CH-13-17 Human Resource Information Systems and International Human Resource Management – Human Resource Information Systems: Basics, Applications, and Future Directions : Chapter Notes

This Document Contains Chapters 13 to 17 Lecture Outline Chapter 13: Human Resource Information Systems and International Human Resource Management CHAPTER OBJECTIVES After completing this chapter, you should be able to do the following: ❖ Understand the differences between domestic-only and international HRM ❖ Identify the types of organizational forms used for competing internationally ❖ Understand the different types of employees who work in MNEs ❖ Discuss the staffing process for individuals working in MNEs ❖ Understand the problems that handling expatriates poses for the IHRM department ❖ Describe the training needs of and programs for international assignees ❖ Reconcile the difficulties of home-country and host-country performance appraisals ❖ Identify the characteristics of a good international compensation plan ❖ Understand the modifications necessary for using HRIS applications in IHRM INTRODUCTION: INCREASTING IMPORTANCE OF INTERNATIONAL HUMAN RESOURCE MANAGEMENT (IHRM) ● Perhaps one of the major changes in the world’s business economy has been the formation of regional free-trade zones. ● The passage of the North American Free Trade Agreement (NAFTA) in 1994 established the world’s largest free market, increasing trade between Mexico, the United States and Canada. ● Subsequently, the European Union (EU) was formed and includes over 25 member countries (a membership that’s still growing) engaged in free trade. ● Other trade agreements, such as the Association of Southeast Asian Nations (ASEAN), the East Asia Economic Group, the Asia-Pacific Economic Cooperation (APEC), and the South Asia Association for Regional Cooperation (SAARC), have improved trading relationships in Asia. ● As illustrated in the diagram in Chapter 1, organizational functioning is contained within a national culture envelope. The host country and its culture will affect all of the factors in the external environment: government regulations, labor market, societal concerns, technology, HRM research, and competition. ● There are a variety of factors that have led to the increased globalization of business and increased the importance of the IHRM function. These factors include the following: o Imported products have increased competition in every nation. Global competition has increased dramatically. o Deregulation in the United States, Germany, and other industrialized countries has changed the domestic business environment in those countries. There has been increased market accessibility. o An increase in international mergers and acquisitions o An increased awareness of the existence of talented human capital in all countries of the world. This availability of talented individuals has helped the globalization process. Globalization means managing human resources around the world. ● One cannot overlook that one of the major factors is the availability and cost effectiveness of computer technology. TYPES OF INTERNATIONAL BUSINESS OPERATIONS International Corporation ● An international corporation uses its existing core competencies to expand operations into foreign markets. These organizations compete in the global marketplace by exporting existing products and eventually opening facilities in other countries. While their corporate headquarters reside in the parent country, international corporations have foreign operations in one or more host countries. ● This type of international business operation presents various unique challenges for the HRM function of the organization. Two issues particularly relevant to international corporations are the host country’s legal system and the host country’s national culture. ● A legal issue might arise because of a country’s minimum wage, for example. In some countries, the minimum wage is relatively high, driving up labor costs. Examples of cultural differences affecting international corporations are communications and morale problems. Multinational Corporation ● A multinational corporation is a more complex international business operation. Multinational corporations operate as fully autonomous units in multiple countries in an attempt to capitalize on lower production and distribution costs. An example of a multinational corporation is General Motors (GM). ● The HRM issues experienced by multinational corporations are similar to those encountered by international corporations, only exacerbated. ● One approach taken by multinational corporations has been to hire expatriates from countries other than the parent country to help with staffing and management issues. Global Corporation ● Global corporations are similar to multinational corporations; however, the global corporations integrate their worldwide operations through a centralized home office. Multinational corporations produce and distribute identical products and services worldwide. Global corporations, on the other hand, emphasize flexibility and mass customization to meet the needs of differing customer groups worldwide. ● Due to the integrative international focus, global corporations must manage their human capital through a transnational HRM system. This type of system is characterized by three attributes: (1) It is essential that HR decisions are made from a global rather than a national perspective. (2) It is important that the company’s management is composed of people from all over the world. (3) It is imperative that decision-making and planning processes include people from a variety of cultures and backgrounds. Transnational Corporation ● A transnational corporation uses an HR approach that is locally responsible to its country location and is focused on being highly efficient, plus emphasizing learning and sharing. Although these distinctions among MULTINATIONAL ENTITIES (MNEs) are important, the actual structure of the MNE determines its effectiveness. There is no “best structure” that fits the distribution and marketing needs of all MNEs. Perhaps having a flexible approach to structure is the best way to manage an MNE. Going Global ● There are a number of challenges that organizations face when going global. The topfour—cultural differences (47%), lack of resources (40%), technology/systems issues (39%), and time zone differences (35%)—are among the top IHRM-related challenges facing global organizations. ● As noted by Beaman (2009), “As expected, the majority of global data maintained is in the core HR (86%) and compensation (71%) areas—the most basic types of information and the most mature areas of HR systems deployment” (p. 4). Note that performance (45%) and payroll (42%) global data are maintained by just less that half of the respondents, whereas talent and benefits have the least global HR data. Differences in HRM in MNEs ● There are the three different types of employees in a typical MNE, as opposed to one type in a domestic firm. ● MNE employees include parent-country nationals (PCNs), host-country nationals (HCNs), and third-country nationals (TCNs). Parent country refers to the country in which the corporate headquarters of the MNE is located while host country refers to the location of subsidiaries. Obviously, TCNs are employees from countries other than the parent or host countries. ● In addition to the three different types of employees, there are also other factors that affect the complexity of IHRM. The complexity of international HR can be attributed tosix factors: (1) more HR activities; (2) the need for a broader perspective; (3) more involvement in employees’ personal lives; (4) changes in emphasis as the workforce mix of expatriates and locals varies; (5) risk exposure; and (6) broader external influences. Managing Different Types of Employees in MNEs ● MNEs are shifting from an expatriate-focused workforce to a global workforce. Thus, it is important to understand a number of cultural differences between expatriates and the host- and third-country workforce. ● Global Diversity and Inclusion: MNEs, in their search for human talent, are focused on a worldwide labor market. This search for new employees as businesses recruits must take account of cultural differences in countries. The arguments for increased diversity and inclusion have their basis in equal employment legislation. However, two additional reasons for increasing diversity and inclusion in MNEs are as follows: (1) the moral issue of discrimination in hiring and promotion on the basis of gender and race and (2) the business case reason that increasing diversity and inclusion will improve the financial position of the MNE. The EIU researched the diversity readiness of 47 countries to create the Global Diversity Readiness Index (DRI), an online spreadsheet tool that is available on the SHRM website (www. shrm. org/diversity). ● Cultural factors include education, politics and law, and economics. Education. Having a workforce of PCNs, HCNs, and TCNs means the educational level of the workforce will be highly varied. It is important for managers to understand and deal with the human capital needs of a highly diverse workforce made up of individuals (1) coming from different cultural backgrounds, (2) possibly speaking different languages, and (3) having different educational experiences. These education differences require that managers provide a supportive work environment for their employees. One important aspect of support is training on (1) cultural differences, (2) verbal and nonverbal communication, and (3) specific skill sets particular to the employee’s job. Political and Legal Systems. The type of HRM practices adopted and how these practices are used will be determined by the political and legal system of the host country. The laws and regulations of the host country are determined in part by the societal norms of that country. Economic System. The economic system of the host country is one determinant of the way in which HR programs and practices are used. The economic system affects human capital through its compensation system. HR PROGRAMS IN GLOBAL ORGANIZATIONS International Staffing ● The complexities inherent in managing a global organization make staffing an especially important part of the IHRM system. When staffing managerial and nonmanagerial positions, the MNE needs to determine if these personnel will be selected from the home-country, host-country, or third-country talent pool. Selecting Global Managers: Managing Expatriates ● One of the most difficult but important responsibilities of the IHRM function is the selection of managers from the parent country, commonly referred to as expatriates, for assignments in the host countries. ● Most of the literature on this topic is focused on the selection of expatriates, whether they be PCNs, HCNs, or TCNs. The reason expatriates can be from any of these three categories is that at the managerial level in an MNE, these individuals will move from country to country to gain international experience for their career development regardless of their home country. Thus, the term expatriate will be used to designate global managers, regardless of the home country. ● It is very difficult to be successful in selecting expatriates due to the following factors: (1) the cultural environment of countries, (2) expatriate failure and its causes, and (3) selection criteria and procedures for expatriates. o The Cultural Environment of Countries. One of the most important aspects of an expatriate’s job that will significantly affect performance is his or her interaction with the local government and people of a country. Most expatriates will experience culture shock as they move from country to country within an MNE. Culture shock is the adjustment that occurs in a relatively short time when moving from one country to another. ▪ Culture has been defined as the collective programming of the mind that distinguishes the members of one group or category of people from another. ▪ The following elements that differentiate countries in terms of their cultural environment for international business: (1) education/human capital, (2) values/ideologies, (3) social structure, (4) religious beliefs, and (5) communication. Expatriate Failure and Causes ● Expatriate failure is defined as the return of an expatriate to the home country before the period of the assignment has been completed. Expatriate failure represents an error in a selection decision. The reason there is such an emphasis on expatriate failure is because of its costs to the MNE. ● The two categories of costs are direct and indirect. Direct costs include the actual money spent on selecting and training, relocation costs for the expatriate (and family), and salary. Indirect costs are harder to quantify, but they could include loss of market share in the country, negative reactions from the host-country government, and possible negative effects on local employee morale. ● What are the causes of expatriate failure? A major factor affecting expatriate failure is the inability to adjust to the new situation and culture by the expatriate and her or his family. The problems reported by expatriates and companies are as follows: o spouse/partner dissatisfaction, o inability to adapt, o difficulties with family adjustment in the new location, o difficulties associated with different management styles, o culture and language difficulties, and o issues associated with the accompanying partner’s career development. o Selection Criteria and Procedures for Expatriates ● The factors involved in the selection of expatriates can be divided into two general categories: individual and situational. o In the individual category are technical ability, cross-cultural suitability, and family requirements. ▪ Technical ability is quite clear and would include both managerial and technical skills. ▪ The second individual factor, cross-cultural suitability, has several aspects, including language ability, cultural empathy, adaptability, and a positive attitude toward the assignment in the specific country being considered. ▪ The third individual factor, family requirements, is often cited as a cause of expatriate failure. The adjustment of the accompanying spouse/partner and children has been well documented as one of the major causes of expatriate failure. o The situational factors that affect the assignment situation are country/cultural, language, and MNE requirements. Country/cultural requirements could include work permits and visas. The opportunity for the spouse/partner and the children to learn another language is sometimes seen as a benefit of the international assignment. MNE requirements could involve getting permission from the host country for the selection of any expatriate. o Selection of expatriates is a critical function of IHRM, particularly in MNEs where expatriate assignments are used to “groom” managers for higher levels of management. Many of the factors to consider in selecting expatriates and the factors causing expatriate failure are handled by training. However, the software applications available can greatly reduce the time required to make this process work. TRAINING AND DEVELOPMENT OF EXPATRIATES ● Training and development activities and programs in MNEs also include expatriates and nonmanagerial employees of all types: PCNs, HCNs, and TCNs. Since traditional training and development were covered in detail in Chapter 13, the use of an HRIS and its applications will still be discussed. ● The corporate IHRM department has responsibility for all training; however, this responsibility is usually decentralized by delegating it to the MNE’s subsidiaries. Most of the local training for nonmanagerial employees will