Business Case for Recreation and Wellness Intranet Project
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East & West Inc. (E&W) is a company that provides a variety of health care services across the globe. E&W has more than 20,000 full-time employees and more than 5,000 part-time employees. E&W recently updated its strategic plan, and key goals include reducing internal costs, increasing cross-selling of products and exploiting new Web-based technologies to help employees, customers and supplies work together to improve the development and delivery of its health care products and services. Below are some ideas the Information Technology department has developed for supporting these strategic goals:
1. Recreation and Wellness Intranet Project: Provide an application on the current intranet to help employees improve their health. A recent study found that E&W Inc pays 20% more than the industry average for employee health care premiums, primarily due to the poor health of its employees. You believe that this application will help improve employee health within one year of its rollout so that you can negotiate lower health insurance premiums, providing net savings of at least $30/employee/year for full-time employees over the next four years. This application would include the following capabilities: Allows employees to register for company-sponsored recreational programs, such as soccer, futsal, bowling, jogging and other sports. Allow employees to register for company-sponsored classes and programs to help them manage their weight, reduce stress, stop smoking, and manage other health-related issues. Track data on employee involvement in these recreational and health management programs. Offer incentives for people to join the programs and do well in them (e.g. incentives for achieving weight goals, winning sports team competitions, etc.)
2. Health Coverage Cost Business Model: Develop an application to track employee health care expenses and company health care costs. Health care premiums continue to increase and the company has changed insurance carriers several times in the past ten years. This application should allow business modeling of various scenarios as well as tracking and analyzing current and past employee health care expenses and company health care costs. This application must be secure and run on the current intranet so several managers and analysts could access it and download selective data for further analysis. The new application must also import data from the currents systems that track employee expenses submitted to the company and the company’s cost to the insurance provider. You believe that having this data will help you revise policies concerning employee contributions to health care premiums and help you negotiate for lower premiums with insurance companies. You estimate that this application would save your company about $20/employees/year for full-time employees over the next four years and cost about $100,000 to develop.
3. Cross-selling system: Develop an application to improve cross-selling to current customers. The current sales management system has separate sections for major product/service categories and different sales reps based on those products and services. You see great opportunities to increase sales to current customers by providing them discounts when they purchase multiple products/services. You estimate that this system would increase profits by $1 million each year for the next three years and cost about $800,000 each year for development and maintenance.
4. Web-enhanced communication system: Develop a web-based application to improve development and delivery of products and services. They are currently several incompatible system related to the development and delivery of products and services to customers. This application would allow customers and suppliers to provide suggestions, enter orders, view the status and history of the orders and use e-commerce capabilities to purchase and sell their products. You estimate that this system would save your company about $2 million each year for three years after implementation. You estimate it will take one year and $3 million to develop and require 20 percent of development cost each year to maintain.
1. Summarize each of the above-proposed projects in a simple table format suitable for presentation to top management. Include the name for each project, identify how each one support business strategies, assess the potential financial benefits and other benefits of each project and provide your initial assessment of the value of each project. Write your results in a one to two-page memo to top management, including appropriate back-up information and calculations. (20 marks) 2. Prepare a weighted scoring model. Develop at least four criteria, assign weights to each criterion, assign scores and then calculate the weighted scores. Print the spreadsheet and bar chart with the results. Also, write a one-page paper describing this weighted scoring model and what the results show. (20 marks) 3. Prepare a business case for the recreational and Wellness Intranet Project. Assume the project will take six months to complete and costs about $200,000. (20 marks) 4. Prepare a project charter for the Recreation and Wellness Intranet Project. Assume the project will take six months to complete and cost about $200,000. (20 marks) 5. Prepare a stakeholder analysis for this project. Be creative in making up information about stakeholders. (20 marks)
Project Name: Recreation and Wellness Intranet Project
Support for Business Strategy:
The Recreation and Wellness Intranet Project directly supports Manage Your Health’s new business strategy by reducing internal costs, in this case via employee health care premiums.
Potential Financial Benefits:
There are huge potential financial benefits to this project, as it could yield a net savings of $600,000/year over the next four years by negotiating lower health insurance premiums. However, there are other variables to include, such as the cost of the company-sponsored classes and programs. This would include paying either another organization to run them, or giving extra to current employees.
The value of this project cannot be overlooked. It may hold the key to dramatically reducing our internal spending, but there is one factor that also cannot be overlooked: How are we going to cover the expenses of these company-sponsored classes and programs? Certainly these expenses are not going to come close to the potential savings we could incur, however all variables must be thought through, and this is definitely one of them.
