How the Cloud is transforming HR

Companies are rethinking processes and embracing a more strategic role

"Wash, rinse and repeat." That's how Justin Watras describes the paper-based process that used to take up hours of managers' time whenever a new employee started at Brooks Brothers.

"In a perfect scenario they'd show up with a bunch of employment documents, but more often than not they forgot or weren't told," explained Watras, the clothing retailer's director of talent management and organizational effectiveness. "Either way, a manager or HR member would have to devote significant time to sitting with them and filling out paperwork in a process that often lasted hours."

It's a little different today.

Now, as soon as someone accepts a job, Brooks Brothers sends out an email with a link to the online equivalent of all that paperwork so they can do their part ahead of time. Also included is access to an employee portal filled with resources such as FAQs and a video from the CEO.

Not only has the process required on that first day been reduced from hours to minutes, but new hires begin to get acclimated before they even start work, Watras said.

Making it all possible: the cloud.

'It's been the Wild West'

Cloud computing promises benefits in numerous functional areas, but in few has the impact been felt as keenly as in human resources. Particularly for core "back office" HR areas such as benefits, time and attendance, and systems of record, decades spent using -- and customizing -- on-premises software have created considerable inertia.

"Companies have spent loads of money on installed systems, and often they're not terribly excited about spending a ton of money to change," said Claire Schooley, a principal analyst with Forrester.

The virtually limitless customizability of on-premises software has led many companies to do just that -- customize -- seemingly with abandon. The result can be an almost impossibly intricate set of software and processes.

"Financial processes are governed by very structured reporting and processing standards, but in HR you really don't have that," said David Ludlow, a global vice president with SAP. "It's been the Wild West in some cases in terms of how things are done."

Even when companies do upgrade their software, they tend to remain committed to those legacy processes, many of which "reflect complexity dating back 30, 40 or 50 years," Ludlow said.

Add to that the fact that HR is typically a cost center, and therefore less likely to be on the receiving end when extra funds are handed out, and it's not difficult to understand why many HR departments have had some catching up to do. For some, the cloud is not only making that possible, it's allowing them to leapfrog ahead.

'We went from the dark ages to the cloud'

Brooks Brothers moved away from its paper-based processes and onto SAP's SuccessFactors cloud software about two years ago. Prior to that, it had been using a legacy on-premises payroll system that had been retrofitted to perform many HR duties.

"We went from the dark ages to the cloud," Watras said. "It was a massive leap forward."

Far more than just a technology shift, however, the move has had a democratizing effect on the company and its data as well.

"We really viewed our transition to life in the cloud less in terms of system change and more in terms of process and ownership," Watras explained.

In the old days, hiring managers in the company's hundreds of stores may have been the ones to slave over getting those employee forms filled out, for example, but after that, the data was keyed in and owned elsewhere. Today, those managers are in charge.

"We sold this to managers by saying, 'Yes, you'll be responsible for inputting some data, but you'll also have access to all this data -- compensation, performance, biographical -- that empowers you to support and to know and grow your people," Watras said.

Among the benefits so far: 15 paper-based processes eliminated and a 10 percent boost in productivity thanks to the reduced admin time needed for hiring.

A multigenerational workforce

By avoiding the up-front expenditures associated with on-premises software -- not to mention the maintenance of such older systems -- subscription-based cloud offerings are making it easier for HR departments to make the budgetary case for a face-lift. Given young workers' expectations that even work software will offer a consumer-style experience, that's become particularly critical.

"Today's workforce is multicultural and also multigenerational," SAP's Ludlow said. "Strategies, processes and technologies have to accommodate the needs and expectations of all of them."

Cloud software vendors have focused increasingly on a consumer-friendly, mobile-style experience, making adoption by younger employees more likely. And because cloud software isn't as easily customized, it's enabling a rethinking of processes and greater standardization.

"It's getting people to think about, can we redesign around this and get better through technology?" said Lisa Rowan, a research vice president with IDC.

Encouraging that mind-set is the fact that many existing customizations are tailored to outdated processes.

"Companies will sometimes say, 'We have to have these customizations,' and I'll say, do you really? What areas do you absolutely have to have customized or you can't move forward?" said Forrester's Schooley. "I've had organizations come back and say it's really just two or three."

That level of customization is entirely possible in the cloud, but that's not to say the shift won't entail some pain -- a change in culture and expectations may be required along the way. The long-term benefits, however, can be significant: Simpler technology with a simplified set of processes makes it much easier to respond faster to the needs of the business, Ludlow said.

'We don't talk about systems anymore'

Integration across systems is one of the top benefits touted by City Year, which is part of the AmeriCorps national service network.

City Year works with 3,000 AmeriCorps members each year to help kids in high-poverty communities stay in school through mentoring and tutoring. Because it focuses on young adults, mobile and the cloud were "baked into our strategy from the very beginning," said Welles Hatch, the organization's CIO.

City Year's HR department turned to SuccessFactors early on, but a new IT strategy launched in 2010 and "acute needs" in finance prompted the organization to move to Workday across the board. "We needed to leapfrog from spreadsheets to something else," Hatch said.

City Year implemented Workday in stages and now uses almost all of the suite's components. Like Brooks Brothers, it credits the cloud technology for a much bigger transformation.

"The architecture and design of the user experience has changed the way people think about how their work is supported," Hatch said. "We don't talk about systems anymore -- it's all about how we do the work."

Software vendors are fond of the term "environment," but "until the cloud, that only meant something to the tech people," he explained. With an integrated suite, "we've been able to get the business people to think of the tool set as the environment we work in."

The software's cross-department integration and accessibility make it easier to have "very specific conversations" with department heads about how to improve the recruitment process or update other key processes, he added.

An increasingly strategic contributor

Looking ahead, analytics, machine learning and predictive capabilities will feature increasingly prominently in HR cloud software, SAP's Ludlow said.

Brooks Brothers' Watras expects such capabilities to make HR an increasingly strategic contributor.

"My dream, which we're now starting to realize, is that when we have the executive team come together for weekly reviews of the business, they'll be looking not just at financial and other dashboards but also the people analytics," Watras explained.

If a store is underperforming, for example, the usual questions may focus on rent, traffic and product assortment. Now, factors like employee turnover and compensation -- "things we know correlate with successful business outcomes" -- can easily be brought into the conversation as well, Watras said.

Ultimately, it's about repositioning HR within the organization so that it's no longer viewed as a cost sink but rather a value contributor, Watras added. "That's where I'm placing my own money in terms of the road ahead."

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