Long reads

Choosing the right HR software

25 Apr 2019 By Jo Faragher

Many vendors will make unrealistic claims about their people systems. With AI changing the landscape, what questions should savvy businesses be asking, and how should they avoid the wheeler dealers of the technology world?

Attend any conference on HR technology and the chatter will almost certainly focus on artificial intelligence (AI) – who’s got it, what they’re using it for and what’s coming next. 

According to a CIPD report, People and Machines: From Hype to Reality, new technologies have the potential in almost equal measure to enhance and limit jobs; the supporting survey of more than 750 UK organisations found that among those introducing AI to the workplace, more than two-fifths (43 per cent) reported job creation, while 40 per cent reported job destruction. 

More worryingly, less than half (44 per cent) had included HR in the implementation process for their new technologies, which was flagged by the CIPD as a notable risk given the implications for health, productivity and wellbeing. If ever there was a time to understand this landscape, it’s now – and with headlines suggesting many aspects of people professionals’ roles are already being taken over by algorithms and that other routine tasks will be eliminated soon, it’s easy to imagine it’s changed the HR software landscape forever.

But HR itself has been slower than other functions to embrace change. Drill down into actual investment and the number of HR departments using AI to transform how they work, and there’s a lot of noise but not much action, according to Ashleigh Belgrave, a client partner at talent research firm Wilbury Stratton. “People are not doing as much as they’re discussing,” she says. It’s a talking point rather than a reality.” 

This inertia does not just apply to AI investments – more and more businesses find themselves at a crossroads where legacy HR systems are becoming increasingly obsolete, but the choice and range of new tools available is bewildering. And while at one end of the adoption curve a few organisations are automating sophisticated processes through AI, at the other end there are thousands still running things on Excel. 

“By their nature, HR professionals are risk-averse and not always technology-oriented – and I can say that because I was one,” says Devyani Vaishampayan, who runs investment fund the HR Tech Partnership. She estimates that in 2018, there were 8,000 start-ups globally in recruitment technology alone, so it’s not surprising HR professionals are cautious about where to direct their budgets. 

This fragmentation in the market, and the way nimbler vendors are offering bespoke products – often on a subscription basis – marks a significant shift. The new solutions cover any aspect of HR imaginable – from AI-powered voice assistants to behavioural nudges for performance improvement based on mood detection. Some buyers might be looking for a product purely to automate legacy paper processes or replace homegrown systems. Vaishampayan says: “It’s no longer all about big systems rollout; companies are looking for smaller tools that solve specific problems and are the domain of HR rather than IT.” 

Dr Nigel Guenole, director of the Institute of Management Studies at Goldsmiths, University of London, says making decisions around technology investment is daunting in the current environment. “Many organisations will have an HR management system that is a system of record, runs payroll, perhaps has embedded analytics and employee self-service,” he says. “They might also have a workforce management system for hourly workers, plus a talent management and acquisition system. Then they might start to add focused tools that address particular HR challenges.” 

To the end user, this all needs to look seamless, he adds, which means compatibility and integration must be top priorities with any investment.

Burned by legacy issues, employers are aware that vendors’ giddy promises don’t always translate into reality, and the choice of options on the market can be deceptive. 

“It’s like buying a car – there may be 50,000 different models but you’re restricted by budget and what you want to use it for,” says digital transformation specialist and author Denis Barnard. “Precious few organisations are doing HR tech investments well – there have been a litany of mistakes.” 

Barnard highlights supermarket chain Lidl’s decision last year to ditch a software project having already spent more than £400 million on it. When investing in HR technology, there are two main considerations, he adds: how much it will cost versus how much it will save; and what it will mean in terms of supporting resources. “How long will it take to put in place, how long will the tech guys be camped out in your spare room? You’ll need people to prepare the groundwork – do you take someone off their day job or do you ship someone in to do their day job while they run the project? The issue here is readiness.” 

One strategy is to break up the employee life cycle and consider the pain points in each, argues Guenole: “Everything from onboarding to compensation to performance management… what are you struggling with in each area? Then you can start to build the business case.” 

