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Chapter 7: eHR—Trends in Delivery Methods

Overview

Hal G. Gueutal Cecilia M. Falbe

The delivery of HR services is undergoing the most significant change in the history of our field. Traditionally, we provided services to employees through personal contact and paper forms. For more forward-thinking firms, delivery may have included IVR (voice response) systems. That was yesterday. Today and tomorrow will be a very different world for HR professionals, managers, and employees. Virtually all large, and most medium-sized companies, now deliver at least some HR services via the Internet. On the positive side, managers will have much easier access to information and be able to more rapidly and efficiently manage their staffs. Employees benefit by being able to obtain information at times convenient to them, to manage their careers, and to maintain skill sets that help them stay marketable in an increasingly competitive job market. On the negative side, eHR technology can serve to isolate HR professionals, as employees interact primarily with a website rather than a human being. Indeed, one outcome of eHR could be a further alienation of employees from employers.

The advent of web-based self-service is transforming the practice of HR. For HR professionals, new skills such as knowledge and content management will become important. Many activities formerly handled by HR staffs are rapidly being transferred to employees and line managers. One impact of this trend is a dramatic reduction in the number of HR professionals required by organizations. Often the reduction in HR staff is on the order of 33 to 50 percent following implementation of self-service technology. Evidence of the commitment of corporations to eHR technology may be seen in a recent study by Towers Perrin, which reported that, even in a relatively weak economy, only 3 percent of firms surveyed planned to reduce spending on HR technology (Towers Perrin, 2002b). The same study reported that 80 percent of the HR executives surveyed felt that web technology could lower HR costs, although only 40 percent reported that they had observed such savings to date in their firm. Other research by the Aberdeen Group anticipated that spending on self-service applications would exceed $12 billion in 2003 (Authoria, Inc., 2003). Indeed, in 2003 spending on HR technology increased 27 percent over figures for 2002, according to the Cedar Group (Cedar, 2003).

eHR implementations range from simply using email to communicate with employees to sophisticated systems that personalize information for each employee. Examples of the latter might allow employees to complete a diagnostic skill assessment and tailor a training plan to their individual needs. New terms such as ―knowledge base,‖ ―employee self-service‖ (ESS), ―managerial self-service‖ (MSS), ―strategic application‖ (SA), and ―HR portal‖ have become part of our vocabulary. As of 2002, more than 70 percent of

larger organizations had implemented some form of employee self-service, and most of the ones who had not planned to do so (Cedar, 2002). Likewise, MSS is growing rapidly, as almost 80 percent of larger organizations either have implemented MSS or plan to in the near future (Cedar, 2002).

This chapter serves as a review of the literature regarding new delivery methods for HR products and services. It is intended to provide a primer on best practices in this emerging area. The first section reviews the terminology and techniques that enable eHR. Each major type of self-service application is reviewed, along with examples of how the technology is used to deliver services to employees. The next section reviews the business case for these systems. That is, what evidence is there that these expensive systems work? What return on investment (ROI) is expected—and achieved—with these systems? How cost-effective are they? Do users like them? The third section discusses best practices in implementing these systems and identifies common errors to avoid. The final section takes a look at key issues in the ongoing management of the HR portal.

Before beginning our review, it bears mention that much of the published research in this area comes from the practitioner literature and from vendor and consulting firms. Clearly, much of this research accentuates success stories and the positive aspects of this technology. This is not to suggest that the literature is intentionally biased, only that it must be viewed with a critical eye. Unfortunately, there is very little peer-reviewed literature in the area. This is surprising, given the scale of the potential impact of this technology on our profession. We hope academic researchers will come to better understand this technology and provide a more substantial research base in the future.

Terms and Technology

As with any new way of working, eHR has its own vocabulary. In this section we will review a few of the key terms and technological applications. Also discussed is how these technologies are changing HR practice.

HR Portals

HR portals provide a single site for employees to visit for HR services. These are sophisticated websites that are designed to communicate a range of HR information. More than a third (36 percent) of larger organizations participating in a recent survey reported they currently had a portal strategy, and this number is projected to double by 2006 (Cedar, 2003). Another study by Towers Perrin found that 42 percent of the organizations they surveyed had implemented a portal strategy by 2002. An additional 31 percent planned to move to a portal approach in 2003 (Towers Perrin, 2002a). HR portals range from very complex sites that include information personalized for each employee to basic sites that only provide static information or allow only simple data maintenance. More sophisticated portals allow the user to customize the portal to the individual preferences of the employee. For example, a customized portal might allow the user to show stock quotes or scroll a news ticker on a portion of the screen. The site

might also be tied into an instant message system with other workers. Portals typically offer the user a ―single sign-on‖ to simplify access to a variety of organizational resources. Increasingly, portals provide role-driven services to employees. That is, the services and information offered to the employee depend on their organizational ―role‖ or position. For example, regional managers may be given access to information about employees that is not available to first-line supervisors. Shown in Figure 7.1 is a sample portal for managers.

Figure 7.1: Managerial Self-Service Portal from PeopleSoft.

Copyright © 2004 PeopleSoft.

The portal can be an important tool for creating the employee brand. Employment brands give prospective employees an image or impression of what it would be like to work for the firm. While ―branding‖ has long been a part of the overall strategy for marketing products, it is a relatively new concept in HR. Companies with a positive employment brand image can have a significant advantage in attracting the best applicants.

Today the portal is often the first stop in the employment process. Indeed, the first impression of the company for a prospective employee may be formed by the HR website. A poorly designed website filled with static and uninteresting content can cause high-quality applicants to look elsewhere. An attractive portal can also serve to entice

applicants to apply and to collect résumés and data for initial screening. The portal has become HR’s front door.

HR portals are seen as an important tool for HR executives who wish to assume a more strategic role in the organization. Having a sophisticated portal allows the HR group to showcase its products and services. It puts HR in front of the employees on a frequent, sometimes daily, basis. On an organizational level, the portal demonstrates that HR is technologically sophisticated and in tune with the move toward e-business.

