HR Management systems in the New Economy: They haven't added any value – you say?

HR Management systems in the New Economy: They haven't added any value – you say?

By Hannes Trollip who can be contacted at Trollip@vizualsa.com; www.vizual.co.uk

1. Introduction

Several years ago we were slaving away with the implementation of a Human Resources Information System (HRIS) at a manufacturing company in Boksburg - it was great; this new tool was going to add great value to the ailing HR department. We would be able to extract information quickly, and make decisions decisively. How wrong we were! Nothing really changed that much. We still argued why information was not correct and why we couldn't get the reports out that we really needed for the departmental heads. We still "massaged" spreadsheets to plan and calculate salary increases, and management still believed that the payroll system was still the source of all accuracy.

Human Resource departments were the change leadership custodians - surely we would understand that roles needed to change, people re-oriented and trained to utilise the new HR system. That didn't work either; instead we saw the emergence of HR System Super Users - who ended up extracting information on request for "I-don't-know-how-to" HR staff.

More than a decade later, having been involved in many more HR system implementations, including the illustrious "one-stop-shop" and enterprise resource planning systems, I am compelled to ask whether the situation has changed significantly from those trailblazing days gone by. The modern-day HR systems certainly changed - they became technically more powerful, graphically pleasing, windows desktop-driven, the design and functionally can be integrated, not to mention web-enabled and providing unlimited accessibility options. But have these HR tools added any real value to organisations besides making the HR department administratively more efficient and providing a reason for their existence? The answer in most cases is a definite no, it has not yet.

The CEO of Dimension Data* was once quoted as saying that HR departments have no place in his organisation and it was the first thing to go when they acquired new companies. Why would a CEO of a high-tech company, that makes its money from technology, make such a statement? Simple, HR is not adding to the bottom line, and you don't need an HR department to run a purely administrative function and system.

2. Real value?

Herein lies the answer to why HR systems have not added any real value. Human resources systems have been acquired and moulded around administrative activities such as ensuring accurate personal and job data, staff development activities such as career planning and training administration, time collection, labour relations data collection, benefit and leave management, health and safety data and so the list goes on.

The focus has been on ensuring that information is collected timeously at the point of activity, and that the data is accurate. With accurate data on hand, the HR department is able to extract accurate reports, deliver on all the statutory requirements and aggregate information into apparently useful statistical and trend reports.

No one will repudiate that this information is important, but surely these outputs are far from the expected return on investment from a HR information system, which can run into millions of rand to purchase and implement AND to maintain.

Most HR software vendors sell their product on its functional strength, claiming that their product offers "best operating practices", is "best-of-breed" or uses some other catchy phrase to attract their customers. The reality is that most of the more reputable HR systems offer similar functionality and content, and if the function is not available now, it will be in the next release. The vendors' selling approach endorses the functional approach to HR management with the underlying view that by using all the functional abilities of the system, real value will be added to the organisation.

3. Value-adding tool

Human resource management systems mirror HR effectiveness in organisations. If HR staff members are not offering real value to their "customers", then the HR system will not become the value-adding tool so many HR departments expect. It is only when HR functions become an integral part of the business process, and move away from their functional mindset and can prove that they ad value through suitable business measurements, will an HR system provide substantial benefits to the organisation.

The HR fraternity has traditionally considered their customers to be the employees of their organisations, but as organizsations expand vertically and horizontally and connect to other organisations through e-business mechanisms, so HR functions across organisations need to "connect" with each other. Human resources management needs to challenge their own paradigms and boundaries to keep pace with the value-add expectation of their function. Future HR boundaries will include competitors, traditional external customers and the all-important employee.

The low value-add delivery of most HR systems in South African organisations reflects the paradigm that HR departments are stuck in. Unless organisations are prepared to shake up their HR views, their valuable HR system will continue to add no real value.

4. Human resource management systems do add value

Installing a computer system to automate bad processes is like giving an illiterate person a word processor and expecting him/her to read and write. The same is true about installing a Human Resources (HR) system without planning and establishing HR processes as best practices. One must keep in mind that electronic systems deal with information, whether financial, manufacturing, payroll or human resource, among others. This planning exercise is an integral part to the success of any HR management system implementation. Companies selecting HR systems should carefully look at the value their business-consulting partner brings to the table.

