IoT APPLIED TO HR

IoT will most likely impact the business landscape just as profoundly as the cloud. Although not yet quite as robust in its offerings to HR, IoT is predicted to provide undeniable benefits and spur new, ingenious applications. IoT is like a digital nervous system of mobile devices (including wearables) and sensors that connect devices with each other and with people. Because of this network of connectivity, IoT can collect a lot of data. 

IoT is and will be increasingly more useful to HR departments. Mobile phones and tablets can serve as central hubs in IoT because they provide easy access to people and their preferences. HR incorporation of IoT allows managers to provide continuous performance management by gathering performance data through IoT and providing immediate feedback. Employees will someday use IoT to identify the availability of flex workspaces because through IoT vacant rooms will be shown as “available.” Attendance and location IoT trackers can monitor employee alertness on the job or provide time tracking to capture time and attendance data. IoT has endless, as yet untapped possibilities.

KSAs of Client-Centric Staff

HR staff must have the interpersonal skills needed to relate effectively to clients and the creativity skills to resolve problems when they occur (for example, conflicting goals among clients).

Manufacturing employees can be quite confident that each car on the assembly line will have essentially the same task requirements as every other car when it reaches their workstation. An assembly-line worker can also rely on the quality-control inspector to catch any errors before a car is shipped to a dealership. Not so in HR. HR staff must successfully perform their tasks with all types of clients who have all types of personalities — in the absence of a “quality inspector” to catch service mistakes before the client’s experience is completed.

HR staff must find and fix mistakes quickly, appropriately, and creatively when HR fails the client in some way. The nature and criticality of each client’s judgment of the quality of each service experience make it essential to assess an HR applicant’s attitude toward client-centric service before that person is hired.  

Spotting Talent for Service  

Former Chili’s Chairman Norman Brinker said, “Look for people who are smart. Remember, sinners can repent, but stupidity is forever.” At go!Mokulele Airlines in Hawaii, a receptionist was overheard telling a prospective employee on the phone, “You don’t need specific qualifications to work here. You just need to be customer-focused.” Among the best predictors of performance in any job are cognitive ability and three personality dimensions that are good indicators of a client-centered disposition:  

•» Conscientiousness: the extent to which a person is dependable and organized and perseveres on tasks 

•» Agreeableness: the degree to which a person is amiable, tolerant, honest, cooperative, and flexible 

•» Emotional stability: the degree to which a person is secure, calm, and independent and can work autonomously 

Integrated vs. Separate HR and Payroll

rganisations often agonise over the best approach to running their HR and Payroll systems, with a common question being whether to have a fully integrated HR and Payroll system or to operate entirely separate systems. The arguments for and against each option are set out below: 

1.       Arguments for Integration 

In an integrated system, the core HR Management System and payroll modules sit on top of a common database, so all data about an employee such as their pay, conditions, cost centre, organisation, position and personal information are simultaneously available in every module. This has several advantages in terms of processes and workflow. For example, a newly hired employee can be set up in the system by an HR administrator, the employee can add personal data through self-service and pay details can be added by a payroll administrator using the same core data. There is no need for cross-referencing or waiting for data to flow through the system.

The biggest risk with separate (non-integrated) HR and Payroll systems is that the same core data is frequently needed by both, relying on either an electronic interface or even manual re-keying, requiring additional work to manage and validate the transfer. Both these methods almost always cause delays and potentially problems in reconciliation. From a business process perspective, it’s usually much easier to design a process based on a smooth flow of data between HR and payroll within the same system. Retaining all data within the same system also reinforces the idea that the HR module is the master source of data about people. If the two systems are not synchronised, it could lead to problems in performing certain calculations, for example, where pay calculations are based on position-related data that needs to refer to Terms & Conditions (held at the HR level) in order to work out overtime pay or calculate a pay increase. 

