A pair of studies from The Aberdeen Group found that integration between HR systems generates significant benefits and that “Best-in-Class” companies are more likely to integrate than others.
For example, a 2017 study found that Best-in-Class companies that integrate HR systems are 27% more likely than “All Others” to improve the accuracy of operational reporting. This finding builds on a 2013 study that also found that payroll integration improves accuracy while dramatically reducing manual labor. Specifically, organizations that integrate payroll with time & attendance see 21% lower payroll processing error rates, 24% lower error rates in tracking actual time worked, and an astounding 98% decrease in manual transactions.
But what does all of this mean, and why is integration so crucial to these benefits?
Most organizations use multiple tools to handle data, processes, and transactions related to HR. From our example above, one system might handle payroll, and another time & attendance. The two systems don’t talk to each other and cannot share information. Overlapping information has to be entered twice, and any analysis or reporting that relies on information from both must be handled manually in a third-party tool like Excel. That’s where all of those manual transactions and error rates come in (for example, up to 90% of spreadsheets have errors in them, sometimes very serious errors, e.g., a cut-and-paste error once cost JP Morgan $6 billion).
Integrating means connecting those different platforms, either by consolidating them into a single system, or by implementing some kind of bridge that allows them to share information.
That removes humans having to enter duplicate data by hand. It also opens all kinds of business opportunities.
For example, Aberdeen says that integrating payroll into the total human capital management ecosystem enables “insight into labor performance against spend.” In other words, organizations can begin to analyze previously disparate data points to glean a greater understanding of how their business operates. With that, leaders can “build complete models for labor optimization.”
High performing organizations know all of this: “Aberdeen found that Best-in-Class companies are 2.6 times more likely than All Others (77% vs. 30%) to automate payroll, and to start with payroll as the kickoff point for introducing technological automation into their human capital management (HCM) strategy.”
And indeed, payroll is just the start. Compliance data, for instance, can also be integrated, which allows organizations to analyze labor management decisions against compliance consequences. As a result, “Best-in-Class companies are 33.4 times more likely than All Others to find that their cost of compliance has decreased in the last 12 months, thanks in large part to the integration of their payroll resources into the greater HCM ecosystem.”
In short, using HR technology platforms that cover more areas of functionality, and/or that can communicate with other tools, can yield significant performance gains for HR groups while simultaneously cutting costs.
CoAdvantage, one of the nation’s largest Professional Employer Organizations (PEOs), helps small to mid-sized companies with HR administration, benefits, payroll, and compliance. To learn more about our ability to create a strategic HR function in your business that drives business growth potential, contact us today.