Artificial Intelligence is the “flavour of the day”. We are subjected to predictions about its future impact – negative and positive – on all aspects of life. Organisations use AI-washing to Artificially Inflate (a different type of “AI”) their share price or attractiveness to investors. The world has gone a little AI crazy.

For these reasons, I have been reluctant to write about AI over the past few months. Nonetheless, like many of you, I do reflect about the future AI-enabled world. For example, I think about how PeopleWeek could or should build AI capabilities into our technology, and about how people management practices might evolve using AI. On the other hand, I am brought quickly back down to earth when I think about how many medium- and large-sized organisations do not even provide their employees, managers, and HR with basic HR technology, never mind AI.

In this article I consider the application of AI in human resources – as distinct from the deployment of AI tools in an employee’s own role – in terms of its potential impact on the HR function and on employees. I contend that while AI can offer many benefits for HR, employees will approach its adoption with scepticism, only embracing AI tools in HR if they enhance their overall work experience.

Benefits for the HR Function

The area of HR that has seen the most usage of AI (and Machine Learning) up till now is recruitment. Advocates of AI-powered recruitment tools argue that it drives more accurate and objective screening and selection, as well as a faster and more engaging candidate experience. Critics point out the potential data privacy risks and express concern about the possibility of an AI system being trained on past recruitment data, which may unintentionally perpetuate biases, leading to unjust and discriminatory results for specific applicant demographics.

However, there are many other potential uses of AI that would make the job of HR teams more efficient and enjoyable. Here are three examples with varying degrees of complexity:

Low Complexity

Job descriptions are a foundational tool for so many HR activities, including recruitment, performance management, workforce planning, compensation benchmarking, career planning, and talent management. Yet, in my experience, most employees do not have an up to date job description because it is too time consuming for HR and managers to do it properly. With only a little bit of basic information, a tool like Chat GPT can quickly write a job description that may be a ~70% match and can then be personalised and finalised with relatively little effort.

Medium Complexity

Job and compensation benchmarking requires very large data sets. In particular, the task of matching like-for-like jobs across relevant geographies and industries is painful. I used to dread the annual process of preparing the data with the survey vendors. Sadly, at least double the amount of time was spent on data preparation than data analysis of the results to make informed decisions. AI could surely take a lot of the pain out of this important activity and free up HR time for analysis and informed recommendations.

High Complexity

AI could drive Predictive HR. Today, HR tends to be reactive rather than predictive. For example, HR intervenes because there is a vacancy, a performance issue, a behavioural issue, a resignation, etc. With the right data set and algoriths, AI could help organisations to identify patterns that lead to the need for reactive HR interventions, and thereby mitigate them or avoid them altogether. For example, imagine if HR had access to data that indicates a certain employee – and a highly valued one at that – is susceptible to a near-term burn out. This “prediction” could be derived from analyzing the employee’s data alongside a comprehensive historical dataset encompassing individuals – both internal and external to the organization – who have previously experienced burnout. Factors considered may include age, gender, family situation, marital status, income level, post code, performance evaluations, vacation patterns, and absenteeism.

Benefits for Employees

The benefits of AI for HR would also indirectly benefit employees. Nonetheless, I doubt that any of the examples above would particularly interest them and predictive HR may raise concerns about the use of personal data even if it could prevent the talented employee having a burn out.

We know that some industries are already shedding jobs due to AI-powered productivy gains. This is very rarely the result of an entire job having been replaced by AI but, rather, some parts of many jobs having been replaced by AI and this, in turn, meaning that collectively less humans are needed. This trend is an important factor in the record share prices of the “Magnificent Seven” technology giants: they have been able to significantly increase revenues whilst reducing costs thanks to AI-driven productivity increases and resultant workforce reductions.

As such, the starting point for many employees is that AI is a threat to their job security, earning power, and personal data. For this reason, organisations will have quite a challenge selling the virtues of using AI in HR. Using AI to automate administrative people management tasks could also alienate employees by making HR less human or personal. For example, whilst ChatGPT could help managers to prepare an employee’s job description or a reference letter, an employee would surely be upset if the AI generated output was a lazy, generic job description or reference letter that did not acurately reflect their responsibilities and achievments.