2.       Arguments for Separation 

In some cases, separate HR and Payroll systems may make good sense on cost grounds. For example, when implementing the payroll module of a large ERP module, it may not be economically viable to implement the payroll module to pay only a small part of the organisation, which may have its own pay rules. Paying a relatively small number of people (for example a country where only a few people are employed) involves many of the same set-up costs as those for a large population and it’s not uncommon for global implementations to feed separate, stand-alone payrolls or to outsource to a local provider. The ‘tipping point’ for these calculations will vary according to several factors such as payroll complexity, the availability of local providers and scale. In some organisations, the payroll system seems to be working well enough – people are paid the right amount every week or month and the view is that there is no point throwing something away that is fit for purpose - ‘If it’s not broken, don’t fix it’. When the same payroll system has been running for some time, it will probably have reached a point of maturity where the team responsible for it feels comfortable, knows it thoroughly and is reluctant to change. Staying with the same system means there is no need to set up new software and its operation will not require staff to be retrained. The current license period may not have expired, in which case the team may wish to let the contractual period naturally expire, saving cost. However, it’s important to recognise that introducing an HR system will inevitably have an impact on payroll process (as outlined in the pro-integration argument) because of the fundamental need to reconcile the systems. This may actually introduce more cost as the data will need to be passed to payroll by some means, either through re-keying or via an interface.

Disadvantages of Best of Breed: The Pros and Cons

The disadvantages of Best of Breed HR applications are: 

❐ The potential cost of evaluating all options within a given market to identify the most appropriate software may be prohibitive. In the HR market, there are many potential providers with very different offerings, which can confuse or delay selection decisions. 

❐ Perhaps the strongest argument against Best of Breed applications is that they are often produced by small, start-up organisations that initially get a good foothold in the market, become popular but cannot then sustain the growth needed. This has been particularly true of highly specialised providers that operate in niche markets – for example, when flexible benefits initially became popular, several small providers launched web-based systems to support flex and many subsequently went out of business, leaving customers with unsupported systems. The solution is to thoroughly check the financial status of any software vendor.

❐ The need for the organisation to acquire a different set of skills to support specialised software. Increasingly, support contracts are available to minimise the burden of maintaining these skills; organisations are also turning to cloud-based solutions to transfer the organisational system management overhead outside the business. 

Advantages of Best of Breed: The Pros and Cons

The advantages of Best of Breed HR applications are: 

❐ Best of breed software providers are typically quicker to respond to market trends and the requirements of particular sectors. 

❐ Each Best of Breed component can be implemented as a stand-alone application. This incremental approach subjects the organisation to smaller amounts of change, reducing organisational trauma. 

❐ Best of Breed HR software contains an inherent best practice business model that is specific to the function rather than the overall flow of organisational data. As such, HR functions have greater freedom to review business processes and change their approach and organisation structure. 

❐ Although integration is often cited as a reason for selecting ERP, the reality is that integration need not be complicated or expensive. In an HR context, most organisations need only 10-12 key integration points to link the HR / Payroll system to Finance (for example transferring transactions to the General Ledger and providing basic data to populate headcount tables). 

Disadvantages of ERP

The disadvantages of ERP systems are: 

❐ ERPs are often seen as too rigid and too difficult to adapt to the specific workflow and business process of some companies. 

❐ The re-engineering of business processes to fit the "industry standard" prescribed by the ERP system may lead to a loss of competitive advantage. Some organisations operate unique, value-adding processes that provide a competitive edge but these often do not fit within the limits of highly structured ERP systems. 

❐ Implementing ERP is expensive and buyers often report substantial cost and time overruns against their original budget. Once an ERP system is established, switching costs are very high, leading to dependence on a single supplier and lack of organisational flexibility. In some cases, project costs spiral out of control – in November 2012, the US Air Force abandoned its plans to implement an ERP system after spending the first $1 billion, concluding that finishing it would cost far too much more money for too little gain (reported by Computer World, November 13, 2012, “Air Force scraps massive ERP project after racking up $1 billion in costs”.

