What does it take to put in an HRMS?

Implementing an HRMS should be easy. All it takes is time, money and people. Enough of these resources, and many of the problems go away. But what if you don’t have the time or the money or the resources? As one respondent to our survey put it rather succinctly, “The implementation has been extremely painful and costly to the organization.”

In Canadian HR Reporter’s survey, HR Management Systems: Are they Making a Difference?, we asked participants, “When you planned your HRMS, what did you estimate the total cost of implementation to be? (Include software, hardware, consulting fees and internal resource requirements.)” Only 97 of the 181 one respondents who had implemented a system could provide even estimated figures. Perhaps if we had asked the accounting or IT departments we might have received additional information.

Few implementations accurately track the costs of all resources. After a period of time has passed, (and staff have turned over) the records disappear into the accounting system never to be seen again. As Ann-Louise Menks, senior HRIS/payroll administrator for the Calgary Stampede noted “…the person involved in the original implementation has not been employed by our organization in more than three years and little documentation exists regarding the original selection/implementation process.”

We salute the respondents who have made the effort to estimate the costs.
HRMS project cost varies as a result of several factors such as:

Size of the organization
The licensing of the software in human resources is largely based on the number of employees in the company and the number of users of the system. Larger organizations also have more complex processes, may have multiple locations and may have international legislation or multi-currency issues.

Culture of the organization
The culture of the organization also affects the processes internally in the HR and line management areas. Larger companies may require greater co-operation between stakeholders in the HRMS system. Generally this leads to more meetings and may make the decision-making a cumbersome process.

People resources
The availability of internal “people” resources to participate in the project and to carry out their “day job” while assigned to the project can have a serious impact on the implementation. A second issue is that a company may have the resource but may not have trained resources. This generally leads to project team training and the use of external consultants to supplement an organization’s workforce.

Scope of the project
The more functionality and business user area requirements (payroll, recruitment, compensation…) the greater the impact on the costs of the project either through increased software fees or through additional configuration required to implement the functionality. Geographic scope also becomes an issue as there are multiple roll-outs required. Multiple locations may result in an increase in the costs of travel and project co-ordination, and greater complexity in dealing with localization of the software.

System platform
It costs much more to implement a mainframe or complex client-server application than it does to load a single user application on a single PC. The skills necessary to install and maintain the application may not exist in house or may be assigned to higher priority projects.

So what are the costs? The survey results show that overall implementation costs ranged between $1,000 and $12 million. Quite a gap. (See table 1 for a look at costs based on organization size.)

When we examine the data there is significant variability. There is no direct relationship between the size of the organization (in terms of Canadian employees) and the cost of HRMS per employee. As a result a benchmark such as this would be meaningless. We divided the costs of implementation by the number of Canadian employees and found that the results ranged from $4.40 to $13,691 among a small sample of 44.

There was an average of 11.3 employees on each project. Of course, the results varied widely. When we removed one large outlier the number dropped to 9.3 employees.

Of 158 companies reporting the number of people resources (human resources?) involved , 33 companies reported that they did not use consultants during the implementation. Of the 125 companies that did use consultants the average number of consultants used on the project was 4.6.

Comparing the ratio of internal resources used versus external resources is 1:4.2. In other words, there were 4.2 employees used for every external consultant. The median result (explained previously) was 1:2.2 employees used for every external consultant. Based on our experience on projects, and depending on the complexity of the implementation, this is a reasonable ratio estimate when looking at a new implementation.

Time is money. The faster a project is implemented the lower the cost and greater the return on investment (ROI). Sean Sergi, of AGF Management, points out, “We went with a rapid implementation (20 weeks). Given the small size of our HR group, this was very strenuous, but in the end this was the right approach for our group and organization. In order to do a rapid implementation, spend some time during your planning phase talking to consultants.”

Table 2 shows the time respondents required to implement an HRMS. The numbers are broken out by size of organization to determine if organization size was a key factor.

Undertaking an HRMS project is not a walk in the park. From the starting gun to the finish line even small- to mid-sized enterprises took an average of 16.7 months to implement. In larger organizations, (more than 5,000 employees) the average was three years.

A large part of the elapsed time is spent in the needs analysis/system selection process. Much of management thinking is changing around the selection process. Forward-looking organizations are determining the key differentiators necessary for their business and are using this knowledge to drive the selection process rather than the request for proposal process. On the other end organizations are finding that it takes as long to stabilize a system as it does to implement it in the first place.

With these indications of time, money and resources you will have the building blocks to create the cost estimates for your project.

SIDEBAR

Implementation resources

Implementation resources can be broken down as follows:

•Hardware (Costs):
•Desktop (Webtop) clients: Are the PC’s fast enough? Enough memory?
•Server(s)
•Network Infrastructure: bandwidth, networks, routers…
•Cabling

•Software (Costs):
•Licence
•Maintenance
•Add-on Packages: reporting, analysis, org charting…

•Software Modification and Configuration (Costs)

•Activity (Time) (Cost)
•Project Management
•Process Re-engineering
•Change Management
•Analysis
•Selection
•Installation
•Configuration
•Conversion
•Testing
•Training
•Support
•People (See Activities)

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