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Thou Shalt Manage Human Capital Better

Written By: Predrag Jakovljevic
Published On: September 26 2006

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.
  • Payroll
    Handles accounting and preparation of checks related to employee salaries, wages, and bonuses.
  • Benefits
    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.

Part One of the series Thou Shalt Manage Human Capital Better.

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

  1. smaller and less sufficiently skilled,
  2. increasingly global,
  3. highly virtual,
  4. vastly diverse, and
  5. 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 rsums 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.

Such systems aim at helping organizations improve the processes of recruiting and hiring by more quickly prescreening, sorting, and storing rsums, and then matching those rsums 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 life-cycle management" software, which encompasses a range of processes spanning recruiting, training, career development, and internal hiring.

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 rsums, 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, 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 have learning management functions as part of their human capital management (HCM) suites, like SAP HCM, Oracle HRMS, and PeopleSoft HCM.

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), 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.

 
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