❐ In theory, ERP systems should allow organisations to consolidate support around a common set of skills. However, in practice, ERP systems require different specialist skills across each application – so the Finance module needs different skills from Logistics and different skills again for Human Capital Management. Organisations may therefore have to hire in additional consultants to get the range of skills needed. 

❐ Research has found an inherent paradox in ERP - organisations with the scale needed to justify an ERP system may be the least equipped to derive benefits from the technology. Organisations that are mechanistic, dominated by routine, highly programmed technologies and tightly regulated operations present the best initial fit with ERP requirements but are the least able to capitalise on the information potential these systems provide. However those that are flexible and adaptable are the best placed to create value from the knowledge but are often a poor fit with the requirements (and budget) of ERP systems.

Advantages of ERP

ERP: The Pros and Cons

The advantages of ERP systems are: 

❐ ERP contains an overall business model that provides organisations with an inherent set of business processes, linking together different organisational functions and ensuring the most efficient flow of data. 

❐ ERP links physically separate business processes such as order tracking, finance and Human Capital Management, based on common data sets. ERP eliminates the time delay that can prevent accurate forecasting, for example, allowing inventory and resourcing estimates to be kept at an optimum level. 

❐ Because ERP Systems centralise data in one place, they eliminate the problem of synchronising changes between multiple systems and the consolidation, for example, of different finance, payroll and manufacturing applications. 

❐ ERP links revenue, cost and profit data at a high level of detail, enabling real-time financial modelling. 

Barriers to eHRM Adoption

Although e-HRM offers enormous potential, in practice organisation often implement only a small proportion of the functionality available. In many cases, organisations have bought the functionality but failed to switch it on or use it its full extent – this is like having a powerful car parked in the garage that is used for only short, low speed journeys. Yet, if the technology to implement e-HRM is available and provides significant benefits, it raises the obvious question, “Why isn’t doesn’t every organisation deploy the maximum amount of HR technology”? Several crucial factors influence the adoption of eHRM:

❐ Competitive Strategy: HR technology strategy should be directly related to the HR and competitive business strategy of the organisation. Where the overall strategy is solely based on lowering the cost of production, a simple e-HRM replication strategy is more likely. However, if the competitive strategy is based on innovation or differentiation, the organisation is more likely to focus on good people management, leading to an enhancement or (ideally) transformational approach to technology will find it harder to justify an investment in sophisticated people management technologies, whereas knowledge-based organisations such as those in the technology, pharmaceutical and professional services sectors are likely to view people as unique differentiators where ‘talent management’ is critical.

❐ Size of the Business: Larger organisations may be more willing to invest in complex e-HRM systems because they have access to larger budgets and other resources, as well as having a larger employee population to manage, reducing the per-employee cost. Larger organisations are also more likely to deploy a large ERP system, of which the HR module forms part of the infrastructure. 

❐ Management Perceptions of the HR Role: If managers want HR to take a more strategic approach to HR, they will tend to be more supportive of e-HRM and favour a transformational approach; however, where employees and managers see HR as passive and transactional, they will tend to have a more negative attitude towards e-HRM. In some cases, line managers may see employee and manager self-service as a potential barrier to their relationship with HR

❐ HR Perception of Technology: If HR teams perceive technology to be too technical, it will be difficult to make the transition. In some cases, e-HRM leaves HR professionals cold or at best, disinterested, especially where its use is perceived as a transactional, administrative activity that does not enhance HR’s strategic reputation. For many HR professionals, e-HRM remains merely an administrative tool and its role in the development of strategic HR practice is often discounted; there is an underlying sense that somehow ‘people’ people do not need to understand or use technology. This may partly explain why the majority of HR technology investments remain at the basic administrative/ operational level; only obvious cost reduction is seen as a viable outcome of the use of technology, limiting its use to the most basic processing functions.

❐ Lack of Technical Infrastructure: It’s easy for those who regularly have access to a computer at work to access e-HRM technology – a simple web link will take them to a wide range of services – but what of those that work outside, on factory floors or in remote environments? The answer so far has been to provide employee kiosks in cafeterias or other common areas, but there are issues of privacy and lack of time in the working day that mean this is a limited solution. However, the next few years are likely to see a reduction in the cost of tablet and smartphone technologies that will solve this problem and enable people to access HR services anywhere, anytime. 