vary by different geographic locations of the MNE. Purpose of Expatriate Training ● The dual purpose of any training program is to inform and motivate employees. In addition to these two purposes of training, the first specific purpose of expatriate training is to supplement the selection process and assist the expatriate and her or his family in adjusting to the new situation. The training program content for expatriates is based on both the selection criteria identified above and the causes of expatriate failure. ● The second specific purpose of expatriate training is economic. When one calculates the potential direct and indirect costs of expatriate failure, the amount of the investment is obvious. The MNE makes a major investment in selecting employees for placement in its subsidiaries, and training programs are another IHRM element used to protect that investment. Predeparture Training ● Since one of the major causes of expatriate failure is the dissatisfaction or lack of adjustment by the spouse, partner, or family, the inclusion of these people in predeparture training is very important. To assist the adjustment of the expatriate and his or her family to a new culture, predeparture training typically includes training in cultural awareness, language, and practical matters regarding daily living in the new culture. Most MNEs will also include preliminary visits as a part of predeparture training. ● Another element in predeparture training that is highly recommended is repatriation training. Repatriation is the process that occurs as the expatriate and family return to their homeland. Transfer of Training ● Predeparture training should not be viewed as a “one size fits all” but rather that the training design and program should be contingent on other factors in the expatriate assignment. The two factors that most affect predeparture training design are (1) the dissimilarity between the expatriate’s native country and the host culture—low to high—and (2) the expected amount of interaction between the expatriate and members of the host country—low to high. ● Based on an analysis of these two factors, the design of the training program can then vary on three dimensions: (1) the training methods used, (2) the level of training rigor, and (3) the duration of the training program. ● Performance Appraisals in MNEs ● Performance appraisal is an important process for documenting the performance of employees, determining areas for development, deciding on pay increases and promotional opportunities, and giving employees the opportunity to express their views. The inclusion of plants with a diverse employee population in multiple countries creates considerable complexity, particularly when the results of the appraisals are being used to move managers from country to country. ● Most vendors of HRIS products have packaged available software applications that can be modified for local conditions in each specific country. Appraising Expatriate Performance ● Important considerations in the appraisal of expatriate performance are who should conduct the appraisal and what performance criteria are specific to the expatriate’s situation. The performance of employees is appraised by their supervisor. Managers of expatriates tend to base their evaluations of the person on the objective criteria used for other employees in similar positions located in the parent country. ● Because of these complexities, it may be most appropriate to obtain multiple ratings of the expatriate’s performance through the use of a 360-degree feedback system. ● Ratings of the expatriate manager’s performance could be garnered from his or her superiors, peers, and subordinates in the expatriate assignment, as well as from the expatriate himself or herself. This would provide a clearer picture of the expatriate’s total job performance. What Performance Criteria Should Be Appraised? ● It is important to evaluate the specific job-related competencies of the expatriate manager. However, assessing the competence of an expatriate is somewhat more complex in that there are qualities they need to possess to perform their role effectively. ● In addition to typical task and contextual performance behaviors, expatriates should be assessed on other behaviors such as cross-cultural interpersonal skills; sensitivity to differences in norms, laws, and cultures of various countries; and the ability to adapt to uncertain and unpredictable circumstances. Appraising Host- and Third-Country Nationals’ Performance ● Appraising the performance of HCNs and TCNs is somewhat different from appraising the performance of domestic employees in the United States. It is important for PCNs to be sensitive to cultural differences when appraising performance. For example, in Japan, discussing the negative aspects of an employee’s performance may be taken as an insult. ● This perception is important since performance evaluations are used to determine pay increases and promotional decisions, training opportunities, and dismissal decisions. These appraisals can help identify individual performance problems that can be solved by training. Managing International Compensation ● The management of compensation in an MNE is one of the most complex but critically important functions of the IHRM department. Its complexity comes from having a mix of PCNs, HCNs, and TCNs within one company and, thus, having to handle wage, salary, and benefits information that differs across countries. ● The HR compensation manager must be aware of differences in taxation, labor laws affecting compensation and benefits, currency fluctuations, and cost-of-living differences within and between countries where the MNE has a presence. ● The criticality of compensation and benefits management by the IHRM rests, in part, on the effects that salary and benefits have on employee motivation. ● The other reason for the critical importance of compensation management in subsidiaries is its link to the strategy of the MNE. The Objectives of International Compensation Policy ● The first objective for an MNE is to align its compensation administration with the strategy of the firm. Compared with the domestic firm, this alignment is much more complex for the MNE. It requires the MNE to have accurate and up-to-date labor market compensation information for all the countries in which the MNE has a presence. o This requirement is one of the most powerful advantages of having an HRIS with labor market information for the HR department. Reports generated from the HRIS would be much more complex in an MNE since multiple countries would be involved, but compensation administration can serve several motivational purposes. It must motivate employees to (1) join the firm, (2) be productive while members of the firm, and (3) stay with the firm. ● The MNE’s second objective is identical but more complicated since multiple cultures are involved. There are clear differences across world cultures in terms of the other factors that motivate employee behaviors. For example, the meaningfulness of the work may be very important in some cultures, whereas the opportunity for promotion would be most important in other cultures. ● The final objective of compensation policy for an MNE is that it must be perceived as fair by the employees. With the mix of employees from different companies (PCNs, HCNs, and TCNs), perceived or real differences in wages or benefits between groups of employees could lead to considerable dissatisfaction among the less privileged groups and, consequently, affect retention of employees. ● The Components of International Compensation Policy ● Are similar to those in a domestic company in that compensation administration has a very close relationship with the strategy of the firm. The Components of International Compensation ● The major components are a base salary and a set of benefits. However, extra pay premiums would be much more complex for an MNE. For example, there may be a foreign service or hardship premium for expatriates, whether they are from the parent or a third country. ● MNEs must also use between- and within-country cost of living adjustments (COLAs) to have an equitable compensation system. Two Approaches to International Compensation ● Going rate approach. In the going rate or host-country approach, the base salary for international employees is tied to the salary levels in the host country. For example, an expatriate would earn pay that is comparable with the salaries of employees in the host country. It should be obvious that HRIS applications for compensation based on the going rate would be useful for establishing initial compensation levels, particularly for expatriates. Having this database would also be quite useful for handling complaints by any MNE employee regarding the equity of his or her compensation. ● Balance sheet approach. The balance sheet approach has as its goal the maintenance of a home-country living standard plus a financial inducement for accepting an international assignment. Although this approach would appear to be more attractive to the expatriate, it has the disadvantage for the IHRM department that it can be very complex to administer. Although the use of software applications and reports from an HRIS can assist in untangling these objective and probably perceived inequalities, it still requires the IHRM professional, along with line managers, to explain these programs to employees. ● To summarize, compensation is probably the most difficult and complex of the HR programs to implement and administer in an MNE. However, it is critically important to the equity exchange (or psychological contract) between the company and its employees. HRIS APPLICATIONS IN IHRM Introduction It should be apparent from the previous sections of this chapter that management—and HRM, in particular—in an MNE is exceedingly more complex than in a domestic firm. International companies in the past were hampered by the lack of sources for and the slowness of transmission of important HR information for effective management decisions. With the current technologies available, difficulties in executing the basic HR functions of planning, recruiting, selecting, training, and managing performance in MNEs have been reduced. Organizational Structure for Effectiveness ● The issue of the most effective structure for the operation of an HRIS in an MNE has been a “moving target. ” The most common advice regarding the management of an MNE has been to “think global, act local. ” However, it has been argued with the changing nature of global business that MNEs should “think local, act global” for HRIS in MNEs. ● A well-established piece of advice in the management literature has been that “structure does not drive success—people do. ” IHRM-HRIS Administrative Issues ● Service-oriented architecture (SOA). One of the most important approaches for handling administrative issues in an MNE is the use of a service-oriented architecture (SOA). An SOA is a paradigm for organizing and utilizing distributed [computing] capabilities that may be under the control of different ownership domains . . . providing a uniform means to offer, discover, interact with, and use capabilities to produce desired [business] effects. ● SOA is focused on providing a service for a function that is well-defined, self-contained, and context and platform independent, a function that adds value to the organization’s business purpose rather than simply being focused on the technology itself. Creating an SOA was a way to use the IT capabilities of an organization more efficiently and would fit the needs of the IHRM function of an MNE. ● Outsourcing, Offshoring, and Insourcing. MNEs were the first organizations to outsource many of their jobs that required low levels of skills (e. g. , call centers). Later many traditional IHRM functions like recruiting and selecting were outsourced. ● There are tremendous financial benefits associated with outsourcing or offshoring; however, many fail because companies outsource dor-offshored HR functions that were a critical part of the primary business of the organization—for example, talent management. Thus, many companies reverted to insourcing certain business processes, particularly those in the HR department. ● Data Privacy and Security. The general cautions and guidelines for maintaining data privacy and security given in Chapters 3, 10 and 16 also apply to MNEs. In addition to the normal safeguards used in a domestic company, the MNE has to create additional ones to be in compliance with security and privacy laws and regulations in different countries. HRIS Applications in MNEs ● Two issues arise when data are shared across wide geographic locations. These are (1) managing the day/time of a transaction and (2) determining where to store the various components of the business application, DBMS, and database. ● To deal with the date and time issues, developers of DBMS such as Oracle, MS SQL Server, and IBM DB2 are building the capability to deal with recording dates and times according to the time zone in which the data originated. So, for example, if a database is stored in London and an employee records a transaction while sitting at a terminal in Los Angeles, in addition to the time (say 1 P. M. in Los Angeles), the time zone (−08:00Greenwich Mean Time) is also stored with the transaction. ● As part of a global information system design, organizations have chosen to break their business application and DBMS into components, often called tiers. Traditional client–server architectures broke an application into two tiers, typically with the user interface and some business logic on the user’s computer, such as a PC (the client) and the database and mainstream parts of the application stored on a server. In today’s global environment with high-speed data networks, N-tier architectures exist with databases and applications being distributed among many different computers around the world. ● A centralized database allows a company to confine its data to a single location and, therefore, more easily control data integrity, updating, backup, query, and control access to the database. A company with many locations and telecommuters, however, must develop a communications infrastructure to facilitate data sharing over a wide geographical area. The advent of the Internet and a standardized communication protocol made the centralized database structures and geographically dispersed data sharing feasible. CHAPTER SUMMARY Globalization is a reality. Twenty-five years ago, it was the reality primarily for major corporations such as GE and IBM. Now, it has become increasingly important for midsized firms—the fastest-growing group in all countries. This chapter has examined the implications of this globalization on the HRM function in MNEs and has documented the explosion of the HRM function into a separate field, IHRM. How IHRM has become increasingly complex by expanding on the traditional HR functions of selection, training, and compensation was also covered. The complexity of having a diversity of employees (PCNs, HCNs, and TCNs) and of contending with the varying laws and practices of the countries dictated that MNEs abandon the paper-and-pencil system for computer technology. The advantages of having employee information stored, manipulated, and reported using computer technology were discussed relative to the use of these capabilities in multiple IHRM programs. However, some of the more critical information that an HRIS can store, analyze, and produce reports on is the cultural and legal profile of countries. This information is valuable in all of the activities and programs of the IHRM department and significantly influences the management of the many parts of an MNE. Lecture