HR Software: Ready-made or Tailor-made?

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

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.

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.

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.

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.

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”.