Organisations need to think about uses of AI within HR that will make the quality of working life better for employees, as opposed to implementing tools that will make them less relevant and job secure. Here are some examples of how AI within HR could benefit employees:

• Job Fit – The precise and thoughtful use of AI in recruitment can help organisations and job seekers (and internal candidates) to find the right match of role and organisation to person. This would increase job satisfaction and, therefore, both productivity and retention.

• Process and Product Improvements – AI can be used to perform organisational analysis designed to identify trends in customer and employee complaints and pain points. This could help to drive improvements in processes, product design, and systems that would make work more enjoyable and rewarding. This type of analysis would require the processing and cross-referencing of a large data sets, for example from emails, ticketing systems, performance reviews, customer surveys, etc.

• Information Management – In many medium- and large-sized organisations, employees spend excessive time trying to find the information they need on the corporate intranet, SharePoint, Slack channel, etc. The use of an AI chatbot can help employees to find answers to questions far more quickly, for example information on company policies, procedures, training material, etc.

• Well-being – Tools exists today to help proactively identify stress or tension amongst employees by analyzing their voices during video meetings. This software is integrated into the company’s meeting app and performs the analyses using machine learning algorithms.

Conclusion

There is a lot of potential for the use of AI within HR and this goes well beyond recruitment. It offers the prospect of HR departments becoming more efficient, thereby freeing up time to focus on higher value-added tasks. It also raises the exciting possibility of Predictive HR, though this will raise concerns about the use of personal data. Despite this great potential, which must be embraced by HR rather than resisted, I see two major challenges. The first is that organisations need to be willing to invest more money in HR technology, be it in AI or HR software in general. HR departments in most organisations still struggle to secure the fair share of the IT budget despite CEOs declaring that people are their greatest asset (“blah, blah, blah”). Secondly, organisations – led by HR – will need to demonstrate to employees that AI used within HR will improve their quality of life: not all workplace AI threatens job security, earning power, and data privacy.

The regulatory regime for data protection and cyber security is fast evolving. The bar is being raised and it is hard to keep up with the new regulations, both local and international.

In this article we look at the effect this has on how organisations manage their employee data, where the most common risks lie, and some PRACTICAL suggestions on how organisations can improve their overall data protection posture.

HOW FAST IS THE REGULATORY ENVIRONMENT EVOLVING?

Very fast and the changes are only moving in one direction, namely more stringent requirements, improved enforcement mechanisms, and tougher financial and criminal penalties.

Here are just a few examples:

• The European Union’s NIS2 directive (Network Information Security 2), with a national adoption deadline of 17^th October 2023 for all EU member states, impacts critical sectors like energy, transportation, and healthcare. It mandates stricter cybersecurity measures for these industries, improved incident reporting, and greater cross-border collaboration to bolster the resilience of Europe’s digital infrastructure against cyber threats.

• Switzerland’s new Federal Act on Data Protection (nFADP), which came into force on 1^st September 2023, heighten employer obligations, demanding stricter data handling, consent, and transparency to safeguard employee privacy.

• South Korea’s amendment to the Personal Information Protection Act (PIPA) expands data protection obligations for employers, requiring stricter consent and security measures. It strengthens individuals’ privacy rights and imposes harsher penalties for non-compliance, prompting employers to enhance their data handling practices to safeguard employee information.

• Changes to the California Privacy Rights Act (CPRA), effective January 1, 2023, introduced enhanced data protection requirements on employers. It grants employees more control over their personal data, requiring transparency in data handling, and imposes stricter regulations on businesses.

WHAT DOES THIS MEAN FOR HR?

HR handles some of the most sensitive data within an organisation, including employees’ personal data, family data, health data (e.g. medical certificates), compensation data, bank account details, tax data, etc. Historically HR teams have relied on their IT departments to keep this data secure within the organisation’s IT environment. HR then simply needs to follow common sense day-to-day working practices to avoid personal data being seen by the wrong person, e.g. save sensitive documents on a secure drive, don’t leave documents lying around the office, and be very careful to enter the right email address when emailing a document.

