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HRMS Gets Easier, Better for Smaller Companies

HR pros at smaller companies now have more confidence that HRMS products will do what they want. More companies are either upgrading their systems or buying their first ones.

June 20, 2002
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Related Topics: Human Resources Management Systems (HRMS/HRIS), Latest News
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We've read the headlines for a couple of years now: software businesses have been falling by the wayside, and companies have been cutting back their technology budgets.

But as this tech shake-out has gone on, HR systems have become more user friendly, more affordable, and much closer to what HR professionals need to manage their workforces. Skill tracking, succession planning, and self-service have become critical for smaller companies, and vendors seem to be responding.

More efficiency
Over the last couple of years, HR pros have had similar kinds of mandates: save money, be more efficient, automate as much as possible, and make time for strategic planning. The economic downturn has accelerated these trends.

In response, HRMS products have had to become more affordable and easier to use. For the most part, they have. HR pros at smaller companies now have more confidence that a product will do what they want, and more companies are either upgrading their systems or buying their first one.

Jean Hubbard, senior vice president of human resources for Rurban Financial Corp., has for years been thinking about getting a better HR system.

Until now, the various systems offered different services and were incomplete, she says. Now she's ready to make a change. "We're just now finding vendors who are providing efficient systems."

During this recession, HR is under more pressure to prove that its systems are an investment that will pay off, and not just an additional cost.

Case in point: Hubbard has 320 employees spread out over five different companies that Rurban owns. Her current system generates EEO reports, but not one report for the five companies. This means that if an employee is transferred from one Rurban company to another, the system thinks the employee was fired by one company and then hired by another. "It takes a lot of manual manipulation to get it right," she says. Most of the newer systems that Hubbard is considering are capable of handling employee transfers.

Denise Haws of Made2Manage Systems, an Indiana software company, is also finally ready for an HRMS. She has to be "more strategic," she says. "For HR to be able to contribute to objectives, you need quick access to information. You need to see the staffing game plan. What the cost per hire is. What the fill rate is. Quite honestly, right now, we just have personnel files."

Self-service even hotter
Pressure from Wall Street and from CEOs to cut costs has accelerated the self-service trend. Work that was once done by HR is slowly shifting to managers and employees, even in smaller companies.

As smaller companies get more comfortable with self-service, HR professionals are looking to do more sophisticated forms of self-service, beyond such tasks as checking on 401(k) allocations and requesting time off.

ITeX, a 75-employee Silicon Valley engineering company, is using its HRMS to conduct customized performance reviews appropriate to an industry in which skills are tough to quantify. Employees at Kyphon, a 217-employee medical-device company in Sunnyvale, California, have access to an anonymous suggestion box as part of the HRMS. At HPM Building Supply in Hawaii, which has a staff of about 350, the HRMS includes a "leaders tool kit" for managers to improve hiring and managing. At Made2Manage, Haws hopes to use her new system to show employees what their "true" compensation is when the value of all benefits is included.

Moving these kinds of duties away from HR's desk not only saves time and money, but also increases employee satisfaction. If you ask employees what health benefits they have, they won't be sure. With self-service, they can log on to a computer -- from anywhere -- and see when they qualify for a preventive doctor's exam, what a filling costs, what their co-pays are for drugs, or what their annual allotment is for contact lenses.

The potential to save money and time and to achieve higher employee satisfaction isn't the only incentive with self-service systems. There's a domino effect coming from Washington, D.C.

By October 16, 2002, health plans will be required to accept enrollment information electronically in a format adopted by the government. Though the rules don't apply to employers, they'll affect HR, says Ascentis Software CEO Chuck D'Ambrosia. That's because health plans are spending big bucks to purchase technology that can accept digital information, and aren't going to want information faxed over from HR. D'Ambrosia expects health plans to offer incentives to HR departments that send benefits-enrollment information by computer.

Skills and succession
As demographics change and baby boomers approach retirement age in record numbers, employers increasingly are concerned about how they are going to replace these skilled employees.

Roberta Harrison, HR director for Peace River Electric Cooperative, a 100-employee utility company in the Florida town of Wauchula, has a triple whammy on her hands. About a quarter of her workforce will retire in the next five to seven years. There isn't a big labor pool of qualified workers in Central Florida to replace them. And the actual work of constructing and maintaining utility lines is a skilled craft that is becoming more technical each year. "We're losing a quarter of our workforce, we have no labor pool to go to, and it takes five years to train them when we find them," she says.

Peace River is scheduling thousands of hours of training for its employees and using its HRMS to track each technician's 270 skill sets. The company is also tracking what local high school and community-college students are learning about the industry, so that when kids graduate, Peace River knows what basic utility-industry knowledge they have.