Outline Chapter 14: HR Metrics and Workforce Analytics CHAPTER OBJECTIVES After completing this chapter, you should be able to do the following: ➢ Discuss the factors that have led to increased organizational interest in HR metrics and workforce analytics ➢ Discuss why the information from numeric systems like HR metrics and workforce analytics do not generate any return on investment (ROI) unless they lead to different and better decision making ➢ Discuss the difference between metrics and analytics ➢ Describe the limitations of the traditional HR metrics ➢ Discuss the historical role of benchmarking and its strengths and weakness today ➢ Discuss the roles that activities such as data mining, predictive analytics, and operational experiments play in increasing organizational effectiveness ➢ Discuss the differences between metrics and analytics for HR efficiency, operational effectiveness, and organizational realignment. Offer examples of each. ➢ Describe which characteristics of HR metrics and workforce analytics are most likely to have organizational impact INTRODUCTION ➢ Human resources (HR) metrics and workforce analytics have become a hot topic in organizations of all sizes. Interest is rising, and organizations are reaching out to learn more about metrics and analytics and how they can use them to improve organizational effectiveness. ➢ These changes fundamentally altered the dynamics of human capital assessment in organizations, driving the marginal cost of assessment lower while providing the potential for near real-time analysis and distribution of information. ➢ An important driver is the widespread implementation of integrated HRIS. The adoption of these systems shifted what had been primarily paper-and-pencil processes to electronic processes and, as a result, greatly increased the capacity of organizations to access and examine transaction-level data. Today’s HRIS builds on the capabilities of faster and more capable computers, improved connectivity through organizational networks and the Internet, and the availability of user-friendly analytics software. ➢ These changes, combined with recent and growing interest in evidence-based management, have produced a rapidly growing interest in HR metrics and workforce analytics. A Brief History of HR Metrics and Analytics ➢ Systematic work on the development of measures to capture the effectiveness of an organization’s employees can be traced as far back as the days of scientific management (Taylor, 1911) and industrial and organizational psychology (Munsterberg, 1913). ➢ Methods of quantitative analysis and its use in decision making were developed during World War II. Further development occurred during the postwar industrial expansion in the United States. Many of the most common HR metrics in existence today were first considered and developed during this period (e. g. , Hawk, 1967). ➢ The HR metrics most frequently used in organizations can be traced to the pioneering work of Dr. Jac Fitz-enz and the early benchmarking work he conducted through the Saratoga Institute in 1984. These metrics were developed through the joint efforts of the Saratoga Institute and the Society for Human Resource Management (SHRM). ➢ Kaplan and Norton’s (1996) introduction of the balanced scorecard further refined managers’ thinking about metrics. Balanced scorecards focus on developing leading indicators of performance from several important perspectives, including customer satisfaction, process effectiveness, and employee development, as well as financial performance. Limitation of Historical Metrics ● Unfortunately, while the computing, communications, and software infrastructure supporting HR metrics and analytics has undergone dramatic change since the late 1990s, the metrics themselves have not. Current computing operations are capable of capturing data on a wide range of electronically supported HR processes, extracting, analyzing, and then distributing that information in real time to managers throughout the organization. However, currently popular HR metrics were developed before current computing infrastructures existed. As a consequence, recognizing what data most organizations could easily and inexpensively gather played an important role in identifying which metrics could reasonably be included in benchmark studies. ● Consequently, these metrics emphasize costs or easily calculated counts (e. g. , head count and turnover) that often serve as proxies for costs. Every managerial decision has cost and benefits consequences, whether we recognize them or not. As a result, when metrics and analytics systems only provide information about costs, they are of limited value to managers. If managers are only provided information about costs, with little or no information about benefits, costs are likely to become the primary driver of managerial decisions. This perpetuates the still common perception of HR as a “cost center. ” Thus, information on benefits from a managerial decision must also be known in order to conduct an estimated return on investment (ROI) for the decision. ● A second limitation of early metrics efforts is that they tended to aggregate data to the level of the organization. As such, they offer limited information that could be used to identify and diagnose within-organization differences. Organizational turnover rates, for example, are heavily influenced by the turnover rate in the organization’s dominant job category, masking any differences in turnover rates for jobs with fewer incumbents. ● Finally, early efforts only provided data after events had occurred. This results in slow responses to problems or opportunities. Because they provide data afterthefact, these are described as feedback metrics. Feedback metrics can be effectively used to signal problems, but they are suboptimal as a primary source of data because they do not support real-time remedial action to minimize any negative effects. Contemporary HR Metrics and Workforce Analytics The following points should be emphasized for this section of this chapter: ● The field of HR metrics and workforce analytics is currently in transition. Because of the development of strong computer-based communications and greater access to data through integrated human resource information systems, organizations are more consistent in the reporting of HR metrics. ● It is important to recognize that many organizations use metrics to measure or audit their HR programs and activities. Historically, the use of such audit metrics to measure the effectiveness of HR was identified by Cascio (1987) and Fitz-enz and Davidson (2002). ● Early efforts in benchmarking were primarily conducted using paper-and-pencil processes. As a consequence, recognizing what data could be easily and inexpensively gathered (usually from accounting systems) defined which metrics to include in benchmark studies of HR effectiveness. ● The Main Objective of HR Metrics and Workforce Analytics ● The emphasis on improving managerial decisions changes the dynamics driving metrics and analytics assessment efforts. It is not simply good enough to “do” metrics and analytics. These activities need to increase the possibility that access to the information from these efforts will change managerial decisions, making them more effective. Using HR Metrics and Workforce Analytics ● There is a fundamental distinction between HR metrics and workforce analytics. Metrics are data (numbers) that reflect some detail about given outcomes (e. g. , success in recruiting new employees). These metrics reflect characteristics of the organization’s HR programs and activities. Analytics refer to strategies for combining data elements into metrics and for examining relationships or changes in metrics. Workforce Analytics ● Workforce analytics refer to strategies for combining data elements into metrics and for examining relationships or changes in metrics. Understanding these combinations is done to inform managers about the current or changing state of human capital in an organization in a way that can impact managerial decision making. ● The importance of this view is that the analytics an organization needs depend on the problems and opportunities that currently face its managers. Understanding what opportunities and problems managers face suggest relevant analyses that can support better decisions. These analyses then determine what metrics that the organization needs in order to compute these analyses and how those metrics should be calculated. Benchmarking ● The Saratoga Institute’s benchmarking efforts were the first to develop information on standard HR metrics regarding the use and management of human capital. Benchmarking data is useful in that it provides insights into what is possible. ● However, a challenge in using HR metrics as benchmark data is that an organization’s human resource practices and the use of its HR staff reflect current challenges facing that organization. As a result, most organizations have an HR department, but the specific functions performed by these departments vary widely across organizations. ● Consequently, direct comparisons of HR benchmarking data from one’s own organization to data from other organizations may not provide realistic guidelines for either goal setting or forecasting the potential effectiveness of remedial actions an organization might undertake. Data Mining and “Big” Data ● Interest in data mining human capital information has been on the rise since the implementation of integrated HRIS and digitized HRM processes. ● Data mining refers to efforts to identify patterns that exist within data and that may identify unrecognized causal mechanisms that can be used to enhance decision making. To identify these causal mechanisms, data mining uses correlation and multiple regression methods to identify patterns of relationships in extremely large datasets. ● Data mining has a number of important applications, but the caveat with its use is that it can also uncover spurious and nonsensical relationships (e. g. , taller employees make better leaders; older employees have longer tenures). ● Current interest in Big Data reflects efforts to analyze the extremely large data sets created by many transaction systems. Often these datasets can be many terabytes (210 gigabytes) or more. ● Many Web-based applications and transaction sites, like those generated by Amazon. com, Google, and many social media sites generate large numbers of transactions. ● Efforts in Big Data reflect attempts to mine these very large data sets for patterns that can provide additional insight for managers about customer preferences or process characteristics that managers can use to drive greater sales, gain higher customer satisfaction, and reduce costs. Predictive Analyses ● Predictive analysis involves attempts to develop models of organizational systems that can be used to predict future outcomes and understand the consequences of hypothetical changes in organizations. ● For example, if the organization discovered a correlation between employee job satisfaction and turnover, HR could use this data to suggest modifications to the employees’ work situation or their benefits. ● Efforts to develop balanced scorecards are examples of elementary predictive systems. They involve identifying leading indicators of important organizational outcomes and the nature of the relationships expected to lead to them. Engaging in efforts to test the assumptions in these models over time can lead to enhancements in the quality of the models’ underlying predictive analyses, either by identifying additional leading indicators or better specifying the nature of the relationships between predictors and outcomes. Operational Experiments ● The evidence-based management movement argues that managers should base their decisions on data drawn from the organization and evidence about the actual functioning of its systems rather than using personal philosophies or untested personal models or assumptions about “how things work. ” One of the most effective methods for developing the evidence on which to base decisions is through operational experiments conducted within the organization. ● Google uses operational experiments to test the effectiveness of the ad words used on its website. Rather than simply relying on intuition or “expert judgment” about which ad wording is more effective, it creates an experiment. It configures its site to alternate the presentation of competing ad text to visitors to its site and then tracks the number of “click-throughs” on the ad for a period of time. Given the large number of daily hits, Google can get objective data on the effectiveness of the various ads in a relatively short time and then adopt the ad wording demonstrated to be most effective. Workforce Modeling ● Workforce modeling attempts to understand how an organization’s human capital needs would change as a function of some expected change in the organization’s environment. This change may be a shift in the demand for the organization’s product, entry into a new market, divestiture of one of the organization’s businesses, or a pending acquisition of or merger with another organization. This process involves establishing a human resources planning (HRP) program, which is covered in more detail in Chapter 11. HR METRICS, WORKFORCE ANALYTICS, AND ORGANIZATIONAL EFFECTIVENESS ● HR professionals tasked with reporting metrics often question whether these efforts have had a significant impact on organization effectiveness. They report frustration with their inability to get managers to (a) tell them what information they need, (b) use the HR metrics information included in existing reports, or (c) even acknowledge receipt of the reports. These perceptions represent a fundamental problem in the approach organizations’ take toward the utilization of metrics and analytics. ● HR metrics and analytics compose an information system, and information systems can only have an impact on organizations if, as a result of the information they receive, managers make different and better decisions than they would have without that information. Better Problem Solving and Decision Making In organizations, decisions result in tactical choices that may be among alternatives to achieve specific outcomes or in response to specific problems. Making these decisions requires three things: (1) understanding the outcomes that one is attempting to achieve, (2) understanding the factors that influence those outcomes and their current states, and (3) knowing available tactical options and their costs. For an HRIS that can produce metrics and analytics to improve decision making requires that these sources of information do influence decision makers to choose to make different and better decisions. A Common and Troublesome View A common perspective adopted in many organizations is that data elements lead to metrics. These metrics can then be combined in various analyses that can then be reported to managers who use the information in these analyses to drive decision making. This view was dominant in the development of many metrics and analytics over the last decade. However, the problem with this approach is that it is not clear which data elements are relevant, and there is no basis for guiding how they should be combined into metrics or how those metrics should contribute to analytics. A more effective approach is to start with the problems or opportunities faced by the organization and develop an understanding of what information is likely to be useful to managerial decisions. An understanding of these problems determines the analytics that will be useful in improving organizational effectiveness. These analytics then determine which metrics are relevant to the analysis