There is a general consensus that technology has enabled human resource management to dispense with routine and transactional administrative tasks. In turn, HR managers increasingly contribute to business strategy and execution. The advances have been impressive. But a question that remains is whether increasing HR participation in management alters downstream firm outcomes. Will increasing HR's involvement with line management temper management decisions? If so, will changes be in predictable directions?
In his book Human Resource Champions (Human Resource Champions. Cambridge, MA.: Harvard Business School Press, 1996), David Ulrich argues that human resource managers must perform four tasks: change management, administration, employee advocacy and strategic planning. Empirical studies on HR technology indeed find that technology has increased HR's involvement with the business and, to a smaller degree, with change management. But so far, little work has been done on what difference HR's increasing involvement makes at the level of corporate performance. Does HR help to integrate employees' concerns into the business? Does it make strategy more effective by integrating employee performance and culture issues into strategy? Or does it make strategic thinking more efficient by reducing frictions that change and strategy execution generate? Recognizing the HR function's increasing integration with line management, the HR community needs to formulate answers to these secondary questions.
How Technology Can Improve HR
In 1998, D. Lepak and S. Snell ("Virtual HR: Strategic Human Resource Management in the 21st Century. Human Resource Management Review 8(3): 215 - 34) argued that there were three ways in which technology could improve human resource management (HRM):
- It can streamline operations.
- It can improve relations with other departments through more timely and efficient service.
- It can play a transformational role by removing barriers to horizontal integration within and outside the firm.
Lepak and Snell claimed that the last consideration is most important. Technology is transforming HR because it is altering the way that firms departmentalize. Whereas in the past firms allocated tasks or differentiated internally, technology facilitates differentiation externally; it facilitates outsourcing.
Although Lepak and Snell saw this as something new, in fact HR had been outsourcing long before the advent of the personal computer. Four examples that come to mind are:
- Staffing departments' use of personnel agencies and external recruiters;
- Benefit departments' use of recordkeepers for defined contribution (DC) plans;
- Benefit departments' use of actuarial consultants for defined benefit (DB) plans; and
- Training managers' outsourcing of training.
While it is true that technology has facilitated outsourcing and reduced the need for transactional work, executed properly, outsourcing creates the need for controls and administrative oversight of a sophisticated nature.
Building on Lepak and Snell's ideas, Bradford S. Bell, Sae-Won Lee and Sarah K. Seung "The Impact of E-HR on Professional Competence in HRM: Implications for the Development of HR Professionals." Human Resource Management. 45:3. 2006) review surveys that have found that companies can reduce transactions costs by up to 75 percent and that 70 percent of companies report that technology has improved service quality. Bell, Lee and Seung's survey finds that the transactional aspects of HR have become less important, while knowledge of the business and delivery of HR functions like staffing have become more important. It is not that HR managers have become more tech savvy. Rather, they have increasingly needed to work with service vendors and the internal IT function. Lepak and Snell argue that technological expertise ought to be added to the list of HR competencies. But they do not mean technology expertise in the sense of Google co-founder Larry Paige's or Microsoft's Bill Gates'. Rather, it is ability to coordinate and manage technology that matters.
Samir Shrivastava and James B. Shaw ("Liberating HR through Technology." Human Resource Management. 42:3, 2004.) agree that workplace applications are expected to drive the next phase of growth with respect to enterprise software, but they point out that some applications fail with respect to coordination and implementation. They claim that there are three phases required to implement technological change:
- Adoption phase requires needs analysis;
- Needs analysis asks the questions of the technology's aims and of which users it must satisfy; and
- Implementation phase requires HR's taking service providers and clients as well as HR's own needs into account. In the implementation phase, a number of outcomes such as cost savings, HR's increased credibility and superior service can result.
Process-driven approaches focus on internal development. Best-of-breed or off-the-shelf applications can be used to solve specific problems. As with any organizational problem solving, the concerns of stakeholders with many interests should be consulted via multidisciplinary teams. It is also important to remember that off-the-shelf software can require tailoring that significantly increases its costs.
A 2010 Towers Watson survey updates these findings. (Towers Watson. 2010. HR Service Delivery & Technology. Survey Research Report.) For the past few years HR managers have viewed talent management software as the most pressing technology issue. Towers Watson finds that the increasing integration of talent management software has helped stimulate technology spending. As well, increasing use of technology to replace pencil-and-paper administrative work and counter-productive controls has increased HRM's business alignment. Forty-two percent of HR organizations surveyed say that talent and performance systems are their top technology concerns, followed by streamlining processes, involvement in strategic business-driven issues and defining human capital metrics and dashboards. A dashboard is a front-page control panel that contains critical charts and measures. According to Towers Watson, the recession highlighted the need to pinpoint, reward and manage performance. Hence, talent management is viewed as critical. Moreover, more than two-thirds of respondents remained committed to re-engineering key HR processes. Towers Perrin concludes that employers have embarked on new levels of service delivery. Nearly 70 percent of firms are seeking increased HR alignment with the firm's business.
Towers Watson's Philadelphia-based consultant Tom Keebler says that talent management software incorporates recruiting, a skill-and-competency inventory, performance management, learning-and-development software and succession-planning software. In an interview, Keebler said that because all of the programs are integrated, the software can identify gaps and suggest learning opportunities. He gives the example of learning-and-development systems that performance appraisals or succession-management software can trigger. You can go online and the learning-and-development system can tell you what courses or learning experiences you need to take next.
Not all areas of HR have seen the same degree of innovation. In benefits administration, Keebler notes, the core transactional perspective has not changed that much. But what has changed is the form of employee interaction. Web-based wellness tools can be used for self-care, knowledge about treatments and tracking breakthroughs. Unfortunately, though, technology cannot do everything. For instance, computer programmers have yet to find a substitute for those pesky trips to the gym.
One area in which technology has made a big difference is in moving the role of HR generalists away from basic transaction processing and answering rudimentary questions. Generalists now give higher levels of support and they rely on technology. As a result, they can participate in corporate-level planning and integration of HR at the line-management level. Keebler sees technology as continuing to eliminate more of the transactional steps. Increasingly integrated systems will create the need for more generalists.
Technological breakthroughs may be going in surprising directions. In a recent study that appeared in the Journal of Human Resources in Hospitality and Tourism, K. Zelenskaya and Neal Singh interview managers of 10 firms that have used Second Life — a computer-based virtual environment that allows users to interact in a simulated world — to interview job applicants. ("Exploring Virtual Recruiting From Employers' Perspective Using Second Life." Journal of Human Resources in Hospitality and Tourism. 10:1. 2011.) Zelenskaya and Singh identified the firms that conducted career fairs on Second Life between 2006 and 2007. Although its use is controversial, the Second Life career fairs are low cost and result in an average of one hire per fair. Favorable publicity is also a by-product. Once the Second Life platform is established, it can be re-used at virtually no cost.
The trend toward increasing substitution of technology for administration is clear. It is now up to HR departments to show their stuff in integrating human resource concerns into business strategy.
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Mitchell Langbert, PhD, is an associate professor at Brooklyn College. Widely published on the subject of human resource management, Langbert has consulted and served as an expert witness.