Author: Samuel Greengard

The complexity of today’s human resources management systems and the technical demands placed on an organization–and its IT department–are leading many companies down the path of business process outsourcing.

    But achieving success is no simple matter. Not only is it important to know when to outsource, but it’s also essential to know how to use outsourcing to full advantage. Here are 10 questions that industry guru Naomi Bloom says organizations should ask before embracing human resources BPO:

• Does the outsourcing opportunity match the organization’s business needs? If an outsourcing initiative can create a strategic advantage, then it’s worth pursuing. If it’s merely intended to deal with temporary tactical problems–such as a reluctance to invest in an upgrade to a core HRMS while revenues are down–then it’s doomed to failure.

  
  

• Will outsourcing improve performance? A successful outsourcing initiative translates into service that is better than it would be if an organization handled the tasks internally. Before turning to BPO, it’s important to ask how and why it will drive improvements.

  
  

• How can an organization that turns to outsourcing develop excellent human resources generalists, specialists and experts in managing vendor relationships? Remaining human resources executives and managers use metrics and other measurements to ensure that the company is managing its initiatives and relationships well and meeting business goals.

  
  

• How can an organization understand and control costs? It’s essential to understand the cost structure for various components of outsourcing, particularly if the entire package of products and services is bundled into a single fee.

  
  

• How can outsourcing affect the organization in an acquisition, merger or sale of a peripheral business? Any structural change to the organization can create new challenges and alter the dynamics of the business. It’s wise to understand such implications up front.

  
  

• Are the financial projections accurate? Take a critical look at the numbers, particularly those generated by a vendor, and try to spot assumptions, over-simplifications or just plain misleading figures.

  
  

• Are adequate protections in place for when business conditions change? Make sure that the proposed contract protects your organization as much as it protects the outsourcing provider. Your business may look quite different three to five years from now.

  
  

• What are the cultural ramifications of BPO? How will managers and employees react to the changes? Will these individuals view the new system as a positive or a negative? How can such reactions affect the success of the initiative? Is it possible that these individuals will walk out if they see a major upheaval?

  
  

• Who will manage the financial and performance aspects of the project? Without people, processes and technology to measure and manage the outsourcing initiative, an organization can find itself overspending and underachieving. Factoring the management aspects of the task into the initial proposal can reduce the odds of problems occurring later on.

  
  

• Is there an escape strategy? If the BPO provider fails to live up to expectations–even with a solid service-level agreement in place–or if the vendor is acquired by another firm that has been previously rejected (because of management style, ethics, customer-service track record, technology, geographic coverage or other factor), there must be a way to make a change without enduring a crippling disruption.

  
  

You think a congressional debate can be contentious? Try finding a recruiting application.

    “It is not unusual for human resources, the IT department and corporate executives to have entirely different ideas about which system is best and what approach to take,” says Ed Newman, president and founder of The Newman Group, a Phoenixville, Pennsylvania, consulting firm.

    While human resources may view functionality, speed and performance as key factors, the IT department is more likely to regard compatibility, ease of integration and its ability to support the application as the most significant issues. Executives, on the other hand, often prefer to leverage a company’s existing enterprise technology investments. Not surprisingly, cost and compatibility often win out–with the organization opting for the more basic functionality that comes with an enterprise resource planning module orhuman resources management systems. A niche or “best of breed” solution is viewed as a luxury.

    The end result? An organization can compromise its ability to achieve recruiting success. “It is possible to wind up with different factions that do not understand the functional and strategic issues,” explains Tedd Long, managing consultant and director of HR technology at Findley Davies, a Toledo, Ohio, consulting firm. Ultimately, “a company can spend a lot of money and time putting an application in place that isn’t right for its needs.”

    Too often, he says, workforce-management executives begin a selection process on their own–without consulting other departments or divisions. By the time others find out what is being proposed, there’s resentment over not being involved in the selection process, and an adversarial relationship develops. Even worse, key factors in the decision-making process–technical, practical and strategic–wind up receiving too little attention. Although functionality and strategic issues are important, a company should not base a decision solely on these factors, Long says.

The payoff
    Although the IT selection process has always been a hotbed of conflicting ideas, opinions and approaches, the factors leading to disagreement have increased in recent years. Prior to the 1990s, organizations had fewer choices to ponder. Typically, they bought a mainframe and built custom applications to run on it. Although various departments, such as human resources, provided input, it wasn’t possible to heavily customize applications to fit specific needs and scenarios, Newman points out.

    The situation began to change in the 1990s, when client-server applications emerged. Later, the Web opened up even greater opportunities to create highly flexible and highly customized systems. As finding and retaining talent became increasingly important, many companies began to look at recruiting systems to turbocharge their capabilities. Not only could these systems process applications electronically and store them in a vast database, but they also could analyze all the résumés and pinpoint the top candidates quickly.

    Today, many companies find themselves with recruiting software that came with an SAP, PeopleSoft or Oracle implementation. Although an organization can achieve considerable cost-savings using the software, it often comes at a price: a 6- to 18-month lag in features and performance compared to top-tier, best-of-breed applications. “Many human resources professionals feel that they’re at a disadvantage without leading-edge functionality,” Long explains.