of the decision situation. The difference in these two approaches is dramatic. The latter one is targeted at specific managerial decision situations while the first one does not have this focus. All organizations have ultimate outcomes of interest. For profit businesses, these ultimate outcomes center on some combination of revenues and costs. But how those outcomes are achieved is often the result of complex sequences of processes that form causal chains producing the outcome of interest. For example, generating a high-performing sales force requires that high potential sales people first recognize sales as a potential career. Then, they must apply for sales positions when they become available; they must be recognized as potential high performers during selection processes. Next, they must accept job offers when they are extended, be effectively on-boarded to the organization, be trained effectively, and be appropriately supervised so that they choose to remain with the organization. Each of these data points reflects an intermediate outcome that may be influenced by earlier outcomes and may influence subsequent outcomes. Further, each outcome itself may be capable of being influenced by the actions of an organization’s employees. Linking these outcomes creates a framework of useful organizational metrics and analytics. These intermediate outcomes are potential avenues for influencing ultimate outcomes and tracking relevant metrics that can give managers the capability to determine where managerial intervention may be most effective. Lermusiaux argues for a new metric, return on workforce (ROW),which monitors and best reflects the value that the total talent returns to the organization. ROW is calculated as follows: Return on Workforce = Operating Income divided by Total Labor Cost. Then, the identification of the action–outcome sequence leading to ROW could be determined by working backward from ROW, which would constitute the Ultimate Outcome. Of course, there are statistical analyses, like regression, that could be used to define the outcomes at each step, but they require historical data on all of the HR programs. Opportunity Domains of HR Expertise Excellence in human resources functioning requires three sets of expertise. First, an organization must have access to the knowledge in centers of excellence to potentially change the activities of HRM. This access to knowledge refers the “know-how” required to deploy available human resource programs (e. g. recruitment, selection, job design, etc. ) to improve organizational effectiveness. A second set of expertise exists in HR’s business partners. Whereas the centers of excellence represent the technical expertise of internal HRM professionals, these external business partners can work with managers from other functional departments (e. g. , production and marketing) to examine the organization’s business and processes to understand how HR programs can support these processes. The third set of expertise is administrative process efficiency. This sort of HR efficiency refers to the capacity to conduct existing HRM processes accurately and on time while minimizing costs. HR Process Efficiency Each of the three areas of expertise represents a separate domain in which organizations can conduct both metrics and analytics work. Currently, most metrics focus on the third set of expertise: administrative process efficiency. These metrics focus on how well the HR department accomplishes its critical processes to support organizational effectiveness. However, process administration is only desired to support the company’s operating departments in pursuit of their goals. Organizational Effectiveness HR metrics and workforce analytics focused on organizational process improvement are primarily focused outside the HR department. The objective is to utilize the technical competence of the HR professionals in HRM to achieve the outcomes that are the business units’ operational metrics (i. e. , percentage of on-time deliveries). Analyses will focus on what changes in HRM practices can help organizations or specific business units improve their operational effectiveness and, in turn, improve organizational effectiveness. Strategic Realignment Strategic realignment involves the set of activities most commonly known today as human resource planning (HRP; for more detail, see Chapter 11). These planning efforts focus on long-term plans for needed strategic changes in the organization. Strategic realignment also extends the use of HRM analytics to planning for new situations and circumstances (i. e. , mergers, acquisitions, divestitures, or entries into new geographic or product markets). In sum, all three areas of expertise are important. HR managers must to be able to demonstrate their capacity to use metrics and analytics to manage their own operations well, and then, others will be more likely to listen to their recommendations. MEASUREMENT, METRICS, AND ANALYTICS BASICS Getting Started When undertaking a metrics and analytics effort, the first question the organization needs to answer is what problems in the organization are worth solving, or what opportunities for enhancing organizational effectiveness exist? The Role of “Why?” An important test of the appropriateness of outcome metrics is the “why” test. When one considers a potential outcome variable, it is useful to ask why the organization is interested in that particular outcome. Putting HR Metrics and Analytics Data in Context Reporting HR metrics data alone is ineffective in leading to improvement in managerial decision making. Data points representing important organizational outcomes become useful when the decision maker can attach some meaning to them. Often data will need to be placed in context. For example, that an organization’s turnover level for newly hired management trainees is 13% is more meaningful when it can be placed in the context of the organization’s previous turnover history for this position. Benchmarking is a second method for adding context to an organization’s metrics. Data on metrics from other organizations in the same industry can provide information that offers insight into an organization’s performance relative to its peers. Reporting What We Find For individuals conducting metrics and analytics work, paying attention to the capabilities and needs of the targeted audience is critically important. The information reported must be relevant to the issues facing the managers who receive it. Further, simply providing numbers to managers is unlikely to be of much use to them until they can understand the meaning of the information for their decision situations. HR metrics and analytics information can be reported in a number of ways. Generally, a combination of “push” and “pull” means of communication will work for most organizations. Push systems like e-mail are excellent for getting information to decision makers. Pull systems are ways of making information available to managers so that they can access any of it at a point in time when it will be most useful for their decision making (e. g. , posting HR metrics and analytics analyses and reports on internal company websites). Dashboards Dashboards are a component of reporting. Dashboards reflect efforts to align real-time analysis of organizational and HR processes, as well as an increased capacity to aggregate organizational data. Infographs In many instances, pictures can provide a more compelling way to present the story resulting from an analysis, particularly when that story is based on complex analyses that build upon insights from a number of different data sources. Infographs combine a number of data elements, often incorporating pictures, figures, tables, and text to help tell a story more effectively than can be done by any of these elements. Useful Things to Remember About HR Metrics and Analytics Don’t “Do Metrics” The primary objective of developing capabilities in HR metrics and workforce analytics is to increase organizational effectiveness. It is not simply to generate a static menu of HR metrics reports. Bigger Is Not Always Better The success of any metrics and analytics project is not measured by how many people are involved, how many metrics it tracks, or how many people receive reports. It is gauged by the impact that the project’s results have on managerial decisions. HR Metrics and Analytics Is a Journey—Not a Destination Because the focus is on identifying and responding to opportunities and problems, useful and effective HR metrics and workforce analytics projects change over time. These changes will require adjustments in the ideal size, skill requirements, and deployment of an organization’s human capital. Be Willing to Learn Organizations that have an HR metrics and analytics function will develop a bias for experimentation to try out new HR activities, programs, or processes. One consequence of organizational life is the ongoing opportunity to recognize that there may be a better way to do things than your current approach. Avoid the Temptation to Measure Everything Aggressively Not every HR function, process, or metric that can be analyzed should be. Successful efforts will focus on those things, at a given point in time, that are most likely to have the greatest impact on managerial decision making. HR Metrics and the Future The development of useful and effective HR metrics and workforce analytics is likely to be viewed in the future as a very significant source of competitive advantage. We now have the tools and the computing infrastructure to handle these projects that can help us understand organizations and support effective organizational functioning. By using HR metrics and workforce analytics, decision makers will acquire the ability to more effectively manage and improve HR programs and processes, as well as to improve the effectiveness of HRIS use. Using this acquired ability, managerial decision makers may be able to modify entire employment systems to manage the company’s human capital more effectively. Some managerial benefits of metrics for organizations are as follows: ● Operational reporting is more efficient and cost-effective because the data from individual applications is integrated and accessed through a single solution. ● Graphically rich information is available to the people who need to make decisions and show metric-based results. ● Real-time analytics demonstrate the true relationship between workforce investments and the organization’s bottom-line financial, customer, and operational results. ● Human resources practices and investments can be optimized to meet enterprise performance goals. ● CHAPTER SUMMARY The central focus of this chapter was to define the domain of HR metrics and workforce analytics and discuss how they can contribute to improving organizational effectiveness. HR metrics are data elements that contribute to analyses that provide information to help decision makers in organizations make better decisions. HR metrics and analytics activities provide no return on the organization’s investment unless managers make different and more effective decisions as a result of the information provided by metrics and analytics reports. Therefore, focusing the development of HR metrics and workforce analytics on organizationally important problems and opportunities is likely to increase the possibility of significant returns for the organization. This chapter also highlights the wide range of activities that fall within the domain of HR metrics and workforce analytics. Although classic metrics offered some value in the past, new computing infrastructures offer tremendous opportunities to change both the metrics and types of analyses organizations undertake. We can expect both the types of metrics organizations use in the future to change as the needs of decision makers change and as these analyses continue to work toward effectively balancing the cost and benefit consequences of decisions. Components of this continued evolution of metrics and analytics capabilities are driven by increased use of both push and pull reporting systems, more extensive use of predictive analytics and operational experiments, and the development of organizational expertise in metrics and analytics capability. As these skills mature, organizations will be able to move beyond simple analyses of HR efficiency metrics to a greater emphasis on operational effectiveness and organizational realignment analyses, which will further enhance the value of HR metrics and workforce analysis systems. Lecture Outline Chapter 15: HRIS Privacy and Security CHAPTER OBJECTIVES After completing this chapter, you should be able to describe the following: ❖ The importance of information security and privacy in today’s technology-intensive and information-driven economy ❖ The important components of and threats to information security ❖ The legal requirements pertaining to information security and privacy ❖ Best practices in safe information-handling procedures INTRODUCTION Information privacy and security are particularly important issues for HRIS because unlike many other organizational systems, an HRIS includes a great deal of confidential data about employees, such as Social Security numbers, medical data, bank account data, salaries, domestic partner benefits, employment test scores, and performance evaluations. Therefore, it is critical for organizations to understand and pay close attention to what employee data is collected, stored, manipulated, used, and distributed—when, why, and by whom. Organizations also need to carefully consider the internal and external threats to this data and develop strong information security plans and procedures to protect this data and comply with legislative mandates. Doing this is much more complex than it was 30 years ago. Consider that most computers at that time were mainframes that were secured in a central physical location, with very few HR staff having access to them. If an HR staff member had access to the mainframe, it was through “dumb” terminals with limited functionalities, and access was easily restricted through physical access and passwords. Due to this closed environment, there was little threat of security breaches or vulnerabilities being exploited. During those days, information security was considered to be a process that was composed mostly of physical security and simple document classification schemes. Physical theft of equipment, espionage, and sabotage were considered the primary threats. However, starting in the 1990s, as computer networks became more common, threats to information security became more involved due to presence of enterprise-wide systems. There is a growing concern about the extent to which these systems permit users (both inside and outside of the organization) to access a wide array of personal information about employees. As a result, employees may perceive that if these data are accessed by others, the information contained in their employment files may embarrass them or result in negative outcomes (e. g. , denial of promotion or challenging job assignment). Recent research suggests that this concern may be well founded. For example, one report indicated that over 500 million organizational records have been breached since 2005, and there has been a rise in the theft of employment data (Privacy Rights Clearinghouse, 2010). In view of the growing concern about identity theft and the security of employment information in HRIS, a number of states (e. g. , AK, CA, FL, HI, IL, LA, MO, NY, SC, and WA)passed privacy laws requiring organizations to adopt reasonable security practices to prevent unauthorized access to personal data (Privacy Protections in State Constitutions, 2012). Despite these new