Thomas Shelton

A recent "Mercer Global Business Challenges Survey cited globalization of operations as a key business priority, along with continuously improving processes, controlling costs, and managing risk. Indeed, strategic human resources (HR) functions (i.e., human capital management) are among those operations that are critical to ensuring global competitiveness. However, while global companies may share some common ground, no two have identical needs when it comes to HR functionsespecially compensation administration and management. From maintaining a comprehensive database to formatting templates to calculating and allocating compensation, HR must administer complex plans for expatriates who are operating under different policies and arrangements, in multiple currencies, and under different employment laws and taxation structures. In addition, HR must be able to extract data in a format that will provide critical business intelligence to the organization.<br /><br />Of course, technology has aided HR in meeting many challenges. However, a new global landscape requires that HR look beyond "out-of-the-box" software and toward vendors who offer flexible solutions with customization capabilities and easy implementation. Such solutions will allow companies to compete effectively in an increasingly flat business world and provide HR with a means to not only effectively manage global compensation, but also to solidify its role as a strategic partner in the management suite. However, there are numerous misconceptions that has made HR hesitant, even reluctant, to adopt new technology or tailor the functionality of existing technology.<br /><strong><br /><br />Dispelling Misconceptions</strong><br /><br />The first misconception is actually an outgrowth of the disconnect that exists in many organizations between HR and IT. HR is typically tasked with evaluating and implementing solutions that will streamline processes and improve operational efficiencies. Moreover, in the case of global compensation, HR may only be administering a solution for a few hundred expatriate employees of a larger employee population. IT, on the other hand, is often focused on keeping applications running and platforms functioning for an organization's entire employee populationwhich can number in the thousands.<br /><br />As a result, HR's requests are not always at the top of IT's list. In turn, HR has transferred this experience to the purchase of new solutions. In other words, HR has come to accept "out-of-the-box applications and adapt the company's changing business processes to fit within the limitations of a purchased solution.<br /><br />However, HR should view its solutions provider as a technology partner that works to understand individual needs and can customize applications accordingly. Such a partnership is backed by a focus on responsive service and proactive support. In addition, a technology partner can provide assistance for a much broader range of issuesoftentimes outside of the scope of their solutionthan a typical vendor.<br /><br />For example, this might include addressing client-specific network and performance-related issues associated with accessing the technology partner's solutioneven though other clients may not be experiencing the problem. The support can also be associated with general functionsfrom demonstrating how to utilize Excel to produce more meaningful reports (i.e., with pivot tables, charts, and graphs) to assisting clients to configure their Internet browser settings to best meet their needs.<br /><br />Second, HR is often hesitant to adopt or adapt technology based on previous experiences with IT implementationsoverly complex ERP or HRIS solutions that take months to install and disrupt routine operations. Admittedly, depending on the scale of the request, compensation and payroll changes can be complex. Previous implementation experiences can set a precedent and create anxiety regarding what will be entailedi.e., implementation, testing, etc. Other departments that are impacted by new technology are also likely to have an aversion to system changes and the perceived disruption that can ensue. In reality, however, technology partners shoulder the responsibility for implementation and testing, shielding the end-user (HR and associated functional areas) from significant disruption and operational hiccups.<br /><br />Finally, HR is under the misconception that customizing applications, especially in the area of compensation, benefits, and payroll, is costly. The expectation is that technology vendors will charge high fees to customize applications that enable end-users to produce reports or modify data entry fields. In some cases, after a significant application purchase, management may indicate to HR that no other changes (customizations) can be requested for a set period because of cost concerns, integration issues, and so on. Undoubtedly, extra costs can be difficult to justify after management has green-lighted an initial, often substantial, investment.<br /><br />The truth is that many modifications can be made easily and cost-effectively during the implementation process and throughout the client/vendor relationshipas long as your solutions provider is truly a technology partner. HR can work effectively with a technology partner to discuss and request modifications up front.<br /><br /><strong><br />Communication Is Key</strong><br /><br />Communication is another critical component. Much lip service is paid to the concept of customer relationship management and most vendors are responsive to client needs and requests. However, a technology partner initiates communication on a routine basis to not only push out information, but also to preempt questions, identify pain points, and develop solutions. Problems are easy to fixprovided the vendor is aware of them. As such, HR also needs to utilize the communications channel that its technology partner has established.<br /><br />A best-of-breed technology partner provides these routine customer-centric services:<br /><br />" Has a client services team that not only serves as a resource for troubleshooting, but also furthers the customer relationship by reaching out to clients on a routine basis<br /><br />" Conducts annual site visits to review the operation of the application, meet with end-users, and identify opportunities to help solve critical needs<br /><br />" Hosts user conferences and attends industry conferences to showcase new products and share information<br /><br />" Pushes out information, via mediums such as newsletters and blogs, on actionable information related to industry trends, developments, product upgrades, or service options<br /><br /><strong><br />Changing Expectations</strong><br /><br />According to AMR Research, HR software is now the fastest-growing area of business software. The market for human capital management applications (including compensation and benefits) is projected to expand 11 percent annually between 2006 and 2011, to $10.6 billion.<br /><br />As the complexity of an organization's business needs increases, so should HR's requirements of the applications and the solutions provider with which it partners. Flexibility and customization are important in general and, moreover, integral in a global compensation solution. To reiteratefrom a global standpoint, it would be difficult to find two solutions that could accomplish the same objectives. Flexibility in a compensation and payroll solution is paramount simply because each end-user is different.<br /><br />A best-of-breed global compensation solution offers HR the flexibility to designate how each compensation element should be paid. For example, a percentage of each pay element can be input to designate the value to be paid to the employee in host currency. Next, amounts to be paid in both home and host currencies are calculated based on that percentage. Finally, this data is transmitted directly to the employer's payroll system. Embedded within the solution are functions to ensure that complex compensation rules and guidelines and other formulas are accurately applied and calculated for each employee's "split-pay structure. Technology can provide employers with a seamless and streamlined solution that ensures every phase of this processfrom calculating amounts to delivering payis accurate.<br /><br />HR also requires a means to create management reports from its compensation solution that will provide critical business intelligence that is used to direct organizational objectives. Keep in mind that different management teams within an organization are also likely to request custom reports&perhaps even using the same data presented in a different format. While the basic solution is the same, the process becomes more detailed so that HR can pull and correlate necessary data to generate specific reports. For example, data on employee demographics, payroll and compensation costs, relocation expenses, and employee benefits impact the overall bottom line and are vital in calculating human capital ROI.<br /><br /><strong><br />Stepping Outside the Box</strong><br /><br />HR is strategically positioned to identify unique needs and implement a solution that will ensure the seamless management and administration of its global compensation plan. In addition, while solutions providers have changed the paradigm and now offer flexibility and customization, HR needs to divest itself of the common misconceptions surrounding the implementation of new technology and embrace a new brand of solution and a new breed of vendor.<br /><br /><br /><br /><br /><font size="1"><br />About the Author<br />Thomas Shelton is the Founder and President of HRToolbox (Atlanta). The HRToolbox product suite provides HR professionals with a complete and efficient solution that addresses the challenges of managing and administering payroll, benefits, and compensation for a global workforce. For more information, e-mail twshelton@hrtoolbox.com, call 877-HRTOOLBOX, or visit www.hrtoolbox.com.</font>