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How To Fulfill Technology's Promise

February 1, 1999
Related Topics: Human Resources Management Systems (HRMS/HRIS), Featured Article
Managing human resources has never been easy. At most companies, a dizzying array of issues and processes exist: recruiting, staffing, employee evaluations, payroll, compensation and benefits, time and attendance, training, and safety, to name a few. Over the last two decades, technology has created an opportunity to handle these administrative and strategic tasks in ways that were once unimaginable. Yet, at the same time, computers have added to the complexity of HR management by requiring additional layers of expertise and experience.

"Technology and human resources now are inseparable," says Jenni Lehman, research director for Administrative Applications Strategies at the Gartner Group, a Stamford, Connecticut-based market analysis firm. "Today, understanding how to use systems and software to solve problems and manage work is essential. HR is becoming a key differentiator for highly successful organizations. That’s a trend that’s going to continue to accelerate."

But making sense out of today’s human resources software market is no simple matter. Even for companies that have an HRIS department to handle the technical side of the equation, deciding which core system to use and which bolt-on software to add is fraught with risks and uncertainty. Determining which applications offer the greatest return on investment (ROI), and which best fit an overall technology plan isn’t for the faint of heart. More and more, key decisions must come from HR executives and managers, who are expected to take ownership for projects and shepherd them through to fruition.

According to the "HR and Technology Survey," conducted in 1998 by Deloitte & Touche and Lawson Software (see "HR Functions That Use the HRMS," page 15), only 37 percent of HR managers believe their organizations are innovative in the use of technology. A mere 21 percent said their enterprises use the best available HR technology on the market, while only 19 percent indicated their companies have the technology required to rapidly provide human resources information for business planning purposes. "A lot of HR organizations know they aren’t up to speed, but they’re not exactly sure how to get there," explains Ron Hanscome, director of HRMS Product Marketing for Lawson.

Increasingly, that’s not good enough. But where does a company begin to map out a software strategy? What pieces of the technology puzzle make the most sense? What’s really required to automate and eliminate transactions so that HR can become a strategic partner? "It requires a vision, but it also requires a plan. Technology holds enormous promise, but only if it’s understood and used efficiently," Hanscome adds.

Building an infrastructure from the HRMS up.
Over the last decade, the HR software landscape has evolved and changed. Originally, HRMS software existed only as stand-alone or "best-of-breed" packages that processed HR data. These products remain, and now include companies like Ultimate Software, Cyborg, Spectrum and Meta4. Today, however, ERP packages such as PeopleSoft, SAP, Bann, Oracle and Lawson offer products that can integrate HR data with other departments, including finance, sales and marketing, and operations. Moreover, all support third-party applications—sometimes referred to as "add-on" or "bolt-on" products that can extend the functionality of the core HRMS.

The key differentiation between ERP and best-of-breed vendors, says Lehman, isn’t a head-to-head comparison of functionality. "The fact is, there’s very little difference in capabilities and features, with a few exceptions. It comes down to a strategic HR decision." Regardless of the direction an HR department takes, Lehman thinks it’s essential to pay close attention to the array of add-on products that are designed to manage recruiting, workforce management, performance management and other areas.

Although ERPs have stolen much of the thunder in recent years, dedicated HRMS vendors also have thrived, thanks to growing third-party support, ease of installation and use, and, in many cases, a much lower price for the software package. Clearly, it’s that not every organization needs the high-powered functionality of SAP or PeopleSoft. What’s more, a few dedicated HRMS providers are beginning to take a step beyond the mainstream and offer advanced functionality not found in other HRMS applications.

A perfect example is Meta4, a Madrid-based company that has sold its product in Europe since 1991, and recently entered the U.S. market. Previous releases of the software handled the regular laundry list of HR needs—including employee records, competencies, tracking education and training, and compensation and benefits—but the most recent version of Meta4, dubbed Meta4Mind 3.0, now offers leading-edge knowledge management tools. "You cannot manage people unless you manage knowledge," states Juan Moran, the company’s chairman.

Meta4’s approach transforms static knowledge into explicit knowledge, records the knowledge in a document database and then spreads it to where it’s most needed within the organization. For example, a company launching a new product might be able to tap into previous documents and expertise generated from past launches. By finding the knowledge or the people with it, it’s possible to assemble a team of experts or slot the right people into a strategic alliance. That could save the company time and money.

That’s the idea at Telefonica España’s mobile division, which currently uses Meta4 to manage people and competencies, and has knowledge management on the radar screen. By analyzing competencies, skills and gaps in knowledge, it’s possible to design effective incentives and adjust compensation to fit the company’s precise needs. The organization can better prepare itself and its employees for the challenges of the marketplace. "It’s definitely a competitive advantage," remarks Santos Quintanilla, manager of personnel administration of the 2,800-employee division, based in Madrid. In the future, Telefonica España will likely move into the realm of knowledge management to tap into existing expertise that might not be apparent to managers and project leaders.

Alan Goldstein, vice president of Development for Ultimate Software Group, a Fort Lauderdale, Florida-based HRMS vendor, says that no matter which approach a company takes, it’s crucial to ensure that the core HR software can be easily deployed and offers a high degree of scalability.

