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HRMS implementation strategies for small business

Here's how small business can stay competitive and benefit from an HRMS implementation, despite challenges, such as limited resources and technical expertise.

HR leaders in small companies often see the benefits of automating their manual processes, just like larger companies...

do, by implementing a human resource management system, or HRMS. However, there are many HRMS implementation challenges unique to small companies. While these challenges can be difficult at times, there is still hope to overcome them if the HR leader is determined to make it happen.

HRMS implementation challenges in small companies

  1. Budget: Getting money to implement an HR system is never easy, no matter the size of a company. Small companies will often direct all discretionary spending to the product or service they deliver and focus less on back-office systems. HR is often seen as transactional, and therefore, the strategic benefits of an HRMS are not as evident.
  2. Limited HR resources: The HR team in a small company may be limited to one or two people, leaving very little time to take on another project, especially one as important as an HRMS implementation. The size of the HR team is something to consider when selecting a system. If there is no HRMS administrator role dedicated to the HRMS, the system must be easy to use and allow HR to streamline processes.
  3. Undocumented processes and policies: Processes and policies are often nonexistent, outdated or only cover a few critical areas. This is a critical requirement to address before starting an implementation.
  4. Data is limited and poorly managed: As employee data is often entered and maintained manually using less-efficient applications (i.e., Microsoft Excel or similar programs), the HR team may record only what is absolutely necessary. In addition, there are often data errors, in part because data may be re-keyed in multiple places, and effective data management may take less precedence over other HR initiatives or day-to-day issues.
  5. Lack of required skill set in HR: In small companies, HR employees may focus on the more traditional HR functions, such as hiring, employee relations and terminating employees. Given this, their skill set may not typically include project management or the technical understanding required to move from current state to a new HRMS.
  6. Few all-in-one HRMS products: There are many vendors who can service small companies. However, their software is typically designed to offer one module in an HR suite, such as recruiting or core employee data. To automate performance management, for example, you may have to use another vendor. This presents many challenges, such as differing user experiences, additional training and the need to set up and maintain interfaces between each application.
  7. Small IT team: While the IT team may be able to help with the selection and implementation of an HRMS, it often has very similar challenges as the HR team -- too much work to take on a new project, manual processes and a long list of requests.

Strategies to mitigate HRMS implementation challenges

Despite these challenges, there are opportunities an HR leader can take to bolster an HRMS implementation in a small company and make it a success. Here's how:

  1. Build the business case step by step: Since the HR team is often stretched, building a good business case may not be something that can be done right away. Instead, keep track of real situations, called use cases, where an HRMS would have helped. One might be a request you receive from an executive that is impossible to answer in a timely manner, such as the amount of time you spend on the onboarding process for new employees, tracking changes, re-keying data in multiple locations, building reports and so on. Also, provide business examples about the benefits of an HRMS to managers and the executive team, such as the improved ability to see employee data at any time without having to ask HR. Record their reactions so you can use them later when building the business case, and address any concern they may have raised at that time.
  2. Take advantage of your network: You may have a colleague at another company who went through your exact situation and has a lot of information and documentation to share. This will save you from doing a lot of research and perhaps having to write a business case from scratch.
  3. Consultants or temporary employees: Since time and skills for an HRMS implementation are so limited, find someone who is willing to work on a tight budget, at least initially, while you build the business case and seek approval for it.
  4. Identify manual and error-prone processes: Look at the tasks you currently perform, and see if there's a more efficient way to accomplish them. Perhaps writing a macro in Excel to streamline the process of creating reports will save you hours every week. It may be as simple as creating an Excel template that employees and managers use to submit information to HR.
  5. Explore low-cost resources: To free up your time, look for low-cost resources that can accomplish your manual, routine tasks. This might be a student, someone new to the workforce or a person wanting to get experience in HR.
  6. Prioritize your HRMS needs: List the functionality you want to automate with an HRMS, such as recruiting, onboarding, core employee data or something else, and identify the critical features to your organization. Then, look for vendors who can satisfy many or all of your key HRMS needs so as to avoid having to integrate multiple products. It may mean settling for reduced functionality in less-critical areas. However, the payoff is a system with a consistent look and feel that allows you to automate manual processes and have few interfaces.
  7. Include payroll and time and attendance in your proposal: Payroll and HR are closely linked, both in terms of data and, in many cases, systems. However, because payroll is so important, your company may be inclined to invest in a better payroll system if you can show a positive return on investment. You can then augment this by identifying vendors who offer an HRMS with payroll and time and attendance. In some cases, the cost of the additional HRMS functionality is much less than if you were to purchase an HRMS on its own and have a separate payroll system. The benefit of the time and attendance component is that it automates a manual process, which also helps track and control a significant cost for a company. One downside to this approach is that, often, these systems were built with payroll in mind first and HR functionality second, so the HR functionality may be more limited than with a pure HR solution.

By keeping your primary goal in mind -- moving from a manual, disjointed process to an automated system -- you will be able to make the hard tradeoffs that are required. There are no simple solutions, but with persistence, a good business case and some creativity, small business HR can benefit from an HRMS just as its peers in larger organizations do.

Next Steps

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This was last published in August 2017

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