INTRODUCTION
In 1999, Peter Drucker said: “A new Information Revolution is well under way. It is not a revolution in technology, machinery, techniques, software or speed. It is a revolution in concepts.” As a result of information technology (IT) innovation and reorganization, enterprise resource planning (ERP) was proposed by the Gartner Group in the early 1990s. It is a successor to manufacturing resource planning (MRP II) and attempts to unify all departmental systems together into a single, integrated software program that runs off a single database so that the various departments can more easily share information and communicate with each other (Koch, 2002). Over 60% of the U.S Fortune 500 had adopted ERP by 2000 (Kumar, & Hillegersberg, 2000; Siau, 2004), and it was projected that organizations’ total spending on ERP adoptions was an estimated $72.63 billion in 2002 (Al-Marshari, 2002).
Many scholars have recognized the importance of people in organizations, and this viewpoint is the central focus of the human resource management (HRM) perspective (Pfef-fer, 1995). In this perspective, HRM has the potential to be one of the key components of overall enterprise strategy. Additionally, HRM may provide significant competitive advantage opportunities when they are used to create a unique (i.e., difficult to imitate) organizational culture that institutionalizes organizational competencies throughout the organization (Bowen & Ostroff, 2004).
Typically, an ERP system supports HRM, operation and logistics, finance, and sales and marketing functions (Daven port, 1998) (see Figure 1). But the early development stage of ERP in enterprises was all along with the center of production and sales course. Until recently, research has empirically supported the positive relationship between corporate financial performance and HRM function, and managers have also realized that HRM can deliver organizational excellence and competitive advantage for enterprises (Boudreau & Ramstad, 1997; Huselid, 1995; Wright, McMahan, Snell, & Gerhart, 2001). The HRM module was introduced into ERP, forming a highly integrated and efficient resource system with the other function modules of ERP. However, there are still many HRM-related problems that may result in the failure of ERP projects arising. So, there have been regular appeals to scholars for more research about the implementation of ERP systems in the HRM perspective in the last few years (Barrett & Mayson, 2006).
Figure 1. Function modules of an ERP system
This article introduces the functions of an HRM module in ERP systems from the fields of human resource planning, recruitment management, training management, time management, performance management, compensation management, and business trip arrangement. Then it analyzes five HRM-related problems that may block the enterprises from implementing ERP successfully, and it provides reasonable recommendations. Finally, the article discusses future trends and suggests emerging research opportunities within the domain of the topic.
BACKGROUND
ERP, a term coined by the Gartner Group, is not simply a tool that provides singular outputs, but rather an infrastructure that supports the capabilities of all other IT-based tools and processes utilized by a firm (Enslow, 1996). Shang and Seddon (2000) classified the different types of ERP benefits as: IT infrastructure benefits, operational benefits, managerial benefits, strategic benefits, and organizational benefits. Palaniswamy (2002) pointed out that the failures of ERP projects were not because the software were coded incorrectly, rather the companies failed to understand the real organizational needs and systems required to solve their problems to improve performance. Lynne, Axline, Petrie, and Cornelis (2000) analyzed the adopters’ problems with ERP including project phase problems, problems with product and implementation consultants, shakedown phase problems, underestimating data quality problems and reporting needs, and so on.
Within the managerial literatures, a coherent approach provides a conceptual basis for asserting that human resource is a key source of competitive advantages, since it offers a unique contribution to value creation, rarity, imperfect imita-bility, and non-substitutability of a firm’s strategic resources (Bellini & Canonico, 2007). Stone (2007) considered the past, present, and future of HRM theory and research. He concluded that HRM theory and research has considerable potential to enhance organizational efficiency and effectiveness. Ashbaugh and Rowan (2002) summarized the technology features of a modern HRM system (see Table 1).
In addition, some scholars have already studied the relationship or connection of ERP implementation with HRM. For instance, Ashbaugh and Rowan (2002) argued that the major difference between ERP and its predecessors (e.g., MRP II) is the linkage of financial and HRM applications through a single database in a software application that is both rigid and flexible. Wright and Wright (2002) listed two of the most-cited HRM risks in an ERP system: lack of user involvement and inadequate training. Hsu, Sylvestre, and Sayed (2006) supplied another often-overlooked HRM factor when implementing an ERP system—that is, the result of high stress levels on the staff, particularly in the finance or accounting departments, which are already under stress from the heavy workload in a legacy system. Li (2001) studied the HRM function module in an ERP system. He insisted that the practical HRM system should be built up to improve incentive mechanism and to strengthen the training of employees while applying ERP.