Today, the trend is toward greater consolidation of HR functions and independent sites into a unified portal. Too often, organizations find that a large number of uncoordinated sites have developed to serve specific HR needs. This can be bewildering for both employees and HR managers alike. For example, the benefits group might have sites dealing with health insurance, retirement, open enrollments, and flex-spending accounts. The training group might offer sites dealing with online course offerings and maintain a training history for employees. The payroll group might post W- 2 forms and pay stubs and handle sign-up for direct deposit. And the list continues. Consolidating sites into a portal offers the opportunity for significant cost savings and greater consistency in services to employees. A recent survey by Towers Perrin found that organizations delivering HR services via the Internet are quickly moving toward a unified site model. As of 2002, 58 percent of respondents in the Towers survey had ―very unified‖ HR portals.

Portals are really a collection of HR services found at a single convenient location. These services can be grouped into three general categories of applications: employee self-service, managerial self-service, and strategic applications. These major types of applications are discussed in the following sections.

Employee Self-Service

Employee self-service applications are the single most popular form of eHR. They are typically the first eHR self-service application that an organization mounts. Published research disagrees on the penetration of ESS applications in organizations. Estimates range from near 100 percent penetration (Towers Perrin, 2002a) to about 50 percent penetration (Cedar, 2003). The difference in these figures may be somewhat accounted for by varying definitions of what constitutes an ESS application. However, there is general agreement that the trend in implementing these systems is continuing at a rapid pace.

What is ESS used for? Here’s a partial list of the HR services that an employee may find on an ESS website.

 Input and edit personal information such as address, phone, emergency contact, and so on

 Model retirement options, varying key factors such as contribution rates and investment return

 Receive company communications and updates  Review and change allocation of new and existing retirement investments (may

be via a link to a vendor website; link may be transparent)  View a current or past paycheck  Change a W-4 form  Enroll in benefits programs, including flex-benefits, healthcare, childcare, and

cafeteria plans  Research various benefit options (for example, the site might link to various

HMO vendors and allow employees to compare plan costs and services and review the credentials of physicians associated with the plan)

 Select benefits where choices are allowed (cafeteria plans)  Enroll in training  View internal job postings based on selection criteria established by the

employee (for example, what jobs are available that meet these criteria: California location, electrical engineering, software engineering, managerial level 3, R&D division)

 Time entry, including recording time off  Review and plan individual development activities  Participate in 360-degree feedback programs  Receive customized information relevant at the individual or job level (for

example, at the individual level, workflow systems may route important ―paperwork‖ to the individual automatically; at the job level, the system may deliver similar ―paperwork‖ to all ―team leaders‖)

 Access HR policy manuals and use natural language interfaces to ask HR questions (for example, ―How many weeks of vacation do I get after four years of employment?‖)

 Complete employee surveys  View the skill requirements of jobs and compare those skill requirements with

the individual’s skill profile  Review personal performance appraisal records and schedules  Order services and purchase company or other products  Participate in training delivered via the web  Link to other sites (for example, some firms allow employees to customize their

ESS homepage with information from other sites, such as placing a stock ticker or his or her portfolio on the ESS homepage)

 Take diagnostic tests to identify training/development needs  Submit and track expense reports

Inspection of this list gives a feeling for the range of HR services that can now be delivered to, and managed by, employees. Such services have been enabled by the near universal access to the Internet. Published studies suggest that between 78 and 90 percent of workers have either Internet or intranet access (Cedar, 2002; Towers Perrin, 2002a).

As noted earlier, ESS applications are the most popular area of HR technology.

In North America as of 2003, the most popular ESS applications were those shown in Table 7.1.

Table 7.1: Percent of Organizations with ESS Applications in Use or Planned.

ESS Application In Use In Use in 2003* Planned*

Communications Information 79% 19%

Health and Welfare Benefits Management 57% 31%

Personal Data Management 50% 40%

Retirement Management 65% 11%

Time Management 38% 35%

Pay-Related Management 35% 46%

*Approximate percentages

Source: Cedar 2003 Human Resources Self-Service/Portal Survey.

Other research (Towers Perrin, 2002b) provides more information in terms of the specific applications commonly in use. These results are shown in Table 7.2.

Table 7.2: Percent of Organizations with Specific ESS Tasks in Use or Planned.

ESS Application Available in 2002

Planned for 2003

Planned for 2004

Total

View Job Posting 86% 7% 5% 98%

View HR Policies 83% 8% 9% 100%

Apply for Jobs (Internal) 71% 9% 8% 88%

Change Personal Data 52% 14% 23% 89%

View Pay Stub 43% 18% 21% 82%

Change Direct Deposit Information

32% 17% 19% 68%

The move to ESS is driven by a variety of factors, not the least of which are the substantial cost savings possible via ESS service delivery. While the business case and cost data will be discussed later in this chapter, a short discussion of the impact of ESS on HR practice is appropriate here.

Probably the greatest impact of ESS technology is to change the manner in which employees acquire information and interact with HR. Data is available to employees 24/7 and 365 days per year. Employees no longer have to wait until ―regular business hours‖ to access information and services. Employee convenience is enhanced, at least

for those with Internet access. On the downside, there is the risk that HR becomes more depersonalized and further isolated from our customers. In addition to changes in the manner of information acquisition, the nature of HR work is also changing. The Cedar 2002 Human Resources Self-Service/Portal Survey suggests a rather dramatic shift in the plans of organizations for delivering HR services. Today, the majority of HR services are still delivered by HR specialists, although for many HR service requests there are multiple information sources available to employees (for example, call center, IVR, ESS applications). However, a very different world is envisioned by senior HR executives. Investment is clearly slanted toward web-based applications, and few, if any, organizations plan to increase investment in HR specialists as a delivery method. Table 7.3 shows the results of the Cedar 2002 survey.

As can be seen from Table 7.3, executives do not plan to spend the time of HR specialists on many of the data retrieval and approval tasks that are common today. Also clear is the plan to rely more heavily on ESS systems and to reduce the use of call centers. These data alone demonstrate the potential impact the ESS and web technology have, and will have, on the HR field. For example, International Paper changed its ratio of HR staff to employees from 1:80 to 1:126 by implementing new eHR technology (Roberts, 2002b).

Table 7.3: Percent of Organizations Using Various Delivery Methods.

