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Source: Technology Evaluation Centers
State of the Market: HR
is also known as :
Human Resource Management Systems
Human Resource Software
HR Management Software
Human Resource Information System
Performance Management Solution
Human Resources Management Applications
Implementation of Human Resource,
Define Term Human Resource Management Systems,
Payroll Management Software,
HR Automation Human Resource Software,
On-demand Workforce Management,
Human Resource Management Systems Explained,
Managed Jointly by Human Resources,
Easily Organize Workforce Data,
Web-based Human Resources Management System,
Human Resource Management,
Knowledge Human Resource Management Systems,
Review Human Resource Management System,
Strategic Human Resource Management,
Conceptual Review of Human Resource,
TEC Newest Trend in HR.
Welcome to Technology Evaluation Centers' (TEC's) HRIS buyer's guide for SMBs. In this guide, we discuss some of the challenges that small to medium businesses (SMBs) face when recruiting, hiring, and managing staff. We will also feature information about the latest vendor offerings for the SMB market in the area of human resources information systems (HRIS).
The products covered in this guide address the management of a company's workforce, including hiring, payroll, benefits, training, health and safety, and more.
While HRIS are also commonly referred to as human resource management systems (HRMS) or as human capital management (HCM), for the purpose of this guide, we will refer to the systems that support HR functionality as HRIS throughout. All these systems'in one way or another'encompass core HR functionality.
We've included customer success stories to illustrate how the various HR solutions have helped companies like yours solve personnel, payroll, and benefit management problems.
For your convenience, there is also a vendor directory to assist companies looking for an HRIS, whether it's an end-to-end on-premise solution, an on-demand or software-as-a-service (SaaS) solution, a third-party solution, or a best-of-breed solution.
We hope you'll find this guide a useful tool in determining which HRIS is best suited to your company's business model and particular needs.
State of the HR Marketplace
For many years, HR management has been viewed as the enterprise function responsible for staffing and personnel-related issues, such as recruiting and hiring, establishing employment policies, handling pay and retirement plans, and administering benefits. Today, company executives see the HR function in an entirely different way. From recruiting, hiring, and training new staff, to the transfer of key functions from the back office to the front line, it is evident that executives are looking to transform HR from a seemingly low-priority function into a strategic and vital part of the business.
What is fueling this transformation is that SMB executives are beginning to understand the critical link between their people and the bottom line. To remain competitive as an SMB in today's job market, employers need to know what their employees are doing, what skills they have, their ambitions, how they are progressing, and how they fit into the future of the business.
SMBs that continue to view HR as strictly a department or administrative service and that fail to infuse HR functions throughout the organization will inevitably limit their ability to compete and grow.
We'll review some of the trends in the HR space, as well as some of the challenges facing SMBs in the wake of globalization and the changing HR landscape.
Recruitment and Retention Challenges
One of the biggest challenges SMBs face in the area of HR is recruiting and retaining skilled talent. According to TriNet's 2007 HR Trends Report: People to Profitability (http://www.trinet.com), which surveyed more than 500 SMB executives, talent management was the second greatest business concern after revenue. The irony is that while many SMB owners value developing their staff almost as much as building a company culture, less than a third of them have an HR director.
Some of the demographic trends that are most likely to have a major impact or cause a radical restructuring of the workplace include an aging workforce, the retirement of the baby boomer generation, and a shortage of skilled workers. In fact, the US Bureau of Labor Statistics forecasts a shortage of 10 million skilled workers by 2010 (www.bls.gov). Thus, succession planning is also becoming a growing concern for companies of all sizes. In order to ensure business continuity, succession planning must be aligned with the company's high-level goals and embraced throughout the organization.
In order to stay competitive, companies must revise their hiring, retention, and workforce management strategies so as to maintain a supply of skilled personnel in a rapidly shrinking labor pool.
Cutting through Compliance Complexities
Compliance is one of those necessary evils that companies must deal with'and SMBs are no exception. Between federal, state, and industry requirements, compliance is perpetual. But according to data compiled from Achilles Group's 2007 Q2 research report (www.achillesgroup.com) concerning owner trends in the SMB space, not one business owner selected HR compliance as an area for improvement'even though they must comply with thousands of HR laws and regulations.
The HR regulatory compliance arena is a constantly evolving myriad of labor laws and HR issues. The cost of ensuring compliance increases with each new regulation'which often leaves many SMBs struggling to keep up.
The truth is that no matter what the size of the organization, companies cannot afford to risk being non-compliant with labor laws. Doing so could seriously jeopardize the business.
Globalization: Communication Is Key
According to TriNet's 2007 HR Trends Report, another challenge in HR is the 'flattening' of the global marketplace. This global interconnectivity creates the need for flawless management and communication from, between, and with employees. This is especially relevant for companies that have branch offices and teams across the globe or that use third-party outsourcing providers to manage their HR.
While most have adapted to this global reality in their operations, many are falling behind in developing the HR policies, structures, and services that support global operations. In order to create a truly global workforce, organizations that operate on an international level must stress the importance of the HR function throughout their global environment'while having the right systems in place to support such a structure.
To this end, HR can be invaluable in developing a unified corporate philosophy for attracting and retaining much-needed talent across the globe.
Benefits Can Make or Break the Deal
As an SMB executive, you may already know the difficulties of finding and retaining good employees. If you're competing against larger companies for potential staff or looking for a way to boost retention and loyalty within your enterprise, a comprehensive benefit plan might be the one part of your compensation package that makes or breaks the deal.
