HR Technology Strategy: e-HR, HRIS, and the Future of HR

Introduction: The Changing HR Landscape

Change continues to reshape the workplace. Today's HR professional is called upon to help the organization retain its competitive edge in the marketplace. Along with representing the best interests of employees, HR professionals assume the role of strategic partner, administrative expert, and change agent. HR assumes a critical role in promoting the vision and shaping the focus of the company. HR professionals must be skilled and knowledgeable business partners, able to wear many hats while demonstrating their own competencies in communication and decision-making skills (Aghazadeh, 1999).

Today, HR departments face many challenges. Some are conventional and continuing concerns. They include attracting, retaining, and motivating employees; ensuring legal and regulatory compliance; and managing the human side of technological change. Perhaps most critically, progressive HR departments are also charged with adding value to the corporation as they seek to meet the demands for a more strategic HR function—specifically, a shift from the tactical (transaction processing) to the facilitation of strategic planning (Ashbaugh & Miranda, 2002).

Employment contracts that represent long-term job security and predictable career paths are a relic of the past. In some cases, employees are viewed as transitional pawns—replaceable and transferable—giving their time but not really vesting in companies that fail to appreciate them as critical resources. Consequently, employees are losing the sense of loyalty they once exhibited. It becomes the vital role of HR to champion these employees and lead the drive to create an environment where employees feel valued, where they are willing to share ideas, work harder, and successfully interact with the customer (Aghazadeh, 1999).

Although HR has traditionally not been a profit center, it can still have tremendous impact on the company's bottom line. In terms of the recruiting process, for instance, there are measures that, given the appropriate human capital management systems, will allow a company to gauge the effectiveness of both its internal and external resources. HR departments can and should measure their efficiency in terms of their ability to understand, attract, retain, and make the most of human capital in realizing the entire organization's goals (Koven et al., 2003).

Faced with new challenges, many companies have restructured or revitalized their HR departments by launching a variety of organizational initiatives. These initiatives may take the form of leadership development and balanced scorecard projects, or they may manifest themselves in the creation of new roles like Chief Learning Officer or Chief Knowledge Officer. Typically, these mandates also initiate a debate regarding whether the new project or function belongs within HR. In many instances, HR loses. The very initiatives that would contribute to the renewal of HR are structured outside of it. This may be because placing a key strategic initiative inside HR reduces its perceived credibility or legitimacy (Saint-Onge, 1999).

In order for HR departments to provide comprehensive support for their companies and bolster their viability in the corporation, HR professionals need not only the traditional soft people skills, but they must also possess the ability to understand and support the operational requirements of the organization. This new proactive role helps ensure the success of the company and the survival of HR. From an operational perspective, HR professionals must understand the processes they support, helping to provide better solutions rather than simply automating ineffective existing HR systems. They must learn to think outside the box, setting organizational direction for employee empowerment. Beyond back-room support, the top HR professional is called to move to the boardroom, helping to shape the future of the organization through continuous improvement, the building of core competencies, and proactive goal setting (Aghazadeh, 1999).

Evolution of Current HR Technologies

The vitality of a world-class organization in the new millennium will depend upon the strength of its organizational infrastructure and the strategic vision of its HR professionals.

The first round of HR technological innovation focused on administrative functions. As with all significant investments in technology enhancements, HR departments must present cost justifications. The most obvious value of these first-generation HR technologies is in the reduction of paperwork, the streamlining of paper-based processes, the elimination of redundancies, and the reduction of errors created through manual processes. HR technologies also help departments create benchmarks of historical performance trends and patterns in turnover, cost per hire, and timelines. The less apparent value of these technologies extends beyond the obvious benchmarks, however, allowing companies to establish relevant measures of productivity and operational effectiveness (Koven et al., 2003).

In the mid-1990s, HR departments typically expected to invest in IT products with a lifecycle of five years. With the prevalence of Web-based technologies, this expectation has shifted. HR managers now need to ensure that their HRIS (human resource information systems) solutions both exploit the capabilities of the Internet and provide a suitable platform for future and near-term growth. Current HRIT (human resource information technology) sales are focused on the hard realities of cost savings and business efficiency. Self-service and performance management software top the list. Today, these products are sufficiently mature to garner the attention of the average cost-conscious practitioner (Rodgers, 2003).

The business case for e-HR is relatively straightforward in organizations where people are the main resource. When employees are the company's primary assets, the investment in them makes good business sense. However, in mainline industries such as manufacturing, the recruitment, staffing, training, and retention of personnel is much less strategic (Ball, 2002). In these cases, HR professionals must be even more diligent in presenting the business case.

Typically, organizations start with basic functionality—perhaps providing employees with the capability to change their demographic data online or, as an incentive to use the system, to view pay advice. Next, this self-service orientation moves beyond HR itself, becoming a vehicle for better knowledge management across the organization as it provides a platform for collaboration between different departments or even other companies. In the coming year, this functionality is expected to extend at both the employee and managerial levels, as manager self-service begins to accelerate into the mainstream. Applications are set to become richer in capability and more intuitive, with manager self-service also moving into the area of collaboration (Rodgers, 2003).

