Shyamal Majumdar: Why e-HR makes business sense

THE HUMAN FACTOR

When Polaris Software wanted a web-based solution for managing the entire recruit-to-retire process for its employees spread across 22 locations worldwide, it developed Adrenalinet.

The software for people management gave the company a readymade tool to cater to the needs of its disparate project teams working across time zones. Adrenalinet also brought down the formidable cost involved in communicating and managing these teams.

A few years later, Adrenalinet is being used by a host of companies, including Royal Sundaram Alliance, Dr Reddy's Labs, Hero Honda, Samtel, Micro Incs and Mahyco.

At Royal Sundaram, for example, each employee can easily access Adrenalinet through the corporate intranet that is smoothly integrated with other internal systems and applications, such as the performance development system and employee directory.

But what made Polaris commercialise its e-HR product that was originally meant only for its own employees? Listen to what the company has to say: within a few months of its application, Adrinalinet helped save Polaris's employee costs by 20 per cent and processing costs by 90 per cent.

The time spent on administrative jobs was slashed by 80 per cent and communication spends were down 50 per cent. The return on technology infrastructure (ROTI) via direct savings in time and costs was 400 per cent in the first year.

Polaris realised soon enough that Adrenalinet was a winner and created a separate company, Empower Works, to focus exclusively on people management software.

There are many other companies who have realised that automation of the various facets of HR (a trend known as "e-HR") makes eminent business sense.

Oracle's Human Resources Management System (HRMS), for example, is gaining huge acceptance among corporations in India because the suite offers the technology to help HR departments evolve from mere transaction processors to valuable partners in the overall process.

For example, a large company estimates that before adopting e-HR, it processed up to 85,000 HR forms per year and six people had to be dedicated full-time to manage all that paper. It's no wonder the data moved at snail's pace and the filing and processing costs added up. The company decided that the only way out of this mess was to automate as much of the HR burden as possible, which would not only speed up the process, but would also curb errors.

With working practices and the legislation changing so rapidly, businesses need processes and tools to help them overcome any legal pitfalls. Such processes can also save HR professionals time that is spent on updating records or approving holidays.

HR experts say while companies can achieve better employee communication and reduction of job drudgery through e-HR, the main driving force behind this trend is the focus on hard savings.

That's the message HR executives are pushing heavily so that adoption of e-HR technology is taken more seriously by company chief executives. A survey conducted by consulting firm Watson Wyatt & Co found that e-HR efforts built around savings and efficiency produce a measurable shareholder return.

But not many companies can adopt the Polaris model of developing the HR software in-house. Outsourcing of HR is the only option for them. There are good reasons for this. A study by Hewitt Bacon & Woodrow discovered that the costs related to an organisation's HR services typically exceed what's apparent.

The data shows that the real cost of providing HR services in participating organisations was between 1.8 times and 2.8 times the employment cost of the HR staff, with the average being around 2.6 times.

The finding dramatically underscores the gross underestimation by some organisations of the business case for making substantial changes to HR service-delivery mechanisms.

Research has also shown that 87 per cent of the funds mid-sized companies budget for HR goes towards routine processing transactions, rather than strategies that could actually impact business, enabling it to gain efficiencies. Mid-sized companies, in fact, spend almost twice as much as large companies in maintaining a HR head count.

HR consultants, however, say quality is indeed a major issue with HR outsourcing in India. That a majority shares this view comes across clearly from a June 2002 on-line survey by Hewitt Associates on outsourcing in Asia Pacific.

According to about 55 per cent of the participants in the survey, the biggest apprehension was the quality of the outsourcing vendors.