He also notes that while a client/server architecture remains a major consideration for many firms, the ability to use the Web through intranets, extranets or the Internet is paramount. He believes the technology should provide easy access to the Web—preferably through object-oriented rules-based capabilities—and easily link to third-party applications. "An HRMS must extend beyond the HR department. The Web is a natural architecture for turning HR applications into business applications," he explains.

Venture beyond core HRMS.
Of course, no software package can address an organization’s every need. In many instances, it’s necessary to step beyond the core HRMS and use special applications designed to address specific business issues. Applications can include everything from competency management software to recruiting systems, succession planning and organ- izational charts to employee assistance provider (EAP) applications. These days, virtually no area is untouched by technology.

Gartner Group’s Lehman breaks HRMSusers down into three camps: A, B and C companies. The A group consists of early adopters that view a product as a competitive advantage. "They’re willing to put up with some of the shortcomings of the technology and maybe some of the functionality limitations because they need it right away." Group B waits until the vendor has worked out the kinks and the product is relatively well tested. Group C consists of laggards that perpetually take a wait-and-see attitude. In most cases, it’s the Group A companies (and occasionally Group B) that benefit from the third-party applications. "They want the functionality before the capability is rolled into the next release of the HRMS or they prefer the specific capabilities of the software," Lehman says.

For example, two years ago, Don Harris, manager of staff development at Belk Department Stores Services Inc. in Charlotte, North Carolina, realized that he had to boost the effectiveness of recruiting and skills development. At the time, the entire process of managing employee evaluations was handled on paper, making it difficult to follow an individual’s progress and learning over time. With 200 people in the IS department and a whopping 23 percent annual turnover rate, he knew that without a more sophisticated database, the company, which operates stores in 260 communities in 13 states, would be in trouble.

So Harris turned to software from Skillview Technologies. Now, employee evaluations are stored in the computer, and managers are able to view an employee’s progress over time. They also can aggregate data into reports, charts and graphs to spot skill gaps on the organizational level. What’s more, Belk employees can view various possible career paths and better understand what training or skill sets they need to climb the organizational ladder.

That, along with other changes, has slashed turnover at Belk to just over 10 percent annually. "We can schedule classes better, and target our training budget to be far more effective," states Harris. "We now have an accurate snapshot of what’s going on within the organization." In fact, managers can drill down within the database to track more than 200 different skills, attach ratings to various skills and change criteria based on the department.

The system, which required less than a $25,000 investment, paid for itself within a year.

Automate HR with the right tools.
Goldstein believes the most useful bolt-on applications are those that provide a high level of employee or manager self-service and expedite workflow. Typically, that includes 401(k) administration, time and attendance, recruiting, competency management, salary and performance reviews, and ad hoc reporting linked to business intelligence (BI) and decision support systems (DSS). The latter uses data warehousing, datamarts and specialized query tools to mine existing data for trends.

Since the advent of the Internet and intranets, recruiting has become one of the hottest areas of HR software. Forrester Research has reported that employers spent $48 million in 1997 for online recruiting, and the figure topped $125 million in 1998.

Established players like Restrac and Resumix, which have helped HR professionals manage the crush of résumés more effectively, have been joined by products from the likes of HotJobs and CareerBuilder. Today, it’s possible to collect résumés from a variety of sources—the Internet, mail, fax and e-mail—and slot them into a database. Then, when a position opens up, HR can search through the database using specific criteria and find qualified candidates.

But not all the action is online. Many HR software products provide steady behind-the-scenes functionality that can boost performance and crumple paperwork. Jan Coulter, an HR specialist with Charleston County Park and Recreation Commission in Charleston, South Carolina, knows all about that function. With 130 full-time employees and 500 part-time workers spread across eight area parks and beaches, managing time cards and plugging the data into the payroll system used to be a time-consuming and paper-intensive task. Three employees used to require three days to process the data.

No longer. With time and attendance software from Kronos Inc., the agency has reduced the time required for processing to three or four hours. The Timekeeper client/server system offers central data collection via Windows NT and a SQL sever. Workers clock in and out using an identity card with an embedded magnetic strip. Running it through a dedicated terminal, the data is then transmitted to a central server and then on to Ceridian Corp. for payroll processing. At any point, supervisors can edit and update information from their PCs. "It’s a very simple solution that offers tremendous benefits," Coulter explains. And with powerful reporting and analysis tools, she has been better able to manage staffing levels and overtime pay.

Putting all the bits and bytes together requires a strategy.
Building a more efficient human resources department means assembling the right set of software solutions, says Lehman. Although it’s impossible to take advantage of every cost-cutting, productivity-boosting application available on the market, it’s essential to move toward software that offers a good fit for the organization. That means crunching numbers and calculating the ROI, she suggests.

"Too many HR departments have relied on intuition and the common sense belief that technology will drive improvement," says Lehman. "The bottom line is that if HR doesn’t get involved in understanding the effectiveness of technology, someone else in the company will measure it instead. And those people—or that department—will be driving decision making instead of human resources."

Ultimately, she believes that by 2002, human resources will be the key differentiator in highly successful organizations. However, research conducted by the Gartner Group indicates that only 25 percent of companies will be able to gain competitive advantage through human resources. "The companies that use technology effectively, especially HR software, will have a tremendous advantage over companies that struggle with it. We’re headed toward a world divided between the ‘haves’ and ‘have-nots.’"

Workforce & Softworld, February 1999, pp. 10-18.

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