Introduction
In my experience, labor efficiency saving (aka labor saving) is one of the most significant benefit categories in the return on investment (ROI) models to evaluate SAP/IT investments.
While justifying/ calculating labor saving is the easy part, implementing the recommendations is another story.
Customers are often nervous about implementing the plan to realize labor savings, which is generally construed as a suggestion to cut resources. It is very important to first understand the rationale behind proposed labor savings and then create a plan which is practical and employee-friendly, and also minimizes business interruptions.
Labor Saving- What is it?
I have observed that Operations/Finance Executives pay close attention to labor saving while evaluating ROI models. They want to make sure that business case for the proposed SAP/ IT investment has clearly defined and logically derived labor savings.
The all important question to qualify any labor saving opportunity is- Will implementing SAP/IT solution reduce effort and save productive time for a business user?
Consider following examples of labor savings:
Some labor savings can be computed relatively easily and attributed directly to time potentially saved by someone in a specific job functions. Some other labor savings are either calculated indirectly and/or benefit a group of people in a more “general sense”.
How to minimize business disruptions and also realize labor savings?
Some managers jump the gun, and start cutting head-count somewhat randomly and pre-maturely in anticipation of benefits from SAP/ IT investments. But they risk business disruptions, and reduced morale/ loyalty among employees.
In my opinion, the restructuring of resource model must factor in professional aspirations and personal welfare of employees, while also doing what is right for the business.
To illustrate this point, let me elaborate upon the following example I had also cited in my earlier blog- Big Return on Investments (ROI) from IT Projects- Reality or Hype?
The above example illustrates how the companies can be smart and yet be sensitive in dealing with re-structuring of the labor force in order to realize gains of labor savings
I welcome your views on this topic.
I am a Sr. Principal with SAP America. Prior to SAP, I worked at a large consulting firm as Partner and management consultant. Please respond to this blog on SCN. You may email me privately @ anil.joshi@sap.com
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