In the implementation of first-generation, transaction-based HRIS, companies can expect the following benefits: system integration and a common relationship database to gather employee information across the organization; elimination of data silos that may exist in highly bureaucratic enterprises; reduced risk related to legacy systems; elimination of redundant data entry; reduction of error-prone paper-based manual processes; improved staff productivity and more effective resource management; real-time transaction data throughout the organization; forced standardization of processes and embedded best practices; improved managerial information and reporting; allowance for expansion to emerging technologies; Internet and intranet capabilities; and employee self-service capabilities (Ashbaugh & Miranda, 2002).

Many experts believe that the increasing acceptance of self-service, along with the uptake of employee portals, will be a major factor in the adoption of the next generation of innovation: HRMS (human resource management systems). Rather than simply capturing data, HRMS supports managerial decision-making with intelligence. Typically, companies look to HRMS to capture the following advantages:

Improve core business processes. HRMS can automate standard HR processes such as recruiting and hiring. However, the technological capabilities are maximized when the tools are used to improve underlying business processes.

Develop human capital inventory. This includes tracking employees from application to retirement and allows organizations to match individual skills, interests, and performance with organizational goals, succession planning, and organizational charting.

Manage budget controls. The integration of HR with the financial planning process provides a critical function for line departments and budget staff interested in calculating current and future costs. It includes functionality that supports projections and forecasts based on headcount, hours, and actual expenditures, and links HR data to the budget planning process.

Changing Human Resource Role

Facilitate labor/management relations. HRMS can provide comprehensive and accurate analysis for critical labor-management reporting, such as seniority list tracking, disciplinary action, automated bid processing, grievance tracking, and effective management of workers' compensation and long-term disability programs.

Generate business intelligence. This term refers to the use of advanced analytical tools such as online analytical processing (OLAP), data mining, and Executive Information Systems (EIS). Business intelligence provides insight into organizational trends and improves organizational decision-making capabilities. Used in conjunction with HRMS, these tools can support HR management decisions, analyze turnover, recruitment, or training data, and assist with workforce and salary planning (Ashbaugh & Miranda, 2002).

When Sears, Roebuck and Company found themselves on the tail end of a ten-year business downturn, they knew that change was in order. In September 1992, Arthur Martinez began his tenure as head of the merchandising group by making monumental changes to the strategy and culture. Sales increased by more than 9% and total shareholder return rose by 56%. To leverage this success, Martinez created a core group of senior executives known as the Phoenix team. The charter of this team was to duplicate the success by creating a plan to implement and sustain changes across the entire organization. Using an employee questionnaire, the group determined that employee attitudes correspond to customer satisfaction. They perfected a model indicating that a 5-point improvement in employee attitudes drives a 1.3-point improvement in customer satisfaction, and that the increase in customer satisfaction drives a 5% increase in revenue growth. The bottom-line result was an additional $200 million in revenue, resulting in an increase of nearly a quarter of a billion dollars in market capitalization (Aghazadeh, 1999).

Interestingly, they found that two areas of employee satisfaction have the largest effect on employee loyalty and behavior toward customers: (1) attitude toward the job and (2) attitude toward the company. Through this experiment, it became clear that employees do matter. Any plan to increase profitability, stretch the margins, and expand growth will enjoy only marginal success outside of initiatives that include employees and their attitudes. In an increasingly competitive environment, it is patently clear that the HR role must expand (Aghazadeh, 1999).

In many companies, HR functions as the policy police and the regulatory watchdog. While these are both important roles, there are clearly other pressing needs in today's workplace. Many HR departments oversee recruitment, manage training and development, and design initiatives to increase workplace diversity. These functions, though important, are seen as auxiliary and not central to the actual work of the company. Admittedly, the duties performed by most HR departments are prosaic rather than transformational. The most innovative HR departments are doing more, however (Aghazadeh, 1999).

During economically challenging times, most companies have already realized the gains they could accomplish from downsizing, reengineering, delayering, and consolidation. Now they must consider revenue growth—an area where gains will be most difficult, requiring companies to exercise creativity, innovation, and collaboration. This is where factors like shared knowledge in a learning organization provide the critical competitive advantage (Aghazadeh, 1999). Enter the challenge of building, collecting, storing, and disseminating intellectual capital, enabled through technology and championed through people.

The most successful organizations of the future will be those that can attract and develop individuals who are empowered to manage global organizations—preferably ones that are responsive to customer needs and can exploit the opportunities presented by technology. It will become the HR department's responsibility to find, grow, and keep these employees, even as employee loyalty dwindles (Aghazadeh, 1999).

Further, the HR department will become the voice of the organization's employees—worker advocates who drive management decisions that will impact the long-term viability of the company. It will be their responsibility to help line management initiate practices that elevate employee morale so that employees grow and develop as valuable corporate assets. Many of these practices will be in support of technology that enables the creation of global capabilities through employee empowerment. HR departments will present opportunities for employees' personal and professional growth, and support them with tools and techniques that assist them in meeting the demands placed upon them. To achieve the long-term economic performance that will allow companies to thrive, it is critical that organizations invest in technology-enabled, people-based strategies. Forward-thinking HR professionals will drive these strategies (Aghazadeh, 1999).