Reference no: EM131052757

CASE

"Our people are our most valuable asset." How many times have you heard that company slogan? In recent years, HR departments have focused their technology efforts on driving down costs by automating or outsourcing nonstrategic, transaction-oriented processes such as benefits enrollment and payroll. As a result, many employees can now do a number of things online that used to require the intervention of HR staff, such as viewing pay stubs, changing personal information, or enrolling for benefits. Increasingly, however, HR is being urged not only to reduce the cost of hiring, retaining, and compensating employees but also to optimize the corporate talent pool.

After all, if your workforce is your biggest expense, shouldn't you shape it to support the strategic goals of the business in the best way possible? Imagine placing an electronic order to hire an employee the same way a factory manager uses ERP software to order more parts for the assembly line. That's roughly what's happening at Oregon Health & Science University (OHSU). "More and more, HR is being called upon to be a strategic partner," says Joe Tonn, manager of HR management systems at OHSU in Portland. The payoff is significant: The university is filling job openings two weeks faster than it once did and saving at least $1,500 per job now that it's using Oracle Corp.'s iRecruitment software.

The iRecruitment application, part of Oracle's e-Business Human Resources Management System (HRMS) suite, enables managers to request a new employee and process applications electronically. The software handles most of the time-consuming administrative work, including routing requisition forms to the appropriate managers and posting the job on the Web site. "We wanted to be able to open a job requisition in the morning and have qualified candidates in the afternoon," says Tonn. In fact, OHSU now has access to applicants only minutes after a job opening is posted to the university's Web site, and it fills those jobs in just four weeks instead of six or more. The university also recently added Oracle's Manager Self-Service module for logging changes to employee status (e.g., promotions or use of family leave) and uses the Oracle Employee Self-Service application for benefits management. Tonn expects to add software for performance reviews, succession planning, and learning management over the next couple of years. Large and midsize organizations such as OHSU are increasingly turning to these new types of employee management applications-commonly called human capital management (HCM) or workforce optimization software-to automate HR processes that used to be done manually, on paper, or by e-mail.

"Human capital management covers the whole discipline of managing the workforce, bringing them in and tracking them over time," says Christa Manning, an analyst at AMR Research Inc. in Boston. AMR forecasts a 10 percent compound annual growth rate through 2010 for the $6 billion HCM market. Much of the market growth can be attributed to the upcoming retirement of baby boomers, which will shrink the pool of available workers. Companies need to automate their systems so they can better identify employees they want to retain and then provide a career path for them. Sony Computer Entertainment America Inc. uses recruitment software from Work force Logic to automate its process for hiring contract workers. Sally Buchanan, director of human resources, says the software is particularly useful for ensuring that hiring managers understand and comply with the legal distinctions between contract and salaried employees. "When they requisition a contractor, they must answer a series of questions through the Work force Logic interface, and the application renders a recommendation on whether the position is best filled by a contractor or by someone on the payroll," says Buchanan. Employee performance management, career development, and succession planning are all functions that can be automated with HCM applications.

For example, Tyco International Ltd. uses Kenexa's Career Tracker to track employee performance and promotions. The software, which is configured with Tyco's performance standards and rating system, can plot employee performance on a graph to identify the top performers, both in terms of job achievement and in meeting Tyco's leadership behavior standards. Using the database of employee credentials and expertise, Tyco can also locate the best people to fill key job openings and analyze what type of training they'll need. "We can identify who we have and how they fit," says Shaun Zitting, director of organizational development at the Princeton, N.J.-based company. According to AMR's Manning, most corporate executives like having a tool that helps them evaluate and promote people on purely objective criteria. "They know it's not based on, ‘I like Joe because we go to lunch every day.' It brings some real science to the process and allows you to not only identify your top performers but also to know why they're top performers," she says. Career development and succession planning applications have also become more important as baby boomers retire and organizations have to find qualified replacements. Succession planning isn't just for CEOs and other top executives anymore. "It's starting to cascade down into the organization as the collecting and associating of employee information become easier," says Manning. Managers can associate key characteristics with specific jobs and analyze the traits of successful employees. Employees themselves can use the data to see their most likely career paths in an organization. Compensation management, another function often found in HCM tools, enables organizations to create incentive programs, tie compensation to performance goals, and analyze pay packages and trends. Scheduling work shifts for 27,000 health care professionals in a wide range of specialties and at multiple locations is a formidable task. At Banner Health, a large hospital system based in Phoenix, however, the implementation of the Kronos scheduling application has automated much of the process. Banner uses the Kronos application to log hours worked and to plan schedules, says Kathy Schultz, director of IT at Banner Health. Integrating data about hours worked with future scheduling helps to ensure that employees aren't expected to work if they've just put in a lot of overtime.

"What hours you work isn't always what you were scheduled to work," notes Schultz. "Having scheduling integrated with live time-and attendance information is extremely critical." At pharmaceutical giant Novartis AG, sales and research and development professionals are expected to take various classes to keep them up to date on the latest products and trends. With about 550 Web-based and classroom-based courses available, the old paper- and Excel-based process for administering training had become cumbersome and time consuming. Yet by using Saba Software Inc.'s Learning Suite, administrative work has been reduced by 50 percent, according to John Talanca, head of learning technologies at Novartis. "It's allowed the administrators to be more efficient and take on other work. In the past, they would spend hours and hours each day managing this," says Talanca. HR applications often contain a variety of employee data, including salaries, experience, education, performance reviews, and benefits selections. Analysis tools can enable HR managers to leverage those data for strategic decision making. They can, for instance, track employee performance against company benchmarks, forecast the skills that will be needed for future projects, analyze salary increases by geographic region or professional field, or predict trends in benefits selection and costs.

For example, OHSU's Tonn hopes eventually to use analysis tools to evaluate recruiting practices more efficiently. Honing the school's recruiting campaigns could produce better candidates as well as lower costs. "We can see how many applications a particular source gives us, and whether we ever hire applicants from that source. If we do hire them, do they become successful employees? Running an ad in The Oregonian might produce a thousand applications. But if we didn't hire any of them, then that was a whole lot of administrative work that didn't bear any fruit." Organizations such as Tyco are increasingly viewing employees as assets, to be acquired, cultivated, and deployed strategically-not unlike product inventory or IT systems. The very name of the software category, human capital management, conveys the notion that a worker is an investment that should be optimized. "Managers want to see how the people they hired are doing," says Manning. "It's taking the organization's people assets and leveraging them to reach business goals, such as increased sales, profitability, and customer satisfaction." Individually, the various HCM tools are helpful, but to get optimal value, they need to be integrated, with the data stored in a common repository. Organizational issues may be in the way, such as if the various HCM functions are split between different corporate departments, or if the HCM suite has to be implemented across multiple business units running disparate ERP and HR applications. Changing your HR system from transactional to strategic can take three to five years, but the important thing is to get started. As we move from an industrial to a knowledge economy, it's not what you manufacture but what your people know that gives you competitive advantage.

CASE STUDY QUESTIONS

1. What are some of the business benefits of the technologies described in the case? Provide several examples beyond the mere automation of transaction-oriented processes.

2. Do you think the business value of these strategic HRM applications depends on the type of business a company is in, for instance, consulting, manufacturing, or professional services? Why or why not? Explain.

3. What are some of the challenges and obstacles in developing and implementing HRM systems? Are these unique to this type of system? What strategies would you recommend for companies to meet those challenges? Provide several specific recommendations.