In HR Analytics & Reporting teams, we are pros at building out Headcount Reporting solutions, that core, standard set of reports that every organization requires. Public companies need to report headcount externally to the financial markets and to local government authorities, and also internally to manage personnel costs and monitor the overall health of the organization. It’s a standard we come back to time and time again, to stabilize and improve, or to make it more flexible. In the last 3 years alone, I’ve worked on six or seven initiatives to improve our headcount reporting internally at SAP, trying new technologies, or making further reports available to more stakeholders, and I’m sure there will be new solutions in the future to go even further. Why do we keep coming back to something that should be so simple and straightforward?
Mathematically, there is nothing simpler than Headcount. It is either the total number of Heads (individual People) or the total number of FTE (Full-Time-Equivalent) where somebody working half time is counted as 0.5 FTE. We are not talking about any complex statistical analysis, modeling, or predictive insights. Just counts. 1.2.3… Yet organizations consistently struggle with managing the process of reporting on headcount. I’ve even heard about one organization (to remain nameless, but not SAP) who estimates their headcount at plus or minus 10000. It seems crazy to me to not be able to fully account for 10000 people on your company roster!
To sum up the challenge
The challenge for organizations is knowing who to count when, and in what category. This is it. Simply put. However, it is more complex to get agreement and alignment across management teams, Finance, and HR, while taking into account legally required government reporting standards that can differ widely across countries. These teams must align on the following:
– Who to count?
o At what point do individuals on company payroll get counted in official headcount numbers?
§ active status ?
§ minimum length of contract ?
§ minimum number of hours for hourly employees ?
o How do we count people who are in long-term leave?
§ What length of leave is the minimum to count them as being on leave and out of active headcount?
§ What types of leave are excluded from active headcount, sometimes per local government standards of what constitutes a paid or unpaid leave of absence?
§ Do they automatically come back on headcount at the targeted end date of their leave ? or only when that return from leave is effectively processed ?
o What about temporary employees?
§ What length of contract is included?
§ Do they automatically get removed from future headcount numbers per the planned contract end date? or only when that termination has been effectively processed?
o What about terminations?
§ How to categorize terminations which are voluntary, versus involuntary or other? How to categorize those employees whose contract is effectively terminated due to death? (quick tangent – how to explain that death most often gets categorized as voluntary since it is not the company making the decision to terminate the contract?)
§ When are terminations counted? If an individual’s last day on payroll is the 31st of December, is that a termination as of 1 January the following year, or per the last day on payroll, so counting as a termination in the previous year?
– When to count?
o End of Period? Most often we speak of end of period headcount, so as of the last day in a given period, generally monthly. So if somebody is active only in the middle two weeks of a month, they are not at all included in the overall headcount for that month.
o Average headcount?
§ should you count per a daily average (very uncommon) ?
§ monthly average ? (quite common, particularly for financial headcount budgeting processes) other averages ?
o What about for previous months?
§ do you restate your headcount taking into account changes applied retroactively (e.g. hiring or termination processed late or with retroactive effect, wrongful termination contested in courts and required to be reinstated in headcount with retroactive effect, mistaken hiring or no-show…) ?
§ do you refer only to frozen snapshots of headcount for closed months ?
– In what category?
o Employment categories? I find these are most often driven by the national culture of the headquarters.
§ External workforce to be included in your numbers? which ones ? and if very short contracts do you manage by averages ?
§ What about subcontractors? mentioned at all ?
§ Temps or employees on leave of absence in separate categories?
o Organizational structures?
§ Do you apply the current structure on the past data, restating the past to match the current view? how do you map old organizational structures to new ones ?
§ Do you apply the organizational structure from that point in time in the past on that past data? and the current organizational structure on current data ?
o Open positions?
§ How to count future open positions, projected to be filled in a given time frame?
§ What about the positions still open where a contract or offer letter has been sent out or a verbal agreement reached?
It boils down to needing simple corporate level governance to answer these questions, audit data to ensure selected rules are applied, and consistent messaging to explain how headcount reporting is done. Separate reports or solutions may also need to be developed to support local government reporting rules.
