for individual payroll areas ◦ the run is for a specific group of employees and a specific period of time ◦upon release all affected personnel records are locked will generate an payroll results, and earning statement, bank transfers and check payments

43. January 2007 (v1.0) © 2007 by SAP AG. All rights reserved. SAP University Alliance. The Rushmore Group, LLC43 HCM Process: Payroll Administration Payroll Process ◦determine Gross Amount  base pay and any other additional payment ◦ overtime, sick pay, Christmas bonuses, special pay ◦determine Deductions (Net Amount)  processes garnishments, deductions, taxes, and benefits for employees ◦ Federal/State Income Tax, Insurance (Health, Life), Loans ◦Integration with Financial Accounting & Controlling  G/L postings, payments processed, reports available

44. Overview of the Payroll Process

45. Payroll Accounting

46. Calculation of Remuneration Elements

47. Time Management 47 Shift planning Administration Time data Time evaluation Work schedule Incentive wages Time sheet

48. Time Management 48

49. January 2007 (v1.0) © 2007 by SAP AG. All rights reserved. SAP University Alliance. The Rushmore Group, LLC49 HCM Process: Time Management supports planning, recording, and evaluation of internal employee time data time data that would be gathered and evaluated ◦hours worked ◦leave ◦illness ◦overtime ◦substitutions ◦business trips  conference, training

50. January 2007 (v1.0) © 2007 by SAP AG. All rights reserved. SAP University Alliance. The Rushmore Group, LLC50 HCM Process: Time Management There are multiple methods for data collection: Time Terminals Mobile Technology Cross Applications Time Sheet Employee Self Service Time Administrators Time Manager’s Workplace

51. January 2007 (v1.0) © 2007 by SAP AG. All rights reserved. SAP University Alliance. The Rushmore Group, LLC51 HCM Process: Time Management Time collection will be used for: ◦payroll accounting ◦personnel cost analysis ◦internal cost allocations ◦invoicing ◦performance analysis ◦capacity availability ◦shift planning

52. Time Management Process

53. Training and Event Management It involves the management of employee activities associated with training, workshop attendance, and other business-related events. Information on descriptions of programs, prerequisites, and cost factors can be generated. This functionality in SAP R/3 relates to training and development in HCM.

54. Travel Management It enables organizations to monitor the controllable expense associated with travel, training, and entertainment. Employees frequently travel on business, so managing this expense is essential

55. Manager’s Desktop It is a tool which enables managers to access employee information at a manager’s fingertips, i.e., managers do not have to access menu paths or transaction codes to retrieve employee information. Rather, through decentralization of HR tasks and responsibilities, managers can easily access HR data of subordinates, both directly and indirectly supervised, to perform administrative and organizational tasks, and to make strategic decisions

56. Business Process Integration January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC 2008. All rights reserved.56 MM PP SD Org Data Rules MM PP SD Master Data MM PP SD FI HCM MM FI PP SD HCM

57. January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC 2007. All rights reserved.57 Business Process Integration HCM Org Data Rules Master Data

58. Organizational Data in HCM A hierarchy in which the organizational units in an enterprise are arranged according to task and functions Are static data and are rarely changed The definition of organization units is a fundamental step, it is a critical factor in how the company will be structured

59. Structures of HCM Enterprise structure Personnel structure Organization structure

60. Structures of HCM Enterprise Structure Personnel Structure Organizational Structure

61. Enterprise Structure This structure makes up the legal identity of the company Every employee in an organization is included in the structure of his or her enterprise. The Enterprise Structure sub-divides organizations and employees according to factors relevant to time management and payroll. The Enterprise Structure is made up of the following elements:  Client  Company Code  Personnel Area  Personnel Sub-area

62. Enterprise Structure (-continued) Client is the major organization criterion in the system, and is a self-contained unit. ◦ Client has technical structure feature Personnel data entered in a client can only be accessed in that client. Data cannot be exchanged among clients. If employees change clients, data have to be re- created in that new client.

63. Enterprise Structure (-continued) Company code is an independent accounting unit, and is also self- contained. A set of accounts can be developed in the company code, and financial statements such as balance sheets and profit-and-loss statements are created at this level.