Understanding the importance of an employee's life concerns (e.g., health, children, home, aging parents), has led employers to negotiate a variety of health benefit incentives with their group health care insurance providers. Some of the latest trends include
- group insurance discounts on vision care, chiropractic care, weight-management programs, and fitness memberships
- incentives/penalties for healthy/unhealthy lifestyles
- voluntary benefits, including homeowners and automobile insurance
- consumer-directed health care plans
That said, the fact remains that relative to their net earnings, small businesses pay exorbitant rates for their employee benefits. With a growing number of employees absent due to job-related stress and the increase in prescription drug expenditures, these numbers are expected to rise dramatically over the next decade.
According to a 2004 Compensation Trends and Projections Survey conducted by leading HR consulting firm Morneau Sobeco (http://www.morneausobeco.com/ the rising cost of health care benefits was the top HR concern for organizations, and was identified as a major issue by 57 percent of the survey's respondents. Rising pension costs was also a high-level concern.
While costs are expected to continue rising over the next decade, SMBs can keep these in check, by taking the appropriate actions. Some examples:
- changing the cost-sharing equation
- providing better governance over the benefits program
- forecasting the future by determining how costs may change (new hires, turnover, etc.)
What Does It All Mean?
So far, we've identified four of the major challenges that SMBs are facing today, and some of the trends that we're seeing in the SMB space with respect to HR management:
- recruitment and retention challenges
- compliance complexities
- benefits costs
With the exception of compliance complexities, each of these issues points to one common thread: people. What that translates to is quite simple. Innovation (or improvement) lies not only in the technology that organizations use to operate their businesses; it lies within their people as well. In order to drive innovation, HR executives must harness the human-capital potential within their organizations. Doing so requires investment in the recruitment and development of talent that in the long run can provide a competitive advantage over the competition.
Because of these challenges and in light of the trends, it's more important than ever for an SMB to choose a system that is suitable to its needs. By leveraging the right technology, companies can help their HR professionals cut through the paperwork, allowing HR more time to concentrate on the company's strategic resources'its people.
A Sensible Way to Manage Your Most Important Asset'Your People
While SMBs have the same HR issues as large companies, they often cannot afford the expertise'or simply don't want to pay for it. Until recently, emerging HR solutions largely ignored the SMB challenges. Today, however, there are a number of emerging cost-effective solutions that go beyond core HRIS offerings to provide SMBs with solutions for their unique requirements.
Core HRIS encompass functionality for handling personnel-related tasks for corporate managers and for individual employees. An HRIS generally supports personnel management, benefit management, payroll management, training management, workforce management, time and attendance, compliance reporting, and health and safety administration. Many systems support employee self-service functionality as well. These systems support HR personnel by automating a large percentage of the work.
There is also an overlap of HRIS functionality which can be found in a learning management system (LMS)'this includes recruitment management, workforce gap analysis, payroll, benefits, and rewards. HR functionality is also seen in solutions such as knowledge management, succession management, and talent management.
Solutions, Solutions: Let's Do Some Comparison Shopping
When it comes to the type of HRIS to implement, SMBs have the same options from which to choose as do large enterprises. For example, one SMB may select an all-in-one (or integrated) solution to use in conjunction with its existing HR processes and information systems. Another SMB might decide to go with an information system that offers various modules'where it can pick and choose the software features and functions it requires'and outsource the rest of its HR operations to a third-party provider. The options are almost endless.
In today's market, SMBs must look toward an HRIS that can offer flexibility and a variety of options to fit the company's changing needs. Among the choices are hosted and non-hosted solutions, as well as outsourced and best-of-breed options. In this section of the guide, we will examine various HRIS vendor offerings and briefly discuss the advantages and the disadvantages of each option. Offerings include:
- on-premise solutions (also referred to as in-house or non-hosted solutions)
- on-demand solutions (also referred to as SaaS, Web-based solutions, or hosted solutions)
- outsourced solutions
- best-of-breed solutions
In order to remain competitive, SMBs need advanced HR functionality that enables them to recruit, train, and retain valued employees, as well as meet increasingly complex regulatory compliance standards. This can be achieved with a comprehensive on-premise solution (i.e., an out-of-the-box or homegrown application).
While implementing and managing an on-premise HRIS application may be the way to go for some 'mom and pop shop' types of businesses, traditional on-premise HR applications are often too labor-intensive for most SMBs to manage. The inherent start-up costs associated with the on-premise model are another concern for the SMB.
On the other hand, on-premise systems have several advantages which can be very compelling for the SMB. Many smaller businesses deploy on-premise solutions because they provide a greater sense of security; employee records are kept in-house instead of off-site. And the solution can be easily customizable and scalable to fit the company's growing needs. As the business grows, the on-premise software environment provides the flexibility for SMBs to select the peripherals and third-party applications that complement and support its business processes.
While on-premise may not be a thing of the past just yet, software vendors aren't waiting around to find out, so many that offer traditional on-premise HRIS are now adding on-demand and outsourcing services to their roster.
Some of the advantages and disadvantages of implementing on-premise HRIS in the SMB space are summarized in the table below.
Some Facts about On-premise HRIS
- While on-premise implementation requires a large up-front investment, over time it generally provides a good return on investment (ROI).
- On-premise has fundamental limitations (see Figure 1) in addition to cost and technical disadvantages.
- On-premise applications provide greater integration capabilities, easier customization, and tailored configuration capacity as compared to on-demand applications.
