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October 15, 2004
Michaels Crafts Its Way to Self-Service HR

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Implementing an HR self-service application for managers has resulted in big savings for Michaels Stores Inc., the world's largest arts and crafts retailer.

Speaking at the Seventh Annual HR Technology Conference & Expo in Chicago, Michaels' Senior Vice President of Human Resources Susan Elliott described the 2-year rollout of Oracle's HR, Manager Self-Service, and Compensation Workbench products.

Saddled with manual systems to communicate and administer payroll and performance information for more than 27,000 associates, the company quickly looked for a cost-effective way to consolidate its fragmented systems and regain control over the largest single element of cost in the $3 billion company—payroll.

The return on investment analysis was based on hard dollars. The company estimated that rate growth and position "creep" (hiring employees outside of pay rules, employees receiving multiple pay raises during a year, hiring more employees than budgeted) was costing the company more than $4 million annually.

Incorrect hiring and payroll adjustments usually were identified after the fact, and there was little or no consistency in the appraisal/merit cycle. Complicating the task was the fact that Michaels earns 40 percent of its profits in the period between October and Christmas. The company can add as many as 10,000 part-time employees, many of whom are rehires, during this peak time.

Adding to the hard dollar savings challenge were costs from an onerous manual system, with more than 200,000 faxes sent back and forth from retail locations to corporate headquarters, resulting in lost paperwork, delays in performance based raises, delays in hiring, and lots of finger pointing. Initial efforts to "automate" included multiple Access databases, Excel spreadsheets, and failed efforts to convert a payroll system to a management system.

The solution designed by Michaels involved attacking the highest-benefit, least-risk elements or what Elliott refers to as the "quick hits". Automated and proactive processes were at the top of the list, along with creating a central repository and regaining control over payroll costs.

Working with a small team of system analysts, and compensation and HR staff, the company established grades and a rate structure covering the 27,000 associates. A workflow was designed for obtaining approvals when a payroll action is outside of business guidelines. New hires overpay guidelines and off-cycle pay changes or over-budget payroll increases were all automatically routed to the District Manager for approval.

The system was piloted in six stores where requirements were further refined and online training materials and a guidebook were developed. Every store manager was required to review and take the online training with successful completion monitored by the Oracle learning management system. A second non-production environment was set up to allow store managers to "practice" as a part of their training. Individual payroll transactions were entered and then reviewed by trainers and call center support staff at the corporate office for completeness and accuracy. Rollout was then accomplished with 50 to 60 stores at a time. The entire process took just less than a year including the break for the Christmas selling season.

The system has been fully operational for more than nine months and is viewed as highly successful.

"The biggest reason for success is that the store managers are now the owner of the data and the process," Elliott said.

Store managers can easily monitor upcoming appraisals, where each payroll action is in the process as well as monitor the elapsed time that each transaction takes to complete the cycle. The company has gained control over its payroll expenses, on-time completion of performance reviews has gone from 30 percent to 98 percent, a consistent and fair approval process is in place for associate appraisal, and more than $1 million in retroactive payroll processing entries have been eliminated.

As for the future, Michaels has plans to expand the system including evaluating employee self service, online learning, and compensation planning. But for now, well, Christmas is coming.

—Brian Gurnham


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