Tactical Human Resources Evolves into Strategic Human Capital Management

Given the examples of the changes in human resource (HR) management discussed in Thou Shalt Manage Human Capital Better, and the mushrooming number of point solution providers, many enterprises have realized the significant shortcomings of traditional HR (in terms of technology, beliefs, processes, and practices) that require a strategic-level mind-set change. This is particularly relevant during times of economic sluggishness and low investment capacity (which typically translates into layoffs or hire freezes, cost containment, and stalled innovation), when most enterprises and their employees are left wondering if they can (or should) rely on each other for their future.

Part two of the series Thou Shalt Manage Human Capital Better.

In the early 2000s, with the economy in a downturn, HR administration delivered some organizational value by outsourcing an increasing number of HR business processes, either wholly or in part. In many cases, outsourcing to some trusted technology vendors that have already demonstrated their HR domain expertise may help companies achieve additional efficiencies and functionality, reduce head count, and cut costs.

Of the many solutions in the HR realm, the most predominantly outsourced have been payroll processing, employee assistance programs, payroll tax filing, and background screening. The most appealing and achievable benefits of outsourcing are streamlined operations, access to better HR capabilities and industry expertise (when it is not a core competency of the user enterprise), freeing up of internal staff, reduced labor costs, and accurate and predictable monthly costs.

However, the returns from layoffs (often undertaken without much thought to who should really go, potentially resulting in the hasty release of the lynchpins of the enterprise's ongoing performance) and relentless cost-cutting have proved to have only a limited (if not negative) effect. While some organizations have tried to cut labor costs to be competitive in their markets, the most progressive companies have embraced their labor forces and used them as a strategic differentiator.

As products and technologies become commoditized in this information-based economy, companies are beginning to realize that the best way to differentiate themselves and create long-term strategic advantages over their competitors might be through their people. It is no longer what one owns that counts, but rather what one knows, which is particularly critical in information technology (IT) and similar professional services organizations (PSOs), because it is the technical expertise and experience of knowledgeable staff that means the difference between success and failure.

In fact, according to Forrester Research, more than 85 percent of the market value of a typical Standard & Poor's (S&P) 500 company today is the result of intangible assets. For many companies, the bulk of these intangible assets is their people (or human capital), and such companies spend as much as two-thirds of their overall costs on labor. Thus, they should focus on business processes, using technology to more effectively manage employees and improve their productivity. Combining training, incentive management, and compensation management tools delivered through a role-based dashboard, emerging people-centric software category aims to transform each individual in the workforce into an enterprise asset.

Best-of-breed HR Technologies

The most progressive of companies have been using best-of-breed HR technologies for attracting, hiring, training, motivating, and managing their people. Software applications are becoming more and more sophisticated to help companies with these tasks, and as these solutions continue to evolve and communicate with one another, user companies will have a more seamless access to methods and data for managing their employees throughout the employee life cycle.

On the other hand, the laggard companies that do not embrace these technologies will likely fall behind in their quest for market dominance. For instance, by implementing a holistic employee performance management process across the enterprise, corporate strategy can be aligned (and properly communicated) with individual goals and objectives, whereby actual performance against those goals can have ramifications for individual compensation and rewards. This should drive behavior and attitude toward executing on the corporate strategy, with improved employee satisfaction and loyalty as a result.

This certainly comes in handy when the economic downturn ends, when employees begin to feel that they have more employment choices. Enterprises will again need clear, credible, and reliable strategic sourcing strategies and management in order to plan for and engage the competencies (people and companies) needed to accomplish their business strategy (by building the required effectiveness and increasing efficiency). For instance, with the economy improving and IT budgets rising, competition for IT talent—especially in key skill areas—is bound to intensify. At the same time, an improved hiring picture in IT will most likely mean higher turnover, as many unhappy IT staffers who saw workloads increase while compensation and benefits stagnated (during the economic downturn of the early 2000s) will put even more pressure on IT management.

Hence, there is a true need for much tighter integration between performance management and compensation (regardless of the economic milieu), so that exemplary employees can be rewarded more often (and feel truly special to the enterprise), as opposed to the outmoded, blanket-regulated, across-the-board annual basis (which typically produces mediocrity).

Analyzing the workforce and strategically managing the company's human capital has become the focus of human resource management systems (HRMS), as a way to transform these from dull functions to those that greatly affect corporate performance. Integrated business information warehouses, to that end, enable multidimensional analysis on information aggregated from internal and external resources (salary survey, for example), performance indicators (as in turnover), and views on strategic HR information with powerful drill-down features. Some surveys indicate that almost a third of businesses are already using data warehouses, a quarter of them are using workforce performance management or analytics, and one-eighth of them are using workforce planning.

Workforce analytics have become a core of talent management systems. This is because they focus not just on "time" (or who has clocked in and who has not), but also on such strategic business issues as overtime and turnover trends that impact a business's bottom line profit, equal employment opportunity (EEO) or ethnicity-based hiring trends, compensation patterns, relative recruitment effectiveness and sourcing costs, cost per hire, etc..

Human Capital Management

This brings us to the notion of human capital management (HCM), or talent management, which Gartner defines as a set of HR practices that focus on acquisition, management, and optimization of the enterprise workforce. These practices include such processes as competency and skills management, succession planning, and team management. The key tenet of HCM is that companies must change the mind-set of viewing employees as an administrative cost, and instead see them as a strategic investment and a key enterprise asset, with a resulting focus on aligning workforce capabilities with business strategy. This more strategic view of the workforce will gradually become less an HR function and more a management discipline.

HCM should be about value and not cost, since people should be regarded as value-adders, and not overheads and liability. It should measure organizational outputs (such as profit, revenue, and service levels) related to better management of people rather than focusing on input measures (such as recruitment costs) and the HR “best practices” of earlier days.

According to studies by the Brookings Institute, in the early 1980s, tangible assets amounted to over 60 percent of firms' total assets. This ratio has now been reversed, with over 80 percent of assets being intangible, most of which is represented by human capital. Yet, while decades have been spent investing in automation technologies for better use of tangible assets, only recently have enterprises begun to invest in optimizing human capital.

Moreover, many non-HR business processes can benefit from leveraging HCM strategies, such as project portfolio management (PPM) processes (see Project Portfolio Management for Service Organizations: Bridging the Gap between Project Management and Operations), which can be improved via incorporating competency and skills data and by leveraging the team management capabilities of HCM applications. Similar examples of business processes that should benefit from “picking the HCM brains” include production planning, job costing, scheduling, training, compliance, budgeting, and field service. In fact, any people-centric business process should benefit from integration to HCM, whereas traditional administrative HR applications and processes will hardly support this integration at all.

This leads us to a broader notion of employee relationship management (ERM), business-to-employee (B2E) management, or whatever the three-letter acronym (TLA) du jour might be (see BLM—Buzzword Lifecycle Management). In any case, these acronyms try to depict a business discipline that focuses on optimizing the employee's total employment experience—including both the human and technology aspects of that experience.

ERM espouses a comprehensive and unified view of the processes and technologies that support the workforce and their workplace, including manager-employee interactions, the formal business tasks required to manage employee relationships, and the technology used to manage the employee experience. To that end, ERM encompasses the full suite of B2E services needed by employees, managers, and others, including knowledge management, e-learning, self-services, community and collaboration support, travel and expense (T&E) management, indirect procurement, and so on. Thus, ERM is most closely aligned with the HCM focus area of workforce management.



SOURCE:
http://www.technologyevaluation.com/research/articles/tactical-human-resources-evolves-into-strategic-human-capital-management-19578/

Innovation and Change in Human Resources

Veronica Inoue: What is [Federación Interamericana de Asociaciones de Gestión Humana] FIDAGH's perspective on human resources [HR] in Latin American countries?

Paul Rosillón: We have to look at it from different points of view. First, I think that Latin America is undergoing a process of change and transformation—as is the whole world— but this particular geographic region is where we are experiencing the most changes.

On the other hand, a big part of the changes that we are facing in Latin America are related to the needs of individuals and the way people are acting in the social, political, and economic spheres.

Third, and regarding the world of management and organizations, in the last 20 years, the topic of people management has changed dramatically. This has been a paradoxical change, because people have always been the most important factor. However, from a managerial science standpoint, individuals are a different subject now because they are managed differently and they are considered an economic factor. What do I mean by this? When knowledge and innovation become critical, people go from being a resource to being owners and capital. And that is somehow what is leading managerial sciences to focus more on intangibles and make leadership once again the underlying topic.

Another important change is occurring, and that is that people management is no longer part of HR functional management; it now concerns the whole management process. Therefore we, as management professionals, have had to understand that our roles are different—that we are also facilitators, internal consultants, coaches, or internal staff managers. In this sense, we can say that great changes are taking place.

Personally, I think there are two different levels: organizations understand that people are very important, but professionals in this area are not progressing at the same pace. A lack of connectivity exists within managerial education and training programs. Take, for example, an [master of business administration] MBA or similar postgraduate program; the attention to people management is minimal. Marketing and finance are still the more prestigious subjects.