The newest trend in HRIS to emerge is on-demand (more commonly referred to as SaaS), which is being rapidly adopted by scores of SMBs today. It trades on-premise deployment and its traditional software licenses for a pay-for-use or subscription-based approach. The vendor owns the software; the company simply pays for the service.
The application is delivered over the Internet to anyone with a web browser. Using the Internet as a platform provides an interface independent of the client's computer. SMBs are attracted to the advantage of this type of set-up because the costs of acquiring, implementing, and operating the software can be shared by more than one customer, which yields economies of scale. This is known as multi-tenancy; what multi-tenancy does is provide SMBs with savings through the consolidation of IT resources into one single operation.
Instead of spending hundreds of thousands of dollars on licenses, companies are billed on a monthly basis for the modules they need and use'which makes this alternative very appealing to SMBs. And they avoid the cost of complex upgrades because the on-demand applications are automatically and routinely updated and delivered to the provider's customers. For HR organizations that lack resources for IT upgrades or process improvements, on-demand is an alternative worth considering'not to mention they can focus on business while minimizing their IT resources and expenses.
On-demand allows SMBs and managers to take control of their payroll and address HR needs, without adding the expense of hiring an HR manager. Having the ability to actually speak to qualified HR professionals about an HR issue can be invaluable to a small business owner. Most SMBs want the best practices expertise of larger companies; with a rented software model, they can have that access'without a large upfront investment.
This web-based solution platform is designed to help SMBs automate critical core HR activities as well as do performance management, policy management, and compensation planning.
While many HRIS vendors have focused their initiatives primarily on the large enterprise market, they are now looking at the growing opportunities available to them in the SMB space. To be successful, however, HRIS vendors will need to price their offerings to accommodate the SMB requirements.
The following table illustrates some of the advantages and disadvantages of implementing on-demand HRIS in the SMB space.
Some Facts about On-demand
- According to a study by market-research firm AMI-Partners Inc. (http://www.ami-partners.com/), 21 percent of small businesses have jumped onto the on-demand HRIS bandwagon.
- While on-demand HRIS is installed and managed in a remote facility, companies still have complete access to their entire system and full control over their HR functions.
- Technical issues associated with implementing, maintaining, upgrading, and supporting HRIS are handled by IT professionals.
- According to one Gartner, Inc. study (http://www.gartner.com/it/page.jsp?id=496886), SaaS represented approximately 5 percent of business software revenue in 2005. By 2011, 25 percent of new business software will be delivered through SaaS.
- On-demand solutions can potentially provide SMBs with a more practical option for meeting their HR needs.
In today's competitive business environment, companies are increasingly contracting out (outsourcing) specialists to perform specific functions within their HR operations. One example is payroll management. Many SMBs rely on third-party providers to manage their payroll. In addition, more and more companies are approaching third-party providers to take on other HR functionality as well. It has become an increasingly popular way to improve basic services while allowing HR professionals time to play a more strategic role in their organizations.
On the flip side, while HR is important to executives, many are afraid to transition away from their on-premise solutions or current HRIS providers due to the uncertainty associated with change and possible legal complications. For these reasons, the HRIS provider partnership is often unexplored.
However, companies that partner with an HRIS outsourcing provider that offers HR guidance are poised to succeed. Why? Because a company that partners with an outsourcing firm that specializes in its industry can reap the benefits of the provider's expertise and use it to advantage. Providers that are knowledgeable about their customers' industries are better positioned to anticipate HR issues and help resolve high-level problems.
An outsourcing firm has experienced professionals to handle various HR responsibilities, as well as ensure compliancy with state, federal, and industry laws and regulations. They can help to streamline business processes, ensure you are receiving the best benefits package possible, and provide a commitment to delivering competitive retirement planning programs for your employees.
As the cost of health care is on the rise, many SMBs find they cannot afford these kinds of additional costs'even though they can provide better selling points to potential job candidates. Insurance companies like Fidelity, Prudential, and Sun Life (to name a few) are providing SMBs with affordable retirement plans and health care insurance programs that enable them to compete with larger enterprises for talent.
But outsourcing these types of core HR activities is not a decision that should be made hastily. Before embarking on such a partnership, to maximize their chances of success, organizations must analyze their own company culture before researching the market.
Before signing on the dotted line, work out the contractual details with the vendor. A detailed service level agreement (SLA) that outlines the vendor's roles, responsibilities, deliverables, support, and timelines will help to ensure an effective outsourcing arrangement. Even after the SLA has been signed, companies must monitor SLA performance to ensure that the details of the agreement are being respected.
Below are some of the advantages and disadvantages of outsourcing HR functionalities in the SMB space.
Some Facts about Outsourced Solutions
- Companies can benefit from the latest in HRIS technology'without the added expenses of an on-premise solution.
- Small business owners can focus on their core business.
- Full-service HRIS outsourcing is often too expensive and requires SMBs to give up a fair amount of visibility and control.
- Outsourcing is a complex and intricate process involving several stages, each of which has potential pitfalls for the unsuspecting SMB.
Best-of-breed HRIS combines multiple solutions into a unified system and provides companies with the innovative tools they need to strategically manage their workforce and meet new business challenges. Best-of-breed encompasses one or more of the following: human resource management (HRM), talent management (TM), and workforce management software (WMS). With a combined solution, SMBs can select a customized solution to manage their diverse needs. Consolidating multiple HR information sources not only improves data integrity, it eliminates interfaces and simplifies reporting.
Best-of-breed focuses on specialized applications rather than broad suites of applications and embodies all the key benefits of outsourcing HR. Having the freedom to select a specific module from a larger suite allows companies to take advantage of superior HR functionality'without the out-of-reach cost.
