Table of contentsAbstract1

Information Technology and Human Resource

Master thesis, specialization Human Resource Management University of Groningen, Faculty of Management and Organization

Version 1.0 20-07-2008 Thijs Rieff S1556924 Dr. H. Colijnstraat 394

1067 CP Amsterdam 0628259724 thijsrieff@hotmail.com

Supervisor/ University H. van Polen

Table of contents

Abstract

1. Introduction

2. Human resource management

2.1 Development of personnel management 2.2 HRM defined

2.3 HR in the Netherlands 3. Trends and developments 3.1 General trends and developments 3.2 Consequences for organizations

3.3 Trends and developments in HR according

4. Alignment of HR strategy with business strategy 4.1 Importance of strategic HRM

4.2 Roles of HR professionals 4.3 Strategic level of HRM 5. Design of HR function

5.1 Consequences of HR development for HR function 5.2 New service delivery model

6. Information Technology systems in HR

6.1 ERP

6.2 Success of HR IT systems 7. Research model / methodology 7.1 Research question and hypotheses 7.2 Benchmark

7.3 Research object 7.4 Research plan 7.5 Questionnaire 8. Results 8.1 Selection

8.2 Statistical analysis 9. Conclusion

9.1 Composition of the HR department

9.2 Allocation of workload within HR departments

9.3 Alignment of HR processes to organizational objectives 9.4 Further research

Literature Appendix Abstract

Human Resources (HR) has grown increasingly more important among modern organizations since its

beginnings in the 1960’s and now provides companies a competitive advantage synonymous with

organizational success. As such, HR Management (HRM) is often integrated with overall business

strategy to maximize the benefits of HRM, but as a result many HR departments suffer from the burdens of new strategic tasks superimposed on traditional administrative HR duties. In this paper, the introduction of Information Technology (IT) systems to HR departments is examined as a means of raising the efficiency of administrative performance and redistributing HR workload to allow for more strategic and consulting operations. Success of implemented IT systems in redistributing HR workload was determined by administering a survey to 674 European (including 60 Dutch) organizations with a minimum of 200 employees, focusing on seven aspects of HRM: business and HR strategy, the HR job, the employee record, HR IT systems, HR processes, HR performance indicators, and HR e- business. Survey results demonstrate a correlation between use of IT systems departments and the workload distribution within HR departments as well as their alignment with overall business strategy.

A correlation between the use of IT systems in HRM and operational advising and strategic activities at medium and larger sized organizations seems to exist. This study significantly contributes to the existing body of knowledge on the effects of using IT systems at HR departments, specifically with regard to overall HR performance, and clarifies the positive outcomes of implementing IT systems at HR departments.

1. Introduction

“Employees are our most important asset” could nowadays be the motto of any company’s director, no matter the sector or country. Human Resource Management (HRM) as a strategy is becoming

increasingly important in organizations. Modern organizations describe themselves as ‘people- centered’, ‘people-focused’, or ‘people-driven’, often proclaiming themselves to be investors in people. As an acknowledgement of these declarations, they also need to apply them to their strategy, processes, organization, and technology. The job behind the scenes – that is, Human Resources – is thus becoming very important in this new context.

The most important force driving the popularity of HRM is a reaction to the growth of competitive uncertainty, regulatory reform, and new technology. Implementing a successful HR strategy seems to have become synonymous with competitive advantage. HR strategy is now more often in line with the overall business strategy.

Overseeing the lead-up to collective labor agreements, providing employee benefits and administrative support, and advising the managers regarding trends in employee retention are all examples of tasks for an HR department, while contributing to the company’s business strategy seems not to be included among its tasks. Within organizations, HR departments are faced with some obstacles. Ulrich (1998) described these as a paradox: while the organization expects its HR department to add value to the whole organization, these departments are often burdened with tremendous administrative workload.

An HR department can add value to its parent organization by exercising strategic personnel

management. HR can collaborate with other departments to elucidate the specific ways in which

employees can contribute to the organization’s success. Through a variety of HR tools they can support the overall goals of the organization. HR’s other main task, personnel administration, can be simplified by using several Information Technology (IT) systems. With the help of such systems, an administrative process can be simplified significantly, raising efficiency within the HR department itself. By saving time on administrative duties, HR departments allow themselves more time to focus on the strategic aspects of HR. Figure 1 depicts two models of workload in an HR department, with and without the use of IT systems. This thesis focuses on the transition that an HR department could make.

Figure 1: Overview of workload change after implementing IT systems at HR departments (Copeland, 2004).

The success of an implemented IT system in achieving the described transition within an HR

department will be determined by administering a survey within the organization. This survey will be carried out in medium- and large-sized organizations. Seven aspects of personnel management will be measured: the business and HR strategy, the HR job, the employee record, HR IT systems, HR processes, and HR performance indicators.

The data generated from these surveys will constitute the practical portion of this thesis. The subject of this thesis is the use of IT systems at HR departments and the effect of these systems on the workload distribution within HR departments.

The central question of this thesis is:

What is the effect of the use of IT systems at HR departments at medium- and large-sized

organizations, specifically on its strategic, advising, and operational activities?

The sub-questions of this thesis are:

S1 .What are the consequences of using IT systems for the workload at HR departments? Does the administrative workload decrease, and do the advising and strategic workloads increase with the use of IT systems?

S2. Does the implementation of IT systems lead to a better match between HR instruments and company objectives?

The main purpose of this research is to gain insight into the significance of implementing IT systems at HR departments. The study will focus on the change in workload from an administrative role to a more strategic and consulting role at the HR department. This thesis will examine whether the use of IT systems results in a change in workload, leading to a more strategically-focused HR department.

The relevance of this study is a contribution of knowledge on the effects of using IT systems at HR departments, specifically with regard to overall HR performance. For medium- and large-sized organizations, this study will elucidate the potential positive outcomes in the HR workload after the implementation of IT systems. In other words, the study will answer the question, does the use of IT systems result in more advising and strategic functioning of the HR department?

This research is scientifically relevant in that it generates more empirical data on the use of IT systems at HR departments as well as the changes in business strategy resulting from IT-enhanced HR

departments.

