Workplace Issues

Making a Mess of People-System Purchases

Committing any of these mistakes could doom your company to a painful experience with human-capital-management technology.
David McCannMay 14, 2013

This is the third of five articles in a special report looking at the buying of HR technology from a CFO’s point of view. Also included are Why Upgrade Your HR Systems?; What Kind of HR Automation Do You Need?; HR Tech Vendors: Who’s Out There?; and Anatomy of a Buying Decision, one CFO’s journey to procurement success.

Choosing HR technology can be less risky than it was a number of years back, when the only options were expensive installed systems. Once you had them, you had them for a good while. Today’s cloud-based systems are easier to ditch if you don’t like them, because there are no up-front capital costs.

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Does that mean the selection process is worry-free? Hardly. There will always be some financial penalty for making a wrong decision, and the list of ways it could be messed up is long indeed.

The cardinal sin in buying technology is getting overly excited upon viewing flashy product demos. CFOs are especially vulnerable to the trap when it comes to HR technology, owing to their relative lack of familiarity with it.

“It’s a very easy way to botch this,” says Jim Cook, CFO of Mozilla, maker of the web browser Firefox. “To think you could get a sales call, see a demo and say ‘Oh, this looks cool, it would be great to do it this way,’ and then just write the check and the system works fine – that’s a big fallacy.”

Steve Armond was burned in just that way. “In hindsight, we didn’t test [an HR technology] tool nearly as well as we should have before deploying it,” says the CFO of T-System, a $100 million provider of emergency-medicine management solutions.

The vendor had described a certain level of work-flow efficiency, feature functionality and ease of use that never materialized. “What we got instead was a frustrated organization, a lot of difficulty leveraging the system’s processes, problems getting information out of the system and too much down time, among other things,” Armond says. T-System quickly abandoned the product and, smarting in the wallet, went in a different direction.

In a way, the unhappy experience was a blessing in disguise. It prompted T-System to put together a cross-functional team of technology end users among those responsible for making business decisions. The team has established a program for detailed testing before buying new technology, what Armond calls “a solid try-before-buy” process. The company also now refuses to sign technology contracts unless given freedom to walk away without penalty if it encounters any issues.

“The experience with the HR tool helped us rethink how to mitigate risk in the technology-purchasing process,” Armond says.

The main cause of that error is not being clear on what you’re looking for in the first place. “We see time and again where HR technology vendors show functionality that then becomes what the client believes it needs to have,” says Scott Bolman, a Mercer principal focused on HR service delivery. “Instead you should define your requirements up front and then go to the marketplace.”

Following are a number of other red flags for potentially poor decision-making, according to experts in the HR technology field.

Failing to Ask: Are We Ready?
CFOs should consider company culture and the appetite for change before making a purchase. If you purchase a human-resources technology system but can’t get managers and employees to use it, there may be a huge cost to the company, says Joy Krausert, CFO of Pinstripe, a recruitment-process outsource company that also gives clients vendor-agnostic advice on optimizing HR technology.

For example, some of the newer recruiting solutions are linked to social-media platforms. Depending on where a company resides on the spectrum of adopting social media, there may be resistance to such a platform. “You would be paying for an enhanced offering that people may be slow to adopt,” Krausert says.

Buying from a Vendor Inexperienced in Your Space
CFOs should ask themselves: Has the vendor worked in my industry? With companies of my size? Make sure the vendor can show you a track record of success with companies like yours, especially if you are in an industry with specialized hiring needs (like manufacturing, utilities or energy) or compliance requirements, counsels Krausert.

“They need to be able to speak the language of your employees in order to get full adoption,” she says. Seek references to customers that have gone through implementations in the past three to six months.

Leaving IT on the Bench
How much of a role should IT have? A large one, says Harry Osle, global HR practice leader for The Hackett Group. “Often HR thinks it can take on all this [HR technology] work alone,” he says. “I’ve seen very unsuccessful implementations at organizations that didn’t step back and consider how to partner with IT to understand the company’s overall technology strategy and how this new system will fit with that.”

Falling Victim to FUD
That’s fear, uncertainty and doubt – in particular, over data security. “Some vendors will tell you anything,” says HR technology evangelist Naomi Bloom, managing partner at Bloom & Wallace, clearly referring to vendors of the installed (“legacy”) HR systems. “Like, ‘Well you know, that [cloud] stuff is really dangerous, with your data floating where anybody could get at it.’ ”

Don’t take such claims at face value, Bloom says. Cloud-based HR software is often equally or more secure. Make sure IT does a thorough investigation of any system you’re seriously considering.

Getting a Case of RFP-itis
Bloom: “This is where a naïve, uneducated consumer, aided and abetted by a systems consulting firm, comes up with a 500-page request for proposal and sends it out to a big bunch of vendors, and they all say ‘Yep, we can do all that.’ They probably can’t.” Send fewer RFPs so that you can more thoroughly investigate a smaller number of vendors.

Deciding to Sit on the Sidelines
If you do not invest in HR technology, you will seep cost into the organization, says Hackett’s Osle. “You will instead create things like spreadsheets and Access databases, so you’ll have a multitude of manual inputs, with higher-paid people doing transactional work. You think you’re lowering costs by not investing in technology, but world-class organizations spend to drive down costs of labor, outsourcing and lack of process standardization.”

This is the third of five articles in a special report looking at the buying of HR technology from a CFO’s point of view. Also included are Why Upgrade Your HR Systems?; What Kind of HR Automation Do You Need?; HR Tech Vendors: Who’s Out There?; and Anatomy of a Buying Decision, one CFO’s journey to procurement success.