    For many companies, figuring out the ROI of these technologies is a complex equation. A top-of-the-line, best-of-breed product might cost $50,000 for each site license–$1 million for 20 users, for example. Although a PeopleSoft, SAP or Oracle applicant-tracking system often comes with the core ERP product, it might not provide the level of functionality a company requires.

    It’s important to calculate not just the cost but also the value of a faster or more robust system–what it’s worth to have recruiters spend less time on administrative tasks and more on recruiting. Freeing up time to do more recruiting–and having a system with faster and better search capabilities–can ultimately lead to better hires. The value ofbetter hires is also tough to quantify, but is often associated with higher productivity and lower turnover.

    Companies typically expect to achieve an ROI on a system within 18 to 24 months (though many aim optimistically but unsuccessfully for 6 to 12 months).

A “love triangle”
    AtSouthern Company, an Atlanta utility and electrical distributor with more than 26,100 employees and $11.2 billion in 2003 sales, putting an effective applicant-tracking system in place was a top priority. Just over four years ago, the company began examining software packages in order to provide relief for recruiters, who found themselves increasingly burdened by the high volume of résumés streaming in. Southern Company receives upwards of 150,000 applications each year for 1,800 to 2,500 open positions. “Finding the right candidates from such a large stack of applications is an enormous challenge,” says recruiting manager Eric Muller.

    The HRMS staff began investigating software applications and examining how the firm could consolidate and unify existing systems. After extensive analysis and discussion, executives opted to use an existing PeopleSoft applicant-tracking module to manage the process. Muller describes the decision as a “love triangle”–with IT, HRMS and an executive team all stating different preferences and desires. “Ultimately, the decision was a compromise for everyone because there were three different agendas involved.”

    According to Muller, the experts in human resources technology would have liked to use a best-of-breed approach; this would have given them the functionality they wanted. Their first preference would have been a combination of Hire.com and PeopleScout, which is used to track phone interviewing and scheduling. Hire.com was being used as the Web-based front end, but human resources wanted to use the product to manage the whole recruiting process. From the beginning, IT wanted to maximize the existing investment in PeopleSoft and minimize implementation and integration issues.

Put it through a test
    Building a solid business case is key, Long says. When workforce-management executives spend their time building a strong case for a particular system and the ROI it can provide, they’re much more likely to receive the system they desire. “Sit down and compile a list of functional requirements up-front. At that point, it is possible to make a more logical and compelling argument to IT and an executive team,” he says. “Simply creating a matrix of functional requirements and comparing best-of-breed and enterprise vendors allows everyone to view information in a useful way. It is a much stronger and more persuasive argument than simply saying, ‘It’s less expensive’ or ‘It’s better.’ “

    Johnson Controls, a Milwaukee manufacturer of automotive systems with sales of $22.6 billion in 2003, has taken the process a step further. As part of its evaluation process, it conducted usability sessions with suppliers as well as a group of recruiters and managers. “The usability analysis proved invaluable in our selection process and served as a necessary step in change management,” says Carol Willenbrock, executive director of human resources. She says that it allowed human resources and IT to get closer to the potential products and identify the strengths and weaknesses of each.

    In the United States, Johnson Controls uses PeopleSoft 8.3 for human resources, payroll and benefits administration. However, it opted to go with a Recruitsoft package to manage applicant tracking and hiring. From the beginning, human resources and IT worked together to analyze and evaluate vendors and packages. In fact, IT conducted its own technical study of various programs–looking at such factors as user interface; process efficiencies; ease of use for recruiters; ease of use for job-seekers; system reliability, performance and security; configurability versus customization; and the vendor’s financial standing and reputation for customer support. In all, the company examined 70 factors.

    The end result was a process that allowed all key players to provide input, and enabled the company to make a decision that seemed to work best for everyone. Johnson Controls hopes that the recruiting system, scheduled to go live in the early fall, will help the company achieve significant cost gains and operational efficiencies.

Team effort
    Newman believes that as recruiting evolves into highly focused talent acquisition and human-capital management, workforce-management executives will have to work closely with other departments, including IT and finance, to choose systems that keep the company competitive on the labor front. “HR will not have carte blanche decision-making ability,” he says. “The CIO and CFO play an increasingly key role.”

    Although some compromise is unavoidable, Newman believes that workforce management can sway the decision-making process and help executives focus on key strategic issues. “By putting a formal selection process in place and conducting a detailed analysis,” he says, “it is possible for a company to make a selection based on its underlying business requirements.”

