Pressing for returns

first_img Comments are closed. Previous Article Next Article Pressing for returnsOn 27 Nov 2001 in Auto-enrolment, Personnel Today Blowing the budget on HR IT systems in time of recession may not sound likegood business sense, but suppliers armed with ever-more sophisticated tools aremaking the case for investing now to get ahead in the human capital game. ByKeith RodgersEveryone knew that the economic data coming out of the US this month wasgoing to be bad, but the scale of the problem took many seasoned watchers bysurprise. According to figures released by the Labor Department at the start ofNovember, 415,000 jobs were lost in the US in October – a fall that pushedunemployment rates in the world’s largest economy up by one half of apercentage point. Combined with data showing that 24 million jobs will be lostglobally in 2002, the picture could hardly look bleaker. For some specialists in the human resources IT industry, it was yet anotherblow – now, one would assume, is not a good time to be touting recruitmentsoftware applications. The marketing arm of the IT sector, however, has always proven to beresilient, and even in the face of global slowdown, vendors are busy puntingout statistics that demonstrate how investment in HR software can lead to fastreturns. For example, Job Partners, an online recruitment service provider,argues that getting the employee acquisition process right is as valid in arecession as it is in boom years. Because some skills remain hard to find andgood quality candidates are more reluctant to gamble on a job change,streamlining your recruitment processes is as important as ever if you arelooking to improve your human capital asset base and cut operational costs. Andwhile it might not be the kind of investment that first springs to the mind ofa finance director looking to improve the bottom line, there’s merit in theargument. HR IT investment still makes a lot of sense in the current climate –it just needs a solid business case. For years, HR has been the poor cousin in the IT market. Viewed historicallyas a transaction-based activity – in much the same way that the HR functionitself has long been viewed primarily as an administrative centre – investmentwas largely driven by somewhat prosaic needs. More recently, however, as the HR function has begun to carve out astrategic role for itself, the IT industry has set its mind to systems thatimprove effectiveness, particularly in terms of employee measurement, retentionand the leveraging of human capital. These strategic systems, catering foractivities such as performance management and competency assessment, focus ondelivering both hard and soft benefits. In the boom years, when organisationswere prepared to gamble in the hope of gaining a competitive edge, thesesystems were beginning to find their way on to boardroom agendas. Now, as IT budgets and headcounts are slashed, boardroom focus is elsewhereand the criteria for investment have changed. Whether it is a system upgrade orprocurement of a niche product, approval rests on delivering rapid, tangiblereturn – and preferably, one that shrinks the cost base. “Companies arereally zeroing in on the cost-reduction side right now,” says StaceyLawson, vice-president and general manager of employee relationship managementat Siebel, which recently entered the HR market. “Intuitively they believethere are lots of benefits, but in all areas people are looking more directlyat the cost-saving side of ROI. That’s life these days in enterprisesoftware.” Ironically, while the IT industry continues to offer ever-more sophisticatedsystems, many organisations still lag behind at a basic transactional level.Any administrative process that involves either manual labour or duplication ofactivities between HR and employees is ripe for automation, from timekeepingrecords to updates of personal information and delivery of pay advice. All of the major HR systems from leading suppliers such as PeopleSoft,Oracle, SAP and Lawson provide the engines and application modules to handlethese kinds of processes, while a raft of specialist software providers offeran alternative in the shape of “point” solutions. In each case, theROI argument is relatively simple. If you can cut costs – not just in terms ofHR administration, but also from the line of business – and improveeffectiveness, particularly the quality of management data, you’ll probablyhave a business case that the board will listen to. At a transactional level, however, some of the more significant efficiencygains promised by vendors go beyond basic automation and involve a degree ofcorporate reorganisation and a new approach to data management. In particular,the advent of Internet-based systems from the leading HR suppliers has promptedmany organisations to look at rolling out employee portals, the front-endsystems that form the platform for Web self-service. By allowing end-users to input their own HR-related data and checkinformation through their browsers, organisations can automate a range offunctions, from enrolment in healthcare schemes to online distribution ofpayslips. Re-keying of data – a resource-hungry and error-prone operation – ismade redundant as users enter their own information directly into systems in atimeframe that suits their working patterns. In addition, as end-users becomecomfortable with the methodology, the portal provides a means to distributeboth HR-related and corporate information across an organisation. On thesurface, this combination of hard cost-savings and soft benefits makes for aconvincing business case. Even at a pure process level, however, early adopters of employee portalswarn that implementation throws forward a number of challenges. For one thing,portal deployment is dependent on the development of a suitable IT infrastructure,and for users of older technology, that may require an upgrade to a moreflexible system architecture (see box). This kind of investment clearly impactsthe ROI equation. At a cultural level, meanwhile, HR departments have to be aware of a varietyof issues when they adopt this kind of technology. Information dissemination,for example, has to be carefully controlled – because data is being”pushed” to the user rather than requested, reactions can be negativeif employees receive irrelevant material or simply feel they are being swamped.In addition, take-up of many of the add-on services that organisations aretempted to offer employees – such as personal holiday offers from corporatetravel agents – can be low, particularly in European countries where Internetusers are less familiar with online retailing. Above all, the HR department hasto be ready to handle change – self-service demands that HR administratorsrelinquish control over many of their activities, raising the spectre of majorrole changes or redundancy. Each of these cultural issues could have asignificant impact on the real – as opposed to projected – investment story. But while these transactional and process-based investments focus ontangible cost-savings, the argument for implementing HR technology is much morefundamental, based around potential productivity gains and the more strategicissues surrounding effective human capital management. As Roger Moore, servicesdirector at RCMS, argues, “ERM is more than any single product or system.It should link together existing disparate employee-related systems includingadministrative, business intelligence, knowledge management and reportingsystems, as well as systems to manage staff performance, analyse skillslevels/shortages, and improve staff efficiency, training, loyalty andcollaborative working.” Clearly at this level, the investment argument becomes far more complex forHR, but it rests primarily on the assumption that in most companies, humancapital and retained knowledge is not being effectively leveraged. At onelevel, that requires companies to build an effective enterprise-widedata-sharing structure, allowing knowledge to be freely disseminated betweenindividuals and departments. In itself, with all the data collation andsecurity concerns it entails, this is a significant challenge, and one thatgoes beyond the traditional remit of HR. In terms of performance management, meanwhile, the stakes are raised higherstill. Human capital analytical software touches every part of an organisation– to be able to understand how well individuals, departments and theorganisation as a whole are performing, and then use that information to managechange, HR needs to work closely with line managers across the company. If, forexample, an account manager’s performance is measured on the basis of clientsatisfaction, the HR-related data needs to be combined with external customerresearch. Many of the leading HR management systems vendors have developed businessintelligence applications that can demonstrably help this process, measuringthe effectiveness of employees and departments in their day-to-day activitieswhile giving senior managers a strategic insight into the strengths andweaknesses of the total human capital base. While some of these applicationsare based around relatively mature management tools, such as the balancedscorecard, many of the newer applications coming on to the market are morealigned to traditional financial processes such as budgeting. Software vendors point out that while the ultimate goals of effectiveperformance measurement require a far-reaching reassessment of companypractices, there are a significant number of short-term gains to be made. Forexample, the framework for skills and knowledge analysis is typically builtaround some kind of competency assessment programme. Although the initialprocess of assessing and recording skills can be laborious, it can producetangible short-term results even in the throes of recession. Eudie Thompson, CEO of specialist software developer Zynap, argues thatcompanies that develop competency profiles of their employees – including theirpre-hire CV, details of training courses and instructor assessment, appraisals,projects undertaken, and even extra-curricular activities – may discover theycan leverage the skills they possess in-house rather than recruit. Thefunctionality to perform this kind of competency management is contained in araft of systems, from HRMS applications to Learning Management Systems and inZynap’s case, an artificial intelligence based system currently underdevelopment. Ultimately, whether companies choose to invest in HR IT at this leveldepends on whether they buy into the whole concept of effective human capitalmanagement. If HR is still perceived primarily as an administrative function, investmentapproval is likely to be limited to transaction-based improvements. If HR canmake a case for a strategic role, investment in more sophisticated toolsbecomes far easier to justify. Paving the way for a partnership approachThe concept of”collaboration” has primarily been driven in the IT industry byissues well outside the domain of HR, covering “back-office”supply-chain issues such as manufacturing and logistics, and more recently”front-office” business strategies such as customer relationshipmanagement. Moving towards collaborative working practices does, however, havea significant impact on an organisation’s underlying IT infrastructure, whichin turn affects HR’s ability to fulfil its own role. The core principle of collaborative commerce is to streamlinethe way organisations work together in order to match customer demand moreclosely with vendors’ ability to supply. At the back-end of the equation,companies are developing ways to exchange data more freely, improvingvisibility down the supply chain so that every organisation involved in thedevelopment and delivery of products or services is aware of what its partnersare capable of delivering. More advanced forms of collaboration are beingpursued in sectors such as the automotive industry to allow for collaborativeproduct design.At the front-end of the equation, meanwhile, companies areattempting to use customer relationship management as a means to get a morein-depth understanding of real demand and purchasing patterns, which can be fedinto their forecasting processes. Ideally, the business relationship with thecustomer should evolve into a partnership, where customers see the benefit ofsharing data with their suppliers because it ultimately improves the quality ofservice.Underpinning this collaborative model is a new, more flexibleIT architecture that allows for easy integration between different systems. Inparticular, systems that are designed specifically for the Internet offer fargreater flexibility for collaboration at an organisational level, bothinternally and externally, and also give individual users more flexibility inthe way they work. The previous generation of IT architecture was built aroundthe concept of client/server computing, where the bulk of applicationprocessing was carried out centrally, but the “client” system – suchas a PC – ran some code. Pure Internet architectures, by contrast, turn the”client” primarily into a pure access device that allows users to loginto the system easily through various different types of equipment, includingremote PCs.This flexibility has a number of technical benefits for the ITdepartment, but it also underpins the development of collaborative HR-relatedinitiatives such as employee portals. HR vendor PeopleSoft, which rebuilt itsentire enterprise application suite around an Internet architecture, has nowturned the issue into a central plank of its marketing strategy, and the likesof Oracle and others have joined the fray.Although the choice of enterprise-wide architecture is unlikelyto be driven by HR, the implications for the department mean that HR managementshould have a say in decisions affecting its own technology capability. Related posts:No related photos.last_img read more