In today’s world, this is far from an adequate approach. HR teams need to go much further to ensure that employee data is secure and that they can demonstrate that this is the case.

WHAT ARE THE MOST COMMON RISKS?

There are five main risk areas:

1. Storage of employee data
2. Access to employee data
3. Supply chain management (of outsourced activities)
4. Transmission of data
5. Job applicants

Let’s look briefly at each risk and what a robust approach looks like.

Storage of employee data

Employee data should be stored in systems that are following industry best security practices and are therefore more resilient to data-breaches and data-leaks. For example, software that stores employee data should be designed to be secure (e.g. meets OWASP’s architectural standards), the hardware that supports the systems should be secure, and independent penetration testing should performed regularly. The systems storing the employee data should be reliable, durable, regularly backed up and have fall-back procedures in case of disasters.

Access to employee data

Access to employee data should be limited to individuals that need that data to perform their job or the service being provided. This means there needs to be role-based access to employee data and the configuration of systems must enforce that the access cannot be compromised. Two factor or multi-factor authentication should be used for accessing systems that store employee data. 

Supply chain management

Most organisations externalise some aspects of their people management, for example payroll, work permits, pre-employment background checks, and benefits administration. Organisations need to select vendors that have robust data protection and IT security practices and effective people management practices (including training of their own employees). It is also important to ensure that end-to-end processes are secure, such as who has access to personal data and how it is transferred for processing.

Transmission of data

Employee data needs to be shared – both internally and externally – using secure platforms. Sending personal data by email and in Excel files is very risky. It is easy to type in the wrong email address. Emails can be easily forwarded to a person that should not see the data. Password protected files are very easy to crack. Such files often end up being saved on a person’s personal drive on their laptop. The information is then often less secure and very difficult to control (e.g. to permanently delete or anonymise).

Job applicants

Job applicants should consent to their data being processed and stored. In many countries job applicants also have the legal right to request the organisation that has their job application to delete and anonymise all personal data stored on them or any combination of data that would make them identifiable. They may also be entitled to request the organisation to make changes to their personal data in an old job application. As such recruitment systems need to be able to manage these requirements.

HOW CAN WE ASSESS WHETHER OUR ORGANISATION IN COMPLIANT WITH DATA PROTECTION AND CYBER SECURITY REGULATIONS?

Whilst the requirements vary by jurisdiction, in most developed markets there are many commonalities and there has been a lot of international alignment of the rules over the past 5 – 10 years.

If you are unable to answer “yes” to these 4 questions, you are unlikely to be fully compliant with the data protection and cyber security requirements in many countries:

1. Is employee data stored exclusively in a cyber secure HR system or systems that are backed-up at least weekly, are accessed via a dual authentication mechanism, have role-based access, and are penetration tested at least annually?
2. Are all exchanges of personal data with third-party vendors managed via a secure platform rather than by email?
3. Is your payroll managed without any exchanges of employee personal data or remuneration data (internally or externally) by email or Excel?
4. Are you able to permanently delete, or anonymise, and change job applicants’ personal data?

AN OPPORTUNITY FOR HR DEPARTMENTS

PeopleWeek often talks to HR directors that continuously struggle to have the required budget to implement the systems they need to manage and develop their people, as well as help their HR teams to work more efficiently. Whilst most CEO’s talk the talk saying that “people are their greatest asset”, all too often this does not extend to investing money on systems for employees and managers. However, you can be pretty sure that when the HR director highlights that their current processes – and the systems that underpin them – are not compliant with data protection requirements, the CEO and CFO have a different sense of urgency. It is a shame when this card needs to be played but it is perfectly legitimate when, indeed, the organisation is non-compliant with the legal requirements.

PeopleWeek is very happy to talk to you if you have questions on this topic. You may also like to complete our HR Systems Maturity Survey here.