Project Name : Health Coverage Costs Business Model
Support for Business Strategy:
This project is in the interest of long-term cost-cutting by way of reviewing policy over a period of time. In the short-term, it will cost $100,000 to implement, but will save an estimated amount similar to that figure per year, over a four year period resulting in an approximate $400,000 gross savings, or $300,000 net savings covering the cost of initial implementation.
Potential Financial Benefits:
As reviewed above, the four-year net savings projection is estimated to be $300,000 for this project. Taking into account future changes to the application, it may be necessary to reduce that figure by approximately $50,000 to account for those possible changes.
I find this proposal to be extremely viable, and more likely to succeed than others due to the fact that it relies on technology, and is less susceptible to human error. Certainly it is not completely safe from human error, however with the $50,000 reduction in the net savings projection, I believe this is very safe financially, and will benefit the company in the long term.
Project Name: Cross- Selling System
Support for Business Strategy:
The fact that the new business strategy specifically cites increasing the cross-selling of products as one of its goals is one of the primary reasons to go ahead with this project. Cross-selling products will encourage multiple sales, and perhaps even bring in more customers than before. The $1 million dollar figure is enticing, but it is imperative to keep in mind the development and maintenance costs of $800,000 each year.
Potential Financial Benefits:
With a $1,000,000 profit estimation each year for four years from this system, and a cost of $800,000 each year, the net profit comes out to ~$200,000 per year. It’s important to note that potential new customers are not included in these calculations, and so may result in exceeded expectations.
This appears to be a very valuable service to our customers, as it would improve our relations with them, and subsequently our sales. The financial side of this seems stable enough to warrant a go-ahead on this project.
Project Name: Web-Enhanced Communications System
Support for Business Strategy:
Quoting directly from our key goals in the new business strategy: “… exploiting new Web-based technologies to help employees, customers, and suppliers work together to improve the development and delivery of its health care products and services.” This seems exactly like the type of project we need to develop to satisfy that need.
Potential Financial Benefits:
Certainly this project does not pay off in the short term. There would be a $3 million cost in the first year with no payoff whatsoever to offset this. The second year would yield an estimated $2 million in profit, but there would also be 20% of the development cost ($600,000) for maintenance. This would still have us $1.6 million dollars in the red by the end of the second year. By the end of the third year, following those projections, we would still be in the red, but just barely with $200,000. By our fourth year, and our third year after our implementation, we would have made another $2 million, and taking into account the $600,000 for maintenance, our net profit would finally be in the black with $1.4 million. Financially, this is a project for the long-term, much more so than any other project proposed at this time.
The biggest factor here is commitment to the project. This application will not pay off unless we stay committed to the final product for four years straight, and without any substantial increases in expense estimates. Overall, it would benefit employees, customers, and suppliers alike and likely increase moral among the company by providing a more intuitive system
1.0 Introduction/ Background
MYH, Inc. currently pays 20 percent more than the industry average for employee health care premiums, primarily due to the poor health of its employees. Improving employee health can reduce premiums and provide other benefits to the company and individuals. Manage Your Health, Inc. is a Fortune 500 company that provides a variety of health care services across the globe. We have more than 20,000 full time employees and more than 5,000 part time employees. We have recently updated our strategic plan, and our key goals include reducing internal costs and exploiting new Web-based technologies. 2.0 Business Objective
MYH, Inc. provides a variety of health care services to people across the globe. Unfortunately, we have been neglecting the health of our own employees. We pay 20 percent more than the average for employee health care premiums, which is unacceptable. By improving employee health, we can negotiate lower premiums and improve productivity. MYH, Inc.’s strategic goals include reducing our current internal costs. The Recreation and Wellness Intranet Project will help us achieve this by allowing us to leverage our current level of technology applications towards this goal. It will do this by allowing employees to access various wellness programs through an internal intranet site.
3.0 Current Situation and Problem/Opportunity Statement
The company currently does not have a coordinated program to promote employee wellness. It was not until the CFO reviewed our increasing costs for employee health care benefits that we discovered that our own employees were less healthy than average. By developing a comprehensive program to promote wellness, track employee involvement and progress, and provide incentives for improved health, MYH, Inc. can negotiate lower premiums and have a more productive workforce. As a provider of health care services, we must learn to manage our own spiraling health care costs. MYH current health insurance costs are 20% over the industry average. One of the reasons for this discrepancy is the large amount of claims by our employees.
