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Chapter 3 Human Resource Information Systems

Learning Objectives

• Describe the relationship between strategic HRM and human resource information systems (HRIS).
• Explain the use of HRIS in contemporary HR functions.
• Understand the decision-making process that needs to be followed when introducing HRIS.
• Understand the key issues that will determine the success or failure of a HRIS.
• Describe how an effective HRIS facilitates the achievement of HRM objectives.

Chapter Outline
Chapter 3 discusses the introduction and use of Human Resource Information Systems (HRIS). The first
section discusses the relationship between a strategic approach to HRM and the use of a human resource
information system. The potential use of a HRIS and it design are examined in sections two and three. Key
issues that affect the effectiveness of the HRIS are discussed in the final section.

Strategic HRM and HRIS

To become strategic business partners HR managers must work faster, be more accurate, and more
productive. HRIS has therefore become a critical tool for integrating HR information into the organisation’s
business strategy and for demonstrating the positive contribution that HR can make to the bottom line
through the more effective and efficient management of the organisation’s human resources. The critical
priority for a successful HRIS is to ensure that it is aligned with the organisation’s strategic business and
HRM objectives. Thus, developing clear and precise corporate and HRM objectives is essential before any
HRIS technology is introduced. HRIS, if used correctly, can provide a powerful competitive edge.

HRIS is much more than a computerised record of employee information. It is an integrated approach to
acquiring, storing, analysing and controlling the flow of HR information throughout an organisation. It
provides the necessary data for the planning activities such as forecasting, succession planning and career
planning and development. The major benefit of HRIS is the accurate and timely access to diverse data that
it provides to the HR manager and top management.

Payroll vs HRIS.
The issue of HR versus payroll systems is an ongoing controversy. One school of thought is that they should
be integrated to create and maintain a ‘complete’ system and to prevent unnecessary duplication of effort
(because much of the information kept in HRIS is replicated in payroll systems). The second viewpoint is
that payroll and HR are separate activities and should be treated as such. A payroll system is seen as
essentially an accounting function that processes a large number of transactions, while a HRIS is used for
HR planning and decision making.

Typical HRIS data elements

HRIS is simply database management. This is defined as the ‘systematic approach to storing, updating and
retrieving information stored as data items, usually in the form of records in a file, by which many users, on
even many remote installations, will use common databases.’ The use of HRIS can lead to dramatic
improvements in such things as the recruitment and tracking of job applicants, processing of HR transactions
(for example, pay increases) HR planning, and knowledge management.

Uses of human resource information systems

An organization’s culture and HR philosophies and practices will influence the choice and design of its
HRIS. Organisations introducing an HRIS need to consider:
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Flexibility of HRIS - Flexibility is an important feature in a HRIS. A key element to the system’s success
and future value is the ability to use data in ways that he or she may not originally think of when introducing
the system.

Confidentiality of HRIS - HR data are typically confidential and sensitive. A key concern with HRIS is the
potential for the invasion (and abuse) of employee privacy by both authorised and unauthorised personnel. It
is important to thoroughly explore questions about user access, data accuracy, data disclosure, employee
rights of inspection and security.

Legal and Management Concerns - Organisations today must be alert to the risk of litigation and abuse
resulting from employee use of email and the internet.

Computerising the HR department - the decision making process

The easiest way to justify the set-up costs of a HRIS is to highlight the dollar savings resulting from more
effective management of personnel records and compensation and benefits administration. Increasing
legislative demands such as the requirements of affirmative action (AA), equal employment opportunity
(EEO) and workers’ compensation legislation can be very effectively handled within the HRIS. Different
HRIS users (ie. operational , middle, senior managers) will have different requirements from the system.

Types of computer-based HR systems

Three options exist when an organisation commits to introducing a HRIS.
• Design an in-house system using either internal or external resources, or a combination of both.
• Buy a system ‘off-the-shelf ’ and commence operation.
• Buy a system as above but work with the vendor to modify it to better satisfy the organisation’s
requirements.

Outsourcing
Outsourcing involves a company contracting out some (or all) of its HRIS activities to an information
technology specialist. Companies are attracted to outsourcing HRIS because of lower costs, lack of
understanding of the new technology, past problems with HRIS, simplicity and convenience. However,
outsourcing HRIS poses risks for the HR manager — for example, lack of flexibility, expense, loss of
control (and ownership) of data and less time sensitive.