In this article I explain why payroll systems and HR information systems (HRIS) are different – a payroll system cannot be an effective substitute for an HRIS – yet complimentary when designed and used as an integrated solution. This I call Fusion. In contrast, using a payroll system as a makeshift HRIS or without an integration with the organisation’s HRIS, is a recipe for Confusion.

CAN A PAYROLL SYSTEM BE USED AS AN HRIS?

A simplistic answer to this question is “yes” because many organisations do exactly this. They use a payroll system (either their own or that of their payroll partner) to store as much employee data as possible. Payroll systems have standard fields for personal data, job related data, organisational data, and compensation data. If the payroll system allows it, some organisations create customised fields or re-purpose empty fields to host employee data that a payroll system would not ordinarily contain.

However, by its very design, the purpose of a payroll system is to manage payroll, which ends up in the generation of a payslip, tax documents, statutory deductions, a net payment to the employee, and accounting reports. The purpose an HRIS is to manage a much broader set of HR activities, such as time and attendance (which many payroll systems do offer), performance, recruitment, onboarding, off-boarding, talent identification, employee development, training, compensation reviews, expense reimbursements, etc.

As payroll systems cannot manage broader sets of HR activities, without an HRIS organisations need to perform such activities manually (paper, Excel, etc) or in a separate software. Alternatively, they can decide not to implement such processes, perhaps because it is too difficult without a system.

So, whilst I simplistically answered “yes” to the question “Can a payroll system be used as an HRIS?”, the answer should be “no”.

WHAT ARE DISADVANTAGES OF USING A PAYROLL SYSTEM AS AN HRIS?

The downsides of using a payroll system as an HRIS are probably self-evident to HR professionals. Here are just a few:

• Managing the broader set of HR processes manually or in different systems – because it cannot be done in a payroll system – is neither cost effective nor a positive user experience (for employees, managers, or HR);
• Manual processes are prone to human error and data security risks, while using different systems typically results in poor data quality unless the systems have been integrated (which is expensive to implement and maintain);
• If HR, managers, and employees are not given user-friendly tools, organisations are far less likely to have effective people management practices that drive higher employee engagement and performance; and
• Perhaps most importantly, and notwithstanding budgetary constraints, if an organisation persists in using a payroll system as an HRIS it is effectively sending a message that HR, managers and employees are not worth the investment. 

SO WHY DO MANY ORGANISATIONS USE A PAYROLL SYSTEM AS AN HRIS?

Over the years I have seen four main blockers to organisations introducing an HRIS:

1. Budgetary constraints may be a barrier to implementing an HRIS even when the organisation understands that they need to evolve, digitalise, modernise. PeopleWeek often meets HR directors that have been trying (unsuccessfully) for years to secure the budget to implement an HRIS.
   
2. Very few HRIS’ have been designed to help HR or Finance to manage the payroll process. They may offer great features for managing a variety of HR processes, but they do not contain all the data needed for payroll and cannot be integrated with the organisation’s payroll software. Those HRIS’ that can be used as the primary source of payroll data typically require a huge amount of customisation, which is very expensive and time-consuming to develop and maintain. As an HR Director, my team and I once customised our global HRIS to integrate with a global cloud payroll solution for managing payroll in more than 60 countries. The project took more than 1 year (which was actually very fast) and was very expensive.
   
3. The payroll function may sit within the finance department rather than within HR. There are pros and cons of each approach, and the purpose of this blog is not to critique the merits of each. However, when payroll is part of the finance function and it works well for the purposes of finance, there is little incentive to invest in a real HRIS. “Working well for finance” means that payroll is accurate and on-time, payroll accounting is reliable, and reports can be generated (cost analysis, planning, provisioning, and forecasting). When all of this is working well, the finance department is often a barrier to implementing an HRIS as they worry that it will have negative consequences on data quality and payroll.
   
4. The reality, unfortunately, is that despite 20 years of headlines about the “war for talent” and the shortage of skilled employees, many organisations simply do not care enough about people management and employee development to invest in an HRIS. Senior management in such organisations may say that “people are our greatest asset” but it is often lip service. Sadly, their employees also probably know it is pure rhetoric. This is very short-sighted in terms of attracting, developing, and retaining high performing teams. Moreover, it is difficult to create a culture where employees focus on product quality and customer excellence if they themselves are not given the basic tools in the workplace. An HRIS is a basic workplace tool.

