Converse with Finance how to talk about saving the company money

Transcription

1 Converse with Finance how to talk about saving the company money Presented by Diane Tuccito, SPHR, CCP, GRP Director, HR Solutions at Kinetix February 10, 2011

2 Session Agenda

3 Finance Terminology Reporting Metrics M & A Equity

4 Reports Income Statement/ P&L Balance Sheet General Ledger Financial & Accounting Reports Annual Report 10K & DEF 14A

5 General Ledger Chart of Accounts Posting Date Vendor/ Description Debit or Credit

6 Sample HR GL Accounts Payroll Benefits Recruiting Training Employee Activities

7 Income Statement

8 Revenues Nets Sales Total Revenue Other Income

9 Expenses & Losses Cost of Goods Sold Labor Materials Other SG&A Sales/Marketing General Overhead Administrative Costs Losses Loss on Assets Interest Loss Other Misc. Losses

10 Net Income EBIT Earnings Before Interest and Taxes EBITDA Earnings Before Interest, Taxes, Depreciation and Amortization

11 HR P & L Income Tax Credits Benefit Rebates Expenses HR staff HCM Systems T&E Overhead Consulting/Outsource Fees

12 Balance Sheet Balance Sheet Assets Liabilities CURRENT ASSETS CURRENT LIABILITIES Cash $100 Accounts Payable $ 80 Accounts Receivable $125 Salaries Payable $ 50 Inventories $225 $450 Taxes Payable $ 20 $150 LONG TERM ASSETS $ 50 LONG TERM LIABILIITIES PROPERTY, PLANT, EQUIP Note Payable $300 Land, Building $175 Total Liabilities $450 Less Depreciation ($ 50) $125 STOCKHOLDER EQUITY INTANGIBLE ASSETS Capital Stock $300 Good Will $275 Retained Earnings $160 OTHER ASSETS $ 10 Total Stockholders Equity $460 TOTAL ASSETS $910 TOTAL LIABILITIES & EQUITY $910

13 Annual & Quarterly Reports 10K Annual Report DEF 14A

14 HR Metric Definition A business metric is any type of measurement used to gauge some quantifiable component of a company's performance. SearchCRM

15 HR Metric Stakeholders Needs Develop Measures Set Success Targets

16 Measurement Inversion Measure what s easy Even if low in value Avoid what is hard to measure Even if it adds greater value

17 HR Analytic Definition How an entity arrives at an optimal or realistic decision based on existing data. Wikipedia

18 Applying HR Analytics Trend Projections Decision Probability Modeling

19 ROI Definition A performance measure used to evaluate the efficiency of an investment or to compare the efficiency of a number of different investments. Investopedia

20 ROI Formula Gains - Cost ROI = X 100 Cost

21 Calculating ROI HR Measurements/ Metrics ROI HR Analytics

22 Training ROI Example Scenario Company has 500 customers who each bring in an average of $100k in annual revenue with a 20% margin. Problem: Customer retention only 40% Annual cost per lost customer $100k Cost of Sale for new customer $ 25k Goal: Increase Customer retention to 75%

23 Training Solution Training for 40 Customer Service Reps in two 2 full day sessions. Six month follow up training in two 4 hour sessions. Manager Training for 6 Customer Service Reps in one 2 full day session. Six month follow up training in a 4 hour sessions.

24 Training Solution Cost External development of Rep. & Mgr. Programs- $40k Participant guide creation & printing - $ 20k Outside facilitator time- $12k Customer Service Reps Time - $20k Manager Time - $2k Total Cost = $94k

25 Training Expected Outcomes Time Frame Retention Goal % # Addt l Customers Retained Total Customers Retained After 6 months 43% After 12 months 50% After 18 months 60% After 24 months 75%

26 Training Expected Income Increase Time Frame After 6 months After 12 months After 18 months After 24 months Cust s Annual Income YR 1 Income YR 2 Income YR 3 Income 15 $300,000 $150,000 $300,000 $300, $750,000 $0 $750,000 $750, $1,000,000 $0 $500,000 $1,000, $1,500,000 $0 $0 $1,500,000 Total $150,000 $1,500,000 $3,500,000

27 Training ROI Calculation Total Cost = $94k Year One = 60% [($150,000 - $94,000)/$94,000] x 100 Year Two = 1496% [($1,500,000 - $94,000)/$94,000] x 100 Year Three = 3623% [($3,500,000 - $94,000)/$94,000] x 100

28 Reorganization ROI Example Scenario Company has four divisions each with their own finance teams. Each finance team has the following organization structure Div. Controller Div. Dir. Fin. Analyst Div. Dir. Qtly. Forecast Div. Dir. Prod/Cost 3 Div. Fin. Analysts 3 Div. Forecasters 4 Div. Prod/ Cost Acct s

29 Reorganization ROI Example Scenario cont - Corporate Finance has a similar organization structure without the Prod/Cost Accountants. Issue - Should the company invest $1.75 million in implementing an new financial BI tool which could do the work of the field financial analysts and forecasters?

30 Reorganization Cost Avg. Annual Burdened Salary: Analyst/Forecaster $ Div. Director $195,000 Div. Controller $260,000 Existing Severance Policy Mgr. and below by LOS Director and above, 6 months Outplacement Below Mgr., 1 month Basic plan - $2,500 Director, 3 month Intermediate plan $5,000 Above Director, 6 month Executive Plan $10,000

31 Potential Labor Cost Savings Annual Labor Cost # in Field Avg. Burdened Annual Salary Cost Analysts/Forecaster 24 $ 130,000 $3,120,000 Directors 8 $ 195,000 $ 1,560,000 Division Controller 4 $ 260,000 $ 1,040,000 Total Potential Annual Labor Cost Savings $5,720,000

32 Severance Cost Severance Mos. # in Field Total Mos. Cost Analysts/Forecaster 1 year or less $ 10, to 5 years $ 43, to 10 years $ 216, $ 260,000 Directors $ 780,000 Division Controller $ 520,000 Total Severance Cost $1,830,833

33 Total Outplacement Cost Outplacement # in Field Program Cost Cost Analysts/Forecaster 24 $ 2,500 $ 60,000 Directors 8 $ 5,000 $ 40,000 Division Controller 4 $ 10,000 $ 40,000 Total Outplacement Cost $ 140,000

34 Total Project Cost Other Costs $ 140,000 Change Management $ 25,000 New Processes &Training $ 75,000 Management Travel $ 40,000 Total Severance Cost $ 1,830,833 Total Outplacement Cost $ 140,000 BI Tool Cost $ 1,750,000 Total Project Cost $ 3,860,833

35 Reorganization ROI Calculation Total Potential Annual Savings $5,720,000 Total Project Cost = $3,860,833 ROI 1 year post implementation: 48% [($5,720,000 - $3,860,833)/$3,860,833] x100

36 Thank You Diane Tuccito, SPHR, CCP, GRP Director, HR Solutions Kinetix O: C: