Traveling Down The Road To HR Transformation

With technological innovations aiding many companies’ efforts to improve services and support the business, HR leaders are able to free themselves to focus on the big picture.

by Andy Teng

Long-time HR veterans undoubtedly marvel at how much the profession has changed in recent years, but really astute observers will add that the evolution is far from over. In fact, HR is entering a new era, buoyed by a renewed sense of purpose and transformed by the technological innovations recently rolled out in the marketplace. The age of tech transformation is clearly upon us.

What makes the landscape different today from the past? Plenty. Just look at the profession since the advent of HRO. In the industry’s early days, the push to outsource was largely based on economics, a desire to offload back-office services to a provider at lower costs. Today, however, HR organizations do so for transformative reasons. HR leaders have gone from making a business case to making a case that supports the business. Realizing that outsourcing wasn’t necessarily a path to savings, they now understand that it helps to realign their processes to better support their companies’ end goal. By optimizing many of HR’s services—whether it’s talent management, employee training, or plain ol’ payroll processing—organizations realize they can raise quality, produce a more engaged workforce, and better position themselves for growth. The road to transformation leads to the coveted seat at the table.

In part, what’s helping HR leaders to achieve their goals is the rapid development of technology—everything including incremental advancements being incorporated into big ERP and HRMS systems, the proliferation of on-demand services, and the broadening of scope in best-of-breed software. These tools allow HR to completely change the way it addresses its people needs, to shift many administrative burdens to employees through the use of self-service, and to offer managers powerful dashboards that deliver meaningful data that used to take forever to unearth. Moreover, so much of this innovation can be easily integrated to work with the system of record as well as other point solutions so that IT is often spared of any significant headaches. In fact, because technology vendors spend inordinate amounts of time developing implementation schemes, many solutions can be implemented in a few weeks. The result is big gains in productivity almost immediately.

However, technology-enabled transformation is just one way in which HR is changing. A more profound shift still requires any organization to deeply reflect on its goals and analyze the steps necessary for achieving them. More importantly, if technology will be pivotal to a company’s transformation efforts, a diligent selection process and appropriate use of it are necessary for ensuring success.

“Good technology is an absolute essential tool in an effective business, but it has to be accompanied by effective use, and you need to have selected the right tools in the first place and to know what you’re trying to accomplish,” said Naomi Bloom, managing partner with Bloom and Wallace, an HR technology consulting firm.

Two Scenarios
She pointed out that HR transformation can be broadly defined under two scenarios: an initiative described as transformation with a capital “T” and one with a lowercase “t.” In the former, HR leaders examine all aspects of the organization’s processes, goals, policies, and other enterprise-wide considerations. Small “T” transformation is focused on delivery systems, subprocesses, and the like, so its effects are less profound.

She said implementing cutting-edge technology can help HR and the rest of the organization achieve greater efficiencies, but she also cautioned against viewing technology as a panacea to resolving all of a company’s woes. While employees may perform tasks such as interview scheduling or performance review more quickly through the use of an integrated suite of services, that doesn’t necessarily lead to better candidates or higher-performing employees if process and policy don’t take advantage of these improvements. “It doesn’t necessarily mean it’s a great performance model,” she added.

Indeed, HR technology for some time has been capable of delivering many of the value-added functions found in today’s software, but that hasn’t always meant users were able to take advantage of it. For instance, data generated from myriad standalone applications used in, for example, the administration of benefits, time and attendance, compensation planning, and others often resided in a silo. For HR and other managers to make use of the information at times required extensive report-generating efforts involving IT staffers and a countless number of man hours.

The current generation of software allows reports to be generated with a few clicks of the mouse and can make the information easily accessible to colleagues around the world. Moreover, expanded dashboard functionality provides con­tinuous monitoring of departmental activities so HR can more immediately respond to business needs.

According to Watson Wyatt’s 2007 Technology Trends Survey of 182 mid-sized and large companies, a key finding was that employee engagement and information delivery are paramount because of complexity in plans and the need for decision-support tools.

Perhaps the most wide-reaching impact of the technology shift is the efficiency gains possible. With self-service continuing to penetrate the workplace and proliferation of SaaS models that offers employees around-the-clock access from anywhere in the world, many of HR’s old administrative burdens have now been shifted to the workers, who are more than happy to administer their own change of benefits or record updates. Further supported by outsourced service providers, HR can just about trade in all of its tactical chores for ones with strategic value.

Starting with Basics
But even with the recent wave of innovations helping HR to deliver more value to the organization, numerous challenges remain—issues that are unlikely to be resolved in the near future. For instance, with globalization the goal of just about every CEO, ensuring that HR can keep up with these aspirations is a task in itself. Just take the delivery of payroll, for instance. While a number of payroll providers have rolled out global platforms in recent years, their in-country presence still accounts for just a fraction of the total number of nations around the world. While they may be able to serve clients in Europe, North America, South America, and Asia from the same platform, clients in more exotic locales may have to settle for the services of local payroll bureaus because their global providers simply haven’t reached some of these low-volume markets.

“The market is really wide open, and there is a big push to move [to a global platform]. There are not that many out there,” said Eric Delafortrie, director of strategy and development for the euHReka Platform at NorthgateArinso, which provides payroll support in 46 countries. He said that while innovations in payroll processing have been few and far between in recent years, providers are making the technology behind it more seamless and integrated. And that has HRO buyers excited about the prospect of one payroll platform across many regions.