The following hypotheses are made to investigate whether the use of IT systems at HR departments result in more advising and strategic functioning of this department:

Hypothesis 1. By using more IT systems, the HR departments will decrease in FTEs (fulltime equivalents) and become more cost-efficient.

Hypothesis 2. By using more IT systems, HR departments will experience an alteration in their workload. This change is in line with Figure 1.

Hypothesis 3. By using more IT systems, HR departments will be better able to make adjustments to the overall business objectives.

The following chapters will elaborate on the subject of this thesis. In the next chapter, a brief history

of HRM will be described. This literature part will be followed by all the developments in HRM, the

fit between HR strategy with business strategy, and the role of IT systems at HR departments. The

theories described in the literature section will be examined by research executed by Arinso. Data

gathered by this research will be analyzed and reviewed in the results section. Finally, this paper will

conclude by answering the central question.

2. Human resource management

Many trends and developments influence organizations and their behavior. As a component of organizations, HRM has also developed since its emergence and will almost certainly continue to develop in the future. This chapter will highlight the development of personnel management throughout the last 60 years. The next chapter will describe the influence of trends and social developments on HRM.

2.1 Development of personnel management

Many streams and sequences can be described when we focus on personnel management. Until the 1960’s this organizational branch focused solely on efficient use of labor. Personnel utilization would be a better term to replace personnel management during this time period (Kluytmans & Hanké 1994).

This concept was based on Taylor’s scientific management theory. According to Taylor’s theory, labor is efficient only when it follows scientifically grounded methods. Such a strict rational form of personnel management doesn’t play a role in other departments within organizations, such as the financial or production department (Kluytmans & Hanké 1994).

Elton Mayo changed this paradigm with his so-called Hawthorne Experiments, which demonstrated that labor can be influenced by social interaction, raising assumptions that labor is not just economic but also social. (Doorewaard & de Nijs, 2002). Employees are motivated not only by their wages but also by immaterial rewards such as social status and respect. The new stream invented by Elton Mayo is called the Human Relations movement. (Doorewaard & de Nijs, 2002).

After the 1960’s the labor market faced scarcity, and retention of employees became increasingly important for companies. A combination of the two described streams became more common.

Responsibility and self-development gained popularity as means to motivate the employee.

Additionally, job rotation and employee participation in company decisions evolved during this sequence of personnel management. Still, even this new form of personnel management was not recognized as a serious part of the organization (Kluytmans & Hanké 1994).

In the 1980’s and 90’s, an oil crisis spawned numerous re-organizations and bankruptcies. These events brought about unemployment and a more calculated personnel management. This newer form of personnel management became part of the overall company strategy (Kluytmans & Hanké 1994).

By increasing the quality and flexibility of labor, personnel management can now align itself with

other components of a company. This optimal utilization of human resource can be regarded as the

starting point of human resource management (Kluytmans & Hanké 1994). The next paragraph will

continue with this resulting HRM model.

2.2 HRM defined

Currently, HRM can be defined in many ways. The following definitions can be distinguished:

 HRM as a redefinition of personnel management and labor relations without any additional value,

 HRM as a merger between the management of labor relations and personnel management, which leads to the creation of a new management job,

 HRM as a development approach which implicates employees in terms of added value instead of financial deficit, and

 HRM as a department with added strategic value for the organization, with an influential and supportive role.

For this thesis the last definition is most suitable. The following models will illustrate the exact meaning of the vision. The models are created by Fombrun, Tichy and Devanna (1984) at Michigan University. These models highlight how HRM fits into the organization when it is part of the organization’s strategy. The first model (Figure 2) is the so called matching model.

Figure 2: Strategic management and environmental dynamics (Fombrun, Tichy and Divanna, 1984).

The model in Figure 2 illustrates the connection between HR policy and the strategy and structure of the organization. It emphasizes the importance of the close relationship between HR strategy and the overall business strategy. This connection will be elaborated upon in chapter 4.

The next model (Figure 3) shows HR function. In this case, HR function is derived from and depends upon both organizational strategy and objectives.

Figure 3: The human resource cycle (Fombrun, Tichy and Divanna, 1984).

In the model depicted in Figure 3, performance is the dependable variable. The four processes surrounding this variable are affected by (HR-)managers and influence the performance of the single employee and the organization as whole. These four processes are:

 Selection: the strategic planning and control of personnel,

 Rewards: providing material and immaterial incentives to motivate employees,

 Appraisal: matching performance indicators to strategic objectives, and

 Development: designing programs for training and development as well as employees’ career development in line with the organization’s objectives.

According to Figure 3, performance depends on the four HR-processes outlined above. Additionally, performance is also affected by the structure and strategy of an organization as well as by

environmental dynamics. This relationship has been illustrated in Figure 2.

2.3 HR in the NL

Human resource management is the precise definition of personnel management today. HRM was introduced to the Netherlands in the 1980’s (Kluytmans & Hanké 1994). This introduction differed slightly as compared to the Anglo-American countries. In the Netherlands, HRM was embedded alongside many labor laws and regulations, collective agreements and the market environment.

3. Trends and developments

In the past few decades, the HRM vision has undergone a great deal of change as a result of numerous general trends and developments related to the HR profession. These trends and developments will be described in this paragraph.

3.1 General trends and developments

The influence of different developments on organizations is a recurring theme in many publications.

This section will describe the most frequently publicized of such trends and developments.

Enhanced dynamics

Exploding opportunities are created by an increasingly global economy, business reform with diffuse boundaries, technological progress, large scale deregulation, reconfiguration of competitive forces, integration and diffusion of boundaries, and the shift in strategic assets, for example toward

information and knowledge. All of these factors contribute to an overall increase in dynamics which necessitates greater organizational capabilities for innovation, adaptation and renewal. These

capabilities are far from unimportant. In order to deliver a consistent quality of service, organizations attempt to standardize activities and processes, traditionally by adopting regulations and procedures.

New technology facilitates all of these new trends (Ulrich, 1997).

New technology

As described above, new technology makes possible increased dynamics and accelerates many

processes in today’s world. Examples of such technological innovations include the internet, intranet,

teleconferences, and software that renders employee archives digital, among others. This technology improves global communication on many levels (Ulrich, 1997).

