The Impact of Implementing an HRIS
ARE YOU READY FOR A CHANGE Integrated HR Information Systems (HRIS) have a profound effect on firms that implement them. Most often these firms are replacing several related systems, such as a personnel database, payroll system and benefits system, with one HRIS that does it all. Many people focus on the improved reporting and processing that will be realized from the new system, and those are the reasons most firms choose to implement a new HRIS. But what many people don’t focus on is that the new HRIS will most likely affect the company much more deeply – it will challenge the operating structure and principles of all the HR-related departments. An integrated HRIS results is a drastically different environment than a cluster of related but separate systems. The core concept of a centralized data store inherent with an HRIS demands integrated work processes for consistently managing that store. The two attributes – centralized data storage and integrated work processes – will affect the company in ways most managers don’t expect. EVALUATING AND PREPARING FOR A NEW HRIS Many companies go through a process of comparing and evaluating several HRIS packages using a team of analysts or managers from the various departments affected – HR, Payroll, Benefits, Employee Relations, Training and so on. As this team prepares its evaluation criteria and reviews HRIS features, much is learned about the goals and values of the various departments. The HR department is looking for improved reporting of employee data, Payroll is concerned with the system’s paycheck calculations and regulatory reporting, while Benefits may be looking for a more streamlined enrollment process. As this team drives deeper into the selection criteria, the members learn more about each other and may start to see the emergence of some really messy business processes. It can be a bittersweet process. The hiring process is a good example. As a person is recruited, hired and paid each department may have its own specialized system and process for managing the employee data. As the HRIS evaluation team discovers redundant processing and data storage, its members start to see ways to make the process more efficient by aligning their part of the hiring process with the requirements of the other departments. The team members are excited to find a better way to get the work done, but scared by the ramifications of closer ties to other departments. They think: ”If we improve the efficiency of the process (have HR enter the W-4 at the time of hire), we won’t need as many people in our department (we won’t need to key W-4s anymore), and we might lose control of some piece of data that is critical to our business function (how do we know that HR will key the W-4 correctly?)”. As the team evaluates an HRIS software package, it begins to get a better grasp on what the entire company’s business processes are, and therefore what the company might require in an HRIS. The team will most likely find that none of the packages are an exact fit and that substantial effort is required to modify or integrate the chosen HRIS. Or if not enough due diligence and research have been done, the team may be facing this effort and not be aware of it. This gap in planning will show itself later in the implementation phase when the project team realizes there are not enough resources – time, people and money – to implement the HRIS. Perhaps the most critical results of the HRIS evaluation process are that the evaluation team set correct expectations for the project and gain executive management commitment. With correct, or at least realistic expectations and an executive management team that seriously supports the team’s efforts, an HRIS implementation project has a much greater chance to succeed. Most often the HRIS evaluation team members spend most of their efforts building selection criteria and choosing an HRIS, instead of setting expectations and building executive support. THE HRIS IMPLEMENTATION PROJECT Configuring the New HRIS There are three primary activities in an HRIS implementation – configuring the HRIS for the firm’s business processes and policies, interfacing data with other systems and converting historical data into the HRIS, and preparing the organization for the new HRIS. An HRIS comes with built-in processes for most HR activities, but firms will need to customize the system to process according to their specific needs. For example, every HRIS supports the process of benefits open enrollment, but the system does not come delivered with a firm’s specific benefit providers and eligibility rules. Customizing the HRIS for this typically does not involve programming; the common activity is to enter specific data into control tables that then direct how the HRIS operates. The customizing, or configuration tasks then become a process of understanding the firm’s business processes well enough to encode that logic into the HRIS. This mapping of business processes and policies into system control tables requires people who understand both the business process and the HRIS – typically the existing IT support and HR business analysts. Due to the large amount of work, the HRIS project team usually needs these analysts fully dedicated to the project, requiring the ”home” departments to fill the gaps in their absence. Having partially dedicated team members may cause tension since the team members have to maintain responsibilities at the home department while also fulfilling responsibilities on the project team. Either way, back-filling resources becomes a big issue if not planned for during the evaluation stage. Firms may find that the internal resource people assigned to the project do not have the skills or