To expand on this idea, we are undergoing change and transformation, but we still have a long way to go. We lack clarity, and we haven't been able to develop the connecting points [that will link managerial education and training programs together]. We could say that we know what we want to stop doing, but we still don't know how to take new steps. Even the way our federation works reflects that since 2001, we have been experiencing a restructuring process. Today, we have completed the first stage, but we must start stage two.

FIDAGH: The Lever and the Engine in the Arena of People Management

VI: How is FIDAGH searching for a way to do this?

Eladio Uribe: We at FIDAGH think of ourselves as a lever, but we also want to be the engine behind the transformation process that Latin America has to experience.

In Latin America, we all speak the same language—in general—but there are many differences in education, criteria, politics, strategic vision, and direction. The domain of HR in this region of the world is living this debate, which is also reflected in our federation. While we ask ourselves, “What does FIDAGH do for me?” others are asking, “Where should we go from here? What should we do with the HR people and people in other organizations and countries?”

I want to clarify here that the main issue is not the HR people; the main problem is our countries, our communities. The people in HR are working hard to help our communities overcome poverty.

We still have to understand that we must accept people from Argentina, Guatemala, Mexico, Uruguay, etc. as equals—as Latin Americans—instead of as Argentineans, Mexicans, etc. But overcoming inequalities is very difficult for us. We are convinced that we will be able to do it because we have a great source of motivation, and this source is that people who do not work in HR have been pushing these professionals to make a change, so there is no other option.

VI: Today, what are the key areas for HR in Latin America? Which other areas need to be reinforced?

EU: An agreement must be reached between the people of HR and employers on one side, and the state on the other, if we want to improve education systems. One of the greatest issues HR people face is the hiring process, the challenge of bringing “new blood” into the organization—people who are capable, competent, and ready to face the challenges that an organization brings. That is the biggest hurdle they have to overcome.

The other challenge is diversity. We still have to learn to accept and believe in diversity—believing that the person who comes from Asia, the US, or any other country in America can make an important contribution, can be helpful for our performance.

I think these two factors are fundamental: educational development and acceptance of diversity.

PR: There are two issues. The first one is corporate social responsibility [CSR]. While it is a common topic, we haven't started managing it and moving forward with it. Nobody expects organizations to become philanthropists, but they do have to play a role in society, and that is a paradigmatic change that is still in progress.

The other issue is the way companies are organized—the division of work according to tasks and descriptions of positions and roles within the organization. This is a model that is in crisis, and though it is becoming less and less common, we still are not certain of what the new trend will be. It's not easy to change a paradigm that has been the standard for almost 100 years, and that is taught in universities and reinforced everywhere. I think this is a golden opportunity for us, as HR professionals, to contribute and make a change. The problem is that we have been educated with the same old paradigms, so abandoning those notions is like getting undressed—

EU: It also means breaking another important paradigm: believing that only our organization can solve its internal problems with staff, management, or processes, without taking into account what is happening around the world.

Furthermore, my actions as HR have to be collective actions. Instead of aiming solely at my company, these actions must generate change in the community and in my daily environment. This will allow me to have capable individuals in my organization that will help realize strategic, sales, and other goals.

VI: How are the 15 member associations of FIDAGH participating in and committing to these objectives?

PR: As I said before, since 2001, we have been questioning ourselves and acknowledging that we have to change the way we think and see things.

We are halfway through the process. We—both the federation and the associations—have been going through this process since 2001. Next week [referring to May 14, 2007] we will have our 20th conference, our board meeting, and our management meeting, where we will change our approach. We are convinced that our current approach is not working, so we have to take a different direction. We don't know exactly what that direction will be, but we will say, “Gentlemen, we must admit that we have to change. We need to find ways to evaluate the changes that we will implement, and how we will work together in the future.”

Now, as Eladio said, we have diversity, and we feel pressure from each association and each country. But each one of them is different. Therefore, this diversity forces us to modify our ideas of the need for change. During this process, we have had to admit that we are not the same and that we don't experience the same pressures. We understand that the subject of people is important and that we must do something about it, but we have different driving forces. FIDAGH is responsible for harmonizing all these approaches.

EU: Besides, our goal is a collective one that involves management and integration. Therefore, from this standpoint, we do not want to exclude anyone—on the contrary; we have to insist that people come and learn. But we are aware that there are different levels of learning and that we have to work to unify them. It's a difficult task, but we are working on it.

Information Technology: Driving Innovation


SOURCE:
http://www.technologyevaluation.com/research/articles/innovation-and-change-in-human-resources-19112/

Performance and Compensation Management at the Core of Human Capital Management?

While decades have been spent investing in automation technologies for better use of tangible assets, only recently have enterprises begun to invest in optimizing human capital. Tactical and administrative human resources (HR) management is morphing into strategic human capital management (HCM).

Part Three of the series Thou Shalt Manage Human Capital Better.

Some might argue that HCM revolves around better performance management and employee compensation. As the economy continues to rebound and talent wars intensify, companies have been increasingly leveraging traditionally elusive "pay-for-performance" technologies that successfully automate and link compensation planning with business and employee performance. Practically every organization regularly reviews the performance of its employees, which most managers confess to be a chore that is ironically the centerpiece of their existence. In other words, most managers hate personnel reviews, and many procrastinate until the HR department or the employees "scream." Since no employees can get a pay raise until they get a review, HR departments implement systems to automate and force the review process as a means to address this.

The aim of performance management systems is to both automate the employee review process and link reviews to organizational performance. The aim is to ascertain whether employees are taking definitive steps to achieve their determined performance goals; whether there are succession plans in place for top managers; what kinds of skills the organization will need in the next few years; and so on. Those are the kinds of questions (and hopefully appropriate answers) that performance management systems should put on the desktops of both managers and employees.

Performance management systems often include or feed into compensation (sometimes also called employee incentive management [EIM]) systems in order to more justly distribute merit-based pay increases. Before deploying such a system, managers would customarily review employees annually around their date of hiring, often with the result that well-deserving employees would not get the increase they deserved simply because the pool of available money had already been spent by the time they received their reviews. Surprising or not, compensation represents more than 60 percent of total corporate expenditures, yet most Global 2000 firms are still not properly rewarding their highest-performing workers. The aim is now to complete employee reviews at the end of the fiscal year, and also manage the merit expense budget by reviewing all performance scores before distributing the pay increases. Additionally, such systems are useful for obtaining a twelve-month view of employee performance, versus focusing too closely on the period that immediately precedes the review. The customary "defeat the purpose of performance review" experience of many managers has been that the company would set the parameters for pay raises and salary ranges at "budget time," and then expect managers to predict the percentage raises individuals would receive, so that the money would be in the budget when time came to review the employee.

More comprehensive performance management systems nowadays include a stronger link to upstream business goals and objectives, as well as a tighter connection to rewards, including merit pay, short-term variable incentives such as bonus or commission awards, and longer-term incentives such as stock grants. Some vendors offer succession-planning software that builds on performance and training systems to identify likely candidates for jobs further up the food chain. Again, the aim is to turn people into a competitive advantage and to ensure that there are programs that pay for performance and reward people for achieving goals that move the enterprise forward. These outlined capabilities should help users not only hire a higher-quality employee, but also better track that employee's performance, and establish a stronger link between the employee's performance and compensation. Enterprises want to be able to raise the bar for high performers while placing low performers on a performance improvement plan.

One illustration could be at an apparel retailer that often fell short of expectations with the launch of a new line of jeans, which prompted it to decide to test market jeans fitters who had been trained through e-learning about the products, how to fit jeans on women, and how to give the best advice. The project purportedly returned a 75 percent increase in revenue, since the fitters began receiving an incentive every time a pair of jeans was sold. There was a performance management solution in the background telling them how they were doing according to their goals, whereby learning, performance, and incentives were all tied together in an integrated way to drive corporate revenue and performance.

For background information see in Thou Shalt Manage Human Capital Better and Tactical Human Resources Evolves into Strategic Human Capital Management.

Leading Vendors

Leading vendors in this space include Authoria (which recently acquired Advanced Information Management [AIM], a provider of compensation management), SuccessFactors, Halogen Software, Workscape (including recently acquired Performaworks), FirstDoor.com, Callidus Software, Centive, Ceridian, HRsmart, Kadiri, ProAlt Technologies (now both part of Workstream Software), Softscape, Kenexa, and enterprise resource planning (ERP) giants SAP, Oracle, and Lawson Software.

In July, Lawson announced the acquisition of Competency Assessment Solutions (CAS), a provider of performance management solutions for the health care industry to comply with reporting standards set by the Joint Commission on Accreditation of Healthcare Organizations (JCAHO). Compensation management aligned with individual performance management creates a true pay-for-performance environment, and leaders in this realm are tying the workforce to organizational goals and productivity, such as revenue per full-time equivalent employee (FTE). Developing competency models for each work position can be time-consuming and costly, but once conducted, these models can be leveraged across the entire HCM realm to improve the quality of new hires, compel desired employee performance, facilitate employee development, and assist in the development of succession plans. In other words, the entire employee life cycle (acquiring, developing, managing, and measuring performance) can be facilitated.