An effective HRIS must be able to track all the information a company needs about current and former employees. This automated functionality will reduce the workload of your HR staff, allowing them to focus on their primary responsibility: your employees. A solution that is dedicated to providing your company with the latest in HRIS offerings keeps your HR initiatives in mind while ensuring you reach your strategic goals.
Below are some of the advantages and disadvantages of best-of-breed HRIS in the SMB space.
Some Facts about Best-of-breed Solutions
- Best-of-breed usually provides richer functionality than traditional on-premise solutions.
- In a best-of-breed environment, IT staff must be trained to use and support multiple systems with diverse interfaces (e.g., hardware platforms, operating systems, databases, and programming languages).
The face of HR is constantly changing. No longer the low-priority function it once was, HR is now a strategic and vital part of the business. HR professionals share in the decision-making processes of the company rather than being on the receiving end of those decisions. And while there are a number of reasons for this change, the fact that it has changed indicates that company executives are taking a greater interest in their people'and in how employees can affect the future of the business.
Employees play a key role in the success of any business. The key to competitiveness, however, is for SMBs to understand this fact and use their knowledge about employees to their advantage. To remain competitive with larger enterprises in today's job market, SMBs must be willing to go the extra mile.
While having the right goals in mind is the first step in the HR transitioning process, companies must also ensure that they have the right system in place to handle their employee information. Selecting the right system for your HR needs will require time and effort. So before embarking on a long term relationship with a vendor or provider, do your homework. This introductory guide will get you started in the right direction by providing you with information about current trends, as well as what types of systems are available on the market today.
Whether you decide to lease or purchase HR software, or if outsourcing your HR processes is the way you choose to go, there are hurdles you must clear. SMBs will overcome these challenges in time by becoming more familiar with the available software and its processes. Whichever route you take, your choice must be cost-effective, efficient, dependable, and most importantly, meet your needs and be in line with your HR initiatives.
About The Author
Sherry Fox is a TEC research analyst with over 20 years of experience in the private sector. Before joining TEC, Fox spent five years as vendor compliance administrator for a large Canadian clothing retail chain. She helped create and manage the department and provide support regarding policies and procedures to vendors all over the world. Fox also helped develop various programs relating to environmental and human rights issues within the apparel industry, and participated in conferences on the subjects of sustainability and climate change.
Fox has been involved with several software implementation projects during her years in the retail industry. From deploying payroll software to integrating a benefits module, she was actively involved in all phases of these implementations.
A proficient writer of articles, online content, guides, and manuals, Fox has comprehensive knowledge in the areas of retail, manufacturing, compliance, and technology. She also has in-depth management experience with various enterprise segments, including payroll, human resources, logistics, and compliance.
Executive Summary: Core HR
Thou Shalt Manage Human Capital Better
Administrative human resource (HR) management has traditionally received much more lip service than true respect from businesses and individuals. However, many recent events and consequent realizations promise to transform the HR department from a lowly cost center, a necessary evil, and a gaggle of boring pen pushers and record keepers (and other derided whatnots), into a strategic and crucial part of any competitive business. In other words, for a long time HR management has been the enterprise function or organization responsible for mundane staffing and personnel issues, such as hiring, employment policies, handling pay, retirement plans, and benefits. It encompassed applications for handling personnel-related tasks for both corporate managers and individual employees, and typically included common modules and high-level functions:
- HR administration
- Automates personnel management processes, including recruitment; personnel profile; organizational structure; career development and training; reward management; job position and wage profiles; business travel; and vacation allotments.
- Handles accounting and preparation of checks related to employee salaries, wages, and bonuses.
- Administers a diverse range of benefit plans, including health and medical, life and supplemental life insurance, accidental death and dismemberment (AD&D), disability plans, flexible benefits, US 401(k) plans, profit sharing plans, stock plans, retirement plans, and leave plans such as vacation and sick leave accruals.
- Self-service HR management
- On one hand, lets workers change their personal information and benefit allocations online, without having to send forms to the HR department. Typical tasks include enrolling in benefits, changing contact information, enrolling in training, applying for a position, etc. On the other hand, such modules deliver key HR information to managers' desktops, such as turnover, competency gap analysis, compensation analysis, headcount, and cost analysis (actual versus budgeted). Web self-service applications enable business line managers to access selected reports, performance indicators, graphs, etc., as well as view information on their employees, complete and transmit a job requisition form, report on interviews with applicants, follow up on upcoming performance appraisals, approve a promotion, change salaries, etc.
These administrative functions have traditionally been handled by HR management systems (HRMS), whether as stand-alone HRMS application suites, or as part of broader enterprise resource planning (ERP) suites (see Essential ERP'Its Functional Scope). In any case, HRMS customarily involves business applications for the management of HR transactions, best practices, and enterprise reporting, with typical functions like core HR tracking, payroll, and benefits. Lately, their scope has been extended to include recruiting, competency management, training, time management, performance management, and so on. Most of these have been bolstered by the advent of the Internet, with which came the aforementioned manager and employee self-service and e-recruiting tools. In fact, providing employees with Internet-based self-service access to their HR information (for instance, address, dependents, benefits, payroll information, and education) and to corporate HR information (such as job openings or training enrollment) has enabled companies to significantly increase the efficiency and responsiveness of their HR department and improve the overall quality of HR management.