Type of HR Service Percent Using This Delivery Method Today

Percent Planning an Increase in Use of This Delivery Method

Simple Questions

HR Specialists 98% 0%

Web-Based Self-Service 65% 33%

Call Center 45% 11%

Simple Data Change

HR Specialists 80% < 5%

Web-Based Self-Service 55% 42%

Call Center 25% 10%

Approval-Based Change

HR Specialists 88% 8%

Web-Based Self-Service 25% 58%

Call Center 25% 8%

Note: Percentages are approximate.

Shown in Figure 7.2 is a sample ESS page from SAP. It illustrates many of the features that can be found on ESS systems today.

Figure 7.2: Employee Self-Service Portal from SAP.

Copyright © SAP AG.

Managerial Self-Service

Managerial self-service (MSS) is the second major application area that underlies eHR. MSS applications allow managers to access a range of information about their staffs and electronically process much of the HR ―paperwork‖ that typically flows through the hands of the manager. For example, a manager might go to her MSS website to complete a requisition to fill an open position. The system would post the opening on the internal job posting site and even filter the responses based on selection criteria specified by the manager (for example, sales experience).

MSS systems provide several benefits to the organization. Cost savings is the most obvious, as managers can more quickly and efficiently handle HR tasks, freeing time for other managerial work. SAP estimates that organizations can save approximately $500 per year per manager in managerial time through the use of MSS (Kuppe, 2003). MSS systems also have the potential to increase consistency in HR practice by managers, as processes and information are delivered in a similar fashion to all employees. This can reduce the potential for litigation based on inappropriate actions by managers. MSS systems can also assist managers by reducing the cycle time for HR actions. For

example, positions can be posted and filled in less time, thereby improving service to customers and enhancing the competitive position of the organization. HR managers also gain time by reducing the amount of coaching that line managers require, as they can get answers to HR questions, and increasingly advice, via the MSS website.

MSS systems typically go beyond HR management and often include tools to assist in budget review and reporting and mundane tasks such as expense reimbursements. MSS sites are often integrated into the ESS site relevant to the manager. That is, the web page delivered to the manager contains links that allow the manager to handle personal employee transactions (ESS), but also provides options for accomplishing managerial tasks. Often the specific managerial options delivered to the manager are based on his or her ―role‖ in the organization. Indeed, role-based ESS/MSS delivery is a best practice today.

MSS applications are not as prevalent as ESS applications. In 2002, somewhere between 30 and 45 percent of larger organizations had implemented some form of MSS (Cedar, 2002; SAP-AG, 2001). The most frequently implemented categories of MSS applications as of 2003 were budget management (42 percent), reporting applications (46 percent), and staff management applications (41 percent; Cedar, 2003). In terms of specific uses, the 2003 Service Delivery Report (SAP-AG, 2001) shown in Table 7.4 highlights the MSS applications in place or planned for the near future.

Table 7.4: Organizations with Various MSS Applications in Use or Planned.

MSS Application Available in 2002

Planned for 2003

Planned for 2004

Total

View Rèsumès 45% 11% 27% 83%

Merit Reviews 45% 5% 22% 72%

Job Requisitions 44% 11% 18% 73%

View Salary History 37% 12% 22% 71%

View Performance History 33% 10% 21% 64%

View Training History 33% 9% 21% 63%

Figure 7.3 shows a sample screen from the MSS website for SAP.

Figure 7.3: Managerial Self-Service Portal from SAP.

Copyright © SAP AG.

MSS implementations sometimes face resistance from managers who view the new technology as pushing ―HR work‖ onto managers. The perception can be that MSS applications are a way of unloading onerous HR paperwork on the line manager. While little research exists to speak to this issue, what has been published suggests that experience with these systems serves to mitigate these perceptions. Two studies suggest that most commonly (47 percent), managers see no change in their workload after implementing MSS, and in more than a third of the cases (39 percent), managers reported that their workload actually decreased after MSS introduction (Towers Perrin, 2002a; SAP-AG, 2001). Results related to the ROI for MSS applications are generally positive and will be discussed later in this chapter.

Strategic Applications

Strategic applications (SA) represent the third component of web-based eHR applications. In 2003, almost half (47 percent) of the organizations participating in the Cedar survey reported they were currently using SA technology, and another 28 percent planned to deploy this technology in 2004 (Cedar, 2003). SA include tools and services that serve groups external to the organization as well as serve strategic HR objectives. Examples of strategic applications include online application systems that are part of virtually all company websites. These applications often include marketing material designed to reinforce the HR brand and attract qualified applicants. The application may

collect applicant data, administer screening ―tests,‖ and send follow-up information to applicants. For example, Home Depot places kiosks in stores to screen job applicants. They report saving $4 per test administered and $135 per applicant in reduced administrative costs. Interestingly, they also found an 11 percent reduction in turnover among candidates screened through the kiosk application.

Another very popular area for strategic applications is in workforce development. For example, organizations have embraced various distance learning approaches to training. SA systems can assist users to identify personal training needs, enroll in training, monitor completion and user satisfaction with training, and update training history to assist the organization in compliance and intellectual capital management. Skills management is a growing area for eHR. Given today’s environment of fewer workers and greater competitive pressures, maintaining a clear picture of the skill sets of employees has become paramount. Employees with critical job skills and competencies can be quickly identified, allowing the organization to respond to opportunities in the market. SA can help identify individual and organizational level development needs and allow senior HR managers to target development dollars. This has become a more critical concern, as one of the best predictors of turnover among highly skilled professionals is a perceived lack of developmental opportunities.

Strategic applications were some of the first web-based HR services. As soon as organizations created company websites, options were added to allow interested applicants to learn about job opportunities and submit résumés or applications. This trend is continuing. In 2002, over 50 percent of the firms participating in the Cedar HR Self Service/Portal Survey reported using web-based technology to attract talent, and another 34 percent planned to implement this technology in the future. Talent development and related applications still lag behind other areas of web-based HR, with only about 20 percent of participants in the Cedar survey reporting the current use of such systems. However, almost a third of the remaining organizations plan to implement these applications in the future. Strategic applications are now the fastest growing eHR application area.