❐ Inability to Translate Requirements into a Viable Business Case: 

Making any kind of technology investment requires a strong business case, to quantify the benefits of technology and the impact on the organisation. If the project has been very technology-centred or has focused mainly on administrative processes, there may not be a good understanding of what might be possible at the next level.

e-HRM Strategies

Experience suggests that there is no ‘one size fits all’ for introducing e-HRM. Organisations typically follow one of three strategies

❐ Replication: This approach involves simply recreating the content and functions of the existing system(s). It is typically an IT ‘refresh’ activity, a strategy often followed because older technology becomes non-viable or is simply out of date. There is usually no desire to improve HR/Payroll processes or service quality – its intention is simply to reduce costs or avoid system obsolescence. Projects are relatively unambitious, with little vision and a focus only on technology, simplifying IT support and lower maintenance costs, rather than creating long-term business value. The main advantage of this approach is that it can be undertaken relatively quickly using technical resources. However, because there is no focus on business processes, it may result in missed opportunities to create business benefits and there is a risk that old processes will not work effectively under the new technology - end-users may have the same frustrations they had with the old system. It should only be undertaken in circumstances where old technology will absolutely fail if nothing is done and there is no time to take a more strategic approach. 

❐ Enhancement: This approach can take several forms and it is shaped by intention and ambition - even when an entirely new system is purchased, organisations may decide that there should be only an incremental, evolutionary impact on HR service delivery and operations. There is often little appetite to use technology to drive through major changes; it may be that the organisation does not believe that radical change is possible, perhaps because it expects resistance, lack of resource or cost issues that prevent a full transformation. It may be that a strategy of ‘change by stealth’ is more appropriate, where the technology platform is developed over a period of time. However, by playing safe, organisations may not achieve the Return on Investment needed and the lack of a technology champion or adequate resource means that projects may not get beyond the initial implementation phase; it may have the same impact as if a pure Replication strategy had been pursued. 

❐ A Transformational approach: Technology is part of a wider strategy, enabling highly devolved HR services, making managers more accountable, where the HR function takes on a more substantial role. It involves a revolutionary restructuring of HR service delivery, including the use of service centres, outsourcing and the Business Partnering model. For an organisation under cost pressure to transform HR services, this is a better strategy. The vision often includes giving on-line access to processes, policies and procedures and extensive self-service. Technology has a truly transformational role under this approach, with a major impact on the organisation, changing the roles of HR, managers and perhaps even employees. It is not an easy option and requires a large investment in infrastructure and resources to make it work, with an emphasis on managing the changes. However, the business case typically offers a good payback.  

Organisations have a choice as to which technology strategy to pursue and the approach typically depends on factors such as culture, expectation, previous experience, an awareness of what is possible and the strength of the business case. 

Why Companies Outsource the HR Function

While short-term cost savings are generally seen as the major reason for outsourcing, they are not the only reason. Academic research suggests the following drivers for HR Outsourcing  

❐ Influence from Elsewhere in the Business: Organisations often explore outsourcing as part of a business-wide exploration of service delivery options, together with several other internal functions. For example, the organisation may have a parent company that encourages or requires an outsourcing strategy. Indeed, research indicates that the decision to outsource is often not driven by the HR team alone – there is usually pressure from fellow directors or other internal forces. 

❐ Cost Reduction: The most obvious benefit of outsourcing is the removal of cost from the HR operation, achieved by streamlining processes and the introduction of leading-edge technology to support new processes. Although in theory organisations could achieve much of the cost reduction through their own efforts, many lack the skills to bring about the transformation or do not have the right technology or scale to do so. For this reason, organisations often conclude that it is much more cost-effective to use an external provider that has an established infrastructure in place and can bring expertise and experience to their customers. Outsourcing providers deliver services to a wide range of customers and are able to spread costs over a large number of employees, enabling them to achieve extensive economies of scale that would not be available to individual organisations. Outsourcing also reduces the cost of overheads involved in providing the service, smoothing out peaks and troughs in workload to ensure consistency of service delivery. 