To recap, HCM has evolved beyond the simple automation of business tasks to the more complex streamlining of traditional HR processes and increasing of efficiencies in the broad management of human capital. Strategic HCM solutions can help organizations transform their people into a competitive advantage by aligning managers and employees with corporate goals of driving business value. Authoria reportedly recently spoke to more than 200 senior HR executives and asked them about their top "pain points." Leading this list was aligning employee goals and corporate goals, paying for performance, and developing top talent. Trying to accomplish these important objectives in a pedestrian way has proven to be equal to finding the fountain of youth or the holy grail. Conversely, well-devised HCM strategies and methods should help execute these priorities and make these initiatives successful.

Moreover, Genesys recently released the results of its HCM trends survey. The vendor's web-based suite PeopleComeFirst streamlines HR, benefit administration and payments, payroll processing, self-service, competency-based learning management, performance management, recruitment, and time and attendance (T&A), and it can be implemented as either human resources outsourcing (HRO) services or as licensed software. According to respondents of the survey, the top HCM priorities for 2006 included talent and leadership development, combined with talent acquisition and retention (45 percent), performance management (21 percent), and streamlining processes (18 percent). In addition, 18 percent of respondents also indicated that aligning people and business goals would be an important priority in the coming year, which shows that the attention of HR departments is increasingly centered upon becoming process experts and improving business processes, focusing on talent acquisitions and subsequent management, and providing better data for decision making. Moreover, 38 percent of respondents indicated that budget expectations over the next 12 months for HR technology and outsourced solutions would increase, by as much as 9 percent in some cases, thereby enabling funding of the services and tools required to support these top priorities.

SOURCE:
http://www.technologyevaluation.com/research/articles/performance-and-compensation-management-at-the-core-of-human-capital-management-18740/

Technology's Role in Strategic Human Resources

Most chief executive officers (CEOs) are challenging their human resources (HR) departments to make more strategic contributions to the organization. With HR traditionally viewed as a cost center, it is often difficult to know precisely what that means. CEOs, who are focused on growth, earnings, and shareholder returns, want HR to support corporate business objectives and to have the necessary data to support business decisions. These roles are necessarily integrated with HR's responsibility to ensure that there are qualified and satisfied workers when and where they are needed. The way to fulfill these roles is through process excellence, integrated HR systems, and accurate and actionable data from all HR departments. When these elements come together, HR can have a tremendous and meaningful impact on the bottom line.

It sounds like a lot to ask, but these demands are achievable today. And the HR department doesn't have to go it alone. There are technologies and service providers that can help move HR from the administrative rut, free up manpower for strategic tasks, and employ business intelligence capability to align HR with desired business outcomes.

The Role of Outsourcing

Human resources outsourcers play a critical role. Companies often choose to work with outsourcers to gain access to the latest technologies without having to make the associated capital investment. At most enterprises where HR functions have been outsourced, the initial tier of value is well-established. Processes are standardized and employee interactions are professionalized. Transactions are faster, more user-friendly, and less costly. As employee programs continually become more complex and difficult to administer, outsourcing consistently delivers high levels of service.

But it's that next critical tier where advanced HR outsourcing technologies are delivering strategic leverage by gathering and combining fragmented data from discrete vertical HR systems. When data from various departments is integrated into a reliable, consistent source of centralized information, HR can make better-informed and more strategic business decisions daily. The impacts of HR programs and practices can be assessed, and critical insights into the workforce revealed.

Sophisticated analytics can measure how HR systems and programs affect employee behavior and influence customer behavior (for example), ultimately impacting financial results and corporate growth. Companies are beginning to see that reducing HR administrative costs is only the tip of the iceberg. A new priority is to employ the technologies that provide data and analysis, in order to realize the savings that lie in HR.

Technology at Work

For example, your time and attendance program tracks worker hours and absences, and is the entry process for generating payroll. A separate program handles short-term and long-term disability payments. Both of these systems are important. But viewed separately, they reinforce HR's traditional administrative role. An outsourcing solution that combines information from both systems and employs business intelligence functionality delivers a human asset management program that tracks absenteeism, peak work periods, and turnover. Now your data shows impacts on labor costs, overtime, and the amount of money spent on temps and employee replacement. This business intelligence can be used to closely align the workforce with long-term labor needs, manage absence and labor utilization, and thereby reduce operating costs.

Training, staffing, and recruiting programs can be linked in beneficial ways, too. There are lots of technology tools that enable prospective employees to submit rsums online. But does your HR department use that information beyond the recruiting process? By integrating prospective employee data and skill sets against the company's development plan and training programs, qualified individuals can be "pipelined" into the organization over time, and existing staff can be educated. This ensures more strategic hiring decisions from the outside, and better use of existing personnel.

Succession planning is another key area where HR outsourcing can provide strategic value. For example, if a company has a 10 percent turnover rate, and it typically takes 30 days to fill a job, what does that mean for its staffing at any given point in time? It means the company is nearly one percent understaffed at all times. In an organization of 50,000 employees, that's 400 workers not meeting deadlines or producing, which negatively impacts customer satisfaction.

In that same scenario, add in the ramp-up time required for new hires to fill the open slots, and the "downtime" could be as much as sixty days per opening. Factor in absenteeism, short- and long-term disability, sabbaticals, maternity and paternity leave, job sharing, and other benefits, and the staffing levels are likely to be much lower than imagined. Using business intelligence technologies and analytics allows HR departments to better see and manage what is really happening with staffing levels, and predictive measurements can help plan more accurately for the normal ebbs and flows of business.

Selecting the Right Outsourcing Provider

As important as deciding to outsource HR functions, however, is selecting the right partner. Partnering with an HR provider is a critical business decision, and should be considered with the same due diligence as a merger or joint venture. Companies should be culturally compatible and share a common vision.

An outsourcing partner's service framework and delivery model should be engineered to meet your requirements, and there should be a clear definition of the scope of services and defined service levels. The objectives of outsourcing should be translated into service-level agreements so performance can be measured against stated expectations. Most large enterprises will want a full-service provider rather than one that handles just one element (such as payroll). References should be checked, and the provider should demonstrate capabilities in full-spectrum HR outsourcing (and have the financial backing to be around for the long term).

Remember, working with an outsourcer is not about giving up control. Rather, it is about finding the best ways to deliver quality service, impact organization economics, and provide the data that aligns the HR department with business outcomes.

The Metamorphosis

In today's economic climate, all CEOs have a growth agenda that requires a solid and committed workforce—in other words, they need to have the right people in the right place at the right time. The true value of the human resource team will be measured in how well it aligns with this growth agenda. Effectively integrating HR business intelligence technologies is foundational to HR's metamorphosis from administrative cost center to strategic contributor to corporate growth.


SOURCE:
http://www.technologyevaluation.com/research/articles/technology-s-role-in-strategic-human-resources-18570/

Human Resources: To Outsource or Not to Outsource, That Is The Question

In today’s business world, human resource outsourcing (HRO) is becoming increasingly popular than it was five years ago. While earlier adopters of HRO have had less than ideal experiences with their outsourcing partners (poorly integrated service delivery, lack of common HR standards, etc.), today’s outsourcing services have greatly improved.

According to a mid-2009 report by AMR Research Inc. on the state of IT outsourcing, roughly 80 percent of enterprises plan to either increase their amount of IT outsourcing or keep it the same. This dramatic change occurring in today’s organizations—and its workforce—has propelled this latest trend toward outsourcing. Workers’ needs are changing, human resources (HR) costs are on the rise, there are increasing pressures for HR managers to stay abreast of the latest legislative changes (e.g., corporate governance), and there is an overall increasing demand to simplify HR-related activities.

You may be asking yourself this question: How does an organization make the transformation from the standard in-house HR administration and services? Answer: By partnering with a firm that can deliver the varying HR and benefits needs of the company’s employees and that can empower its managers to make healthy workforce decisions—ultimately driving organizational success. Enter HRO.

In this article, I will discuss some of the reasons why HRO may be right for your organization (the benefits and concerns), detail some high-level considerations, and finally provide you with some tools that you can use to make an informed decision to “outsource or not”.

HR Outsourcing Models

• Business process HR outsourcing: where an external service provider manages a company’s HR activities (e.g., payroll, benefits, recruitment)

• Shared services HR outsourcing: where only the transaction or administrative elements of HR activities are sub-contracted to an external service provider

• Application and facilities service HR outsourcing: where an external service provider controls/maintains the technological and physical infrastructure that supports HR activities

• HR off-shoring: outsourcing local human resource activities to another country

How Do You Know When HRO is Right for You?
As with any big enterprise software purchasing decision, there are many factors that come to mind when considering outsourcing. Here are just some of the main reasons companies decide to outsource their HR activities:

Company growth is often the first trigger. As a company grows, quite often they don’t want to be burdened with HR’s daily administrative tasks (recruitment, payroll, benefits, and training). To put it bluntly, a company has better things to do with its time like concentrating its efforts on core goals such as policy enforcement, compensation strategies, human capital management (HCM), assessing benefit healthcare plans, and delivering a higher quality of service.

Businesses can’t afford the rising costs. The world of HR is changing. Companies are no longer just managing employee folders and writing paychecks. With the addition of talent management and the point solutions and suites offered by a wide variety of software vendors, companies that already have a core HR system in place suddenly have to make very complex decisions about what types of add-ons it will need to purchase to address its changing needs. This can lead to confusion about which system might be the best. Not to mention, the costs that go along with purchasing multiple solutions can be exorbitant.