Knowledge Bases

Knowledge bases provide the core content for MSS and ESS applications. That is, when an employee submits a question to the system, the answer comes from the knowledge base. For example, if an employee wants to know the organization’s policy on banking sick days, the system will access the knowledge base to provide a response. The knowledge base in many ways contains the information that formerly resided in policy manuals, and more interestingly, in the heads of the HR staff. Cedar reports that more than 70 percent of the firms they surveyed either currently use a knowledge base or plan to use a knowledge base to support their web-based applications.

Knowledge bases have several advantages for organizations. First, developing or customizing a knowledge base can be a diagnostic activity for HR. That is, often the existing HR ―knowledge base‖ exists in many locations, ranging from policy manuals to

individual experts and the undocumented local practices of individual units. When a self- service application is implemented, these multiple sources of HR information must be unified and reconciled. The process of establishing this database can help identify inefficiencies and inconsistencies in HR processes. While this task can seem overwhelming, several vendors now supply ―best practices‖ knowledge bases as part of the ERP system. These ―best practice‖ applications can serve as the starting point for a customized, company-specific knowledge base. The process of developing the new knowledge base can drive the kind of HR transformation sought by senior management.

The term ―knowledge base‖ is a generic term and may refer to a variety of different types of software. These range from very sophisticated vendor-supplied databases employing artificial intelligence to home-grown collections of relevant documents. Variations include call center support tools that customer service representatives use to respond to employee questions and lists of frequently asked questions available online. In ESS and MSS systems, the knowledge base is the engine that drives the application. Most systems employ standard web navigation techniques to allow users to access information. For example, a link might provide information about the dental plan in which the employee is currently enrolled. More sophisticated systems allow employees to input questions in text statements (for example, What dental plan am I enrolled in?). Rather than the employee having to call an HR representative, the system is able to ―answer‖ the question. Knowledge bases also can help to avoid ―answer shopping‖ by employees—that is, making multiple calls to a service center or HR representative in order to find an answer the employee likes. With a knowledge base, there is one consistent answer. Support for this approach can be found in the 2003 Cedar Survey, which reports that 65 percent of organizations ―planned to use a structured repository of HR-oriented knowledge.‖

Several vendors provide ―standard‖ knowledge bases of HR rules and practices customized for a particular country (for example, the United States, the UK, and Canada). Typically the organization has to engage in some degree of customization to reflect the specific HR policies of the company. Often, specific knowledge bases are included to support specific applications. For example, open enrollment might be supported by a benefits knowledge base with information on healthcare options, while a manager inquiring about hiring processes might be supported by a general HR knowledge base. Vendor-supplied knowledge bases are used by approximately 43 percent of organizations (Cedar, 2003). Indeed, knowledge base vendors and knowledge base services are one of the fastest growing segments of the eHR market.

The Business Case and Cost-Effectiveness

The Business Case

eHR technology represents a significant investment for organizations. Today, approximately 70 percent of organizations in North America require a business case be

made for funding eHR systems (Cedar, 2002; PeopleSoft, 2002). This makes the question of ROI critical in making the business case for eHR systems. The starting point for this discussion is to examine the objectives that organizations set for such systems. Several studies have examined this issue. For example, PeopleSoft found that 75 percent of their users cited all five of the following objectives for their systems (PeopleSoft, 2002):

 To enable HR to be more strategic  To improve service  To reduce administrative costs  To streamline services by reducing process steps, approvals  To increase employee satisfaction

Similar results were reported by the Cedar group in their survey work (Cedar, 2002). Table 7.5 shows these findings.

Table 7.5: Rationale for Implementing eHR Technology.

eHR Objective Endorsing Percentage Endorsing Objective

Reduce administrative costs 98%

Improve service to employees and managers 98%

Increase information access 97%

Eliminate process steps/approval/forms 93%

Enable manager access for improved decision making 86%

Enable the HR function to serve more strategically 79%

In addition to the objectives cited in the PeopleSoft and Cedar surveys, another important rationale for new systems is the need to integrate multiple disparate systems. Most organizations have had various portions of their HR services automated to some extent. This may include applicant tracking systems, early HR applications, training databases, and multiple HR systems from different vendors in different divisions. Often this has occurred through mergers, acquisitions, and decentralized approaches to HR management. For example, Seagate Technology implemented a new self-service approach to HR delivery in part because of the need to consolidate seventeen different HR management systems (Roberts, 2002a). General Motors consolidated some eighty- five separate websites containing various types of HR information into a single HR portal (Jossi, 2001). In some ways, having multiple systems can help make the case for new integrated systems. Often the financial, as well as managerial, cost of duplicated and incompatible systems far outweighs the cost of the new system. Vendors now often provide tools and templates to assist potential clients in making the case for new technology. Users should expect vendors to assist them in preparing the business case.

ROI Evidence

Over the past several years, a growing body of reports has surfaced that speaks to the ROI and cost-effectiveness of eHR technology. In this section we will review much of this research, but a word of caution is in order. Most of this research was conducted either by software vendors and/or consulting firms that implement these systems. Thus it is likely that there is a ―bias‖ toward reporting the successes and not the failures—and there are failures. However, these reports do provide data on what can be achieved in terms of various measures of effectiveness.

Return on investment is the foundation of any business case. It has become an article of faith that HR technology reduces cost. Towers Perrin found that 80 percent of HR executives believed self-service technology could lower costs, but only 40 percent of those surveyed found that the promise had been realized (Towers Perrin, 2002a). In general, the typical payback period today is about thirty-six months, although there are examples of shorter as well as longer payback periods. The trend is toward longer payback periods. Over the last three years, the average payback period has grown from twelve months in 2000 to twenty-two months in 2003 (Cedar, 2002; Cedar, 2003). This is due in large part to the increase in sophistication of today’s applications and user demand for systems to offer a broader range of services. It is very common for organizations that implement a ―basic‖ ESS system with limited functionality to quickly be faced with users demanding more features. Remember, the comparison standard for users is not the old paper-based system, but rather the best of breed commercial websites such as Amazon or Yahoo. Vendors have responded to this trend and offer much greater functionality in ―basic‖ applications when compared with offerings of a few years ago. As a result, payback periods are growing.