The focus on smaller solutions suggests that is just what HR departments are doing. And for those wondering where to start, recruitment is a fertile area to pilot new tech. “It’s very visible in terms of cost and impact. People are more used to technology in this part of the employee life cycle than any other,” says Vaishampayan. “It also covers a huge area – from employee referrals to screening to attraction and onboarding.” 

This is one aspect of HR where implementing AI can be relatively inexpensive and low risk; for example, introducing chatbots to answer frequently asked questions for candidates and machine learning to sift through CVs in high volume recruitment campaigns. “Companies are looking for faster time-to-hire so they can react to all the requirements being placed on them,” says Belgrave. “They also want to reduce bias, and the need for external spend on agencies and consultants. Automation can help this, but there’s the worry that you lose the personal touch.” 

There are also concerns AI-powered selection processes can reinforce existing bias. But one of the bigger challenges with technology investment is the fast-changing nature not just of work, but of workers themselves. 

“Users want tech that is built to work together, that’s in the cloud, that works with their other platforms,” says Ben Wardleworth of Engage Tech Partners, a platform that helps businesses manage workforce suppliers. “Everything will become configurable, so with a degree of manipulation it will work for your business in its current operation.” 

Increasingly, organisations are looking for software to help them respond to external pressures, he adds, whether that’s the potential impact of Brexit on migrant labour or the introduction of IR35 regulations into the private sector. 

Organisational design will ebb and flow as demands change, too, so take this into consideration when agreeing how the technology is costed and paid for. 

Justine Brown, a former HR leader who has run tech projects at companies such as Taylor Woodrow, says finding a vendor that charges on a per-head basis can be the most transparent route. “In this climate, you could lose a business unit and 200 people with it; equally, you might add 500 people through a new business,” she says. “If you’ve signed a contract for an annual fixed fee and added consultancy on top, you’ll end up paying more.” 

More than ever, users’ expectations of technology are high. With increasingly sophisticated technology at home, having to log into multiple, unintuitive systems in the office can be a drag on engagement. 

Core to this is employees’ need to access technology ‘in the flow of work’, rather than stopping what they’re doing to access a system so they can make a decision. This is especially important in learning management systems. Towards Maturity research has found that many learners feel systems are too general and too geared towards new employees, which is why more modern solutions ‘nudge’ individuals into retaining knowledge using the principles of behavioural economics. And a growing number of Netflix-style platforms are serving up learning when an employee chooses to access it – during the working day or via their smartphone on their way home. 

With so much new and innovative technology available, it might be easy to imagine all-encompassing HR systems have had their day – but that’s not necessarily so. 

“Big implementations still happen but there’s a lot more focus on customer success,” says Jeff Mike, vice president and head of research ideation at Bersin by Deloitte. He describes it as akin to a membership-style approach, where a client success manager will answer questions and maximise return on investment. “Retention is driving this. It used to be a lot harder to ‘lift and shift’ a system when capital investments in hardware were involved,” he says. 

When approaching a software investment, HR should first of all look at what the business needs it to do, says Barnard. “It’s as simple as asking a vendor: can your software be configured in such a way that it will work with our processes in the way that we want? The real winners are the outfits that have adopted regular technology and are getting value out of the bits that they need.”

Guenole adds that organisations need to consider the behavioural changes required when introducing a new piece of technology – the more profound the shift, the harder the implementation. 

“You need to ask what the new tool will require employees to do differently and how you will manage that change,” he says. “Those classic change management cliches about not doing change to people but with people ring true here – you’ve got to involve employees in the decision and the implementation.”  

With the external business environment changing constantly, it’s essential to push suppliers on how they will support your organisation, not just through the installation of technology but in years to come. “Being able to predict things in three to five years is over,” says Mike. “The HR technology market has mushroomed, in terms of start-ups and how the traditional players are innovating. You can talk about the features and functions they offer now, but how will they support you as the world changes?” 

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