When the Peterson Sullivan accounting firm in Seattle hired Andrea Ballard as its new head of HR in 2007, the only automated software the one-person department was using was ADP for payroll. "Everything else was done on paper or Word documents," Ballard says.
That was fine for the time. The firm had only 70 employees in one office and Ballard could handle the paperwork. But in the years to follow the company grew rapidly, initially through aggressive hiring, which put Ballard's paper-based system under constant strain.
She added a résumé-tracking tool, which helped for a while, but when the firm started acquiring competitors, she told the executive team she couldn't do it anymore.
"Imagine doing new hire paperwork for 40-60 people," says Ballard, who recently left Peterson Sullivan and launched her own HR consultancy, Expecting Change. "They wanted to bring these companies onboard quickly, and to do that we needed an HRIS."
An HRIS is a human resources information system, a category of business software that helps organizations track employee data such as name, position, hire date, manager and salary.
Ballard isn't alone in recognizing the appeal of an HRIS to a smaller firm. Also sometimes called human resource management systems or "core HR" software, these automated systems can allow small or midsize organizations to eliminate the manual labor and errors associated with paper-based employee tracking, freeing them to focus on more strategic people-management initiatives.
Although there is no exact number of employees or annual revenue that suggests a company is ready for its first HRIS, 100 employees is a common threshold, says Diane Horton, a partner at consulting firm PricewaterhouseCoopers. Having multiple satellite offices, or the need to combine large employee groups after mergers or acquisitions are also triggers for implementing an HRIS.
Small HR departments become overwhelmed with piles of paperwork, which leads to data errors, delays in onboarding and training of new employees, and a poor use of the HR team's time. "They get to the point where they cannot function effectively," Horton says.
Fortunately, the introduction of scalable software-as-a-service (saas) HRIS tools in recent years has made it easier for smaller firms to implement HR systems without draining their IT budgets. "It's a myth that HRISs are too expensive for small companies," Horton says. "The market has changed dramatically, and there are a lot more options for small companies today than there were five years ago."
The interest by smaller companies in HRIS tools is part of a broader uptick in the HR technology market. Nearly a third (31 percent) of companies plan to increase their spending on HR software in the coming year, shows a Towers Watson survey of 628 global organizations released in August. The top three areas of investment include rolling out additional functionality from existing vendors, upgrading HR management systems and expanding existing self-service functions. They are making these investments because they believe they will create greater efficiency, encourage collaboration, improve quality and lower costs.
"Beyond the core costs of owning and operating technology, it seems that not only is HR technology seen as 'needed to play,' but also that organizations recognize that investment in it is needed for them to remain current, expand capabilities and continue to improve operations," Tom Keebler, global leader of Towers Watson's HR Service Delivery and Technology practices said in a statement.
There are limitations, though, to entry-level HRIS products. Saas tools are configurable but not customizable, meaning they have some flexibility but cannot be tailored completely to match all unique business methods. So companies need to choose a tool that either accommodates their existing processes, or be willing to adapt their processes to work with the tool.
That's not such a bad thing, says Christy Gigandet, senior HR partner at Sarnova Inc., a medical products company in Columbus, Ohio. Sarnova implemented an HRIS to replace its paper-based system when the company doubled in size, to nearly 500 employees, through mergers with two other companies that also had no HRIS. "It was the perfect time to bring everyone together and find the best processes for all of us," she says.
Sarnova implemented an HRIS tool from ADP called Workforce Now, which was an easy choice because the company already used ADP for payroll. "It was a simple transition and we didn't have to worry about integration," Gigandet says.
She did, however, have to rethink how the HR group operated, the reports she would want to generate and the data she needed to track. "We didn't want to mirror the payroll department because their data was too intricate," she says. But she was surprised by how much thought and effort it took to decide how the data would be organized.
She spent months working with ADP Inc.'s implementation team to refine corporate data so it would be relevant to HR. For example, at Sarnova accounting tracks sales employees by their pay class, but through the HRIS Gigandet tracks them by region; and while payroll breaks down employee groups by numbers, she tracks them by titles and categories.
Along with configuring the data, she implemented an internal job posting board that all employees can access, and recruiting tools that have reduced the time it takes to fill vacant positions.
But the most beneficial feature for Gigandet was open enrollment for employee benefits. "Automating open enrollment saves us at least a month in man hours," she says.
Instead of spending weeks printing and mailing every employee's paperwork, and manually entering selections into the system, it's all automated and self-service-driven, so all Gigandet has to do is approve the applications. "It's made everyone's life easier."
Ballard had a similar experience at Peterson Sullivan. When she first broached the idea of an HRIS with her executive team, members had never even heard of it. But when Ballard explained what it could do, and the time and cost-saving benefits that would come from an automated, paperless HR system, the executives agreed. "They are accountants," she says. "When I related the HRIS to moving accounting files to a paperless system, it was easy for them to understand the benefits."
Six months later she had an HRIS system installed and running, including an automated benefits open enrolment system, online performance management documents and paperless recruiting tools.
"It was a huge time savings," she says. By eliminating the paperwork, she was able to help the company grow faster rather than slow it down. "It gave them the confidence to get the mergers done more rapidly," she says. "Prior to the HRIS, I would have told them no way."
Sarah Fister Gale is a writer based in the Chicago area. To comment, email email@example.com.