All businesses want to see a certain amount of growth over time. However, while this growth and the revenue streams that come with it are always great to see, many businesses quickly find out that their back-office technology doesn’t always scale the way they need.
They may find themselves stuck clinging to legacy systems or manual spreadsheets that used to be helpful, but quickly cause problems as the business starts prioritizing the use of more modern solutions. The challenge here is that trying to mix incompatible systems, like payroll platforms, benefits technology, and hiring workflows, gets more and more difficult the more isolated these systems become.
“Duct-taping” these older systems and processes can only get you so far. While you might be able to mix and match manual and automated workflows for a while, the larger your business gets, the less sustainable this practice becomes.
Below, we’ll discuss the visible and hidden costs that come with duct-taped HR systems and how you can fix them the right way moving forward.
The Hidden Costs of HR Debt
The Cost of Manual Intervention
Using people to bridge the gap between different software platforms isn’t really a long-term fix. While it might be a quick stopgap, every time your HR teams have to manually copy data from a recruiting tool into a payroll system, there’s a higher risk of costly human error.
Over time, as your teams spend hours a month inefficiently handling their workflows, more time is spent having to fix common mistakes, and HR leaders aren’t able to focus on more strategic initiatives. All of this adds up over time.
Errors Where Trust Matters Most
Data inaccuracies hurt more than just your bottom line. For example, if benefits coverage details don’t automatically line up with payroll deductions or insurance carrier portals, these discrepancies can have a range of consequences.
Employees might discover that what they thought they were covered for in a medical plan, such as emergency care, isn’t actually part of their plan, even though they were led to believe it was. This might only be discovered during a claim due to a data entry error. This can take a lot of time and resources for your HR team and the employee to address, while damaging the trust your staff has developed.
Compliance and Regulatory Risks
Working with disconnected data can lead to dangerous blind spots in your business, especially when it comes to regulatory compliance. Without a single source of truth your HR teams can depend on, it becomes challenging to track essential metrics such as FLSA status, FMLA eligibility, and ACA compliance.
Lack of data visibility increases exposure to potential non-compliance penalties. If you’re business isn’t able to quickly produce accurate, consolidated records during an audit, your risks only increase. The company may then be subject to fines for missed filing deadlines or face litigation.
How Fragmented HR Leads to Turnover
Poor Employee Experience (EX)
Most employees expect that the technology they use at work is just as intuitive as the applications or devices they use at home. When you have fragmented systems in your business, they can catch you off guard, forcing you to navigate platforms just to meet basic needs.
Eventually, daily frustrations like this make employees rethink the value of their compensation packages and can lead to higher turnover than expected.
Manager and HR Burnout
Most HR professionals enter the field with a hope of helping the business create a positive working culture and help source great talent, not get stuck doing data entry all day long. Unfortunately, disconnected tech stacks often force HR specialists to spend the majority of their time dealing with administrative issues rather than driving important company initiatives.
This new reality can be a primary cause of HR burnout. Not only do teams get less accomplished, but the business ultimately loses the competitive advantages it may have had.
Lack of Business Insight
When payroll, benefits, or employee performance data live in separate places, it makes data analysis much more difficult for the business to execute. This means it becomes harder to plan budgets or to accurately prioritize staffing training.
Without real-time reporting capabilities, businesses are also often forced to make decisions based on intuition rather than hard data figures, making their ability to stay agile much less achievable.
Modernizing Your HR Systems and Processes
Audit and Build the Business Case
Effective change begins with real data, not just anecdotes. You should start any HR modernization project by conducting a comprehensive audit to quantify all your visible and hidden operating costs. Calculate these figures through a mix of data analysis and feedback gathered from employees and HR teams.
Try to look past general complaints and understand the real financial impact of errors or inefficiencies, compliance risks, and any lost productivity due to highly manual processes. Understanding each of these elements helps you build a defensible business case and secure buy-in from Finance, IT, and executive leadership.
Prioritize Automation and Self-Service
Implementation strategies should target the highest-volume, most error-prone administrative tasks first. These are perfect candidates to set up new automation as well as employee self-service options.
Empowering your staff to manage a variety of low-hanging administrative tasks, such as updating personnel details, submitting PTO requests, and completing digital benefits enrollment forms, significantly reduces the administrative load on HR. Since employees know their own information best, this is often the most efficient way to manage these tasks, while freeing HR staff to focus on more complicated inquiries that actually require their involvement.
Data Cleansing and Phased Rollout
Migrating corrupted or outdated information into a new system only changes where the problems live. This is why it’s important to thoroughly cleanse your existing data to ensure all records are consistent prior to the transition.
Once implementation begins, follow best practices by running parallel systems, particularly for payroll and benefits, to validate accuracy before the final cutover. Remember not to overlook the human element – ongoing training and clear communication are essential to manage change resistance and ensure proper adoption.
Keep Your HR Systems Streamlined
Moving away from a patchwork of legacy systems isn’t an easy process, but the operational stability it can provide is well worth the effort. By investing in unified systems, you protect the organization from costly errors and empower your HR team to focus on people rather than time-consuming administrative processes.
Frank Mengert
Frank Mengert continues to find success by spotting opportunities where others see nothing. As the founder and CEO of ebm, a leading provider of employee benefits solutions. Frank has built the business by bridging the gap between insurance and technology-driven solutions for brokers, consultants, carriers, and employers nationwide.