Name	Title	Speaking Fee	Schtick	Books	Web
Clayton Christensen	Professor, Harvard Business School	$40,000+	“Disruptive technologies” will force innovation	The Innovator’s Solution (2003) ▪ Innovation and the General Manager (1999) ▪ The Innovator’s Dilemma (1997)	www.claytonchristensen.com
Jim Collins	Independent researcher	$45,000+	Ideology, not technology, defines long-term success	Good to Great (2001) ▪ “Building Your Company’s Vision,” (1996) ▪ Built to Last: Successful Habits of Visionary Companies (1994) ▪ Beyond Entrepreneurship: Turning Your Business Into an Enduring Great Company (1992) Collaborator/Coauthor: Jerry Porras	www.jimcollins.com
Stephen Covey	Author, Co-chairman, FranklinCovey Co.	$65,000	Successful lives lead to business success	First Things First (1994) ▪ Principle Centered Leadership (1991) ▪ The 7 Habits of Highly Effective People (1989)	www.franklincovey.com
Gary Hamel	Founder and chairman, Strategos	$50,000+	Companies must identify their “core competencies” and strive to attain “stretch goals”	Leading the Revolution (2000) ▪ Competing for the Future (with C.K. Prahalad, 1994)	www.strategos.com
Michael Hammer	President, Hammer and Co.	$2,500 + per student	Companies must embrace change by reengineering themselves around their core processes	The Agenda: What Every Business Must Do to Dominate the Decade (2001) ▪ Beyond Reengineering (1997) ▪  Reengineering the Corporation (1993)	www.hammerandco.com
Rosabeth Moss Kanter	Professor, Harvard Business School	N/A	Innovate and grow through knowledge and empowerment	Leadership and the Psychology of Turnarounds (2003) ▪ E-Volve!: Succeeding in the Digital Culture of Tomorrow (2001) ▪  Innovation: Breakthrough Thinking at 3M, DuPont, GE, Pfizer, and Rubbermaid (1997) ▪  World Class: Thriving Locally in the Global Economy (1995) ▪ The Change Masters (1983) ▪ Men and Women of the Corporation (1977)	N/A
Don Peppers and Martha Rogers	Founders, Peppers and Rogers Group	N/A	Companies need to know today what customers will want tomorrow	The One to One Manager (1999) ▪ The One to One Fieldbook (1999) ▪ The One to One Future (1993)	www.1to1.com
Tom Peters	Founder, Tom Peters Group	$65,000	Overthrow the traditional corporate hierarchy	Re-Imagine! (2003) ▪  Liberation Management (1992) ▪ Thriving on Chaos (1987) ▪ In Search of Excellence (1982)	www.tompeters.com
Michael Porter	Professor, Harvard Business School	$70,000	Successful strategy boils down to three essentials: cost leadership, differentiation, and focus	The Competitive Advantage of Nations (1990) ▪ Competitive Advantage (1985) ▪ Competitive Strategy (1980)	www.isc.hbs.edu
Don Tapscott	President, Digital4Sight	$35,000+	The Internet will dominate industry in the future and business transparency is inevitable	The Naked Corporation (2003) ▪ Digital Capital (with David Ticoll and Alex Lowy, 2000) ▪ Creating Value in the Network Economy (1999) ▪ The Digital Economy (1996)	www.tapscott.com

Applicant-tracking systems and recruiting software can cost anywhere from a few thousand dollars to several million dollars, depending on the size of the organization, the scope of the project and the particular application.

    With that investment, time to hire may plunge by two-thirds and cost per hire by 40 percent or more. Many organizations also reduce turnover by 10 percent or more by hiring more effectively up front. In many cases, however, the technology proves to be a disappointment.

    Here are some of the fallacies that have caused companies to go astray:

1. You can handle all recruiting online. There’s no question that the Web has made it a lot simpler to reach hot prospects–and for them to reach you. It can also slash recruiting costs dramatically. However, it’s not the only game in town. Recruiters with solid industry connections are essential for finding candidates for senior- and executive-level positions, and valuable for combing through piles of résumés for many other positions. What’s more, paper-based résumés can yield impressive results.

If it’s not possible to process paper or scan it, it’s wise to at least send a letter or e-mail to the individual asking that he or she head to the Web site to fill out an electronic résumé. Otherwise, “an organization can see excellent candidates slip through the cracks,” notes Peter Weddle, a leading expert on online recruiting.

2. The software will find the best candidates. It’s tempting to think that an applicant-tracking system will mine all the résumés that stream in, monitor job boards and land all the A-players your organization desires. Unfortunately, switching on a totally automated system is a recipe for disaster. “It is essential to have a sourcing strategy for driving hot prospects to your Web site,” says Scott Erker, a vice president at DDI, a Bridgeville, Pennsylvania, consulting firm. “Otherwise, unless you’re a brand-name company with incredible appeal, you may wind up with a lot of candidates, but a lot of mediocre candidates.”

Attract desirable candidates through a well-designed corporate Web site, job boards, professional journals, job fairs and highly targeted advertising. And use recruiters–internally or externally–who understand the needs of the organization.

3. The computer will help an organization work faster and better. Faster, yes. But better, only if you use the system effectively. Unfortunately, “too many organizations take an entirely myopic approach to applicant-tracking systems,” says Weddle. “They wind up using them for ad hoc sourcing.” Indeed, a recruiter searches the database to find the candidates of the moment–usually the first names that pop up on a list.

