Manila folders, paper documents, copy machines and steel filing cabinets become a thing of the past when a business implements electronic-based human resources management. Electronic HR management, also known as E-HRM, uses web-based technology to create an HR information system. While very small or new businesses may find implementing E-HRM unnecessary or simply too costly, many reconsider after reaching a threshold of about 100 employees. Any small-business owner even remotely considering E-HRM should, however, fully understand the characteristics, advantages, limitations and options for implementation before deciding whether to invest in an E-HRM system.
As a small business grows, even the most well-organized owner or HR employee can become overwhelmed with managing and maintaining a manual HR system. Too much work and too little time can be the cause of data errors, delays in hiring and training new employees and, in a worst-case scenario, lack of attention to HR internal controls. E-HRM has the potential to change how the HR department functions by automating some or all HR processes. This includes but isn’t limited to processes such as forecasting, recruitment, selection, performance management, work flow planning and employee compensation. Automation can also ensure a small business consistently complies with security and privacy internal controls.
Types, Objectives And Tools
E-HRM can be implemented as a whole or in part according to type and objectives. Operational E-HRM focuses on HR administrative duties such as payroll, managing employee information and vacation or time-off requests. Relational E-HRM supports recruiting, hiring and training directives and assists the business owner or department managers with employee performance management. Transformational E-HRM focuses on strategic objectives such as knowledge management and HR forecasting. Each function uses web-based tools such as an employee information database, electronic job boards on a career or business website, online hiring assessments, and e-learning and e-training available to potential employees, current employees, department managers and the business owner.
Costs Vs. Benefits
The total cost to purchase, install, conduct training and maintain an E-HRM system varies considerably. For example, CostOwl.com reports the cost of a basic off-the-shelf HR system for a very small business can run about $1,000. More complex client-server systems requiring software license fees start at about $40 to $100 per user for a business with 50 employees. Total costs increase to about $200 to $300 per user, however, as the complexity of an E-HRM system increases. When assessing direct purchase costs, it’s important to also consider both direct and indirect cost savings and benefits to the business. Direct cost savings, such as labor, storage and security costs, may, in some businesses, pale in comparison to benefits the business may experience through greater efficiency and productivity.
Limitations and Considerations
In developing a full understanding of E-HRM, it’s also important to consider E-HRM’s limitations. In addition to direct cost considerations, which themselves can be significant limiting factors, there can also be mindset, familiarity with technology and trust limitations to consider. One of the most significant is a mindset some may have about moving from a face-to-face to a virtual HR environment. E-HRM does, in fact, depersonalize HR at least to some extent and is a limitation that must be overcome to ensure success. It can also stress or alienate employees who may be unfamiliar with computers or web-based technology. Creating an environment in which employees feel secure and that protects the security and privacy of personal information can, without strong and effective internal controls, be a significant limiting factor.