Designing and Managing a Human Resource Information System

Overview

Technology has noticeably changed HR management; most organizations provide universal access to HR services through technology and web-based applications. These changes often result from the need to cut costs and expand or improve services. Research shows that organizations that successfully adopt sophisticated HR technology tools outperform those that do not. But the simple automation of HR processes can no longer guarantee a competitive advantage. Instead, organizations must determine how to use technology to transform their HR practices and market their HR brand. See Small HR Functions Can Adopt Automation Technologies, Too.

Business Case

A formal business case is needed to gain support from the decision-makers who can authorize funds for a new or upgraded HRIS. The business case should closely align HR goals with the organization's business strategy and specify the anticipated impact on the organization's bottom line. Presenting a strong cost/benefit analysis to justify the costs of purchasing and implementing a new HRIS is necessary. See How to Persuade Company Leaders to Invest in New HR Technology and How to Make the Case for Investing in HR Technology.

Because HR is not generally viewed as a profit center, the business case should focus on reducing administrative and processing costs, increasing efficiencies, and improving value-added knowledge from analytics while supporting the organization's principal business needs. To corroborate the value of a new HRIS, quantify the cost of providing the current level of services as well as future anticipated benefits against the new system's bottom-line impact.

When developing a business case, determine the quantity and quality of the department's services to enable an assessment of how a new HRIS will improve existing manual processes and deliver services more efficiently. Determine why the existing system is no longer sufficient and identify any weaknesses in the existing system processes and functions. Investments in integrated systems or cloud technology, while bringing HR to the technology table, must be well positioned to contribute to the organization's bottom line.

When developing a business case for a new HRIS, address the following:

• Outline precise business problems. For example, lack of integrated systems results in poor data integrity and time spent reconciling information from incompatible systems.
• Clearly state the objective and the anticipated results. For example, purchase, install and implement a state-of-the-art system that will upgrade HR's quality of service through efficiency and better information.
• Specify any current HRIS issues. For example, the department has outgrown the current HRIS, which does not run the latest software and is incompatible with other systems.
• List all other available options or alternatives. For example, remain with the current HRIS, upgrade individual systems, or outsource some or all HR services.
• Provide clear goals and objectives. For example, use assessments of delivery value analysis to determine necessary functions and results.
• Include a summary of the current cost for HR service delivery.
• Determine the expected rate of ROI upon implementation.

From the list of immediate needs, determine what will bring the most value to end users and the organization. In addition, assess which functions will be enhanced by improved automation and integration, information, and analytics and establish the tangible and intangible savings and costs.

A first step is to evaluate the value of the changes the new HRIS will enable. Employers should think in terms of cost reduction and automating and improving inefficient, superfluous and labor-intensive HR services. Examples include:

• Cost reduction via automation:

• • Time entry and attendance tracking.
  • Benefits administration.
  • Recruiting.
  • Training.
  • Payroll.
  • Performance management.
• Improvements through integration:
• • Benefits administration.
  • Compensation management.
  • Ability to track training, licenses, certifications and education.
  • Report generation and processing.
  • Performance management.
  • Centralization and efficiency of the flow, capture and use of HR data.
• Speed in delivery of services.
• New or updated delivery of services:
• • Benefits confirmation statements.
  • Electronic payroll advices.
  • Companywide standardization of policies and procedures.
  • Use of interactive voice response (IVR) and Internet.
  • Employee self-service.
• Improved reporting and analytics such as:
• • Turnover of high-potential employees.
  • Refined compensation modeling.
  • Standardized, automated and scheduled reporting
• Ability to accommodate remote users.

Organizations should carefully estimate the cost of providing the services today against the anticipated cost with the new HRIS. See Kick-Start Your Digital HR Strategy: Information Systems.

Determining Needs

An HRIS can be as simple as a small, internally developed employee database or as complex as a fully integrated multimillion-dollar enterprise resource planning (ERP) system offering economies of scale to larger companies. Depending on the organization's business operations, consolidating workflows and capturing data in a single application may be more critical than implementing a global solution that would support multiple languages or provide all employees with remote access. See How to Select an HRIS.

Employers must have a firm understanding of the organization's culture, its ability to accept large-scale changes—whether it is expanding its operations globally or undergoing mergers and acquisitions—and, most significantly, its short- and long-term goals. Employers must also understand how tech savvy its managers and employees are and be able to accommodate for mobile as well as traditional access models. See Emphasis on Employee Experience Revolutionizes HR Technology.