There is a need for greater knowledge and expertise. One of the fundamental reasons for outsourcing is allowing critical internal operations to be handled by a firm that can do it more efficiently—and at a lower cost. The high-end quality of outsourcing services demonstrated by experts in the area of HR is often unparalleled to their in-house counterparts—especially in the area of regulatory compliance. That’s not to say that you should let all of your HR people go. In fact, companies should always retain somebody in-house in order to oversee corporate policy, decision-making, and to manage the relationship with the outsourcer.

HRO Benefits and Concerns
Of course, HRO is not for everyone, but the benefits that outsourcing has exhibited over the past few years seems to heavily outweigh the concerns.

High-Level Outsourcing Considerations
As with any new enterprise software selection initiative, the task must not be taken lightly. Before making the decision to outsource, there are some high-level factors that must be considered.

• Do your research: Ensure the outsourcing firms you are looking at have enough experience to handle your company’s needs and that they will be able to meet or exceed your quality expectations; and ask for references. According to a Hewitt Associates 2009 survey, HR expertise continues to be valued over cost.

• Understand the technology: When choosing an HRO, it is important to understand that most firms have their own standards, generally using one multi-tenant infrastructure with one core service delivery model. Standardizing this delivery model in the end provides companies a significant cost savings (economies of scale).

• Get ready for a transition: The transition from in-house HR to an HR outsourcing firm must be well thought out. You must

* Identify your needs: identify tasks that take key staff away from their prime purpose; and assessing which services your business would like to outsource
* Develop an effective change management strategy: helps to minimize disruptions while implementing changes
* Prepare for the change: provide employee orientation/training in order to ease employee fears

• Partnership agreements: Both service provider and client must view the partnership as just that—a partnership. An understanding of the organization’s current and future business strategy and potential changing business profile is important before entering into any contractual arrangement. Both parties must be in sync regarding expectations, communication, governance, and processes. Having the outsourcing firm sign a service level agreement (SLA) will help to define the requirements of both parties and detail the penalties for non-compliance. While the typical length of an HRO contract is one year, increasingly, HR outsourcing arrangements are becoming more long term—five to 10 year contracts are not unusual. The other point to consider is “what kind of relationship does the outsourcing provider have with the vendor supplying the underlying technology”? Of course, there are times when they are one in the same, however more often we see that the two are separate firms altogether. No matter what your arrangement is, make sure the contract between parties is clear.


SOURCE:
http://www.technologyevaluation.com/research/articles/human-resources-to-outsource-or-not-to-outsource-that-is-the-question-20678/

An Unusual Human Capital Management Suspect

The most progressive companies have been using best-of-breed human resource (HR) technologies for attracting, hiring, training, motivating, and managing their people. Software applications are getting more and more sophisticated to help companies with these tasks, and as these solutions continue to evolve and communicate with one another, user companies will have more seamless access to methods and data to manage their employees throughout the employee life cycle. On the other hand, laggard companies that do not embrace these technologies will likely fall behind in their quest for market dominance.

There is a true need for much tighter integration between performance management and compensation (regardless of the economic milieu), so that exemplary employees can be rewarded more often, and thus feel truly special to the enterprise. This is vastly preferable to the outmoded blanket-regulated, across-the-board annual "incentive," which typically produces mediocrity. Analyzing the workforce and strategically managing the company's human capital has become the latest focus of human resource management systems (HRMS), as a way to transform these systems from dull functions to applications that greatly affect corporate performance. To that end, integrated business information warehouses enable multidimensional analysis with powerful drill-down features, on information aggregated from internal and external resources (for instance, salary surveys), performance indicators (such as turnover), and views on strategic HR information. Some surveys indicate that almost a third of businesses are already using data warehouses; a quarter of them use workforce performance management or analytics; and one eighth of them are using workforce planning.

This brings us to the notion of human capital management (HCM) or talent management, which Gartner defines as a set of HR practices that focus on the acquisition, management, and optimization of the enterprise workforce. This includes such processes as competency and skills management, succession planning, and team management. The key tenet of HCM is that companies must change their habit of seeing employees as an administrative cost, and instead see them as a strategic investment and key enterprise asset, with a resulting focus on aligning workforce capabilities with business strategy. This more strategic view of the workforce will gradually become less an HR function, and more a management discipline.

HCM should be about value and not cost, since people should be regarded as value-adders and not overheads and liability. It should measure organizational outputs related to better management of people (such as profit, revenue, and service levels), rather than focusing on input measures (such as recruitment costs) or the HR "best practices" of earlier days. According to studies by the Brookings Institute, in the early 1980s tangible assets amounted to over 60 percent of firms' total assets. But now this ratio has been reversed, with over 80 percent of assets being intangible—most of which is represented by human capital. Yet, while decades have been spent investing in automation technologies for better use of tangible assets, only recently have enterprises begun to invest in optimizing human capital.

For an extensive examination of HCM, see Thou Shalt Manage Human Capital Better.

An Unusual HCM Suspect

Vendor consolidation activity continues, both among complementary and competing HCM products (see The Human Capital Management Market—Hot, but also Overpopulated?), and the HCM fray has lately been enriched by Infor, a somewhat unexpected (or under-regarded) HCM aspirant. Infor is a provider of extended enterprise resource planning (ERP) solutions for manufacturing, distribution, retail, services, and public organizations worldwide (see The Enterprise Applications "Arms Race" To Be Number Three). Although much better known for its manufacturing and supply chain management (SCM) expertise, the vendor has garnered a strong portfolio of HCM applications, mainly stemming from the former Infinium HR and Computer Associates (CA) Masterpiece/HR suites (that came via the recent acquisition of SSA Global), as well as from the recent acquisition of Extensity, which brought the former Geac HR and Payroll solutions. These applications have all achieved strong penetration in some service industries. In fact, Infinium remains the undisputed leader in the hospitality and gaming sector.

In August 2006, Infor announced the general availability of Infor Human Capital Management (HCM) 3.0, a comprehensive solution that aims at helping companies reduce workforce-related costs (which, as mentioned above, can contribute up to 60 percent of any company's total expenditures) and improve workforce productivity. With this product release, the vendor has combined both transactional and strategic HR functionality with integration to its flagship ERP and extensions solutions, so that its customers can better align their HCM initiatives with overall business strategy. The solution is integrated with core Infor Financial Management (Infor FM), Infor Portal, and Infor Workflow, and provides extension solutions such as Infor Corporate Performance Management (Infor CPM). Infor HCM and FM are not only integrated, but also share the same technology foundation.

In tune with the exhaustive market analysis presented in an earlier series, Infor believes that HCM is no longer a back-office function, but rather a key component of a modern extended ERP solution. This solution must be able to add value to uninterrupted business processes, and become a means to enable compliance through organizational alignment. Accordingly, Infor HCM enables companies to automate core processes such as HR, benefits, and payroll, and also offers capabilities including self-service, analytics, and workflow to better connect managers and employees. In other words, the efficiency and effectiveness of a user enterprise's operations and processes can be achieved via both core HR and strategic HCM capabilities, bundled with workflow integration and a workforce portal. Some potential benefits are thus reduced HR costs and time, through business process efficiencies and improved employee communication and productivity. The vendor claims that a vast number of existing customers surveyed have told it that they want to 1) improve workforce performance through accountability and visibility; 2) achieve greater efficiency and effectiveness by adding value to processes and increasing capabilities; and 3) lower total cost of ownership (TCO) through application flexibility and compatibility.

To accommodate the last requirement—lower TCO through application flexibility and compatibility—the suite is built on open standards, including Java 2 Enterprise Edition (J2EE) and extensible markup language (XML). It can be deployed on multiple platforms, including UNIX (Sun Solaris, HP/UX, and IBM AIX), Microsoft Windows, IBM iSeries, Multiple Virtual Storage (MVS), and Virtual Storage Extended (VSE) mainframe operating systems (OS). It can also be deployed on Microsoft SQL Server, Ingres, Oracle, IBM DB2, Informix, and CA-Datacom databases. Initially available in English only, the product suite has since been internationalized to accommodate multiple language and currency support, and Spanish, French, Italian, German, Norwegian, Finnish, Danish, Brazilian Portuguese, Simplified Chinese, and Japanese are being rolled out throughout 2007. The product is also slated for continued adoption of the recently released Infor Open SOA (Service-oriented Architecture) (see Contributing to the Rejuvenation of Legacy Systems in the Enterprise Resource Planning Field).

The product already features J2EE-based self-service and talent management (as in learning management and performance management) modules, and a J2EE/XML-based user interface (UI) and integration layers (whereby the integration layer also supports Microsoft .NET). The future should see continued adoption of J2EE, and more modular SOA development. These traits have been provided with potential customer benefits in mind, such as the ability to capitalize on and leverage existing IT infrastructures, and the potential to further meet global requirements. Thus, one should see Infor HCM as a major cross-selling product in the ongoing merger of a few fellow extended-ERP providers (Infor, SSA Global, and Geac); pre-merger Infor's native HCM capabilities have been all but non-existent thus far, despite an immense product portfolio.

What Does Infor HCM Entail?

