Strategic HR command

Integrated personnel and payroll systems are helping the HR function play a
more strategic role. Robert McLuhan reports

Payroll used to be the province of number-crunchers but advanced systems are
increasingly making it a tool for HR, offering strategic benefits, improved
efficiency and cost savings. And where the finance department continues to be
seen as the decision-making hub of many companies, the ability to work with it
closely offers HR ever greater relevance.

Integration is the key, as suppliers of payroll and HR software rush to
ensure compatibility. Instead of allowing individual systems to be cordoned off
by proprietary computer languages, the aim now is to enable both sides to talk
to each other at will.

The most advanced of the new generation systems is enterprise resource
planning (ERP), marketed by the major suppliers such as SAP, PeopleSoft and
Oracle. This is seen as the ideal, marrying all business information together
in a single package.

"Effectively the company owns the book but each chapter is owned by the
department responsible for putting in and using the information," says
Rehena Harilall, senior consultant at William Mercer. "The integration is
seamless and because the data is all consolidated it makes the process faster
and more effective."

Besides minimising errors and avoiding duplication, the new systems put
timely and accurate information at directors’ fingertips. That offers strategic
benefits, Harilall points out, overcoming the confusion that still reigns in
some companies. One recent client, a UK bank, had three separate systems for
time recording, employee information and payroll, with the same information
being entered on each. Management reports took a week to organise, often
arriving too late to help with crucial policy decisions.

"If I know that absence is costing me a certain amount I can change my
policy and increase performance," says Harilall. "Similarly, if I see
that a certain number of people are leaving I can investigate the reasons and
discover what it is costing to replace them."

Most open databases are actually initiated not by HR but by IT departments
seeking to keep costs down and create a common approach, says director of
Snowdrop Systems Tim Tobin.

But he agrees that HR can benefit from opportunities for strategic
reporting. "A big organisation like the BBC might have lots of different
car policies across the business, but if it’s following an open database
strategy that’s easy to link up," he says.

For engineering firm Hyder Consulting, a holding company for Welsh Water,
Snowdrop is providing a system that links six autonomous sites. Hyder’s
business information consultant David Phillips says the aim is to speed up the
process by entering HR data directly via an interface, giving HR managers more
control over their input.

In the past, for instance, it would have been difficult to know recruitment
costs and the rate at which vacancies were being filled at individual
locations. The new system will enable the company to do a trend analysis,
benchmarking against individual sites.

A key trend that Tobin notes is the move away from centralised payroll to a
devolved function that effectively runs itself. Instead of having to justify an
employee’s bonus or a pay rise to payroll, line managers can be given the
responsibility to input the data themselves in accordance with their own
budgets.

And rather than generate a whole report to analyse aspects such as absence,
the system can be set up to alert managers to any data they need to know about
as it is entered. That can save hours of combing through reams of paper.

Another benefit is the integration of pay and benefits data in a single set
of figures. Hugo Fair, director of Software for People, says, "Finance
loves that, because it can truly track the trends and changes in costs and
associated benefits. It can also take strategic decisions such as which
benefits are working and whether closing a factory will impact on the bottom
line."

Providing digested information instead of numerous little files also reinforces
HR’s claim to be at the centre of the strategic decision making process.
"Unless HR can speak in numerical terms it will not get respect from
finance," Fair points out.

But are some in the HR community still reluctant to recognise the strategic
potential of payroll? "Our experience is that some companies are
finance-driven while some are HR-driven," says Tobin at Snowdrop.
"The latter are very comfortable about working with payroll and people
being linked to pay. But finance people often want the payroll separate to HR
and that is where you get difficulties."

But at Rebus Software, managing director Sandy Scott believes that the
obvious benefits offered by advanced systems are making it increasingly
difficult for office politics to block cooperation. "Organisations which
decide to combine HR and payroll do so because they believe payroll information
can have strategic value," says Scott. "Integration also comes from
the need to put power in the hands of employees, which gives them the feeling
of having greater control of their careers."

Scott points to the increasing use of intranets as a means of offering staff
direct access to payroll to enter their details, record details of absence and
holiday plans, and in some cases even set up their own benefits packages.

Not everyone is convinced that the technology on offer can meet the
challenges. Software for People’s Fair points out that systems provided by most
suppliers are either essentially payroll systems with HR features added on, or
the reverse, which limits their effectiveness. "We believe that virtually
all these products tend to have a bias to one or the other, while those that
try to link multiple databases together are a mess; it is better to provide one
local database," he says.

Clearly this is a process that still has a long way to go, but where the
perceived benefits are so obvious, the technology will surely follow.

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