Steve Foster
How HR directors can take the lead in creating value through HR technology
ÂÂ
By Steve Foster, business consulting manager, NorthgateArinso UK
Everyone knows technology can help reduce operational costs in HR, yet research has shown that many organisations struggle to get beyond the administrative benefits, and few fully exploit their investment in technology. Participants in a three year research programme generally agree that there is still work to be done to use technology to create value in the HR department and across the business – despite being aware of its potential value to their organisation.
 As we emerge from the recession, there are two key drivers for defining the value we get from technology. Firstly, the budgeting belts that have been tightened are unlikely to be loosened easily, meaning that new investment in support services for HR will be hard to come by and it will become paramount to drive value from existing investments. Secondly, as organisations prepare for growth, HR must be ready to support the business beyond the operational level, creating value in everything it does.
So why does it seem that driving value from technology investment resides at the bottom of an HR professional’s ‘to do’ list? Unfortunately, technology has an air of ‘witchcraft’ about it – clouded in mystery and often driven by IT-types who seemingly don’t speak the same language as HR. Despite HR’s best intentions, their relationship with technology can be somewhat uncomfortable. The attitude is often, “We know it’s out there, but we don’t know what’s possible, or how to use it to our best advantage.”
HR’s lack of awareness of the ‘art of the possible’ often means that technology is confined to running basic administrative services, rather than becoming a key strategic tool. Line managers become cynical about the investment, often creating a big gap between technology’s potential and its actual use. In many organisations, I have found that there is a lack of a common language or framework to discuss e-HRM value.
The eHRM Value Model has been developed to explain the three key areas where technology can provide the whole organisation with a way of defining the organisation benefits of e-HRM to give insight into where a little further effort could reap great rewards. Our research suggests that value can be created in three areas:
- Operational cost reduction: reducing the cost of day-to-day HR processes.
- People management / productivity: supporting managers in people management, together with better management information
- Strategic capability: deriving benefits that can only be accessed through technology, for example, on-line brand positioning to attract the right recruits
Most organisations understand tangible HR operational cost reduction. However, the real value comes not from taking cost out of processes, but from adding value in other areas. Bear in mind that the cost of the HR department is usually only around one per cent of total business costs, so even if you can shave thirty per cent off these costs, it’s just not significant enough in commercial terms. Even so, it’s often difficult to define the value created by people management and strategic aspects, in part because the benefits are more intangible; yet, these areas are where the most organisational value lies waiting to be realised.
Using technology to improve people management is about creating a toolkit for managers to manage people better, providing them with clearer information to make better decisions, ensuring adherence to HR policy and procedures and freeing up HR time to support managers. There is evidence that use of these tools is linked to higher levels of productivity in best of class organisations. Technology tools can also be pivotal in supporting a restructuring of the HR function.
Once this is in place, you can move to using technology to increase the strategic capability of the organisation as a whole. Automating web content and online recruitment can, for example, position you more strongly as an employer, improving your online employer branding – without increasing HR’s workload. Better long-term strategic information (rather than day-to-day operational information) is also included in this category, as is the potential to improve employee satisfaction with HR services.
These findings are based on research undertaken with fifteen large UK organisations, looking at perceptions and expectations of e-HRM about value. It revealed that many organisations simply do not know how to create an extended business case for e-HRM investment; it also highlighted that there is a gap between HR managers and line managers with regard to expectations, and an urgent need to create a common framework for describing value.
The result is the e-HRM Value Model, which sets e-HRM in the context of competitive advantage for the whole business. This is the real value of technology to HR – not just cutting costs, but contributing to business strategy, and success. Unless you can show added value, you simply won’t get priority for investment in technology.ÂÂ
Steve Foster is speaking at the Leveraging HR Technology 2009 conference on Wednesday 2nd December at BMA House in central London. Steve will discuss creating value through HR technology.
For further information on NorthgateArinso and how our solutions may work for you, please call 0800 035 0545, email [email protected] or visit www.northgatearinso.co.uk.
To register for the Leveraging HR Technology 2009 conference please visit www.symposium-events.com
Steve,
I agree with your assessment, that the presumed, and often limited measured value of HR technology is based on transactional efficiency. While this is an almost arcane method that hearkens back to the earliest concepts of “Data Automation”, for most organizations it is the quickest and most direct way to establish savings through reduced labor costs. Never mind that the validity to this approach is limited to actual reductions in headcount as opposed to redeployment.
Realizing gains in the other areas you mention are certainly possible; however, from my experience, most organizations are poorly equipped to provide the necessary metrics to measure change. For example, the quantifiable measures of an improved recruiting process should include reduced time-to-hire (from requisition to on-boarded new hire), and quality of hire, which can be measured through a couple of different indicators (turnover rates within first 30-60-90 days of hire; position based performance measures, etc.). What I’ve found in suggesting these types of measures, the general response is that there is a dearth of current state data, so establishing a baseline is not possible. And while analytics seems to be high on most organizations wish-list when considering technology, it usually falls to a lower priority during implementation.
Not to create barriers to the ideas you are rightfully suggesting, but I think some of the activities around organizational measurement need to be more fully imbedded into the transformational process.
You’re getting close. Its all about providing business solutions, not HR solutions. You have to engage key executive leadership and business unit managers to identify ‘business requirements’, not just HR requirements and making employees happy.
I discovered a long time ago that if you show how HR technology can deliver business solutions…value to the organization, not just HR needs, the executive leadership will pay for the best HR technology solution that meets ‘business requirements’ for business solutions and HR will get a robust solution for HR needs in the process.