Human resources and HR technology have taken on greater importance as the sluggish economy puts a premium on avoiding unsuccessful hires. A recent survey shows companies continue to invest in such technology, and many intend to change the structure of their HR operations in coming years.
A Towers Watson survey of HR and HR IT executives from 628 global organizations found 31% plan to spend either more or much more on HR technology this year, while 53% say they will spend about the same.
“Organizations have to make sure that any new hire is so much better than in the past,” says Derek Beebe, a senior consultant with Towers Watson. “If you hired someone five years ago and it didn’t work out, that was unfortunate” but companies had some buffer, Beebe says. “But now, organizations have to be so much more precise because they don’t have the extra profits to address some non-perfect hiring.”
When it comes to HR management system providers, Workday is the up-and-coming star. Workday is a fairly new company with a very small market share, Beebe says. But when Towers Watson asked about what systems companies are planning to deploy, 24% of those planning a deployment said they were going to implement Workday’s system, making it the most popular choice along with SAP, which was also cited by 24%, while 8% said legacy PeopleSoft, which is owned by Oracle.
Workday, founded by Dave Duffield, who also founded PeopleSoft, offers a core HR technology system that uses software-as-a-service (Saas) technology, making it dramatically less expensive to deploy and maintain. And because it’s brand new, the Workday system takes advantage of the latest technology, Beebe says. “In the world of HR technology, Workday is a very disruptive and enabling technology.”
Meanwhile, there have been several significant acquisitions in the talent management area in the last year, including SAP’s acquisition of SuccessFactors, Oracle’s purchase of Taleo and, most recently, IBM’s agreement to acquire Kenexa.
The acquisitions are “a sign that HR is very hot, like CRM used to be five or six years ago,” Beebe says. “The bigger organizations don’t want to get left behind. They’re seeing that it’s better to purchase than build it themselves given the pace of innovation in these markets.”
Getting and effectively deploying talent and performance management systems is by far the leading HR service delivery issue, according to the Towers Watson survey, with 40% citing that as one of their top three priorities, while 22% cited streamlining business processes, recruiting and staffing systems.
Talent management includes performance management, learning management, compensation planning, recruiting and career management. These systems provide visibility into what employees are working on, including their goals and objectives and how effective they are in accomplishing them, says Beebe, pictured at right. “They allow the organization to drive the results of their business and change the culture a bit for more efficient use of limited assets.”
Deploying performance management technology effectively involves not just turning the system on, but making sure that the people, managers and leaders “understand how best to get the desired behaviors using the technology,” he adds. The Towers Watson study found that 52% of respondents said the technology is only somewhat effective in achieving the desired outcome, while 14% said it’s neither effective nor ineffective.
Indeed, the survey found that a key area of focus for respondents is improving the HR technology that they have already deployed or adding another module. Their goal is “basically getting the most out of what they’ve already spent their money on,” Beebe says. “It’s all about expanding and improving, vs. ‘We need to go with a new provider.’”
What’s next in the HR technology space? Companies have seen how successful technology can be, so now they’re beginning to look at implementing it more fully across HR functions, Beebe says. “Organizations realize that if they get HR service delivery right, it can be very cost-effective and provide tremendous returns to their organization. Organizations are willing to change HR and invest the money because they know in relatively short order they’ll get a nice return on it.”
More than half of the respondents to Towers Watson’s survey were from large and mid-sized organizations with more than 5,000 employees.