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How can human capital management systems unlock your company’s most valuable assets?

Organisations may already have the blueprint for their next big thing without knowing it. How can human capital management systems unlock the company’s most valuable assets?

Although the main focus on enterprise software seems to be around customer relationship management (CRM) and enterprise resource management (ERP), one area that often gets overlooked is the workforce. Organisations will have systems in place, such as from Oracle or SAP, but these are often seen as the poor cousin to the ERP and CRM systems, with little strategic focus on the real capabilities required from an HR system.

Having an excellent technology platform to log all interaction with suppliers and with customers is good for business, but software is also required to look after the employees.

What should be the cornerstones of anHR software architecture? Payroll is clearly one of them, but many other HR processes are paper-based. For example, many organisations still use manual systems to manage their expenses, such as a word processor or a spreadsheet.

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It is also apparent that the UK workforce is leaving around £330m per annum on the table in unclaimed expenses. Why? Existing systems are not flexible enough to allow for expenses where a receipt is not available, so car park expenses, underground fares and the odd cup of coffee with a customer are being paid for by the employee directly. Does this matter?

Yes it does. An employee who believes they are funding the business themselves will not be tempted to go that extra mile for the business in other areas. Expense management is the next thing that needs to be looked at.

Next comes vacation and sickness management. Some companies will be working on a flexitime model, where employees can work extra hours on some days and build up time off; some will be working on multiple shift patterns; others will be running a fairly standard 40-hour working week. All these variations on working patterns need to be allowed for. Everyone is entitled to time off, even if this is due to sickness, maternity or paternity leave – but where a person is off sick or is using up statutory paternity/maternity leave, this needs to be put through to HM Revenue and Customs (HMRC) as well, so that payments due to the business itself can be calculated and paid back as applicable. An employee should be able to use a self-service portal to see what time they are allowed off and to request or book vacation time in a clear and easy manner.

It should also be apparent that expenses, vacation and sickness management are also intrinsically linked to payroll, so trying to keep these areas completely apart with separate solutions will only lead to problems in making sure that everything does work together seamlessly. Expenses and salary should be paid at the same time for most people; any impact on salary through sickness needs to be logged in a manner that makes reporting this as easy as possible so that the employee, the business and HMRC can see what has happened throughout the year at a granular and, for the business and HMRC, an aggregated basis.

Indeed, with the latest changes to how pay is dealt with, everything has to be managed on a near real-time basis to meet HMRC’s RTI requirements. Knowledge and training Training is an HR issue and systems need to tie in to ensure that each employee, contractor and consultant gets the right training they need, according to the tasks and projects they are working on at any one time.

This collective group of human resources also has a value to the business that few organisations are making the most of. Held in the heads of the people are thoughts and ideas on how a task or process could be carried out better, making the employee happier and probably saving the company money at the same time. Some may have innovative ideas for new products or services which they are keeping to themselves for no other reason than they believe there is no way to get their idea to the business in the right way.

Managing the training and intellectual capital of human resources is often referred to as human capital management (HCM) and has come on a long way from the computer-based training (CBT) modules and IBM Lotus Notes knowledge bases of old. Companies such as Imaginatix, Infor and Oracle offer systems that work around the concept of capturing ideas from employees and providing recognition to those who provide ideas that lead to a useful outcome to the business.

Part of HCM is also around listening to the people involved and responding to their needs as appropriate. Companies such as Confirmit and Verint provide software that manages not only employee but also consultant, contractor, supplier and customer feedback and can be used to help in adding to the intellectual property base being built up in other areas of HCM.

Getting people in and out

Employee churn will happen. For a 1,000 user organisation with a 10% churn, 100 employees will leave and 100 will have to be taken on, just to stand still. If the organisation is growing at 10%, then an extra 100 people will need to be dealt with – that’s 300 adds and deletions that have to be accommodated, never mind all the amendments such as address changes, changes of surname on marriage and so on.

On top of this are the more itinerant workers from the contractor and consultant pools: The overall impact for a modern business is in dealing with thousands to tens of thousands of adds, changes and deletions (ACDs) to an HR system where each has a knock-on effect throughout other systems.

Recruitment also has to be a part of the overall solution. Indeed, if there is a need to bring on board 200 new staff a year, it averages out as one person per working day. If each position gets only 10 applications, 2,000 people will have to be dealt with – and some jobs are attracting thousands of applications in today’s economic conditions.

A further important part of any HR system is in managing those who are not direct employees. Most organisations now have a mix of employees, consultants and contractors working for them, and it is important to treat each according to their needs.

With such a varied and changing group of resources involved, HR also has to play a direct part in the rest of the technology environment. For example, as soon as a person is put into the HR system as a resource, this should set in place a whole raft of tasks, for example, set up a computer account for them and provision the software services they will need to carry out their job, as well as a telephone account, security passes and so on. When they leave, stating this in their HR records should block their access to all the services they were provided with.

The HR architecture challenge

An additional problem is that the rules that underpin a lot of HR are driven by legislation and on-premise systems run the risk of falling behind the times with what laws they use in their rules engines. Online systems can be kept up to date more effectively and the service providers responsible for them can concentrate on keeping them up to date with the relevant laws, ensuring their software provides the correct support.

HCM solutions are moving to the cloud. The likes of Workday, (which offers a more complete cloud-based HR offering), and SAP’s SuccessFactors offer intellectual property management systems based around ideation and jam sessions, with employee recognitions and other modules included, such as succession management to ensure that the loss of key personnel through resignation, sacking or other causes does not have a massive negative impact on the business.

However, if the decision is to go to a cloud-based overall HR solution, the main issue will be in pulling the various bits and pieces together in a manner that is seamless and yet still does effectively support the business. This is where cloud standards and application programming interfaces (APIs) are important, areas where cloud is still at its most deficient. This can cause issues when a company looks to using cloud as an overall solution but should not be an insurmountable issue. Already, many will be using an external online service such as APT or Sage One for payroll and the likes of Concur or KDS for expense management.

Over time, it is likely that HR systems will become more cloud-based and sufficiently well integrated. At the moment, it is key to identify where the interfaces between any chosen systems are needed and concentrate on ensuring that these are managed in a manner that avoids any confusion and issues for the business.

Clive Longbottom is co-founder of analyst company Quocirca

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