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1/11/2006
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HR and Workforce Disconnect with ERP

Businesses must address pragmatic needs for improving workforce processes and performance.

VentanaView™

Summary
Finance departments’ attempts to realize the potential of their organizations’ enterprise resource planning (ERP) systems have had a negative effect on efforts by HR and Operations to address workforce performance management. As organizations have assessed their investments in ERP systems over the last three to five years, they largely have ignored the issue of managing human capital and the processes associated with it. Ventana Research believes those who are serious about managing the performance and potential of their workforce should reassess their priorities. ERP suppliers are having to change their systems to provide the capabilities needed for workforce management by HR, and users therefore will have to make additional financial investments in ERP upgrades to be able to utilize these new application capabilities. This, in turn, will increase the time to deployment and thus the risk of not addressing the workforce management issue expeditiously. Ventana Research advises organizations not to rely solely on ERP for processes and systems to manage the workforce.

View
The enterprise resource planning (ERP) market sees many of the basic activities in HR as routine and no different from other business activities. Yet decisions about who to hire and how to make them more productive are significant components of innovation and competitiveness. If an organization believes human capital is important, it should invest in applications that can manage and harness the value of the workforce.

In the hope of simplifying the operation and management of their ERP applications, organizations are consolidating these tools under the banners of Oracle, SAP and other vendors. But in doing this, they have not made management of the workforce a top priority. For their part, the established ERP suppliers have simplified user interfaces and consolidated the transactional capabilities, but they have done little to serve the HR or workforce needs of their customers. This lapse has created opportunity for new application suppliers focused in this area, including Authoria, Kenexa, RecruitMax, Softscape, SuccessFactor and Workscape.

Even the latest-generation ERP systems, which are far more centered on processes and underlying business events than were their predecessors, are not delivering on management needs to manage the workforce more effectively. This is not surprising; to address the workforce effectively, maximizing the value of the business’s human capital assets, requires reconsidering, if not reengineering, the core HR function to focus it on process management. To make this shift away from being a passive service center, HR must be empowered with new processes and systems.

To travel this path, organizations will have to assess the both the efficiency and the effectiveness of critical workforce processes: recruitment and hiring, employment and compensation, training and monitoring, incentives and rewards, and competency and transition management. Then they can determine where to make investments, in ERP and other management systems, to improve substandard processes. Our research and analysis suggest that organizations will find significant gaps they must address.

If the organization chooses the ERP route, being able to use the new capabilities offered by the ERP suppliers likely will require that the users first upgrade to the latest releases. This is a step that will require additional investments, and thus additional time before companies can gain access to the applications and information systems currently being marketed. Luckily, there is an alternative, in the form of a class of new suppliers in the market

Assessment
The existence of efficient ERP systems that manage enterprise resources for operational needs does not ensure that the right talent is hired, compensated, trained and motivated by appropriate rewards and goals. The current consolidation of the ERP market offers organizations the opportunity to focus on acquiring or building a set of processes and systems that will improve the management of the workforce and its performance. Finance executives should re-evaluate their investment priorities and allocate time and capital to upgrading workforce management processes and deciding who should be providing these mission critical systems. Ventana Research recommends that executives in HR and Operations work together to define common goals that enhance the people element of both workforce and operational performance management and then to meet them. Organizations that ignore this opportunity will find themselves with antiquated workforce processes and systems that will undercut their potential for the competitive advantage of exceptional performance by their workforce.

About Ventana Research
Ventana Research is the leading Performance Management research and advisory services firm.  By providing expert insight and detailed guidance, Ventana Research helps clients operate their companies more efficiently and effectively. These business improvements are delivered through a top-down approach that connects people, process, information and technology. What makes Ventana Research different from other analyst firms is a focus on Performance Management for finance, operations and IT. This focus, plus research as a foundation and reach into a community of over two million corporate executives through extensive media partnerships, allows Ventana Research to deliver a high-value, low-risk method for achieving optimal business performance. To learn how Ventana Research Performance Management workshops, assessments and advisory services can impact your bottom line, visit www.ventanaresearch.com.

© 2005 Ventana Research

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