Enabling Technology

2006 TECH TRENDS: Leveraging Technology in HR Transformation

Bringing the iPod “experience to HR could make things fun again. Our panel of expert techies reflect on the impact and pitfalls of technology on the department.

by Andy Teng

Naomi Lee Bloom (NB) is the managing partner of Bloom & Wallace and a recognized leader in the HRM delivery system (HRMDS) sector. She works as a change agent and HRMDS planning coach for large corporate clients, as an advisor to HRM software and services vendors on business strategy and product/service design, and as a provider of competitive insight and due diligence services to the investment community.

Jamie Davis (JD) is vice president of corporate development at Recruitmax and has been with the company for seven years. He has extensive knowledge of the applications, processes, and culture of the company and works to seek out and establish strategic partnerships. During his tenure at Recruitmax, he has helped establish partnerships with several of the industry’s leading HRBPO providers and also identified and completed several acquisitions.

Tod Loofbourrow (TL) is the founder and CEO of Authoria, Inc. and is responsible for strategy, management and growth of the firm. An author of publications about knowledge-based systems and B2B Internet commerce, his work has been featured in dozens of leading publications. Previously, he ran a leading IT consulting firm, Foundation Technologies, Inc.

Doug Merritt (DM) is executive vice president and general manager of SAP Products and Technology Group. He has more than 18 years of sales, marketing and strategy leadership experience in the enterprise software market. A frequent speaker at industry events and functions, Merritt has established a long track record of quickly ramping up and dramatically growing product revenues in large organizations, including PeopleSoft and Oracle Corp.

More and more, HR professionals are looking to technology as a tool for improving organizational transparency, productivity, and employee self-sufficiency, but the difficulty with technology is determining its proper role in the HR world. Moreover, with technology changing so quickly, how can companies protect their investments for years to come? HRO Today asked four tech-savvy experts for their outlook on state-of-the-art developments and deployment of HR technology.

HRO Today: Within your particular area of expertise, what has been the most important recent technological developments and tools? How have they helped the HR department?

NB: If we put aside what has been around for years and focus only on what’s really new in the last couple of years and going forward, I see three major developments: (1) multi-tenancy architectural design in software, which is the key architectural enabler of software as a service as well as cost-effective HRM BPO; (2) web services architecture, a.k.a. SOA, which holds the promise of greater long-term flexibility as well as greater implementation ease, therefore of lower total cost of ownership; and (3) intelligent self-service, which combines traditional transactions with the content (i.e., business rules, policy information, analytics, etc.) needed to ensure complete and correct transactions while reducing demands for customer contact. When these are combined, as they have been and are being done by leaders in HRM BPO (because they must do so to provide effective and efficient services), the results are improved business benefits at reduced TCO.

It’s also interesting to note that they haven’t yet been combined fully by long-established vendors of licensed software (although they’re all working on this) because it means a complete overhaul of their current generation of software (to which all are headed, but at different speeds), which is going to cause a good bit, at least in HRM, of data design incompatibilities.

The price for moving forward, as always, will be new implementations, which may well be the final straw for in-house HRM delivery systems.

JD: HR departments’ buying preferences have shifted from software to solution, from perpetual license to software as a service, and from stand-alone products to product suites. In the past, HR departments would often make system selections based on feature/function/price matrix within a function like recruiting, performance management, or compensation planning. RFPs from many companies now specify the availability of additional modules which have the capacity to integrate as a workforce management suite. The benefits that the suite brings to the HR department include an integrated approach from a consistency of user interface perspective and ease of integration for future rollouts of additional modules.

TL: I’d say the most important technological innovation of late has been the convergence and integration of individual solutions to specific strategic HR challenges. Previously, for instance, performance management, hiring automation, and compensation management were all purchased as separate software applications and managed as separate silos. Today, these applications are coming together to form an integrated, complete talent management solution so HR and line managers can truly optimize investments in human capital.

This is important because these functions are obviously deeply interrelated. When a manager is working on performance reviews, shouldn’t that manager be able to tap right into the compensation system to see what funds he or she has available for raises and what policies apply? Also, shouldn’t HR professionals be able to run reports on how employee performance and employee compensation correlate? The new breed of talent management solutions leverage a common set of data across all processes, providing users a consistent experience and allowing unprecedented insight.