Greater uncertainty

This segment on increased business dynamics refers to multiple forces that share the impact of increased organizational uncertainty. Moreover, the integrated environment, with its high degree of interconnectedness, creates a complex situation. Ambiguity, unpredictability and uncertainty are associated with the term ‘complexity’. Dealing with the described dynamics requires employee involvement in the form of addressing or continuously rectifying emerging deficiencies. This capacity for emergent control rests on capabilities related to human resource.

Changing job and job content

As argued above, it seems clear that organizations are facing an increased level of interdependencies and consequently a growing complexity in the roles required to deal with the described dynamics.

According to Rockart and Short (1991) networking, collaboration and interdependent problem-solving are essential for someone who possesses the analytical, conceptual, and interpersonal skills to perform well in such a situation. Additionally, in an integrated environment many activities are connected to each other. Individual errors could culminate in major failures, which can cost a great deal. Problems of such a major scale in turn require someone skilled in working with the latest technological tools, who can effectively respond to and anticipate problems. Osterman (1991) argued that skill upgrading is a product of an “increased role complexity brought on by continuous changes in products, markets, processes, and organization”(P:184).

3.2 Consequences for organizations

Organizations confronted with complexity and increasing uncertainty need to invest in a redesign of their organization. Torraco (2005), reviewed several theories that enable organizational redesigns.

The first theory is called the Social-Technical Systems Theory, first conceptualized by Eric Trist. This theory emphasizes the importance of job satisfaction. By developing an organizational design that focuses on interdependence among its employees, work environment, and technology, higher productivity can be achieved (Torraco, 2005). Hackham & Oldham (1980) founded the ‘job

characteristics model’, which attempts to counter increasing uncertainty and complexity by motivating and satisfying the employee. Hackham & Oldham’s theory describes core job characteristics, such as skill variety, task identity, task significance, autonomy, and feedback, and claims that these influence the psychological state of the employee (Torraco, 2005).

Process improvement is another theory related to organizational redesign. This theory derives from

the assumption that understanding how work is accomplished could generate information about

possible improvements to the work processes. By using this information an organization can be redesigned (Torraco, 2005).

Techno-structural change models are derived from the assumption that changing the organizational structure and improving the organization’s technology are the best means of dealing with contextual factors (Torraco, 2005).

More theories exist on this subject, but describing them lies beyond the scope of this thesis. On the other hand, their impact resulted in organizational redesign. Their specific impact on organizations will be described in chapter 5.

3.3 Trends and developments in HR

The described developments also influence HR function. Internationalizations, mergers and large- scale cooperation projects result in the formation of new multinational companies which cannot apply previous HR processes. Organizations now need to gain competitive advantage on an international level, demanding a different application of HR departments in order to survive. Topics such as working with cultural differences, as well as attracting, educating, and motivating valuable employees become more important (Cummings & Worley, 2001).

Secondly, HR function needs to identify the existing capacities of a given organization. Flexibility, creativity, and quality are growing ever more important due to increased dynamics. As a result, knowledgeable and informed employees are especially important (Cummings & Worley, 2001).

A third trend is the combination of human capabilities and technology. By introducing new processes and procedures, organizations now run with the help of information and communications technology.

These technological developments also make possible a different way of working. With the aid of teleconferencing, telecommuting and sharing data globally, it is possible to work from home or any internet-enabled point around the world.

Finally, it is important to note that the continued evolution of job relations spawns new employee preferences and desires. The increasingly popular – especially among women – possibility of working part-time, facilitated by the above-mentioned technology, shrinks the gap between work and personal life. The freedom of an employee to choose a company at will is now influenced by the working culture, rewards and bonuses offered by the prospective organizations. All of these factors require an organization to have a clear and unified mission, as well as negotiations with its employees concerning primary and secondary wage types, instead of a hierarchical structure and a control mechanism.

All the economic, workforce, organizational, and technological trends discussed in this chapter have

implications for the future role of HR. As Cummings and Worley (2001: 618) write, “A global

economy populated with flexible, networked organizations and driven by information technology and

a diverse workforce will require HR and organizational development to be more embedded in the

organization’s operations, more technologically enabled, shorter in cycle time, more innovation and learning oriented, more disciplinary, applied to more diverse clients, more cross-cultural, and clearer about values.”

Enacting change requires a flexible organization and an advanced HR strategy that responds to change better than do the competitors. As noted by Cummings and Worley, of the integration of HR into the organization’s operations is essential for success. The next chapter will continue by describing the increasing importance of HR within the organization.

4. Alignment of HR strategy with business strategy

The previous chapter concluded by emphasizing the importance of integrating HR into the operational field of an organization. The HR department is assigned greater weight if it aids in fulfilling

organizational objectives. This chapter describes the way an HR department adds value to an organization.

4.1 Importance of strategic HRM

Peters and Waterman (1982) were the first researchers to demonstrate the link between employee performance and the accomplishment of business goals. In 1982 they published a book derived from this research, in which they described excellent organizations. These outstanding organizations differ from others in their human input. Excellent organizations consider human beings, rather than capital investments, as their most important asset and a crucial component of increased productivity (1982:

43).

The importance of the HR role in the organization was investigated more broadly in the years following Peters and Waterman’s publication. Many studies concluded that HR should be aligned with the overall business strategy. Brockbank (1999), among others, provided empirical evidence for this statement. In a 1997 study by Brockbank, Ulrich and James, the group figured out that HR departments of successful organizations in 1988 had a similar focus on both operational and strategic aspects of HR (Brockbank, 1999). Between 1992 and 1997, they provided empirical evidence to demonstrate that those HR departments that focused more on strategy performed much better.

Besides empirical evidence, Brockbank (1999) also described general developments that underscore the importance of aligning HRM with the overall business strategy. First, there is an increase of HR managers reporting directly to the CEO. Furthermore, the general improvements at companies are now regarded as an outcome of an HR contribution (e.g. at Sears, Ford, Unilever, and Harley Davidson).

4.2 Roles of HR professionals

Now that the importance of HRM as an integral component of the business strategy has been

described, the position of HR within the organization should also be considered. The HR department should play a supporting role for the rest of the organization and should not harbor a lonely strategy.