There is an increasing number of success stories. In terms of ROI and related success measures, several criteria can be considered. These include the payback period, cost savings, efficiency increases, and user satisfaction. A variety of case studies as well as survey data are available. The 2003 Cedar Survey provides data on a variety of ROI indicators. Table 7.6 presents these results.

Inspection of Table 7.6 suggests that new systems can have a significant impact on the organization. Probably the most striking finding was the reduction in inquiries to the service center. If these findings generalize to most organizations, we can expect call centers to decrease in popularity as an HR delivery method. Today, almost 50 percent of larger companies use call centers as a delivery method. Call centers allow HR expertise to be concentrated and shared throughout the organization. Until the advent of web-based applications, call centers were viewed as the most efficient method of delivering HR information to managers and employees. Today, however, new technology is rapidly changing the role of call centers, as the simple employee questions are answered by websites supported by knowledge bases. In the 2002 HR Service Delivery Survey Report, Towers Perrin highlighted some of these changes. They noted that almost a third of respondents report fewer inquiries to the call center

after implementing ESS, but that the calls received were more complex. They also reported that the call center now had to handle questions about the ESS website.

Table 7.6: Cedar 2003 Survey ROI Results.

Success Metric Result

Cost Per Transaction Average 43% reduction

Cycle Time Average 62% reduction

Headcount Changes Average 37% reduction

Return on Investment Average 40% reduction

Payback Period Average 1.8 years

Employee Satisfaction Up to 50% improvement

Inquiries to the Service Center Average 50% reduction

Usage Up to 100% increase

Similar ROI results have also been reported by major vendors. PeopleSoft commissioned a survey of users of PeopleSoft 8. Based on a sample of sixty-eight users, the ROI period ranged from 1.5 to 3 years, with an average of a 33 percent reduction in HR administrative costs. Likewise, SAP provides case study evidence of the value of these systems (SAP-AG, 2003). As noted earlier, SAP argues that MSS applications can save organizations $500 per manager per year in managerial time (Kuppe, 2003).

Cost and Cost-Effectiveness

How much do these systems cost? How cost-effective are they? How do the costs break down? As with most systems, eHR systems tend to cost more than originally budgeted (Cedar, 2002). With that in mind, let’s review the cost data. Overall, organizations spend an average of $1,300,000 annually to administer and maintain an HR portal/self-service application (Cedar, 2002), with actual cost running about 15 percent ahead of budget. As would be expected, budgets vary with organizational size. Smaller organizations (under 1,000 employees) budgeted an average of $337,000, while medium-sized organizations (5,000 to 10,000 employees) budgeted $751,923. The largest organizations (more than 50,000 employees) budgeted approximately $2,000,000. These numbers represent the ongoing cost of the systems. Initial costs for system purchase and implementation also vary widely depending on a variety of factors, including the existing hardware and software infrastructure, sophistication of application chosen, degree of integration with other IT systems, and hosting choice (in-house, vendor, ASP). Implementation often runs approximately 150 percent of the cost of the software. On the individual employee level, costs drop rapidly with economies of scale. For example, the cost for small organizations is quite high (around $2,400 per employee) and is as low as $35 per employee for the largest organizations.

Specific examples as well as cross-organizational summaries of cost savings support the cost-effectiveness of self-service applications. Typically, comparisons are made with traditional HR personal contact, IVR, and call centers. Authoria, a vendor of knowledge bases used to support self-service applications, reports that answering an employee inquiry via a call center costs between $5 and $30, while an IVR answer costs between $0.10 and $0.50, and a web-based self-service response is approximately $0.05 (Authoria, Inc., 2003). General Motors reports similar findings. For GM, calls to the employee service center cost between $1.50 and $2.00 per minute, while a web-based response was less than $0.05 per minute. Other research suggests that the cost of providing HR services to employees using traditional methods ranges from $1,000 to $2,000 per year, but that self-service applications can cut that cost anywhere from 20 to 66 percent (Bartholomew, 2002; Sorenson, 2002). PeopleSoft reports that a survey of its customers showed a 33 percent reduction in costs and a 20 percent reduction in HR headcount after implementing PeopleSoft 8 (Harlty & Matin, 2002).

Case studies and anecdotal evidence showcasing the success of self-service implementations are common in the literature. For example, shown in Table 7.7 is a summary of the experience of one organization.

American Airlines saved $3 million per year by offering employees just two self-service applications (Roberts, 2003). These were employee travel reservations and open benefits enrollment. Microsoft saves over $1 million per year with ESS applications that allow employees to handle a variety of payroll tasks, such as viewing pay stubs and changing W-4 forms (Mecham, 2001). PeopleSoft provides case studies of several organizations in the financial services and insurance sector. These case studies show the impact of self-service in terms of cost, reductions in cycle time, employee time savings, and a variety of other factors. The results show consistent improvement on all criteria (PeopleSoft, 2002). Likewise, SAP provides an in-depth look at the experience of a Canadian utility. The utility, TransAlta, reported a payback period of 4.9 years and a ten-year cost savings of $31 million.

Table 7.7: Sample Cost Savings Using ESS Delivery.

Task Manual Cost ESS Cost Percentage Saved

View Benefit Profile $6.00 $0.50 92%

Access Policy Handbook $4.00 $1.00 75%

Change Home Address $10.00 $2.00 80%

Provide Current 401(k) Statement

$50.00 $0.60 99%

View Paycheck $3.00 $0.50 83%

Post Job $8.00 $0.50 94%

View Skill Profile $1.50 $0.50 67%

Table 7.7: Sample Cost Savings Using ESS Delivery.

Task Manual Cost ESS Cost Percentage Saved

Employee Change Action $12.00 $4.00 67%

Source: The Cedar Group, 1999 Human Resources Self-Service Survey.

User Satisfaction

Most of the publicly available data suggests that employees, managers, and organizations are generally satisfied with their self-service implementations. Again, we are more likely to hear about the successes than the failures, but there does appear to be convergence in much of the published information. The Cedar 2002 Human Resources Self-Service/Portal Survey suggests that success rates are quite high overall, although ESS applications seem to be a bit more successful than MSS applications. Table 7.8 summarizes these results.

