At most companies, there is so much focus on improving transactional systems that people can become an afterthought.

The HR information systems that manage those people become a secondary concern – a 'tick-the-box' part of a larger enterprise application that handles the drudgery of time slips and payrolls but has little strategic value. However, a leading Australian law firm, Corrs Chambers Westgarth (CCW), has recently set about changing all that. Recognising that its entire viability rests on its ability to manage 1,100 employees, the company implemented a new HR system and made sure that it was complemented by a robust analytical platform – in this case, a product from Yellowfin.

Tapping into potential

The project’s goal was to ensure that CCW managers could integrate HR-related information into their strategic planning. “They didn’t want the HR system to rest on its laurels, being a data repository,” says Lyndal Bradilovic, a university lecturer in HR and consultant for the project. “Combining information from the HR system with, potentially, the finance or case-management system, is a very compelling thing that provides powerful, substantive evidence to decision makers.”

Yellowfin allows CCW managers to build reports on HR data, linking them to key indicators to get a better picture of the real costs of the firm’s projects.

For example, billed hours can be cross-matched with staffing details to find out which employees are being most effective during a project. Analysing the availability of individual employee skills against the timeline for upcoming cases can also enable better planning in hiring and training practices. Ultimately, the use of analytics on HR data will allow the creation of standard business tools such as key performance indicators. Boston Consulting Group analysts are working with CCW to determine just what these should be and how the linked information system can best support them.

Assigning a strategic value to an HR information system may seem counter-intuitive for many companies, given that HR – with its repetitive processes and need to manage large volumes of staff issues – has traditionally been seen as a non-core function. Particularly since about half of all HR dollars go to relatively menial tasks such as payroll administration while most of the remainder is split evenly between benefits administration and staffing.

The extent to which this perception is ingrained in corporate culture is reflected in IDC’s projections for the Asia-Pacific on business process outsourcing (BPO) market. The firm predicts that HR will come second only to finance and accounting as the most widely outsourced business function. It also predicts revenues will grow from $1.3 billion this year to about $2.3 billion by 2009, outpacing the BPO market’s 18.7 per cent cumulative, annual growth rate.

Missed opportunities

However, many companies that outsource their HR are missing out on considerable opportunities. Buried in even the most basic HR system is a wealth of information just waiting to be exploited.

“We’re really working to educate the market that there is more to an HR system than just producing a pay slip,” says Michael Specht, a consultant and convenor of the Australian Human Resource Institute’s Victorian Special Interest Group.

“HR systems need to be an enabler that adds value to an organisation based on its strategic plan. The cost of people on a company’s balance sheet is huge; in the way that businesses want to benchmark and understand their finances and manufacturing, they want to do the same with their people.” Making that happen can be difficult for a variety of reasons. In many companies, HR systems work well enough, with processes that have been in place for years to keep employees paid – and therefore happy.

Often, this philosophy is reflected in a disparate approach to administrative systems in which payroll, training, HR and other back-end functions are all managed using separate and poorly integrated systems.

McDonald’s Australia manages a payroll for about 15,000 employees at 250 company-owned restaurants across the country and has been running its AS/400 SSA Global-based HR environment since 1994. Time and attendance information is collected at the stores then sent back to the AS/400 system for storage and processing.

A number of prebuilt reports, made available through a web interface bolted onto the system, allow store managers to obtain information about their workers’ annual leave, hours worked and other employment trends.

Beyond that, managers must do the analysis themselves using spreadsheets or other tools. “Our HR department consistently says that it would like different reporting, but it all comes at a cost,” says Christine Corke, payroll and benefits manager at McDonald’s.

“Ad hoc reporting can sometimes be difficult: you can find out things like how long a person has been with the company, for example, but it is hard to bring it up quickly – you’ve got to manipulate the data.

“There’s a lot of information that we just choose not to keep because we don’t think there’s enough value in spending the time maintaining that information. We have to work out what’s important, what’s not and what we can get from manual intervention,” says Corke.

Learning the lingo

Manpower issues apart, another reason why HR systems have struggled to be seen as strategic is that they have been maintained in a way that makes sense only to each individual HR organisation. Compound this across even a moderately sized business and you have major problems with data integrity and its analytical value.

A major part of CCW’s project is the implementation of an HR glossary to standardise the definition of what constitutes a full-time employee and a part-time employee.

These measures, which seem obvious to outsiders, are interpreted differently by different HR practitioners and have implications for staffing, funding, training and other related expenditure. Inconsistent definitions among HR practitioners are so much of a problem that the industry is turning towards HR-XML, a data representation standard backed by skills networking portal OpenSkills and the 90-vendor HR-XML Consortium, which is designed to provide a common method of HR data exchange between systems.