Each HRIS user will have slightly different information needs and can be split into two groups—employees and nonemployees. The employee category includes:

• Managers who rely on the HRIS and its data for decision-making.
• Analysts and power users who evaluate potential choices and opportunities.
• Technicians who are responsible for providing a usable, up-to-date system for all users.
• Those who use the system on a self-service basis to access and/or update personal information.

The nonemployee group includes:

• Potential employees (applicants).
• Suppliers.
• Business partners.

Planning

The planning phase is crucial in the design of any software implementation project. A comprehensive planning process will provide both the necessary framework within which the implementation team can proceed and the decision-making parameters for unforeseen difficulties.

The initial planning process should include discussions of the following:

• Project scope. Clearly defining which pieces of the system must be completely operational to satisfy various end users' needs is imperative to any successful implementation. Agreeing to requests for additional work, or scope creep, raises costs and could cause significant implementation delays.
• Management support. Sufficient management support is essential to identify initiatives and priorities, attain high-level support, allocate resources and funding, remove obstacles, gain consensus, and meet timelines. Depending on the organization's size, the executive sponsor may be an individual or a cross-sectional management group. The sponsor should remain involved through the project. The executive sponsor should be someone who can make decisions and commitments for the company, including vendor selection, final process confirmation and project sign-off.
• Project duration. The project's size and complexity and available resources will determine completion and go-live dates. Firm, realistic deadlines will help keep staff motivated and reduce scope creep.
• Project manager. Depending on the project's size, complexity and duration, the organization should select a person to oversee all aspects of the project. Selection options for this role include:
• • Hiring an outside consultant, who many have a strong technical background but will have limited knowledge of the organization's mission, strategy processes and needs, which could increase costs.
  • Hiring a full-time certified project manager, which could reduce costs if the organization has enough projects to justify a full-time position.
  • Temporarily transferring someone involved in the project into a project management role.
• Steering committee and project charter. Project managers often receive assistance with the planning and implementation process from a steering committee comprising key stakeholders. Steering committees often include the following positions:
• • Project manager.
  • Project sponsor from senior management.
  • Lead employee from each technical area (e.g., systems analyst, database administrator).
  • HR functional experts.
• A charter outlines the overall goals of the project in one document. The project charter accomplishes the following:
• • Builds the case for the implementation.
  • Illustrates the project's connection to organizational goals and strategies.
  • Identifies project scope.
  • Outlines roles and responsibilities.
  • Identifies additional available expertise.
  • Describes the decision-making process.
  • Identifies deliverables.
  • Outlines a change enablement and communication plan.
• Implementation team. Functional team members often include HR professionals with some technological expertise. Technical team members include HRIS specialists, systems analysts, database administrators, and other software and hardware specialists. It is strongly recommended that a member of the IT department be involved because ultimately IT will be expected to offer front-line support.
• Outside consultants. Organizations that have never undergone a major software implementation or that lack the necessary in-house skill sets may consider hiring an outside consultant.
• Process mapping. The implementation team  should compile a list of HR processes, and then develop a model of each process. The model should incorporate a flow chart and a dataflow model (i.e., detailing data elements, processes and outputs to go with each step of the process). This map should also identify any integrations with other systems or dependencies on other systems or functions.
• Data migration and configuration. The implementation team should also determine which data should be migrated and how that migration will take place.
• Documentation. Throughout implementation, the project team should record each action and decision. Items to document include:
• • A log of outstanding issues and risks.
  • All decisions, who made them and when they made them.
  • New or modified procedures or processes.
  • System training manuals.
  • Technical requirements.
  • Business case presentations.
  • Table set-ups.
• Change management. The implementation team conducts an impact assessment to identify affected stakeholders. Next, a communication, education and training plan addressing each affected audience should be developed to ease the transition to the new system and to facilitate acceptance among users.

Design Considerations

Once an organization has decided to implement technology in its overall HR strategy, it must determine whether to use a single platform, an integrated technology solution to support multiple HR functions or multiple smaller systems—sometimes known as best-of-breed (BoB) solutions, each supporting a different HR function.

Integrated solutions

With this strategy, a single vendor helps the organization develop one platform that incorporates multiple HR functions. Often these platforms are part of an enterprise-wide information system architecture that includes a variety of business functions such as a general ledger, customer relationship management and logistics. See Weighing the Decision to Unify HR, Finance and ERP Systems.