capabilities needed for the job. Sometimes training can resolve this, but other times the people lack basic analytical skills required for the implementation. One of the key requirements for a person to be successful on an HRIS implementation project is that he/she have excellent analysis skills. The most analytical people in HR and IT should be assigned to the project, or else the company should rely on external resources (i.e. contractors or consultants). The project can get done this way – but the more an implementation team relies on external resources the more difficult it will be for the company to become self-sufficient in ongoing HRIS support, maintenance, and operations. Many HRIS implementations include, to one degree or another, business process reengineering. As a firm documents, investigates, and discovers its true business processes, it’s natural that the firm also take time to improve them, or at least integrate the processes across departments. The integrated nature of most HRIS packages drives this activity. When a process is reengineered or integrated, once-independent departments become much more dependent on each other. That dependency can increase tensions on the project team as representatives from those departments learn to trust others to do their part of the process. Or, once the project team members become comfortable with the new processes they have designed, they may have a hard time selling those changes back to their departments. Most HRIS packages don’t handle exception processing very well. As new business processes are designed, the project team customizes the HRIS around those new processes. Users will most likely find that exception cases require significant manual thought or labor to process – since the exception does not fit into the business process as implemented in the HRIS. HRIS project team analysts will walk a fine line between generalization of the process to fit exceptions vs. a more narrowed implementation of the process to enforce data integrity and accurate application of HR policy. This is a great time to enforce some standards and clean-up ”special deals” – but HR managers and policymakers must be willing to support these efforts, and to help implement them. Finally, as the project team analysts dig into the current business processes, they may find that the HR users, and sometimes managers, don’t really understand or know the processes well. Users may know what is done, but not why it is done. Knowing the why part is critical to getting the most out of your HRIS implementation. In most every HRIS there are two or three technical methods of implementing any given requirement – knowing why something is done in a business process helps ensure the project team analysts select the best method of implementing it in the HRIS. Linking the New HRIS with Other Systems Most HRIS project teams have a number of people assigned to converting historical data from the existing HR databases into the new HRIS, as well as for interfacing the new HRIS with other systems that rely on HR data. As this group starts mapping historical data to the new system for conversion, most often group members will find (particularly when combining data from several existing systems to go into one HRIS) that the existing HR data contains a significant amount of invalid, incomplete, or contradictory data. As the new HRIS was configured for new, reengineered or streamlined business processes, the existing employee data may not fit well into the new system. The new HRIS will demand more complete and accurate employee data. Making sense of these data conversion problems is a skill that falls to HR analysts, not the programmers writing data-conversion routines. Conversion and interfacing are not solely technical activities – user consultation and input are required. Many HRIS project teams discover these requirements too late, thus increasing the demand for time from HR analysts on the project team – time that the analysts most likely do not have. If the firm has a data warehouse, the new HRIS data will need to be mapped to it. If the data model in the warehouse is based on the legacy HR database, the two data models may not be compatible. A lot of effort can be spent mapping the new HRIS to an existing data warehouse. Or if the HRIS vendor has its own data warehouse application, the project team might be tempted to use it, but they’ll still have to contend with converting existing historical HR data into the new warehouse. Either way, HRIS project teams spend more effort than planned on this issue – the details can get very tedious and time consuming. Replacing HR systems involves any area of the company that reads or relies on employee data. New system implementation may highlight employee data privacy issues, or increase the scope of interfacing once the project team realizes just how many systems read employee data from the current HR-related databases. Preparing the Organization Many times it is easier for project teams to focus on technical aspects of the implementation, which is ineffective. For example, configuring the HRIS to correctly assign resident tax codes based on the employee’s address is easier than getting HR, benefits, payroll, and recruiting to buy into and implement a reengineered hiring process. The HRIS project team must track progress not only on the technical aspects of implementing the HRIS, but also on the softer side of managing the organization as a whole to accept the new business processes that come with the HRIS. Companies typically underestimate this change-management effort. From the very beginning there must be a focus on preparing the organization and the employees for the new HRIS. A new HRIS, with more integrated work processes, tends