Resolution of key issues

When choosing an HRIS the HR manager should:

• Have a clear view of the HRM function

• Beware of the ‘Bells and whistles’ trap
• Know whether they want a Payroll or HRI system
• Know the jargon
• Use the ‘show me’ test
• Know what data and reports they will want to extract
• Know when to call for help
• Seek integration of the computer, people, policies/procedures and information flow

Relationship with the information technology department

IT specialists and HR professionals should cooperate to achieve the organisation’s strategic business
objectives. Implementing an effective HRIS requires a strong partnership not only with the IT department
but with other departments as well (for example, the HR department depends on the accounting department
to record labour expenditure and leave liabilities in the organisation’s general ledger). Consequently, the HR
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department must be outwardly (not just inwardly) focused if it is to receive the support it needs. This means
that the HRIS should generate reports which help line managers to do their job.

HRM and the Internet

HR managers are going online with the internet to recruit personnel, conduct research, access electronic
databases, send email, network, advertise and undertake corporate promotion. Some proactive HR managers,
for example, use the internet (and intranets) to post such HR-oriented information as company mission
statements, company history, the company as an employer, HR policies (for example, AA and EEO policies)
and job openings.

Chapter Summary
The primary purpose of a HRIS is to assist both the HR manager and line managers in decision making.
Therefore, an HRIS must generate information that is accurate, timely and related to the achievement of the
organisation’s strategic business objectives. It is important to analyse HRM needs because each organisation
will want to use its data in different ways. Some uses of HRIS include the management of personnel records,
HR planning, recruitment and selection, performance appraisal, training and development, career planning
and development, compensation and benefits, health and safety and industrial relations.

The importance of flexibility in system design and use cannot be ignored. As the HRM function continues to
change, so will the needs of the supporting systems. Because a computerised system must reflect these
changes, the HR manager must ensure that it can adapt to the organisation’s evolving needs. The process of
introducing HRIS applications into an organisation is critical. A basic question is whether the organisation
should design its own system, buy an off-the-shelf product or modify a bought system to suit its own needs.
Further issues for the HR manager include ensuring the competence of vendors and their products and
determining the role of the IT department in HRIS development.

Terms to identify
access IT (information technology) department
central processing unit (CPU) knowledge management
database management mainframes
disk storage microcomputer
hardware microprocessor
HRIS security minicomputer
human resource information system (HRIS) off-the-shelf
Internet processing speeds
intranet software
vapourware

REVIEW QUESTIONS

1. How would you assess the strengths and weaknesses of an organisation’s HRIS?

A number of criteria must be considered in answer to this question:

contribution to strategy
flexibility
volume of data
speed of calculation
confidentiality of information
assistance provided to other departments
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2. What items should be included in a checklist to evaluate solutions to your HRIS requirements?

Most organisations have developed a potpourri of manual systems in response to these increasing demands
to provide more and better quality information within a reasonable time frame. Technological developments
in turn created new opportunities to satisfy these requirements as computerised information systems became
more accessible and affordable. Increasing legislative demands have added another batch of tasks to this
‘grassroots’ category. The Requirements of affirmative action (AA), equal employment opportunity (EEO)
and workers’ compensation legislation can be very effectively handled within the HRIS. Once it is known
who is on the payroll, that they are being paid correctly, and that all legal requirements are being met, more
complex issues can be tackled.

Different HRIS users will have different requirements from the system. Operational users need to process
routine transactions (for example, payroll) and to answer general inquiries relating to basic personnel
records. Middle managers need to generate regular and ad hoc reports (for example, EEO compliance) for
day-to-day planning, decision making and control. Finally, senior management needs an interactive
capability to answer ‘what if’ questions dealing with strategic planning, policy formulation and decision
making (for example, in developing HR projections).

3. What are three major uses of HRIS within an organisation?

The importance of analysing HRM needs must be stressed because each organisation will want to use its
data in different ways. Some uses of HRIS include the management of personnel records, HR planning,
recruitment and selection, performance appraisal, training and development, career planning and
development, compensation and benefits, health and safety and industrial relations.

4. Why are data security and employee confidentiality important? What do you perceive to be the
minimum security requirements? How would you implement them?

HR data are typically confidential and sensitive. Consequently, a key concern with HRIS is the potential for
the invasion (and abuse) of employee privacy by both authorised and unauthorised personnel. It is important
for ensuring employee and management confidence in a HRIS to thoroughly explore questions about user
access, data accuracy, data disclosure, employee rights of inspection and security. Failure to do so may result
in ethical, legal and employee relations problems of a magnitude which could destroy the credibility of the
system. ‘Establishing security and end user privileges’, says O’Connell, ‘calls for a balance of incorporating
HR policy, system knowledge and day to day operations.’