Table 1. Technology features of modern HRM system
| Integration | User friendliness |
| Common relational database | Enhanced reporting and analysis |
| Flexible and scalable technology | Process standardization and malleability |
| Audit trail and drill down capabilities | Internet and capabilities |
| Robust security | Document management and imaging |
| Workflow |
implementation of erp related to hrm
Functions of the HRM Module in ERp System
We have studied the necessity and essentiality of HRM to the implementation of ERP in the preceding part of this article. The adoption of ERP also greatly impacts HRM by extending its functions to the all-direction management category (see Figure 2). The functions of HRM have developed from simple compensation calculating and personnel management to the fields of human resource planning, recruitment management, training management, time management, performance management, compensation management, and business trip arrangement (Ahmad & Schroeder, 2003; Li, 2001; Stone, 2007). Data from all function systems will be collected into a central database, and the database can further supply data needed for all function systems by integration.
Human Resource Planning
Based on the requirements of enterprises, managers can use the HRM module of an ERP system to establish human resource planning conveniently. The ERP system assists the decision making of managers by simulating the performance of human resource planning and comparing the data. Additionally, the ERP system is also able to analyze or forecast the human resource planning costs by integrating relevant information.
Recruitment Management
Recruitment should be taken as a significant investment because human resources are the foundational assets of an enterprise. To keep advantages in competition, the human resources department must have a reasonable recruitment system to select talents for enterprise. The ERP system can support recruitment management in three ways. First, it optimizes the recruitment process to reduce the workload. Second, it offers scientific management to recruitment costs. Third, it provides useful information for the decision making on recruitment management.
Training Management
Training in the use of multiple skills including process improvement skills, which can provide long-term work-life security rather than job security (Schonberger, 1994). The implementation of ERP can help train employees to acquire technical, interpersonal, and business skills required to become fully participating team members in the early stage of team development (Pasmore & Mlot, 1994). In other team development stages, by giving support to the human resource department to make an appropriate training plan, the ERP system can also help train team members to accept new skills, improved management regulations, and so on.
Time Management
Time management may support the planning, controlling, and management processes of HRM. It means to arrange the time table for the enterprises and staff flexibly according to the local calendar. The ERP system can record the attendance rate and other relevant information by using a Telematics Control Unit (TCU). For example, data related to the compensation will be further processed in the compensation management system.
Performance Management
Performance evaluation might consider the following issues: How are the facilitative and operational activities allocated to individuals in an organization, and how does the facilitative content of a task vary in an organization (Nilakant, 1994). The human resource department can establish an evaluation index system according to these issues. By integrating the performance management system with the time management system, the ERP system will record data in a central database and keep relevant data timely for each evaluation index. These data will be useful to the decision making of managers on corporate strategy, too.
Compensation Management
A reasonable compensation system should be able to apply proper calculation methods in terms of different regions, departments, positions, and so forth. The implementation of ERP will achieve this objective by integrating the compensation management system with other systems (e.g., timing management system, performance management system) so that it can update relevant data in a timely fashion so as to establish a dynamic compensation calculation system. The human resource department can simulate the performance of the calculation system to forecast compensation information needed and to adjust the structure of the compensation management system. This is an excellent improvement because it decreases management costs as well as problems caused by the intervention of manpower. Compensation management also includes other functions such as salary payments, loans for staff, and so forth.
Business Trip Arrangement
A business trip arrangement system can control the whole flow of a business trip from application to ratification and reimbursement. These data will be further processed in other function modules of ERP (e.g., finance module) through systems integration.
Main HRM-Related Problems of ERP Implementation in Enterprises
ERP has been broadly applied in enterprises for nearly 20 years because of the enormous potential economic benefits.
However, 53% of the ERP projects in U.S. firms were failed by 1996, and the success rate of ERP projects in Chinese enterprises was only less than 20% by 2002 (Edwards, 1999; Yang & Zhao, 2003). Hsu et al. (2006) pointed out that HRM factors played a significant role in almost all failed information systems. This article analyzes five main HRM-related problems that may block the success of ERP projects in enterprises (Lynne et al., 2000; Wright & Wright, 2002; Hsu et al., 2006; Sun, & Xu, 2006).
Figure 2. Traditional and extended functions of HRM
First is the shortage of professionals, especially the inter-disciplinary talents who are expert at both IT and management. ERP is not just an advanced technique, it is also an advanced management concept. Therefore, the interdisciplinary professionals are crucial to the success of ERP. This problem is especially serious in the small and medium-sized enterprises because of the weakness of strength and management level.
Second is the deficient talent introduction mechanism. Employees who take charge of the ERP project of an enterprise are under high pressure because they take great responsibilities for the success of the implementation. If an enterprise does not have an effective talent introduction mechanism to attract talented people who are needed, it will be hard to start the ERP project at all, not to mention the successful application.
Third is the insufficient education and training for employ -ees. The cultivation of talents is a process that needs much time investment as well as money, while some enterprises do not want to pay much investment to the education and training of employees due to lack of an in-depth understanding of ERP.