Best-of-breed solutions

Organizations that implement a BoB strategy pick the best applications for each HR functional area, working with one or more vendors. For example, the organization might use a recruiting solution from one vendor, a time-and-attendance program from a second, and a payroll system from a third. Smaller businesses with limited resources or those that want to use technology selectively as part of the overall HR strategy, might prefer this approach.

The organization must also consider how the technology will be delivered. Options include:

• On-premise or purchase and install. The organization will purchase and install hardware and software on internal machines that internal IT staff support.
• Hosted or application service provider. The organization purchases applications that are located at the vendor's site and supported by external IT staff.
• Software as a service (SaaS). The organization subscribes to software that is developed and deployed remotely and accessed via a Web browser. Vendors offer many organizations access to the same package (known as multitenancy) and maintain the software for each organization.

Both hosted and SaaS approaches can be effective for organizations that lack the resources or technical expertise to implement a large, integrated system. Many vendors are beginning to market SaaS applications to small and midsize businesses that want to expand their HR services.

One of the most significant changes in the practice of HR management has been the "democratization" of HR data, expanding access to employees, managers, health insurers, workers' compensation carriers, senior executives, job applicants and regulatory agencies. These diverse users have unique needs that various solutions are designed to meet.

An HR portal provides a single, targeted and often customized access point for each employee (and increasingly, each job applicant). The HR portal allows an individual to access the necessary resources and data for his or her circumstances and position, enabling each to design an interface that displays the most relevant data. Most HR portals are also Web-enabled, so employees can access HR services anywhere and anytime on a variety of mobile devices.

Employee self-service (ESS)—often provided through the HR portal—enables employees to access and maintain their personal HR information and to directly conduct many HR transactions. A well-designed ESS allows employees to make informed decisions and become much more self-sufficient. See Leveraging the Value of Employee Self-Service Portals.

Another tool accessible via the HR portal is a manager self-service (MSS) application, which enables supervisors to conduct many HR transactions online and generate real-time reports. Organizations can determine the number and complexity of HR tasks in the MSS. For example, managers could authorize merit increases, promotions and transfers; approve leave requests; change an employee's classification; and conduct performance management, succession planning and onboarding.

Most software packages are robust and flexible. However, if customization is necessary, organizations must ensure that the ROI justifies any additional costs. A customized package may match the organization's processes more closely, but extreme customization may cause problems when the vendor upgrades software affecting compatibility or support issues.

Installing the appropriate security features in the HRIS should be one of the top priorities to properly handle:

• Disclosure of sensitive electronically stored information such as payroll and benefits data among employees.
• Loss of sensitive personnel data outside the organization (such as Social Security numbers), resulting in data breaches or identity theft.
• Unauthorized updates of key data such as salaries and stock options (quantity and dates).
• Sharing of personnel or applicant review—comments to unauthorized employees.
• Sharing of data with external organizations and service providers.

Employers should have protocols developed to respond to security breaches or the unintended exposure of sensitive information. In addition, as identity theft becomes more prevalent, management should be prepared to assist employees who report identity theft to ensure their information is updated and secured.

The implementation team should work with the IT department to ensure proper information security protocols are in place to provide the right access to authorized users while ensuring data security. Common security measures could include encryption, data classification models to highlight restricted information and authentication procedures. See Employees Are Key to Curbing Data-Breach Risks.

Vendor Selection

Although developing technology in-house is possible, using external vendors is generally more cost-effective and often provides a more comprehensive HR solution. However, the wide selection of vendors and variety of products can be daunting.

When an organization purchases a new HRIS system, it is entering a new business partnership, so choosing the right vendor is as important as choosing the necessary software.

HRIS software packages vary greatly in scope and functionality; therefore, organizations should select a vendor that will take time to gain a better understanding of the organization's processes and functional needs.

The HRIS market includes software providers that sell systems directly and resellers that provide consulting and installation services for third-party applications. When working with a reseller, employers should look at the vendor's software update and new release history to gain insight into its commitment to its offerings.

Any reputable developer or reseller should provide references from current clients of similar size with comparable business processes. Employers should ask vendors' references questions such as:

• How has the system improved HR functions?
• What modules are you using?
• Has the system met your expectations? If not, what is it missing?
• Are end users satisfied with the system?
• Has the system been expanded or upgraded since the original purchase? If so, how did the upgrade affect customizations and other features?
• How has the vendor responded to any problems?
• What do you like best about the system? What do you like least?
• Has the system provided the expected ROI? Why or why not?
• What was the implementation experience like? Did the vendor deliver on budget and on schedule?

