It sounds so rational and so good: connect the paper-intensive human resources jobs with new technology, and a cost-effective, exquisitely efficient system is created. But alas, in the real world this doesn’t always pan out. The promise of customized technology capable of unerringly tracking job applicants, making performance reviews and handling the administration of benefits and training isn’t always realized.
While no one would argue that the benefits of the computer age aren’t extraordinary, software systems are hardly problem free--and can be an unmitigated nightmare. Savings don’t materialize the way the software salesperson promised. Millions of dollars are spent on equipment that doesn’t work well, or ends up costing far more than initial estimates. Hewitt Associates estimates that 55 percent of the big projects using enterprise resource planning software come in late and over budget. Only 10 percent of software implementations, Hewitt says, are considered completely successful.
Even the good news is sobering. Earlier this year, Standish Group International Inc. published a new study based on an assessment of 13,522 information technology projects. Although the study said that only 34 percent of all projects were successful, it was a dramatic improvement over 1994, when such tasks showed a 16 percent success rate. (Only baseball players are applauded for getting on base a third of the time.) Nonetheless, companies are investing millions in a constant quest to speed up hiring and recruitment, process internal personnel data, and get far-flung global operations wired up and speaking the same language. Gartner Inc. says that the human resources business processing outsourcing market alone will grow from $25 billion in 2002 to $37.8 billion in 2007, an 8.6 percent compound annual growth rate.
Fixing mistakes is one of the drivers pushing this explosive growth. One company after another, say those who follow the industry, has tried to implement its own system and then given up and decided to hand the headache over to someone else. "A lot of organizations are probably unprepared for the extent of the cost and the time and the effort it takes to implement a major ERP," says Steve Hitzeman, a senior technology solutions consultant with Watson Wyatt. Computers aren’t the only ones that speak different languages. Getting corporate divisions like finance, information technology, manufacturing and human resources in sync can be just as vexing, Hitzeman says. "Something like the merit-increase process can be significantly different from business unit to business unit," he says. "One unit might use spreadsheets, another an abacus; this one decides on raises from a single pool of money, another takes bonuses into account, while others do it based on hiring dates. If you don’t understand all that, it could cost significantly more."
Not only are there complaints that expensive technology systems don’t perform as advertised or cost far more than expected, but there is the additional problem of keeping up with rapidly evolving computer systems and software. Outsourcing companies are seeing a wave of clients that need to replace expensive systems they installed in the late 1990s to address Y2K fears. Companies find themselves faced with horrendously expensive updates that they sometimes feel are unnecessary, says Jim McGhee, technology development leader for Hewitt Associates and a longtime observer of the evolution of technology. This is an industry that was in its infancy less than 20 years ago, when most of today’s systems hadn’t even been invented. Each year still brings out thousands of new products, and countless start-ups.
Jim Madden, CEO of Exult Inc., a fast-growing outsourcing firm, says half of his company’s revenues come from corporate clients that had set up their own human resources technology, then decided to turn everything over to a third party, both to save money and keep up with cutting-edge technology. "In some cases, maybe they tried something five years ago and have hobbled along with it since," Madden says. "In other cases, they have a more recent system and just want to move on."
For human resources executives, finding and understanding the right technology offers a challenge at every turn. There is a consensus that off-the-shelf software systems generally work just fine. Problems develop because no two companies are alike and so customization is often required. Companies often buy in at a relatively low cost and then ask for changes, only to find that the change orders sharply increase the cost of the project. When companies start tweaking, the bills start increasing.
"There is no software that exists that meets everyone’s needs," says Joe Stimac of Accuhire, a software vendor and consulting firm. "If you want something customized, it is going to cost. People want a magic silver bullet. There is no such thing." Stimac says that companies can avoid a lot of problems and extra costs if they insist on a demonstration of how a new system will perform. Human resources executives have to "be good buyers," he says. He suggests that companies make sure to ask for references and call the firms that are listed as clients. "Most HR departments are not sophisticated buyers for this kind of industry," he says. "They don’t know the red flags when they come up, and then they get hurt."
Michele M. Pavlyak, a consultant and author of Systems Survival Guide for the "Systemically-Challenged" Executive, estimates that more than 80 percent of software projects either are canceled or experience significant time and cost overruns. She suggests testing a new system on a non-business day at least three weeks before it’s scheduled to go live.
Pavlyak thinks that it’s a mistake to blame cost overruns and systems failures on vendors. Many of the problems occur because buyers customize a system that works fine intact but breaks down when integrated with other software or gets stretched too far doing add-on jobs. "A lot of times client companies get carried away in modifying and customizing the software package," Pavlyak says. "Stories are widespread about companies that find they don’t like paying increased maintenance costs and walk away from the deal."
Bill Henry, vice president of marketing and strategy for market leader PeopleSoft Global Services, acknowledges that there were problems with technology during the dot-com boom, but says things have improved dramatically in recent years. "There were a lot of budget overruns. I’ll call them missed expectations. People learned a lot from the mistakes of the ’90s." One of the initial problems, he says, was that companies jumped into technology "on a very, very large scale" with projects that could cost millions and take years to fully implement. The situation is different today. "Instead of doing a three-year project, they will do a series of six-month projects that will get them the same capability," Henry says. "What companies do with that approach is to dramatically reduce their risk." He adds that one of the biggest points of failure is with high degrees of customization.
Mark Mehler, a consultant and co-author of the online recruiting bible CareerXroads, says that problems can be traced back to the exponential growth of the information technology industry, and the dizzying number of name changes, mergers and acquisitions. Applicant-tracking software was pioneered by a couple of companies, he says, but the field quickly ballooned to 150 firms. "You can’t identify the players without a scorecard," he says.
With large and complex systems, a request for proposals can include hundreds of pages of data. This leads to situations in which a human resources executive, who may not be up to speed on technology, is given a program and "asked to get in the boat and row like hell," Mehler says. The only way to really understand a system is to install it and see how it performs over a period of weeks. "It’s like getting engaged," he notes. "Until you’ve spent nights, weekends, 24/7 together, you never find out where the secrets are buried."
Workforce Management, January 2004, pp. 55-56 -- Subscribe Now!