The Recreation and Wellness Intranet Project will allow us to cut down on these expenses by helping us to create a healthier workforce. The project will not only include information about healthier lifestyles, but it will also include classes that our employees can join to take care of such issues as smoking cessation, weight loss and stress management. Employees will also be able to sign up for company sponsored sports teams such as softball, soccer, jogging, walking and other sports. With the implementation of the Recreation and Wellness Intranet Project, we will be able to track employee involvement. We can also offer incentives for employees that join and achieve their goals, such as successful weight loss. Incentives can also be offered to teams that do well.
4.0 Critical Assumption and Constraints
The proposed solution is to organize current services and provide easy access to new services via a Recreation and Wellness Intranet Project. The new system must run on existing hardware and software, and it should require minimal technical support. It must be easily accessible by employees yet secure from unauthorized users. The proposed Recreation and Wellness Intranet Project site must be a valuable asset for MYH. Employees must actively support the program, as participation cannot be made mandatory. MYH must get behind the project, and make it as visible as possible. We must also be able to integrate the new Intranet site within our current structure. This includes not just the Intranet site, but the data collection integrating within our current HR database.
5.0 Analysis of Options and Recommendation
There are three options for addressing this opportunity:
1. Do nothing. We can continue to operate without this new project. 2. Require employees to pay even higher rates for insurance themselves. 3. Design and implement the new intranet capabilities in-house using mostly existing hardware and software. 4. Outsource the work involved in providing a system to track and manage employee progress toward improving health. Based on discussions with stakeholders, we believe that option 3 is the best option There are three options for addressing this opportunity:
1. Do nothing. We can continue to pay the increased health care costs. 2. Farm out the service to another company. This way our employees can partake of the needed services without having to build and support these services in-house. 3. Build the Recreation and Wellness Intranet Project and run it in-house. We feel that the third option is the best one. This will have lower the costs and allow us better control the project.
6.0 Preliminary Project Requirements
The main features of Recreation and Wellness Intranet site include the following: Allow employees to register for company-sponsored recreational programs, such as soccer, softball, bowling, jogging, walking, and other sports. Allow employees to register for company-sponsored classes and programs to help them manage their weight, reduce stress, stop smoking, and manage other health-related issues. Track data on employee involvement in these recreational and health-management programs. Offer incentives for people to join the programs and do well in them (i.e., incentives for achieving weight goals, winning sports team competitions, etc.). The main features of the Recreation and Wellness Intranet Project will be to inform employees about health issues and allow them to: 1. Register for company-sponsored recreational programs
2. Register for company-sponsored classes and programs to include weight loss, stress reduction, smoking cessation and other health related issues. 3. Track data on employee participation.
4. Offer incentives for employees to join programs and do well. 5. Other features as they are suggested by our employees and health insurance providers, if they add value to our business.
7.0 Budget Estimate and Financial Analysis
A preliminary estimate of costs for the entire project is $200,000, based primarily on the costs for internal staff to develop the new system. After the project is completed, maintenance costs of $50,000 are included for each year, primarily to update the information and provide necessary changes.
Projected benefits are based on reducing the insurance cost per employee by $30 each year for four years. Total projected benefits, therefore, are about $600,000 per year for four years.
Exhibit A summarizes the projected costs and benefits and shows the estimated net present value (NPV), return on investment (ROI), and year in which payback occurs. It also lists assumptions made in performing this preliminary financial analysis. All of the financial estimates are very encouraging. The estimated payback is within one year.. The NPV is over $1.6 million, and the discounted ROI based on a four-year system life is excellent at 444 percent. A preliminary estimate of the cost for the entire project is $200,000. This includes the hire of a temporary project manager, and the hours used by current employees to work on the project. Project savings comes in the form of reduced health insurance cost due to a healthier workforce that makes fewer claims.
8.0 Schedule Estimate
The sponsor would like to see the project completed within six months, but there is some flexibility in the schedule. We also assume that the new system will have a useful life of at least four years. The sponsor feels that the project can be completed in 6 months, but there is some room to go over without adverse effects. The system should have an indefinite lifespan, as the increased participation by employees will keep our health insurance cost down.
9.0 Potential Risks
There are several risks involved with this project. The foremost risk is a lack of interest in the new system by employees as well as the risk that we may not be able to negotiate lower insurance premiums. We also need to provide useful programs and incentives to realize improved employee health. The main business risk is investing the time and money into this project and not being able to recoup the costs.. There are a few risks involved with the Recreation and Wellness Intranet Project. The main risk is in our employees not participating in the various services offered. Therefore, employee input is necessary to make sure that those services offered are those that employees are interested in. We must also make sure that the various managers allow the employees to partake in the services. The secondary risk is that of the technical type. We must make sure that we use technologies that are currently employed by our current Intranet and HR departments. This will insure smooth integration with our current assets, and decrease the possibility of non-compatibility.