Table 7.8: Success Rates for Self-Service Applications.

Application Type Less Than Successful

Somewhat Successful

Successful

Employee Self- Service

6% 41% 54%

Managerial Self- Service

14% 41% 45%

Another look at system success is provided by Towers Perrin in its 2003 Service Delivery Survey Report. Survey participants were asked whether their employee self- service applications improved service in three key areas: timeliness, accuracy, and HR workload. Positive results were found on all three criteria. Increased timeliness was reported by 80 percent of organizations, while 74 percent reported improved data accuracy and 60 percent reported a reduction in HR workload. Of those who did report a reduction in HR workload, more than half reported at least a 30 percent reduction.

On the negative side, many users (44 percent) still report that information is difficult to find, given the amount and complexity of information available (Towers Perrin, 2002a). The data with regard to actual reduction in HR workload is also mixed. One of the promises of self-service is that routine transactions will occur without HR intervention, thereby reducing the workload on HR staffs. While several studies cite reductions in HR workload, the data are inconsistent. For example, Towers Perrin reports that HR staffs are still involved in many HR transactions, even after implementing managerial self- service applications. Their survey results are summarized in Table 7.9.

Table 7.9: HR Involvement Post-MSS Implementation.

Transaction Review Only Involved Only for Exceptions

Approve All Transactions

Change Unpaid Leave Status 14% 38% 49%

Transfer Employee 13% 33% 53%

Change Work Status 12% 35% 54%

Organizations must also keep in mind that self-service applications cannot handle all HR transactions. Systems are great for retrieving data and answering relatively simple questions; however, they cannot counsel employees and handle emotionally laden issues such as discrimination, serious health problems, or substance abuse problems. Indeed, many organizations run a serious risk in trying to divest too much to a website and knowledge base. Strategically, HR cannot afford to ―outsource‖ too much HR support to self-service applications and risk losing internal HR capability. The objective of self-service is, after all, to improve service to employees, not to make the employer seem uncaring and impersonal.

Best Practices in Implementing Self-Service Applications and Common Errors

The biggest challenge faced by organizations moving to self-service is in implementing the new system and changing the HR culture of the organization. Whether it is a complete portal solution or basic ESS application, the new system represents an entirely new way of delivering services to employees. It will change HR roles, skill requirements for HR staff members, HR processes, and the perception of HR within the organization. A successful implementation is the first litmus test in transforming HR. Fortunately, given the widespread growth of self-service applications, we now have a good handle on what makes a project successful. Let’s look at the experience of organizations that have implemented these systems.

General Trends

In order to expand on the published literature in researching this chapter, several senior executives were interviewed by the authors. These interviews included senior consultants at specialized implementation firms as well as executives at firms currently implementing large-scale eHR systems. These individuals identified a number of factors that facilitate eHR implementation.

The first factor relates to the key skills needed both by implementation consultants and by employees of the organization. These include listening skills and problem-solving ability. For the implementation partner, this means developing more than technical skills in the staff. Time and again, we heard that consultants who are skilled at listening to the

needs of organizations and who approach implementation as a problem-solving process are most successful. Employees of the client firm need the same types of skills, not only to work effectively with the implementation partner, but also to be effective working with others in the organization impacted by the new system. Knowledge of the system and technical skills are commodities in today’s market. Now it is equally important to understand the culture or personality of the organization and to be ready to adapt the system to the organization. In the past, expert consultants provided ―the answer‖ to clients. Today, however, consultants must also be familiar with the organization and the client’s business in order to be effective.

The second major factor impacting implementation success is the long-term commitment of sufficient financial resources and human capital to the process. One good practice is to develop realistic timelines from both vendors and organizations. Frequently, timelines are underestimated in an attempt to ―control costs.‖ Implementation always takes longer than anticipated. This occurs for a variety of reasons, including changes to the system specification, data quality issues, software changes, and the need for more customization than anticipated. Organizations need to be realistic about the time commitment that will be required of their employees. All too often, employees are asked to do double duty, adding implementation responsibilities to their already demanding jobs. The result is turnover, poorer service to employees, and invariably, implementation delays. In the short term, unrealistic timelines and fewer dedicated employees may appear to reduce costs, but in the long term this approach increases costs significantly. Our expert panel recommended adding at least 33 percent to initial time and cost estimates!

Several additional factors emerged from our discussions. These include the importance of promoting the vision of eHR and the need to convince people of the strategic implications of the new systems. Support from key decision makers in the organization is a critical success factor. One executive noted that lack of such support resulted in the rollout of a system with minimal functionality and resulted in a corresponding decrease in the contribution of eHR to achieving the company’s strategic goals. The complexity and difficulty of implementing systems for global applications was also mentioned as a concern. Finally, it is clear to those interviewed that a successful implementation must include plans for maintenance and future upgrading of the system. This involves support for continuing cycles of learning and improvement, as well as developing robust systems to measure the contribution of eHR for achieving strategic goals.

The themes noted above are also consistent with published research. To identify common barriers to successful implementation, Cedar (2002) asked organizations to rate the severity of each of the following barriers to a successful implementation. A three-point scale was used, ranging from 1 = low severity to 3 = high severity. The results were as follows:

Cost of ownership/limited budget 2.1

Other HR initiatives take precedence 1.6

Security/privacy concerns 1.4

Technical infrastructure not in place 1.4

HRMS or other key application not in place 1.2

Unavailability of technical skills 1.0

Best Practices in Implementation

Budget Is Always the Number One Issue

Implementation costs are often difficult to forecast, and systems invariably cost more than anticipated. There are several reasons for this finding. Cost can increase as organizations begin to realize the amount of change that self-service involves. HR processes often need to be reexamined and redesigned. Upon close inspection, data in existing systems often prove unreliable or incomplete. The amount of customization required is usually more than planned. The hardware infrastructure may not be so strong as originally believed. Indeed, implementation costs often run 150 percent of the cost of the software, and costs often run about 15 percent over budget. It is important to be realistic in the budget estimates and to make sure the business case is strong enough so that, if costs are more than anticipated, the firm can still show a reasonable ROI.

