Despite early disappointments, technology can improve HR and benefit the bottom line, say experts.
In the past couple of years, a lot of HR departments have been disappointed by their attempts to go “e.”
Intuitively, people always felt technology held tremendous potential for HR departments. Automation through technology would improve the quality of service, operating costs would be reduced and HR would be freed from the transactional duties that so often prevented it from playing a strategic role. The reality is that few organizations fully realized these benefits.
In a recent survey by consulting company Towers Perrin, 80 per cent of respondents said employee self service can lower HR costs, but only five per cent said they have fully achieved this objective. Another 35 per cent said they have only partly achieved this result. Similarly, just five per cent of respondents said they had fully realized goals of improved HR functional efficiency and only three per cent said it was accelerating HR’s transformation to strategic partner.
But, say the experts, this is not because there is anything wrong with the concept — far from it.
When done right, eHR can more than offset the costs of system implementation, improve the HR function and in fact, there is evidence to suggest eHR can improve shareholder value. Underline “when done right.”
The success rate numbers are going to get better in the next year and continue to improve after that, said Minaz Lalani, a consultant with Towers Perrin. There was a lot of hype in the early days of eHR — the early days being two or three years ago — and a lot of companies suffered from unrealistic expectations, both in terms of what the technology could do but also in terms of what it took to implement.
Success depends upon having one primary focus for the HR technology initiative, said Ed McMahon, an eHR expert with Watson Wyatt. In organizations where there is a clear focus on specific quantifiable improvements, shareholder value can increase by more than six per cent, according to research by Watson Wyatt.
“The focus of the initiative is the key driver in achieving financial results,” said McMahon. “The same technology initiative implemented in two similar organizations, but with a different focus, can actually result in a dramatically different impact on the company market value.”
Watson Wyatt surveyed companies from across North America on their human resources practices and matched findings to objective financial measures. The study revealed that organizations that maintained a disciplined, narrow focus on, for example, reducing costs, experienced a market value increase of 2.3 per cent. Similarly, those that concentrated on using technology to improve service to employees enjoyed a 2.3 per-cent increase in market value, and using an eHR application to increase transaction accuracy was associated with a 1.9 per-cent increase.
Conversely, counting on technology to promote corporate culture or enhance employee communication, decreased company value by 6.6 per cent and 7.7 per cent respectively.
The problem with many eHR implementations is not that return on investment can’t be calculated, but that companies haven’t been calculating their ROI in the right way to begin with, said Lalani. Because it was brand new, many of the metrics that were being used were unrealistic but the metrics are being defined better now and people have a better understanding of what to expect.
One of the common problems was that organizations forgot that no matter how advanced the technology being rolled out was, success still depended upon the people using it right, said Lalani. Fully realizing the potential of an application usually requires changes to the processes associated with the technology. In some cases, an HR technology initiative wasn’t an automatic fit with the culture of the organization. Often times it was simple things like overlooking the fact that employees without access to computers won’t be able to get online to use the HR self-service applications. People weren’t taking these things into account when they were setting expectations and goals. “Things are going to change in the next couple of years,” Lalani predicted.
Lalani added that even though technology is intended to automate many of the labour-intensive processes, HR departments haven’t been shrinking yet. “I think what is happening is that they are being re-deployed elsewhere,” he said. Once they offload the transactional duties they can move closer to the front line where they can add more value to the organization.
Intuitively, people always felt technology held tremendous potential for HR departments. Automation through technology would improve the quality of service, operating costs would be reduced and HR would be freed from the transactional duties that so often prevented it from playing a strategic role. The reality is that few organizations fully realized these benefits.
In a recent survey by consulting company Towers Perrin, 80 per cent of respondents said employee self service can lower HR costs, but only five per cent said they have fully achieved this objective. Another 35 per cent said they have only partly achieved this result. Similarly, just five per cent of respondents said they had fully realized goals of improved HR functional efficiency and only three per cent said it was accelerating HR’s transformation to strategic partner.
But, say the experts, this is not because there is anything wrong with the concept — far from it.
When done right, eHR can more than offset the costs of system implementation, improve the HR function and in fact, there is evidence to suggest eHR can improve shareholder value. Underline “when done right.”
The success rate numbers are going to get better in the next year and continue to improve after that, said Minaz Lalani, a consultant with Towers Perrin. There was a lot of hype in the early days of eHR — the early days being two or three years ago — and a lot of companies suffered from unrealistic expectations, both in terms of what the technology could do but also in terms of what it took to implement.
Success depends upon having one primary focus for the HR technology initiative, said Ed McMahon, an eHR expert with Watson Wyatt. In organizations where there is a clear focus on specific quantifiable improvements, shareholder value can increase by more than six per cent, according to research by Watson Wyatt.
“The focus of the initiative is the key driver in achieving financial results,” said McMahon. “The same technology initiative implemented in two similar organizations, but with a different focus, can actually result in a dramatically different impact on the company market value.”
Watson Wyatt surveyed companies from across North America on their human resources practices and matched findings to objective financial measures. The study revealed that organizations that maintained a disciplined, narrow focus on, for example, reducing costs, experienced a market value increase of 2.3 per cent. Similarly, those that concentrated on using technology to improve service to employees enjoyed a 2.3 per-cent increase in market value, and using an eHR application to increase transaction accuracy was associated with a 1.9 per-cent increase.
Conversely, counting on technology to promote corporate culture or enhance employee communication, decreased company value by 6.6 per cent and 7.7 per cent respectively.
The problem with many eHR implementations is not that return on investment can’t be calculated, but that companies haven’t been calculating their ROI in the right way to begin with, said Lalani. Because it was brand new, many of the metrics that were being used were unrealistic but the metrics are being defined better now and people have a better understanding of what to expect.
One of the common problems was that organizations forgot that no matter how advanced the technology being rolled out was, success still depended upon the people using it right, said Lalani. Fully realizing the potential of an application usually requires changes to the processes associated with the technology. In some cases, an HR technology initiative wasn’t an automatic fit with the culture of the organization. Often times it was simple things like overlooking the fact that employees without access to computers won’t be able to get online to use the HR self-service applications. People weren’t taking these things into account when they were setting expectations and goals. “Things are going to change in the next couple of years,” Lalani predicted.
Lalani added that even though technology is intended to automate many of the labour-intensive processes, HR departments haven’t been shrinking yet. “I think what is happening is that they are being re-deployed elsewhere,” he said. Once they offload the transactional duties they can move closer to the front line where they can add more value to the organization.