Diving a bit deeper into some individual modules, the Infor HR module covers traditional multi-organizational workforce management, multi-job position management, workforce development, training administration, basic recruitment, and salary planning and budgeting. However, the novel Infor e-Recruitment module seems particularly comprehensive in terms of global applicant tracking and Internet-based recruitment, and is taking care of both salaried and hourly hiring support on a single platform. It manages most of the business processes in the web-based staffing process, including requisition management (creation, sign-off, and approval); candidate sourcing tools (including corporate job boards and job cross-posting, and resume parsing and searching); customizable applicant screening and ranking, interviewing, candidate communications, selection and offer generation; hiring and on-boarding; and internal talent management. Also, there is the management of such employment applications as portable document forms (PDFs). The underlying workflow management tools support customized business processes, and the analytic tools provide customized activity and metric reporting.

Infor Benefits Administration provides virtually unlimited benefit program management in terms of benefits plans, providers, and rates. The module identifies appropriate dates for calculating coverage and deductions, provides maintenance of dependent and beneficiary information, and supports flexible benefits plans, such as the definition and maintenance of flexible credits. There is also compliance with the US Health Insurance Portability and Accountability Act (HIPAA) and Family and Medical Leave Act (FMLA). Infor Payroll is also quite functional with support for payroll and year-end accounting, including compliance with US Equal Employment Opportunity (EEO) laws, and the US W2, 1099, and 1099R forms. It also includes compliance with Canadian T4, T4A, and other germane forms. There is a plethora of earnings and deductions combinations, as well as support for basically any type of payroll period (weekly, biweekly, semimonthly, monthly, and special [executive] pay cycles). Other notable features are possible overrides of earnings, deductions, and taxes; retroactive payroll processing; "compute-a-check" (on-demand payroll and check provision); workers' compensation; absence management; and garnishment tracking and deduction.

Infor Self-service provides four modules:

* Employee Self-service, to update personal and contact information, access learning management, update skills and competencies, and view performance management;
* Payroll Self-service, to view paychecks, submit tax elections, change pay locations, view W2 forms, and view or change direct deposit information;
* Benefits Self-service, to view benefits summaries, view or edit lists of dependents and beneficiaries, perform benefits enrollment, and view or enroll in flexible spending accounts; and
* Manager Self-service, to view employee information and conduct employee status changes, and for performance management and salary planning.

The Infor Learning Management module provides support for many training methods, including instructor-led, online or web-based, computer-based training (CBT), event-based, synchronous, and blended methods. There is integration with leading collaboration platforms such as Centra, Placeware, and WebEx, and a solid online content management repository from multiple internal and external sources. This repository includes a built-in authoring tool and "anytime, anywhere" content development and uploads. The module supports self registration and group registration using credit cards, cost centers, subscription, or purchase orders, while collaboration can take place through discussion forums, e-mails, and chat rooms. There is delivery and tracking of proprietary and standards-based content, including Aviation Industry CBT (Computer-based Training) Committee (AICC) and Sharable Content Object Reference Model (SCORM) standards. The module is also integrated with its SSA counterpart modules (Performance Management, Development Planning, and Competency Management).

Last but not least, Infor Employee Performance Management provides the ability for the enterprise to establish objectives and goals, and track them to completion via features like "360-degree feedback" (meaning feedback from all sources connected to the employee), including peer reviews. It also enables automatic calculation of performance review scores based on employee ratings and weight inputs. There is support for formal and informal performance appraisals, based on accomplishment of established goals and attainment of competencies. Again, in this context there is underlying automated workflow (to ease administrative tasks and ensure that performance reviews are completed on time). Other notable capabilities are detailed skills and gap analyses that more clearly identify areas for improvement and development; cascading goals to help users align employee performance measures with those of the organization; and role-based assessment of individual competencies and skills to provide further insight into employee performance. All these capabilities aim at identifying top performers to aid in corporate succession planning.

How Does This All Fit Together?

In a little demonstration of the Infor HCM system at its 2005 Global Client Forum (GCF) user conference, former SSA Global illustrated how the process of bringing new employees on board and deploying them into the organization can be streamlined, with all information set up in internal systems beforehand to ensure that new hires are productive from the first day. This is often a time-consuming, paper-intensive process which results in low engagement during the early days of employment. In the demonstration, a new recruit in the information technology (IT) department has accepted an offer of employment, and needs to become registered in the company's systems. The HR administrator completes an online job hire wizard in the aforementioned Infor e-Recruitment module, and this automatically creates an employee record in Infor HCM 2.0. For speed and efficiency when on-boarding new employees, Infor Workflow will automatically notify various departments to continue the process of setting up the new employee. Accordingly, an e-mail notification is sent to the benefits administrator, and there is a workflow inbox for the administrator which contains the actions necessary to complete the new hire process. By clicking on these links, the administrator can complete the benefits enrolment process for the new employee.

When the set-up process is complete, the employee has immediate access to Infor Self-service, where it is possible to enter annual tax elections in the Infor Payroll solution, and also to verify and update personal and work-related information, such as name and address, emergency contacts, and work location. In Infor Learning Management, the new employee can enroll in learning and development plans during the first day of orientation training, since it is possible to access the course online. When the course is complete, the learning transcript and evaluation can be made available to management. The HR department can view all employee information online, including analysis with Infor Enterprise Reporting and Analytics (with Cognos as the underlying platform). Finally, with the new employee deployed into the organization, HR executives can proactively plan and budget for future staffing needs using Infor Enterprise Planning and Budgeting.

Rounding Out with a Talent Management Acquisition

Infor Global's capabilities in HCM were enhanced by the late-2005 acquisition of Boniva Software, a provider of e-learning, skills management, and performance management applications. The addition of new, complementary HCM functionality expanded Infor's ability to address the growing need among its customers for solutions that support employee recruitment, learning management, competency and skills assessment, and employee performance planning. The Boniva applications were based on a similar SOA, and built using the same J2EE technology as the Infor Open SOA mentioned above. The combined architecture has provided the flexibility to integrate with existing enterprise applications, and to quickly tailor solutions for specific industries.

As for addressing its customers' foremost requirement—accountability and visibility of workforce performance—Infor offers a combination of capabilities like workforce planning and budgeting, HCM analytics and reporting, and talent management. Logically, potential customer benefits should arise from alignment with corporate strategy by combining workforce requirements and business plans. They should also gain the potential for improved decision making through visibility of performance, and the ability to acquire and develop the best talent. To that end, in mid-2006, Infor (formerly SSA Global) announced the general availability of Infor Talent Management 4.5, a comprehensive workforce management solution for midsized and large enterprises.

Infor Talent Management is enabled by many HCM components and cross-integrations, including workforce planning; web-based recruiting; employee performance and competency management; workforce development; succession planning; learning management; and compensation management. The solution was designed for easy integration into core ERP systems, and can be implemented as an Infor Global-hosted solution, or installed as a licensed solution. Its modular format makes it possible to integrate only the required talent management functionality into a customer's existing platforms or services. The solution is double-byte enabled, making it a suitable talent management solution for multinational companies that need to manage a workforce in several countries. Infor Talent Management 4.5 is currently available in English, with plans for localization in more languages in 2007.



SOURCE:
http://www.technologyevaluation.com/research/articles/an-unusual-human-capital-management-suspect-18760/

Tactical Human Resources Evolves into Strategic Human Capital Management

Given the examples of the changes in human resource (HR) management discussed in Thou Shalt Manage Human Capital Better, and the mushrooming number of point solution providers, many enterprises have realized the significant shortcomings of traditional HR (in terms of technology, beliefs, processes, and practices) that require a strategic-level mind-set change. This is particularly relevant during times of economic sluggishness and low investment capacity (which typically translates into layoffs or hire freezes, cost containment, and stalled innovation), when most enterprises and their employees are left wondering if they can (or should) rely on each other for their future.

Part two of the series Thou Shalt Manage Human Capital Better.

In the early 2000s, with the economy in a downturn, HR administration delivered some organizational value by outsourcing an increasing number of HR business processes, either wholly or in part. In many cases, outsourcing to some trusted technology vendors that have already demonstrated their HR domain expertise may help companies achieve additional efficiencies and functionality, reduce head count, and cut costs.

Of the many solutions in the HR realm, the most predominantly outsourced have been payroll processing, employee assistance programs, payroll tax filing, and background screening. The most appealing and achievable benefits of outsourcing are streamlined operations, access to better HR capabilities and industry expertise (when it is not a core competency of the user enterprise), freeing up of internal staff, reduced labor costs, and accurate and predictable monthly costs.

However, the returns from layoffs (often undertaken without much thought to who should really go, potentially resulting in the hasty release of the lynchpins of the enterprise's ongoing performance) and relentless cost-cutting have proved to have only a limited (if not negative) effect. While some organizations have tried to cut labor costs to be competitive in their markets, the most progressive companies have embraced their labor forces and used them as a strategic differentiator.

As products and technologies become commoditized in this information-based economy, companies are beginning to realize that the best way to differentiate themselves and create long-term strategic advantages over their competitors might be through their people. It is no longer what one owns that counts, but rather what one knows, which is particularly critical in information technology (IT) and similar professional services organizations (PSOs), because it is the technical expertise and experience of knowledgeable staff that means the difference between success and failure.