Until this happens, however, companies will wade through the morass of data interoperability themselves. Pharmaceutical giant Pfizer is addressing this issue as part of an HR data remediation project that was kicked off in 2004.

The project came two years after the implementation of a major PeopleSoft system when management realised that regional differences in data representation were hampering efforts to get meaningful information about Pfizer’s 115,000 staff worldwide, including about 2,000 in Australia.

To improve the situation, the company set about developing a standard vocabulary for its various HR operations under the auspices of the Global Data Structures and Standards project.

Last year, the project involved entering basic details on employees in a standard format.
Phase two, now under way, is focusing on standardising terminology across the dozens of countries where Pfizer operates. By the year end, improved HR data is expected to finally allow the company to gain an accurate global headcount and other relevant metrics.

Growing use of the HR system – it now feeds employee-related data to systems handling payroll, expenses, invoicing, network user authorisation and others – has increased management commitment to the project, says Tracey Grimes, Pfizer’s HR audit and compliance manager.

“It has been difficult to get management to take some ownership of the data; they think HR will fix it and they can’t,” she explains. “But we don’t know what we don’t know and unless they tell us, we can’t change anything. Now that we run so many other applications from PeopleSoft, it’s in their interest to make sure the data is correct.”

Dirty data has significant implications on the perceived value of HR systems to the rest of the organisation.

“I get the feeling that most of the important strategic decisions are made by chief executives without regard to HR information,” says John Macy, director of HR consultancy Competitive Edge Technology and a member of the Australian Human Resource Institute. “When the crunch comes, they have relied more on financial information,” he adds.

A matter of trust

This is not always out of ignorance. Many executives simply do not trust the information provided in their HR system to be accurate or relevant, Macy says. In his experience, “only five per cent or so say they consider information to be reliable”, he says. “It’s probably the way they’re collecting it – and there is a lack of importance allocated to maintenance.”

As with any major IT initiative, broad commitment to the system’s success is essential for any company that wants to get more value from its HR system.

IT teams and integrators can tackle festering incompatibilities, but the HR team needs to work with both IT and the other business divisions to put some rigour around the ongoing maintenance of the data.

A major driver for this is employee self-service, which exposes a range of employee-related data fields through a web interface. Empowered with the knowledge that they own that data, anecdotal evidence suggests that employees in environments with self-service HR are heeding the call.

By using self-service interfaces, they not only ensure data is up to date and correct, but they can relieve a significant portion of the burden normally shouldered by HR help desks handling repetitive queries about pay runs, benefits, annual leave, changes of address and the like.

Of course, a bit of incentive never hurts either. Some time ago, oil and gas exploration company Santos moved to consolidate its five payrolls and three HR groups into a single system. This involved a major implementation of Oracle HR and, last year, Oracle’s Self-Service HR, payroll and time and labour modules. The platform is fully integrated with the company’s financial system, allowing it to improve HR-related reporting and costing analysis.

With the provision of self-service capabilities for the company’s 1,800 employees, “we have noticed a substantial increase in data accuracy and integrity and a corresponding decrease in manual faults such as transcription errors”, says Einar Vikingur, group executive for shared services at Santos.

The company has also implemented a manager self-service capability, which is focused around providing a range of reports, ad hoc reporting and alerts that speed up awareness of extraordinary events.

When an alert is triggered, it pops up on the manager’s screen and is moved through the organisation using fully integrated work flow capabilities.

The next phase of the project is to move all employees’ pay-slip information online. This will not only save the company the considerable effort and expense of running its own payroll, but will lure employees to the HR environment, where they will be even more aware of the capabilities of self-service. Historical data will allow employees to trace every salary payment since they started with the company.

Promotion of employee self-service and use of analytics to improve the use of HR data is also offering value, Vikingur says, by increasing the visibility of the company’s administrative information. Allowing employees to see the information held about them is in line with Santos’ philosophical commitment to transparency.

Back-end emphasis

The enhancements Santos has made to its HR environment may dramatically improve the management of its workforce but none of it would be possible without having standardised the back-end environment and getting the entire organisation involved in keeping clean data.

“If you are going to implement these systems, which are very complex and expensive things to do, unless you pull value out of them by doing things like this, you don’t get a return on your investment,” Vikingur says.

“We value what we get out of the system and managers now have some very powerful tools for helping them manage their people. If an organisation is willing to make the effort, the amount of value they’ll pull out of it is directly proportional to the effort they put into it.”