64. Enterprise Structure (-continued) Personnel area represents the “company and country version for payroll” view. It used primarily in personnel administration, is unique within a client, and is a sub-division of the company code based on locations or divisions. It serves as a selection criterion for reporting, constitutes a unit in authorization checks, and allows one to generate default values for data entry, e.g., for the payroll accounting area.

65. Enterprise Structure (-continued) Personnel sub-area represents the “location and public holiday calendar” view. It is subdivision of a personnel area (such as a department), and identifies groupings of employees assigned to a particular personnel area or company code. It is the level at which the primary organizational aspects of human resources are controlled. Its functions include specifying a country grouping, setting groupings for time management so that work schedules can be set up for individual personnel sub-areas, generating a default pay scale type and area for basic pay. sub-area must be unique to a company code

66. Enterprise Structure

68. Enterprise Structure: Pen Inc. Client Personnel Subarea Company Code Personnel Area Client 750 Pen Inc _ _ _ P_ _ _ Pen Inc. Central Office P _ _ _ Pen Inc. MFG Center 0001 Administration 0002 Finance 0001 Manufacturing

69. Personnel Structure This structure sub-divides organizations and employees according to factors relevant to time management and payroll. The Personnel Structure is made up of the following elements: ◦Employee Group ◦Employee Subgroup ◦Payroll Area

70. Personnel Structure (-continued) Employee group is the highest level, and defines the relationship between an employee and a company in terms of work, i.e., active employees, pensioners, and early retirees. These groups can be differentiated further. For example, an active employee may also be a trainee, an hourly wage earner, a salaried employee, etc. The principal functions of the employee group include generating default values for payroll accounting area and basic pay, serving as a selection criterion for reporting, and serving as a unit in authorization checking.

71. Personnel Structure (-continued) Employee sub-group enables distinguishing among employees specifically with regard to their status. For example, active employees may be classified as a trainee, hourly wage earner, non pay-scale employee, salaried employee, etc. Functions include allowing different payroll procedures for different employee subgroups, controlling the validity of wage types on an employee sub-group level, and defining the validity of work schedules, attendance and absence quotas.

72. Personnel Structure

73. Personnel Structure: Elements Payroll Area ◦It groups employees together that are paid the same (time)  Weekly, Bi-Weekly, Monthly ◦The payroll area is determined from a combination of the Employee Group and Employee Subgroup  number of employees in the payroll run  specific dates of the payroll run

74. Organization Structure in HCM The organizational structure and plan is the comprehensive model of the structural and personnel environment in the enterprise, with hierarchies and reporting relationships clearly defined. Hierarchies and reporting relationships are determined once object types are created. Typical object types include ◦organizational units, ◦jobs, ◦positions, ◦tasks, and ◦persons.

75. Organizational Structure Using organization and planning, you can get a clear picture of your organization at any point in time: past, present or future. With this information, you can be proactive in planning for future human resource needs.

76. Organizational Structure: Pen Inc January 2007 (v1.0) Organizational Units Person Position

77. Organization Structure (-continued) Organizational units reflect the various business units or departments in the enterprise. Several organizational units can be created, and they must be related to one another in an organizational plan. They can be defined as functional, divisional, or geographical departments, or as project groups. An example of a functional structure would include accounting, sales, human resources, and manufacturing departments.

78. Organization Structure (-continued) Jobs reflect the tasks, duties and responsibilities of the work being performed in the organization. Typically, they are grouped in terms of the similarity of tasks being performed, and are more generic in nature. Some examples include analyst, specialist, manager, and supervisor.

79. Organization Structure (-continued) Positions are more specific than jobs, and all of the information stored in a job is inherited by all of the positions created from the job. Positions reflect individual employee assignments, and are occupied by persons. Examples of positions include Accounting Analyst, Logistics Specialist, Compensation and Benefits Manager, and Production Supervisor.

80. Organization Structure (-continued) Persons are assigned to positions in the organizational structure, and generally represent the employees in the company. For example, Ross Quarles may be the Accounting Analyst, Fawzi Noman may be the Logistics Specialist, Kathy Utecht may be the Compensation & Benefits Manager, and High Asa Kite may be the Production Supervisor.

81. Organization Structure (-continued) Tasks are the individual duties and responsibilities undertaken by employees in their positions, as reflected in their job descriptions. Examples of tasks include “prepares accounting reports,” “maintains warehouse inventory,” “reviews salary surveys,” and “oversees production scheduling.”