TRADITIONAL APPROACHES TO CREATING FUSION BETWEEN THE PAYROLL SYSTEM AND HRIS

Once an organisation reaches a certain size, they need the following to operate effectively and efficiently:

1. Country-specific payroll software (in-house or outsourced);
2. HR systems to help manage HR processes, employee development and engagement;
3. Finance and HR teams with fit-for-purpose tools; and
4. Accurate and consistent data in their payroll system and HRIS.

At some stage, therefore, it is almost inevitable that an organisation of a certain size will implement a payroll solution (first) and then an HRIS (or a mix HR systems). Whilst the payroll system and HRIS may initially be managed in a siloed way, it soon becomes apparent that a lack of fusion between them is the cause of administrative and operational headaches. Usually because point 4 above is not being achieved. As such, the systems need to be aligned. I have also noticed that whenever data from an HRIS is used to calculate payroll, employees and HR are much more likely to take ownership for the quality of the data in the HRIS because wrong data leads to wrong payslips.

Traditionally, there have been three approaches for achieving this alignment:

1. Relying on manual processes, i.e. double data entry, to keep the HRIS and payroll system aligned. This is clearly prone to human error and is inefficient.
   
2. Purchasing a highly customisable HRIS that, with significant programming effort and ongoing maintenance, can be adapted to host all the data needed for payroll and is integrated with the payroll software. This is a good solution but an expensive one that is beyond the reach of most organisations.
   
3. Integrate the HRIS with the payroll system for basic information that is stored in a typical HRIS (employee name, job title, department, cost centre, hire date, employment end date, etc) and then manually enter all other data needed for payroll into the payroll system. This is blend of 1 and 2. It is the best solution for most organisations given that 1 is not a long-term solution and 2 is too expensive.

A NEW APPROACH

PeopleWeek has created a new approach.  We have built an HRIS that enables our clients to store all information needed for managing payroll in any country. The main features are:

• Country-specific payroll data management configurations
• Client-specific pay and benefits configurations
• Payment instructions are entered into PeopleWeek (one-time payments, repeat payments, employee benefits, overtime, deductions, etc)
• Payroll cut-off and processing dates are configured in PeopleWeek, and on the relevant dates all the information needed for payroll (including absences and timesheets information) is exported from PeopleWeek to the payroll department or external vendor
• Integrations with third-party payroll software
• Payslips and tax documents are imported into employees’ personal profiles within PeopleWeek
• Payroll Partners can access payroll information within PeopleWeek without having access to non-payroll related information [click here to learn more about PeopleWeek’s Payroll Partnership Programme].

This new approach means that organisations that do not have the budget for Approach 2 – or do not want to unnecessarily spend hundreds of thousands of dollars on a customised solution – can now have it for a fraction of the implementation cost (a few thousand dollars) and quickly. This solution works for organisations with employees in one country or in many countries. HR and Finance can be confident that payroll is accurate, efficient, and secure, whilst other important employee processes are managed using a proper HRIS.

PeopleWeek would love to see more HRIS’ taking a similar approach to help normal organisations with normal budgets benefit from “fusion” and to end “confusion”.

Feel free to contact us at admin@peopleweek.com to learn more. Final thought: I’d like to recognise the under-recognised work done by payroll professionals across the world. It is often stressful with high workloads and tight deadlines. As an employee we take it for granted that we will be paid on-time and accurately. Whilst this is nearly always the case for employees in most organisations, a lot of effort happens behind the scenes to make this a reality and payroll professionals rarely receive a thank you from employees or senior managers.

In this article I explore how the role of an HR leader has evolved and that an HR IT strategy is now a “must have”. Over the past decade or so there has been an abundance of literature on how the role of a CEO has changed and that understanding technology and investing significant time in the organisation’s IT decision-making is now a key requirement. I argue that the same is now true of HR leaders and that an HR IT strategy is the link between (efficient) HR operations and the organisation’s (desired) culture. Towards the end of the article, I look at some of the common reasons organisations lack an HR IT strategy and share some ideas on overcoming the barriers.