On the recruiting front, candidate slates now contain all of the information recruiters and managers need to make critical hiring decisions. With disparate solutions, users have to log into multiple applications to get a complete picture of the candidates available for a specific job. A comprehensive talent management solution consolidates key data so that recruiters can quickly review a ranked list of internal and external candidates and have confidence they’re going with the individual who’s absolutely the best fit for the job.

Further, HR professionals should be able to track the performance of hires over time to determine from which sources their organization finds the best talent. Not only does this insight allow staffing teams to build more effective sourcing programs that target the high-caliber people needed to grow their business, it also reduces costs associated with “scatter shot” strategies.

DM: The enterprise technology industry is finally at the point of maturity where it can focus on and deliver meaningful solutions for the “average user” rather than the specialist user or the computer-savvy elite. I group most of the tools, technology, and delivery mechanisms that our industry has been exploring into one, larger “casual user” trend—a trend that SAP has categorized “Enterprise 3.0.” There is a large thread of commonality between SOA, model-driven development, integrated/rich client deliverables, ubiquitous multimedia, on-demand computing, simple/easy search, etc. The list of initiatives is long, interesting, and very broad, and all ultimately are focused on actually making it fun and cheap to consume technology.

HRO Today: What new advancements do you foresee in the new year? Are therebreakthrough technologies that will come to fruition in the new year or can we expect more incremental improvements?

NB: The changes I’ve described above aren’t going to mature fully in 2006, but they are likely to get a boost from some startups and relaunches professing to address all three. Dave Duffield’s Workday comes immediately to mind. They are also going to get a boost from the BPO providers who have worked hard to develop delivery system platforms that are money-makers and client-pleasers rather than money-losers delivering self service. Here, Hewitt comes to mind, not only for their overhaul of the acquired Cyborg code base but also for their proprietary self service, which can wrap daughter-of-Cyborg or whatever ERP a client brings to them.

While they keep the details quite secret, I think we can presume that Fidelity’s overhaul of their acquired HR Access code base also focused on making it multi-tenant, but they may well not have made it SOA. Fidelity’s proprietary self service has also focused on embedded intelligence and multi-tenancy, but, here, too, the use of SOA may not be pervasive. And we shouldn’t forget the wrappers that BPO providers have developed that make it easier for them to run SAP, Oracle, or PeopleSoft (and there are providers which have done this for each of these ERPs)—wrappers that are definitely multi-tenant and some of which have been written on an SOA.

JD:  Moore’s Law will continue to have a profound effect on system performance. The adoption of 64-bit architecture and server operating systems will extend the capacity and scalability of some legacy applications. In addition, the growing adoption of web services and HR-XML standards will allow a more centrally managed user experience. HR application users will increasingly be able to manage their work and initiate all transactions with one seamless application interface. Further development using rich media tools will continue to improve the user experience as well.

TL: On-demand delivery will continue to become more robust and compelling, so much so that by the end of this year, there will only be a handful of on-site or on-premise TMS deployments. It eliminates the need for a large capital outlay, replacing it with a monthly subscription fee. Companies don’t need to maintain a large IT infrastructure to support the application, and when the application is updated, it happens transparently; HR signs on one morning, and new features are ready to be used.

In addition, individual functions within talent management will continue to become more tightly integrated, which will give front-line managers better tools to perform HR tasks and give HR professionals a better view into the entire organization. Personalized dashboards, designed to meet the needs of specific user types, will increase visibility into talent management programs and will drive user adoption. I’d bet we’ll also see renewed focus on self-service capabilities for managers, employees, and candidates.

DM: I think the breakthrough advancements for the next few years will be more on the packaging, delivery, and consumption side than on the core technology invention side, much like the “breakthrough” of the iPod. An iPod is actually composed of fairly mundane technology components. Apple delivered an incredibly rich experience, in all facets, around these mundane component parts. The breakthroughs in the enterprise market will be the delivery of enterprise-relevant iPod experiences.

HRO Today: There tends to be a reliance on technology to help resolve many of the HR department’s woes. Do you feel this is the case? What mistakes are companies making that cause them to improperly or inadequately use technology in HR?