The purchase agreement should include not only the system deliverables but also anticipated long-term support, service levels expected, and training for all users, including the basics of entering data, running reports and troubleshooting typical problems.

Before contacting potential vendors, management should set internal ground rules, such as whether to share its budget and a list of other vendors under consideration and how to handle communications with the vendor.

In addition, the organization should determine how to compare competing bids and decide which functional and technical requirements and costs are most important. Employers should gain consensus from senior management on the selection weighting.

After identifying potential vendors, the organization should develop a concise, detailed request for proposal (RFP) to gather information about what each vendor would offer. The RFP should provide an objective measure of the organization's requirements and budget to induce vendors to respond. At a minimum, an RFP should include:

• Information on the company, users, objectives, technology infrastructure and any other background information necessary for the vendor to understand the organization and its needs.
• A way to objectively compare software functionalities and technicalities, such as a list of mandatory requirements in a questionnaire for the vendor. Generally, it is a good idea to identify "must have" requirements as well as "nice to have" functionalities that would enhance the experience but not be deal breakers in the vendor selection process. Some organizations choose to narrow their lists of mandatory requirements to approximately 50 key requirements that are likely to differentiate vendors. They can evaluate other solutions during demonstrations and one-on-one discussions.
• A request for pricing based on specified terms (e.g., by module or number of named users).
• The software selection process, due dates, contact names and other essential project details.

After reviewing the proposals, the organization should select two or three of the most suitable vendors—based on proposed solutions and pricing—for demonstrations. Employers should prepare for each demonstration, ensuring that key individuals are in the audience, giving vendors a demo "script" that outlines which functions are required and a "score card" that enables attendees to note their likes and dislikes about each demo. Demonstrations of small systems could take only a few hours, whereas large systems could require a few days. Employers must make sure to strike a balance between getting enough details and keeping the process manageable for vendors and the selection team. See Making the Most of HR Tech Demos.

Organizations should take time to confirm the vendor's claims and perform reference checks. Once this due diligence is complete and HR has settled on a vendor, obtain senior executive approval and negotiate the pricing, terms and conditions in a well-vetted contract. If organizations are implementing a complex, expensive system, they are advised to have a contracts attorney review the document prior to signing. See How to Negotiate Contracts with HR Technology Vendors.

Implementation

Once the organization has selected a vendor and finalized the contract, it should conduct more due diligence to ensure a successful implementation. Understanding the HRIS end users' needs, technical possibilities, software parameters, and the implementation process will increase the probability of rolling out a system that meets HR and organizational needs.

First, identify and document the underlying objective for the new HRIS. This involves determining which pieces must be implemented versus which would be nice to have. Keep in mind the organization's size, number of employees and overall scope of deliverables.

No matter how thoroughly an organization prepares for an HRIS implementation, things could go wrong. Some of the most common problems encountered when implementing technology projects include scope creep of the deliverables, poorly defined requirements resulting in rejected deliverables, late delivery or poor communication between stakeholders, project management and vendors. A strong project implementation team will identify problems early on to keep the project on track.

After implementation, the organization and vendor should conduct system testing, often concurrently with data migration and configuration, to verify data integrity. Are the data stored in the correct location? Can users query the data? Are the data available to individuals with appropriate security clearance? Technical software team members should test each module for proper functionality, and functional HR team members should verify that the module is working properly and maintaining data integrity.

Some organizations opt to change over to the new system immediately, turning off the old system. Adjustments are made as needed when problems are identified during testing and initial use. The potential downside to this approach is the organization-wide learning curve as users adjust to the new software.

Another option is to run both systems concurrently, waiting a defined period of time (e.g., a month or quarter) before turning off the old software, and incorporating any final system testing into the changeover process. A parallel change allows for significant testing before the old software disappears.

See How to Boost Lagging Adoption Rates of New HR Technology and How to Introduce New-School HR Tech to an Old-School Team.

Evaluation

To help support and validate the new system's value, organizations should identify the lessons learned from the implementation and share them with management. What worked? What did not work? Which areas need improvement? Finally, create and adhere to a schedule of measurement or identification of milestones and related reporting during the planning process and assign a dollar value to each critical step to evaluate budgets.

Software Vendors

SHRM's Vendor Directory

HRIS Comparison Tool

SHRM's Guide to HR Management Systems Vendors