HR strategy should always support the overall business strategy. According to Kouwenhoven (1990), it sometimes happens that the HR department is operating in total isolation from the rest of the organization. The increased importance of an HR department with its contribution to the business strategy assumes a shift from an operational to a more strategic role. Such a shift implies that the operational role becomes less important, threatening negative side effects for an organization. For this reason an HR department should be successful in both the operational and strategic fields. To succeed in these two fields and truly add value to the organization, HR departments should not focus on daily activities or processes. Rather, a focus on the results of the activities and processes is more important.

Ulrich (1997) designed the following model which describes four roles in terms of their results that an employee of an HR department should master in order to become a serious business partner.

Management of strategic Human Resource

Management of transformation and

change

Management of firm infrastructure

Management of employee satisfaction

Every day operational focus Future / strategic focus

people Processes

Figure 4: Roles of employees at HR departments (Ulrich, 1997).

In figure 4 above, the different roles of an HR employee are distinguished. More broadly, these roles are:

Strategic expert: This role focuses on matching HR strategy to the business strategy, facilitating a faster adjustment to change and a better answer to organizational demands, and will ultimately lead to a better financial outcome. Generally, this role contributes to a better means of accomplishing the overall strategy of an organization.

Change agent: This supportive role helps people in the entire organization. Identifying and solving

problems, as well as creating plans for change, are important aspects of this role.

Employee champion: This HR support role focuses on the daily problems and needs of employees, ensuring a higher retention percentage and level of employee satisfaction. By satisfying the needs of employees this role adds value to an organization.

Administrative expert: This is a traditional HR role. Efficient HR processes should be designed and introduced to manage all kinds of employees, and their improvement can be perceived as an

improvement of the infrastructure. An administrative process is fundamental for this role, involving the gathering and provision of all kinds of information. Over the last several decades, a so-called

‘shared service center’ has been introduced at many companies, specializing in administrating data and adding value to their parent organization by simplifying processes.

To become a serious business partner, HR employees should fulfill all of these roles. A simple shift from the operational field to the strategic field is not possible. Another important activity not described in the above model is the interaction with the line manager. Strategic activities should be translated and executed in cooperation, since both employees and the line manager are essential for bringing about competencies and values to accomplish organizational objectives.

4.3 Strategic level of HRM

On top of adding strategic value to an organization, an HR department can bring about more benefits.

Brockbank (1999) distinguished between re-active and pro-active activities. The following model shows his ideas:

Implementation of business strategy

Creation of strategic alternatives in future

Implementing of basic HR processes

Improvement of basic HR processes

operational Strategic

Pro-active Re-active

Figure 5: Levels of competitive advantages by HR activities. (Brockbank, 1999: 337).

The model in Figure 5 depicts four quadrants occupying territory along two axes. The axes range between:

1. Operational re-active: The HR department is focused on implementing the basic processes. The most important activity is to provide the correct rewards and trainings, and to recruit and select employees.

2. Operational pro-active: The HR department is focused on improving the basic processes. The question raised is what can be improved to avoid future problems. The redesign of HR processes, application of methods such as total quality management, and creation of a positive mood in the organization are very important at this stage.

3. Strategic re-active: The HR department is focused on implementing the business strategy. This business strategy is already existent (e.g. growing or undergoing renovation). The HR department successfully facilitates the implementation of this strategy.

4. Strategic pro-active: The HR department creates potential strategic alternatives. Maintaining a culture where innovation and creativity are valued, as well as developing corporate skills that adjust to market circumstances are both important goals for HR departments in this stage.

The more an organization transitions from operational re-active to strategic pro-active, the more benefit it can draw from its HR department.

5. Design of HR function

The previous chapters describe all the developments related to HRM. This chapter continues with the consequences of all those developments for the design of the HR department. The so-called ‘service delivery model’ will be applied.

5.1 Consequences of HR development for HR function

As previously stated, a well-developed HRM is regarded as a strategic partner. Alongside other company departments such as the financial department, HR can also add value to an organization and makes increasingly more significant contributions to the organization’s survival.

This new task demands even more from the HR department. To keep pace with this increasing

demand while continuing to complete traditional operational tasks, a new working method is needed in

the HR department. The introduction of new support methods to the HR department facilitates a new way of working.

5.2 New service delivery model

Contrary to the controlling and administrative role of past HR departments, today it provides support in a variety of ways. Together, the new methods form the new service delivery model. Examples of these new support methods include:

 Shared Service Center (SSC): this is a central unit specialized in executing standard administrative tasks in a very efficient way. The main objective of a SSC is to simplify processes and concentrate all administrative work in one place.

 Professional Support Unit (PSU): This is a central unit that clusters different HR professionals to provide excellent service. Such a cluster could be responsible for recruitment and selection, rewards and benefits, or organizational development. The main objective of PSU’s is to share knowledge and deliver uniform excellent service to the entire company.

 Employee Self Service (ESS) / Manager Self Service (MSS): Both employees and managers have access to their company’s intranet, which provides all sorts of information, such as the company news bulletin or an overview of the company’s collective agreement. Another function of ESS is to allow company members to express their basic information and preferences; more sophisticated ESS systems allow employees to exchange salary for extended holidays or request leave. On the other end, MSS allows managers to approve or decline employees’ requests. Furthermore, MSS grants managers access to the data of their subordinates, including information regarding employee illness or retention reviews, for example. The main objective of these Self Service tools is improvement through simplification and reduction of the HR workload.

 Outsourcing: HR processes can be outsourced to external companies. Some companies choose to outsource their recruitment and selection activities to an external organization, while other companies outsource their entire HR workload.

In this new service delivery model (see also figure 6), HR strategy determines HR operations. Within the HR department there is a focus on HR processes and people, which should be aligned with HR strategy. HR strategy should be in line with the overall business strategy so as to maximize HR’s contribution to the organization.

Some components of the service delivery model are dependent on new tools and require a particular

technology in order to function. For example ESS and MSS are technical tools that simplify processes

in the organization. In the next chapter, the role of technology within organizations will be discussed.

Figure 6: HR Transformation overview.

6. Information Technology systems in HR

The previous chapters have described the expansion of HR’s tasks in response to HR’s new role in the organization. In addition to its new tasks, the HR department remains responsible for the entire traditional administrative workload, which demands a large workforce. This chapter will describe possibilities to simplify these tasks by implementing IT systems in HR departments.