“It’s our ability to absolutely have the same approach from an implementation and operations and support perspective, which means everything is aligned,” he said of the reason why buyers are pulled toward the euHReka platform. “All of our customers understand that for this (a common payroll system) to be successful, you need to have a provider with a global platform.”

Of course standardization of processes has been a holy grail for HR leaders, but for a plethora of reasons—mergers and acquisitions, resistance to eliminating legacy applications, requirements of various regional business units, and others—many companies still operate disjointed systems and processes. Not only do HR organizations continue to struggle with this chronic issue, but the marketplace is sorting it out as well. But thanks to the lessons learned by HRO providers in the past few years, a greater push to standardize technology and processes is occurring.

Greg Secord, the vice president of marketing strategy for National Accounts Services and Employer Services International at payroll giant ADP, noted that vendors understand that to make money, they can no longer deliver customized technological solutions to their clients. Nor should they if HR organizations are ever to move into a standardization frame of mind.

“There is this acknowledgement that if you can standardize around best practices and implement them, there are some real benefits. Part of the benefits is better economics and better services,” he said, pointing out that ADP through its SAP-based GlobalView is able to deliver templated solutions to employers around the world. “I think clearly a templated rollout of SAP is something that 5 or 7 years ago people wouldn’t have believed possible.”

But it’s this aspect of the technology evolution—not necessarily greater functionality or lower costs—that is serving as the linchpin of HR transformation. By enabling employers to standardize their processes and tools, they can improve quality of service more efficiently and at a lower cost.

Another benefit of standardization is it also minimizes the disruption of technology implementation. In ADP’s case, it is dedicating a lot of resources specifically toward developing tem­plates for new geographies so that as a sufficient number of prospects are reached to constitute an attractive market, it can offer those employers a uniform implementation that’s faster and cheaper than a one-off rollout.

Secord explained that one difficulty that multinationals still wrestle with is how to win buy-in for a centrally mandated initiative from their dispersed business units. Often, the effectiveness of these projects is diminished by holdouts resistant to change or who fail to see the reason for the effort. To overcome this, he said, a clear business case must be demonstrated to the units, and implementation must occur smoothly and quickly to sustain support. “The longer the rollout, the more likely the project team will lose momentum,” he added.

Best of Breed vs. ERP
Achieving standardization and best practices is for sure a desirable goal, but for many organizations, this path is fraught with pitfalls and difficult decisions, especially for those in transition. As Bloom pointed out, companies are constantly in a state of flux when it comes to technology investments, and deciding where to spend valuable resources is not an easy task in a market full of different choices. After all, the technology dollars spent today could affect an HR organization for many years to come.

One ongoing debate is whether HR should look to its ERP systems as an enabler of transformation, turn to another HRMS, or simply address pain points with standalone offerings or SaaS components. This argument pits the integrationists against the functionalists, with each side making valid points. On one hand, transformation is more effective when technology empowers employees and makes them more efficient so best-of-breed should emerge as the approach of choice. On the other hand, organ­izations that have made significant investments in PeopleSoft, Oracle, SAP, or other platforms don’t want to give up on those dollars. They contend that ERP developers constantly add functionality to their systems and could eventually rival best-of-breed software developers in features so it makes sense to wait for new releases.

Yvette Cameron, senior director of HCM BPO strategy for SAP, contends that the market will always be bifurcated into ERP users and best-of-breed adopters. She said while best-of-breed technology can serve its supporters well, especially those in the small and mid-sized business segments, there are drawbacks, including frequent updates that can be disruptive to users. While ERP solutions might not be as feature-rich—however, Cameron added, all of the ERP developers are looking into adding support for talent management and other services—its data can be easily shared across the entire enterprise, including customer service, finance and accounting, procurement, and more. Giving the organization such a broad view of operations has tremendous advantages.

“At SAP, we’ve invested so much in talent management. And customers are looking at us and saying, ‘That’s where we want to be. The functionality is enough for what we need,’” Cameron said.

But even as ERP developers expand their offerings, best-of-breed providers are growing more sophisticated in how they develop their products to work in conjunction with HRMS. Many providers say data integration issues have long been resolved, and there should be little concern about whether their software will work with a customer’s existing platform.

“We have a fairly standard process by which we can connect the ERP and other related systems,” said Peter Cohen, vice president for product marketing at talent management software developer Authoria. He said his company has developed standard operating procedures to help buyers integrate Authoria’s solution with customers’ ERP in just a few weeks so they can use the software right away.

To be sure, this debate will exist for some time, and the lines will likely blur even further as both sides enhance their technology. Who will come out the eventual winner? Observers point out that the market will be big enough for both sides to flourish, and buyers will fall in line with one of the camps. In any case, it’s the users who will ultimately win since they benefit from all the innovations.

So as HR morphs into a new role in the enterprise, it will be charged with delivering a host of services that supports business growth. To do so, it will have to continuously assess the best technological solution and invest wisely on the tools for achieving this goal. After all, HR transformation won’t be so much a choice but a necessity for organizations to compete in today’s challenging environment.

Posted September 10, 2008 in Enabling Technology

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