to pull related departments together. Some firms recognize this as they go through the implementation process, and also implement a new organizational structure with the HRIS roll-out. For example, HR and Payroll may have reported to separate areas of the company, and parts of HR business processes were scattered throughout various departments. But as a new HRIS is implemented, the previous organizations are transformed to report to a single authority, and a shared-services group is established to perform the integrated work processes that were once scattered. This is a common, but often unexpected, result of HRIS implementations. During the implementation phase, firms should also be determining what their support model will look like – what kind of organization will be required to support this new HRIS? Those who study this task in detail will realize they need cross-functional support teams – containing programmers (ABAP), configuration experts, and business analysts – to successfully support the new HRIS. But this integrated support team does not fit well into the vertical departments in most companies today. Finding a way to implement this cross-functional team is a critical success factor for the new HRIS’ ongoing operation. All of the items mentioned so far force HR managers to become involved in what is usually perceived as an IT project. They may be accustomed to pushing responsibility for such projects onto IT managers, but implementing an integrated HRIS requires HR manager participation and active involvement in scoping, implementation, cutover, resourcing and management. LIVING WITH THE NEW HRIS Changes in the HR User Community An integrated HRIS leads to more integrated reporting of employee data, which can lead to efforts that benefit the company. Better reporting of employee costs, skills and requirements, time-keeping and recording, etc. give senior managers information that can be used to improve the application of HR policy or to cut costs (i.e. reducing time-card fraud, highlighting wasteful compensation practices, etc.). Most integrated HRIS packages are very sophisticated in the functionality and processes they offer. Compared to legacy, or screen-based/code-based systems, the new HRIS requires a more analytical user. The user cannot simply be trained to put certain codes into certain fields -- he/she must know the business process and how it relates to the HRIS. In most companies, a certain portion of users will be able to make this jump to ”analytical” thinking; others will not. The resulting shakeout has to happen, and it is most often painful – either for the employees themselves or for the HRIS support organization. If a more centralized, integrated HR organization doesn’t surface during the implementation period, the organization will tend to evolve in that direction. An integrated, centralized HRIS tends to pull user departments together. Using integrated work processes across departments that do not operate under a common authority will highlight data and process ownership issues. These issues in turn get pushed up to HR managers or executive management. Eventually, these managers resolve the issues by increasing the integration of the departments to match the processes. Either way it happens – at implementation or via evolution -- this level of organizational change is always difficult. Supporting the HRIS IT support analysts may be accustomed to, and only skilled for, flat-file processing techniques. Most HRIS packages rely on relational data models, higher-level programming languages, and interactive data management – presenting technical requirements for which some IT analysts may not be ready. The new HRIS may have proprietary languages or facilities, requiring new IT skills. Often these skills will be in high demand, driving a premium rate of pay. Internal resources may opt to leave the company for the higher pay, or they may demand higher pay at the company. The higher pay might be outside the HR guidelines for fair salary. The resulting dilemma can create retention problems. HR users – the analysts in HR, payroll and benefits – must take a more active role in ongoing support and system changes. Since business rules are often coded into the HRIS instead of resting in manual processes, the business analysts are necessarily drawn into this activity. Some firms may push this “business rule” knowledge to their IT support analysts, or rely on consultants who help with the implementation. Although either of those scenarios can work, HR business analysts and managers have the most to lose if the HRIS does not process transactions correctly. Placing HR analysts in system support and change roles will help ensure that the HRIS processes transactions correctly. Some companies depend too much on consulting firms or contractors to perform an implementation. Many times this happens because the firm can pay a consultant to do precisely what the firm wants to do, which is often easier than getting internal resources to do the same thing. It takes some of the pain out of change management. This can lead to a continued dependence on external resources and might be acceptable for firms that have historically relied on external resources. For others it may generate substantial internal conflict in the way of higher IT budgets or continued presence of non-employees in the HRIS support organization. RECOMMENDATIONS FOR SUCCESS Given all the things that often do go wrong with HRIS implementations, what can be done to ensure a smooth transition? There is no one solution, no grand secret for avoiding all the problems. As with most successful efforts, a successful HRIS implementation requires participation and commitment from all areas of the firm. The first area