laws, results of surveys revealed that43% of businesses stated that they did not put any new security solutions in place to prevent the inadvertent release or access to employee data, and almost half did not change any internal policies to ensure that data were secure. The cost of these data breaches can be large. For example, the average cost of a data breach has increased to almost $7 million per firm. In addition, a recent study by McAfee estimated that global economic losses due to information security breaches amounted to over $1 trillion. Software vendors such as Oracle, are aware of the potential for security breaches and offer multiple security models (e. g. , Standard HRIS Security and Security Groups Enabled Security) that enable an administrator to set up HRIS security specifically for an organization. This means that the software allows companies to determine the kind of data access and responsibility each employee has. EMPLOYEE PRIVACY The U. S. Fair Labor Standards Act of 1938 requires employers to maintain basic information on all employees, including Social Security number, address, gender, occupation, pay, and hours worked. However, the increased use of HRIS to store these data has prompted concerns about the degree to which these systems have the potential to invade personal privacy. Information privacy has been defined as the “degree to which individuals have control over the collection, storage, access, and release of personal data. ” Unauthorized Access to Information One reason that employees are concerned about the storage of data in an HRIS is that they fear that these systems may allow unauthorized access to their private information. For example, employees may perceive that if users have access to their Social Security numbers or bank data, they will experience identity theft. In fact, some reports indicate that identity theft is the primary consequence of the breach of HRIS data (Privacy Rights Clearinghouse, 2010). Similarly, if unauthorized users have access to medical data or domestic partner benefits, then employees feel that they will experience embarrassment or loss of job opportunities (e. g. , promotions, pay raises, or challenging job assignments). Some research also indicated that employees were more likely to perceive an HRIS as invasive of privacy when they were unable to control access to their personal data, and information was accessed by users outside the organization than those inside the organization. Results of other research revealed that the use of an HRIS was perceived as invasive of privacy when (a) supervisors were able to access information in employee records, (b) the same data were used for employment rather than HR planning decisions, and (c) the employees did not have the ability to check the accuracy of the data before decisions were made. Unauthorized Disclosure of Information Another concern about the use of HRIS is that employees may perceive that these systems allow for the unauthorized disclosure of information about them to others. For example, research revealed that 70% of employers regularly disclose employment data to creditors, 47% give information to landlords, and 19% disclose employee data to charitable organizations. In addition, some reports indicated that organizations regularly sell data collected on recruiting websites. Furthermore, 60% of employers do not inform applicants or employees when they disclose information within or outside the organization (Society for Human Resources Management & West Group, 2000). Data Accuracy Problems Employees are also troubled about data accuracy because HRIS may contain inaccurate or outdated information about them. Not surprisingly, individuals are often unaware that data in these systems are inaccurate, and many organizations do not give them the opportunity to review or correct data stored in HRIS. In support of these arguments, Linowes (2000) found that 72% of private-sector organizations do not allow employees to review their employment records for inaccurate data, and 24% do not give them the opportunity to correct their records. In addition, research by Stone et al. (2001) found that individuals were more likely to perceive that their privacy had been invaded when they were not able to check the accuracy of data in an HRIS system than when they were allowed to check the accuracy of data. Thus, employee concerns about the degree to which inaccurate data may unfairly stigmatize them or affect their outcomes in organizations appear quite justified. Stigmatization Problems Employee are often uneasy about the use of HRIS, especially when they feel that networked data may lead to them to be stigmatized or deeply discredited in employment. Use of Data in Social Network Websites Recently, organizations have started collecting and using data about applicants and employees from social network websites (SNWS) (e. g. , Facebook, MySpace, Google+). For instance, organizations now use SNWS to collect information about job applicants’ lifestyle, family background, friends, sexual orientation, religion, political affiliation, and personal interests. Estimates indicate that between 20% and 40% of employers now scan SNWS to gather data about job applicants, and 75% of recruiters are currently required to do online research on applicants before making hiring decisions. Lack of Privacy Protection Policies Despite the widespread use of HRIS and growing concerns about the (a) unauthorized access, (b) unauthorized release, (c) data accuracy, and (d) use of data to stigmatize employees, many companies have not established fair information management policies to control the use and release of employee information. COMPONENTS OF INFORMATION SECURITY Brief Evolution of Security Models The complexity of the networked environment in which HR data is captured, stored, and utilized means that personnel transactions and information processing are increasingly more vulnerable to security threats and risks than ever before. Therefore, the traditional CIA model of information security does not suffice. The National Security Telecommunications and Information Systems Security Committee (NSTISSC) security model, also known as the McCumber Cube, provides a more detailed perspective on security. The McCumber Cube provides a graphical representation of the architectural approach widely used in information security. It examines not only the characteristics of the information to be protected but also the context of the information state. The Cube allows an analyst to identify the information flows within an HRIS, view it for important security-relevant factors, and then map the findings to the cube. The cube has three dimensions. If extrapolated, the three dimensions of each axis become a 3 × 3 × 3 cube with 27 cells representing areas that must be addressed to secure a modern-day information system. ● Desired Information Goals – Ensure that data is kept confidential, has not been manipulated, and is available to those who are authorized to access it. ● Countermeasures – Identify mechanisms that can be used to protect data. ● State of Information – Identify the state in which data are currently residing. ● SECURITY THREATS What kind of threats are our organizational security practices protecting us from? In security, it is important to “know your enemy. ”The following are common security threats: ● Threat Sources ♦ Human error: When an HRIS is not well designed, developed, and maintained and employees are not adequately trained, there is a high potential threat of security breaches. Research suggests that human errors, such as incorrectly entered data or accidental destruction of existing data, constitute security threats to the availability, accessibility, and integrity of information ♦ Disgruntled Employees and ex-employees: One of the concerns overlooked by HR managers is that information may be damaged by disgruntled employees. This is commonly referred to as an insider threat. Employees and ex-employees are dangerous since they have extensive knowledge of systems, have the credentials needed to access sensitive parts of systems, often know how to avoid detection, and can benefit from the trust that usually is accorded to an organization’s employees. ♦ Other “Internal” Attackers: Many businesses hire contract workers, who work for the organization for a short period. Contract workers usually gain temporary access to various critical areas of an organization. This creates risks almost identical to those created by employees. ♦ External Hackers: Another significant threat is the penetration of organizational computer systems by hackers. A hacker is defined as someone who accesses a computer or computer network unlawfully. Such attacks, often termed intrusions, can be particularly dangerous because once the hacker has successfully bypassed the network security, he or she is free to damage, manipulate, or simply steal data at will. ♦ Natural disasters: Typical forms of natural disasters are floods, earthquakes, fires, and lightning strikes, which destroy or disrupt computing facilities and information flow. ♦ Types of Threats. ♦ Misuse of computer systems: One of the predominant internal security threats is employees’ unauthorized access to or use of information, particularly when it is confidential and sensitive. ♦ Extortion: The perpetrator tries to obtain monetary benefits or other goods by threatening to take actions that would be against the victim’s interest. ♦ Theft: The value of information can be much higher than the price of hardware and software. With contemporary advances in technological developments, a relatively small computer chip (e. g. , a USB device) can easily store over 100 GB of data. For example, the State of Hawaii’s HR department had medical records stolen when doctors’ offices of two doctors servicing workers compensation claims were burglarized. ♦ Computer-based fraud: There is growing evidence that computer-based fraud is widespread. Over 90% of companies have been affected by computer-based fraud, such as data processing or data entry routines. ♦ Cyber terrorism: Cyber terrorism is the lever aging of an information system that is intended to intimidate; cause physical, real-world harm; or cause severe disruption of a system’s infrastructure. In one such scenario, a person with high-level computer and network skills (e. g. , a hacker) is hired to break into a specific computer or computer network to steal or delete data and information. Cyberterrorists often send a threatening e-mail stating that they will release some confidential information, exploit a security leak, or launch an attack that could harm a company’s systems or networks. ♦ Phishing: Victims usually receive e-mail messages that appear to come from an authentic source with which the victim does business. The official appearance of the message and the website often fool victims into giving out confidential information. According to Gartner, the estimated cost of phishing is around $2 billion. ♦ Denial-of-service: A denial-of-service (DoS) attempts to make a service unavailable for legitimate users by flooding it with attack packets. The server that is hosting that service is then unable to handle the large number of requests, thereby shutting it down. The financial services sector has been hit particularly hard by this type of attack. For example, Bank of America and JP Morgan Chase have both experienced outages on their public websites due to DoS attacks (Holland, 2012). ♦ Software Threats ♦ A computer virus is a type of malware that works by inserting a copy of itself onto a computer or device (e. g. , smartphone) and then becoming part of another program. It can attach itself to files without the user’s knowledge and duplicate itself by executing infected files. When successful, a virus can alter data, erase or damage data, create a nuisance, or inflict other damage. ♦ Worms are, in some ways, similar to viruses since they can replicate themselves. However, unlike viruses that require the spreading of an infected file, worms such as Code Red, Slammer, and My Doom can spread by themselves without attaching to files. ♦ Spyware is software installed on an unknowing user’s computer that gathers information about the user’s activities on the Web (keystrokes, websites visited, et cetera) and transmits it to third parties, such as advertisers or attackers. Problems associated with spyware include potential privacy invasion, appropriation of personal information, and interference with the user’s computer operation. ♦ Blended threats: These threats propagate both as viruses and worms. They can also post themselves on websites for people to download unwittingly. ♦ Trojan is another type of malware that usually hides inside e-mail attachments or files and infects a user’s computer when attachments are opened or programs are executed. Trojans are named after the Trojan horse of Greek mythology in that they appear to be something positive but are, in reality, doing something malicious. Unlike viruses and worms, Trojans do not reproduce by infecting other files nor do they self-replicate. Instead, they must be opened on a computer by a user. Some Trojans can work as spyware while others can display a login or install screen and collect personal data, such as usernames and passwords or other forms of identification, such as bank account or credit card numbers. They can also copy files, delete files, uninstall applications using remote access programs on the computers, and format disks without alerting the victim. Information Policy and Management It is important that organizations have policies and procedures in place to protect employee data. There are two mechanisms though which this can occur: fair information management policies and strong security practices. One way to decrease individuals’ perceptions of invasion of privacy is to establish fair information management policies for controlling data in HRIS. Fair Information Management Policies To date, there has been legislation restricting the collection, storage, use, and dissemination of employee information in the public sector (e. g. , Privacy Act of 1974), but there is no comprehensive federal legislation on employee information privacy in private-sector organizations. However, one state, California, has recently passed a law that protects the privacy of employee records in private-sector organizations (Privacy Protection in State Constitutions, 2012). In addition, multinational organizations should also consider the privacy practices in the countries in which they operate. The challenge for organizations is that every country takes a different perspective on protecting employee information privacy, and your organization will need to be familiar with all the applicable laws in each country in which you operate. Even though there are few laws governing the storage, use, and dissemination of information in HRIS, organizations may decrease the degree to which employees perceive that HRIS invades their privacy by establishing fair information management policies and practices. For example, in 1977, the Privacy Protection Study Commission recommended that private-sector organizations proactively establish policies for managing employee information to protect individuals’ perceived or actual rights to privacy. For instance, they recommended that organizations limit the collection of information to data which are job related, control unauthorized access to information in HRIS, adopt reasonable procedures for assuring that data are accurate and timely, and limit external disclosures of data without employees’ consent. EFFECTIVE INFORMATION SECURITY PRACTICES The second way that organizations need to protect employee data is through their security practices. “Security is a process, not a product” (Schneier, 2000). This statement alludes to the nature of information security. That is, information security is not predominantly a technical issue; it is more of a management issue. It is easy to see why, at times, there is a major focus on technology. Technology is visible, and there are many things that we can say about security technologies. Management can seem more abstract. There are fewer general principles to discuss, and most of these cannot be put into practice without well-defined and complex processes. But the management issues are actually often complex and a focused both on behavioral information policies as well as the technical practices. This lends credence to importance of effective security policies. Security policies identify valuable assets, provide a reference to review when conflicts pertaining to security arise, outline personal responsibility, help prevent unaccounted-for events, outline incident response responsibilities, and outline an organization’s response to legal, regulatory, and standards of due care. For effective implementation of security, organizations usually follow established security standards, such as ISO/IEC 27000 series. ● This series focuses on areas such as access control, security management, good practices, and protection of health-related information. Almost all aspects of the ISO/IEC 27000 series mesh with HRIS. For example, it is standard practice to require HR employees to change their passwords on a quarterly basis to achieve optimal access control. It is also a generally good practice to verify that all HRIS users are properly trained in the secure use and handling of equipment, data, and software. Many breaches occur when users are not consciously aware of what they are doing. Unconscious behavior can defeat the best efforts of security experts, meaning all of the security protocols in the world are powerless in the face of a stressed-out worker. According to Microsoft’s Security Intelligence Report, 44. 