A better approach, Weddle says, is to identify prospects up front, communicate with them regularly and even pre-qualify them. Then, when an opening occurs, it’s possible to speed up the hiring process and slot them into a position–with a much higher rate of success.

4. Today’s applicant-tracking software doesn’t require training. One of the biggest mistakes, says Jim Holincheck, a research director at Gartner, is unleashing human resources staff and recruiters on a system without adequate training. That can lead to bad searches and interviews with unqualified applicants. Simply typing in keywords is no guarantee of success. An applicant could be studying for an MBA and play Chinese checkers as a hobby but appear on a search for MBAs who speak Chinese. “Candidates are getting smarter and stuffing résumés with keywords,” says Scott Johnson, a human resources business consultant at Household Finance, a Prospect Heights, Illinois, lender that receives more than 1,000 online résumés each day. “The software must have an artificial-intelligence component, and recruiters and line managers must understand how to use it correctly.” With AI, the software can analyze word patterns in a résumé and discover whether an applicant might qualify for a certain job, and do it better than a run-of-the-mill keyword search can.

5. A good applicant-tracking system makes interviewing and background checks less significant. While an applicant-tracking system can generate a list of solid candidates, that’s only the starting point, Erker explains. “A company still has to be very good at interviewing candidates, and it must use screening tools and background checks to ensure that the person has the skills and integrity that are desired.”

Without the right mix of systems and tools–and an appropriate understanding of how to use them–line managers and others will likely find themselves hiring the wrong applicants. An organization could find itself staring down the barrel of high turnover, increased labor and recruiting costs, theft, drug use and an array of other problems.

6. All systems are created equal. While many of today’s applicant-tracking software tools function in a similar way, there are significant differences between various products. “All organizations are somewhat idiosyncratic, and what works for one might not work for another,” Weddle explains. What’s more, some products are better for certain types of organizations–or certain industries. Too much emphasis on the up-front price can torpedo ROI down the line. “It’s often necessary to customize a system to handle specific challenges or problems, and have special reports and forms available,” he adds.

Without the right product, a company can find itself boxed in and forced to use a system that creates more problems than it solves.

7. A good recruiting and applicant-tracking system will force a company to put effective business processes in place. Nothing could be further from the truth. The most outstanding system in the world can wreak havoc if an organization doesn’t have solid practices in place to support recruiting and hiring. “It’s important that an organization understand the business problem and what it is trying to accomplish,” Holincheck observes. In fact, the underlying business issues affect not only the decision about which product to purchase, but also how the entire process of recruiting and hiring takes place. That can mean scrutinizing everything from job descriptions to the formal requisition process. Johnson, from Household Finance, adds: “Many companies believe that once they launch a program, they can sit back. There are ongoing issues related to productivity, training, evaluation, metrics and system compliance. In reality, it’s an always evolving and ongoing process.”

Throughout history, humans have spent countless hours debating the relative merits of tools: swords versus spears; cable versus satellite TV; Ford versus Chevy. In today’s business world, similar vexing issues must be addressed. And if you listen to Richard Pikowski, vice president of payroll and benefits at Crédit Lyonnais, the New York arm of the French banking and financial firm, he will politely inform you that none is more significant than the choice between an enterprise resource planning application and best-of-breed software. “It’s a decision that every company must make,” he says.

Pikowski isn’t one to take those words lightly. In 1996, Crédit Lyonnais began to examine different options for payroll and various other human resources functions. For the next year or so, he and other executives at the firm considered various approaches and solutions, including adopting an ERP package from a major vendor. Finally, in 1998, Crédit Lyonnais opted to abandon existing HRMS and payroll systems but to maintain the best-of-breed approach to which it had become accustomed. A human resources management system from Ultimate Software along with various other packages, some developed in-house, offered the company far greater flexibility, Pikowski reasoned.

The end result? Crédit Lyonnais has achieved the flexibility it needs without breaking the bank. “We have been able to streamline processes without feeling as though we’re locked into a particular approach or technology,” Pikowski says. “We have specific desires and needs and prefer systems that allow us to work the way we see fit. We do not want the rigidity that comes with many of the ERP systems now on the market.” The bank has integrated the core UltiPro payroll and HRMS functions with an in-house time and attendance system and outside tax-reporting services from Ceridian. It also uses a Web-based time and attendance system and is now migrating to Oracle for financials and general ledger. All of this has helped cut costs by nearly 25 percent.

The great debate over ERP versus best of breed is once again flashing across radar screens and computer screens. Although the fundamental issue has existed for well over a decade–as enterprise computing has matured–open standards, more sophisticated software, and the ability to integrate more easily and painlessly have prompted many organizations to take a closer look at the topic. “It’s an issue that organizations continually wrestle with,” observes Jim Holincheck, a research director at market research and consulting firm Gartner, Inc. “There’s no one-size-fits-all approach.”