NB: Improving organizational business outcomes—such as increasing revenues and profitability or opening up new lines of business, selling into new geographies or bringing better products/services to market faster and at lower cost—must be the business case for everything about human resource management and its use of technology. Unfortunately, that is rarely the case. Speeding up and improving the workflow of applicant management does not improve the quality of the applicants nor the quality of hiring decisions. Having brilliant turnover analytics doesn’t help unless we address, with policy and business rules changes, the reasons why we’re losing our best people and keeping the drones. And spending big money on workforce development is really foolish unless we’re targeting the money at the desired learning outcomes and competency improvements and can demonstrate that the selected workforce development tactics are accomplishing those outcomes and improvements.

So, what really matters here is the analytical heavy lifting that HR professionals must do to understand their organization’s desired business outcomes and then figure out what’s needed in HRM to achieve them. You can’t improve hiring decisions without having great competency models for those roles and insightful evaluative techniques for determining the competency fit of each applicant.

JD:  Unfortunately many companies are mired down in internal politics, thus HR business processes evolve in reactionary increments. Such politically constrained companies tend to adopt new technology as an overlay on top of inefficient or just plain bad processes. Often, a better approach would be a complete transformation of the business process in conjunction with the implementation of a tool to enable and support best practices. The good news is now there are viable and increasingly credible options for overcoming onerous political constraints. The strong growth of transformational HR business process outsourcing indicates that companies and HR departments are catching on.

TL: It’s important for companies to invest time up front to identify gaps in their existing processes and work towards consensus on an “end state” or “ideal solution” before deploying technology. Organizations should carefully consider the needs of the full spectrum of their user community and only partner with vendors with the depth of domain experience necessary to fulfill those needs. Even when you’re using a top-notch HR solution, it’s still crucial to adopt HR best practices around performance, compensation, hiring, and employee communications before automating these processes through technology. Automating a bad process just delivers bad results faster.

System flexibility is also key. Technology must be able to scale/evolve with the needs of the company. Deploying a talent management solution is a great opportunity for an organization to re-evaluate and strengthen its HR processes.

DM: Most dissatisfied user problems can be traced to a lack of understanding of who the customer is and what that customer really wants and needs. I believe that this is the root of the problem for the HR department. The most important first-wave customer for HR is the CEO/CFO/board of directors, which means that compliance and back-office efficiency is the core focus for HR, and success here is not optional. But, this necessary focus is contradictory in almost every dimension to the second job of HR and the more visible job: being an HR consultant and services provider within the organization. With this natural conflict, the HR department is set up for failure. Even when they are able to generate the most innovative requirements from the line of business user, the other portion of HR must say no to some of those requirements, leading to mixed messages and confusion coming out of the HR department.

HRO Today: Many companies are looking to outsourcing as the alternative to making capital technology investments. Will this remain a key driver behind outsourcing? Will this necessarily require the providers to make constant, costly technological investments?

NB: I am personally persuaded that creating and sustaining a state-of-the-art HRM delivery system requires not only more capital but also more ongoing expense, human capital, management attention, risk management, vendor management, etc. than most organizations can devote or justify. And this is the true driver of comprehensive HRM BPO. Point solution outsourcing, similar to point solution software use, still requires the end-user organization to practice extreme solutions integration, manage many separate vendors and SLAs, and do both every time there’s a change at any vendor or in any product or outsourced solution.

Just as we learned the value of more integrated and broader-function software, so we are learning the value of more integrated and broader function outsourcing. But only those comprehensive HRM BPO providers which have already made wise decisions in the design of their HRM delivery system software platforms and then executed well against those decisions are going to be left standing. Only those providers which are prepared to continue making and executing well their technology investments are going to be able to continue to remove costs from their service delivery while delivering better and better quality. And those providers which have standardized on one of the ERP/HRMS or on other commercial HRMS are all facing some degree of disruption, at their cost to address, when these software vendors reveal their fully SOA product lines with their new and not entirely backward-compatible data designs.

JD: Avoiding capital expenditures will not remain a key driver reveals a short-term perspective. There are many companies who seek an outsource provider who will “lift and shift” their current processes to a cost-saving outsourced model. In purely transactional processes, a cost-avoidance approach works well enough, but when applied to strategically important processes like workforce management, for example, a cost-avoidance approach can be counter-productive. How an organization recruits, measures, and compensates its employees has long-term implications. This is not the place for cost-saving shortcuts.

