Strategic HR Integration

Call it dealing with the whole person. Disconnected strategic human resources applications—incentive management, employee performance management, workforce scheduling, and training and learning management—offer CIOs an integration opportunity that could bring new benefits to the enterprise. Merge those applications into a closed-loop system, analysts say, and the enterprise can reap the same kinds of rewards with its “human capital” management as it has with its supply chain management. And CIOs could help drive real ROI for the company by approaching HR systems strategically.

“If you don’t integrate these systems, the business will still run today,” says Sandra Lee, director of talent management at biotech firm Invitrogen. “But if you don’t start now for the long term, you’re going to be paying for it a few years down the line.”

Past HR-oriented IT efforts focused on operational systems such as payroll, usually with just minor CIO involvement, but analysts and consultants say strategic HR applications have more potential to benefit the enterprise, especially as baby boomers retire during the next decade, creating labor and knowledge shortages. When that happens, business success will ride on making the best use of staff. Compliance requirements such as Sarbanes-Oxley have also caused some organizations to examine HR management as a whole, particularly compliance-oriented training, and that has helped raise the profile of the greater strategic HR need, analysts add.

With the CIO’s help, HR is also now ready to tackle strategic issues such as performance management, training and succession planning, says Lisa Rowan, program manager for HR management and staffing services at IDC (a sister company to CIO’s publisher). That’s because the HR information systems for employee records, payroll and benefits management are now largely in place or outsourced. “They’re getting to the point where the HR information system is taking care of the administrative burden,” she says, freeing HR executives to tackle strategic issues. CIOs should help champion and lead these efforts, she says, rather than continue the past strategy of letting HR staff fend for themselves, since a strategic HR IT effort could greatly help the entire organization.

Today, the various strategic HR applications—often called human capital management applications by vendors—are regularly installed as standalone departmental applications with minimal CIO involvement. “A lot of people put in a bunch of single components and never look at the whole system,” says Larry Carr, a business professor at Babson College who’s writing a book on management control systems.

Piecing It Together

Linking some or all of these systems can allow more intelligent use of HR applications. For instance, using an integrated human capital management system, a company could assess hiring strategies by tracking new employees’ performances after they are hired or apply incentives methodically and automatically based on “soft” goals such as effective leadership.

The only way to accomplish all of this, however, is through integration. Connect the HR technology and process dots, and the opportunities for dramatic breakthroughs in talent management become apparent, says Tom Kraack, managing partner for workforce transformation at Accenture. “For the first time, you can imagine a huge change in the employee equivalent of time to market.”

One model for such technology and process integration is supply chain management, which also links disparate activities that affect each other. IBM, for instance, is integrating its internal strategic HR tools along the supply chain model, using a database of roughly 6,000 skills that forms the taxonomy for managing hiring, deployment and staff development. By creating its own taxonomy, IBM assures that all tools and managers are working from the same assumptions, says Frank Persico, director of learning at IBM. This lets the company know what skills it needs for consulting projects or manufacturing positions so that the recruiting system can screen for those skills, as can internal scheduling tools, says Dan Forno, IBM’s vice president for global operations workforce optimization. It also lets managers identify skill gaps so that they can focus staff development, training, incentives and promotions to coordinate with the skills needed, Persico says.

Other efforts are less encompassing. For example, Symbol Technologies has linked its internal e-learning system with order management, which stops resellers from ordering parts for certain products until they complete required courses for those items, says Josh Bersin, president and founder of the consultancy Bersin & Associates, which helped develop the system.

Integration Challenges

If all this unification sounds like an integration project, it is. But the prospect isn’t as scary as some other integration efforts. “The investment is significantly less than ERP. Typically, human capital management apps do not have the number of interfaces, the mission-critical or operational-risk characteristics, nor the number of administrative users characteristic of a broad-based ERP application,” says Accenture’s Kraack. The effort is also much less than that required to deliver operational human resource information systems (HRIS), whose complexity is more like ERP, he adds.

