HR Systems 1: Selection
Why do organisations select, in particular, HR systems that are out of scale to their organisation profile? How do they compute the Return on Investment (ROI) for these applications?
Over the past few years I have worked with many clients who want to buy their first HR system, replace an existing one, or see if they can get more out of what they already have.
I am frequently struck by the fact that somewhere along the way these organisations have chosen to burden themselves (or are proposing to) with software that would require an army to actually keep it running at full capacity, and costs an inordinately large sum of money to purchase.
The mere fact that there is provision in a system for recording O and A Level attainments does not mean that those fields have to be populated!
Many fields are simply just not used and have no relevance to the needs of the organisation, but providers are usually shy at “switching off” unwanted features.
For instance:
Recruitment modules can present a very labour-intensive solution for any organisation that is not running year-long large-scale resourcing campaigns;
Training modules will handle every aspect of booking and managing training courses, but the module should take the grind of administration out of the task, not create a new rod for the HR officer’s back.
Of course, it is usually the HR Officer grades who get to use the application more than anyone else, being familiar on a daily basis with inputting, navigating around the system, and actually producing the reports, whereas HR Managers and above are primarily concerned with the reporting output and its interpretation or supply to internal clients.
It is essential to keep focused on the organisational requirements when specifying HR software. There can be no other consideration.
Most Payroll software is generic, and can be judged on its ability to handle the required numbers of staff, weekly and/or monthly pay patterns, and so on; I recommend to my clients that rather than detail the minutiae of Payroll features, it is better to focus on the quirkier requirements of an organisation’s pay methods, and request the potential provider’s solution,
Employees have to be paid, that is a cost that cannot be avoided. It is a question of deploying the most effective yet economic means of doing this.
The choice in most cases lies between:
an integrated in-house HR & Payroll application;
an outsourced Payroll being fed by an in-house HR system;
an outsourced Payroll providing basic HR reporting.
The guiding principles can go out of the window when the HR part of the equation is under consideration. Systems are more often than not selected because the provider:
1) has a well-advertised profile;
2) has supplied to competitors or sector peers;
3) is deemed to be a substantial player, and therefore risk-free (and by implication, blame-free if the selection doesn’t work out!)
4) passes an overly-stringent Due Diligence exercise by the
Procurement function.
As a result perfectly adequate systems, costing less from smaller and less well-known suppliers can be overlooked or discarded.
The traditional way that systems were selected often involved nothing more complex than considering the number of employee records held; if you had more than 1000, you were headed towards a major provider (Tier One in the common parlance). Yet I have seen organisations with numbers as low as 400 employees approving software costing in excess of £70,000; software that could easily handle fifty times that number of records!
To avoid this, the prospective purchaser must draw up a matrix of the essential features, and a subsidiary list of further features for which it is certain there will be requirement; do not include fanciful notions – if your organisation has a high proportion of shift-working casual workers, then you will not be thanked for shelling out for a Self-Service module!
Talking about Self-Service…. You have to be very clear in your mind about how beneficial this can be. To merely enable employees to change a few of their personal details is not empowerment – or progress. Self-Service is not cheap; you need to ensure that the culture and the processes are receptive to this type of enhancement. If you are unfortunate enough to introduce this and it subsequently does not work…well, it doesn’t bear thinking about, does it?
The biggest gain for HR is Automation (and its advanced derivative,Workflow) of the basic administrative functions. At the moment, this is only available with the larger and more expensive applications, but expect all providers worth their salt to have this as part of their offering within the next twelve months.
Quite simply put, Automation will take care of the routine tasks without anything falling down the cracks of manual diaries and peoples memories; you can programme a whole series of date / action driven events to occur and know that they will be executed. When you come to weigh the benefits, one of the biggest “earners” on your investment will prove to be the reduction of administration harnessing Automation.
A key aid to selection is to compare the various offerings on a financial yardstick, and what better than to use Return on Investment (ROI). This will be language that your Financial people will understand and appreciate!
The methodology for producing an ROI for HR Systems is contained in the next article “HR Systems: The Return on Investment (ROI)”
© Denis W Barnard 2009