6.1 ERP

ERP systems (Enterprise Resource Planning) are technical tools/software programs that have become

important for most HR departments (Tansley, Newell, 2007). These systems are able to register all

sorts of HR data, including; absence records, tardiness records, job history (promotions, position

changes, demotions), records of rewards, and holiday entitlements. ERP systems are electronic

databases for HR data that can be retrieved by any authorized individual from any network computer.

Tansley and Newell (2007) distinguish two ways in which these systems can be used in organizations.

The first mode is using the systems in a simplified way as an electronic database; essentially, the automation of HR operational processes. The second mode is a more strategic approach that involves the strategy of the HR department.

The first mode begins with the implementation of an ERP package in an organization. The term

‘automation’ reflects the reduction of physical labor that accompanies the use of computerized data information systems. Greater efficiency in operations can be reached by reducing overhead costs through task mechanization and process automation (Tansley and Newell, 2007). Computers take over employees’ labor, leading to consistency in the process and faster service. The second mode does not always follow after improved efficiency through automation of processes has been accomplished.

Occasionally, the transformation of HR practices is not implemented, and the HR role does not change (Tansley and Newell, 2007). Implementation of the strategic capabilities of the new technology may be bypassed when organizations use the system solely as a tool to store employee data.

In Figure 1 at the start of this paper, a model showed the added value of implementing HR IT systems.

Implementation of IT the systems allows more attention to be devoted to strategic activities. Authors including Tansley and Newell (2007) claim that the focus can shift to strategic activities only after operational tasks are perfectly fulfilled.

The main objective of implementing HR IT systems is to reduce FTE’s within the HR department and substitute these operational activities with strategic activities. The next paragraph will continue with possible outcomes of HR IT implementation.

6.2 Success of HR IT systems

Implementing an HR IT system begins with choosing one of the available brands. According to Frauenheim (2006), SAP and Oracle are the world’s top vendors of human capital management software. Together they account for nearly 50 percent of total HR applications sales.

Implementing of one of the applications is the next step. Following implementation, the software’s success can be measured using different parameters (Haines and Petit, 1997; Maguire and Redman, 2006):

 is the system user-friendly?

 do all employees use the system following its implementation?

 is the new application well integrated with systems from other business units?

 does the new application meet predetermined quality goals?

In general, it can be concluded that the management’s involvement as well as the quality of the

application’s user-interface are the most important factors for success of an ERP implementation.

7. Research model

The preceding chapters constitute the theoretical part of this thesis. The ensuing chapters the practical part will be applied. At first, the research model will be described more broadly. In this part the central questions and the hypotheses will be repeated and explained. The last two chapters are dedicated to the results and analysis.

7.1 Research question and hypotheses

This thesis examines the use of IT systems at HR departments and its influence on work methods within these departments. The central question is:

What is the effect of the use of IT systems at HR departments at medium- and large-sized organizations, specifically on its strategic, advising, and operational activities?

The sub-questions are:

S1 .What are the consequences of using IT systems for the workload at HR departments? Does the administrative workload decrease, and do the advising and strategic workloads increase with the use of IT systems?

S2. Does the implementation of IT systems lead to a better match between HR instruments and company objectives?

After analyzing HRM theory, the match between HR strategy and business strategy, and the use of IT systems at HR departments, the following hypotheses were generated:

Hypothesis 1. By using more IT systems, the HR departments will decrease in FTEs (fulltime equivalents) and become more cost-efficient.

Hypothesis 2. By using more IT systems, HR departments will experience an alteration in their workload. This change is in line with Figure 1.

Hypothesis 3. By using more IT systems, HR departments will be better able to make adjustments to the overall business objectives.

In the theoretical part of this thesis, the use of IT systems was broadly discussed. These systems

function directly to standardize administrative processes, imparting better control of these processes

and thereby downsizing the necessary departments. In addition to reducing the number of employees

per HR department, each employee’s role is also allowed to focus on more advising and strategic

activities. A stronger focus on various HR processes can result in a better fit with the overall business strategy. Examples of these other processes are recruitment and selection, education and training, rewards and remuneration, employee development, and employee retention.

Later on this chapter will describe the methods to be used in justifying the hypotheses and answering the central question. The following paragraph will continue to clarify the way in which data for this research was gathered.

7.2 Benchmark

The research part of this thesis is based on the ‘HR Benchmark Survey 2006’, which includes a study of performance and accountability records related to personnel management. This study was

conducted by consultants of Arinso International, including the author of this thesis.

This research has the following objectives:

 For sales and marketing instruments: to promote HR activities of Arinso and generate assignments.

 For benchmarking: to develop a database that can be used for assignments for clients.

Different clients can be compared with this data.

This benchmark study embraces the practical part of this thesis.

7.3 Research object

The research has been focused on large- and medium-sized companies; that is, organizations with a minimum of 200 employees. Organizations with fewer than 200 employees do not always have an HR department, or they may have an HR department that is too small for the purposes of this research.

The organizations were approached by a so called ‘survey-method’, which will be described in the following paragraph.

After collecting all data, the respondents were classified into different groups. The following groups can be distinguished:

 Industry & energy

 Entertainment and media

 Government and non-profit

 Information and communications

 Business services

 Financial services

The large- and mid-sized companies are divided into two ranges: the first group includes companies

with 200-1200 employees and the second includes companies with more than 1200 employees.

7.4 Research plan

This paragraph will describe the research method, the period of data collection and finally, the way the research has been carried out.

In the previous paragraph the name ‘survey method’ was already introduced. ‘Survey method’ stands for a systematic approach to gathering data. With the help of questionnaires, data will be collected from randomly selected organizations that represent a variety of sectors. The next paragraph will explain the questionnaire that was used. The collected data is gathered in a database where each question represents a variable.

In the Netherlands this survey has been sent to 500 companies, some of whom are clients of Arinso. A month prior to this research the respondents were informed about the anticipated benefits of this investigation for their organization. In September 2006 the questionnaire was mailed to the organizations. Data were collected over the course of three months.

In return for taking approximately two hours to complete the questionnaire, a reward felt appropriate.

Thus, all participants were offered the results of this benchmark survey to allow them to compare their own HR performance with that of other companies.

