Technology in HR
HITECH CENTE SAVERS
words by > Neal Learner
Technology has been lowering the cost of doing business since long before the advent of typewriters and assembly lines. So it naturally follows that human-resources (HR) executives would embrace automation as a means to draw savings out of industry’s biggest expense: its employees.
Smart HR departments know that implementing strong technology systems can streamline administrative duties that save millions of dollars to the bottom line, as well as free up HR professionals to focus on more important tasks of improving human capital.
TEXTRON.INC
Textron, Inc. is a global manufacturer of aerospace and automotive products and supplies. Before implementing its HR technology system, the 45,000-employee enterprise grappled with ineffi cient and expensive HR processes in operations across 36 countries.
“Textron was highly decentralized with numerous payrolls and HR systems using varying levels of technology,” says Wendy Raymond-Dunham, from the firm’s HR Operations and Compliance Center of Excellence. To address the problem, Textron overhauled its processes and systems by establishing regional HR call centers, a global HR information system and an improved employee self-service HR site.
“The redesign of the HR organization helped eliminate redundancy in systems and processes,” says Raymond-Dunham. Th e payoff? An estimated annual savings of $12.1 million. Shedding the administrative work also allowed HR to focus on “higher value-added activities,” including employee attraction, development and retention, she adds.
CORESTAR FINALCIAL GROUP
CoreStar Financial Group, a 190-employee, Maryland-based mortgage banking company, is using an IT system to collect data on the productivity of its sales representatives. “It identifies employees who may need additional training,” says CoreStar CFO Tom Monteleone. “We’re capturing data along the whole sales process.” He explains how the system measures various performance areas (known as metrics), including how many customers take applications, receive additional paperwork and send in their paperwork. Th e company developed the system internally, because off -the-shelf software packages were not robust enough to handle the job.
“We rank our employees on their success at moving the customer to the next stage, and identify opportunities for training them and determining at which point in the process their conversion rate seems to be slipping,” says Monteleone. The company then identifies employees who need extra help. “Right now, a lot of our focus is going to on-the-job training with managers sitting beside some of our employees.” Th e result is that CoreStar has increased sales by roughly 45 percent year over year, but only increased its sales force by 10 percent.
Technology can also address more basic HR functions, such as knowing where your employees are most needed. “Firms can use it to connect available workers to emerging job demands across a large enterprise,” says KC Whitehead, a consultant at Affi liated Computing Services, who has helped firms automate and improve HR functions.
He cites an example of a firm that had two lines of businesses both requiring engineers. “One is firing engineers and the other is hiring engineers, and the two don’t know it,” says Whitehead. “When you look at it from the big-picture perspective, that’s kind of silly. But without an HR ERP [Enterprise Resource Planning application], such as SAP, Lawson or Oracle to tie all of the HR information together, it happens all the time.”
Other common-sense saving opportunities are equally compelling. A direct-deposit paycheck system, for example, eliminates the need for paper pay stubs. One paper paycheck costs a company between $2 to $4, according to Whitehead. A company with 50,000 employees, all getting paychecks every two weeks, spends $2.6 million a year just to print and distribute the checks. “If you have a big organization, and you get everyone to go to a self-service HR site to view their paychecks, that can be a big savings,” he says.
PUSHING FOR CHANGE
While most large firms now use HR technology, only about 40 percent of midsize companies have implemented such systems, according to experts. Th e figure is even lower for small firms. Th is picture is changing, however, as HR comes under increasing pressure to demonstrate its strategic contribution to the bottom line.
To make the case, one technology vendor suggests HR offi cials identify and drill down on key challenges that could benefit from a technological solution.
Mike Hayes, vice president of sales and marketing at Ascentis (which markets the HROffi ce products), says HR should analyze and quantify the problem areas. Once the system is in place, they should measure the expected payback. If all goes well, they should be able to take the data and say, “Hey, Mr. CEO, look at this. Our bills have gone down by X percent.”
MEASURING ROI
“Calculating the ROI of HR is exceedingly diffi cult,” says Raghav Singh, product manager of human capital management at Lawson Soft ware. He points to the cost-per-hire calculation as an example. Direct costs in hiring include job-board postings, advertising and search fees, while indirect costs include recruiter and manager time.
“An overwhelming majority of organizations do not capture the data in suffi cient detail to allow for a meaningful ROI calculation,” says Singh.
Demand for soft ware products to measure HR ROI is growing, but very slowly. According to IBM’s 2005 Global Human Capital Management Survey, just 25 percent of organizations polled reported measuring the ROI of human capital programs.
Michael Mercer, author of Turning Your Human Resources Department Into a Profit Center, urges HR professionals to begin measuring HR performance if they hope to survive. “Companies run to make profits,” he says. “Th ey don’t run in order to keep people employed or be do-gooders, like a lot of HR people think they’re supposed to do.”
Technology can accomplish many of the administrative tasks that HR professionals still spend so much time doing, says Whitehead. It allows companies to consolidate HR activities, and in many cases outsource many HR functions to service centers.
“If you take all of the administrative work out of the field, you won’t need as many HR people,” Whitehead says. “It sounds cruel and harsh, but that is where the money is—doing better HR with fewer people.”