THE TRADITIONAL ROLE OF AN HR LEADER
During my 20+ years in HR, and now as an HR tech leader, I have observed that HR leaders (typically HR directors) broadly fall into one of two categories:

• Technical Expert – Highly knowledgeable of HR processes, operations and, perhaps, employment law/policies.
• Business Partner – Trusted advisor and coach to a business leadership team, strong knowledge of the business and, probably, focused on culture, strategy and transformation.

In many large organisations, the HR function has been organised around the concepts of HR specialist departments (Centres of Expertise, HR Operations, HR Shared Services) and internal client-facing Business Partners. This model became prevalent in the mid to late 1990s and is associated with Dave Ulrich, the management and HR thinker.

I learned a lot working with Technical Experts and respected their focus on delivering core HR activities such as HR admin, payroll and processes like compensation and performance reviews. However, often they were not very inspiring and added limited commercial value to their businesses.

I learned less working with Business Partners, in part because their work with their business leadership teams was less visible. Nonetheless, they had significant organisational impact and were often inspiring. On the other hand, they could be frustrating to work with because they were often too distant from the operational realities and lacked technical depth (indeed, in some organisations Business Partners may not have an HR background).

During my HR career I did not work with many “All-Rounders”, i.e. HR leaders that combine both strong technical expertise and business partnering capabilities. They were very impressive in the same way as an all-rounder in any team sport. They were also highly valued and respected by colleagues, business leadership teams and CEOs.

THE MODERN ROLE OF AN HR LEADER
In today’s world, being either a Technical Expert or a Business Partner is too one-dimensional. Organisations need HR leaders that are All-Rounders and can help them to address two challenges that are key for success: Operational Efficiency and Organisational Culture.

Operational Efficiency

In era of rapid digitisation, increased competition and thinning margins (compounded by inflation and, in some markets, recession), organisations’ operational processes need to be highly efficient, robust (scalable, reliable) and business continuity-proof (e.g. pandemic ready).

As an HR director I spent a lot of time working with colleagues on initiatives to improve companies’ (or divisions within companies) operational efficiency. Such initiatives included analysing and benchmarking existing efficiency levels and identifying opportunities. One of the things I learned very quickly was that my own HR department needed to be very efficiently run before I could expect line managers to partner with me to improve the efficiency of their own departments. Otherwise, I simply lacked credibility.

As such, HR leaders need to ensure that HR is run efficiently and (then) work with their peers to maximise the efficiency of other departments.

Organisational Culture

HR leaders have an important role to play in defining an organisation’s culture, as well as the values and expected employee behaviours to maintain and promote that culture. The culture should be a positive force that unites and energises a diverse group of employees. Ultimately, it is a driver of organisational performance and success.

Maintaining an organisational culture is increasingly challenging because organisations exist within societies and many of our societies are increasing polarised. Examples of polarisation include “right” vs. “left”, facts vs. fake news, social progressives vs. reactionaries, green committed vs. green-washed, right (for a woman) to choose vs. right to life, different work/life expectations of generations Z, Y and X, and internationalists vs. nationalists. An additional challenge that many organisations are grappling with is maintaining their office culture in an era of increased remote working.

AN INTEGRATED HR STRATEGY
Modern HR leaders need to bring together operational efficiency and organisational culture in an integrated HR strategy. A pre-requisite of any strategy is knowing what the desired outcomes are. A focused list of interventions or activities can then be designed to deliver those outcomes. An HR strategy typically involves aligning the HR operational processes to the stated culture, values and desired behaviours. For example:

• Recruitment process needs to identify candidates with the required technical skills AND cultural fit;
  Performance management needs to include an evaluation of employees’ delivery (results) AND demonstrated behaviours;
• Compensation needs to reward what was delivered AND how;
• Promotions need to be awarded to employees that have consistently demonstrated strong performance AND alignment to the organisation’s values; and
• Talent identification and succession planning need to focus on performance, potential AND behaviours.