HR'Good, But Not Sufficient
Yet overall, HR management (including processes, technologies, and systems) has thus far done little to support the evolving workforce and its needs. Instead it has focused almost entirely on compliance-driven transaction handling and record keeping, and maybe in part on employee productivity. In fact, many employees are nowadays spending less and less time at their 'assigned' offices, cubicles, or desks, while more of their time is involved with the prevalence of project-based workgroups that constantly get created and disbanded. However, the management of physical space, technology platforms, and employee services is still built on the assumption of standard 'nine-to-five' working hours, when people are supposedly stationed at a desk, in an office, with a desktop personal computer (PC) and a telephone.
In fact, Hewitt Associates, one of the world's largest providers of multiservice HR business process outsourcing (BPO) and consulting, recently issued the insightful report 'Next-Generation Talent Management,' which indicates that demographic, economic, technological, and sociopolitical phenomena are driving the most drastic workforce changes in decades, creating a workforce that is more diverse, mobile, informed, and in demand than ever before. The report reveals the five trends reshaping the workforce, which is becoming
- smaller and less sufficiently skilled,
- increasingly global,
- highly virtual,
- vastly diverse, and
- autonomous and empowered. The apparent conclusion is that most organizations are not prepared to manage these new generations of talent.
As the economy begins to warm up and the demographic shifts continue with the retirement of the baby boomer generation, look for even more emphasis on improving workforce management practices. The US Bureau of Labor Statistics forecasts a shortage of 10 million skilled workers by 2010. In order to stay competitive amid such a demographic bomb, companies will have to change their hiring, retention, and workforce management strategies to maintain an effective, stable workforce, and to keep their candidate pipeline sufficiently full for future growth.
It is thus no wonder that lately one of the more active areas of more strategic HR-related software has been recruiting or talent acquisition. In this domain, Monster, Resumix, BrassRing, Deploy Solutions, Peopleclick, Taleo, Vurv (formerly Recruitmax), Webhire (now part of Kenexa), Unicru (now part of Kronos), Hire.com (now part of Authoria), and Jobster (including recently acquired WorkZoo) are merely a handful of choices that first come to mind in a software segment that is abundant in niche players. More than just a system that stores and searches resumes for keywords, recruiting software is touted by these providers as a way to save time and money by streamlining the hiring process, and to work more effectively by better matching candidates to available jobs. While best practice HR solution providers like Ceridian offer scalable recruiting systems, they take the solution to the next level, by offering full recruitment process outsourcing, which allows companies to outsource some or all of their recruiting function, including people, processes, and technology. This maximizes the opportunity for long-term cost reduction and ability to focus on the core business.
Such systems aim at helping organizations improve the processes of recruiting and hiring by more quickly prescreening, sorting, and storing resumes, and then matching those resumes to available job openings. Some systems also include modules for various administrative tasks, such as background and reference checks, and skills assessments, while some vendors go a mile further to offer so-called 'talent lifecycle management' software, which encompasses a range of processes spanning recruiting, training, career development, internal hiring, performance management, and succession planning.
The software is typically offered via an on-demand subscription service (see What is Software as a Service?), since much of the functionality that goes along with hiring and recruiting, such as creating job postings, and collecting and storing resumes, can be easily delivered via the Web. If one adds to that the cyclical nature of hiring, it seems logical for user organizations to go with a subscription-based service as required, although many vendors do offer recruiting software as a traditionally licensed product or module within a broader suite.
Deployment of Learning Management Systems
Related to talent management are learning management systems (LMS), since for organizations of virtually any size, ongoing training is an essential component of developing a workforce. Learning management software essentially delivers training to the desktop (often via a web browser, and is thus sometimes also called e-learning). It allows organizations to track and monitor which employees receive training (in other words, verifies attendance), when they are trained, and how well they understand the training material (for instance, by centrally testing their comprehension). Such systems are particularly relevant in industries that are bound by regulation and compliance issues (such as finance and health care) or that require employee certification.
To that end, these systems have also caught on in manufacturing, retail, and even casinos'due in part to the impact a better educated workforce can have on the top line. Manufacturing companies specifically are in need of more effective ways to manage their employees amid shrinking workforces (driven by plant closings and outsourcing) and skyrocketing benefits and disability expenses, and they have been grappling with how to deliver learning modules to employees with specific information. For instance, a company could design an event-driven workflow that is triggered by mandatory learning assignments,
whereby a touch screen kiosk situated near the factory floor work area administers a training program.
The interactive kiosk would then track, for instance, which individuals completed the module as well as what direct association they have with lowering machine downtime as a result of completing the training session. That would then tie back to HR and other associated enterprise applications.
Learning systems are also deployed to train employees on new products'either those they are using internally, or those they are selling to customers. Such systems are based on foundational software that acts as a database or administrative hub, tracking employees, course content, and other components, whereas on top of that may sit content creation tools and other middleware that helps distribute content. And then, there is the training content itself, which can be developed in-house or obtained from a universe of third parties. Cost avoidance (due to paper and travel elimination) and efficiency (for example, an enterprise has to quickly train its sales force prior to the launch of a new product and service) can be a primary reason for deploying learning systems, although one often has to reckon with a price tag in millions of dollars. GeoLearning, Knowledge Anywhere, Plateau Systems, SumTotal Systems, Intellinex, Saba, and Convergys are among the pure-play providers in this space, while some traditional ERP providers like SAP and Oracle/PeopleSoft and an integrated best-of-breed HR Solution providers like Ceridian offer learning management systems. ERP providers bundle it as part of their human capital management (HCM) suites, like SAP HCM, Oracle HRMS, and PeopleSoft HCM, and Ceridian offers it as a component of its integrated HR solution'which integrates best-of-breed applications in the areas of finding, paying, developing, and engaging talent and supports this application suite with a best practices team.
