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HR Function Commoditization – The Future of HR

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57 years ago ADP commoditized payroll.  You have 100 earnings codes, a specific set of parameters each code can have, and if you want to go outside those parameters, you can’t.  Many see this as a bad thing, but this is actually extremely liberating.  Rather than taking each HR function and process and figuring out the best practice for your organization, they’ve done it for you.  (Disclaimer: ADP is up to 64,000+ earnings codes, as many deduction codes, great configurability within the set-up, etc…)  The world of payroll was commoditized long ago, and benefits followed recently.  While not to the extreme point that payroll had gone to, any benefit vendor can basically tell any client how their generic life event process or EOI process should work (with some minor tweaks).  Don’t even try telling me that benefit plan set-up is a highly personalized process!

Talent continues to be the hardest area to standardize.  With great differentials in how organizations approach learning and workforce development, singular best practices simply have not emerged in a way that allows for rigidly structured standard implementations.  Take recruiting for example.  Here’s a function where your job postings onto a web job board can be pretty easily defined, but the broader recruiting process and strategy are highly customized.

Employee and manager services lays somewhere between payroll and talent.  We’ve gotten pretty good at defining what a promotion process looks like, or how we treat employee pay increases.  We’ve also gotten very good at service delivery with the help of call center tools like Authoria.  However, each organization still implements workflow process differently, partly because of differing organizational hierarchies, and partly due to process philosophy.  While the generic processes are probably 90% the same, each process requires organization specific set-up.

I believe that the future of HR lays in a place where tactical process is fairly homogenous.  HR strategy and decision support become the main drivers of what HR does.  It’s not going to be about employee processing, and getting to that point means that process configuration mimics ADP payroll.  (have I made you sick yet?)

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9 responses to “HR Function Commoditization – The Future of HR”

  1. HR Function Commoditization – The Future of HR August 16, 2006 on 2:00 am | by Systematic HR 57 years ago ADP commoditized payroll.  You have 100 earnings codes, a specific set of parameters each code can have, and if you want to go outside those parameters, you can’t.  Many see this as a bad

  2. systematicHR – Human Resources Strategy and Human Resources Technology » HR Function Commoditization – The Future of HR

  3. This is the list of 2006 articles that was most read on systematicHR.com. Thanks for your readership and I look forward to another year. 1. Sleepless Nights in HR parts 1, 2, 3, 4, 5, 6 2. The Wrong HR Silos 3. HR Function Commoditization – The Future of HR 4. Hewitt’s Lessons Learned 5. PS vs SAP parts 1, 2 6. Independent Consulting: Perception or Reality? 7. Oracle versus SAP – 2008 8. The #1 and 2 Factors for Successful HRMS Implementation 9.

  4. This is the list of 2006 articles that was most read. Thanks for your readership and I look forward to another year. You can view current (daily) posts at systematicHR.com. Sleepless Nights in HR parts 1, 2, 3, 4, 5, 6 The Wrong HR Silos HR Function Commoditization – The Future of HR Hewitt’s Lessons Learned PS vs SAP parts 1, 2 Independent Consulting: Perception or Reality? Oracle versus SAP – 2008 The #1 and 2 Factors for Successful HRMS Implementation Vendor or Client: Who’s Fault is it?

  5. Naomi Bloom Avatar
    Naomi Bloom

    You’re absolutely correct, and the sooner HR gets with the program, the sooner they’ll be able to focus on that which is truly strategic about human resource management — and there’s plenty of strategic work to be done. From knowing what KSAOCs are needed to knowing where to find them and how to incent/reward them, we’ve got a lifetime of meaningful work to do while we leave the rest to our outsourcing partners. This is also where success lies for the comprehensive HRM BPO providers, and it’s no surprise that ADP’s GlobalView is moving down this path. Naomi

  6. systematicHR Avatar

    Naomi: I was not aware that ADP might be replacing their HRO platform from Enterprise to GlobalView. This is actually great news as GlobalView should offer a much better platform to offer more robust functionality, and SAP will develop technolgies like SOA much more quickly than ADP would.

    So far from what I’ve seen, the HRO (HR BPO) providers have not done well trying to semi-standardize their clients. In the effort to gain market share, these large dollar deals have lead the clients to believe that their are incredibly complex and unique (which most are). It’s great for a client to outsource the whole thing, but in the long term, it’s not a successful business model for the HRO vendors. If it was not sustainable for the client, simply transitioning it to the vendor won’t work.

  7. Naomi Bloom Avatar
    Naomi Bloom

    Quick and important correction. ADP’s GlobalView business is completely separate from their Enterprise business and is targeted at quite different types of customers. I don’t know what in my comment caused you to think that GlobalView is replacing Enterprise on a platform basis, but let me correct that. GlobalView is addressing the global client which wants a truly global (versus country by country) payroll/HR recordkeeping solution that offers a single data base in which all of the relevant data resides. Hope this helps. Naomi

  8. David Haas Avatar

    As with many issues in the HR world, there is a fine line between perception and reality. Payroll and benefits were commoditized because they are transactional processes. Talent management on the other hand is not transactional, in the sense that the X’s and O’s do not fall into pre-determined fields.

    When you try and apply a transactional process to talent management the system fails because it is to rigid and lacks the flexibility to make adjustments to the process. There are certain areas of talent management that can be standardized, but organizations are still requesting customizations to meet their specific and unique talent management processes.

    But that’s the great thing about the people business, nothing is standard!

  9. Thomas Otter Avatar

    This is spot on.
    Data and most processes can and should be standardised. Then you can focus on the 1% that differentiates you from the competition.

  10. Bruce Lewin Avatar

    This trend can only be a good thing for everyone involved with or who works with HR!