What makes the issue so complex, and even gut-wrenching, is that the pressure to perform is now greater than ever. As organizations look to slash costs, boost productivity and streamline work processes so that they can compete more effectively in today’s business environment, information technology is under the magnifying glass. And while an ERP suite can simplify data integration and provide a streamlined way to get data to various divisions, departments and people, it typically costs a tidy sum and doesn’t always provide the leading edge that some organizations desire. On the other hand, an unfocused BoB strategy can drain the coffers and prove downright troublesome without achieving the desired return on investment. Besides the challenge of tying together disparate systems, there’s the question of whether a best-of-breed vendor can provide long-term service and support.

 

“It’s an issue that organizations continually wrestle with. There’s no one-size-fits-all approach.”

 

Further complicating matters is the fact that there’s no simple definition for best of breed. The term generally refers to applications that are designed to handle a single business function as opposed to an array of functions, but there’s no guarantee that a BoB product performs better than a comparative ERP tool. Ultimately, there are cost issues to consider, performance factors to weigh and IT matters to think about. “The issue isn’t only about which features an application offers, but also how it integrates throughout the enterprise and what it allows a company to do,” says Monica Barron, a research director at AMR Research, a Boston-based market research and consulting firm.

Breeding success
A couple of decades ago, choosing enterprise applications was a fairly straightforward proposition. Most organizations plopped a mainframe computer in place and unleashed an army of programmers to develop a homegrown application. Then, in the early 1990s, the birth of client-server computing models, which brought PCs to the desktop, changed all of that. It ushered in an era of shrink-wrapped applications, complete with templates and tools for myriad tasks.

Suddenly, companies began to carefully evaluate software and systems and make decisions about what worked best using side-by-side comparisons. However, by the mid-1990s, networking and e-business once again altered the landscape. No longer could each department choose specialized software in a vacuum and operate as a data island. Organizations found themselves sharing departmental data across the enterprise, frequently through an intranet or portal.

As the definition of data ownership has changed, so too have enterprise systems. For example, operations and HR must now tap into budgeting and financial-reporting tools to make more informed decisions. Project accounting functions have migrated away from headquarters and into the field. And companies increasingly plug sales and marketing data into a database to determine the value and performance of particular employees and work teams. That, in turn, can determine who gets raises and who needs additional training.

For many companies, this enterprise-wide hunger for data has led to an ERP-centric model. After all, one of the promises of enterprise resource planning suites is piping data to all corners of a far-flung organization. In recent years, SAP, PeopleSoft, JD Edwards (recently acquired by PeopleSoft), Oracle and Lawson Software have emerged as major players in the enterprise computing universe because they’re able to deliver on the concept of a one-source solution. “The high level of data integration and a standard interface make them very powerful and appealing,” says Kathy Battistoni, partner in the human performance service group at consulting firm Accenture.

One firm that has plugged into an ERP-centric approach is TransAlta Corp., a Calgary, Alberta, power producer and reseller with 2,500 employees in North America and Australia and sales of $1 billion in 2002. In 1998, the company ditched an array of systems in favor of an SAP R/3 implementation. “We made a conscious decision to embrace a single platform,” says Mike Williams, senior vice president of human resources. “We recognized that HR is only part of the enterprise picture and that a single data-delivery mechanism would boost our capabilities.”

 

“The issue isn’t only about which features an application offers, but also how it integrates throughout the enterprise and what it allows a company to do.”

 

Today, the ERP suite automates an array of functions: employee and managerial self-service, recruiting, hiring, benefits administration, payroll and reporting. TransAlta also is in the process of adding a sophisticated performance-management module and is eyeing several other upgrades and additions, many of which interact with other ERP applications run by finance and operations. The results are notable. TransAlta has trimmed transactional activity by 60 percent and slashed HR administrative staff by about 55 percent. The annual savings has topped out at more than $800,000. Equally important, the company has realized gains that extend beyond dollars and cents. “The system allows managers and others to engage in more strategic work,” Williams says.

Last year, when TransAlta began scrutinizing salaries and conducting comprehensive compensation planning, managers turned to the ERP suite to analyze data without diving into a swamp of spreadsheets. “They could look at how each individual or group of employees affected budget planning on a dynamic basis,” Williams says. “With the ability to view the entire organization, we were able to eliminate the drift that’s usually associated with the process. We came within $500 of budget.”

An enterprising approach
The divide between the ERP and BoB worlds isn’t as clear-cut as it might at first seem. In reality, many organizations turn to enterprise resource planning software for core functions like payroll, benefits administration, employee and managerial self-service, and performance management. However, many of these same companies also use best-of-breed applications to fill needs on a niche basis. Among them: time and attendance, succession planning and e-learning.

Gartner’s Holincheck calls it the “hype cycle.” As best-of-breed vendors discover new market niches and develop products that attract interest in the marketplace, ERP vendors take notice and play a frenzied game of catch-up. Over time, the ERP applications mature and BoB providers find new opportunities. A few years ago, for example, online recruiting and performance management fueled best of breed. Today, ERP vendors have acquired or developed their own offerings, and BoB vendors are pushing into new territory such as workforce analytics and workforce optimization.