7.5 Questionnaire

The distributed questionnaire was designed by consultants of Arinso and based on previous HR research. Some more recent topics such as IT systems and e-business were added. The subjects chosen to be included in this survey are in line with the data required for this thesis. The subjects are:

A. Strategy: This part of the survey examines which business and HR activities have priority in the organization. New HR trends can be elucidated, as well as the degree of alignment of HR strategy with overall business strategy.

B. Analysis of the personnel record: In this part the respondent is asked about the size of the organization in FTE’s as well as other aspects related to: employee age, retention, seniority, and salary costs.

C. The HR job: In this part the respondent is asked to reflect on the design of their organization’s service delivery model. S/he also needs to declare the utilization of the different HR jobs and the amount of FTE’s that the employees spend on different HR processes. This part of the survey will be useful in determining the effect of IT systems on the utilization and time expenditure of HR departments.

D. HR processes: In this part of the survey, detailed information about HR processes will be

elicited. Specifically, this part of the survey asks about methods used for employee

recruitment and selection, assessment, education and training, retention, and rewarding.

E. The HR IT systems: In this part the respondents are asked to provide information about the existent HR IT systems and the way these support HR processes. Analyzing the ways in which HR processes are supported by IT systems will be especially important for this thesis.

F. HR performance indicators: In this part respondents are asked to provide information related to the application of HR benchmarking statistics.

8. Results

In this chapter the results of the research will be presented. A description of the organization selection and the statistical results will be explained.

8.1 Selection

Despite the benefits of the survey for all participating organizations, the response rate in the Netherlands was very low. This can be explained by a variety of causes. One possibility is the complexity of the survey. For respondents, the survey can be quite demanding, both in time and complexity. A second cause could be the approach, the so-called survey-method. Furthermore, the survey was distributed by email, which is a very impersonal approach.

Ultimately, of the 500 organizations initially approached with the survey, 84 completed it, making for a response rate of 16,8%. Two respondent types can be distinguished – those with contacts, and those without. Specifically, Arinso offered services during the survey for 60 of the 500 organizations; 40 of these organizations responded. The response rate seems to be enhanced by having contacts at the organizations.

Table 1 gives an overview of the kind of organizations that responded.

Sector → Size↓

Industry Information &

Communication

Government

& Non-profit

Business services

Financial services

Total

<200 FTE 2 3 6 2 2 15

201 -1200 FTE

8 4 14 11 5 42

>1200 FTE 3 3 6 10 5 27

Total 13 10 26 23 12 84

Table 1. Respondent organizations classified by size and sector.

Table 1 displays the classification of the survey respondents. Both the size and sector are clustered as

described in the previous chapter. In Appendix part F a more exact distribution of the sector is shown.

By using the data derived from these organizations, it is possible to generalize outcomes for the entire population – that is, for all Dutch organizations.

It seems obvious that all sectors and organization sizes are well represented. A good representation allows generalizations about the whole population. Unfortunately, 24 of the 84 organizations have fewer than 200 employees. These smaller organizations are not part of the research objective since most of these organizations do not have an HR department.

In total 60 organizations remain within the objective for this research. Incomplete forms returned by some organizations generated another problem for this research project.

To compensate for these losses, data that was gathered in other European countries has been added to the selection. In other European countries, Arinso carried out the same survey. The new selection contains the whole European Union and Switzerland.

Together with other European countries, the selection contains a total of 783 organizations. 674 of these are suited for this research since 109 organizations are too small to participate. Table 2 displays the total selection.

Sector → Size↓

Industry Information &

Communication

Government

& non profit

Business services

Financial services

Total

<200 FTE 30 26 9 22 22 109

201 -1200 FTE

159 39 24 46 49 317

>1200 FTE 147 50 33 64 63 357

Total 336 115 66 132 134 784

Table 2: Respondent organizations (including the European Union and Switzerland) classified by size and sector.

8.2 Statistical analysis

This paragraph includes the statistical results. Since this research is grounded in quantitative data, it is necessary to determine the representation by tests. Based on the hypotheses described in the previous chapter, relevant calculations analyses will be made.

Occupation of an HR department Hypothesis 1:

In the survey, the HR-function is divided into 18 processes. In the survey the respondents declared

which HR processes were supported by their HR systems. The process ‘maintenance of HR system’ is

not of importance for this hypothesis.

A variable has been created to reflect the degree to which IT systems are being used. The following formula allows a calculation of the percentage of processes that are supported by HR-IT systems.

Composition of an HR department

The composition of an HR department can be separated into four categories. Appendix part C displays the different jobs/activities and the category to which they belong.

A Supervisors B Personnel officers

C Policy makers / HR specialists D Administrative support

A negative correlation between the use of IT systems and the composition of the HR department was expected. By using the Pearson correlation coefficient, a correlation analysis can be carried out.

Pearson verifies the relation between independent variable, IT use, and the dependent variable, the composition of the HR department.

Table 3 displays the results.

Category ↓ R ↓

A Supervisors -0,071

B Personnel officers -0,078

C Policy makers / Hr specialists -0,161

D Administrative support -0,124

Total -0,043

Table3: Correlation between IT use and the composition of an HR department.

The procedure continues with setting a null hypothesis, set up to be nullified in order to support the H1 hypothesis – the alternative hypothesis. H0 is presumed true until new statistical evidence, in the shape of a hypothesis test, indicates differently – that is, when researchers have a certain degree of confidence, for this study 95 percent, that the data support H0. An experiment can reject H0 when the p-value is smaller than 0,05.

Results give evidence of a small correlation between the use of IT systems and the composition of an

HR department. This difference is not significant (p=0,3). Three categories displayed a negative

correlation with the use of IT systems. These are A, B, and D (p=0,003). The other category, C,

correlates positively with the use of IT systems.

A second analysis has been carried out to support the results above. For this analysis the respondents were divided into three groups according to different proportion of IT systems use. These groups are classified as follows:

1. Organizations that have less than 30 percent of their processes supported by IT systems.

2. Organizations that have between 30 and 70 percent of their processes supported by IT systems.

3. Organizations that have more than 70 percent of their processes supported by IT systems.

By using a t-test, the assumed significance will be investigated. A t-test is used to uncover real differences between the averages of two different groups.

