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Performance Based Budgeting

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Presentation on theme: "Performance Based Budgeting"— Presentation transcript:

1 Performance Based Budgeting
Luminita Scarlat / Senior Presales Specialist SAP Romania 28 Martie 2012

2 Budget Formulation is an integrated component of a Complete Performance Lifecycle
Analytics Strategy Management What are the right things to do? Processes Execution Cost Management Budget Formulation SAP Public Budget Formulation SAP BPC Do our expenditures align with our strategic vision? PBF is one of the legs that completes SAP’s vision for the complete performance lifecycle. How should we allocate resources? Costs Cost Objects Activities

3 Performance Management
Vision Enterprise Goals Strategic Goals Company goals and Organizational Goals SAP Strategy Management Board Company- / Area Goals Higher Management Department and Team Goals Department and Team Goals Department Manager and Team Leader This slide describes the objective setting process as it is envisioned in the performance feedback process. Ideally, objectives are set in the planning meetings that take place at each level of the organization. This is both a top-down and a bottom-up process. This means that on the one hand, the business objectives are set at board level and transported through the organization, and on the other hand these objectives are linked at each level of the organization through the planning meetings that must take place at each organizational level. It is important that a dialog between manager and employee takes place so that the objectives set are realistic and appropriate. When it comes to reaching agreement on individual objectives for the year it is important that the employee and the manager focus on both long-term and short-term goals. The agreement should include a number of short-term objectives as well as a number of objectives that will promote long-term results. Perhaps some objectives will fulfill both categories Short-term goals are results-based goals that link directly to to your unit’s most immediate results. In order for your to reach these short-term goals there may be some specific skills and competencies that you have to develop or improve on. Long-terms goals are linked to developing less immediate skills and competencies, for example the skills and competencies required of someone who must manage a large project in 2 years’ time would require more long-term thinking. It is important to agree on a development plan that promotes both short-term results and long-term development. Operational Goals On employee basis Compensation relevant SAP Human Capital Management Individual Goals Individual Goals

4 Benchmarking and Key Performance Indicators
Business Strategy External Benchmarking Internal Benchmarking Definition of Objectives Key Performance Indicators (KPI) Initiatives If you can’t measure it, you can’t manage it!!! Measurable Objectives

5 Performance, Compensation and Succession Management
Integrated Talent Management One integrated platform for the best people and talent Key Features Eliminates redundant processes and reduces integration costs Wide breadth of functionality across the entire HCM spectrum Unmatched global capabilities Integrated Talent Management Focus Recruiting Onboarding Performance, Compensation and Succession Management Classroom Training E-Learning Classroom Training and E-Learning Recruiting Travel Planning Travel Expense Employee Data Organizational Data Competency Data Talent management is part of the complete solution for Human Capital Management offered by SAP. The functionality is fully integrated with other HCM and business processes to help you more effectively manage your talent. From an integration perspective, we base all of our HCM processes and capabilities on one shared information source consisting of employee, competency, and organizational information. We offer a wide breadth of functionality in all the major HR and HR-related categories all sharing the same source data. Talent management includes recruiting and learning as well as performance management, enterprise compensation management, and succession planning; we’re focusing on performance, compensation and succession here because those processes typically have a common buying center and the decisions for those solutions will most likely be in the same people’s hands (for recruiting and learning, there are usually other decision makers such as VP Recruiting, VP Training & Development) Global HR and Payroll Administration Scheduling and Deployment Employee Administration Organizational Management Global Employee Management Benefits Management Payroll and Legal Reporting Time and Attendance Shift/Roster Planning Scheduling Optimization Planning and Analytics HCM Service Delivery Workforce Analytics and Measurement Workforce Planning Manager Portal Employee Portal Employee Interaction Center

6 SAP Best Practice: Use of Position Primary driver of HCM Processes
Qualifications Skills / Competencies Person Job Job family Job Evaluation Cost Center $ Org Unit Org Structure/Chief Requirements Skills needed Learning Map Skills gap/course list Position Key Position Occupied/Vacant Budgeting Salary, Facility, Travel, Education Personnel Cost Planning Address (Office) Compensation Comp plan, default grade Security System access $

7 Employee Performance Management SAP Solution
Goal Management Goal and Objective Management including Cascading Goals Multi-rater feedback (360 0 ) and offline appraisal capabilities Full process integration to competency frameworks and learning environment to drive employee development End-to-end pay for performance process Templates for workflows and analytics Planning of Individual Objectives Assessment of Performance & Potential Calibration Approval & Follow-up SAP Differentiators Integration: Seamlessly integrated with compensation management to realize pay-for-performance as well as with other HCM and talent management processes Highly flexible solution: Allows adoption to organizational processes; cascading goals support with multiple levels of organizational goals

8 Enterprise Compensation Management SAP Solution
Establishment of compensation plans Administration of Compensation plans and programs Budgeting Reviews and Approvals Automatic hand-over of compensation adjustments into payroll Delivered templates for workflow and analytics Manager planning and approval Follow-up SAP Differentiators SAP provides a complete solution for compensation management, budget handling, compensation administration, long-term incentives, job pricing, and reporting. One of the key strengths of the SAP solution is the tight integration with Employee Performance Management that ensures that employees are rewarded based on their performance as well as the integration to relevant payroll data for automatic and smooth transfer of compensation changes into payroll. Integration: Integrated with Employee Performance Management to realize pay-for-performance, with Personnel Cost Planning to create budgets and predict costs, and with payroll master data records for automatic and smooth transfer of compensation changes into payroll Highly flexible solution: Enables you to meet your compensation strategies and program needs while streamlining and automating the entire process 8 8

9 Budgeting Calculation Overview
Bottom-up approach Budgets are determined and saved at employee level Employee-level budget gets added up to obtain the organizational unit budget Top-down approach Budgets are determined at organizational unit level You can decide per budget type and budget period which approach to take Different scenarios for simulation

10 Compensation adjustments may now be made for the is team
Compensation adjustments may now be made for the is team. A guidelines button may be used to push out suggested increases based upon the overall appraisal scores or individual amounts may also be populated, either by currency amounts or by percentages. Workflow enablement then manages the approval routing and final update to the employees master data record. As the entire solution is real time, this update occurs when all approvals have been obtained. Compensation adjustments may be retro or future dated.

11 The Return On Investment of Integrated Talent Management
Companies with mature, integrated talent management strategies, have lower turnover, higher productivity and have experienced less downsizing through the economic recession.” Bersin & Associates, 2009 Companies with integrated talent management processes and systems experience: 26% higher revenue per employee 28% fewer companies downsized during 40% lower turnover among high performers 87% more likely to “hire the best people“ 94% more likely to have “the right people in the right job“ 144% more likely to “plan for future talent needs” If talent management is done right, the ROI can be very compelling. Successful talent management is a major driver of organizational performance and competitive advantage. Talent management can pay off in a number of ways, as outlined on this slide Source: Bersin & Associates, 2009 11

12 Questions With this, I would like to start the Q&A session providing you with the opportunity to raise your questions. In case of any upcoming questions after this session, please send them via to the RDS Mailbox

13 Thank You! Luminita Scarlat SAP Romania E-mail:


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