Does Automated Human Resources Make Sense for SMBs?

By Pedro Hernandez | Posted July 23, 2014

When it comes to human resources (HR), it's time to put away Excel, says David Vanheukelom, general manager of human capital management (HCM) applications at FinancialForce, a cloud-based enterprise resource planning (ERP) specialist.

A spreadsheet is no way to manage personnel, says Vanheukelom, particularly when a small to midsized business (SMB) starts adding to its headcount. Many small business owners still "spend way too much time managing the business on spreadsheets," he says.

Small Business, Complex HR

Small business may not face the same quantity of HR issues as big business, but when they reach a particular tipping point, those issues are every bit as complex.

In Vanheukelom's experience—he's headed HR projects at Oracle and PeopleSoft prior to FinancialForce—HR hits the unmanageable mark around the time small businesses add their 50th employee to the payroll, it not sooner. "On the HR side, [small] organizations have a lot of similar issues" as larger enterprises, he told Small Business Computing. "They share a lot of the same business pains managing HR data."

Those issues include recruiting and hiring along with managing benefits, professional development and absences—and that's just scratching the surface. HR alone can quickly monopolize a small business worker's time when the responsibilities grow from processing timesheets to managing the entire "employee lifecycle." Another challenge: finding qualified HR experts on a small business budget.

Human Capital Management Is for SMBs, Too

While you might associate HCM with HR departments at big enterprises, products and services have finally trickled down within reach of most small businesses. HCM, often synonymous with HRMS (Human Resources Management System), describes software that lets you manage several HR functions, including hiring, payroll, benefits and performance reviews.

Functionality may differ, however vendors generally aim for an automated, one-stop HCM environment that lets HR workers efficiently process and coordinate practically all of the employee-related aspects of running a business. This can also include self-service capabilities that let workers request time off, review their benefits, download forms and update their information using an employee portal. Not only does it add transparency to the sometimes confusing and opaque realm that is HR for the average worker, it lifts a huge administrative burden from the HR department.

If the process of getting employees paid affects your ability to run a business, pursue success and delight customers, then it's time for HCM. In short, when HR begins to eat away at time better spent innovating, creating great products or delivering amazing service, it's a sign that HCM is long overdue.

Small businesses that rely on spreadsheets, Word documents, paper forms and other manually intensive HR processes aren't just using their time inefficiently. They also run a "huge risk of error" due to duplicate data entry, says Vanheukelom.

HCM solutions typically capture data once and reuse it for various HR functions. No more social security number mismatches or other inaccuracies that can gum up the works, or worse, prevent employees from collecting their paychecks.

And if you're hiring millennials, Vanheukelom notes that they expect HR to be "social and collaborative." Having come of age in an era of consumerized, mobile-enabled computing experiences, they want to "manage their own employee data and provide feedback" on any device, not ask permission or shuffle forms. HCM permits them to do just that "using a consumer-oriented application" that boosts engagement and sparks a genuine interest in their roles and responsibilities as employees.

Finally, small businesses can absolutely afford HCM, assures Vanheukelom. In the past, HCM was "too costly to license, too complex [to implement] and built for the largest enterprises in the world." Today, the cloud has changed the game.

Software-as-a-service (SaaS) products allow SMBs to automate HR on a subscription basis without major upfront investments. "The introduction of cloud-based technology makes HCM accessible to small businesses," says Vanheukelom.

Pedro Hernandez is a contributing editor at Small Business Computing. Follow him on Twitter @ecoINSITE.

Do you have a comment or question about this article or other small business topics in general? Speak out in the SmallBusinessComputing.com Forums. Join the discussion today!

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