Human Resources Information System (“HRIS”)
HRIS management is a fundamentally important element of any organisation. The cost of labour and the management of this labour is one of the largest expenses facing modern organisations and, as such, is an area that many companies will look at in order to reduce costs and improve efficiency, but it can, if used effectively, return costs ten fold to the company. The current business model involves the continued expansion of the business adding in new departments, on a regular basis. As the business becomes more diverse, so too will its human resource management needs. The need for a centralised and efficient system is paramount, if the business is to make full use of its available expertise, labour power, understand its workforce and utilise the workforce for the businesses advantage.
- Benefits of the Proposed HRIS System
A HRIS system offers huge potential scope for improving the efficiency of the organisation. It is estimated that a standard human resources function spends 50 – 60 % of its time completing routine administrative tasks. This was held to be the case in Hoechst, Celanese Corporation where an analysis of human resources activities showed that, at any one time, 150 to 180 of its 300 person strong team were engaged in routine administrative tasks that could easily be automated.
Human resources are fundamentally involved in the inputting of personnel data, the updating of these data and the production of reports and plans based on these data. An HRIS system can dramatically reduce the time lag experienced at each of these stages. Human resource professionals will still be required in order to manage these processes; however, the routine element of the data capture and management will become considerably more streamlined.
HRIS goes a lot further than simply collecting basic, core data on employees. Whilst it is true that any system must have the capability to capture basic data such as employee details, the potential for such a system is much greater. A new HRIS system, if correctly used, could allow the company to track employee abilities and competencies across all departments to ensure that expertise is being utilised in the correct areas. Employee skills and capabilities, including any training needs, could be maintained as part of the system, thus allowing human resource staff to note substantial training gaps and to deploy the correctly equipped staff in to the most appropriate roles.
Furthermore, employee incentivisation is widely recognised as a substantial driver in overall performance. The relative costs and benefits of these programmes are often unknown or not suitably tracked. Inputting data relating to these programmes allows management to determine which schemes are proving the most popular, how the take-up relates to the individual performance of the employees participating in the schemes and, therefore, making it possible to produce a cost / benefit analysis on such schemes.
Updates and data input are likely to be much quicker with a technologically based HRIS. Many of these systems will even allow employees to assume a degree of control over their own data and allow them to update information such as personal details. Line managers will also be able to utilise the systems by inputting appraisal results and absence details directly into the centralised system used by human resource professionals and high level management. This ability to disseminate information quickly throughout the organisation has several benefits. Employees feel more empowered as they are able to update their own information and find out basic information relating to their employment such as holiday entitlement and human resource policies. Line managers and departmental managers will benefit from the centralisation of all information when it comes to producing their reports (i.e. in relation to staff absences or when determining staff efficiency).
High level managers can also benefit from a HRIS for longer term strategic planning. For example, information collected regarding pay and performance can be used to consider long term labour force planning and salary review policies. Information relating to training and the impact that certain training courses have on employee performance can be used to discover the value of such training schemes. The information can also be used when planning recruitment drives in order to ascertain whether the expertise does, in fact, already exist internally and where there may be expertise gaps across the company as a whole.
As the company comes under greater pressures to comply with legislative demands, for example, in relation to working time or age discrimination issues, a HRIS will allow for more efficient and quicker monitoring of these areas. Particularly during the recruitment process, this allows human resource managers to track decisions made and produce reports to ensure that equality and statutory requirements are being met. Not only will these reports allow the human resource function to deal with any growing issues but it will also allow reports to be produced, proving compliance in the event of a dispute.
- Requirements of an HRIS
There are several companies currently providing both bespoke and off the shelf HRIS solutions. Depending on the overall scope of the HRIS and what the end product is expected to be, the requirements, both functional and non-functional will vary. Given the diverse nature of the company and the continued expansion through the addition of extra departments, it would appear that the more integrated and centralised the human resource function can become, the better the benefits to the company, in terms of both costs and efficiency, will be.
Fundamentally, the HRIS must be user friendly and offer the range of reports that will support the overall objectives of higher management. The value of a HRIS lies with the speed in which data can be collected and disseminated. One of the most important elements of the proposed system must, therefore, be the ability of people at all levels such as the employees themselves, line managers, human resources and higher management to access and update information.
A particular challenge facing the company is the drawing together of new departments, as they join the company. Each has its own system and methods of recording information. Currently, the majority of the departments are storing data through a series of spreadsheets and databases which are not bespoke to the business needs. These databases are also unlikely to be interactive meaning that information cannot readily be drawn across departments and an overall view of the company is not easily obtained. One of the improvements that will be seen based on one integrated HRIS is that information regarding one department will be visible by another department. This ability to integrate information centrally will be the corner stone of any system and should be the ultimate aim of any company tasked with creating a bespoke system.