Research reports indicate that cost-savings is not usually the top selection criteria for organizations looking to outsource HR functions. Increasingly, companies are looking for outsource providers who have the ability to execute best practices in areas of strategic importance. Achieving significant transformation does often require technology investments, although the return on investment is much greater than with a “lift-and-shift” approach.

TL: Many of the drivers that are pushing organizations to outsource are also pushing organizations toward on-demand delivery of HR solutions. IT resources are still constrained, and CFOs are leery of making large capital investments in IT infrastructure, especially with technology improving at such a rapid pace.
HR outsourcers’ expertise is human resources management, not managing a large IT infrastructure. Last year, Authoria signed several partnerships with HROs in which they will provide their clients with Authoria’s talent management solutions delivered by Authoria via on-demand. Authoria takes care of the technology so that the outsourcer can focus on HR. We expect to see this trend accelerate in 2006.

DM: Within a larger enterprise, who already has a sizable investment in IT infrastructure with thousands to hundreds of thousands of solutions riding on top of that infrastructure, the capital investment argument is a difficult one to credibly make. It would actually be more financially prudent to amortize one more technology investment over the large, committed infrastructure already in place. What I do believe outsourcing provides is the distance and flexibility to make rapid and meaningful structural and personnel changes in an area of the business that needs this extensive overhaul and/or the opportunity to “rent” competencies and capabilities that a business doesn’t have or doesn’t want to spend the time and energy building.

HRO Today: As providers make technological investments and roll out new tools to their clients, how will clients handle this? Who will provide the trainingto the their customers (employees)? Will this, then, become a bottleneck to HR transformation?

NB: This is a really excellent question. Putting aside the comprehensive HRM BPO providers which offer to run the client’s mess for less, transforming not only the client’s administrative workflow (little p processes) and even some business rules but also their HRM process and plan/program/business rule designs (big P processes) is essential to realizing the business value in this type of BPO but also to achieving essential business outcomes for the client organization. Those providers without the deep subject-matter knowledge and change management capabilities needed to help clients achieve these essential transformations are basically IT outsourcers with added call centers—and that’s not going to be good enough except, perhaps, for putting a BPO wrapper around payroll outsourcing or other, equally regulated and standardized processes. Comprehensive HRM BPO providers who are able to lead their clients to improved HRM practices, policies, plan designs, and administrative processes and support all of this with highly automated and cleverly automated software platforms will be able to deliver business outcomes at a much higher level than their ITO competitors.

But the bottleneck, as always, will be the organizational culture of their clients in terms of the incentives for making those changes that benefit the organization. There just aren’t enough strategically minded HR leaders to go around, and comprehensive HRM BPO illuminates this shortage by removing the administrative burden even in HR organizations that took comfort in it.

JD: The most successful training programs have an ongoing practice to reinforce the proper use of tools and methodologies. Many providers will opt for a “train the trainer” approach and will task the initial trainers to continue on as local mentors. These mentors also act as local sponsors and can make a huge difference on how the initiative is received in the field. The risk with this approach is that often business units identify the weak link in their staff, the one they can do without, to serve in this trainer/mentor role. It is very important to select trainer/mentors who are capable and respected among their peers. This approach, when executed properly, not only can avoid bottlenecks, it can provide an important ongoing feedback mechanism to the transformation project manager.

TL: Increasingly, HR solutions are including manager and employee knowledge bases that help employers communicate with their employees and managers and teach workers how to use the application’s features exactly when they need to use them. These learning features will only become more sophisticated in the future, which will lessen the need for outsourcers to provide ongoing training. As the applications evolve, so will the learning tools that go along with them, eliminating the bottleneck.

DM: This new generation of ubiquitous, “casual user”-centric enterprise solutions won’t and can’t demand the same level of training and hand holding as we’ve all come to accept in the enterprise space. To be successful in the Enterprise 3.0 wave, providers will have to make their systems intuitive and easy to use, or they will go out of business. For example, SAP is rolling out a series of deliveries this year that require zero end-user training, despite the fact that they are automating complex processes and bringing together huge amounts of varied data. How much training does a user need before he is able to use Amazon, eBay, Google or an iPod? If outsourcers don’t hold their delivery bar to this level, they will fail while they are failing their clients and users.

Tags: Enabling Technology

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