Human Resource information Systems (HRIS)

What We Have Been Doing Recently

Over the last year or so, Justin and I have been working with a small number of very large multinationals, developing and implementing a new computer system to support HR managers’ strategic planning.

In each case we have been working with regional (corporate) people, who were wanting to provide common planning methods and toolsets to their local HR people. Those local people are spread across Asia (in 2 cases), and Latin America in a third case.

The systems issues that we encountered were invariably products of HR management issues, and today we would like to relate some of those stories. We also learnt some hard lessons, that may also be some interest for builders and users of HRIS’.

Roles and responsibilities of HR Managers

HR managers need to do lots of things. They need to do hands-on, day-to-day things (like hiring and firing, and paying, for example). And they also need to think and act strategically, with rest of the corporate front-line.

Does your HRIS help you do these sorts of things? Is it holding you back? Or, worse, is it just another brick in the wall that adds rather than reduces your workload?

Scope of our HRIS experience

We build strategic support systems for HR managers, so they are ‘kind of’ HR Information Systems. Our systems use the data held in mainstream corporate HRIS’ (or far better still, data warehouses, if companies have done that work).

So we have seen a fair bit of strategic systems design and use in the HR department, and we have been on the pointy end of trying to extract and use HR data.

Decision Support Systems

Looking At Info from the Top-Down

Strategic information flows quite nicely if you look at from a top-down perspective. This graphic shows, as an example, the kind of ‘Big Board’ that a CEO of a life insurance company might like to have, to stay in touch with how that business was going from day to day.

The Key Performance Indicators are displayed, at very high levels, and are (hopefully) linked directly to underlying business systems - so they are always current.

This provides a quick, current overview of where the business is at, and highlights any broad areas needing more detailed attention.

Drilling-down for more detail

If the manager does want to drill down into the information, to see more detailed data and projections on specific business areas and segments (say for a more detailed analysis of existing and planned headcount, sliced up into particular job families or performance levels or business units, say, then a screen something like this one might be what the manger sees next.

This is the sort of system that we work with. We regard a system like this as an extension of a HRIS.

Getting Information to Managers

We haven’t met many managers who don’t want this sort of information. But it is not easy to implement this type of system, unless you have very good data sources (preferably already feeding into a data warehouse infrastructure)

Decision Support lives or dies on the quality and accessibility of source data (and for comp management that means your employee and pay data, and the market data that you have been able to obtain and load into your computer system).

Using PC’s, there are many, many good ways to analyse that data: with spreadsheets, ‘query’ tools, graphic analysis tools, and purpose-built software. If you picture what you want to see, then there will some PC tool that will let you do that (even if you have to ask your children how to use the PC).

The critical role of the HRIS is to hold the source data, and to make it accessible. If this source data is held in a convenient format, say a relational database, then you are well on the way to making this type of system work. The newest generations of mainstream HRIS’ (like SAP and Peoplesoft, for example) hold their HR data in forms that allow you, the HR professional, to access and use it.

‘Data Warehousing’ is an explicit example of how to make that happen. This middle layer is an explicit way of managing and organising data. It is a big-investment IT project to establish a data warehouse, but long-term paybacks are potentially enormous.

Compensation Management

The Broadbanding Push

Next, we would like to discuss some specific examples of using these kinds of systems.

Starting with one of the more day-to-day planning activities, we have just rolled-out a system, to sites around Asia, to support compensation management.

Like many corporations around the world, this particular corporation is moving, globally, to a ‘Broadbanding’ approach to compensation management. They are dropping their old pay structure, with 30 or 40 ‘pay levels’, and moving towards a set of a dozen or broad pay ‘bands’.

While that sounds straightforward, it is actually a huge change, and they have done a great job of making the transition. But to get there, they had to deal with all sorts of issues, not least of those being the systems issues.

All sorts of new employee reference data was needed. They had to develop and implement a new job coding and job description reference table, covering the full range of jobs across a dozen different countries. They to re-categorise every employee. They had to map every job (there were hundreds) to the new pay band structure. They had to add new data fields to their existing HRIS’, and they had to populate that data.