The gap between best-of-breed software and ERP applications is also narrower than in years past. “Many ERP vendors have focused on providing more robust functionality,” Battistoni says. Although they may not offer all the bells and whistles of a BoB package, the difference isn’t great enough to justify veering toward a mélange of BoB products. “Many buyers feel that what they gain in a standard interface and improved data integration with ERP more than offsets the richer features of a best-of-breed product,” she notes.

ERP systems, of course, don’t come cheap. For small to medium-sized businesses, most applications are entirely out of reach at $2,000 to $8,000 per seat. Yet even for large organizations, an enterprise resource planning approach isn’t a slam dunk. “It’s best to buy a system for the core payroll and benefits functionality and worry about future features, such as performance management or competency planning, later. Either the ERP provider will offer the capability or a best-of-breed vendor will offer a product,” Battistoni says. And as the market moves from data automation to data analysis, many best-of-breed vendors have a distinct advantage. Their products are more powerful and flexible.

To be sure, BoB applications aren’t likely to wind up on the endangered-species list anytime soon. Deborah Leland, director of strategic enterprise development for Akibia, a Westborough, Massachusetts, systems integrator, is well aware of that fact. After sorting through all the issues almost two years ago, the 450-person firm opted to go best of breed. Leland looked at PeopleSoft and other enterprise suites but decided to stick with an approach that allows Akibia to use best-in-class systems. The company turned to an application service provider-based HRMS from Employease, and has plugged in a homegrown time and attendance system (a manual process via e-mail), along with the Certif-A-Gift employee-recognition application. Today, the system manages virtually all internal HR functions. “We’re able to handle virtually the entire life cycle of an employee,” she explains.

At Crédit Lyonnais, the story is much the same. In the past, “we didn’t have the flexibility we required. We couldn’t manage information as effectively as we needed to,” Pikowski says. The company’s approach was highly fragmented, with an HR system, outsourced payroll processing and various plug-in applications. By switching to the UltiPro HRMS, it consolidated various functions without finding itself locked into an ERP package.

“The key issue,” Holincheck says, “is what kind of return on investment a particular application offers. If the payback is relatively short, then it’s probably wise to go with a best-of-breed vendor. If the short-term gains aren’t all that significant, it might be wise to wait until the ERP vendor offers the desired functionality.” Oftentimes, it’s a balancing act. In the real world, most organizations understand, it’s impossible to get everything from a single ERP system. As Jeff Beinke, vice president of product strategy at Employease, explains, “[It] means looking at a combination of software and outsourcing services to meet an organization’s business objectives.”

To a certain extent, the debate over enterprise resource planning versus best of breed misses a basic point: swords and spears each offer a tactical advantage when they’re used in the right situation, and a skilled army uses whatever works best in a given battle. Centuries later, the story is the same. “There’s no single way to succeed or fail,” Barron says. “It’s important to use a combination of applications that makes sense for a particular company.”

Workforce Management, November 2003, pp. 53-56 — Subscribe Now!

Organizations can find their way through the perils of the enterprise-application selection process by:

Assessing the complexity of current and anticipated planning requirements, including the speed of cycle times. It’s essential to consider previous planning successes and failures. This can help an organization identify critical planning and buying needs. AMR Research suggests that organizations use this information to shop for products accordingly. It also advises that companies ask vendors to demonstrate the benefits of their proposed systems with actual scenarios suited to the organization’s requirements.

Looking for software that gathers and translates data across the supply chain and allows for quantifiable and qualitative planning. Applications should accommodate data and connect to other systems. Applications should be driven by work flow, and accommodate multicurrency and multilingual translations, e-mail and alerting features. They should also provide a way to link to human-capital management and analytics software.

Minimizing project and implementation creep by asking vendors in detail about integration issues, best-practice templates and planning and analysis experience in their industry. This direct approach is particularly critical for planning that cuts across CRM, ERP and supply-chain data, as well as data residing outside the corporate firewall.

Workforce Management, November 2003, p. 56 — Subscribe Now!

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.

“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.”

    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.

“There is still a heavy reliance on paper and forms. Many organizations are taking on projects at a very deliberate pace.”

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!

Robert Capwell has seen the future of electronic communication and he’s not exactly pleased. While the goal of staying in touch with employees, customers and business partners is noble enough, today’s technology can create more than a few diversions and even devastations along the way. And in his mind, nothing is more than the wildly popular practice of sending instant messages. “It can become a productivity drain and a security concern,” says the president and CEO of Comprehensive Information Services, Inc., a Pittsburgh firm specializing in background checks.

Capwell speaks from experience. A couple of years ago, employees began using AOL instant messaging to communicate with one another. At first, he welcomed it as yet another tool in the digital arsenal. But as time went on, he began to notice that employees were using it to chat with one another and talk to people outside the office. The productivity drain was bad enough, but when the company got smacked with a computer virus transmitted through IM, he pulled the plug. “We established rules about electronic communication, and one of them was to ban the use of instant messaging,” he says.

