HR Systems: Prevent Now or Pay Later

The chief financial officer (CFO) of a Midwestern insurance company bumps into the HR director in the men’s room and asks how his new benefits administration strategy is shaping up. Before the HR director can respond, the CFO declares his belief that benefits administration should be outsourced to avoid spending money on the new technology it would need for any in-house strategy. But, either way, he urges the HR guy to contact a specific consulting firm to help figure out a strategy. Unless the HR director is savvy, he may never know that the recommended consulting firm specializes in outsourcing. Other options might never be considered.

That’s a true war story, offered anonymously by a veteran of HR information systems (HRIS) battles. Sound familiar? If not, just wait. With HRIS still in its infancy at many companies, other HR professionals are likely to face similar situations. HR data has resided on mainframes and other computers for decades. It is only in the past 10 years that companies have begun to upgrade to systems designed specifically for HR information, reporting and decision making. And, only in the past five years have companies-mostly a handful of large ones-attempted to reengineer HR processes before finding the software to support those new processes.

If your HR department is contemplating a shift in technology to support new processes, then the undertaking represents much more than simply selection of the right software. HR veterans and other experts agree that you should be looking at the processes first-even if you don’t change a single one-as part of a broader strategy that links revamping of processes with new information systems.

Understanding your business

To determine the system you need, you must answer a list of basic questions about your business, says Freddye Silverman, director of HR information systems for Cendant Corp., a hotel chain based in Hunt Valley, Md. If you don’t know your business well enough, and you don’t know what products are out there to help you, then you need a consultant, she says. But you need to be honest with yourself.

“Most HR people think they understand their business but they don’t,” says Silverman. “Small and medium-sized companies especially don’t.” Cendant is in the midst of moving a payroll system for 12,000 people to a client-server model. Silverman, who has been in HR systems for 10 years, says she opted not to use a consultant because of her own expertise and the experience of her team. But that is rare. She believes most HR departments need a strategic consultant to help assess business needs, make process changes, then find the right solution-be it a system or outsourcing.

Here’s the paradox. If you don’t know your business very well, or you don’t know HR systems very well, you’ll need a strategic consult. But, you’ll need to know enough about your business and your HR needs to be able to ask intelligent questions when you interview consultant candidates. So, the message is: Nothing replaces doing your homework. Assuming you’ve done that, here is some advice on how to choose a strategic consultant.

Weeding out biases

Strategic consulting is expensive; the cost can run as high as $5,000 per day. So, it’s not a minor undertaking. Essentially, the goal is to size up what’s at stake in the decision you’re making. Ask, “What are the consequences, financial and otherwise, of making a poor decision?” advises Dick Frantzreb, publisher and president of Advanced Personnel Systems, Santa Rosa, Calif. If you have the in-house expertise, but it’s tied up doing something else or biased toward one solution, then you need to go outside for help. Determining whether a consultant has a bias toward a particular product, vendor or outsourcing strategy is relatively easy. “Consultants should tell you up front whom they are aligned with, if you ask,” says Frantzreb, whose company publishes directories of HR systems and consultants. You’ll be checking references on the consultant candidates anyway. During those reference checks, talk to a lot of different companies that have used the consultants you’re considering and find out what solution they discovered. If you keep hearing about the same product, vendor or outsourcing strategy, be cautious.

Most strategic consultants pride themselves on being vendor neutral. Vince Ceriello of VRC Consulting Group Inc., San Anselmo, Calif., excludes himself from any implementation work for two reasons. He says he can’t possibly learn enough about all the HR systems to credibly implement them, and he can’t play the gadfly for his clients. “I bid only on the strategic work and disqualify myself from the implementation,” he says. That way he has no vested interest in which solution is chosen.

“If clients want this written into the contract, I’ll do that,” he says, adding that if a strategic consultant is not willing to state his vendor neutrality in this way, the potential client should be wary.

Do you need a strategist or an implementer?

Many experts, whom we’ll call implementation consultants, understand a particular company’s system-SAP, Oracle or PeopleSoft for example-and can help to implement it once the decision is made. Or, if you’re looking for a consultant to help you design a benefits or compensation program, many people have track records in these areas. But how about a consultant who has business savvy, an HR background and knows technology? Well, there might not be more than a couple dozen of those in the entire country. Because that type of consulting is an infant industry, the history isn’t there for the strategic stuff, says Tom Armani, manager of compensation and HR information systems for Sara Lee Bakery, a Chicago-based division of Sara Lee Corp.

