November 8, 2007 Low Hanging Fruit

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Often, when coming into an enterprise to work process improvement issues, a client will want to identify some near-term successes to validate the work improvement process itself. That is quite normal and reflects how any project is most vulnerable prior to delivering results of some kind.

I’m going to identify one process that is inefficient at most of my large clients, and is a silent killer of employee productivity. That process is new resource boarding. Typically, a new employee or contractor will need to be provided with access to company network resources and the work facilities in order to be fully productive.

As an example, without access to the company email system, a new employee is not visible to other employees nor can they see the employee directory. Most companies now keep that information in something such as Lotus Notes or Microsoft Exchange Server. Without access, new employees have to tap other veteran employees for even the most basic tasks. Thus the productivity loss impacts the veteran workforce as well. The same thing applies when company documentation is provided via an intranet or shared network resources.

Companies typically do not capture metrics for this process, and some are quite infamous for taking 4-6 weeks after a resource’s first day on the job to complete the process. Better is definitely achievable, as the best managed companies complete the process in less than 4 hours, on average. That includes issuing company computer, telephone, email, shared drive access, travel planning, and badges for building access.

Typically the actual work necessary to board a resource is 10-15 minutes, establishing an email alias and issuing photo badges for building access are the primary process steps. Computers may not be stocked or ready for imaging, which can also delay matters.

How much can a better process save a company? Below is an example using public financial data for two firms in the same general industry group.

The first task is to fully understand current performance and company metrics. Some of the information is public, such as company-wide revenue, income and the number of employees. Company employee turnover is something that the human resources functional group will know. Hopefully, some group already has information concerning the boarding intervals, but if not, sixty to ninety days of tracking data can provide a baseline for further analysis. Note that, where possible, a "hands-off" measurement should be made, for best understanding of the potential improvement.

The example used here is an aggregate analysis based on averages. Obviously, there will be significant variability across functional groups both in contribution to revenue as well as individual cost basis. This analysis primarily illustrates a global issue and what impact to company performance can achieved by addressing one process. An excellent case can be made that poor performance in employee boarding has consequential impacts to employee churn and corporate/network security as well. The network security issue is related to "work-arounds" that unboarded employees use in attempts to be productive, such as using their personal computers and email accounts initially for company correspondence. From the new employee perspective, it is important to show progress and they will find ways to do so.

Key metrics used for a typical analysis include:

  • Employee turnover: Figures published range from 15-40% depending on industry. In this example, I know Company A has higher turnover than Company B and I used 5% per year as the nominal turnover rate.
  • Unboarded Efficiency Loss: This is typically a function that varies from the start of the interval to the end. By using 25%, we’re saying that a normal 10 minute task takes 13 minutes to accomplish. Again, I consider this a conservative value, but can be customized to better suit a particular business.
  • Work days to Board: This is the number of work days for an employee/contractor to be fully boarded, i.e. self sufficient access to company resources. The range in this particular industry has been 1 day to more than 30.
  • Work days per year: Standard 49 working weeks with 5 working days per week

Company A is a high revenue productivity company, hence any productivity loss will be more significant. Using the above assumptions, Company A is experiencing a productivity loss of $81.6M per year due to their average of 30 days to board new employees. In order to gauge the significance of that figure, a general reference to net income is used. The company could have added additional revenue up to an additional 6% of net income for the same underlying cost basis. A single issue, but very significant in terms of net income. I agree, however, that the values are only indicative of an order of magnitude for productivity recapture. The $81M reflects work that can be accomplished without the need to hire additional resources by increasing enterprise efficiency.

Company B has a relatively lower impact, although it is still significant when looking at longer intervals of boarding. Company B is a more efficient company, returning a much higher net income as a percentage of total revenues, as well as gross net income per employee. Improving their metric makes them even more efficient.

Conclusions:

  1. Significant efficiencies can be achieved by managing the Resource Boarding Process
  2. Relative impacts are greatest for companies that are less income efficient


Additional Questions:

  • Is the process metric driven by structural or transactional factors?
  • What is the best functional group to manage the process?

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