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Determining requirements for buying human resource management software

HR software expert Mary E. Shacklett helps you determine your must-have features and functions when buying HR tools.

Before buying HR tools, you should have a clear understanding of the business needs you want those tools to address. Some companies might just need a payroll system. Others might want to replace their entire HR system because it's become obsolete or there's a desire to consolidate all HR applications under a single vendor. In still other cases, companies feel they're losing out in recruiting and developing talent, so they want an HR tool that can help them with this -- but they don't want to replace their existing HR software. Whatever the HR need, clarifying that need upfront and ensuring everyone is on the same page is absolutely paramount.

Understanding your company's HR needs also entails more than just a single observation, such as our company needs talent management. For example, what functionality is the new HR tool expected to deliver that your company doesn't have today? How do users expect to use the system today and in the future? Is it important for the new system to interact with existing systems? These are just a few of the drilldown questions that should be included in a request for proposal (RFP) before you begin shopping for a new HR tool or software suite.

Finally, you must think about your company itself. Is your company small, with a limited budget? Or do you work in a large organization with multiple locations throughout the U.S. or the world that requires HR tools that can address the varying needs and regulatory issues of all locations? Does your company already have HR software in place that it simply wants to add to, or has it outgrown this software? Do you anticipate any major integration challenges if new human resource management software is implemented? And from a strategic standpoint, has the company already decided it prefers on-premises, cloud or software as a service, or SaaS-based HR software?

The answers to these questions are unique for every company, but they should factor into the RFP process.

Elements of a strong RFP for human resource management software

Does the core HR software contain the functions and features your company needs? Most core human resource management software can track time and attendance; administer payroll, payroll taxes and benefits; store information in a central database; and administer and generate periodic and ad hoc reporting on this information. However, there's also a new set of differentiating elements in core HR software that are must-have features for many companies. These include:

  • The ability for departmental and business managers to use the central HR employee database to reference and input information based on set clearances and access permissions;
  • The ability to administer a multilevel payroll system that can concurrently handle the payroll requirements for both union (e.g., union dues deductions, union pay rates and benefits) and non-union employees;
  • Compliance monitoring in areas such as hiring, employee relations, risk and safety;
  • The ability to expand HR compliance monitoring and administration beyond the U.S. to other countries in which the company has employees;
  • A global payroll function that supports multiple countries, languages, currencies and processing requirements;
  • Easy-to-use interfaces from the payroll and benefits systems to third-party providers of insurance, 401k plans, etc.;
  • Employee access to insurance and benefits information 24/7 from anywhere, on commonly deployed desktop and mobile platforms; and
  • The ability to turn certain software features and modules on or off so the software can be tailored to company needs and then scaled upward as the company grows, with the company paying only for what it's using.

Does your company want talent management software? Basic talent management software enables companies to manage their human capital by providing a set of tools for recruiting employees, administering and tracking employee performance, and enabling different levels of compensation for employees based on their performance. The software also provides workforce reporting and analytics for HR and other business managers. In addition to this core functionality, talent management software also offers these differentiating capabilities that are crucial must-haves for many companies:

  • Ease of use and workflow automation for the employee performance review and management process;
  • Performance analytics reporting that delivers workforce trends and results, and predictive analytics that assists employee retention by assessing which employees are the company's top performers and which are most likely to leave the company;
  • The ability to easily create and revise job descriptions;
  • Flexible compensation systems so the company can use both standard comp and pay-for-performance comp simultaneously but in different business units in the company;
  • The ability to narrow the funnel in the employee recruitment process with selective criteria that HR provides to isolate the most attractive candidates for job interviews;
  • An internal training system that lets employees sign up for training, take online classes, receive grades from instructors and certify for positions within the company; and
  • An internal job and project bulletin board that shows employees different opportunities open within the company.

Does your company want employee engagement tools? HR software vendors now offer ways to engage employees with HR and workforce-related areas through an assortment of mobile devices and social-media-style collaboration.

This is an evolving area for most software providers and also for most companies. Because the employee engagement area is still evolutionary with companies and with HR, employment engagement tools have yet to reach the same level of maturity as HR core and talent management tools. At a minimum, companies should expect HR software vendors with employee engagement tools to provide easy-to-use interfaces and support for the common mobile device platforms. Must-have elements that companies should also consider include:

  • The ability for employees to collaborate instantaneously on projects no matter where they're located;
  • The ability for employees in large companies to quickly locate a subject matter expert anywhere in the company when an urgent business problem must be resolved;
  • The ability for employees to take company-provided online courses on their mobile devices; and
  • The ability for employees to access the HR system from their mobile devices to update benefits elections.

What are your system implementation and support expectations? HR software should be easy to implement and support, which is why nearly every HR software vendor focuses on eliminating new software adoption pain points, such as integration of the new software with existing company systems, fit (if the software is on-premises) with your existing IT hardware and software, and vendor support for the new software.

However, not every vendor guarantees in specific terms the degree of implementation and support it will provide. That's why it's important to define what's expected of the vendor. Critical areas of system implementation and performance that vendors must provide are:

  • How the new software will be integrated (if integration is necessary) with your company's existing software. Will integration be achieved through APIs or packaged integrations that all of the vendors involved have working agreements to support, or through custom integration?
  • The vendor should have service-level agreements (SLAs) that address its system uptime and support commitment to you (e.g., 24/7 uptime and support), its mean time to response for system problem resolution and for responses to HR and IT questions, and a tested and certified disaster recovery plan.
  • If the vendor is cloud-based, ask whether it runs and owns its own data center or leases from a third party. If it's the latter, ask what type of contingency plan it has in place in the event of a failure at the third-party's data center.
  • Vendor system and data security standards should meet the same standards that your own corporate governance requires.

What is the human resource management software's pricing and ROI? Budget is a key consideration for every company, and so is the ability to have HR tools that are flexible and scalable. HR software vendors are aware of this, and will offer both scalable pricing and scalable software, with cost most commonly based on either per-seat employee use or on per-module software use. These vendors also have preconfigured ROI formulas that will show you how their software will rapidly repay your initial investment. However, companies need to be actively engaged in the pricing and ROI discussion. Here are some critical issues:

  • If feasible, work with HR to establish your own ROI formula for the payback on software investment. There's no set way to devise an ROI formula, because payback (and needs) are unique to every company. However, most companies look at elements such as cost or time savings they expect to achieve by using the new software, or improving results in areas such as recruiting talent, developing talent or being able to retain valuable employees.
  • If you're buying the software, gain a clear understanding of what the primary HR software consists of and which software modules are add-ons that come with additional charges.
  • Assess if the HR solution will require additional investments in IT or HR (e.g., corporate network expansion, more mobile devices, an additional HR person to develop a training curriculum, etc.).
  • Ask if the vendor has a leasing option.

Will the HR solution vendor be a strong business partner? All vendors are likely to offer a fully developed implementation plan for your new software as well as a dedicated project manager who will direct the project and/or co-direct it with you. Most vendors also offer onsite training for your HR and IT personnel on the new software and a capable support organization that stands behind the product.

Ensuring you make a wise decision

Once you've determined your specific needs, it's time to examine the leading HR products. Indeed, there are many variables that need to be evaluated to ensure you make a wise decision when buying HR software.

Next Steps

Learn what HR managers are looking for in new HR systems

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This was last published in April 2015

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Human resource management software: A buyer's guide

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