The HR software industry had its birth in the late 1960s, when information needs emerged that were not met by the "people systems" at the time. These systems were essentially the early automated payroll/accounting systems, and they lacked three essential characteristics:
First, they did not contain the capacity for non-accounting information, like education, skills, dependents, beneficiaries, etc. These data were becoming increasingly important for workforce planning, and benefits-plan costing.
Second, they did not retain significant history of the events that happened to employees. This was essential to track the employment process for compliance with the social legislation (Equal Employment Opportunity, etc.) of the 1960s.
Third, they were locked into processing periods (pay cycles) that prevented easy ad hoc reporting and analysis.
Solutions to these deficiencies were developed by the late 1970s—full-featured human resource information systems (HRIS) were placed at hundreds of companies. Most of these organizations were large-sized, with thousands of employees. Then the personal computer was introduced in the ’80s, and HR software became available for smaller organizations, as well as for specialized functions within the larger organization, such as recruitment automation, or training registration.
PCs opened software’s doors.
The 1990s was characterized by a growing recognition that integrated solutions which combined personnel, payroll, benefits, recruitment, career development, training and so on. These were able to deliver more value by sharing common information, simplifying multisystem updates, and providing a more complete view of each employee. Integration with financial, manufacturing, and supply chain systems resulted in the "enterprise resource planning" (ERP) systems that are prevalent today.
During this same time, the industry migrated through several technological changes, such as relational databases, local area networks (LANs), client/server architectures, and most recently, the Internet and intranets). However, while more features, flexibility and functions are available, the basic needs of the late 1960s still apply. "Best practice" for HR software is founded on:
- An extensible database for a wide range of employee/ employer information.
- A significant "date-sensitive" historical capacity.
- Easy-to-use reporting and analysis capability, available to a broad user community.
With the vendor industry now over 30 years old, these fundamentals can be found in virtually all of the leading suppliers’ products.
Understand what functions are available.
With many products now on the market with these capabilities, the selection and implementation of a solution requires careful consideration. Of course, company size dictates certain affordability parameters; small companies are unable to justify investment in thousands of dollars toward large-scale software costs. Otherwise, the intended use, functional requirements and technological environment are key determining factors in making the right choice.
These expectations, functions and technologies evolve over time, and therefore, upgrades and enhancements will be needed. HR software projects are rarely "finished," as new needs and features are required to meet changing business needs. An assessment of foreseeable needs in the next two to five years is usually the best planning horizon that can be established.
Make your software selection process a success by understanding what’s out there—define the functions, expectations and technical characteristics that are needed to satisfy your company’s business requirements.
How can HR software be used effectively?
For ease of discussion, company profiles and characteristics are divided into three types:
- Type I companies exhibit high competency and capability, making best use of HR software in support of well-articulated and aligned business goals across all HR disciplines.
- Type II companies exhibit effective competency and capability, within many HR disciplines, but with needs to broaden the impact of the software’s use, across the HR functions and upward to the overall business objectives.
- Type III companies exhibit basic operational effectiveness, such that data accuracy is reliable to support fundamental reporting needs within the primary human resources disciplines.
It’s important to note that these "type" profiles are not directly related to company size in terms of revenue, or number of employees. Large companies may find themselves at the Type III level, just as smaller companies may very well exhibit Type I best practices.
With so many companies "recovering" from the massive ERP implementation projects that were prompted by the Y2K bug, it isn’t surprising that many organizations are only at the Type III level. Such organizations have completed the implementation of the major software components, usually consisting of human resources, payroll and basic benefits information.
Data-maintenance processes and procedures are in place, and users (often only in the HR/payroll/benefits departments) are trained and proficient. Best practices in Type III organizations are reflected by quality, accurate information, well-disciplined processes (albeit still paper-clogged), and periodic reporting of key information such as headcount, turnover, organizational demographics, and necessary compliance reports.
It isn’t unusual for Type III organizations to have extended their HR software impact, and be exhibiting best practices via outsourced 401(k) providers, and automated voice-based self-service for benefits open enrollment.
Moving up the scale, Type II organizations are beyond operational effectiveness, and often have implemented capability for broader functional support and a wider user community. Recruitment automation, which provides applicant tracking, requisition processing and position management features, is frequently in place for these organizations.
Compensation planning and budgeting capability is another high priority function that is technologically supported in Type II organizations. More widely available access, both for data maintenance and reporting, is another best practice characteristic found in Type II companies. These companies often have employee and manager self-service initiatives underway to reduce administrivia, and move the HR function into its desired, strategic and business-aligned role.
Type II companies are also likely to have established intranet strategies which support the dissemination of a wide variety of HR information, such as policy guides, organizational directories, job openings, training course catalogs and so on.
The distinguishing best-practice characteristics of Type I organizations are highly integrated and complete databases, broad self-service access by employees and managers, harnessed intranet and Internet connectivity, and a tightly aligned link between the goals of the business and human resources activities.
One such organization recognizes the human resources function as being responsible for building and maintaining its high-performance workforce. Human resources owns the "employee productivity agenda," and can demonstrate the value proposition for each activity, associated data element, and related business processes.
For example, by using HR data to identify all employees who are connected to the sales role within the company, and by linking sales and commission statistics to these employees, it’s possible to identify the best performers. This information is being used to develop competency and skill characteristics, which form the basis for a sales-performance knowledgebase that can be deployed across the Internet, and around the world. The link between HR software and the improvement in sales performance is compelling.
The best-practice characteristics for each type of organization is affected by the particular HR software that may be implemented. Since new HR software releases (from most vendors) occur at least annually, with new features being added each year, a Type III organization may be able to use older releases, while a Type I organization is likely to be using the most current release. For example, newer releases—and the stated direction of planned future releases—are heavily focused on enabling self-service, Internet and "best performer" competency/knowledgebase functions.
Workforce, October 1999, Vol. 78, No. 10, pp. 90-92.