The pay-offs for this database work however, started, fairly immediately: they had very effective ways of categorising and analysing employee information, across much more manageable groupings (fewer bands than levels); and they took the opportunity to introduce a new, re-directed appraisals methodology (which was essential to their broadbanding direction).

And, because their employee data was better organised , they could accurately feed employee and jobs data to our Comp*Manager analysis program, and they could effectively model and analyse alternative pay structures. Going through the painstakingly detailed work of re-defining their jobs catalogue, and the job grade structures, had enabled them to move to broadbanding.

Setting pay ranges against the market

Moving on, our system is trying to help HR professionals compare their own pay data against market pay data. Assuming that your HRIS is handling your pay data OK, how hard can it be to get reliable market data to compare to your own pay ranges?

Very.

First up, what are you planning to compare to the market? Base pay? Base plus Allowances? ‘Total Cash’? ‘Total Remuneration’? Whichever definition you decide to use, you will have problems:

if you use ‘Base’, how do you assess relativities to competitors who pay higher or lower bonuses, commissions, benefits and perquisites than you?

if you use ‘Total Cash’, can you be sure that everyone includes the same pay components than you (and then what about benefits and perq’s)?

if you use ‘TRem’, what do you think of the survey provider’s valuation methods and assumptions? (in fact, do you think of the survey provider’s valuation methods and assumptions?)

What the Survey Providers give you

Next, pop quiz, does your survey provider (1) collect and (2) show you pay data at

(A) ‘incumbent’ level ie one record for each and every employee in every surveyed job, for every participating company?

‘company’ level ie one record summarising data for each surveyed job at each surveyed company?

‘job’ level ie one record summarising data, across participating companies, for each surveyed job?

If your answer is ‘C’, you’d better hope that

the right companies are in the survey group

no-one handed in any wrong or misleading data

your survey provider is real good with statistics and computer processing.

Oh, and that no-one had any problems matching the right jobs to the right jobs. Good luck on all those.

[Slide 8] If your answer was ‘B’, you at least have a sporting chance of (subjectively) dumping data points that look plain wrong to you (see Figure 1), and you can ‘re-weight’ the individual company points if you wish (eg to remove the ‘swamping’ effect of companies with large numbers of employees, like government departments). Your main hassle (and it is not that big a problem) is how to accurately re-combine the by-company points (after you have excluded or re-weighted individual data points).

If your answer was ‘A’ (incumbent level data), then can I please have the contact address for your provider? To run serious, and even accurate analyses, this is what you need. I know all the objections about sensitive data, and ‘guessing who is paid what’, but if you are serious about market data analysis, you need to bite that bullet, and work something out with peer group companies and survey providers.

HRIS market data requirements

The HRIS issues on market data analysis were simple and hard. The simple need that your HRIS should handle is that to get decent market data you have to provide your end of that survey pay data: your HRIS has to be able to produce your pay data for the survey provider (in some sort of sensible electronic format). In the ideal case, you could ‘run an extract’, at the required level of detail, at any time, including all of the data fields that could be required for the particular survey. Filling in paper formats went out with the ark.

The hard issue is the converse of sending data to the provider: getting it back. To be able to analyse and use survey data effectively, you (probably) will want to get it into some sort of computer system (maybe even a HR Information System).

When we did the implementation mentioned above, we had 1, 2 or 3 survey data output files, for each of the dozen or so countries - from the usual Asia Pacific survey providers. No two files were the same shape, some were spreadsheets, some were text files, some we had to capture ourselves from paper outputs. A very small number contained incumbent-level data, some had company-level data, most had (the least satisfactory) job-level data.

So, the analysis system needed to be able to capture and store various sorts of survey data, with various data fields, in various physical formats.

That was all before anyone started to actually look at the survey data to think about whether it needed any ‘cleaning’ or editing. This is a fairly non-trivial requirement of any computer system.