TECHNOLOGY ENABLES OPERATIONAL EFFICIENCY AND CULTURAL ALIGNMENT
Technology is a means to an end, not an end-in-itself. It should enable an organisation to improve operational efficiencies and, in the case of human resources, promote the desired culture.

Recruitment, performance management, compensation, talent management, and many other people management processes can be “enabled” by smart software. “Enabled” means made more efficient and designed to deliver the desired behaviours/culture. For this reason, HR leaders need to have an IT strategy. It is an essential lever for driving the efficiency of HR processes and reinforcing or transforming the organisational culture.

BARRIERS TO HAVING AN HR IT STRATEGY
There are number of common reasons why organisations do not have an HR IT roadmap:

• HR leaders’ reluctance to ask for an IT budget because they think it will be declined;
• Linked to the above, a perception that the investment will be very expensive;
• HR leaders taking a piecemeal approach to identifying the needs (this often results in organisations having an expensive and clunky patchwork of software for different processes); and
• Concern that new IT will result in significant change management that neither HR nor the line have the time to manage.

OVERCOMING THE BARRIERS
Organisations that have an HR IT roadmap overcome these barriers. Their HR leaders have typically addressed the following points:

• Articulated the business case – in words and numbers – for investing in HR technology. Such a business case highlights the existing deficiencies such as inefficiency, quality and control issues, and places a monetary value on them;
• Taken a holistic approach to the organisation’s HR software needs, focusing on the overall user experience (for employees, managers and HR) and the total cost of ownership (“TCO” in IT speak) of different solutions;
• Made the link between HR software and culture, and how the new HR IT investments will enable or reinforce the organisation’s desired culture; and
• Demonstrated that change can be managed responsibly, is needed and is healthy.

GETTING STARTED
If you are an HR leader without an HR IT strategy, I would encourage you to develop one. Getting started is not easy and the current macro-economic environment may make it daunting to ask the CEO or the Board for investment in HR software. On the other hand, a strategy can be implemented over a number of years if needed and a well-constructed business plan should demonstrate that the return on investment (ROI) is relatively short. The financial investment may also be less than you expect.

PeopleWeek works with organisations to help develop such business cases and implementation roadmaps that are aligned with their operational and financial realities. Other HR software providers may do likewise. Exploratory conversations are free and may help you take the first steps in developing an HR IT strategy.

Selecting the right HR software platform is challenging. Firstly, organisations need to make the strategic decision on whether to purchase

Selecting the right HR software platform is challenging. Firstly, organisations need to make the strategic decision on whether to purchase a “one-stop-shop” solution, a variety of stand-alone solutions for different activities, or a core HCM system with integrations to specialist software (e.g. recruitment, learning, talent, etc). The trend for organisations of all sizes is to implement one-stop-shop solutions. Secondly, once the strategic decision has been made, there are many HR software solutions to choose from and other important criteria such as IT security, customer support and pricing.

Most HR software is either highly customisable (tailor-made) or off-the-shelf (ready-made). Nonetheless, when selecting or implementing software, companies – small, medium, and large – tend to expect the new solution to deliver content and processes that are identical, or at least very similar, to their existing ways of working. Whilst the importance placed on causing as little internal change as possible is well-intended, the long-term downsides are often overlooked.

More importantly, business and HR leaders need to remember that in an increasingly competitive world your mid- and back-office processes need first and foremost to be efficient in terms of cost, quality, and speed.

In the case of HR processes, they are certainly important in the promotion of an organisation’s culture. However, bespoke processes – that require bespoke software solutions – are very unlikely to be a differentiator in an organisation’s success and culture is primarily shaped by humans, not by technology.

In this article, I will share my thoughts on the following points:

• Why organisations want to maintain existing processes
• Why seeking the status quo is not always a good idea
• Why it is difficult to select an HR platform
• How technology can help
• Whether organisations should adapt or customise

WHY ORGANISATIONS WANT TO MAINTAIN EXISTING PROCESSES
There are many reasons why organisations want software to “bend” to their existing ways of working and the main driver is usually minimising change management.