❐ Moving HR up the Value Chain: HR often sees administration as a barrier to working strategically – if the function can be freed from the burden of administrative work, there is more scope to operate at a higher level (this issue will be explored in subsequent chapters). Even in organisations where the HR Business Partner model has been introduced, evidence suggests that organisations experience difficulties in breaking away from administrative tasks and seek transformational approaches that enable HR to concentrate on other activities. For example, Business Partners often find themselves pre-occupied by operational issues and are unable to diagnose and develop strategic HR solutions, becoming ‘bogged down’ in detail.

❐ Risk Reduction: All organisations have a legal obligation to comply with the requirements of local and national employment legislation. Employment legislation continues to become more complex (especially in Europe) and non-compliance can ultimately lead to legal action. A report by BusinessHR and MORI, which looked at UK SMEs and their attitudes towards staff attraction, retention and motivation found that 43% of managing directors experience difficulty in keeping in keeping up with growing employment legislation. The risks are obvious – failure to comply with legislation can consume huge amounts of management time, while the cost to employers of defending a tribunal claim can be very high (in some cases, such as those linked to gender and disability discrimination there are unlimited penalties). Bad experience of employment claims is often the trigger for exploring outsourcing options. 

❐ Service Quality Improvement: Companies that want to improve the speed, quality and effectiveness of their HR operations face two barriers. Firstly, they lack knowledge of best practice processes and how to implement them and secondly, their HR teams are so entrenched in current ways of working that they find it difficult to make the transition to a customer-focused service centre approach. HR outsourcing service providers typically bring experience and knowledge of best practice processes, built through experience of working with a range of customers and technologies. 

❐ Increasing HR’s Capacity to Respond to Organisational Change: Outsourcing is a tool often used by smaller organisations during their early growth if they are not able or motivated to invest in an internal HR function. It can also be used by organisations that wish to transform HR but cannot see an effective way to change their service delivery structure without external intervention. Likewise, outsourcing is sometimes a response when one division of a company is sold (such as in the case of a management buy-out) leaving it with no HR infrastructure, as an alternative to establishing a new internal HR operation. 

Why is HR Service Delivery Important?

In his 1997 ground-breaking book ‘Human Resource Champions’, Management Professor (and HR guru) Dave Ulrich set out a model for the operation of the Human Resource function that would influence a generation. One of the roles he defined for the HR function was the ‘Administrative Expert’, a role designed to cope with the vast range of back-office support services that ensure the business is compliant with statutory requirements and internal policy. HR typically delivers two distinct types of service: 

❐ Simple transactional services: Administration arises as a direct result of employing people and covers a vast range of processes – including issuing employment contracts, managing pay and conditions and maintaining personal data, all of which require effective administrative processes. As a minimum, processes must be legally compliant, but ideally they should also be cost-effective, efficient and of good quality. These activities are generally considered to be ‘compliance’ processes – they enable the business to operate within the law and policy, although they do not in themselves provide any direct strategic capability. 

❐ Transformational HR services create value for the organisation through processes such as learning & development, performance management, talent management and recruitment, leading to increased employee engagement and the creation of competitive advantage. These types of services tend to be delivered in organisations where the Human Resources model is relatively mature and where adding value is more important than compliance with policies. Providing HR and Payroll transactional services is expensive for an organisation, representing an overhead to the business both in terms of operational cost and managerial time. Anything that can be done to reduce the cost of delivering these services represents money the business could invest in other customer facing activities that can create wealth. As a result, there is often pressure on HR functions to meet the dual and sometimes conflicting requirement of reducing the cost of delivering service while at the same time improving its quality. A key decision facing organisations is how best to structure the delivery of HR and Payroll services to meet these needs, a problem that remains just as much a challenge now as it did in the mid-1990s.