82. Organizational Structure

83. Integration of Org. Mgt. with Personnel Admin.

84. Integration of Org. Management with Personnel Admin.

85. HCM: Master Data Master data is relatively fixed ◦Record that contains all the necessary information to conduct business transactions ◦Information within a master record can and will change, our hope is that it does not change frequently. Before making the master data configurations, you must have completely defined the organizational structures

86. HCM: Master Data Master Data A vast amount of HR data can be maintained in SAP R/3. Personnel data provide the basis for various HR transaction processing and reporting. Hence, its accuracy, timeliness, relevance, and completeness are crucial. While most data may be housed in an HR department’s information system, it is important that data that pertaining to an overall HR information system be included. Typically, the data pertains to employee information which is entered into the system using infotypes (types of information) and HR Master Database which stores Infotypes.

87. HCM: Master Data (-continued) Infotypes categorize information and enable data input, i.e., they are data entry screens which allow the entering of various types of information into data fields. Similar types of information can be grouped by content to facilitate data entry. Infotypes can be processed individually or through the fast entry mode (entering specific data for several employees at once).

88. HCM: Master Data (-continued) Processing of infotypes may include creating (creating a new record with beginning and end dates), changing (changing or correcting a record), copying (using the initial record as a template), delimiting (upon entering a delimitation date, records valid for that date are selected, and then setting the end date for that record to the day before the delimitation date), and displaying (viewing but not changing records). There are over 600 HR infotypes used to maintain employee and applicant data, and the number, types, and settings of infotypes can be customized to fit the business requirements of the company

89. HCM: Master Data (-continued) HR Master Database is where HR data are stored. Typically, employee information is stored in a personnel file which can be accessed by entering the employee’s assigned personnel number (usually generated internally by the system). Several records of information on an employee can be reviewed, such as organizational assignment, basic pay, addresses, travel preferences, planned working time, etc.

90. HCM: Master Data (-continued) Information can also be retrieved in a relational database format by accessing specific infotypes. For example, if a manager wants to review the basic pay of an employee, the manager does not have to access the personnel file and review all of the records until basic pay is reached. Rather, the basic pay infotype (i.e., 0008) can be accessed directly so that only that information is retrieved.

91. HCM: Master Data - Employee Data Information must be recorded and maintained effectively for every employee ◦Infotypes (Information Types) are units of information that aid in the entry of master data and group like information together Status of the Employee will determine what information should be gathered ◦Active vs. Intern ◦Exempt vs. Non-exempt

92. Employee Data: Infotypes Numerous infotypes will be created for each employee ◦Organizational Assignment must be the first infotype recorded

93. Employee Data: Infosubtypes Certain data that is entered in an infotype can trigger the need for a infosubtype ◦ex. Family Member/Dependents  If you enter that you are married or have children it will generate the need for a spouse/child infosubtype to capture the information about the spouse or child(ren) Subtypes also allow you to account for time constraints ◦Different addresses may be current at the same time  Permanent Residence  Temporary Residence  Home address

94. Employee Data: Personnel Actions Personnel actions are a series of predefined infotypes that are grouped together to speed the data entry process ◦Hiring, Firing, Reassignment, Retiring – would all be examples of procedures that could be represented by a Personnel action Personnel Actions enable users to enter information about an employee without having to access each individual infotype

95. Personnel File Information maintained about an employee is stored in their Personnel File

96. HCM: Employee Lifecycle January 2007 (v1.0) Birth WorkTaxes Death (Retire)

97. HCM: Process/Functions Recruitment Cost Planning Reporting Training and Development Manage Work Time (CATS) Payroll Administration Hire Employee ESS Employee Self-Service Compensation & Benefits

98. Exercises: HCM 1: Review your organizational plan for Pen Inc. HCM 2: Create a functional area within your org. plan HCM 3: Create a job HCM 4: Create positions within the PR department HCM 5: Review the organizational structure for Pen Inc HCM 6: Setup parameter ID HCM 7: Display an employee record (master data) HCM 8: Hire a new employee HCM 9: Review the organizational structure for Pen Inc HCM 10: Display open position - salesman (East)