Also, “you need to build or buy applications that are oriented to connection with others,” says IBM’s Forno. There is no ready way to tell if an application is connection-oriented, Kraack says, but CIOs can investigate a vendor’s previous delivery of and thinking on connectivity, as well as look for a core data architecture and ease of configuration. Because most human capital management providers offer “siloed applications intended primarily to serve a fairly linear function,” IT may need to rely on a system integrator who has already figured out the connectivity approach, he says. Fortunately, the immaturity of some aspects of the human capital management systems market gives enterprises one advantage, says IDC’s Rowan: “Most vendors will support the data model of the client’s choice” rather than impose their own.

Kraack says that no vendor has worked out world-class end-to-end functionality across the whole of talent management yet, even though both PeopleSoft and Siebel Systems offer human capital management products within their ERP suites. As such, he advises enterprises to use the “best in class” for each silo and build an integrated capability. Other analysts concur. “The ERP players have a little bit of an advantage of being closer to closing the loop, but they’re not as far along as I’d like to see them,” says Judy Sweeney, a research director at AMR Research.

The lack of strong presence by ERP vendors explains why the HR market still includes dozens of small vendors that specialize in a few application areas—often within specific industries. However, some vendors are beginning to see integration as an opportunity. The learning management providers have taken the lead, Kraack and Bersin say, particularly Plateau Systems, Saba and SumTotal. Performance management provider SuccessFactors has also moved in the integration direction. But by and large, these companies don’t have the resources to develop and maintain a full suite of quality applications, Bersin warns.

Still, for some companies, a suboptimal suite is a better choice than in-house integration efforts. For example, the staffing firm Randstad North America uses the Cornerstone suite to integrate learning management with developmental planning (of which succession planning is a part), since the company has 40 percent annual turnover in its sales force—a little lower than the industry’s average of about 50 percent, says Vince Eugenio, Randstad’s chief learning officer—and needs to manage that churn. Other companies have better components for functions such as performance management, says Eugenio, but “getting the two systems to talk to each other could be a nightmare. I would sacrifice quality to avoid [doing the] integration [myself].” Integration gets harder, he says, the more components you introduce, and thus the more connections you have to maintain.

Invitrogen is also using one provider for its system. The company has put in place a performance management system from SuccessFactors that it plans to link to a succession planning tool and a compensation management tool, also from SuccessFactors. Linking the two will alert managers when their salary plans don’t match employees’ performance or fall outside of guidelines for performance levels. This helps ensure that employees are treated consistently and fairly, yet lets managers implement exceptions as needed, Lee says.

The decision to go with one vendor was a “gut call,” she notes, since Invitrogen has been growing too quickly for the company to take time to do a formal ROI analysis of integrating multiple products versus buying from one vendor. Lee expects that the company’s just-hired HR information systems manager will have to integrate products from other vendors—likely the HRIS, the recruitment management system, or the learning management system—at some point, but “my goal is to minimize the number of integration points.”

CIOs on the Sidelines

Strategic HR applications have largely been a backwater, as organizations have mainly focused on operational issues such as payroll and benefits administration. The HR profession in recent years has been diminished as such operations have been outsourced or automated, notes Bersin, leading both to fewer HR staff and less reliance by company management on HR for strategic guidance on issues such as how to maximize the workforce’s potential. And because HR has not been considered strategic and has failed to develop the tight relationships with IT that other business units often foster, CIOs typically have not paid attention to HR systems. That in turn has kept strategic HR off the CIO’s agenda.

“In HR and learning, IT is less involved. I’m surprised how naive IT can be,” Bersin says of IT’s tendency to make decisions based on existing vendor relationships rather than on assessing actual needs and vendor offerings. “They say, ’Oh, we’re a PeopleSoft shop? Let’s buy all PeopleSoft stuff,’” Bersin says.

Instead, CIOs should take HR technology integration and strategy much more seriously than they have in the past, observers agree. “The medium of management, of planning, of control is IT,” says Babson’s Carr, making it a natural center for strategic initiatives such as integrated human capital management. Even though HR departments have often been left to fend for themselves and CIOs haven’t always understood which applications could make HR more effective, “the CIO can be a real catalyst for change,” says Accenture’s Kraack. “If there’s an effective HR partner, you go there. If not, you go to the business manager—after all, the people who feel the pain are the general managers of the lines of business. Ideally, it’s a holy triangle of the three.”

Galen Gruman, a San Francisco-based freelancer, can be reached at ggruman@zangogroup.com.