Other Comp Management Issues

Job Matching

The biggest problem with market data generally is badly-matched jobs. Wherever we have found strange-looking pay ranges, it has always tracked back to badly-matched company jobs against survey jobs.

The HR community needs to take responsibility for job matching: no survey provider understands your jobs as well as you do. Your HRIS can support the job matching process if it incorporates a well-managed jobs catalogue, with adequate job definition and job description detail.

Decision-sharing with Line Management

In almost every client situation we have worked on, our clients are the HR professionals who take the lead in designing pay structures and benefit programs - but want to leave the actual final decisions on specific employees’ pay increase to the line managers.

To handle that general requirement, the HR people develop and model pay structures in the Comp*Manager system - and then output a data file for each line manager, containing the line managers’ own employees and (sometimes) the HR people’s recommended pay rates for each person.

That data file is sent to the line mangers (usually via email) together with a standard spreadsheet file to help the line managers calculate totals etc. The line managers then set actual pay recommendations for each employee that they manage, and send their finished spreadsheets to their own managers for approval, and to the HRIS administrators for uploading to the main employee database.

This way of working lets the HR people define the pay review process and methodology, but leaves the line managers in charge locally. The HRIS’ involved support the pay review process with timely source information, decision support, and facilitated communications.

Comp Management Cycle Times

This kind of pay process works well when you review pay once per year. But a strong HRIS-facilitated process is critical if you need to review pay more frequently than that.

In Latin America, the hyperinflation there means pay simply has to be reviewed several times per year (in some countries, every month, for every employee). Without strong systems support, the process can fall unacceptably behind, or adjustments can become completely arbitrary.

Benefits management

Program Management: support/integration through HRIS

Specific purpose computer systems, which are actually variations on HRIS’, have been in use for many years, to handle specific benefit programs.

For example, it has been a commonplace in Australia that large corporations would manage in-house superannuation schemes with purpose-built systems (such as the Co-Cam ‘Superb’ and Continuum ‘Super Admin System’ packages).

We see a trend now towards integrating these purpose-specific benefit management systems into or alongside the rest of HRIS platform. The core member data handled by the superannuation systems frequently replicates employee data (name, sex, date of birth etc), salary history data etc held in the HRIS.

As database management technology improves, it will become possible and desirable to have single copies of that core data held in the HRIS - but accessed (kind of) directly by other supporting functional systems (for example, superannuation benefit calculation programs, provided by the usual specialist superannuation systems firms).

Managing with TRem rather than just cash pay

Part of the HR professional’s strategic role is to review and plan benefit programs, within the overall corporate context. (‘Is our plan OK?’ ‘Does it compare well to our competitors?’ ‘Can we afford something better?’ etc).

As with compensation management, if the HRIS contains employee and pay details, as well as details of employees’ benefit programs entitlements, then the HR can use the same sorts of PC-based analysis tools to model program costs etc

What’s the point of running employee benefit programs, if not for employee attraction or retention? Some of our clients take the view that pay competitiveness needs to be measured and managed at the Total Remuneration level, rather than just looking at cash pay.

This adds some fairly serious complexities to your job, and to your system needs.

TRem market reference points

To participate in a TRem survey you need to provide an extra dimension of information: what benefits does your company provide, and who gets those benefits? Can your HRIS produce that data, or do you need to fill in more paper formats from survey providers, in even more excruciating detail than usual?

Again, being able to get market data is a major obstacle to TRem competitive analysis.

There is a daunting level of detail required to adequately differentiate the full gamut of possible benefit program variations, for all the main benefit program types (we usually value around 20 types), across a number of surveyed companies. In our experience, this level of detail usually manages to elude survey providers - not always through fault of their own, as participating companies are not always keen to provide that detail.

As well, there is a chronic difficulty in getting participants and providers to adequately identify just who gets which program eg if a program is identified for ‘Middle Managers’, exactly which survey jobs does that actually mean?