These days, it seems that instant messaging is as popular as BlackBerries for speed dating. According to market research and consulting firm Gartner, 70 percent of all enterprises will use IM by the end of 2003. Meanwhile, market research firm IDC predicts that the corporate instant-messages market will grow from 5.5 million users worldwide in 2000 to 180 million in 2004. By then, the number of messages sent will approach 2 trillion annually.

Yet despite its enormous popularity–understandable if you consider that IM lets users connect to others inside and outside a business at any given moment–some are now taking a critical look at these systems. “Many companies are in denial about how much instant messaging is going on and the risks of using it,” says Larry Pearlstein, a managing vice president at Gartner. “There’s a lot of valid business being conducted using these applications, but for most organizations, the concerns over security, productivity and legal issues outweigh the potential benefits.”

Talk is cheap
   What makes IM so compelling is that it’s insanely simple to use. Employees can see who else is available, and if it’s someone they want to talk to, they’re able to connect in real-time. Passing messages back and forth is as easy as typing sentences and clicking a send button. What makes it more than a bit scary is that consumer versions of IM such as Yahoo! Messenger, Microsoft MSN Messenger and AOL Instant Messenger–which employees might install themselves–can provide entrée to hackers and data thieves. It’s possible for a participant, either intentionally or not, to send viruses through many IM applications via an attached file or a linked Web page.

“Without encryption and virus protection, instant messaging is an open door,” says David Perry, global director of education for Trend Micro, a leading IT security provider. He notes that viruses, worms and Trojan horses can wreak havoc. So-called keystroke loggers can record everything workers type and transmit the data to a remote PC; backdoor programs allow someone to browse the hard drive, alter files and even turn on the PC’s microphone or video camera; and garden-variety viruses can annihilate data and trigger productivity chaos.

Legal issues can also be potentially perilous. Lacking a record of electronic communications with customers and employees, companies can find themselves in a netherworld where it’s one party’s word against another’s. That’s an especially serious concern in the health-care and financial-services arenas. Last December, the Securities and Exchange Commission, New York Stock Exchange and National Association of Securities Dealers fined Goldman Sachs, Morgan Stanley, Salomon Smith Barney, Deutsche Bank Securities and U.S. Bancorp Piper Jaffray a total of $8.25 million for improper retention and destruction of e-mails and other electronic documents.

That’s not all. “There are potential sexual-harassment and wrongful-termination issues, if a company doesn’t take the necessary precautions,” states Chanley T. Howell, a partner at Foley and Lardner, a Jacksonville, Florida, law firm specializing in e-business and information technology. Although a rogue instant message or two may not represent a threat–even if it contains material that’s pornographic–an ongoing pattern of such messages slipping through, combined with unacceptable behavior within the organization, could land a company in court.

The productivity drain can prove even more frustrating. IDC reports that 30 to 40 percent of Internet use in the workplace isn’t related to business, and employee misuse of the Internet is a $63 billion problem for corporate America. While IM is only a small part of the vast Internet universe, it’s clear to Capwell and others that without strict controls, some employees will abuse such systems.

The message is clear
   Despite a hornet’s nest of potential problems, a growing number of organizations are making IM part of their digital tool chest. At Magnet Communications, a New York-based public relations firm with offices in eight U.S. cities, account reps and others regularly ping each other with questions and information using MSN Messenger. “People who are unreachable by phone or e-mail are often willing to exchange a quick IM,” says Catherine Morrison, an account supervisor in San Francisco. She uses IM 40 to 50 times a day.

At Avnet Computer Marketing, a distributor of mid-range to high-end systems and software, IBM Lotus Sametime enables 650 employees to share information and respond to customer needs immediately. That saves each employee 5 to 10 minutes a day. In addition, instant messaging allows technicians in the field to instantly determine who at the office is available and to quickly obtain answers to their questions without having to access e-mail or make telephone calls.

Unlike general instant-messaging systems, IBM Lotus Sametime offers a high level of protection, using encryption and a firewall to minimize threats. It’s part of a growing trend toward secure corporate IM applications. Other vendors that have jumped into the corporate IM space include Reuters and Yahoo! with its Messenger Enterprise Edition. Osterman Research reports that 28 percent of organizations are presently blocking IM traffic, and only one-third have settled on an IM standard.

In the end, perhaps only one thing is certain. “Instant messaging is here to stay,” Gartner’s Pearlstein says. “It’s become part of the business lexicon, and as with the Web and e-mail before it, organizations will have to learn how to use it safely and effectively. With adequate security measures and well-conceived procedures and rules, it can evolve from a bane to a more integral part of the way companies do business.”

Workforce, July 2003, pp. 84-85 — Subscribe Now!

Marcia Barkley, president of MBarkley Consulting in Sacramento, California,believes that workforce analytics will change the face of the organization. Here’sher take on what companies should be looking at and how they can navigate thisnew frontier.

Workforce: What is the driving force behind workforce analytics?