8% of vulnerabilities result from user action, such as clicking a link or being tricked into installing malware. Several best practices have been proposed to ensure that employee data is secured and employee privacy is protected. These include the following: ♦ Adopt a comprehensive information security and privacy policy. ♦ Store sensitive personal data in secure HRIS and provide appropriate encryption. ♦ Dispose of documents properly, or restore persistent storage equipment. ♦ Build document destruction capabilities into the office infrastructure. ♦ Implement and continuously update technical (firewalls, antivirus, antispyware, etc. ) and nontechnical (security education, training, and awareness) measures. ♦ Conduct privacy “walk-throughs,” and make spot checks on proper information handling. Although there is no question that all organizations need to be aware of HRIS security issues and best practices, global organizations need to be particularly diligent. An organization may face specific laws regarding storage, transmission, and transfer of data based on the areas in which it operates. This may limit the flow of employee data across borders and may make the HRIS more complex or may require the organization to adopt different HRIS in different countries. CHAPTER SUMMARY Although it is clear that HRIS have numerous benefits in organizations, this chapter considers some recent issues associated with their use, including employee privacy and information security. In particular, the chapter considers (a) practices that may affect individuals’ perceptions of invasion of privacy, (b) the components of information security, (c) the security threats faced by organizations, (d) the implications for developing fair information management policies and security practices, and (e) cloud computing. Throughout the chapter, we argued that organizations should take proactive steps to develop fair information management policies that can be used to protect individual privacy and implement information security practices and policies that safeguard employment data. Lecture Outline Chapter 16: The Role of Social Media in Human Resources CHAPTER OBJECTIVES The learning goals for this chapter are listed below. At the end of this chapter, you should be able to do the following: • Possess a general understanding of how the Internet and particularly social media is being used in human resources for recruitment, selection, and training. • Understand some of the current social media tools and how they are being used. • Discuss the value of using social media within organizations, as well as some of the potential drawbacks. • Discuss the policies and training needed when using social media. • Explain some of the legal implications of using social media within organizations. • Implement social media policies within human resource departments and organizations that incorporate good business practices. • INTRODUCTION • Social media are Internet-based platforms, based on Web 2. 0 technologies, that allow users to generate and exchange content (Kaplan & Haenlein, 2010). Whereas Web 1. 0 is a “readable” information portal that has allowed users to receive information without the opportunity to respond back via posts or comments, Web 2. 0 is a “writable” platform that facilitates interaction between users and sites in a continuous and collaborative manner and promotes participation and information sharing (Laroche, Habibi, Richard, & Sankaranarayanan, 2012). • Web 2. 0 technology emphasizes tools and platforms that enable users to tag, comment, modify, augment, and rank; users can also create online communities, such as websites and Internet blogs, in order to share information, ideas, personal messages, and other content, such as videos. Some of the examples of Web 2. 0 tools are Facebook, LinkedIn, Instagram, YouTube, and wikis. • Organizations have rapidly integrated social media tools for attraction, selection, recruitment, and engagement purposes both within and outside the organization. Social media offers organizations many new possibilities for building their employment brand, expanding their network, targeting their audience, and attracting employees that fit with their company’s culture and core values. Also, with the increased competition for human capital, many companies have been forced to expand their traditional local and regional searches for talent to a more national or global pool of applicants. • Organizations are also using social media to more readily disseminate work-related content (Verhoeven, Tench, Zerfass, Moreno, & Verčič, 2012), connect employees, (Schultz, Utz, & Goritz, 2011), distribute information about the organization, and improve many organizational processes (Treem & Leonardi, 2012). Global Usage of Social Media • Globally, approximately 2. 34 billion people access social media sites regularly (e-Marker, 2016), a 9. 2% increase since 2015. • Many companies are using SMW to attract new employees and to connect, inform, and retain their existing workforce, most companies are still not sure of how cost-effective these tools are. • Although Americans are familiar with popular SMWs such as LinkedIn, Instagram, Pinterest, and Facebook, other countries may have different patterns of SMW use and tools utilized. • Brazil represents the largest Internet market in Latin American and the fourth-largest market in the world, with over 140 million users (Statista, 2016). Social Media and HR Practices ORGANIZATIONAL RECRUITMENT AND SELECTION • The rapid diffusion of the Web and new technologies have significantly changed the landscape of how we communicate with each other and how organizations use technology to attract, acquire, and retain a new generation of employees. • Organizations are also using online software, social networks, and other platforms to conduct what is now called social recruiting (Wauters, 2011). • As companies compete to attract and retain talented workers, especially those with specialized skills, developing an effective recruiting strategy is a key concern for organizations. • The extensive amount of information available on social media sites has made social network sites (SNWS) a good venue for organizations to learn more about potential hires, and organizations are increasingly using the Internet as a resource to select new employees. • According to Kluemper and Rosen(2009), the broad characteristics shown on SNWS may “be more practical than assessing more narrow aspects of social networking profiles that may be unavailable and/or inconsistent for a large segment of the profiles” (p. 571). • Organizations are also more readily using SMWs to search for passive applicants (SHRM, 2016), who might not otherwise apply to or be contacted by an organization. • Facebook is another frequently used tool in recruitment. Overall, Facebook has the largest audience, with over 1. 79 billion monthly active users (Facebook, 2016). Popular Recruitment Sites • Many organizations are recruiting employees via social media by actively managing their social media presence and using recruitment tools to attract applicants. • Presently, LinkedIn is among the most popular professional social networking sites used by organizations. • Twitter is also effective for increasing exposure and communicating with groups of individuals who want to follow organizations. As such, many organizations have created job channels on Twitter to communicate with and to attract new talent (Heathfield, 2015). • Human resource managers and job recruiters also utilize other social media platforms targeted at specific industries. TRAINING AND DEVELOPMENT • As organizations compete in a global market, businesses need to prepare their employees to be more effective. Social media tools can assist organizations in this process in multiple ways, such as informing teams separated by geographic distance, time, culture, and organizational boundaries. • Organizations can also use social media tools to assess meta knowledge about the type of employees it has, as well as their knowledge, skills, and abilities. For instance, Avaya used collaborative tags to identify organizational experts and integrated these data into a communication system (John & Sleligman, 2006). INTERNAL COMMUNICATION AND ENGAGEMENT o According to a recent Gallup Poll (2013), 70% of the American workforce feels disconnected, or not engaged, at work. Lack of engagement at work can lead to higher absenteeism, higher turnover, and lower firm performance. o SMW can support employee engagement in a number of ways. First, it can improve internal communications, can improve the sharing and exchanging of ideas, and can increase feelings of inclusion (Ruggs & Speights, 2013). o Many organizations are actively using social media to increase employee engagement. For example, L’Oreal, a cosmetics company, believes that people will have greater trust in information about what it is like to work for a company when it comes from their peers on social media rather than from the company (Simpson, 2015). Concerns Over Social Media Some organizations have experienced problems with social media, such as the dissemination of inappropriate posts and decreased employee productivity (Landers & Callan, 2014). Research indicates that up to 86% of employees are connected via social media to a work associate, and 77% indicated they used social media while at work. But 36% also indicated that they utilized social media while at work against company policy (O’Connor et al. , 2016). Corporate Social Media Policies In an effort to address employee usage of social media, many companies have implemented social media policies to protect their professional reputations, as well as proprietary information from exposure (O’Connor et al. , 2016). Organizations also need to ensure that they provide adequate training for their employees. Although the majority of organizations (80%) have a social media policy (Rubenstein, 2014), it is not clear that companies have provided their employees with training on the policy and if the employees are even aware of policy specifics (O’Connor et al. , 2016). RECRUITMENT AND SELECTION A majority of organizations are utilizing SNW as part of their recruitment and selection strategies. But organizations should also exercise caution when using them because of because of potential legal issues associated with using them in this way and the inability to verify with confidence the profile information on these sites. VALIDITY OF SMW IN SELECTION Another concern for human resource decision makers is the fact that organizations may be unable to infer—with relative validity—the qualifications, personality, and/or integrity-related information on an applicant’s profile when using SNWs. Presently, there is relatively little evidence that shows employers are making valid inferences about applicants’ job performance based on their social networking data (Kluemper, Rosen, & Mossholder, 2012; Roth et al. , 2012), and research suggests that the spread of false information through social media can have negative ramifications for organizations and employees (Black et al. , 2014). PRIVACY CONCERNS Of particular concern for employees and applicants is that fact that many human resource decision-makers are using social networking sites to review and gather information about their off-duty behavior, lifestyle, friends, religion, and political affiliations (Gross & Acquisti, 2005). This also poses legal concerns for organizations and can potentially lead to applicant perceptions that their privacy was invaded (Gross & Acquisti, 2005; Tabibi, 2012). DIVERSITY CONCENRS As more organizations use technology and implement SMW tools, they also must consider the risk of adverse impact. Some research has shown that individuals from lower socioeconomic backgrounds are less likely to have Internet access and use of computers and that some socioeconomic and demographic differences exist with organizations’ use of e-selection (Kuhn & Skuterud, 2000; McManus & Ferguson, 2003). FEDERAL AND STATE GUIDELINES The FCRA requires employers to give applicants advanced notice when a copy of the consumer report will be used to make hiring decisions; it further mandates that applicants must provide permission prior to organizations using these reports. Specifically, with respect to job applicants, the FCRA has two primary goals: 1. To ensure that job applicants are explicitly notified of and consent to any background checks that are done when credit, education, military service, and/or medical records are obtained 2. To ensure that job applicants are given the opportunity to correct any misinformation contained therein before any decisions are made by the employer Research-Based Tips for the Use of Social Media In order to successfully utilize social media, organizations need to be proactive in the development of their social media processes and strive to stay current on the legal environment, the validity of the content used, and best practices. By proactively managing their use of social media platforms and implementing proper protocols, HR managers can stay connected with their target audience and be more successful in attracting and selecting a talented workforce (Black, Washington, &Schmidt, 2016). Based upon the research conducted to date, it is recommended that organizations take the following steps to improve their social media policies: 1. Be proactive in establishing social media policies, and stay current on fair information policies regarding the use of SMW data. 2. Implement measures to keep current on SMW technology adoption to ensure you are using SMW technologies that are most popular in the locations in which you operate. 