How do you navigate the suppliers and select the right system for your need? Mark Dorgan, a member of the Management Group at PA Consulting Group, and one of the guest speakers at the recent Softworld HR and Payroll event, offers advice.

Selecting an HR system is as important as any other system selection – you will invest substantial amounts of money in a fundamental business tool you must live with for several years to come. A wrong decision can affect business performance over a long period. The selection step is therefore a critical part of the overall change process.

So how do you navigate the suppliers and select the right system for your need, one that is ‘fit for purpose’?

Put simply, you need to create a structured assessment process that gives you and your team a common framework for viewing the options and the various impacts these may have. Without this framework you will have to rely on the different frameworks and ways of thinking that various software system vendors bring to you. This makes it difficult to compare like with like.

A framework for thinking

A useful foundation for thinking about the options available to you is an employee life-cycle map

This highlights the phases the employee goes through in your company from attraction through to exit and retirement. Much of this will be generic, but there may be some aspects that are unique to your employment environment.

Each step in the life-cycle implies a set of support actions from the company such as providing training to facilitate learning and development. Wrapped around the life-cycle are some supplementary HR activities that must take place to facilitate the path of the employee through the life-cycle such as communications.

When your team reviews the life-cycle it should note what is currently outsourced (perhaps attraction, selection and payroll), what the company currently does in each of these areas and how much staff time is devoted to each. Done formally, this will include an activity-based costing. In addition, the degree to which the service satisfies current business needs should be assessed.

The framework provides a common way of thinking about the HR process and, if the steps described above have been followed, a view of the current state activities, staffing and costs. This can be taken a step further by asking the question, ‘In an ideal world, what would we change or improve in the service provided?’

Based on this information you are able to draw up a preliminary view of the benefits to be gained by improving the HR processes, part of which may depend on a new HR system. Even if you go no further with the system selection, you will have already identified process improvement opportunities that benefit the business.

Adding the systems view

Your current systems supporting the HR processes can now be overlaid on the life-cycle. Click here to see how this might look.

Again it is useful to identify any resources, activities and staffing associated with the systems, including a view of the current costs. Ask what needs these systems satisfy well, what they satisfy adequately and what needs they fail to satisfy. This information can be used to deepen your business case.

Only now are you ready to engage with potential vendors.

Dealing with the software vendors

Identify a short-list of five or six potential vendors from an initial search, using industry literature, reviews and internet searches. HR and IT colleagues in other companies are often willing to share their experiences. Companies like PA Consulting Group also offer an unbiased view of the software options on the market, as they have no preferred relationship with any one supplier.

Invite each of the identified vendors to submit an expression of interest, clearly specifying your employee life-cycle as the framework for thinking. Ask the vendors to describe:

• how their system satisfies the stated needs overall and at each relevant employee life-cycle stage
• what the system requirements are
• what degree of customisation is required to meet your needs, if any
• typical levels of effort and the duration of migration or implementation
• reference sites
• estimated costs

You will be able to compare the submissions to your needs on the life-cycle map:

Click here to view HR Vendor systems.

From the submissions made you should be able to narrow down the vendor list to three or four that might meet your needs. For each of the remaining vendors, contact reference sites and assess both the fit to your need and the customer orientation reflected in the vendor/customer relationship. Do not hesitate to ask more questions. Be wary of being first to try out unproven software packages.

Invite at least three short-listed vendors each to spend time working with you to help you understand their offer and to help them understand your need better. Keep in mind that you will want minimum customisation in the new system and you can learn a lot from these working sessions. Ensure the vendors give a demo. Also keep in mind that you are building a long-term relationship – if the vendor recognises this and is sensitive to your needs they are worth dealing with, if they do not you should exclude them from your supplier list.

Having adjusted your view based on the input of vendors and having a sharper view of the costs involved, you are now in a position to deepen the benefits case once more, leading to a final decision about whether to go ahead or not. Sometimes it becomes clear at this stage that there are a range of options – you may want to simply re-engineer existing processes or upgrade existing software; a modular approach may be best; a full new system may be the answer.

The option to outsource the processes and the running of the systems should also be considered at this point.

Ask for a formal tender at this stage. Clearly indicate to vendors the anticipated decision-making timetable and stick to it.

Assessing the tender

The tenders will provide an opportunity to formally assess the best vendors against an agreed set of criteria, not least of which is the price of the software, its implementation and maintenance.

Ranking the vendor offers according to the criteria will often indicate that there are at least two options that will meet your needs. Involve a cross-section of decision-makers from HR, the business functions and IT. Supplement this with discussions with existing clients of the vendors to assess long-term relationship and reliability, as well as any subsequent unexpected costs.

Negotiate terms to get the most favourable deal, then make your selection. Notify all vendors.

Finally, having selected your solution, you must be prepared to devote the time and the resources to managing the vendor relationship to ensure performance commitments are met and your benefits case realised.

The time and effort devoted to detailed and structured vendor assessment will ensure you select an HR system that is truly ‘fit for purpose’ for your business.

Mark advises on and delivers people and organisational change programmes, primarily in the retail industry. He can be reached at mark.dorgan@paconsulting.com