In this final instalment of a two-part HRIS series, Jacqueline Burns examines the concept of value on investment, common HRIS challenges and how a number of organisations went about building a successful business case
In this final instalment of a two-part HRIS series, Jacqueline Burns examines the concept of value on investment, common HRIS challenges and how a number of organisations went about building a successful business case
Human Resource Information Systems (HRIS) range from basic programs that automate business processes such as payroll, through to the most advanced learning management and performance management systems.
They represent a significant investment for any organisation, costing from thousands to literally millions of dollars in capital and implementation costs.
So how do practitioners know and show HRIS is a wise investment?
Efficiencies or cost reduction is what most people emphasise as these are easily quantifiable: we have reduced the resources required to do the work, we have eliminated duplication and double-handling, we have shifted the responsibility to employees, we have automated archaic paper-based systems . . .
The problem is, when making a business case for new technology, ROI is somewhat inadequate. There is an increasing acceptance that VOI – Value on Investment – is the metric that matters most.
Marc Dalmulder, Peoplesoft’s manager HCM strategy, Asia Pacific takes up the issue. “We say if you only focus on ROI you only get about 30 per cent of the value out of your investment. As much as 70 per cent could potentially come from value creation, as opposed to cost reduction.
VOI is the strategic value that technology can add to a business. It is difficult to measure (and therefore infrequently reported) because it consists of both tangible and intangible components.
The tangible components are the measures that tend to be captured by ROI, such as the dollars or time saved by automating processes.
The intangible components are more complex. For example, a smart recruitment system will assist in attracting the best talent – and best cultural fit – for an organisation. To a degree, its contribution can be measured by calculating how much it costs to rehire and retrain staff, but significant savings are derived from other factors as well.
“If the people you employ are happy at work, they’ll work harder and for longer hours; they’ll be more satisfied because you did a great job finding the right employees for your organisation in the first place. It’s hard to measure but at the end of the day everyone will acknowledge that it’s an important thing to have,” explains Dalmulder.
Cashing in on data
The generation of meaningful data is probably the ultimate intangible output of an effective HR information system. The key word is, of course, meaningful. Statistics might make a business report look impressive but if they lack relevance or are insignificant they are little more than window dressing. Conversely, if the data collected and reported is relevant to business performance it will help management make informed decisions – and in doing so will add immense intangible value.
Highlighting areas of strength and deficiency will certainly endear HR to the CEO. After all, the challenge of remaining competitive is what is keeping so many of our captains of industry awake at night.
For wholesale distribution company, Metcash, HR statistics are much more than ornaments. Metcash operates within the fast moving consumer goods sector under the brand names, IGA Distribution, Campbells Cash & Carry and Australian Liquor Marketers.
The company’s HRIS strategy centres on CHRIS, which it uses primarily to generate data that, when analysed, will add strategic value to the organisation.
Alexandra Richardson, general manager, human resources describes the strategy as “evolutionary” and “not transactional”.
“We have the basics in place but we still have a lot of work to do in terms of looking at the fields that we measure and the way we measure them. But in terms of centralised reporting across all business pillars, it’s pretty much up and running,” she says.
Richardson provides monthly reports to the Metcash CEO, as well as to the heads of each of the company’s three businesses. Included in these reports are employee demographics as well as figures on turnover, recruitment, termination, leave balances, tenure and salaries.
Some of the content of these reports can make an immediate, positive impact on the business. For example, the generation and analysis of leave data enables the company to save on wage costs by managing outstanding leave ahead of annual wage increases.
Other aspects of Richardson’s analysis add more strategic value. For instance, age profiles have been identified as an important area of focus in that Metcash has an aging workforce in highly physical jobs. This could obviously have an adverse impact upon workers’ compensation and highlight workplace health and safety issues.
The devil is in the detail
IT implementation costs are infamous, often representing many times the capital cost. In the past, most organisations created a business case for a return on investment that was realisable within three years. Today, it’s much more likely to be between 12 and 18 months because those making and influencing the decisions are more aware of how to leverage technology – and impatient for results. Phased implementations and purpose-specific products are popular because they demonstrate visible improvements in a relatively short space of time.
At Conrad Jupiters and Conrad Treasury Casinos, HR and IT were married through an intranet known as Conrad Connect and a web of Lotus Notes databases. Since then, HRIS has been an ongoing feat; as soon as one project concludes, another commences.
Despite its ambitious task list, Conrad does not cut corners to save time. Its migration online has been a mammoth task in terms of both time and cost because it reviews its current practice prior to converting anything to an electronic form. For example, Conrad spent 18 months and $250,000 having its 100 or so HR policies legally checked prior to uploading them on Conrad Connect.
“Some of our processes can be quite cumbersome in the number of steps that are involved. When we review them, we challenge everything. That’s really beneficial because in the long run you can quite often save a lot of work”, explains Rolanda Ayling, Conrad’s director, HR strategy and development.
Conrad’s goal is to automate as much as possible. Though the resources required are significant, Ayling considers the savings will justify the cost.
Value learning
The Nuance Group is an example of a company that expects to derive true value from HRIS.
The Nuance Group is one of the world’s largest airport retailers. In Australia, it employs close to 1,500 staff in 85 Downtown Duty Free stores, which are predominantly located in the international airports.
Until now, Nuance has only used technology to automate a few transactional HR processes. However it recently purchased a sophisticated online learning system called Versity E-Learning from Today Corp, a vendor that specialises in software for the retail industry.
Effective this July, Nuance employees will receive the majority of their training electronically, via learning centres located within the international airport terminals.
Christine Stevenson, Nuance’s HR director says the investment was not a difficult decision because the correlation between training and sales is widely accepted. She expects to see a return on the investment within 12 months.
“Certainly, we had to do cost justification. We worked with our operations division to calculate what we think the incremental sales will be from faster delivery of the training – that being one factor that can justify the business impact,” says Stevenson. “Everybody from our CEO down was very easily convinced by the material we presented and are all very enthusiastic for it to start.”
Other factors that Stevenson expects will improve sales are enhanced product knowledge and improved customer service skills.
The company maintains a broad course load for its employees, spanning company and product knowledge through to compliance, sales and retail training.
“Being at the airports, there is a lot of compliance information staff need to know very quickly – security, ACCC and customs type information, duty and tax free allowances. We also have our own policies in terms of pricing, returns and repairs,” Stevenson adds.
The company’s geographically dispersed workforce will benefit by simultaneously receiving highly customised programs that are consistent in terms of quality, delivery and content.
Most Downtown Duty Free stores are open for close to 24 hours per day requiring Nuance employ retail staff to work in rostered shifts. An immediate benefit of e-learning will be the ability for staff to participate in training around the clock and during down time. Currently, training is conducted during normal office hours. That not only necessitates staff be taken off the shop floor for half a day at a time, but also that they be replaced with casual staff or paid over time.
“At the moment we don’t go training people at 9pm or 10pm, but with e-learning we can do that. If business is quiet, a staff member can easily slip away to complete a 30 or 60 minute module,” explains Stevenson.
Training staff will no longer need to travel the country delivering course material. As well as saving both time and money, this will allow them to be better deployed, such as in the development of more strategic training programs.
Most of the modules will be examinable, regardless of whether or not the training is for compliance purposes. Stevenson intends to be rigorous about this, both to ensure the company meets its obligations and also because testing will provide valuable feedback about the effectiveness of the system, particularly in the initial stages.