3. If a decision is made to use SMW in recruitment and selection, determine what type of information is relevant and valid, and ensure that collection methods do not collect data about characteristics protected by law. 4. Be active in establishing privacy policies for the HR decision-makers, employees, and job applicants. CHAPTER SUMMARY Social media has become an integral part of society. It also has created new challenges for organizations, as they are now faced with integrating this technology within their organizational structure, particularly human resources. In order to be competitive in the pursuit of talent and skilled labor, organizations must be agile in adapting to these new technologies and readily incorporate them into their social media practices. In addition, organizations must proactively establish fair information policies that address the use of SMW information as part of their overall Internet usage policy. Moreover, they must work to implement new tools that will enable them to better communicate and train their employees, collect data to better inform hiring decisions, attract a new and more diverse workforce, and create a more engaged and connected workforce. Lecture Outline Chapter 17: The Future of Human Resource Information Systems: Emerging Trends in Human Resource Management and Information Technology CHAPTER OBJECTIVES After completing this chapter, you should be able to do the following: ❖ Discuss the short-term future trends in HRM ❖ Discuss the long-term future challenges for HRM and tactics to handle them ❖ Explain the impact of future trends in IT/IS and workforce technologies on the operation of an HRIS ❖ Understand how HR and IT/IS are combining for future HRIS business applications INTRODUCTION ➢ Before we analyze future trends in HRIS, it is appropriate to revisit how we got here. In Chapter 1 we noted that, with its changing and expanding role, the typical personnel department started keeping increasing numbers and types of employee paper records. Computing technology began to emerge as a way to store and retrieve employee data. Early advantages of using computing were that (1) the HR departments could obtain the records much faster for managerial reports (e. g. , total number of males and females in the company) and (2) the employee records were more accurate than paper-and-pencil records. In the subsequent chapters, we had an in-depth look at the entire system development life cycle (SDLC) of an HRIS that included planning, analysis, design, implementation, and maintenance (Chapters 2–6). We also looked at the specific applications of HRIS in some of the core functions of HRM (Chapters 10–15), for example, talent management, recruiting and selecting, training, compensation, and globalization of HRM. ➢ There is no doubt that technology has radically altered the world of work. Today, one can work anytime and anywhere, using any device, possibilities that have globalized the workplace and given it a 24/7 work cycle. Although HR has evolved from an administrative to a strategic focus, transactional activities, such as HR administration, legal compliance, and benefits management, still consume a major portion of HR resources. ➢ The move to computer-based HR systems, though, has helped greatly in shifting HR professionals toward more value-added transformational activities by enabling the automation of routine, transactional activities. ➢ With the increasing focus on strategic HRM and developments in technology, HR professionals are deploying innovative technology solutions to address their core challenges, such as talent management and workforce metrics and analytics. ➢ Multinational enterprises are leveraging HRIS to align their information technology, processes, and people to replicate their HR policies and practices across global operations. Some enterprises also use HRIS for effective disaster planning and recovery during various crises, such as terrorist attacks and natural disasters. ➢ The contribution of technology to strategic HRM has been limited, and some research indicates that HR professionals view enterprise resource planning (ERP) vendors as “overpromising and underdelivering” in this area. In other words, organizations have done a great job at automating basic HR functions and reducing staff, but organization leaders are questioning whether these changes have delivered enough strategic benefits. ➢ It is important to remember that technology is only an enabling tool and not a solution or panacea for HR-related problems. Instead, the successful implementation of an HRIS depends on many different factors, such as the organizational culture, leadership, and managerial competence and the fit of the technology with organizational processes. In addition, many organizations fail to implement technology successfully because of their inherent rigidity, inertia, and resistance to change by employees, as covered in Chapter 9. Future Trends in HRM ➢ Forecasting the future is, in general, quite difficult—and even more so in HRM. Although one can examine past trends and extrapolate to the future, there can be unexpected contingencies, such as the financial crisis of 2008–2009. ➢ To examine any future trends in the HR field, one must look within and between countries, since labor laws differ from country to country and, thus, could have a significant impact on any new developments in HRM for that country. Thus, future trends in HRM in the U. S. are covered in this chapter, along with future trends in HRM, IT, and HRIS in multinational companies. ➢ Although this chapter focuses on trends that are affecting HRM in the United States, it is important to remember that some of these trends will also be truefor other countries while others may differ somewhat in terms of specific future trends within another country or culture. We briefly discuss six trends that will impact HR in the coming years. HEALTHCARE ➢ For organizations, healthcare costs are a growing concern. In a recent survey, rising healthcare costs were identified by nearly 90% of executives surveyed as an important challenge facing their organization in the next 2–5 years ➢ Chief financial officers identified healthcare costs at the number-one issue facing their organization. To address these concerns, organizations are turning to wellness initiatives, others are reconsidering what health plans to offer, and most are passing increased costs on to their employees. ➢ Not only are healthcare costs increasing in the United States, but with the passage of the Patient Protection and Affordable Care Act (i. e. , Obamacare), HR departments are facing a number of issues associated with its implementation. For example, some organizations offer multiple health plans, some of which are available only to highly compensated employees. ➢ The new law makes some provisions of these plans illegal if they are not available to lower-compensated employees as well. In addition, organizations will have to consider the penalty costs of not offering healthcare to employees and the makeup of their workforce (e. g. , full-time, part-time, or contingent) as they determine how to best comply with the new law, as well as offering plans that best serve their employees. BUSINESS INTELLIGENCE ➢ HR is under increasing pressure to show that its policies and practices add value to the firm (e. g. , to show positive ROI, as discussed in Chapter 8. ). To address these pressures, HR is increasingly turning to the use of business intelligence to support complex metrics. Although covered in greater detail in Chapter 7, we also discuss data analytics and HR metrics here because they are growing in importance to HR departments in most large organizations. ➢ Many organizations already have basic reporting capabilities, but they are increasingly looking to incorporate more sophisticated metrics to better support HR programs (e. g. , training). Consider that each year SHRM brings together a panel of experts to address the most important upcoming concerns facing HR, and one of the panels is specifically focused on metrics. Three key predictions from these panels about metrics are as follows: o Organizations will increasingly demand that HR better measure and assess the value of their human capital initiatives. o The increasing use of metrics may lead to a standard and widely accepted set of metrics to “describe, predict and evaluate the quality and impact of HR practices and the productivity of the workforce. ” o Organizations begin to transform their view of HR, from that of a people function to more of one focused on decision science. ➢ Essentially, with the increasing use of metrics and data analytics, organizations are bringing “decision-making tools such as environmental scanning, scenario-based planning, hypothesis formulation, and testing and organizational development tools to improve workforce management decisions. ” DEMOGRAPHIC WORKFORCE CHANGES ➢ The workforce in the United States is undergoing a dramatic transformation on multiple fronts. First, it is becoming more diverse. More women and minorities are entering the workforce than ever before. For example, nearly 60% of working-age women are now in the workforce, compared to only 40% in 1970 (Bureau of Labor Statistics, 2011). ➢ Also contributing to the diversity of the workforce is the growth in the Hispanic American (Hispanics) population in the United States. Currently, Hispanics make up 15% of the U. S. population and account for more than half (50. 5%) of its population growth (Pew Hispanic Center, 2010). They are also expected to compose at least 25% of the population by 2030 (U. S. Bureau of Census, 2009). ➢ Additionally, there is a major demographic shift occurring in the workforce. Baby boomers are postponing retirement. Recent data from the Bureau of Labor Statistics suggest that the fastest-growing age groups in the workforce will be those over 65 years old, with projections suggesting that participation of those over 65 will have grown by over 80% between2006 and 2016 (Bureau of Labor Statistics, 2008)! At the same time, this same study identified a coming problem. The participation rates of those less than 25 are projected to decrease by 7% over the same timeframe. This means that organizations will have a workforce that has much greater age diversity than they are typically used to managing. GROWING COMPLEXITY OF LEGAL COMPLIANCE ➢ One of the most important themes moving forward for HR will be the growing governmental and agency compliance requirements. Human resources has always been affected by legal compliance, but many would say that the pace of regulations continues to grow. For example, the EEOC continues to develop additional guidelines, and states continue to pass additional regulations on issues as varied as hiring practices to workplace safety. In addition, the recent negotiations due to the recent “fiscal cliff” has resulted in a change in the Social Security tax rates for all employees and the raising of taxes for high-earning employees. Human resources will need to be prepared to implement these changes, and additional changes are likely to occur in the coming years. ➢ Changes due to the new Patient Protection and Affordable Care Act will require human resource departments in organizations from the very small to the Fortune 100 to comply with a myriad of federal requirements and very likely state mandates as well. ➢ What will HR departments need to do in response to these changing laws and compliance guidelines? Essentially, they will need to have the information to support adjustments to the way that HR operates. But they will also have to ensure that the HRIS applications they are using have the ability to handle these changes. VIRTUALIZATION OF WORK ➢ A final trend in HRM on which we briefly touch is the virtualization of work. No longer are employees confined by physical or temporal space. Employees can conduct work anywhere and at any time. “The virtual workspace can be defined as an environment where employees work away from company premises and communicate with their respective workplaces via telephone or computer devices” (Lockwood, 2010). ➢ Text - Figure 17. 1 lists several keys to managing virtual meetings successfully. Given the growing use of virtual teams, organizations will increasingly need to be aware of the benefits and pitfalls of managing employees in the virtual workplace. Future Trends in HRIS ➢ When examining future trends in HRIS, it is impossible to separate the future trends in IT/IS without relating them to the field of HRM. The knowledge economy is being profoundly influenced not only by the intensity but also by the speed of technological evolution. ➢ Information technologies have been steadily evolving and improving from mainframes to client servers and now to Internet/Web interfaces. Network communication technologies (broadband and wireless), convergence technologies (e. g. , cell phones and PDAs), collaborative tools (e. g. , Web 2. 0 and portals), service-oriented architecture (SOA), rich Internet application (RIA), and business intelligence HR software systems are some of the notable developments that have affected the field of HRIS and its related technologies and, in turn, the practice of HR. ➢ One the most critical aspects of the emerging technology is a focus on more efficient and accurate decision making. The goal of intelligent HR software is to replace the traditional approach to decision making with an approach that makes a better decision in the most efficient manner. This technology can help organizations improve the use of the human capital and increase the organization’s competiveness in the market. BRING YOUR OWN DEVICE ➢ The first trend in technology that will affect HR and HRIS is mobile computing and “bring your own device” (BYOD). The change is a dramatic departure from how organizations have previously managed their technological infrastructure and presents a challenge for organizational IT support. Previously, the most common arrangement by organizations was to manage a centralized and tightly controlled technological platform (e. g. , IBM, HP, Dell, Windows, etc. ), and anyone who wanted to use another platform (e. g. , Mac, Linux, etc. ) would potentially have problems receiving adequate support. But today, employees are more likely to want to use their own personal mobile devices (e. g. , smartphones, tablets, and laptops) to work. ➢ In a recent Forester research survey, nearly 70% of employees noted that they would like to be able to bring their own personal mobile devices and use them at work (Forrester, 2012). Gartner also predicts that by 2013 mobile devices will become the most common technology used to access the Web, even surpassing PCs (Gartner, 2012)! ➢ The move to mobile creates some interesting issues for employees and the organization. For example, how do you deal with the privacy issues associated with the storage and use of personal and work data on the same device? In addition, the complexity of managing network and data security dramatically increases when employees bring their personal devices into work, which means that organizations will need to rethink data and network security practices to support these devices. ➢ Companies will need to develop policies in regards to the use of these devices and who will pay for these devices. ➢ Along with the growth in the use of mobile devices will be the growth in smartphone apps (e. g. , for the iPhone, Blackberry, Android, or Windows). For example, vendors such as Workday and SuccessFactors have built apps where employees can use their mobile devices to access and connect to the corporate HRIS. ➢ No longer are employees “chained” to their desks when working with HRIS data. For example, tablets can be used during the interview process to evaluate applicants in a real-time manner. Employees can fill out expense reports wherever they are located and can capture electronic images of receipts as they incur expenses. If a workers compensation incident occurs, HR case managers can document issues at the scene of the event, taking photos of the situation for immediate storage in the database. Software as a Service (SaaS) and the Cloud ➢ This “on-premise” approach to acquiring software was the dominant and often the only approach available to organizations. Traditional software development models, the “on-premise” or“ home-grown” approach, are being replaced by “on-demand” software plans, which see the company or customer leasing access to as few or as many HR functions as it wishes to access. This approach to accessing software has been called software as a service (SaaS). ➢ The newest trend in delivering software to companies is cloud computing. With cloud computing, HRIS functionality is delivered to companies via the Web. For the company, there is no hardware to purchase or software to install. Employees can also access the software anywhere they have a Web browser. As with SaaS, companies are able to adopt only the amount of functionality currently needed and then scale up to additional functionality. ➢ Organizations find moving to the cloud attractive because employees find these systems easy to use. In the last four years, the market share for the largest three cloud vendors (SuccessFactors, Ultimate Software, and Workday) has increased by 361%. ➢ In addition, in a recent survey of companies with IT budgets over $50 million, over 85% of them were exploring ways of getting out of long-term, on-premise contracts and are actively considering cloud vendors because it leads to both lower up-front and ongoing costs. Service-Oriented Architecture ➢ One of the major problems during this technological evolution has been the frustration associated with frequent system upgrade cycles. SOA may be a solution, as it converts monolithic and static systems into modular and flexible components. SOA is about efficient modular design and deployment, and reusable software is at the heart of the architecture. ➢ SOA offers several advantages to end users, who can change the business process when needed and purchase or develop only those applications that are involved in the new processes. Web 2. 