In fact, according to Forrester Research, more than 85 percent of the market value of a typical Standard & Poor's (S&P) 500 company today is the result of intangible assets. For many companies, the bulk of these intangible assets is their people (or human capital), and such companies spend as much as two-thirds of their overall costs on labor. Thus, they should focus on business processes, using technology to more effectively manage employees and improve their productivity. Combining training, incentive management, and compensation management tools delivered through a role-based dashboard, emerging people-centric software category aims to transform each individual in the workforce into an enterprise asset.

Best-of-breed HR Technologies

The most progressive of companies have been using best-of-breed HR technologies for attracting, hiring, training, motivating, and managing their people. Software applications are becoming more and more sophisticated to help companies with these tasks, and as these solutions continue to evolve and communicate with one another, user companies will have a more seamless access to methods and data for managing their employees throughout the employee life cycle.

On the other hand, the laggard companies that do not embrace these technologies will likely fall behind in their quest for market dominance. For instance, by implementing a holistic employee performance management process across the enterprise, corporate strategy can be aligned (and properly communicated) with individual goals and objectives, whereby actual performance against those goals can have ramifications for individual compensation and rewards. This should drive behavior and attitude toward executing on the corporate strategy, with improved employee satisfaction and loyalty as a result.

This certainly comes in handy when the economic downturn ends, when employees begin to feel that they have more employment choices. Enterprises will again need clear, credible, and reliable strategic sourcing strategies and management in order to plan for and engage the competencies (people and companies) needed to accomplish their business strategy (by building the required effectiveness and increasing efficiency). For instance, with the economy improving and IT budgets rising, competition for IT talent—especially in key skill areas—is bound to intensify. At the same time, an improved hiring picture in IT will most likely mean higher turnover, as many unhappy IT staffers who saw workloads increase while compensation and benefits stagnated (during the economic downturn of the early 2000s) will put even more pressure on IT management.

Hence, there is a true need for much tighter integration between performance management and compensation (regardless of the economic milieu), so that exemplary employees can be rewarded more often (and feel truly special to the enterprise), as opposed to the outmoded, blanket-regulated, across-the-board annual basis (which typically produces mediocrity).

Analyzing the workforce and strategically managing the company's human capital has become the focus of human resource management systems (HRMS), as a way to transform these from dull functions to those that greatly affect corporate performance. Integrated business information warehouses, to that end, enable multidimensional analysis on information aggregated from internal and external resources (salary survey, for example), performance indicators (as in turnover), and views on strategic HR information with powerful drill-down features. Some surveys indicate that almost a third of businesses are already using data warehouses, a quarter of them are using workforce performance management or analytics, and one-eighth of them are using workforce planning.

Workforce analytics have become a core of talent management systems. This is because they focus not just on "time" (or who has clocked in and who has not), but also on such strategic business issues as overtime and turnover trends that impact a business's bottom line profit, equal employment opportunity (EEO) or ethnicity-based hiring trends, compensation patterns, relative recruitment effectiveness and sourcing costs, cost per hire, etc..

Human Capital Management

This brings us to the notion of human capital management (HCM), or talent management, which Gartner defines as a set of HR practices that focus on acquisition, management, and optimization of the enterprise workforce. These practices include such processes as competency and skills management, succession planning, and team management. The key tenet of HCM is that companies must change the mind-set of viewing employees as an administrative cost, and instead see them as a strategic investment and a key enterprise asset, with a resulting focus on aligning workforce capabilities with business strategy. This more strategic view of the workforce will gradually become less an HR function and more a management discipline.

HCM should be about value and not cost, since people should be regarded as value-adders, and not overheads and liability. It should measure organizational outputs (such as profit, revenue, and service levels) related to better management of people rather than focusing on input measures (such as recruitment costs) and the HR “best practices” of earlier days.

According to studies by the Brookings Institute, in the early 1980s, tangible assets amounted to over 60 percent of firms' total assets. This ratio has now been reversed, with over 80 percent of assets being intangible, most of which is represented by human capital. Yet, while decades have been spent investing in automation technologies for better use of tangible assets, only recently have enterprises begun to invest in optimizing human capital.

Moreover, many non-HR business processes can benefit from leveraging HCM strategies, such as project portfolio management (PPM) processes (see Project Portfolio Management for Service Organizations: Bridging the Gap between Project Management and Operations), which can be improved via incorporating competency and skills data and by leveraging the team management capabilities of HCM applications. Similar examples of business processes that should benefit from “picking the HCM brains” include production planning, job costing, scheduling, training, compliance, budgeting, and field service. In fact, any people-centric business process should benefit from integration to HCM, whereas traditional administrative HR applications and processes will hardly support this integration at all.

This leads us to a broader notion of employee relationship management (ERM), business-to-employee (B2E) management, or whatever the three-letter acronym (TLA) du jour might be (see BLM—Buzzword Lifecycle Management). In any case, these acronyms try to depict a business discipline that focuses on optimizing the employee's total employment experience—including both the human and technology aspects of that experience.

ERM espouses a comprehensive and unified view of the processes and technologies that support the workforce and their workplace, including manager-employee interactions, the formal business tasks required to manage employee relationships, and the technology used to manage the employee experience. To that end, ERM encompasses the full suite of B2E services needed by employees, managers, and others, including knowledge management, e-learning, self-services, community and collaboration support, travel and expense (T&E) management, indirect procurement, and so on. Thus, ERM is most closely aligned with the HCM focus area of workforce management.



SOURCE:
http://www.technologyevaluation.com/research/articles/tactical-human-resources-evolves-into-strategic-human-capital-management-19578/

Innovation and Change in Human Resources

Veronica Inoue: What is [Federación Interamericana de Asociaciones de Gestión Humana] FIDAGH's perspective on human resources [HR] in Latin American countries?

Paul Rosillón: We have to look at it from different points of view. First, I think that Latin America is undergoing a process of change and transformation—as is the whole world— but this particular geographic region is where we are experiencing the most changes.

On the other hand, a big part of the changes that we are facing in Latin America are related to the needs of individuals and the way people are acting in the social, political, and economic spheres.

Third, and regarding the world of management and organizations, in the last 20 years, the topic of people management has changed dramatically. This has been a paradoxical change, because people have always been the most important factor. However, from a managerial science standpoint, individuals are a different subject now because they are managed differently and they are considered an economic factor. What do I mean by this? When knowledge and innovation become critical, people go from being a resource to being owners and capital. And that is somehow what is leading managerial sciences to focus more on intangibles and make leadership once again the underlying topic.

Another important change is occurring, and that is that people management is no longer part of HR functional management; it now concerns the whole management process. Therefore we, as management professionals, have had to understand that our roles are different—that we are also facilitators, internal consultants, coaches, or internal staff managers. In this sense, we can say that great changes are taking place.

Personally, I think there are two different levels: organizations understand that people are very important, but professionals in this area are not progressing at the same pace. A lack of connectivity exists within managerial education and training programs. Take, for example, an [master of business administration] MBA or similar postgraduate program; the attention to people management is minimal. Marketing and finance are still the more prestigious subjects.

To expand on this idea, we are undergoing change and transformation, but we still have a long way to go. We lack clarity, and we haven't been able to develop the connecting points [that will link managerial education and training programs together]. We could say that we know what we want to stop doing, but we still don't know how to take new steps. Even the way our federation works reflects that since 2001, we have been experiencing a restructuring process. Today, we have completed the first stage, but we must start stage two.

FIDAGH: The Lever and the Engine in the Arena of People Management

VI: How is FIDAGH searching for a way to do this?

Eladio Uribe: We at FIDAGH think of ourselves as a lever, but we also want to be the engine behind the transformation process that Latin America has to experience.

In Latin America, we all speak the same language—in general—but there are many differences in education, criteria, politics, strategic vision, and direction. The domain of HR in this region of the world is living this debate, which is also reflected in our federation. While we ask ourselves, “What does FIDAGH do for me?” others are asking, “Where should we go from here? What should we do with the HR people and people in other organizations and countries?”

I want to clarify here that the main issue is not the HR people; the main problem is our countries, our communities. The people in HR are working hard to help our communities overcome poverty.

We still have to understand that we must accept people from Argentina, Guatemala, Mexico, Uruguay, etc. as equals—as Latin Americans—instead of as Argentineans, Mexicans, etc. But overcoming inequalities is very difficult for us. We are convinced that we will be able to do it because we have a great source of motivation, and this source is that people who do not work in HR have been pushing these professionals to make a change, so there is no other option.

VI: Today, what are the key areas for HR in Latin America? Which other areas need to be reinforced?

EU: An agreement must be reached between the people of HR and employers on one side, and the state on the other, if we want to improve education systems. One of the greatest issues HR people face is the hiring process, the challenge of bringing “new blood” into the organization—people who are capable, competent, and ready to face the challenges that an organization brings. That is the biggest hurdle they have to overcome.

The other challenge is diversity. We still have to learn to accept and believe in diversity—believing that the person who comes from Asia, the US, or any other country in America can make an important contribution, can be helpful for our performance.

I think these two factors are fundamental: educational development and acceptance of diversity.