Armani has a healthy skepticism toward consultants. Sara Lee recently upgraded its HRIS, a project Armani oversaw. Because it was limited in scope and resources, he chose not to use a strategic consultant, saving his consulting budget for implementation. He looked at his options, then chose a package that meshed nicely with his existing payroll system. Consultants can lead you to overkill, if you’re not careful, he believes. “They want to come in and tear apart HR to see how it functions,” he says. “So it all depends on what your goal is. If you are just putting in a system to bolster HR, you don’t need a strategic consultant. If you are reengineering HR, then it’s necessary.”

Some strategic consultants believe that kind of thinking is short-sighted. Though this may seem self-serving to the consulting community, some of the most experienced ones make a solid argument. For example, Naomi Bloom, managing partner of Bloom & Wallace, Fairfax, Va., says HR professionals always need consulting help when making decisions about systems. “HR professionals don’t have a clue,” she says. “You have to understand systems, HR and how to put the two together. Only someone with years of experience doing it will have the relevant knowledge.”

Whether the company already has a consultant or someone external like her is a different question, Bloom notes. With about 30 years experience in information systems, especially in HRIS, she believes an HR delivery system has four architectures-processes, data, organization and technology. “You’ve got to have all those things.”

Ken Chin agrees. Chin is manager of HR systems for Airtouch Communications Inc., a San Francisco-based wireless communications company with 13,000 employees worldwide. He is in the midst of a major transformation of the company’s HR systems to place HR tools in the hands of managers wherever they are and whenever they need them. “We were looking for someone who had a vision similar to ours and could put it into words for us from a technology standpoint,” he says of his consultant-selection process. “We looked for consultants who had industry experience and knew the types of technologies that are out there today.”

Airtouch wound up using one strategic consultant for the high-level concepts and design. Because Chin and his staff had a vision, they wanted someone to validate it. To do so, the strategic consultant had to look at what several other companies were doing and talk to employees and managers. Although Chin and his team had already done those things, the consultant needed to ask different questions and conduct follow-ups. “You have to be very selective,” he cautions. “There is a limited group of people who have the vision that I’m looking for. A lot of people are competent at the small pieces.”

Finding your strategist

So how do you select the consultant to help you with the strategic parts of the project?

Having been chosen and not chosen many times over the years, Bloom offers several helpful tips-which are confirmed by HR professionals who have gone through the consultant-selection process.

Bloom bills about 1,000 consulting hours a year, and spends the rest of the time teaching, reading, attending classes, networking, making presentations and engaging in other activities that keep her up to date and competent. Ask your consultant candidates how they keep current with both HR processes and technology and how much time they spend in that endeavor.

Another question to ask: Is the candidate ever hired by vendors? “If they’re respected enough by the vendor community to be brought in on new product directions, then they know a lot about products,” Bloom says. She urges caution if the consultant is hired by only one particular vendor; that could be a sign of bias.

Most consultants will list speaking engagements at conferences as evidence of their competence and stature in the industry. Bloom urges caution here, too. There are so many programs these days, that practically everyone gets invited. And most do it for free because of the contacts it gives them. A small number of programs, however, pay experts to appear. Find out if any of your candidates’ appearances are in this vein, she suggests. It’s an indication that they are highly regarded in the community.

Screening candidates

Part of the consultant’s job is to ask tough questions and perhaps even make you uncomfortable. When you are screening candidates, ask them to give you examples of the types of questions they’ll be asking. Pay attention to the questions asked early in the engagement. If they’re not hard questions and you don’t feel at least some discomfort, then the strategic consultant may not be doing his or her job properly.

“If you’re not uncomfortable, then you’re not doing the kind of out-of-the-box thinking we call strategic planning,” she says. When the tough issues don’t get handled, they get buried and inevitably turn up during the implementation, Bloom believes. Many large consulting firms, including the big accounting firms, have branched into all manner of systems consulting. If you choose to do business with one of them, keep a couple of stipulations in mind.

Make sure they’re not expecting to also do the implementation work. The strategic consultants you hire from the large firm may not themselves have a product bias, but these large companies generally make a lot more money in implementation consulting than in the strategic end. From the outset, ensure that the large company does not expect to win the implementation work.

When deciding between a large consulting firm and a smaller one, be sure to ask which specific person will be assigned to your project and how much time will be allotted to the engagement. Some large consulting firms have a habit of flying the big-name person in for a half-day or so, then turning things over to the rank-and-file people. If you want the big name on board for the duration, demand it and make sure it gets written into the contract. Otherwise, look elsewhere, Bloom urges. In summary, word-of-mouth referrals and references-combined with careful interviewing and screening based on Bloom’s criteria-seem to yield the most reliable supporting evidence you can gather on consultants. You especially want to make sure you don’t get one with an outsourcing bias or alignment with one vendor. Either bias virtually preordains a particular solution, whether it is right for your company or not.


by Jonathan A. Segal

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