Labor costs are a large part of any enterprise, IT organizations are no exception. Although it is essential tracking and managing the expense on servers, storage data centers or Cloud, effective TBM Offices must ensure that the engine properly allocates labor costs.

In this episode, Bill explains to HR how the system works.

***

Bill’s phone rang: it was Brooke Morgan, from Human Resources.

“Hey Brooke, how can I help you?”

“Hello Bill. I would like to understand how your system handles labor costs. I need to put together a report with the highlights.”

“Sure. How about you come over and I can help you prototype that report, Brooke?”

“I’ll be down in five, Bill.”

***

“So, you want to figure out how our time reporting system works, and how we interact with it.” Said Bill.

“Yes, I know we use a time recording application linked to our Enterprise Resource Planning (ERP) system. And sure, I’m a user myself, but know little else.”

“All right, let’s review the basics then. We report our time against pre-defined activities. Our line managers set those up. Those activities belong to a budget line.”

“What is that for, Bill?”

“When building the budget, managers assign money to the lines they own. They go through the demands, size them, and compare them with the available number of hours. Thus, there ends up being a sum associated to every budget line.”

“That sounds complicated.”

“Maybe, and yet it’s something you can’t avoid if you want to know how you’re using the resources you have available to you as a manager. Also, it helps highlight areas in high demand, the ones managers need additional support for.”

“OK, now I know about budget lines and activities. What happens next?”

“Budget lines have service orders associated to them. Each can have one or more activities. For now, let’s assume that every service order has just one activity. When we fill the time sheet and pick an activity, we have several tasks available. These are the same for everyone.”

“Why is that, Bill?”

“To try to keep the system as simple as possible. Otherwise we’d end up with tens of thousands of tasks, and we’d lose the overview. Let me show you.” Bill clicked a few times and opened a report.

“See? There’s about a dozen tasks. Many of them relate to the software development cycle and are not appropriate for most of us.”

“Yes, that looks a bit strange for us in HR. Why do half of them say REC and the rest DEV?”

“REC represents recurring activities, e.g. maintenance, fixes. Essentially, non-productive stuff. DEV stands for development. It represents tasks that get measurable results, that bring the business forward.”

“Isn’t hat what we sometimes call Run and Grow?”

“Exactly. Run or Grow the business. Project work also falls under the Grow umbrella. We sometimes call those activities Transform.”

“Can we see that from the tasks?”

“Not really. Projects appear in the system along the rest of activities. It’s just another categorization. As everything, projects have their own budget lines.” 

“I’m a bit lost, Bill.”

“Yes, we’ve been drifting a bit, but I wanted you to understand those three types of activities.”

“OK, I record my time against some activities. What’s next?”

“Every month we load an export from the time reporting application. It contains two metrics: the time spent, and the associated cost. They have their own costing algorithms. We used to get only the time, and we would calculate the hourly rate for every cost center. Thus we would figure out how much that department spent, and how much it cost.”

“How did you do that, Bill? Did you get individual employees’ salaries data?” Asked Brooke, somewhat alarmed.

“We got the labor costs grouped at a cost center level. Got no individual’s data. We then divided those costs by the reported times and we had that money value per activity.”

“And what happened if people didn’t report 100% of their time?”

“At first we did nothing. This made the hourly rate go up for the offending cost centers. We kind of expected them to get some heat when the BUs realised they were getting overcharged for the department services.”

“Did that cause an issue, Bill?”

“Nobody complained about it. Eventually, the time reporting application started marking those hours as unused, so at least the business wouldn’t get penalized.”

“Yes, that makes sense. OK, what do you do with that time reporting data?”

“In the TBM engine, we map every service order to an entity in the cost model. We could roughly categorise the activities as follows.” Bill displayed a list on his screen.

• Business Units
• Applications
• Tools
• IT Infrastructure
• Administration
• Transversal
• Project work

“Some of us work directly for the Business Units, like Alex Lane. She works with E-Commerce. Many of us work on Applications or Tools, we have entire divisions there. Yet some others work with the IT infrastructure. All of us spend some time with administrative tasks, like team meetings, objective tracking, etc. Many of us spend some time on projects, depending on our role, this will be a larger proportion of our efforts. Last, but not least, some of us work on transversal activities, not related to the rest. Like us, in the TBM Office.”

“Yes, Bill. That seems to make sense.” Brooke said.

“The categorisation is arbitrary, but it helps explain how we map the labor costs. First, it determines the IT Resource Tower the costs will go to. Subsequently, it’ll ship the costs to the appropriate object in the model.”

“If I understand you correctly, the system maps the labor costs to IT Towers, and from there to the IT infrastructure, Applications or Projects.”

“Exactly, Brooke. With that basic mapping, the engine has all the information it needs to ship the costs further up the model, until they get to the Business Units.”

“And if they ask you in the opposite direction, i.e. if a BU wants to know what labor costs they’re getting?”

“The engine allows to drill down from any object in the model, all the way down to the source of the costs in the general ledger. You can always track the costs up or down, provided that we have enough information at the various stages. Making sure that it works is part of our job.”

“OK, the concept is relatively clear. How can I see it in action, Bill?”

Bill clicked a few times on his computer. “We have created a time report. As you can see, it has two tabs: one for viewing costs, the other for tracking time spent.”

“What are all those check boxes next to the data, Bill?”

“We call them column pickers. They allow us to provide more details, without cluttering the report. The last thing we want is a huge data table, with dozens and dozens of columns. By default, you get the totals, either as dollar values, or time spent. Then you can examine the various dimensions.”

“I would like to see it from an organisational perspective, Bill.”

“I figured that. That’s one dimension we usually get asked about. If you select the Cost Center column, the system will add the org path. You could also add the location. We get those types of questions all the time.”

“What’s that portfolio hierarchy section you have there?”

“That identifies the structure in the time reporting information. Remember, we said it was all about budget lines? That’s this column over here. Above it we have two categories, and finally the service order name. As discussed, these determine the mapping of the costs onto the TBM model.”

“The portfolio view does not tell me much, but I can sure resonate with the organisational breakdown.”

“Sure, Brooke. We try to accommodate different use cases with our reports. The books say that you should have one use case per report, but that’s cumbersome sometimes. I’m glad to hear you find it useful.”

“Thank you, Bill!”

***