Financial Performance and HR Technology Adoption

I’ve been watching a pretty interesting dialogue on the HR Technology LinkedIn group titled, “No Link Between HR Technology and Strategic Gain, Say Researchers.” The report that sparked this dialogue was one by two research academics titled, “An evidence-based review of e-HRM and strategic human resource management[1] and is available from Elsevier Publishing for $19.95. One of the authors gave me a copy. It is essentially an in-depth literature search with analysis and commentary covering about 40+ articles and studies done only by academics. One of the authors says, “Unfortunately, there is very limited scientific research (defined as published in academically peer reviewed journals—just the same as in medical research) supporting the claims and expectations for this evolving information technology.” Sigh…will the twain ever meet between academics and practitioners? I count us on the practitioner side.

With the CedarCrestone HR Systems Survey, we’ve worked for 16 years to identify the value of adopting HR technologies. Many other researchers among the consulting and vendor community have as well, and some of the work is excellent (I include ours, of course). We’ve consistently shown a correlation between HR technology adoption and strong financial performance. We’ve even shown cause and effect conclusions several years ago when we did a cross-lag analysis, as have others. We plan to do the same analysis again this year.

Today, we’re publishing a white paper titled, “The Seven Practices of Top Performing Organizations: Highlights and Recommendations from CedarCrestone 2012–2013 HR Systems Survey Results.” Each year, once the CedarCrestone HR Systems Survey closes, we identify the publicly traded survey respondents and collect their financial metrics. Just as Stephen Covey studied highly successful people, we look for highly successful organizations to understand their key practices. The result is the list and recommendations in this report. The differences between the top cohort of 50 organizations and others are striking and consistent. Top performing organizations—by definition—outperform financially. They also maximize the value of their HR technology investments and control costs.

I’m neither an academic nor a statistician, although we use good statistical methods with our Annual Survey (thanks to my kitchen cabinet colleagues: my husband and daughter, both with PhDs that include deep statistical knowledge). I saw a presentation on HR Analytics by Scott Bolman of Mercer in April 2012 that reports there are three key conditions for making cause and effect conclusions: 1) correlation (i.e., between HR technology adoption and company performance); 2) time (directionality that shows the relationship exists over time/causes precede consequences; and 3) isolation (identification of other factors that could influence the outcome are accounted for).

We have shown 1) correlations between HR technology adoption and company performance that shows organizations with selected technologies do better than those without. We have shown 2) over time that this relationship exists—c’mon, I mean year after year since the early 2000s. Technologies such as the help desk for HR or manager self service enable organizations to achieve lower administrative costs, which then contribute to higher operating income growth, and that is a strategic outcome—not sexy, but any CFO wants the cost reduction. Or, those with succession management when applied to all employees and not just executives show higher revenue per employee and, darn tootin’, that’s a strategic outcome! Or, those with performance management and cascading goals show higher operating income growth— another strategic outcome. And I could bore you with other such findings.

Now, in this Seven Practices paper, we are identifying 3) some of the other factors that can also influence the outcome of HR technology adoption being linked to strategic value. These include, among many others, having standardized processes and using change management. Now here’s a problem I see: why would you do those practices if you aren’t adopting new technologies? Would an organization really strive to get strategic value when standardizing a manual process?

One of the dialoguers on the HR Technology LinkedIn discussion mentioned above says, “We’re never going to find a straight line connection between an investment in technology and strategic outcomes. It just doesn’t work that way, there are other variables involved and it’s difficult to isolate one. Show me that creating a business partner role directly leads to more strategic outcomes…or even that introducing a talent management programme specifically leads to strategic results by itself. No, it’s the technology/programme/role, etc. COMBINED with all the other good stuff that organisations do, such as processes, organisation structure, change, mindset.” He sees technology as an “enabler” that glues together other components. I actually think that technology is more than just an enabler. I’ve said, “Technology is a catalyst for change.” For example, when adopting a SaaS HRMS, you likely standardize your processes first.

So, consider this: adopt the seven practices we identify from the top financial performers. I’d pretty much stake a case of wine on a bet that your organization will improve! And check back to see our upcoming work that may show cause and effect too!


[1] Human Resource Management Review: Volume 23, Issue 1, March 2013, Pages 18–36

Emerging Issues in Theory and Research on Electronic Human Resource Management (eHRM)

 

0 replies

Leave a Reply

Want to join the discussion?
Feel free to contribute!

Leave a Reply

Your email address will not be published. Required fields are marked *