From a functional point of view there should be clear sections and easy data entry processes to encourage maximum possible usage. Individuals are inherently suspicious of change; therefore, the easier it is to use the system, the more likely it is to be utilised to its full potential. Managers need to take their time at the planning stage to decide on the desired outputs from the system in terms of reports and analysis, as this will determine the type of data that needs to be collected and maintained.
There is no denying that introducing a HRIS will be a costly process. However, the long term time, cost savings and efficiency opportunities will outweigh the initial costs, in time. Currently, there is no integrated computer system across the different departments. Some departments use basic computing packages, menswear currently operates a bespoke HRIS system, although it is recognised as being antiquated and not suitable for wider use. In order to establish the HRIS across the entire company, it will be necessary to invest in infrastructure such as servers and computer workstations. The maintenance of these systems and the training of staff will all be additional costs which should be factored into the decisions relating to the most appropriate system. From an infrastructure point of view, the simpler the technology, the lower the costs are likely to be, both in terms of set up and ongoing maintenance. For this reason, the requirements for the system should clearly meet with the functional requirements in terms of the data managed. It is important, however, that these requirements should not be over-engineered, thus incurring unnecessary additional costs.
Collecting data centrally has clear security impacts both from a personal data point of view, but also from a technological and physical point of view. From an internal perspective, careful consideration should be given by management as to who can access the information, what information they can access, whether they are able to amend data or simply view the information and who has the power to control the output from the system.
As a company, there is an obligation to ensure that personal data collected on computer which relates to individuals is suitably secure and does not get misused in anyway. A specific policy should be established detailing exactly how this information will be used and by whom. Moreover, security protection such as passwords should be put in place to ensure that there is no unauthorised access. Issues such as automatic protection in the form of a ‘time out’, if a user accidentally leaves their workstation open, should also be established.
Employees are entitled to make sure that all information held relating to them is accurate and up to date. This means that employees are entitled to request details of all information that is held on them personally to be provided to them within a reasonable period. Whilst the company would be able to levy a charge on anyone making this type of demand, it would seem in the best interests of the company to ensure accuracy and, therefore, regular checks should be made as a matter of routine.
Consideration should also be given to personal security and privacy when managers are producing routine reports, particularly for planning purposes. Not only can the personal identification of an individual employee in relation to performance reports cause difficulties with data protection, it can also be particularly bad for morale; therefore, consideration should also be given to ensuring that strategic planning reports do not identify individuals.
A twofold approach to security needs to be adopted: firstly, to ensure that physical access to the computers and the system is limited, i.e. through passwords; and secondly, to safeguard information security such as the regular backing up of information and the safe storage of back-up disks. A suitable back-up system is vital. As the company becomes increasingly reliant on the computer based system for all of its information, it becomes even more vital that copies of the information are retained in another location so that the data is not lost in the event of a disaster such as a fire or catastrophic technology failure.
- Selection of Team
The success of the implementation of a complete HRIS will depend largely on the expertise and make-up of the team implementing the changes. As this system will be used across all levels of staff from a variety of different departments, it will be vital to obtain opinion and support from across the board.
In order to implement the new system, it will almost certainly be necessary to employ a specialist outside company, particularly if the company’s computer systems are going to be bespoke. Ensuring that communication is seamless between the external company and internal management will also be an important factor in team selection.
Crucially, there should be an internal project manager who will be responsible for the overall implementation of the new systems. This person should ideally be a member of management who is also involved in the human resources function and understands the needs of the department in terms of information and usability.
Representatives from key departments should also form part of the team. Critically, there should be a representative from finance, not only to manage the budget but also to ensure that the system being produced will generate the necessary reports and data to assist with long term strategic planning of resources.
- Stages of Implementation
Ensuring that the system is introduced efficiently will not only ensure that staff using the system has full confidence in the system, but also that little or no time is wasted and that downtime is minimal. As is the case with most major projects of this nature, the first and most critical aspect of the implementation is planning. It is absolutely vital from the outset that the exact requirements of the new system are considered and laid out to the software and hardware developers. This stage of implementation should involve considerable communication with those who are going to be mainly responsible for the operation of the system, i.e. human resources staff. Managers should also be heavily involved, as they will benefit from the output reports. Factors such as what data will be collected, how it will be collected, who will collect it and how it will be used, should all be discussed, in depth
Once the exact scope of the system has been established, the system design stage can commence. Consideration, should also be given to how the system is going to be maintained and updated on an ongoing basis, as it is important that the systems grows as the business grows. The second part of this stage will be the actual technical software development where the bespoke system is put in place for the company.
After the system is installed, a programme of testing, firstly with a small group of individuals should be followed. Users should be asked a full range of questions about their experiences and any changes made to ensure that the system is as useful and user friendly as possible. Once the system has been tested on a small group of employees, it can then be rolled out across the whole company alongside a company-wide training programme. A review of the system should also be scheduled for a year after the initial implementation so that any teething difficulties can be rectified.
