Companies are finally wising up to the idea that their most valuable assets are their people.
Six years ago, Canada Post, Canada’s national postal service and seventh largest employer, with 70,000 employees, was under fire. Increasing competition from private carrier companies, such as United Parcel Service Inc. and FedEx Corp., was eating into profits, and the company’s proprietary systems were too slow to handle the rapid change in the industry. “We started to see our growth rates dry up,” says Jamie Esler, a general manager in the human resources department at Canada Post.
To make matters worse, the HR department was burdened with legacy systems that didn’t communicate with one another, and that were too difficult for line-of-business managers to use, which made scheduling and payroll, as well as other employee management, an unwieldy challenge. Executives knew they needed to take drastic measures to bring the organization into the new millennium. “When it came down to replacing those legacy systems with an integrated HR suite, we realized that there were enough inefficiencies in the existing systems that the new systems would pay for themselves,” Esler says. So the company turned to SAP to overhaul its HR, and made a human capital management (HCM) system an integrated part of the package. Today, Canada Post’s HR department digitally tracks employee skills, training priorities, workforce scheduling and a host of other employee-related issues. And by bringing some previously outsourced HR functions back in-house, the company is saving millions every year.
Canada Post’s experience with human capital management software is fairly typical. Yet, while saving a lot of money is never a bad thing, realization of the full promise of HCM—that is, actually turning employee databases into strategic tools that build stronger teams and drive profitability—is still hard to come by. “We’re at the very early stages with HCM,” says Craig Symons, a principal analyst at Forrester Research Inc. “Really only a few innovative companies are getting their hands around it right now.”
The market figures bear that out. According to Gartner Inc., the HCM market is only about $1 billion at the moment. The slow adoption is not all that surprising. The HR department has always been considered an administrative cost center, and the development of human resources management systems (HRMS) that automate many HR functions—and the fact that almost all of these services are now readily outsourced—has many executives wondering what strategic purpose their HR department now serves, and why they should spend anything to upgrade it.
Cutting costs, like in the case of Canada Post, is the easy way to sell HCM to upper management. No one is denying that HCM software can be a valuable cost-cutting tool—such as driving the costs out of e-learning programs and creating the ability to streamline HR operations such as payroll and provisioning.
The more difficult argument to make is that new HCM software applications can provide greater insight into employees’ skills and leadership abilities, and thereby aid in the strategic planning and development of teams.
It has yet to widely prove itself as a truly strategic business tool, and any CIO should think twice before making this significant investment of both time and money.