0 ➢ This term refers to a second generation of Web-related services focusing on creativity, collaboration, and sharing, in contrast to traditional isolated information silos. Web 2. 0 users not only access information but also generate, share, and distribute new content. ➢ Examples of Web 2. 0 technology include the following: social networking sites (e. g. , chat rooms, MySpace, Facebook), wikis (publicly available collaborative Web dictionaries), and blogs (short for Web logs, i. e. , online journals or diaries) ➢ Mashups (web applications that combine data from multiple sources into a single location or application, e. g. , pulling up a rental car booking site within an airline booking site). ➢ Podcasts (audio or video recordings) ➢ RSS (rich site summary/really simple syndication) – feeds that publish frequently updated sites, such as blogs or news ➢ Personal websites ➢ Peer-to-peer networking (P2P) – file sharing (e. g. , text, music, and videos) ➢ Collective intelligence (sharing knowledge to tap the expertise of a group) ➢ Web services (Web-enabled instant communication between users to update information or conduct transactions, e. g. , a supplier and a retailer updating each other’s inventory systems) Social Networking ➢ Social networking (SNW) is one of the features of Web 2. 0. Social networking tools, such as Facebook, LinkedIn, and Twitter, have become important tools for organizations, and human resources is not an exception. Although many of these networks were originally developed to enhance personal social connections, organizations are increasingly harnessing the power of SNW in the workplace. For example, tools such as wikis are being used by organizations to harness and centralize employee knowledge. Some companies are even requiring that employees contribute to the company wiki, making these contributions a formal component of various jobs. ➢ Companies are using Facebook and Twitter to help expand their HR brand and attract employees to the organization. Many companies, such as IBM and Deloitte, are making social networking a central component of how they bring new employees into the organization, connecting them with current employees and easing their transition into the company by making information more readily available to increase employee engagement. ➢ A recent SHRM study has found that 20% of organizations are using SNW tools for internal communications (SHRM, 2012). Due to the growing use of social networking, HRIS vendors are developing applications within their product offerings to help support employee collaboration, onboarding, and learning. Text - Figure 17. 3 provides an illustration of how SAP Jam is designed to mimic such popular social tools as LinkedIn and Facebook to increase employee acceptance and reduce the employee learning curve. ➢ Companies are also using social networks to connect employees and share information. For example, EMC Corporation uses its social business network, EMC/One, to generate ideas from its employees for its annual innovation contest. After the employees post their innovation ideas on EMC/One, they can also vote for the best idea. Enterprise Portals ➢ Enterprise portal is the general term used to refer to the ways in which individuals can interact with each other. Enterprise portals can be information portals, collaboration portals, expertise and knowledge portals, operation portals, social business networks, or a combination of all of these. ➢ Within an HRIS, employee and manager self-service portals are powerful examples of the potential use of such portals. Open-Source Software ➢ Normally, software that is developed is copyrighted, and the source code is neither open nor available for others. Some software developers have agreed to a different approach to the development of software called open source. In an open-source approach to software development, the developers make the source code available for anyone to see and to change. This means that other companies or developers can then expand on the product or easily develop complementary products. Open-source software also costs much less than traditional (or proprietary) software and is sometimes provided for free. AN EVOLVING HRIS INDUSTRY ➢ Markets and industries are cyclical. Innovations drive change and create new opportunities. In response to these opportunities, new companies emerge that specialize in new innovations. For example, ERP vendors first started introducing their products 15+ years ago. ➢ Over time, the markets consolidated, and vendors merged, leaving a few dominant HR ERP vendors, such as SAP, Oracle/PeopleSoft, ADP, and Lawson. ➢ Cloud-based HR software is driving industry change. ➢ Many of the original cloud-based HR vendors have offered a best of breed for a specific niche, such as Taleo’s recruiting product. Today though, cloud vendors are beginning to merge not only with other cloud vendors to develop breadth across HR functions, they are also being purchased by the major legacy vendors. For example, in the last few years, SAP has purchased SuccessFactors, Workday has established a strategic alliance with Salesforce. com, Oracle has purchased Taleo, and IBM purchased Kenexa. ➢ Mergers and acquisitions are continuing in the consulting area surrounding cloud-based HR. For example, Omni Point Consulting, a specialized firm focused on Workday implementations, was recently purchased by Aon-Hewitt to bolster their Workday offerings. Because of these changes to the HRIS industry, it is important that you consider carefully a vendor’s viability as you assess potential HR software options. ➢ EVOLVING HRIS TECHNOLOGY STRATEGY ➢ Along with the consolidation of the vendor and consultant landscape, organizations are reconsidering their HR delivery models. One of the challenges facing organizations is that many of them have historically chosen disparate best-of-breed approaches where different vendors are added to current offerings, leading to a situation where organizations have added technology support for automating more HR processes (as discussed in Chapters 10–15) ➢ But this has created two issues for organizations. First organizations are faced with managing the complexity of working with multiple vendors. Second, organizations have realized that although they may have added a large amount of technology to their processes, they have not really reflected as to whether they are actually more effective in the delivery of HR services. Therefore, in the next few years, we believe that organizations will spend more time and effort assessing the most effective portfolio of HR technology, and many will likely consider moving to some type of consolidated technology platform. Our assessment is supported by Towers Watson research, which suggests that within the next few years, nearly half of the organizations surveyed are planning to consolidate or reorganize their HR function (Towers Watson, 2012b). HRIS MOVES TO SMALL BUSINESS ➢ The last trend in HRIS that we focus on is the expanding options for small businesses. As short as 5 years ago, the idea that a small business would be able to adopt a full-scale HR ERP would have seemed unlikely. But these days, products are being made available at costs that make their attractiveness to small businesses high. One of the reasons for this change is the availability of cloud-based solutions. Companies no longer need the capital to invest in both hardware and software and the IT expertise to manage the HRIS. Now, much of the risk and expertise for managing the hardware and software is with the vendor. Therefore, small businesses are not only ableto afford access to the software, but they are also not burdened by the technological overhead required to implement legacy systems. Now, no company is too small to have their employees supported by HR software. Future Trends in Workforce Technologies ➢ The many future trends in the HRM, IT/IS, and HRIS fields can easily lead to confusion for organizations, management, vendors, and employees. A solution to this confusion has been proposed by Carden (2009), and we agree wholeheartedly: technology should serve strategic goals. ➢ Carden notes that the increasing competition by organizations to improve their profitability has often led to the conclusion that new technology will solve these issues, but the reality is more complex than that. Organizations that are most successful are those that are able to leverage technology that most closely links to a strong business strategy. ➢ Feeling increasing pressure to remain competitive and survive has led to companies that are adopting technology to carefully diagnose what strategic goals the adoption of technology could support. Even the most sophisticated software is rendered powerless without a solid business strategy behind it. As we consider the changes in workforce technologies, it is important to keep in mind that how effectively organizations are able to harness the power of these new technologies will depend on how well they link it to their HR strategy. Cedar Crestone 2010–2011 HR Systems Survey ➢ The purpose of this survey was to provide “a worldwide benchmark of workforce technologies adoption and the value achieved from their use. ”Cedar Crestone thus broadened its “coverage scope for both HR technologies and emerging technologies . . . to explore over 40 applications concerning adoption, deployment options, vendor outlook, value achieved, and expenditures” (Cedar Crestone, 2010, p. 1). ➢ Data for this report were collected in 2010 from 1,289 respondents representing over 20 million employees. The sample represents companies from throughout the globe, including North America, Europe, Asia and Australia. The major findings of this study (in shortened form) are as follows: 1. Organizations that have more automation across all categories of technologies outperform those organizations with less automation on the important productivity measures of net income growth, sales growth, and sales per employee. 2. The respondents in the survey reported that their organizations have had strong recoveries (from the weak economies), and they forecasted a 100% growth in HRIS talent management, social media, and analytics and planning applications. 3. Organizations reported that business process improvement through techniques such as Six Sigma (Chapter 8) for recruiting new employees was their top initiative. 4. Organizations are increasingly choosing to rent access to applications instead of purchasing and installing these applications on site. 5. Organizations are continuing to invest in applications across all HR functions. Administrative HRIS software for core HR recordkeeping, payroll, and benefits is still the dominant class of technology, with worldwide average use at 90%. 6. There is a continuing trend to use new “service delivery” applications, such as employee and manager self-service systems, portals, HR help desks, and workforce life cycle management. 7. The major increase in the use of technology to support HR will focus on tools such as talent management, social media, workforce planning, and workforce analytics, with over 90% growth in the next 3 years. 8. Among organizations that have installed multiple talent management applications, in particular those companies with four or more applications installed outperformed those companies with three or fewer applications in terms of higher net income growth, sales growth, and sales per employee. 9. Organizations have begun preparing to use service-oriented architecture (SOA) to automate business processes (e. g. , applicant tracking). ➢ Finally, the survey focused on choices and investments, which are providing a strong return to companies. These choices include the following: (1) Focus on Career Development, (2) Use Workforce Optimization Technologies, (3) Choose an Integrated ERP-Based Talent Management Solution, and (4) Adopt Social Networking. CHAPTER SUMMARY As noted early in this chapter, forecasting the future is very difficult. However, students focusing on understanding the field of HRIS must never forget the human issues involved in developing and implementing an HRIS. The field of HRIS continues to evolve, and it is important for those studying it not only to understand what is occurring today but also to look at the environmental and technological forces that will affect it in the coming years. If there is one central theme of our look toward the future, it is the importance of HR policies matched with organizational change and technology; this alignment will have the greatest impact on the future success of HRIS and the organizations investing in these systems. For example, one of the findings from the Cedar Crestone survey was the emphasis on change management—to which an entire chapter of this book was devoted (see Chapter 9). Technology is not a substitute for managerial competence and employee discretionary behavior (Armstrong, 2005). It can only be a messenger, not a message. It is also impractical to expect information systems to supplant the soft functions of the HR department, such as an online electronic tutor replacing a good executive coach (Stanton & Coovert, 2004). In sum, technology is extremely important in the field of HRIS, but people are simply more important. Instructor Manual for Human Resource Information Systems: Basics, Applications, and Future Directions Michael J. Kavanagh, Richard D Johnson 9781506351452, 9781483306933