Managing Contingent Labor
Also, more companies are reliant upon contingent or temporary contract labor and services now than at any other time. For the majority of companies, contingent labor is a significant component of the workforce mix, and they expect their reliance upon contingent labor to increase during 2006 and beyond. According to a recent survey conducted by Fieldglass, a provider of contingent workforce management solutions (which manage the business process of finding, hiring, managing, and monitoring contingent or contract labor or services), companies that take the opportunity to streamline their contingent workforce management processes stand to gain competitive advantage. The most cited motive (from about 60 percent of respondents) for improving the management of contingent labor and services was 'improving the efficiency of procuring and managing services resources.'
If organizations view employees as assets, then it follows that those assets should be allocated effectively, and in the context of business goals and demands. To that end, workforce management software generally involves staffing, developing, tracking, and rewarding employees. In practical terms, such software schedules employees based on business volume, and also tracks labor activities, projects being worked on, work orders, hours, and how workers should be paid. Workforce management software grew out of time and attendance (T&A) monitoring systems, and can now address many facets of the workforce, from making sure that assembly lines are adequately staffed on any particular shift, to identifying the best salespeople to tackle a new account and making sure they are rewarded properly. Workforce management software vendors include Ultimate Software, Kronos (which also recently acquired SmartTime), Ceridian, Automatic Data Processing (ADP), Softscape, Workbrain, 360Commerce (now part of Oracle), Kaba Benzing, MBH Solutions (including the recently acquired Concur HR product), WorkForce Software, and CyberShift.
Customer Success Story: Core HR
Nikon Reaps Benefits from Ultimate Software 's UltiPro'
Based in Melville, New York, Nikon Inc. is the world leader in digital imaging, precision optics, and photo imaging technology. The choice of professional photographers the world over, Nikon is the only major optical company in the world that still controls and manufactures every aspect of its glass-making business, allowing it to ensure the best quality and performance in its products. From the raw silicon to the final coatings, Nikon's glass production is both a science and an art form. Nikon also plays an active role in supporting many different organizations, events, and workshops through its Spirit Initiative campaign. The Nikon name is equated with extraordinary photographic performance, innovation, precision, and optical quality.
Before selecting UltiPro, Nikon Inc.'s HR team had been using a payroll service bureau and was burdened with manual paperwork. The corporation's HR team determined it needed in-house control; an HRMS with end-to-end talent management functionality, including Web self-service; and the timesaving of electronic open enrollment for benefits administration.
Nikon Inc. selected Ultipro, Ultimate Software's software-as-a-service (SaaS) option, and went 'live' in 2003. The company has since rolled out UltiPro Benefits Enrollment and employee self-service. With UltiPro, Nikon has reduced weeks of work to days, given its widespread workforce Web access to HR information and personal details, and increased time for the HR team to focus on more strategic contributions.
Using UltiPro Benefits Enrollment, the digital imaging corporation delivers open enrollment materials to employees via the Internet, rather than stuffing and mailing hundreds of packets of benefit plan materials and forms. The UltiPro portal also houses the organization's quarterly internal newsletter; relevant forms; links to benefits providers; and access to individual employee data, such as compensation history'available only through security-protected logins. Since pay stubs can be accessed through the portal, Nikon Inc. discontinued printing paper checks, creating even more value.
'UltiPro's benefits enrollment feature-set has shaved two to three weeks off of our open enrollment process because there are no mailings to prepare or massive amounts of data for us to enter by hand,' said Jennifer Griffin, senior benefits and information systems analyst for Nikon Inc. 'Conducting our annual benefits enrollment online is also great because we have hundreds of employees in remote locations.'
With a nationwide-distributed sales force and multiple warehouses, Nikon Inc. decided to take advantage of the UltiPro portal to improve service and enable employees to get information when needed without HR assistance. Employees can log onto the UltiPro portal from their office, company kiosk, home, or hotel. They can make benefits changes online and update details such as home address, direct deposit choices, and certifications. Nikon's HR department can transfer the automatic updates from the employee database directly to providers'without duplicate data entry'cutting time and improving accuracy.
'When employees have questions, I can log on and see their live session so that I can help them in minutes instead of spending days passing e-mails back and forth,' said Griffin.
Using built-in workflow, modifications are routed to the appropriate approver and made 'live' once authorized. By automating day-to-day changes through electronic workflow and empowering employees to handle updates on their own, records are current and accurate.
'The decision to use UltiPro's Web tools and move to a paperless environment just made sense. Now our workforce, regardless of time of day or time zone, can help themselves without needing HR as a middleman,' said Griffin. 'My department has more time to focus on improving our strategic contributions to the organization and finding and retaining the right people instead of dealing with paper forms.'
Executive Summary: Human Capital Management
Tactical Human Resources Evolves into Strategic Human Capital Management
In the early 2000s, with the economy in a downturn, HR administration delivered some organizational value by outsourcing an increasing number of HR business processes, either wholly or in part. In many cases, outsourcing to some trusted technology vendors that have already demonstrated their HR domain expertise may help companies achieve additional efficiencies and functionality, reduce head count, and cut costs.
Of the many solutions in the HR realm, the most predominantly outsourced have been payroll processing, employee assistance programs, payroll tax filing, and background screening. The most appealing and achievable benefits of outsourcing are streamlined operations, access to better HR capabilities and industry expertise (when it is not a core competency of the user enterprise), freeing up of internal staff, reduced labor costs, and accurate and predictable monthly costs.