The integrity of the information is based on the efficacy of the business process design. Whereas the former three disciplines tend to be stable, placing them in a business process refining cycle, the human resource discipline is at a historically fluid point, placing it in a business process defining or redefining cycle.

5. Effective partnering

This historical juncture has impacted on HR's ability to make full use of the electronic medium. The solution is more effective partnering between users, suppliers and consulting partners to analyse the reality of HR needs against the reality of HR management systems.

Effective partnering will typically mean looking at all aspects of the business to define the right business processes across the organisation. It is not always the size of the company that counts.

The next logical step is to implement a system that fits the requirement and is flexible enough to change as the demands of the business change – all at an affordable price. This process should be owned by the organisation that is selecting the system, but, as many organisations don't have the manpower or the time to dedicate staff to a long selection process, the task is typically delegated to a business consultant or outsourced at a high cost.

6. Product selection

Great care should be taken when this approach is used, as the result of this can easily become a mere product selection and not the definition of a solution. This amounts to the old aphorism of "a bad strategy executed violently is better than no strategy at all".

There is great diversity in the products available in the market today and a product should not be selected on just track record, good looks and future functionality, but rather on how it fits into the organisation's requirement and how effectively it can adapt to changes without incurring tremendous additional costs over the years to come. This requirement can only be determined once all the processes around the HR function have been properly defined.

Once a business has reached a point where it is ready to roll out a solution and not just bang in a product at any cost, real value will be realised from this solution. In addition, the company won't fall prey to rogue vendors that sell on buzz words and promises of future deliveries. The prove of the pudding is in the eating. Therefore should you ask the vendor and yourself the following:

# Are these products of international standard and based on national legislative requirements and guidelines?

# What are the future objectives of the products and the development company?

# How complex is the systems to use or has it an ease-of-use development structure?

# How can the system be customised to adapt with changes, the timeframe on customisation and the additional cost on customisation?

# How effective is the report writer to provide various formats of reports and queries and how easy is it to write and maintain reports?

# How is your support and annual license fees structured and what are the benefits and costs of this?

# Are you willing to incur a financial penalty regarding non-performance connected to implementation and hand-over periods?

# Can you immediately show the client the functions on the system or does the system require about 10 – 20% programming resources, time and cost to customise for specific needs?

# How long is the total installation period including training?

# What are the experience of your staff on HR system functionality and processes?

# What level of computer literacy is required by the client staff members to be able to effectively use these systems?

# Can you provide an SLA (Service Level Agreement) with penalties on annual license fees?

# What are the technical requirements to effectively run the system over both LAN and WAN environments?

# How would interfaces / integration be done, at what cost and what would be the timeframes?

There are alternatively various other company specific questions that one needs to ask to ensure that the "sales promises" and reality sees eye-to-eye, and that the costs provided will not have any surprises in there for the client, after or even during the initial implementation period.

Successful organisations recognise that many issues are critical to achieve the business objectives and are tied directly to human resources management. In today’s aggressive environment, survival and success depend on the critical human factor.

To outperform competitors, in addition to operating efficiently, human resources departments must take a pro-active role in managing the organisation’s human capital. Accordingly, human resources management is evolving rapidly to a level of strategic value within organisations.

7. Enter the self-service model

Traditionally, human resources have been overburdened with administrative tasks, thereby limiting its ability to contribute strategically to the organization and keep the organization competitive. Today, human resources are being challenged to turn the organization into a competitive force.

This marks a revolutionary change in the role of human resources within organisations. To advance the management of human capital across the organization, human resources departments need enabling technologies. If not managed properly, the administrative burden of human resources becomes so onerous—playing question and answer with employees and acting on managers’ personnel requests, as examples—that human resources departments are hindered from delivering real business value.

By switching to a self-service model, human resources departments will be free to focus on more business critical issues, and at the same time, lower administrative costs and increase information access and autonomy at all levels of the organization— for employees, managers, executives, and human resources professionals—while retaining control over information and ensuring that the organization complies with all policies.

How are you going to empower your human resources department to meet the challenges of its new role within your organisation and within the legislative guidelines, WITHOUT A PROPER SYSTEM SOLUTION?