PR: There are two issues. The first one is corporate social responsibility [CSR]. While it is a common topic, we haven't started managing it and moving forward with it. Nobody expects organizations to become philanthropists, but they do have to play a role in society, and that is a paradigmatic change that is still in progress.

The other issue is the way companies are organized—the division of work according to tasks and descriptions of positions and roles within the organization. This is a model that is in crisis, and though it is becoming less and less common, we still are not certain of what the new trend will be. It's not easy to change a paradigm that has been the standard for almost 100 years, and that is taught in universities and reinforced everywhere. I think this is a golden opportunity for us, as HR professionals, to contribute and make a change. The problem is that we have been educated with the same old paradigms, so abandoning those notions is like getting undressed—

EU: It also means breaking another important paradigm: believing that only our organization can solve its internal problems with staff, management, or processes, without taking into account what is happening around the world.

Furthermore, my actions as HR have to be collective actions. Instead of aiming solely at my company, these actions must generate change in the community and in my daily environment. This will allow me to have capable individuals in my organization that will help realize strategic, sales, and other goals.

VI: How are the 15 member associations of FIDAGH participating in and committing to these objectives?

PR: As I said before, since 2001, we have been questioning ourselves and acknowledging that we have to change the way we think and see things.

We are halfway through the process. We—both the federation and the associations—have been going through this process since 2001. Next week [referring to May 14, 2007] we will have our 20th conference, our board meeting, and our management meeting, where we will change our approach. We are convinced that our current approach is not working, so we have to take a different direction. We don't know exactly what that direction will be, but we will say, “Gentlemen, we must admit that we have to change. We need to find ways to evaluate the changes that we will implement, and how we will work together in the future.”

Now, as Eladio said, we have diversity, and we feel pressure from each association and each country. But each one of them is different. Therefore, this diversity forces us to modify our ideas of the need for change. During this process, we have had to admit that we are not the same and that we don't experience the same pressures. We understand that the subject of people is important and that we must do something about it, but we have different driving forces. FIDAGH is responsible for harmonizing all these approaches.

EU: Besides, our goal is a collective one that involves management and integration. Therefore, from this standpoint, we do not want to exclude anyone—on the contrary; we have to insist that people come and learn. But we are aware that there are different levels of learning and that we have to work to unify them. It's a difficult task, but we are working on it.

Information Technology: Driving Innovation

VI: Do you think that the new information technologies are driving innovation and changes in organizations?

PR: We have learned a lot from this subject. We have learned that IT is not a source of innovation, but that it does facilitate and dramatically increase the potential for innovation.

We have learned to assign a place to the role that technology plays in innovation. But what Horacio Cortese and Ricardo Perret said at the [Human Management Conference] is crucial: if I don't have a working environment in which I build trust or create the emotional conditions that will allow people to think differently, take risks, do their best, defy models, etc., then regardless of how much IT I can have, it won't be enough. Although IT and the human factor come together, there is no question that the latter will always be the more important one.

EU: Let me use an analogy: comfort is important, but it's also important to strike a balance between work and recreation. Nobody questions that. However, Latin Americans in general and HR people must try to put comfort aside at this time, [and focus on the work at hand].

This is a time for study, energy, commitment, and strength—definitely not for comfort. We have to work hard now to get the desired results; then we will be able to rest. What I mean is that this is a transcendental moment for those involved in human management; we are approaching an extraordinary challenge, and if we don't grasp this opportunity, we will stay behind. And those who stay behind in human management might disappear.


SOURCE:
http://www.technologyevaluation.com/research/articles/innovation-and-change-in-human-resources-19112/

Performance and Compensation Management at the Core of Human Capital Management

While decades have been spent investing in automation technologies for better use of tangible assets, only recently have enterprises begun to invest in optimizing human capital. Tactical and administrative human resources (HR) management is morphing into strategic human capital management (HCM).

Part Three of the series Thou Shalt Manage Human Capital Better.

Some might argue that HCM revolves around better performance management and employee compensation. As the economy continues to rebound and talent wars intensify, companies have been increasingly leveraging traditionally elusive "pay-for-performance" technologies that successfully automate and link compensation planning with business and employee performance. Practically every organization regularly reviews the performance of its employees, which most managers confess to be a chore that is ironically the centerpiece of their existence. In other words, most managers hate personnel reviews, and many procrastinate until the HR department or the employees "scream." Since no employees can get a pay raise until they get a review, HR departments implement systems to automate and force the review process as a means to address this.

The aim of performance management systems is to both automate the employee review process and link reviews to organizational performance. The aim is to ascertain whether employees are taking definitive steps to achieve their determined performance goals; whether there are succession plans in place for top managers; what kinds of skills the organization will need in the next few years; and so on. Those are the kinds of questions (and hopefully appropriate answers) that performance management systems should put on the desktops of both managers and employees.

Performance management systems often include or feed into compensation (sometimes also called employee incentive management [EIM]) systems in order to more justly distribute merit-based pay increases. Before deploying such a system, managers would customarily review employees annually around their date of hiring, often with the result that well-deserving employees would not get the increase they deserved simply because the pool of available money had already been spent by the time they received their reviews. Surprising or not, compensation represents more than 60 percent of total corporate expenditures, yet most Global 2000 firms are still not properly rewarding their highest-performing workers. The aim is now to complete employee reviews at the end of the fiscal year, and also manage the merit expense budget by reviewing all performance scores before distributing the pay increases. Additionally, such systems are useful for obtaining a twelve-month view of employee performance, versus focusing too closely on the period that immediately precedes the review. The customary "defeat the purpose of performance review" experience of many managers has been that the company would set the parameters for pay raises and salary ranges at "budget time," and then expect managers to predict the percentage raises individuals would receive, so that the money would be in the budget when time came to review the employee.

More comprehensive performance management systems nowadays include a stronger link to upstream business goals and objectives, as well as a tighter connection to rewards, including merit pay, short-term variable incentives such as bonus or commission awards, and longer-term incentives such as stock grants. Some vendors offer succession-planning software that builds on performance and training systems to identify likely candidates for jobs further up the food chain. Again, the aim is to turn people into a competitive advantage and to ensure that there are programs that pay for performance and reward people for achieving goals that move the enterprise forward. These outlined capabilities should help users not only hire a higher-quality employee, but also better track that employee's performance, and establish a stronger link between the employee's performance and compensation. Enterprises want to be able to raise the bar for high performers while placing low performers on a performance improvement plan.

One illustration could be at an apparel retailer that often fell short of expectations with the launch of a new line of jeans, which prompted it to decide to test market jeans fitters who had been trained through e-learning about the products, how to fit jeans on women, and how to give the best advice. The project purportedly returned a 75 percent increase in revenue, since the fitters began receiving an incentive every time a pair of jeans was sold. There was a performance management solution in the background telling them how they were doing according to their goals, whereby learning, performance, and incentives were all tied together in an integrated way to drive corporate revenue and performance.

For background information see in Thou Shalt Manage Human Capital Better and Tactical Human Resources Evolves into Strategic Human Capital Management.

Leading Vendors

Leading vendors in this space include Authoria (which recently acquired Advanced Information Management [AIM], a provider of compensation management), SuccessFactors, Halogen Software, Workscape (including recently acquired Performaworks), FirstDoor.com, Callidus Software, Centive, Ceridian, HRsmart, Kadiri, ProAlt Technologies (now both part of Workstream Software), Softscape, Kenexa, and enterprise resource planning (ERP) giants SAP, Oracle, and Lawson Software.

In July, Lawson announced the acquisition of Competency Assessment Solutions (CAS), a provider of performance management solutions for the health care industry to comply with reporting standards set by the Joint Commission on Accreditation of Healthcare Organizations (JCAHO). Compensation management aligned with individual performance management creates a true pay-for-performance environment, and leaders in this realm are tying the workforce to organizational goals and productivity, such as revenue per full-time equivalent employee (FTE). Developing competency models for each work position can be time-consuming and costly, but once conducted, these models can be leveraged across the entire HCM realm to improve the quality of new hires, compel desired employee performance, facilitate employee development, and assist in the development of succession plans. In other words, the entire employee life cycle (acquiring, developing, managing, and measuring performance) can be facilitated.

To recap, HCM has evolved beyond the simple automation of business tasks to the more complex streamlining of traditional HR processes and increasing of efficiencies in the broad management of human capital. Strategic HCM solutions can help organizations transform their people into a competitive advantage by aligning managers and employees with corporate goals of driving business value. Authoria reportedly recently spoke to more than 200 senior HR executives and asked them about their top "pain points." Leading this list was aligning employee goals and corporate goals, paying for performance, and developing top talent. Trying to accomplish these important objectives in a pedestrian way has proven to be equal to finding the fountain of youth or the holy grail. Conversely, well-devised HCM strategies and methods should help execute these priorities and make these initiatives successful.