Barkley: Analytics has been around for some time within finance, customerrelationship management, and other areas. It has a proven track record. But ithas only been within the last couple of years that the area of HR and humancapital has begun to receive attention. It’s a softarea, so many people haven’t tried to tackle it. But as vendorssuch as PeopleSoft, Oracle, SAP, and others have introduced applications, exposure and acceptance is growing.

WF: Which organizations should use workforce analytics?

Barkley: HR-related metrics can provide significant value to anyorganization. The more accurate questions are: who can afford it–the softwareis still relatively expensive–and who’s ready to implement it. The realityis that implementation tends to be more complex andtime-consuming than for many other applications. That’s not becausethe software is inherently more complex or difficult to install. It’s becausein order to make best use of that software, an organization must pull togetherdata from many different sources. That translates into identifying data sources,data inconsistencies, and so forth.

WF: What are the key benefits of these applications?

Barkley: Organizations have an opportunity to transform basic data intointelligence and knowledge. They can find new ways to analyze business issuesand make better decisions–based on specific goals and objectives.

WF: What is the leading use for workforce analytics?

Barkley: Much of the focus is on compensation. These applications canindicate the actual impact of pay increases by showing therelationship with employee performance. They can help acompany model how different changes in incentive and benefits could affectproductivity among different employee segments. Another question this softwarecan help answer is, Do the employees in the top quartile of the salary rangeproduce proportionally more than those paid in the middle or bottomof the range?

WF: What factors go into choosing a vendor and product?

Barkley: ERP vendors offer products that are most valuable for companies already using their applications. Integration can be relativelysimple and, as a result, less expensive. However,companies that have disparate data sitting in an array ofsystems will probably require a product that can bridge all the differentenvironments.

WF: What is the future of workforce analytics?

Barkley: It is an inevitable part of the HR business. Unless HR departmentsface this fact and understand and embrace the change that comes with it, someother group within the organization will take the reins and gain the resultinginfluence and power. This is a way for HR to get a seat at the boardroom table.

Workforce, June 2003, p. 15 — Subscribe Now!

It’s friendlier than e-mail. It’s a virtual bargain. And it’s catching on asan effective way of communicating in-house with employees from Boston toBeijing. The technology, called IP/TV, allows employers to use company intranetsto send live video to employees.

    “IP/TV combines the advantages of television and a computernetwork,” saysGerry Kaufhold, principal analyst for Converging Markets and Technologies atIn-Stat MDR, a Scottsdale, Arizona, market research and consulting firm. “Theability to connect to thousands of desktops simultaneously can change the waycommunication takes place. Employees are more receptive to video than to anothertext e-mail landing in their in-box.”

    Not long ago, only the largest corporations could foot the bill for broadcastfacilities, satellites, and television networks. But the evolution of theInternet and video technology has made it possible for a broad range oforganizations to offer real-time speeches, training sessions, seminars,e-learning, and other services to employees.

    Here’s how it works. Rather than rolling a television set into an office,employees switch on a media player, such as RealOne Player, Apple’s QuickTime,or Microsoft’s Windows Media Player, to view content at their desktop or laptop.Some firms also embed icons and links in e-mail to simplify the process. If anemployee isn’t able to view a program at the scheduled time, he can usually tunein later by clicking on a link in a video archive. It’s a formula that’s helpingorganizations–such as Ford Motor, Wal-Mart, and Procter & Gamble–addenergy to internal communications.

    In the last two years, Chicago-based market research firm ACNielsen has usedthe technology for interactive Q&A sessions between executives andemployees, and to offer meetings and other events to more than 2,000 employeeslocated in 20 offices in the United States. The company provides two to threehours of IP/TV programming each month. Human resources has turned to it toconduct briefings and benefits meetings and to launch charity campaigns. Whileviewing a video at a PC, employees can type in questions anonymously and receiveimmediate responses. “The technology creates a sense of immediacy andspontaneity that can’t be captured on pre-recorded video. It’s a boon forcommunications,” says John Moses, senior vice president of human resources.

    At Fidelity Investments, live video is now available on 17,000 corporatedesktops. Every month, the Boston-based financial services firm offers as manyas 60 live events and 120 rebroadcasts over its intranet. These includeexecutive-management addresses, training sessions, and departmental meetings.Because the system works over a PC, presenters can interact with the audience inreal time and Fidelity can acquire demographic data about viewers.

Bobby Lie, Fidelity’s senior vice president of telecommunications, describesIP/TV as an “inexpensive way to reach a large and dispersed audience.” Heestimates that the company spends about $400 per broadcast hour to use IP/TV,compared to tens of thousands of dollars–and in some cases even more–to flypeople to meetings.

    In-Stat MDR’s Kaufhold says that small companies can put basic IP/TV tools inplace for a few thousand dollars–in some cases using existingvideoconferencing gear and technology that extends the data to an intranet.Professional technology can cost from $20,000 to six and seven figures. “It’stough to get people to read all the e-mail and FAQs,” he says. “In most cases,video is far more user-friendly.”

Workforce, February 2003, p. 15 — Subscribe Now!