Support from Senior Management

Senior management is a broad term and applies to those within and outside of HR. Clearly, it is critical to maintain support of top management, especially given competing demands for resources. For this group, ROI measures are likely the most critical. However, the greatest impact of the new system will likely be on the staffs of senior HR managers. For example, a benefits manager may lose significant staff with the advent of an open enrollment application and may resist the new system. Thus, as noted above, it is critical to maintain the support of key managers at all levels throughout the implementation process. Remember, the longer the implementation time, the greater the chance that senior management will change and new executives will need to be convinced of the value of the project.

Importance of Change Management

It is easy to underestimate the importance, time, and cost associated with the change management aspects of the implementation effort. Remember, a move to self-service will have dramatic effects on the HR staff and more limited impact on all employees. MSS will change the job of managers and their relationship with HR. A clearly

articulated change management strategy including a communication plan and specific responsibilities for change management activities should be part of the implementation plan. Cedar found that change management costs averaged 12 percent of total implementation costs, and that this component was projected to increase in the future (Cedar, 2001). By 2003, the investment in change management as part of the implementation process had increased by 150 percent compared with 2002 (Cedar, 2003). It is critical to communicate to employees that the new system is not an effort to push HR work onto employees, but rather to give employees more control over their information and make access to HR information more convenient to them. The importance of frequent communication with all stakeholders is a very common theme in the published literature.

Cooperation Between HR and IT

A strong working relationship with IT is critical for a successful implementation. eHR systems clearly cut across traditional boundaries in the organization. In general, it is a good idea to have a degree of IT expertise in the HR function to serve a communication role between HR and IT. Also, it is critical to fully understand where the self-service application fits into IT’s priorities. Issues of control and ownership should be addressed up-front and monitored throughout the implementation process.

Use an Implementation Partner

The road to eHR success is littered with companies that failed in their implementation efforts. A very common reason for implementation failure is the lack of internal expertise and capacity to put a very sophisticated system in place. Few organizations have successfully implemented eHR systems by relying solely on in-house resources. Internal staff still have day-to-day responsibilities, and few organizations have the slack to support a major systems implementation without external assistance. Implementation vendors offer the technical skills, but in addition can assist with the critical change management aspects of an implementation. Organizations are twice as likely to use an outside vendor to assist with implementation as to rely solely on internal resources (Cedar, 2003).

Best Practices in System Design

Clearly Identify the Vision for the System

Why are we implementing self-service? How will we judge its success? Where do we want to be in three years? Asking these questions early can help to guide the implementation process and focus the HR transformation roadmap.

Metrics Are Important

A variety of indices can be used to evaluate the system. It is important to identify the metrics that will be used to judge system success early in the process. Common metrics include:

 Reductions in cycle time  Headcount savings  User satisfaction  Process improvement in terms of reduction in steps  Reductions in calls to HR or the call center  Website hits  Utilization of web-based training  Cost savings per transaction  Increase in interest by applicants (for recruiting-oriented websites)

Reduce the Number of Points of Contact for Employees

This practice typically translates to actions such as unifying websites into a single portal, replacing onsite HR staff dedicated to transactions with web applications, and focusing the call center on the more complex questions that cannot be adequately addressed by the website.

Knowledge Bases Are Becoming a Key Component of the System

Knowledge bases provide the majority of the content for the site. They codify HR processes and are critical for both operational and legal reasons. In general, organizations should consider purchase of a vendor-supplied solution as a starting point for their knowledge base. Such systems can provide a good beginning, as they will contain the HR information that is common across organizations. For example, the legal requirements of the Family and Medical Leave Act are common across organizations. However, users should anticipate the need for some degree of modification to reflect the organization’s HR practices. How does your organization operationalize the FMLA? Who must be notified of a pending leave and what evidence does your organization require? How do sick and vacation time fit in?

When evaluating knowledge bases, consider the quality of the search function associated with the product. How effective is it at interpreting questions? How robust is the system in understanding the context of the questions and tailoring answers? How ―smart‖ is the knowledge base? How often is it updated? Will the vendor be responsible for any litigation that arises from errors in the information provided to employees?

Plain Vanilla Is the Goal for the First Generation of the Self-Service Application

Many vendor systems supply their version of self-service ―best practices,‖ often customized for specific industries. Try to do the least customization possible. Require a

strong justification for any customization. Customization increases costs dramatically, both immediately and down the road, as upgrades must also be customized. Remember, too, that this approach means buying into the vendor’s view of HR and will likely mean a greater degree of change in your HR practices than originally anticipated.

User Demand Will Increase

Design the system both for the initial implementation and the follow-on services that employees will invariably demand. Employees will quickly request more services on the web, and the organization will need to add new functionality to meet that demand. Remember, new services typically mean greater employee convenience, more efficiency, and increased cost-effectiveness. The best-case scenario for self-service is a growing demand for services. For example, General Motors now receives between fifteen and twenty million hits per month on its HR portal, one year after its introduction. They implement a new release of the portal every six months in order to keep up with the demand for new and expanded employee services.

Consider the Content

What type of information will be most beneficial to the end user? What will hook them in and make them want to use the system? Aon Consulting suggests that portal content can be divided into five categories and has identified the content that might be associated with each area. Their view provides a useful way to look at HR web content (Folan & Mitchell, 2003). The Aon model is shown below, along with sample types of content for each category.

1. Safety and Security

 Building safety procedures and updates  Security alerts  Leadership communications and company information  Personal financial tools for planning and risk-management

2. Rewards

 Benefit plan information  Links to retirement plans, stock purchase plans, saving plans  Reward or bonus statements  Reports recognizing outstanding employee performance

3. Affiliation

 Notices of corporate events  Communications about company success  Chat rooms for employees in similar positions

4. Growth

 Postings of job openings and online applications  Online training courses  Career progression information and advice

5. Work/Life Harmony

 Information on daycare or family care options  Stock and investment links and information  Wellness and healthcare links  Convenience links to products and services

Ease of Use Is Critical

User acceptance, whether it is in the form of ESS or MSS applications, is critical to long-term success. The web interface must be designed for ease of navigation and reflect best practices in website design. Users will compare your website to others with which they are familiar. If information is difficult to find or navigation is confusing, users will have negative early experiences and be less likely to go to the system for their HR services.