Moreover, Genesys recently released the results of its HCM trends survey. The vendor's web-based suite PeopleComeFirst streamlines HR, benefit administration and payments, payroll processing, self-service, competency-based learning management, performance management, recruitment, and time and attendance (T&A), and it can be implemented as either human resources outsourcing (HRO) services or as licensed software. According to respondents of the survey, the top HCM priorities for 2006 included talent and leadership development, combined with talent acquisition and retention (45 percent), performance management (21 percent), and streamlining processes (18 percent). In addition, 18 percent of respondents also indicated that aligning people and business goals would be an important priority in the coming year, which shows that the attention of HR departments is increasingly centered upon becoming process experts and improving business processes, focusing on talent acquisitions and subsequent management, and providing better data for decision making. Moreover, 38 percent of respondents indicated that budget expectations over the next 12 months for HR technology and outsourced solutions would increase, by as much as 9 percent in some cases, thereby enabling funding of the services and tools required to support these top priorities.

Evidence of a Shift in HR Applications

Each year, the CedarCrestone HCM survey also provides the latest data on workforce technologies and service delivery approaches worldwide. The early-2006 survey found that there is now a statistical and causal relationship among key HCM applications and operating income growth. Those four applications are workforce planning, competency management, learning management, and an HR-oriented help desk (call center). However, succession planning shows opportunities for improvement, and this is the area that users cite they would like more help on from IT solutions. Logically, the processes and people that are seen as part of strategic core competencies and competitive differentiators are retained in-house. Conversely, non-core and non-strategic services like payroll, US 401(k), pensions, and benefits administrations are frequently outsourced, as well as hardware technology components.

Consequently, there are many indications that strategic HCM applications have moved to the forefront of enterprise application priorities, replacing the prior focus on core transactional systems and employee self-service. Waking up to the realization that their workforce is one of the most critical, yet perhaps one of the most unexploited sources of competitive advantage, and the recognition of the need to align business and individual performance goals (along with better tools to accomplish this) has been driving HCM investments in many companies.

Again, this increase in demand is a result of a shift from a compliance-driven human resource community to an emphasis on human resource management as a strategic differentiator for organizations. In the modern global economy, success (or even survival) depends on critical human factors such as recruiting and retaining the best talents; successfully leveraging skills, knowledge, and competencies; and adapting to change (for instance, by anticipating and planning new positions, job requirements, training, careers, and succession). To this end, HCM software packages should equip organizations with the means to analyze the workforce and strategically manage the company's human capital. They should at the same time serve as a conduit for information to employees, with comprehensive access to their HR information (meaning the ability to view and update such data as address, dependents, benefits, payroll information, and education) and corporate HR information (such as job openings and training enrollment).






SOURCE:
http://www.technologyevaluation.com/research/articles/performance-and-compensation-management-at-the-core-of-human-capital-management-18740/

Technology's Role in Strategic Human Resources

Most chief executive officers (CEOs) are challenging their human resources (HR) departments to make more strategic contributions to the organization. With HR traditionally viewed as a cost center, it is often difficult to know precisely what that means. CEOs, who are focused on growth, earnings, and shareholder returns, want HR to support corporate business objectives and to have the necessary data to support business decisions. These roles are necessarily integrated with HR's responsibility to ensure that there are qualified and satisfied workers when and where they are needed. The way to fulfill these roles is through process excellence, integrated HR systems, and accurate and actionable data from all HR departments. When these elements come together, HR can have a tremendous and meaningful impact on the bottom line.

It sounds like a lot to ask, but these demands are achievable today. And the HR department doesn't have to go it alone. There are technologies and service providers that can help move HR from the administrative rut, free up manpower for strategic tasks, and employ business intelligence capability to align HR with desired business outcomes.

The Role of Outsourcing

Human resources outsourcers play a critical role. Companies often choose to work with outsourcers to gain access to the latest technologies without having to make the associated capital investment. At most enterprises where HR functions have been outsourced, the initial tier of value is well-established. Processes are standardized and employee interactions are professionalized. Transactions are faster, more user-friendly, and less costly. As employee programs continually become more complex and difficult to administer, outsourcing consistently delivers high levels of service.

But it's that next critical tier where advanced HR outsourcing technologies are delivering strategic leverage by gathering and combining fragmented data from discrete vertical HR systems. When data from various departments is integrated into a reliable, consistent source of centralized information, HR can make better-informed and more strategic business decisions daily. The impacts of HR programs and practices can be assessed, and critical insights into the workforce revealed.

Sophisticated analytics can measure how HR systems and programs affect employee behavior and influence customer behavior (for example), ultimately impacting financial results and corporate growth. Companies are beginning to see that reducing HR administrative costs is only the tip of the iceberg. A new priority is to employ the technologies that provide data and analysis, in order to realize the savings that lie in HR.

Technology at Work

For example, your time and attendance program tracks worker hours and absences, and is the entry process for generating payroll. A separate program handles short-term and long-term disability payments. Both of these systems are important. But viewed separately, they reinforce HR's traditional administrative role. An outsourcing solution that combines information from both systems and employs business intelligence functionality delivers a human asset management program that tracks absenteeism, peak work periods, and turnover. Now your data shows impacts on labor costs, overtime, and the amount of money spent on temps and employee replacement. This business intelligence can be used to closely align the workforce with long-term labor needs, manage absence and labor utilization, and thereby reduce operating costs.

Training, staffing, and recruiting programs can be linked in beneficial ways, too. There are lots of technology tools that enable prospective employees to submit rsums online. But does your HR department use that information beyond the recruiting process? By integrating prospective employee data and skill sets against the company's development plan and training programs, qualified individuals can be "pipelined" into the organization over time, and existing staff can be educated. This ensures more strategic hiring decisions from the outside, and better use of existing personnel.

Succession planning is another key area where HR outsourcing can provide strategic value. For example, if a company has a 10 percent turnover rate, and it typically takes 30 days to fill a job, what does that mean for its staffing at any given point in time? It means the company is nearly one percent understaffed at all times. In an organization of 50,000 employees, that's 400 workers not meeting deadlines or producing, which negatively impacts customer satisfaction.

In that same scenario, add in the ramp-up time required for new hires to fill the open slots, and the "downtime" could be as much as sixty days per opening. Factor in absenteeism, short- and long-term disability, sabbaticals, maternity and paternity leave, job sharing, and other benefits, and the staffing levels are likely to be much lower than imagined. Using business intelligence technologies and analytics allows HR departments to better see and manage what is really happening with staffing levels, and predictive measurements can help plan more accurately for the normal ebbs and flows of business.

Selecting the Right Outsourcing Provider

As important as deciding to outsource HR functions, however, is selecting the right partner. Partnering with an HR provider is a critical business decision, and should be considered with the same due diligence as a merger or joint venture. Companies should be culturally compatible and share a common vision.

An outsourcing partner's service framework and delivery model should be engineered to meet your requirements, and there should be a clear definition of the scope of services and defined service levels. The objectives of outsourcing should be translated into service-level agreements so performance can be measured against stated expectations. Most large enterprises will want a full-service provider rather than one that handles just one element (such as payroll). References should be checked, and the provider should demonstrate capabilities in full-spectrum HR outsourcing (and have the financial backing to be around for the long term).

Remember, working with an outsourcer is not about giving up control. Rather, it is about finding the best ways to deliver quality service, impact organization economics, and provide the data that aligns the HR department with business outcomes.

The Metamorphosis

In today's economic climate, all CEOs have a growth agenda that requires a solid and committed workforce—in other words, they need to have the right people in the right place at the right time. The true value of the human resource team will be measured in how well it aligns with this growth agenda. Effectively integrating HR business intelligence technologies is foundational to HR's metamorphosis from administrative cost center to strategic contributor to corporate growth.

Examples of Strategic HR

Here are some quick takes on how companies can strategically leverage HR for measurable gains. The impact areas and results in the list below are far from complete, and are provided here only as samples:

* Staffing levels: Aligning time tracking with disability and leave information fosters greater understanding of staffing needs.
* New hires: Melding rsum data with future business needs "pipelines" qualified individuals for impending job openings.
* Succession planning: Assessing skill sets of existing employees and overlaying it with upcoming job openings promotes hiring from within.
* Benefits cost: Integrating HR survey data with corporate goals can help predict changing corporate contribution rates that would result in more job turnover.
* Hiring assessments: Extracting data from various HR functions allows you to determine if increased hiring is due to growth and skill upgrades, or to unwanted turnover.

Essential Considerations When Selecting an Outsourcing Provider

Beyond general considerations with respect to the utility of outsourcing providers, there are specific questions which enable companies to determine the compatibility of a prospective provider:

* Do the provider's systems have the capabilities to meet specific technology and business requirements? Note that inadequacy with respect to this question can of course come on two counts: either the provider's systems are too "generic" to meet these specific requirements, or else (in the case where they do in fact address the particular requirements) they simply underperform.
* Does the outsourcer have a clear understanding of needed capabilities?
* Will the operation be transparent, both financially and managerially?
* Do the outsourcer and your company share a common vision?
* Does the outsourcer have a partnering mindset?
* Is the outsourcer's culture compatible with your corporate culture?
* Will the outsourcer be proactive in engaging your company to resolve problems?
* Are the scope of services and performance levels clearly defined in a service level agreement?
* Can the provider enable your company to deliver business performance impact?

By conducting a thorough review of the tangible and intangible elements underlying these questions, companies should be in a strong position to ensure that HR is not only a fundamental element for achieving corporate objectives, but an integral driver of success.




SOURCE:
http://www.technologyevaluation.com/research/articles/technology-s-role-in-strategic-human-resources-18570/