Headcount reporting solutions: pros & cons
Most organizations end up needing multiple headcount reporting sources and approaches, depending if reports are sent to local authorities, or if those reports are used for official corporate metrics around headcount. At SAP, we leverage a few distinct processes (and solutions) to meet different needs. We do resort in certain instances to an ad hoc data extract from our SAP ERP HCM system, and offline excel data manipulation to publish headcount figures. The following two are fully automated, allowing for scalable delivery to a number of internal stakeholders:
1) Headcount management and forecasting process
When we report on future headcount at SAP, showing headcount and recruitment forecasts against headcount budgets, we leverage SAP NetWeaver BW technology, with classic extractors from our SAP ERP HCM instance (one global instance for all 60000+ employees) and from our SAP ERP Financials systems. We also use our planning technology to manage the headcount forecast process. We close past months (frozen headcount data) at the beginning of each month for the previous month, and load headcount data for the current month and future 18 months on a daily basis. We therefore are able to report on future headcount including already keyed hires and terminations that will occur in the future months.
– Past months are frozen, enabling single source of truth for discussing headcount trends for Finance, HR, and management
– Future months are included, being able to clearly show where headcount will end up, and this is refreshed daily
– Able to manage multiple hierarchies (organizational unit, profit center) very well
– Mis-hires or canceled terminations end up not being counted in previous months once those months are closed, end up not being reported at all, essentially falling out of the numbers
Visualizations are possible through a number of front end technologies. As our SAP BW reporting systems have been in place for many years, we rely heavily on BeX Analyzer standard table reports. We are currently leveraging Design Studio to build out reports specifically designed for mobile consumption on top of our standard BW headcount queries. The results look great and our business leaders will be able to quickly answer their critical headcount management questions (am I on my budget? will I meet my forecast ?).
In an early draft (work in progress), we see different tiles presenting numbers on key topics, each of those tiles being a link to a further report with both a graph and table displaying further data points.
First page displaying figures:
… with link to further report to show details.
Workforce Trends and Insights
Headcount trends are not only used for headcount management and forecasting processes. They are often a baseline input to analyze workforce trends over time. Core Workforce and Mobility is the central standard metrics pack included in SuccessFactors Workforce Analytics deployed by SAP internally. This solution helps answer key questions about our organization such as: have we been growing? do we support internal mobility? which kinds of roles are moving? do we have critical levels of attrition in certain parts of the organization (too high? too low?) do we have issues with new hires leaving too soon after integrating the organization? are we a diverse organization? what about our age demographics? … and the list of questions goes on. In this case, business leaders and HR professionals expect to see the numbers reflecting the reality of the organization, capturing each move that has happened over time, and based on the effective date of that change (even if retroactive). It is therefore extremely useful to have headcount and mobility information restated per the actual data in the core HRIS system. Here we use a monthly full load of ten years of data from our central SAP ERP HCM instance, effectively overwriting any numbers which had been reported previously.
– Headcount changes and transfers are consistently captured and reflect the data in the core HRIS system (SAP ERP HCM system for us at SAP)
– Trends over time against the current organizational structure allow us to answer critical workforce related questions
– Manages multiple hierarchies (org unit, profit center, reports to, location, …) effectively
– Headcount figures for the past may not match 100% to the frozen numbers taken for headcount management and external corporate reporting processes
– Future time period reporting is not included in standard solution
– Currently based on a monthly load, instead of more frequent data refresh (real-time sync would be perfect!)
Visualizations and analysis of workforce trends are fairly easy to build out in SuccessFactors Workforce Analytics directly, and many standards can be leveraged from what SuccessFactors teams have developed. And my personal favorite functionality in SuccessFactors Workforce Analytics is the saved filters – once you’ve filtered to one part of the organization, you can navigate to multiple reports and metrics to display results for that same part of the organization, avoiding the general requirement we see in many other reporting solutions to re-apply filters every time you go into a new report.
In summary, when it comes to headcount reporting, you will always need some level of standard, and some level of flexibility, to meet your organizations need for clear visibility into headcount, headcount forecast and workforce trends. The complexity of the solutions reflects the complexity of organizations, and the impact of people flowing in, out and through those organizations, as well as the complexity of differing legally required reporting standards at the national or local level. While the breadth of SAP’s offering does allow us within SAP to easily meet most of those different requirements, we too face the communications challenge of trying to explain why it isn’t always so simple to determine precisely how many people are part of our organization at a given point in time. And why we are continually evolving and exploring new and more flexible reporting solutions to calculate and present our headcount figures.
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