Technology Evolution–Not Revolution

Over the last decade, information technology has transformed human resources. It has forced executives to re-engineer business processes and to look for more efficient ways to manage the workplace. While file cabinets and paper haven’t completely disappeared, it’s clear that eHR will one day reign supreme.

    Yet, for now, many organizations are still struggling to make sense of all the tools and applications available. Putting the various pieces of a technology strategy in place remains a daunting task. The results of the 2003 Workforce Management/Findley Davies HR Technology Survey indicate that organizations are making progress, but few are close to the leading edge of innovation. The survey was conducted electronically on an independent Internet site during the month of July 2003. Respondents were encouraged to participate through invitations in Workforce Management in print and online, through the Workforce Week newsletter and e-mail invitations distributed to Findley Davies clients.

    The survey represents 266 respondents from a diverse group of industries, including agriculture and banking, communications, education and transportation. About 70 percent of these organizations have fewer than 2,000 employees, and half have fewer than 500.

    The findings below help define the state of affairs in workplace technology.

Budgets remain tight
    On the front lines of business, the bottom line has always dictated an organization’s strategy. And in today’s tech-centric world, the story is the same. Coping with a prolonged economic downturn and dwindling revenues, organizations are keeping a close eye on budgets. Findley Davies found that spending on HRMS will remain flat over the next 18 months. About 36 percent of firms indicated that they’re maintaining current budget levels, while about 24 percent are tightening the reins on spending. Meanwhile, about 24.5 percent of respondents are increasing the level of funding for HRMS.

    Not surprisingly, a peek under the hood offers a glimpse of how spending varies. While many smaller organizations invest a mere $34 per employee for an HRMS, other, larger firms are forking over nearly $1,000 per employee. Yet the companies at the high end haven’t consistently leveraged their investments, says Tedd Long, managing consultant and director of HR technology practice at Findley Davies. “Many organizations said that they expect their budgets to remain the same but plan to introduce new features such as online benefits enrollment and e-recruiting. That means that they probably have the technology in place but haven’t begun to use it.”

    Some, like the Gosford City Council in New South Wales, Australia, are placing a heavy emphasis on ROI. “If we can’t measure the return on investment, we have to ask why we’re embracing a project,” says Peter McLean, manager of organizational development. The council has 1,200 employees (the equivalent of 975 full-time workers) and a human resources budget that’s just over $1.67 million. It serves 169,000 constituents in a community about 60 miles from Sydney. The human resources department uses predictive ROI models and direct metrics to gauge the payback of information technology. That has led to some significant gains. For example, using its HRMS to boost internal recruitment led to a 451 percent ROI over two years.

    One of the biggest surprises, Long says, is that ROI and cost containment were not listed as top priorities by human resources executives. In fact, only 13 percent of respondents cited cost-cutting as a primary objective. “Many companies are looking for gains in productivity and greater efficiency in record-keeping and transactions,” he says. “Others indicated that they’re striving to make HR more strategic.” Of course, this approach doesn’t necessarily jibe with the thinking that radiates from the CFO’s office. “The CFO is writing the checks and HR is executing the plan. That filters into the way each views the situation and how they execute a strategy,” Long observes.

   Nevertheless, many human resources organizations have managed to stay within the budgeting boundaries. More than three-quarters of the survey’s respondents reported that the cost of implementing an HRMS was in line with or lower than the initial budget. Although HRMS rollouts are frequently more complex than many organizations realize up front, executives managing the projects are doing a good job of keeping them on track, says Joe Spencer, senior consultant and director of organizational planning and development at Findley Davies: “Despite an array of technical and practical issues, they’re minding the store.”

The wired enterprise
    It’s hard to believe that only a decade ago, the primary tools for communication were phone calls, faxes and in-person meetings. Getting a spread-sheet from Dallas to Detroit often meant dropping 50 pages of paper in an overnight-delivery envelope and following up with a 45-minute conversation the next day.

    No longer. Today’s enterprise is wired, and executives, managers and employees are using online communication tools to redefine both the way work gets done and how people interact. Findley Davies found that at more than half of the companies surveyed, between 75 and 100 percent of their employees have access to an intranet, the Internet and e-mail.

    Not surprisingly, large organizations boast the highest levels of high-tech communications options, while small firms have the lowest. In addition, industries such as information technology, professional services, banking and finance are leaders in online adoption. What was unexpected, Long says, is that about 40 percent of health-care organizations and nearly one-third of manufacturing firms have embraced intranets, e-mail and the Internet. Traditionally, both have lagged in terms of providing these connections to workers. “Organizations across the board now view online access as an essential tool,” Spencer adds. “Without it, they believe, they’re at a competitive disadvantage.”

    Yet the value of e-mail, intranets and the Internet varies greatly, depending on the industry and the requirements of a particular organization. For example, at Lincoln Office, a work-space design and consulting firm in Peoria, Illinois, e-mail has become an essential tool for communication, and the Internet allows the company to tie together six locations in three states, says Pamela Johnson, chief financial officer. Although the 75-employee firm shares standardized forms via an intranet, the firm is putting less emphasis on internal capabilities. “It’s often not the first place employees go for information, despite the fact that we have newsletters and forms online,” Johnson says.