% company processes supported by HR-IT systems Category ↓ group→ 1. <30 2. 30-70 3. >70

Supervisors 0,33 3 0,35 2 0,26 2 3

Personnel officers 0,23 0,21 0,19

Policy makers / Hr specialists 0,37 1 3 0,44 1 2 0,55 2 3

Administrative support 0,79 1 3 0,69 1 0,62 3

Total 1,72 1,69 1,62

Table 4. Composition of an HR department with different proportions of HR IT use.

1.: significant difference between groups 1 and 2 (p<0,05) 2.: significant difference between groups 2 and 3 (p<0,05) 3.: significant difference between groups 1 and 3 (p<0,05)

The composition of the total HR department with 100 employees is 0,1 FTE smaller in the group where 70 percent of the processes are supported by HR IT systems compared to the group where 30 percent are supported by HR IT systems. In three out of four categories, a difference exists between groups 1 and 3. By comparing group 1 with group 2, and group 2 with group 3, twice the significance has been found between both categories. The results highlight a negative correlation between the use of IT-systems and HR composition, and this relation is partly significant.

Allocation of workload within an HR department Hypothesis 2:

The total workload of an HR department is for this section divided into strategic, advising, and operational activities. Most of the processes can not be entirely classified in these categories.

Processes such as recruitment and selection are mostly an advising process, but they also contain administrative activities. In the following table a classification has been made based on the main activity, measured by time.

Strategic activities ↓ Advising activities ↓ Operational activities ↓

-development of HR policy -labor relations -salary administration

-planning of HR

-organizational design / change management

-recruitment and selection -function description and appreciation

-competence management -career planning

-education and training -rewarding

-outflow of employees -labor atmosphere

-personnel administration

Table 5: Categorization of HR processes according to activities.

For every process a percentage of the total amount of time spent on it has been calculated. By using a correlation analysis the relationship between the independent variable, IT, and the dependent

variables, strategic, advising and operational activities, can be explored. The results are displayed in Table 6.

Category↓ R↓

Strategic activities 0,089 *

Advising activities 0,156 **

Operational activities -0,209 **

Table 6: Correlation between IT and the allocation of workload within an HR department.

* P <0,05

**P<0,01

Significant differences were determined between the use of IT systems and the allocation of workload.

Operational workload decreases while strategic and advising workload increase with more use of IT systems.

The following graph (Figure 7) displays the allocation of workload at varying degrees of use of IT systems. The groups are defined similarly to the previous paragraph. Obviously, the operational activities of group 3 form a smaller part than group 1. For advising activities, an opposite tendency is observed. For strategic activities there is no real shift between the groups.

A shift from operational toward advising activities with increased use of HR IT systems can be

deduced from the data.

Figure 7: Allocation of workload in groups.

Group↓ activity→ Strategic Advising Operational

Group 1 (>30%) 8,10% 36,90% * # 41,50% * #

Group2 (30%-70%) 9,10% 40,90% * 33,20% *

Group 3 (<70%) 9,10% 45% # 30,90% #

Table 7: Allocation of workload in groups.

* Significant difference between group 1 and group 2 (p<0,01)

# Significant difference between group 1 and group 3 (p<0,05)

Alignment of HR processes to organization objectives Hypothesis 3:

When an HR department is more focused on advising and strategic activities, HR strategy will better match the business strategy. This relationship is broadly discussed in chapter 4.

In the appendix the questionnaire is added, containing a part about HR processes. These processes are recruitment and selection, performance management, education and training, and rewarding and retention of employees. Respondents were also asked to assess whether the processes contribute to organizational objectives. Respondents were able to choose between:

1. The process doesn’t contribute to the objectives.

2. The process scarcely contributes to the objectives.

3. The process contributes to the objectives.

4. The process strongly contributes to the objectives.

For each process, an average score was calculated based on the responses. The higher the score, the more the organization is satisfied regarding the contribution of a process to the organizational objectives. The analyses are carried out similarly to those for H I and H II. The results are displayed in Tables 8 and 9.

HR process ↓ R↓

recruitment and selection 0,069

performance management 0,153**

education and training 0,090*

Rewarding 0,186**

retention of employees 0,174**

Table 8: Correlation between IT and ‘contribution of HR-processes to organizational objectives’.

* p<0,05

** p<0,01

This correlation demonstrates a positive relationship between the use of IT systems and the

contribution of HR processes to the organizational objectives. Except the processes of recruitment and selection, all correlations are significant.

The following table displays the average score defined for each IT group.

Percentage of HR processes supported by IT

HR Process↓ Group 1 (<30%) Group 2 (30% -

70%)

Group 3 (>70%)

recruitment and selection 3,21 ^ 3,25 3,4 ^

performance management 2,69 * ^ 2,97 * 3,09 ^

education and training 2,84 ^ 2,95 # 3,16 # ^

Rewarding 2,49 * ^ 2,85 * 2,91 ^

retention of employees 2,27 * ^ 2,5 * # 2,74 # ^

N 166 204 43

Table 9: Contribution to organizational objectives defined per group.

* Significant difference between group 1 and group 2 (p<0,01)

# Significant difference between group 2 and group 3 (p<0,05)

^ Significant difference between group 1 and group 3 (p<0,05)

Compared to group 1, the average score is higher in group 2 for every process. Group 3 has a higher

average than group 2 for every process. These results demonstrate the contribution of the HR process

to organizational objectives when the use of HR IT systems increases.

9. Conclusion

Since general trends as well as trends in the field of HRM change the function of HR, new

expectations arise. HR should add value to an organization and HR function should operate more as a strategic business partner rather than a separate component of the organization, despite the

extraordinarily large workload placed on the HR department which must be carried out simultaneously.

In this thesis the role of HR IT systems at HR departments, and the effect of these systems on their workload, are the most important topics. The central question is:

What is the effect of the use of IT systems at HR departments at medium- and large-sized organizations, specifically on its strategic, advising, and operational activities?

A shift in workload, from operational activities to advising and strategic activities, is expected

according to the theory. By using data from ‘HR Benchmark 2006’, it can be concluded that there is a relationship between the number of HR IT systems used and the allocation of workload within HR departments. Every hypothesis from the method section will be described in this chapter, complete with conclusions. Finally, the central question and the sub-questions will be answered in this chapter.