Fourth is the poor incentive mechanism for employees. Above all, the compensation mechanisms of enterprises may not be attractive enough. A competitive compensation mechanism cannot only attract applicants, but it also prevents the job hopping of employees. Still, the ERP projects have not been supported enough by superior administration departments. For example, the application of ERP needs the support of all involved departments, while managers hesitate to place departmental backbones on the ERP implementation. It may also influence the working enthusiasm of employees and kill more innovations if superiors interfere too much with the implementation.
Fifth is the lack of exterior consultation or a supervision system. An enterprise must pass the scientific verification of experts if it wants to adopt ERP. The implementation must be carried out under the direction of exterior professional organizations and the supervision of a special system. Enterprises may neglect the necessity and importance of these functions.
RECOMMENDATIONS
To implement ERP successfully, enterprises must pay attention to such tasks of HRM as follows (Lynne et al., 2000; Ashbaugh & Rowan, 2002; Sun & Xu, 2006):
• Enterprises should realize the importance of human resources. An ERP system is a production of IT, while human resources are part of the essential power of the invention or improvement of IT. The idea that HRM is just a secondary function must be updated.
• Enterprises should redesign the functions of HRM. ERP extends the traditional functions of HRM greatly. The simple compensation calculating or personnel management cannot meet the requirements of an ERP system. The extended functions of HRM are more favorable for inter-departmental cooperation, because they can conveniently provide the decision making with information needed.
• Enterprises should establish an effective talent introduction mechanism and an effective incentive mechanism for employees. An attractive compensation mechanism can provide useful market competitive advantage for enterprises to hold talents. On the other hand, enterprises should supply employees with reasonable freedom to make decisions within position responsibilities. This can enhance the working initiative as well as the sense of responsibility of employees.
• Enterprises shouldplace great emphasis on personnel education and training. The human resource department can carry an ideological education that involves both senior managers and common staff to arouse their concerns about ERP implementation. The frequency and quality of personnel training should be strengthened as well.
• Enterprises should enhance exterior consultation as well as the supervision function for the adoption of ERP. It is a good idea to invite exterior experts to enterprises to make practical guidance. The human resource department can also organize staff to visit the enterprises that implement ERP successfully to draw on experience. Additionally, the human resource department should be in charge of the supervision function or help your enterprise establish a supervision department, made up of interior managers and exterior experts.
FUTURE TRENDS
Enterprise resource planning is a new concept introduced by the Gartner Group in 2000 to label the latest extensions to ERP (Classe, 2001). The new concept is that, having successfully integrated internal business applications such as finance, sales, and marketing to increase efficiency and create a total overview of the business, ERP II can be used to integrate external applications with collaborative commerce arrangements, e-business, and the supply chain (Payne, 2002). Traditional ERP is the main component in an ERP II system, but for the purposes of the collaboration, an ERP II system is opened to inflow and outflow of information (Moller, 2003). On the other hand, during the last decade, a new wave of human resource technology known as electronic human resource management (e-HRM) has emerged with the advent of intranet- and Internet-based technologies. E-HRM is mainly connecting staff and managers with the human resource department electronically through the human resource portal (Lai, 2006). The basic expectations are that using e-HRM will decrease costs, will improve the human resource service level, and will give the human resource department space to become a strategic partner (Rual, Bondarouk, & Velde, 2007).
When we combine the ERP II concept with e-HRM technology, we find a valuable issue to study—that is, the research about the implementation of ERP II based on e-HRM. Additionally, we can also study other details of this issue according to different countries, cultures, industries, and so forth.
conclusion
As IT continues to development, there will be more and more enterprises adopting ERP systems. ERP can extend the traditional functions of HRM greatly and also heighten the importance of HRM in enterprises. Enterprises that implement ERP must perfect the functions of HRM to raise the success rate, so to enhance the whole management level of enterprises. A poignant hope is that this article will be helpful to both scholars and practitioners who wish to improve the current situation of ERP implementation.
key terms
Electronic Human Resource Management (e-HRM): The planning, implementation, and application of information technology for both networking and supporting at least two individual or collective actors in their shared performing of HR activities.
Enterprise Resource Planning (ERP): An approach to the provision of business support software that enables companies to combine the computer systems of different areas of the business—production, sales, marketing, finance, human resources, and so forth—and run them off a single database. Also defined as an application and deployment strategy to integrate all things enterprise-centric.
Human Resource: The people that staff and operate an organization.
Human Resource Management (HRM): The function within an organization that focuses on recruitment of, management of, and providing direction for the people who work in the organization.
Information Technology (IT): The collection of technologies that deal specifically with processing, storing, and communicating information, including all types of computer and communications systems as well as reprographics methodologies.
Manufacturing Resource Planning (MRP II): A method for the effective planning of all resources of a manufacturing company, including functions of business planning, production planning and scheduling, capacity requirement planning, job costing, financial management, forecasting, and so forth.