However, the returns from layoffs (often undertaken without much thought to who should really go, potentially resulting in the hasty release of the lynchpins of the enterprise's ongoing performance) and relentless cost-cutting have proved to have only a limited (if not negative) effect. While some organizations have tried to cut labor costs to be competitive in their markets, the most progressive companies have embraced their labor forces and used them as a strategic differentiator.
As products and technologies become commoditized in this information-based economy, companies are beginning to realize that the best way to differentiate themselves and create long-term strategic advantages over their competitors might be through their people. It is no longer what one owns that counts, but rather what one knows, which is particularly critical in information technology (IT) and similar professional services organizations (PSOs), because it is the technical expertise and experience of knowledgeable staff that means the difference between success and failure.
In fact, according to Forrester Research, more than 85 percent of the market value of a typical Standard & Poor's (S&P) 500 company today is the result of intangible assets. For many companies, the bulk of these intangible assets is their people (or human capital), and such companies spend as much as two-thirds of their overall costs on labor. Thus, they should focus on business processes, using technology to more effectively manage employees and improve their productivity. Combining training, incentive management, and compensation management tools delivered through a role-based dashboard, the emerging people-centric software category aims to transform each individual in the workforce into an enterprise asset.
Best-of-breed HR Technologies
The most progressive of companies have been using best-of-breed HR technologies for attracting, hiring, training, motivating, and managing their people. Software applications are becoming more and more sophisticated to help companies with these tasks, and as these solutions continue to evolve and communicate with one another, user companies will have a more seamless access to methods and data for managing their employees throughout the employee life cycle.
On the other hand, the laggard companies that do not embrace these technologies will likely fall behind in their quest for market dominance. For instance, by implementing a holistic employee performance management process across the enterprise, corporate strategy can be aligned (and properly communicated) with individual goals and objectives, whereby actual performance against those goals can have ramifications for individual compensation and rewards. This should drive behavior and attitude toward executing on the corporate strategy, with improved employee satisfaction and loyalty as a result.
This certainly comes in handy when the economic downturn ends, when employees begin to feel that they have more employment choices. Enterprises will again need clear, credible, and reliable strategic sourcing strategies and management in order to plan for and engage the competencies (people and companies) needed to accomplish their business strategy (by building the required effectiveness and increasing efficiency). For instance, with the economy improving and IT budgets rising, competition for IT talent'especially in key skill areas'is bound to intensify. At the same time, an improved hiring picture in IT will most likely mean higher turnover, as many unhappy IT staffers who saw workloads increase while compensation and benefits stagnated (during the economic downturn of the early 2000s) will put even more pressure on IT management.
Hence, there is a true need for much tighter integration between performance management and compensation (regardless of the economic milieu), so that exemplary employees can be rewarded more often (and feel truly special to the enterprise), as opposed to the outmoded, blanket-regulated, across-the-board annual basis (which typically produces mediocrity).
Analyzing the workforce and strategically managing the company's human capital has become the focus of human resource management systems (HRMS) as a way to transform these from dull functions to those that greatly affect corporate performance. Integrated business information warehouses, to that end, enable multidimensional analysis on information aggregated from internal and external resources (salary survey, for example), performance indicators (as in turnover), and views on strategic HR information with powerful drill-down features. Some surveys indicate that almost a third of businesses are already using data warehouses, a quarter of them are using workforce performance management or analytics, and one-eighth of them are using workforce planning.
Workforce analytics have become a core of talent management systems. This is because they focus not just on 'time' (or who has clocked in and who has not), but also on such strategic business issues as overtime and turnover trends that impact a business's bottom line profit, equal employment opportunity (EEO) or ethnicity-based hiring trends, compensation patterns, relative recruitment effectiveness and sourcing costs, cost per hire, etc..
Human Capital Management
This brings us to the notion of human capital management (HCM), or talent management, which Gartner defines as a set of HR practices that focus on acquisition, management, and optimization of the enterprise workforce. These practices include such processes as competency and skills management, succession planning, and team management. The key tenet of HCM is that companies must change the mind-set of viewing employees as an administrative cost, and instead see them as a strategic investment and a key enterprise asset, with a resulting focus on aligning workforce capabilities with business strategy. This more strategic view of the workforce will gradually become less an HR function and more a management discipline.
HCM should be about value and not cost, since people should be regarded as value-adders, and not overheads and liability. It should measure organizational outputs (such as profit, revenue, and service levels) related to better management of people, rather than focusing on input measures (such as recruitment costs) and the HR 'best practices' of earlier days.
According to studies by the Brookings Institute, in the early 1980s, tangible assets amounted to over 60 percent of firms' total assets. This ratio has now been reversed, with over 80 percent of assets being intangible, most of which is represented by human capital. Yet, while decades have been spent investing in automation technologies for better use of tangible assets, only recently have enterprises begun to invest in optimizing human capital.
Moreover, many non-HR business processes can benefit from leveraging HCM strategies, such as project portfolio management (PPM) processes (see Project Portfolio Management for Service Organizations: Bridging the Gap between Project Management and Operations), which can be improved via incorporating competency and skills data and by leveraging the team management capabilities of HCM applications. Similar examples of business processes that should benefit from 'picking the HCM brains' include production planning, job costing, scheduling, training, compliance, budgeting, and field service. In fact, any people-centric business process should benefit from integration to HCM, whereas traditional administrative HR applications and processes will hardly support this integration at all.