    In fact, a few pockets of resistance still exist. Findley Davies found that 19.8 percent of firms surveyed have rolled out an intranet to less than 25 percent of their employees, 16.7 percent offer Internet access to less than 25 percent of their workers, and 15.1 percent lack organizational e-mail addresses for 25 percent or less of their workforce. While some organizations, particularly those with workers on assembly lines or away from desks, do not require online tools for employees, it’s clear that online communication is rippling through all corners of the modern enterprise. “It is leaving its footprint on the way organizations manage work and processes,” Long says.

HR technology takes hold
    The process of transforming human resources execs from paper-pushers to strategic leaders is not as seamless as one might imagine. While information technology is helping to tame administrative tasks and streamline work flow, the revolution is in the nascent stages. “There is still a heavy reliance on paper and forms,” Long says. “Many organizations are taking on projects at a very deliberate pace.”

    The truth lies in the numbers: more than 81 percent of the organizations polled in the study reported that they’re still using paper for pay stubs. About 71 percent rely on paper for performance management; 65 percent for benefits enrollment; 63 percent for life-events processing; 52 percent for time and attendance and 45 percent for job postings and employee surveys.

    In addition, only a handful of organizations are using call centers. Although online tools, including intranets and the Internet, are gaining ground–particularly for job postings, time and attendance, and surveys–it will likely be years before eHR becomes a mainstream reality.

    Nevertheless, marked differences exist. Findley Davies found that organizations with more than 5,000 employees are far more likely to use manager and employee self-service. At that point, the economies of scale make it a less expensive and more alluring proposition. Meanwhile, small to medium-sized firms are less likely to part with paper. They’re also focusing attention on core applications such as payroll and recruiting.

    Swagelok Company in Solon, Ohio, a firm that manufactures fluid system components used in industries ranging from pharmaceuticals to power generation, serves as an example. The 3,000-employee company, which had sales of $1 billion in 2002, is first automating payroll and benefits. “Employee self-service, manager self-service and work flow will come later even though they are the ‘sexier’ items,” says Bruce Battista, HRIS manager. He estimates that they could take a year or more to install. The firm is currently focusing on a new payroll system. It also is considering online recruiting and applicant tracking, time and attendance, and employee surveys further down the line.

    No less significant is the fact that many firms are still using homegrown systems. The numbers include 45 percent for job postings, 44 percent for performance management, 40 percent for applicant tracking, 38 percent for employee surveys and 34 percent for time and attendance. Couple this with the fact that more than one-third of the HRMS systems are more than four years old and thus nearing the end of their life cycle, and “there’s a good deal of opportunity for vendors,” Long observes. “There’s a prevailing philosophy, ‘If it ain’t broke, don’t fix it.’ But at a certain point companies will have to move on.”

Service administration garners attention
    Managing a mélange of systems and coping with a dizzying array of contracts and service-level agreements is no easy task. Yet in today’s environment, it is more important than ever. And HR increasingly finds itself in the hot seat. Not only must it oversee internal systems–including homegrown and vendor offerings–but it must weigh other options as well, including outsourcing and hosted services. “Organizations have more choices than ever,” Long says.

    Nevertheless, some clear trends exist. For example, payroll administration ranks at the top of outsourced HR functions, though less than 30 percent of the responding companies have embraced it. Other leading candidates for outsourcing are benefits enrollment (15.5 percent), employee surveys (14.2 percent) and e-learning (11.8 percent). Yet while outsourcing is growing in popularity, many organizations continue to eschew it. “The cost is high for many outsourced services,” notes Kathy Blankenhorn, HR generalist/compensation analyst for Texas Capital Bank in Dallas. Others, such as Lincoln Office’s Johnson, say that the limited flexibility makes it less attractive–even with reduced costs.

    In addition, hosted services haven’t yet gained widespread adoption. E-learning (5.9 percent), job postings (5.3 percent) and learning management (5.3 percent) led the way. “The ASP (Application Service Provider) model is a whole new paradigm for HR,” Long says. “It’s suddenly necessary to deal with a vendor instead of an internal IT department. That makes it a whole different ballgame and brings things like quality of service and service-level agreements into the picture.”

    Human resources is often behind the curve when it comes to establishing service-level agreements. Although Findley Davies found that nearly 90 percent of organizations using outsourcing or ASPs had SLAs in place, only about 60 percent had established non-performance penalties. Furthermore, only one-third of the penalty clauses place the vendor at significant risk for non-performance (greater than 5 percent of contract value).

    When asked about the level of satisfaction with solutions provided by vendors, approximately 60 percent of the survey’s respondents indicated that they were pleased with both the level of service and the cost/value of the solution provided. For the small minority that expressed dissatisfaction, payroll administration and time and attendance systems generated the greatest number of service complaints. On the other hand, annual benefits enrollment and life-events processing garnered more complaints about cost than service. “Despite industry horror stories and high-profile articles chronicling the failures of some implementations, most organizations are satisfied with their systems,” Long says.

    Finally, many organizations are becoming more adept at overseeing new projects and ensuring that they’re on track. In every category, the majority of companies are now able to introduce new applications within one to three months. The biggest obstacle, Findley Davies found, was the size of the organization and its workforce. However, a secondary factor was whether the organization handled the process internally or connected to an outsourcing provider or ASP. The latter group was often able to get systems operating in very short order.

Workforce Management, October 2003, pp. 43-46 — Subscribe Now!