San Diego School System
Question 1: What is the appropriate discount rate for a government agency such as the San Diego City Schools? The appropriate discount rate should be determined from the federal risk free interest rate plus a small risk premium. The federal risk free interest rate in 2002 averaged 5. 4%. Using this as the base, a government agency other than the federal government would need to add a small risk premium to compensate investors for the additionalrisk associated with being a school district instead of the federal government.
San Diego would also need to add additional compensation to account for tax factors. With these factors in mind, San Diego should use a discount factor of approximately 7. 8% (5. 4% risk free rate + . 5% risk premium + 1. 9% tax compensation). Question 2: Calculate the ROI for San Diego’s ERP system. How can you quantify the soft benefits of the system and include them in the analysis? The soft benefits can be quantified through creative assumptions.
These assumptions can come from experiences others had when implementing similar solutions or from drawing on similarities between other quantifiable benefits. Other principals compared their successful implementation like receiving an additional recruiting team, valued at $320K/year, this can be used as the estimate for Weiman’simproved recruiting due to the HR solution. Likewise, SDCS spent $400k/year on an internal audit team to provide access to HR data, this team could be disbanded with the implementation of an HR solution leading to a $400k/year benefit.
Improved employee morale and productivity could be measured by a lower turnover rate, leading to lower training costs and recruitment costs, as well as higher output rates leading to lower clerical demands and improved service. {draw:frame} Question 3: With the information you have access to, what should Weimann present and recommend at the board meeting? Specifically, would you recommend going forward with the HR system implementation? If not, what alternatives would you suggest?
Currently, payroll is managed through paper time cards and time sheets, leading to errors and wasted hours for correction. Over twenty eight different forms are used to process various pay actions. With an ERP HR solution, these forms could be simplified, transitioned to paperless and would become more convenient as a result. The ERP HR solution would also result in fewer errors, with employees checking in and out through the system instead of paper cards.
Employees would also be able to frequently check their timecard and make payroll aware of any errors, before paychecks were distributed eliminating, or greatly reducing, the need for any out of period paychecks which increased payroll processing costs dramatically. Employee benefits are currently handled by the benefits department which also monitors payments by employees and the benefits status of each employee. With an ERP solution, employees could be held responsible for their own payments and ensure good standing by monitoring their accounts.
Question 4: What are the risks associated with the project? Would you advise the school board of these risks? As presenting the program to the school board, risks would be brought up in order to ensure no corners were cut after initial implementation. In would be advised and urged that the risks of implementation are natural and inevitable with any technological system. As with any ERP system, many setbacks will be crossed. However, the benefits clearly outweigh the risks and should implementation succeed, the school board will greatly benefit with long term cost reductions.