In the case of HR software, the HR department (or at least the HR decision-makers), often have a fear of requiring employees or managers to change their existing processes, for example their company-specific way of managing performance reviews, recruitment, timesheets, or expenses. They may also be reluctant to introduce changes that have a downstream impact on other departments, for example, accounting, finance, and IT.

It is also often the case that HR is one of the least well-resourced departments, with a heavy workload and little capacity to take on additional change management. Unfortunately, many HR teams are also poorly equipped to manage change because they lack the experience and skills, or are perceived as an administrative function, so they have limited ability to influence business leaders and drive change.

WHY SEEKING THE STATUS QUO IS NOT ALWAYS A GOOD IDEA
In our experience, making software decisions with an imperative to maintain existing processes is often flawed for 3 key reasons:

1. The existing customised processes are often inefficient and/or add little business value. Moreover, there has usually been very little (or maybe no) internal discussion about the efficacy of existing processes or consideration of alternative approaches;
2. The additional implementation costs associated with building bespoke IT solutions may be disproportionate to the added value they bring; and
3. Bespoke IT solutions tend to be significantly more expensive to maintain, which results in increased systems overhead costs (internal operating costs or system licence fees).

Of course, if an organisation has a large budget for implementing and running customised HR processes, then points 2 and 3 will be of less concern.

However, the reality is that most organisations operate in cost sensitive environments. Even in good times you need to prepare for difficult times, competition continuously puts pressure on margins and not-for-profit organisations are usually dependent on unpredictable external financing. Current macroeconomic conditions suggest that there will be more pressure on profits in the next few years, e.g. inflation, commodities shortages, supply chain disruptions, and exchange rate volatility. The war in Ukraine is now compounding these challenges.

WHY IT IS DIFFICULT TO SELECT AN HR PLATFORM
PeopleWeek talks to organisations in many sectors, of varying sizes (revenue and employees), and with a presence in many countries. We regularly see HR directors and other decision-makers struggling with the available HR software solutions in the market. There are 2 main reasons for this challenge:

• The highly customisable solutions are too expensive (and require lengthy implementation times and internal resources); and
• The off-the-shelf solutions offer limited customisation possibilities and functionality.

These two points are often compounded by a lack of pragmatism about adapting – not completely changing – current ways of working to use existing software solutions.

HOW TECHNOLOGY CAN HELP
Software companies need to accept these realities and offer their clients practical solutions. The answer is not “forcing” clients to work within narrow technology boundaries or charging expensive fees for developing unique solutions that are then, typically, paid for by the first client and re-sold with very high profit margins to other clients. This approach is neither sustainable for the client nor for systems architecture, which becomes overly complex.

PeopleWeek was conceived with the ambition to offer the best of both worlds by being an off-the-shelf solution that also allows a significant amount of customisation. In addition, customisations need to be affordable and the only way this can be done is by building the customisable features into the core system design and making them configurable by the client themselves without any IT skills needed. This is PeopleWeek’s raison d’être.

ADAPT OR CUSTOMISE: WHAT’S THE BOTTOM LINE?
I regularly remind myself of the key drivers of business performance outlined by Ram Charan’s in his best seller “What the CEO Want You to Know”: Cash, Margin, Velocity, Growth, and Customers

Whilst effective HR processes are clearly important for organisations, HR professionals and business leaders must not lose sight of the fact that overly customised approaches are unlikely to make a fundamental difference to overall performance. In addition, organisational culture is driven by people and leadership, not by processes and technology.

As such, and given the additional costs involved in overly customised software solutions, PeopleWeek’s advice is:.

Question the effectiveness of your organisation’s existing processes;

Select software that is easily and sufficiently customisable to meet your organisation’s needs with low or no additional costs;

Customise with a pragmatic mindset, remembering that technology is a means to an end and not an end in itself; and

Unless the customisation will genuinely increase efficiency or you have a lot of money (to waste), do not customise.

These principles make commercial and operational sense, though it may be uncomfortable accepting the need to adapt. On the other hand, “if nothing ever changed there would be no butterflies”.