Initial Services Should Be Those That Users Access Often

Early experience with the ESS or MSS system will determine later success and use. Target the services that users will access most frequently for initial implementation. This will help them get used to going to the system for their HR services and make the transition to the self-reliant employee more successful. For example, American Airlines’ initial self-service included employee travel reservations, a very important benefit to their employees. They termed this a ―sticky‖ application, which helped employees get used to going to the web for employee services (Roberts, 2003). One firm related that their MSS site was less successful, partially because users did not have a need to use the site often. This resulted in low visibility for the site, poor user satisfaction, and a poor ROI for the investment.

Personalize the Content

Information is more valuable if it is customized to the user. Think about the last time you visited Amazon.com and how book selections there were tailored to your interests. eHR systems can function in much the same way by giving users targeted information based on their position, work history, and interests. Personalized content will increase use and positive regard for the system. Remember, organizations only save money when employees use the system.

Consider Security

Security is always an issue on the Internet, especially when personal information about employees is involved. Today, the trend is toward ―single sign-on‖ systems that streamline access and provide a reasonable level of security. Consider also encryption protocols and do the maximum to protect the portal from hackers and other threats to the system.

Promote Collaboration

One of the principle objectives of most systems is to facilitate communication. Today, this may include instant messaging, chat rooms, bulletin boards, and calendaring programs. Design the portal to make it easy to contact others in the organization and to share information. Something as simple as building a phone/email directory into the website can have a large payoff.

Key Issues in Managing the HR Portal

Managing Content

A number of issues have been identified as important in the ongoing management of the website. Presented here are the top three. The toughest challenge is the management of portal content. Websites are valued by users for their content; thus, content management becomes a central concern for HR. This is a relatively new role for HR. We never really managed content before. Content resided primarily in the HR staff and was not systematically collected or ―audited.‖ We typically had numerous ―knowledge bases‖ walking around the office. With a portal, we need to systematize this information and monitor it for accuracy and currency. This creates the need for new policies and procedures. For example, who ―owns‖ various parts of the website? Who can change the information? Who is responsible for monitoring the environment for changes such as new policy, legislations, news items? How do we ensure the information is relevant and easy to locate? How do we manage the dynamic portion of our content? That is, portals often draw content from other sites, such as from health plan vendors. How do we ensure that the information being supplied to employees is accurate? What if an employee makes a decision based on information from an ESS that is wrong? Clearly, content management is probably the biggest challenge to the ongoing maintenance of the portal. Part of the design process should be explicit development of policy and procedure for content management.

Managing Employee Expectations

The second greatest challenge is managing employee expectations. That is, once employees become used to accessing the portal for HR services, they will expect to be able to conduct more and more of their personal HR business via the website. Remember, your HR website is being compared with commercial sites for utility, convenience, and ease of use. Expect the demand for new functionality to increase

each year. This is especially true in the early years, as there is a range of services that can be added to the website. From a managerial point of view, this means a continual implementation process. Collection of various metrics to document the success of the system becomes important to ensure that the case for continued funding can be made.

Managing the Impact on the HR Function

The third challenge is managing the impact on the HR function. As mentioned previously, self-service offers the potential for significant reductions in HR staff. This is clearly threatening to staff members and can cause resistance. While it is comforting to suggest that HR staff will be reassigned to more strategic or value-added roles, the reality is that an HR portal can reduce the need for HR staff by 30 to 50 percent. The reductions fall most heavily on lower-level members of the HR staff, who previously spent most of their time in transaction processing and responding to employee questions. To most employees, these individuals are ―HR.‖ Often these staff members are fairly specialized, are the walking knowledge bases of the HR group, and are difficult to move into new roles. In order to be successful, the new system will have to incorporate their expertise and knowledge. Given that these individuals are most at risk in a future HR restructuring, it is often difficult to gain their support. Part of the implementation plan should consider how the impact on these individuals can be mitigated (for example, retraining, early retirement, and other means).

Call center employees are also likely to be heavily impacted as routine questions and transactions are handled via the web. The nature of call center work will increase in sophistication, and the level of knowledge demanded from call center workers will in crease dramatically. Call center specialists will handle the exceptions to HR policy and complicated issues, and therefore will require more training and education and have a greater decision-making role in interpreting HR policy.

New skills are also likely to be required to manage the portal. New roles such as ―Super Content Masters‖ (SCMs) will evolve to support web applications (Gueutal, 2003). These individuals will be responsible for content maintenance of the website and the knowledge base that supports the website and call center. They will be highly qualified experts in specific HR content areas. SCMs will work with knowledge base vendors to tailor ―generic‖ knowledge bases to the culture and values of the organization. They will be the ―last resort‖ for expertise within the HR organization.

―Organizational Effectiveness Generalists‖ (OEGs) will be the second major group of HR professionals. These individuals will be responsible for many of the traditional HR roles in fostering employee motivation, team building, and group effectiveness. They will be the onsite professionals working to implement and maintain HR policies and improve employee effectiveness. This suggests that OEG professionals will need to develop skill sets relevant to this new role. These include skills in team building and coaching, mentoring, individual training, change management, general business, project management, and program implementation. For employees, OEGs will be the new face of HR.

Senior HR managers must consider and plan for the impact of self-service applications on the HR staff. This challenge is made more difficult by the fact that the support of the HR staff is critical for a successful implementation. This may include the need to evaluate the currency of the skill sets of staff members, identify training needs for newly required skill sets and roles, and determine specific employees to target for long-term retention. Those unlikely to remain must be given a reason to participate fully in the implementation.

Conclusion

The delivery of HR information and services is undergoing a radical change. It is easy to underestimate the impact of the technology on our field. For years, we heard about the way information systems would change HR, but we saw little real change. With the advent of the web, many of the promises of technology can be delivered. We are now free of much of the day-to-day transaction processing that used to consume us. Systems can handle most of the routine questions. The challenge today is to make the transformation from a support role for HR to that of a true business partner. It is a time of opportunity for those willing to work in new ways, and a time of risk for those mired in the past.

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