Roll on the time when HRIS’ incorporate ‘rules’ and ‘parameters’ for a catalogue of benefit types and programs, and data specifying which employees get which plans. For the moment, if you want to do TRem analyses, expect to do a lot of hand-encoding of benefit program definitions.

Interpreting TRem reults

The back-end analysis of TRem competitive information is extremely complex - do you just look at the total TRem figure, or do you need to consider each line of benefit type? (‘If our base pay and super plan are better than yours, but your TRem value is better because of other programs like medical coverage, do employees or prospective employees see that, or care?’)

This sort of analysis requires a good subjective feel for the topic area - that’s where you come in. It also requires a very good analysis system, to let you do all sorts of comparative mixes and matches [Slide 13]

Workforce planning

If we talk about using a computer system to empower HR managers to work strategically, it’s hard to find a better application than Workforce Planning systems.

While every HR professional has done some modeling in the past, from back-of-the envelope plans, to complex computer mainframe projections, PC-based spreadsheets and other analysis tools have made this work far more powerful and sophisticated - and accessible to non-IT specialists.

The newer HRIS’ provide the base workforce data, and allow for access to that data from the PC-based analysis tools.

Upsizing, Downsizing, Restructuring

In some markets (like Asia) businesses are springing up expanding very rapidly. WFP systems model workforce mixes, hiring needs, pay and benefits costs (using HRIS-provided pay rate data, by type and level of employee, by market etc).

In other markets, HR managers may need to be able to model downsizing and restructuring impacts and costs.

Skills Planning

In rapidly-changing markets, modeling skills requirements and resources can be a critical need. The HRIS probably profiles existing workers quite well in terms of existing skillsets and experience levels - and as such identifies potential to develop those skills resources further through training etc. By defining skills requirements at various points of time, that skills gap can be assessed and planned for (training, hiring, re-locating etc).

As a real example of this, I worked on an IT project with an Asian airline, planning a strategic move into new customer database technology. A critical issue facing that organisation was how to get enough of their frontline customer servicing people skilled enough with PC/Windows technology, to be able to use that new technology. One of their competitors had invested very heavily in PC-skills training. As an alternative plan, our client’s workforce was young, and turnover was high; and with the likely influx of even more, new young people over coming years, if they just waited a few years their workforce would be fairly PC-literate anyway because children learn how to use PC’s at school. A good PC model of the workforce lets you project age/sex mixes, by job, to assess those alternative strategies.

A controversial example: sex/racial composition

This graphic on this slide is all about the questions:

‘What is our existing sex/race mix?’

‘What is our target sex/race mix?’

‘What does our hiring policy need to be, to get to that target?’

I know a lot of people will think this sort of analysis should not be done, and I am not suggesting that it should, or that it should not. But I am telling you that many companies do this sort of analysis in the US, because of concern over legal exposures from racially-biased hiring, and to establish ‘fair-hiring’ practices critical to obtaining government contracts.

HRIS To Support HR Managers’ Strategic Roles

I would like to finish up with views on where we think HR professionals want their systems to take them (and accordingly, what sorts of systems people like us are building at the moment).

Strategic ("Monitor and Manage")

Most of the clients that we see are regional, corporate executives, with strategic rather than operational interests. On top of the sorts of applications that I have already mentioned, we see the next big application as being a HR equivalent of an ‘Executive Information System’, incorporating up-to-the minute current situation data direct from the HRIS to the HR manager’s desktop.

That HR/EIS application might show things like current and projected

headcounts

pay and benefit costs

skills and other mixes

‘per-employee’ key performance indicators etc

(See the concept illustrated in Figure 5, where each icon is alive summary graph, leading in to more detailed ‘drill-down’ data.)

Systems Empowerment From the HRIS

To do any of this, the critical systems components need to collect and mind the HR data, make that data accessible to the HR professionals working at their own PC desktops, and using PC-based analysis tools for decision support and strategic planning applications.

That’s what the current crop of HRIS’ are now enabling.