This leads us to a broader notion of employee relationship management (ERM), business-to-employee (B2E) management, or whatever the three-letter acronym (TLA) du jour might be (see BLM'Buzzword Lifecycle Management). In any case, these acronyms try to depict a business discipline that focuses on optimizing the employee's total employment experience'including both the human and technology aspects of that experience.
ERM espouses a comprehensive and unified view of the processes and technologies that support the workforce and their workplace, including manager-employee interactions, the formal business tasks required to manage employee relationships, and the technology used to manage the employee experience. To that end, ERM encompasses the full suite of B2E services needed by employees, managers, and others, including knowledge management, e-learning, self-services, community and collaboration support, travel and expense (T&E) management, indirect procurement, and so on. Thus, ERM is most closely aligned with the HCM focus area of workforce management.
While traditional HR and payroll management may not seem to provide a significant competitive advantage in the same respect that the aforementioned emerging technologies do, some ERM systems, like Extensity or Apptricity, help reduce cost, simplify administration, and promote a more connected company-employee relationship. What customer relationship management (CRM) solutions do for customer intimacy, today's ERM packages (replete with employee self-service and manager self-service functions) do for employee intimacy'provide all concerned parties (executives, managers, employees, government, and so forth) with immediate access to a wide array of vital information.
Customer Success Story: Talent Management
Commerce Bank Is Counting On Lawson
Since its inception in 1973, New Jersey-based Commerce Bank has grown to nearly 450 locations across the east coast. Commerce prides itself in providing customers with convenient, quality financial services.
The Commerce-Lawson partnership started in August 2000, with the signing of its first product license agreement. At the time, Commerce began using the Lawson Human Resource Management Suite, which helped simplify and streamline operations within their organization. Still, Commerce had upheld a wish list for changes and enhancements they wanted to see in the next generation Lawson Talent Management Suite solution.
For example, their limited IT staff required a faster applicant tracking system that could stand on its own, with best-of-breed features, according to Jo-Anna Rubin-Berman, Vice President of Human Resources at Commerce.
'We also wanted a system that was faster and easier for our applicants and recruiters to use, our IT staff to configure and brand for our applicants, and our HR staff to administer.'
In 2005, Lawson invited Commerce to become a Lawson Talent Management early adopter, which allowed key users at Commerce and software developers at Lawson to discuss such software needs and enhancements in detail via face-to-face meetings, conference calls, shared documentation, and webinars.
Commerce HRIS executives also attended the annual Lawson Lead-Adopter Forum, where they got to see, try, and critique the full suite of Lawson Talent Management applications in progress, and share ideas with other attendees.
'It was interesting to hear people's perspectives on processes, future plans, user interfaces, and what their applicants and recruiters were looking for. At the forum, we also developed a better understanding of the Lawson Talent Management Suite we were testing as a Charter Implementation Customer,' says Brenda Hancock, HRIS Manager for Commerce.
The Lawson-Commerce alliance facilitated in-depth discussion regarding how Lawson could continue to create products that meet and exceed the bank's needs. According to Hancock, it was obvious that Lawson executives were listening to her team's ideas.
'Lawson executives' willingness to partner and their honesty and attentiveness were much appreciated, and made Lawson stand out. During our meetings, we'd share what we were thinking, and the next time we'd see their prototypes, our changes would be in place.'
'While beta testing the Lawson Talent Management Suite, several features immediately helped address our issues,' says Rubin-Berman.
'The first is the solution's ability to easily configure text and user portals. To this day, we also appreciate the integrated administrative tools, which allow us to post multiple job boards in a single instance and apply multiple jobs to one requisition.'
Hancock adds, 'For us, the biggest and most impressive win is the full integration of Lawson Talent Management. The suite allows us to do all of our maintenance and employee activities in one spot, without having to repeat those processes. Plus, we are no longer required to have the additional audits and controls we used to have in place to make sure all of our data is in sync across the board.'
'The process of partnering with Lawson has given us the opportunity to offer our guidance and insights, and help build a product that we need to make our business grow. Once we implemented Lawson Talent Management, we were able to hit the ground running and continue the expansion of the bank.'
'When we had looked at the gap analysis based on the requirements that were needed by our technology staff, as well as our recruiters, we only found a one-percent gap in our business needs with Lawson Talent Management, compared to the best-of-breed vendors we had considered,' says Rubin-Berman.
She explains, 'While evaluating applicant tracking system vendors, for example, one of the key reasons we liked Lawson was that its Lawson Talent Management Suite is fully integrated.' Full integration is 'horizontal' within the Lawson Talent Management Suite, with interconnectedness among other software system applications. It is 'vertical' where a change at one point of entry into Lawson Talent Management permeates throughout the entire suite and its applications.
According to Rubin-Berman, 'Once implemented, our recruiters regularly reported that Lawson Talent Management is easy enough for them to use, it helps free their time to focus on more important tasks, and its reporting features allow them to complete reports themselves, which they weren't able to do using their former system.'
'Throughout our partnership with Lawson, their talented team has upheld strong commitments to Lawson Talent Management, as well as their customers. As a result, Lawson has introduced a really great product that truly incorporates our feedback, uses our ideas, and helps us achieve our overall HR strategic vision.'
Lawson Talent Management is made up of the following six applications, which are strong on their own, but derive their power from full, horizontal and vertical integration:
- Lawson Global Human Resources
- Lawson Talent Acquisition
- Lawson Goal Management
- Lawson Performance Management
- Lawson Compensation Management
- Lawson Succession Management
- Lawson Learning and Development
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