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Chapter 6
such as stock options. The Human Resources module provides more options for processing
long-term incentives. For instance, the SAP Payroll module enables companies to calculate
taxes accurately when employees exercise stock options and sell their shares in the
company. The Human Resources module can be programmed to share that incentive data
with Accounting so that Accounting can complete the necessary financial reporting.

Personnel Cost Planning
Changes in an organization (including expansions, acquisitions, and downsizing) can affect
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employee-related expenses, which are usually a significant portion of a company’s costs. The
Personnel Cost Planning tool allows human resources staff to define and evaluate planning
scenarios to generate cost estimates. Performing cost planning allows human resources to
forecast cost estimates by integrating data with other SAP ERP modules.

Management and Payroll for Global Employees
Companies who manage a team of employees around the globe face many complicated
issues, including managing relocation plans, visas and work permits, housing, taxes, and
bonus pay in a variety of countries. SAP ERP has enhanced features to support the
management of these issues, with customized functionality for over 50 countries—helping
companies ensure their payroll processes meet current legal regulations and collective
bargaining agreements in the local business environments.

Management by Objectives
The concept of management by objectives (MBO) was first outlined by Peter Drucker in his
1954 book The Practice of Management. In MBO, managers are encouraged to focus on
results, not activities, and to “negotiate a contract of goals” with their subordinates without
dictating the exact methods for achieving them. SAP ERP supports the MBO approach
through a process that incorporates performance appraisal. The appraisal results can affect
an employee’s compensation, generating annual pay raises that can be significant, depending
on the employee’s performance. The MBO process in SAP ERP also allows managers to
include the results of achieved objectives in the employee’s qualifications profile.

ANOTHER LOOK

FMLA Management
Under the Family and Medical Leave Act (FMLA) of 1993, eligible employees can take up
to 12 weeks of unpaid time off per year to recover from a serious medical condition or to
care for a sick member of their immediate family or a new child. At Banner Health, a
company with hospitals and healthcare facilities in seven states, about 5 percent of
employees make use of FMLA leave. The company has calculated the cost of that leave
at close to $1 million per year, not including the cost of regular sick days, vacations,
bereavement leave, and so on. In fact, the Human Resources staff at Banner thinks that
cost estimate probably does not reflect leave taken by another 1 percent of employees
whose time is not accurately tracked. Some absences are not tracked because they are
not documented properly. For example, if an employee takes time off for migraine
(continued)

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