A few years ago, employee relationship management (ERM) applications were touted as the next big thing. The whole area was pushed as the last great corporate bastion in need of automation and was seen as a logical extension to enterprise resource planning, customer, supplier and even partnership relationship management. But since then all the hype seems to have gone very quiet.
Is it all over before it even began or is there life in ERM yet?
According to Jim Holincheck, a research director at Gartner, ERM is not so much dead as still in the early stages of development.
"There was a lot of hype a couple of years ago, but the vendors weren't necessarily able to deliver. ERM is broader than just products and the products weren't ready to support the concept. The depth and breadth just wasn't there, so the market did the right thing and went quiet to get the products ready," he says.
Nonetheless, Holincheck believes the ideas behind ERM are sound and improved product functionality now makes it a feasible choice. As a result, he expects to see a resurgence over the next couple of years, although the technology is unlikely to appear under the ERM moniker. "Once a term has been used and abused, you can't necessarily go back," Holincheck points out.
Gartner, for one, prefers the expression 'human capital management' (HCM) and is not alone in this, although workforce management also seems to be gaining currency.
Getting relationships right
"It takes more than technology and services to make up ERM and it's the relationship element that is key here. When we talk about the technology, however, we refer to business-to-employee (B2E) as being both a subset and a superset of human capital management," Holincheck explains.
It is a subset because it includes specific components of HCM - such as employee and manager self-service, recruitment and compensation - but it is also a superset because some packages tackle things outside of the standard workplace environment such as concierge services.
HCM, on the other hand, also includes administrative functions such as payroll, benefits and pensions. Taken as a whole, this covers the entire employee lifecycle from recruitment to deployment to development and retention, until a part-icular staff member leaves the company.
Wider appeal ERM is broader in remit and according to Dave Cottam, a director at consultancy, Partners for Change, is "the internal equivalent of customer relationship management" (CRM).
In his opinion, it is about managing the 'psychological contract' between staff, management and the organisation rather than just "managing the nuts and bolts of employee relations".
The key aims here are to improve motivation and retention levels as a means of improving business performance and as such, Cottam believes ERM is becoming an increasingly important concept to get to grips with.
What workers want
Moreover, there has been a cultural shift in what employees want for themselves and what type of organisation they are happy to work in and show loyalty to.
"People are increasingly unwilling to be managed as a herd, which reflects changes in society, but ERM gives businesses the possibility of managing staff as individuals," he says.
But this does not mean to say the market has hit anything like the mass adoption stage as yet, indicates Holincheck.
As ever, some of the larger corporates, particularly in the financial and professional services space, have become early takers, but their efforts to date have been more piecemeal than enterprise-wide in nature.
The most popular components so far have proved to be things like performance and compensation management, recruitment, training and concierge services, with the focus being mainly on implementing point products rather than application suites.
On the up"The economy has been difficult and applications spending is down, which points to smaller projects and solutions. But the economy is picking up a bit this year, with real money being allocated to budgets, although spending increases haven't been huge. If this continues into 2005, there might be a better outlook for bigger projects," Holincheck says.
In fact, he predicts that 2005 to 2006 will see "the emergence of the suite concept".
Traditional enterprise resource planning (ERP) vendors such as SAP, and CRM suppliers such as Siebel, will play an important role here by "virtue of their customer base, although they won't make up the whole market", he says.
While both the HCM and B2E markets are currently splintered into clearly defined subsectors each with their own multifarious vendors, they are starting to consolidate as suppliers attempt to broaden out their product offerings.
Such immaturity, however, means no clear leaders have emerged overall as yet, although SAP and PeopleSoft currently dominate the administrative HR side of things.
Things are equally patchy in product maturity, with areas such as employee self-service having a strong history going back to the early 1990s and others such as performance and compensation management being much more recent arrivals.
"As a result of all this, CIOs have to be wary of the vendors they choose to go with and ensure that they manage the risks", says Holincheck.
But despite such risks, warns Paul Hamerman, vice president of enterprise applications for Forrester Research, HCM software is not cheap, with large implementations costing similar amounts to equivalent CRM or ERP projects and often having a three to five year payback period.
There are also cultural challenges to such initiatives, not least because these systems touch every member of staff and management and can generate resistance if change is not handled properly.
This is particularly true if users feel the new applications are simply adding to their workload and do not provide any personal benefits.
But the situation is also not helped by the poor usability of many packages. Despite what the vendors say, most staff need training to use them properly and IT is likely to at least have to tweak the user interface to make it more acceptable.
To make this already tricky scenario worse, HCM projects can also be bedevilled by politics in the HR department itself as many are very siloed, with one area, for example, providing training, another handling recruitment and each having its own sacred system.
"It can be difficult to get everyone to buy into a common solution because there doesn't tend to be a lot of end-to-end process thinking and a suite may not be as good in all areas as an established niche product," Holincheck explains.
The way of the future
But organisations should not let such challenges put them off, argues Cottam, not least because ERM is going to become an increasing must-have over the next couple of years.
"There's a need for organisations to manage talent and that's not going to go away. In fact, it's getting more and more important due to competitive pressures. If companies take a complacent approach to staff, performance will suffer and that will lead to eventual business failure."
How ERM can improve staff motivation and retention.
Why ERM may become an essential application.
What are emerging trends in workforce management.
Capital One: Empowered staff
"It didn't occur to us to buy an ERM application suite - we simply implemented applications where we felt we needed them. But I guess it depends on how much money you want to put into the infrastructure. The question is, does the investment really bring a return financially and we had a question mark over that," says Catherine Hope, director of IT infrastructure at Capital One.
Capital One is a US-based financial services company with operations in the UK and Canada. It provides consumer lending products such as credit cards, loans and insurance to 46.7 million customers worldwide, and was named last year as one of the best companies to work for in the UK by the Sunday Times and Financial Times.
But Hope attributes the winning of such awards less to IT and more to the organisation's "culture and values and the way we live them every day, which you can do with or without technology".
Corporate culture is the bedrock, she believes, but in line with this, Capital One has also implemented various systems to provide employees with more access to information and to "support staff to be more empowered".
For example, at the recruitment stage, candidates can undertake job searches, post their CVs and undertake a pre-screening questionnaire online using applications that have been developed internally.
Once personnel are on board, the company provides a self-service intranet to enable them to view information such as this month's payslip and to post enquiries regarding benefits. This, Hope says, has greatly reduced the number of phone calls to HR and freed staff up to focus on more strategic matters such as how to improve motivation and performance.
But the piece de resistance, she believes, is the firm's e360 online feedback and appraisal system from Halogen Software. This has speeded up the appraisal process, encouraged more people to use it and made it more enjoyable. "We've surprised ourselves with just how popular it is," Hope says.
But she concludes: "No matter how much you automate, people still want to talk to someone and feel understood. People don't want to get rid of the human aspect and you have to remain sensitive to that. It's about balance here."
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