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.