The HRIS security checklist is:

• Review all PC-based HR applications.
• Verify that all users are properly trained in the secure use and handling of equipment, data and software.
• Ensure that all users sign-off (log-off) before they leave the PC unattended, regardless of how long
they intend to be away.
• Caution users not to give or share their password with anyone. Each user should be accountable for
everything done with his or her ID and password.
• Recommend a change of password on a monthly or quarterly basis.
• Caution users against duplicating not only copyrighted programs purchased from vendors but also
programs and data that are proprietary to the company. Copies should be made only to provide
necessary backup.
• Ensure that all software acquired from sources other than vendors are run through a virus detection
program prior to installing on your system.
• Consider the feasibility of separating the duties of the users (ie. assigning the tasks of inputting data,
balancing control totals, etc. to different people) to achieve and maintain confidentiality. Keep in
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mind, the separation of some duties may cause users to lose the continuity of the entire task. Look at
the whole function and how it relates to others in the department before separating duties.
• Review who will use the PCs and where their equipment will be located.
• Ensure that current and backup copies, data files, software, and printouts are properly controlled so
that only authorised users can obtain them.
• Conduct reviews, scheduled and unscheduled, to ensure that an effective level of security is being
maintained by PC users. Staff members who use PCs in their work must be responsible for ensuring
that practices and administrative procedures adhere to security.

5. How does HRIS contribute to HR planning?

HRIS, if used correctly, can provide a powerful competitive edge. As HR managers further assume the role
of business partners with their line counterparts, the need to improve HRM productivity, planning and
decision support services increases. The ability to analyse, to estimate costs, savings or benefits, and to
determine and examine trends becomes vital if HRM is to become a value-adding function. ‘There is no
doubt,’ says Dr Peter Salmon of Salmon Cybernetics, ‘that HR systems when viewed as information systems
rather than administrative systems can contribute significantly to the corporate mission.’ The message is
obvious: ‘the focus of HR systems must be on the corporate business objectives, not simply the HR
department’s administrative problems.’ Thus, HRIS is much more than a computerised record of employee
information. It is an integrated approach to acquiring, storing, analysing and controlling the flow of HR
information throughout an organisation. It provides the necessary data for the planning activities such as
forecasting, succession planning and career planning and development. The major benefit of HRIS is the
accurate and timely access to diverse data which it provides to the HR manager and top management. In
conducting HR planning, it is valuable (and simple) to examine various ‘what if’ scenarios or simulations to
test out different strategic alternatives. ‘This is particularly important,’ say Hall and Goodale, ‘in large,
decentralised organisations, where manual data collection would be almost impossible.’ Once again, it must
be emphasised that if the HRIS is not related to the organisation’s strategic business and HR objectives,
there will be little or no return. However, by applying HRIS technology appropriately, HRM can facilitate
its transition from a reactive administrative role to that of a proactive strategic business partner.

6. How can the intranet help line managers better manage their HR responsibilities?

An intranet can be used to post such HR-oriented information as company mission statements, company
history, the company as an employer, HR policies (for example, AA and EEO policies) and job openings. It
allows the HR manager time to be proactive in disseminating information about the organisation, and frees
up time to allow the HR manager to focus on strategic issues.

7. Do you agree with the view that payroll systems and HRIS should never be integrated? Explain your
answer.

Computerisation began in the HR area via the payroll system. Payrolls are large masses of detailed
information which need to be accurately and quickly updated. This is a fundamental accounting activity, so
organisations had little hesitation in introducing such systems.

Early systems were computer bureaus where data was processed outside the organisation. Initially, it seemed
that the promised benefits of computerisation had finally arrived. The army of pay clerks was substantially
reduced. However, new issues relating to input errors and processing delays soon arose. It is important for
HR managers to understand this history because it explains why many early (and even some contemporary)
HRIS have a bias towards payroll activities. Payroll processors first attempted to introduce HRIS in the
mid-1970s when a major vendor offered a HR system with some additional fields of information that could
be manipulated. Although a crude attempt to take advantage of an emerging need for HR information, the
system gained considerable acceptance.
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The issue of HR versus payroll systems is still very much alive today. One school of thought is that they
should be integrated to create and maintain a ‘complete’ system and to prevent unnecessary duplication of
effort (because much of the information kept in HRIS is replicated in payroll systems). According to one
expert, improvements in computer technology and the increased availability of PC-based HR and payroll
packages ‘means that human resources system integration is becoming not just a realistic possibility, but an
absolute must.’ Given the commonality of information, argues Benson, there is much to be gained by
streamlining data entry procedures. The input of new hire details into a HRIS, for example, would
automatically update both the superannuation scheme and the payroll, eliminating wasteful rekeying and
potential discrepancies. Similarly, details of employee exits and the like can be communicated to payroll.
This, says Benson, promotes ‘increased operational efficiency and data consolidation. Furthermore, it is
likely that the accuracy of shared information will be enhanced because payroll normally contains the most
accurate and up to date information in any organisation’ for the simple reason that it is audited each pay
period by every single employee.