9.1 Composition of the HR department

A weak negative correlation between the degree of IT use and the total composition of the HR

department exists. This is mainly caused by the administrative support category; this category

expanded more than any other following increased use of HR IT systems. The composition of the

total HR department is reduced only slightly when the use of HR IT systems increases, caused by a

positive correlation with the HR policy category. A shift in composition is in line with the model of

Ulrich. The results confirm a shift of the composition of role 2 (administrative functions) to the roles

1 and 4 (advising and strategic functions). The composition of role 3 (employee champion) does not

change. The composition of daily operational functions decreases, while functions focused on the

future or dedicated to strategic and advising purposes expand. With increased use of HR IT systems,

there is a compositional shift. In total, the HR department decreases in FTE. This conclusion is

supported by analyses from the Results chapter. There is a vast difference between organizations that

have less than 30 percent of their processes supported by HR systems and organizations that have

greater than 70 percent of their processes supported by HR systems. These results highlight an

expansion of the composition of HR policy makers and a reduction of all other categories with increased use of HR IT systems.

Formally, Hypothesis 1 is not evident. There is no significant correlation between the amount of IT systems used and the total composition of an HR department. The second part of the hypothesis can not be answered since the information of exact costs of an HR department is not available.

Results from this research strongly point to a correlation between the amount of IT systems used and the composition of the HR department. To make this evident, further research is necessary. This will be discussed in a subsequent portion of this chapter.

9.2 Allocation of workload within HR departments

To verify the second hypothesis, 18 processes carried out by HR were classified into strategic, advising, and operational activities. For this thesis, a correlation between the IT systems used and the time that was spent on these three different activities was investigated. Results confirm that

operational activities are reduced and advising and strategic activities are increased when the amount of HR IT systems use increases. It can be concluded that a shift from operational activities toward more advising and strategic activities comes about with greater HR IT systems use. Thus, the second hypothesis has been verified.

The fact that all HR activities can not be classified entirely into a particular category has been

discussed in the Results chapter. No attention has been given to the weight of various activities within the classified groups. At the end of this chapter, a recommendation to investigate the allocation of HR workload in relation to the use of HR IT systems will be discussed.

9.3 Alignment of HR processes to organizational objectives

To provide a statement related to this hypothesis, it is necessary to exercise caution. This hypothesis is dependent on the second hypothesis. The alignment of HR strategy to the business strategy has already been described in chapter 4. As part of the alignment, the HR employee should be regarded as a strategic business partner. At the HR department, the shift toward advising and strategic activities should now be emphasized (HII). Only when such a shift materializes can there begin an investigation into the impact of this shift on the alignment of HR processes to organizational objectives.

Another issue that should be taken into account is the potential influence of other factors on the

completion of this alignment. The alignment of HR processes to organizational objectives can be

influenced by the methods used in the processes, the quality of the employees, the involvement of line

managers, and the transparency of the procedures. The use of HR IT systems is just one of the factors important for establishing a better connection between HR processes and organizational objectives.

Taking into account the limitations described above, it can be concluded that the third hypothesis can be verified. The alignment of HR processes to organizational objectives is enhanced when more HR IT systems are in use. Fore more definitive conclusions, further research on this topic is necessary.

Central question and sub-questions

In the Results chapter both the central question and sub-questions have already been answered. The first sub-question, as addressed in chapter 1, can be answered as follows: when organizations make greater use of HR IT systems, the administrative workload declines while advising and strategic activities increase within the HR department.

The second sub-question can be answered affirmatively. When organizations make more use of HR IT systems, the connection between HR processes and organizational objectives grows stronger. The limitations, discussed in the previous paragraph, should be seriously considered.

Finally, the central question of this thesis will be answered. A correlation exists between the use of IT systems in HRM and operational advising and strategic activities at medium and larger sized

organizations. This correlation impacts especially the allocation of activities within the HR

department. A workload shift from administrative activities to more advising and strategic activities occurs when an organization makes more use of HR IT systems. There is also a correlation between the use of HR IT systems and the composition of an HR department. The group of administrative support employees shrinks while the group of policymakers grows at the HR department as an organization makes more use of HR IT systems.

Limitations

The correlations measured between the variables in this study can not be considered strong

correlations. This can be explained by several factors that have influenced this research, as well as by the way the data has been analyzed. Possible causes of a weak correlation are:

 Subjectivity of the respondents: Part C of the survey was interpreted differently by the respondents as it is not always clear which activities belong to which category. It is also difficult to make an estimation of the time that has been devoted to these various processes.

The scores of the different processes vary a lot, which weakens the resulting correlation.

 Causality: The results of this thesis were acquired as part of the Arinso Benchmark Survey

2006. The questionnaire contains multiple sections with a different content. The influence of

the use of HR IT systems and its impact on the composition of the HR department and the allocation of workload therein is not explicitly inquired about in the survey. There is a variety of factors that could influence the composition of the HR department; for example, an agreed upon level of service within the organization. Workload allocation can be influenced by the allocation of work between the HR department and the line managers. Adding further

questions to this survey, especially ones which pursue this relationship more explicitly, would improve the reliability of the correlations.

 Time pressure: Completing the entire questionnaire demands a lot of time. Most of the respondents completed the form during their work hours. It seems reasonable that some respondents did not devote too much time to completing the questionnaire meticulously.

9.4 Further Research

This thesis is based on the Arinso Benchmark Survey 2006. A comprehensive questionnaire has been developed specifically for this survey. Most of the questions are related to HRM and HR function.

This thesis is based on parts of that survey, though the survey was not specifically designed for this thesis and the central question of this thesis. In terms of causality, it is hard to provide any evidence.

Further research regarding the use of HR IT systems at HR departments should explicitly focus on causality. These further studies should focus more on the relative time devoted to completing the various activities. On a more detailed level, questions about HR processes should provide more information related to the function and performance of an HR department after increased use of HR IT systems.

The method of this research was based on a specific moment in time when the surveys were

distributed and collected. Respondents answered the questions based on their situation for 2006. This

was followed by an analysis of the correlation of variables between different organizations. Further

research should focus on the development of organizations. By comparing the same groups of

organizations at different moments in time, a more specific effect of the use of HR IT systems on the

allocation of workload at HR departments can be investigated.