- Choice of Provider
We are currently considering two separate providers for the HRIS, Smith Ltd and Horricks Ltd. Both offer similar systems, although the two suppliers are in substantially different financial positions. The ongoing financial health of the provider is important, as they will be expected to provide after sales support to the system.
Sales for both companies have risen steadily over the last three years. Smith Ltd has in monetary value made over four times the sales of Horricks Ltd, suggesting that their systems are currently seen as more popular in the market place. However, despite this, the gross profits figure in Smith Ltd has shown a steady decline, over recent years, dropping to a low of 16 percent last year. Horricks on the other hand has remained reasonably consistent, reaching a gross profit of 24 percent last year. This suggests that whilst Smith may be producing greater revenue, their costs are also considerably greater. This may be attributable to the complexity of the technology involved or to a substantial recent investment; however, it may also be down to inefficiencies and this issue should be explored further. Return on capital employed has steadily increased for Horricks and has dramatically increased for Smith. When considering the gearing percentage (i.e. the debt to equity held by both companies), it is clear that the level of debt to equity has increased significantly in Smith, over the past three years. This implies that the company is relying much more heavily on debt to finance the business. When combined with the increase in return on capital employed, this shows that Smith is making good use of its financing and suggests, therefore, that they have taken on more debt in order to finance the ongoing growth and profitability of the company, in the long term.
This indicates that Smith may provide the better long term prospects. However, there is a concerning trend in Smith’s liquid ratio. Whilst the current ratio (which shows the company’s current ability to meet current debts (i.e. those due within a year) with the use of current assets (i.e. those that can be realised within the year) remains high, suggesting that the overall finances available to Smith are more than sufficient to meet its liabilities, there is a worrying trend with the liquid ratio. This ratio, which is sometimes referred to as the acid test looks at the company’s ability to meet its current liabilities purely through the use of cash and accounts receivable. A company would aim to have a ratio of at least 1. Neither Smith nor Horricks has this ratio; however, Horricks has consistently remained at 0.9, whereas Smith has dropped from 0.9 to 0.6. This suggests that, whilst the latter may have a large amount of stock and other current assets, its liquidity is poor. This could raise concerns that it is not going to be able to meet its obligations and might force the company to be wound up due to cash flow difficulties. It seems that, whilst Smith has invested in its operations and continues to enjoy good sales, its cash flow may prove so troublesome that it becomes insolvent, making the company a greater risk from a long term support point of view. Horricks, therefore, seems like a safer company from a liquidity point of view.
- Setting and Managing the Budget
As this potentially could be an expensive project if not managed closely, so the need to budget accordingly will be of paramount importance. There is a tendency, with these types of projects to prepare a budget on a top down basis. This means that the management team determines how much it is prepared to spend on the various aspects of the project and these figures are given to those responsible for implementing the project.
This top down approach is widely recognised as inefficient. The top levels of management are rarely those with an in depth knowledge of how the new HRIS will work, in practice. They are often senior managers who may not be as technologically savvy and will almost certainly not be involved in the day to day management of the system. Consequently, aspects that they see as potentially costly may in fact be relatively cheap, whereas items they think should be cheap may, in reality, be expensive.
By imposing a budget on those implementing the scheme, there is a danger that the middle managers and those ‘on the shop floor’ will resent the restrictions and will not, therefore, work to stay within the budget. Important aspects of the project may be missed while individuals try to remain within an unrealistically formulated budget. The introduction of a HRIS is going to produce long term financial gains; however, if sufficient resources and dedication are not put into the initial development, the long term benefits may be compromised.
An alternative is to produce a bottom up budget. This involves the various individuals who are responsible for the implementation stating how much they believe they need in order to make their part a success. This approach will undoubtedly result in greater co-operation from those involved in delivering the project, as well as from those involved in the immediate supervision of the project. However, with this approach there is a danger that individuals will not necessarily take into account the overall goals of the project and will instead remain blinkered to their individual objectives.
Therefore, a combination of the two approaches would appear to be the best option. Top level management should set out the overall aims and objectives that they want each individual part of the project to achieve. Those responsible for the implementation should then draw up their expected budget for discussion with the top managers. In doing this, the managers remain in control, yet those responsible for the actual implementation will feel that they have bought into the process and have a personal interest in ensuring its success.
- Conclusions and Summary
There is clear evidence to suggest that the implementation of a company-wide HRIS will be beneficial for the organisation. Centralised information handling will allow the company to monitor and track employee issues and will substantially reduce the manual administrative tasks currently undertaken. Senior managers will also be able to rely on the system to ensure compliance with the various legislative requirements and also for strategic longer term planning.
Careful planning and budgeting needs to take place and a specific team should be established to ensure that the new HRIS is implemented in the most efficient and effective way for the needs of the company as a whole.
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