from which to gain commitment is the firm’s executive management – the sponsors of the project. Given the level of change such a project will create, there will be areas that resist the implementation. Support from executive management is invaluable for making sure new business processes are implemented effectively, for funding the project, and for ensuring appropriate staffing on the project team. Without this support, the payoff of the new HRIS will most likely be compromised, and will cause disruptions in employee service. The executive managers should appoint a steering committee containing stakeholders from all areas affected by the HRIS (payroll, benefits, HR, IT, employee relations, etc). This group should contain members who can ensure that their line managers have the necessary directives and responsibilities for making the HRIS operational. The steering committee should take an active role in resolving broad issues and taking corrective actions if the project gets off course. One of the most important roles of the steering committee is that of “winning the HR managers.” The steering committee needs to ensure that managers fully understand the impact of a new HRIS system, that they are involved in the implementation, and that they support the project with a positive attitude towards change. This will not only set an example and guideline for each committee member’s department, but also prepare the ground for dealing with change-management issues. The steering committee should be responsible for appointing a project manager or project management team, as well as assuring that the project is appropriately staffed. The project manager should carry out team-building exercises for employees who will have to work together, sincemany people who will be assigned to the team may not have experience operating in such an environment. The HR analysts and the technical analysts must learn how to work together to solve issues neither group can solve alone – such as data conversion and interfacing. HR analysts will become more technical, and technical analysts will learn more about HR. The project planning process needs to include not only the technical tasks but also the processes and deadlines for change management tasks. The project manager can get an indication of these issues early in the project by comparing the goals of the different stakeholders involved and identifying all the inconsistencies. For those HR analysts who are placed on the HRIS project team, their managers need to be fully aware of the analyst roles in the project. Managers need to review and possibly redefine the roles before, during and after the implementation. New job descriptions may need to be prepared and managers need to brief employees about any changes and additional responsibilities. Managers also must start back-filling the positions left by the analysts to ensure their departments still run smoothly and the analysts are not torn between working in their departments vs. working on the HRIS project. Not every person will be able to make the transition to a new HRIS. Certain employees – payroll clerks, benefits analysts, IT support, and even managers -- may not want anything to do with the new HRIS and the processes that come with it. Instead of forcing them to make the transition, it is often wiser to place them outside the HRIS-related organization in roles appropriate for their skills. A transition plan needs to be constructed, and the steering committee must accept the fact that there will be some turnover. Likewise, employees who have demonstrated their interest and ability to work with the new system and who have gained substantial knowledge of it should be offered an active system-support role together with a promotion. This should motivate other employees to follow their colleagues’ paths and will discourage internal system experts leaving the company for a higher-paying consulting job. Training – technical and non-technical – must be identified and performed to help people make the transition to working with the new HRIS and the new organization model. The training needs to go beyond screen-prints and mouse-clicking sequences to an explanation of how the new process fits into the organization, its relationship to other processes, and the execution steps in the process. Employees will have to know the why as well as the how of the process. Formalized cross-functional support teams are essential to the steady operation of the HRIS. Firms can be successful by patching together an informal organization of HR analysts and IT analysts, but that loose-knit framework may not hold up to the continued demands of HRIS support. A formalized, co-located team of HR and IT analysts will be most effective. Many firms also find it useful to preserve the steering committee past HRIS implementation and into the productive life of the HRIS. The steering committee is an excellent group to monitor the ongoing quality of HRIS operations, manage relationships with the HRIS vendor, and clear the path for later HRIS upgrades or enhancements. It may take years for a firm to adjust to a new HRIS. As it does, most will see that their organizational structure will tend to reflect the HRIS structure. This is natural – managers for years have organized their departments to fit the way work is done, and the organizational culture often reflects that structure. When the way that work is done changes – and an HRIS will engender that change – it’s natural for the organization to change as well. Structural and cultural changes might be painful, and people will resist, but it’s hard to fight these natural tendencies. Instead of fighting them, managers need to be aware of what’s happening and proactively prepare for this new world.