Vendors of workforce management software offer a new generation of applications delivered over the Internet. The software is presented as much easier to put in place. And vendors say their analytical tools can sift through corporate information and offer insights that help companies make smarter choices about hiring, training and firing.
All this may be true, in theory, but many organizations remain far from the lofty goal of at-a-glance strategic assessments. A major stumbling block is shaky data, which can be blamed in part on the lack of standard definitions for workforce metrics. A related hurdle is continued difficulty with integrating HR systems. Bolting new applications onto an existing human resources system can result in aborted missions, leaving behind silos of data that are not easily studied. A recent report from HR.com found that more than three-quarters of "best of breed" systems—essentially stand-alone products such as recruiting software—are not integrated with core human resource management systems.
That report was sponsored by Oracle, which of course has an interest in clients choosing its family of interconnected applications. But the integration problem is genuine, says Ed Newman, founder of consulting firm the Newman Group. Newman, whose company focuses on recruiting methods and technology, says all recruiting applications today suffer from "gaps" that make implementing them a challenge. He also estimates that less than half the Fortune 500 have "clean" HR data. In his view, much of the dilemma stems from the way large organizations constantly do such things as acquire new divisions, divest units and reorganize. These shifts cause havoc with HR systems, Newman says.
"Companies are changing so fast that it’s hard to keep the data in the system matching the reality," he says.
The Progressive Group of Insurance Cos. is a case in point. Following a corporate restructuring several years ago, the auto insurance provider found itself with workforce reports that clearly were wrong. This was despite a major investment in PeopleSoft software in the late 1990s, says Laurie Munoz, HR systems manager at the company.
"We got these numbers that were ludicrous, like 475 percent turnover in some areas," Munoz says.
The quest for an accurate headcount is a pressing one for many companies, says Lois Melbourne, CEO of Aquire, a Dallas-based HR technology firm. Melbourne, whose software aims to help companies compile workforce data from a variety of sources, says information on reporting relationships also can go missing. In a survey of 2,900 actual and potential clients, Aquire found that typically 3 percent to 12 percent of employees do not officially have a boss.
Cleaning up data
A major reason HR data is so messy, observers say, is that workforces are complex. Coming up with a figure for headcount, for instance, requires deciding how to treat part-time workers, temporary workers and those on maternity leave. Given the relatively recent focus on measurement in the HR arena, standard definitions have not yet emerged as they have for metrics in the finance world, says Claude Balthazard, director of research at HR.com and author of the Oracle-sponsored study. In short, HR lacks a GAAP—the generally accepted accounting principles that guide finance.
In addition, multinational companies face privacy laws that can restrict the flow of employee information between nations. Corporate politics also plays a role. Mergers can trigger battles over whose HR system will be used or whether to retain more than one, says Freddye Silverman, vice president of HR technology solutions at travel and real estate services provider Cendant, which acquired dozens of companies in the late 1990s and earlier this decade.
"Everyone is used to what they’ve got," she says. "Everyone wants to fight for their system."
One way companies can get a handle on their workforce data is to establish a single, central database that becomes the trusted source of information not only for HR but for such departments as finance and risk management. Silverman calls this the "brass ring" of HR systems.
Another method for tidying up data is to let a number of HR applications or databases coexist, but pull information from multiple sources into a new repository. That’s the concept behind the Aquire product Unifi, which is built to be able to aggregate data from multiple Oracle, PeopleSoft and SAP human resource systems.
However they go about it, firms have good reason to get their workforce information in order. Messy HR data can result in unwanted scrutiny under the Sarbanes-Oxley Act, Aquire’s Melbourne says. When checking on compliance with the financial reporting law, one of the first things auditors do is compare payroll records with a company’s organizational chart and job codes, Melbourne says.
"If they start finding problems there, then they start digging deeper," she says.
Data analysis for better decision-making also depends on sound workforce information. Applications today aim to let companies do such things as figure out the financial impact of open job requisitions and extend succession-management programs to include midlevel leaders as well as top executives. But this sort of strategic analysis relies on accurate data in the HR systems.
"If you don’t have the basics down, all the information in the world is worthless," says Nov Omana, founder of consulting firm Collective HR Solutions.
In the wake of its faulty turnover figures, Progressive decided to establish companywide definitions of basic metrics. Getting people throughout the firm to agree wasn’t easy, says Munoz, the company’s HR systems manager.
"The debate over turnover was like pulling out your fingernails," she says. One controversy centered on what time periods should be used for reporting, while another focused on how the average headcount number should be calculated. Human resources eventually realized it should take a leadership role. "We needed to take control," Munoz says.
Cendant HR leaders also asserted themselves to achieve clean data. As the company snapped up firms, all newcomers were forced to adopt the Lawson software system that Silverman’s team had customized. It was the only way to guarantee that employee data from different units was consistent, she says.
The centralized approach also lowered operational costs, and is proving itself again as Cendant splits into four companies, Silverman says. Each of the new organizations is implementing Oracle HR software, and the process has been smoothed by the simplicity of the existing system, she says.
Reliable workforce data is important, but companies can overemphasize exactitude, HR.com’s Balthazard says. Workforce managers have sought to replicate the "hard" numbers of financial accounting, but even the accounting department’s figures involve a degree of judgment, he says. An employee satisfaction survey may be a better predictor of likely defections than past turnover statistics.
"Sometimes it’s more important to have an imprecise measure of the right thing than a precise measurement of the wrong thing," he says.
When it comes to integrating HR applications, things have gotten better, Balthazard says. Standards have emerged for disparate software programs to "talk" with one another more easily. But the amount companies pay overall for software and its integration often exceeds their expectation by 20 percent to 30 percent, thanks to integration difficulties, he says. "There are still hidden costs."
The time to complete software integration projects has shrunk from a year or more a decade ago to a few months now using applications that are accessed over the Internet. But that doesn’t mean the projects are a piece of cake, Newman says.
"Every implementation has its unique challenges—and none of them are easy," he says.
One common challenge is that software applications do not correspond to the actual structure of a company or to its main HR system, Newman says. For instance, a recruiting product may provide summaries of job openings on a department, division and overall company level, but the customer may want additional reports for subdepartments and different countries.
Sometimes the reason integration projects run into trouble has more to do with human habits than technical hurdles, Aquire’s Melbourne says. The users of a particular HR application can be loath to switch to a new one or to learn new tools, she says. "It is a biggie."
To help clients with the change management process that comes with implementing new technology, Aquire often works with consulting partners such as Accenture.
After plenty of work in the trenches Progressive tuned up its HR technology, with impressive results. Its HR Scorecard system showed the company that it should focus on employee referrals as a good source of job candidates. It also highlighted the need to slow its growth in a specific market because of high turnover among claims adjusters, Munoz says.
The experience of Progressive and other companies shows that organizations can—and perhaps should—shoot for the stars with their HR applications. But they should keep in mind that flawless execution could be light-years away.
Workforce Management, June 12, 2006, p. 1, 39-41 -- Subscribe Now!