At Rurban, Hubbard says she also wants an HR system that can address succession planning. In the banking industry, regulators want to make sure you're organized to a T, and having a clear line of succession doesn't hurt, she says. She's identifying which employees need certain supervisory skills, management skills, and leadership skills. She wants an HR system that can help her learn about these skills and will allow her to track the courses that employees take to build those skill portfolios.

At Kyphon, the medical-device company, pressure from regulators is one of the reasons that HR manager Shoaleh Ghaffari bought an HRMS for the first time. The government audits medical-device companies and wants to know how qualified its employees are. Kyphon's HRMS keeps track of this information.

In some cases, changes in the business world are ultimately affecting the need for an HRMS to help track skills. Made2Manage is in the process of converting its products to work with Microsoft.NET, which is Microsoft's new platform, using the Internet instead of software that is loaded on your computer. This means that Denise Haws and her HR team have to know which employees are ready to make the change. "If our CEO comes by and says, 'I need to know who the folks are that know Microsoft.NET,' we need access to that information," she says.

"All ROI"
During this recession, HR is under more pressure to prove that its systems are an investment that will pay off, and not just an additional cost.

Hubbard is analyzing how much time is spent manipulating data and handling various transactions with and without an HRMS. This includes more than just time that HR spends at tasks such as manipulating data to get an EEO report to work right.

It also includes the time and energy that employees spend on tasks such as changing their address for health providers and getting approval for vacations, which can be automated with an HRMS.

Hubbard is converting those hours to dollar figures, comparing those figures with the cost of a new HRMS, and beginning to develop a cost-benefit analysis.

At Peace River, Harrison calculated the cost-benefit of an employee completing the company's five-year training program. The cost includes the employee's time away from work and the money the company spends on training. The benefits include lower turnover, lower recruiting expenses, and less money spent on overtime. The overtime costs come in when, instead of filling a job after an employee leaves, Peace River has other employees work overtime to fill in temporarily.

Harrison says the cost of replacing an employee with five years of training is $100,000. Before last year's purchase of an HRMS to track the training, she says, "we were going by our gut" in terms of an ROI. "This is a very complicated training program. You have to track 270 skills for each employee and where they are as far as those skills. It's not something you can do by hand."

Laura Perkins, vice president of product strategy for Ultimate Software, says HR customers at small companies are increasingly being asked to justify their purchases. "CEOs and CFOs are asking, 'How does it affect employee satisfaction? Productivity? How does it reduce administration? How does it increase decision-making ability?'"

Perkins says using an HRMS facilitates decision-making by allowing the company to better understand which employees leave the company, and why. HR can also use the system to see which benefits are more popular, and then use that information to scrap unpopular benefits and add well-liked plans. This improves employee satisfaction, she says. "It's all about ROI."

ROI, of course, doesn't necessarily mean finding the cheapest alternative. At Made2Manage, Haws presented CFO Tracy Dolan with four alternatives for an HRMS to replace what the company has now, which is basically a hodgepodge of Excel spreadsheets. Haws showed what it costs to manage employee data by hand, and how much money the systems would save. Right now, the company is spending $42,699 a year in people hours. The new system, Daws told her CFO, will cost $11,811 in people hours. She recommended the most expensive option because of the vendor's longer track record, better self-service, and easier HRMS-payroll integration. "We had a hard sell," Haws admits. But it worked. Made2Manage hopes to move to the HRMS when the economy picks up.

Resistance to change
The trend toward more self-service, as well as HR systems hosted online, enables employees and managers to do more of HR's administrative work. HR professionals who want to maintain control aren't always pleased with this change. "Moving a lot away from HR's control can be looked at as a threat to the HR people," says Shafiq Lokhandwala, CEO of NuView Systems. "Sometimes they're worried that this will mean their jobs will be at stake."

Rather than losing their jobs, he says, eventually HR people will be rewarded for getting quicker and better data for recruiting, retention, and training initiatives. "It's about what's right for the bottom line. One of the ways to help the bottom line is to improve the speed and efficiency with which transactions are processed."

Vendors that get it
With so many external factors influencing HRMS selection and use, staying on top of it can be daunting. Vince Ceriello, whose VRC Consulting Group helps companies select an HRMS, says that the key is to not be tempted by the vendor with the most technology knowledge. The real goal, he says, is to find people who are aware of workforce trends and world events that affect the workplace, such as the baby-boomers' retirement. "You need someone who is actually looking at socio-economic trends and how the patterns of work themselves are changing," Ceriello says.

Workforce, February 2002, pp. 46-49 -- Subscribe Now!

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