The second viewpoint is that payroll and HR are separate activities and should be treated as such. A payroll
system is seen as essentially an accounting function which processes a large number of transactions, while a
HRIS is used for HR planning and decision making. Payroll and HRIS also have other significant
differences, for example: HRM transactions are variable and dynamic, whereas payroll transactions are run
in batches and are mainly routine; HRM is event driven, whereas payroll is cyclical; HRM has history
records, whereas payroll usually maintains details only for the current year; online query capabilities are
needed for HR personnel to do their work, whereas payroll updates records according to the pay cycle; HRM
needs frequent ad hoc reports which range from simple to complex, whereas payroll reports are usually
routine. Finally, HRIS is specifically used for processing and reporting HR information .

8. What is an HRIS? What activities does it help organisations perform?

A HRIS involves the use of computers to systematically generate relevant and timely information for the
making of HRM decisions. Its primary purpose is to assist both the HR manager and line managers in
decision making. Thus, a HRIS must generate information that is accurate, timely and related to the
achievement of the organisation’s strategic business objectives. HRIS can assist organisations in forecasting,
succession planning, and career planning and development.

9. What are the basic steps to consider in developing a HRIS?

See ‘The Decision Making Process’ and Types of computer based HR systems.

10. What factors would influence your choice of an HRIS?

The main factors that influence choice of an HRIS are:

• Intended use of the system
• Flexibility
• Security
• Ease of use
• Maintenance/upgrading
• Training and support availability

DIAGNOSTIC MODEL

1. Identify and discuss the factors from the diagnostic model (figure 1.11) that have significance for
HRIS.
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Organisation purpose, organisational objectives and HRM objectives determine the nature of HRIS and their
application. The critical priority for a successful HRIS is to ensure that it is aligned with the organisation’s
corporate and HRM objectives. While HRIS help in the performance of the HRM activities, the rationale
for the HRIS lies with the higher level priorities.

2. Explain the impact of HRIS on the acquisition, development, reward, maintenance and departure of
an organisation’s human resources.

Information systems basically do two things. They store vast amounts of data, and they process calculations
very fast. To the extent that storage and processing of data can help the HRM activities, HRIS are very
valuable. See the section ‘uses of human resource information systems.

3. Discuss the impact that HRIS may have on commitment, competence, cost effectiveness,
congruence, adaptability, performance, job satisfaction and employee motivation.

The HRM activities can better lead to desirable outcomes if those HRM activities are based on accurate data.
HR information systems therefore give the HRM people confidence that the activities are the correct ones
for the objectives and strategy of the organisation.

Soapbox

There are seldom clear answers to these questions. The idea is to stimulate debate as much as to determine
an answer. These dilemmas are very pertinent to the contemporary organisation, however.

ETHICAL DILEMMA

“Whose email?”

1. Who do you think is right — Peter or Carol? Why?

They are both right. However, traditionally, employees have the right to engage in a degree of personal
correspondence in company time, so long as the right is not exploited. Peter has no right to interfere with
the privacy of his employees. However, if he believes that the employee is engaging in correspondence that
is illegal or illegitimate, he has the right to take action. That action should involve giving some warning to
the employees concerned, however.

2. If you were Leo, what would you do to resolve the issue?

Speak to Peter. Ensure that Peter knows how Carol feels. Obtain Peter’s perspective on the issue. Take that
perspective to Carol and ensure that she understands it. Then, get the two of them together to mend fences.
Then, determine a company policy on the matter.

3. What ethical issues, if any, are raised in this case?

Brainstorm about the rights of employees vis-a-vis the rights of the organisation.
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CASE STUDY

A matter of privacy

1. Should information such as telephone numbers be available to other employees? Explain your
answer.

With the increasing trend toward telecommuting and other forms of working from home, there is a need for
greater flexibility in contacting employees. Also, with the extra demands placed on employees’ time, the
ability to contact people at home, and to work from home can improve their output. However, it is
gratifying to see an organisation willing to give up some of the ‘power’ that they have over information.

2. Which is more important — the company’s need to collect job-related information or an employee’s
right to privacy?

Both are important. The issue is the balance that must be struck between the two competing sets of rights.
Problem solving and team building actions are needed to strike that balance.

3. Should employees be allowed to change their own files? Explain your answer.

This is a form of delegation. Therefore, the employees must be aware that they are responsible for the
accuracy of that information, and that they are responsible for any loss that they incur as a result of it. As a
control mechanism, it is risky to delegate this responsibility to employees.

4. Which personnel data should be classified (a) restricted? (b) unrestricted?

Each organisation will need to brainstorm these issues depending upon their unique requirements.