Background

As part of the ongoing financial and management reform that has been taking place in the Australian Public Service (APS), including the devolution of responsibility for managing staff and delivering personnel services from central agencies to line agencies, a majority of Commonwealth organisations purchased new Human Resource Information Systems (HRISs) between 1996 and 2000. The cost of these new systems was estimated to be in excess of $46 million for certain budget funded organisations, with an average reported implementation cost of $1.2 million.¹ These systems support information for employee expenses of $25.5 billion, which represents 14 per cent of expenses for budget-funded organisations for the financial year 2002–2003.

For Commonwealth organisations to implement effective strategies to make the best use of their Human Resources (HR), as well as comply with mandatory reporting requirements in an effi cient and timely manner, it is essential that they have reliable information systems that provide the necessary management information to facilitate informed decision-making. Better use of HR will ultimately benefit individuals, organisations and the Commonwealth as a whole.

The objective of implementing the new HRISs was to improve the collection, maintenance and reporting of HR information. Such information provides organisations with the opportunity to improve Human Resource Management (HRM) practices and, consequently, organisational performance.

Organisations have had a number of years to work with their systems to achieve these outcomes and, for these reasons, it was considered that an audit of the use and management of the HRIS was timely.

Audit objectives and scope

The audit objective was to provide independent assurance to the Parliament on the effectiveness of Australian Public Service organisations in the use and management of the HRIS to satisfy mandatory reporting requirements, as well as provide meaningful information to management. The audit also considered the use of employee self service facilities offered by the HRIS, which has the capacity to provide staff with access to their personal information, reduce manual processing and streamline processing.

Systems are not static. The Australian National Audit Office (ANAO) notes that a number of the organisations examined as part of the audit were upgrading their HRIS, implementing new functionality and/or considering introducing new HR strategies, policies and procedures. In addition, some of these organisations were re-examining the content of internal management reports. Some of the organisations were also developing knowledge and information management strategies at the time of the audit. These strategies would necessarily impact on the processes and tools used to identify, collect and maintain information in the organisation including HR information. In forming an opinion on the use and management of organisations' HRIS, the ANAO has taken these factors into account.

The audit examined processes in four organisations that provided a cross-section of organisations of different sizes, responsibilities and cultures. Each organisation also employed a different HRIS.

Audit conclusion

On the basis of the examination of these representative organisations, the ANAO concluded that, overall, there could be reasonable confidence that such systems were generally being used to satisfy mandatory reporting requirements and to assist in the provision of information to satisfy at least the identified requirements of Executive management. However, there were some important gaps in reporting to management in the organisations covered, as a result, there is significant scope for HR branches to be more pro-active in making suggestions to their Executive, management committees and line managers in respect of HR data they may find useful. This should include the development of HR Key Performance Indicators (KPIs) that support the measurement of the success of HR initiatives and the contribution of those initiatives to organisation objectives.

The extensive use of other shadow electronic and manual systems to record important HR data, indicated that the capabilities and capacities of the HRISs were not being used to the full; and that the efficiencies inherent in a HRIS² were not being realised in the assembly, analysis and reporting of critical HR data. This would seem contrary to the significant financial and other investment in HRIS, as the system was not being used to its full potential to inform strategic and operational decisions.

A lack of financial and operational data on the capital and annual costs of the systems meant that the organisations were unable to measure the cost-effectiveness of the investment in their HRIS. In addition, the growth of shadow systems not only added to the Information Technology (IT) costs but also detracted from the original HRIS capability rationale.

The ANAO did not examine the basis for selection of these systems. However, criteria used by the ANAO to assess the use and management of HRIS, were based on the principle that investment cost and payback period should have been approved by the organisation at the time of selecting the HRIS product. There was no evidence that the organisations had determined the level of investment and, more importantly, whether traditional investment hurdles together with the achievement of strategic objectives had been achieved. This information would normally be fed into the budget process to assist management in making decisions regarding where the HRIS fits within overall organisational priorities.

Key audit findings

The main findings in this report are as follows.

Information needs

Executive committees determined what information would be routinely provided to them. Such information was mostly operational in nature³ but committees did receive additional information⁴ on an ad hoc basis when they requested it. The organisations with HR committees tended to ask for, and receive, more strategic information. Even so, there was still a way to go before organisations could measure the success, or otherwise, of their HR initiatives and their contribution to organisational effectiveness.⁵ There was significant scope for HR branches to be more pro-active in making suggestions to management committees in respect of HR data the committees may find useful. This should include the development of HR KPIs that support the measurement of the success of HR initiatives⁶ and the contribution of those initiatives to organisation objectives.⁷ The development of KPIs would also support more frequent reporting on strategic matters that may only be provided in response to requests for additional information.

There was little evidence of consultation with line managers to identify their HR information needs. In addition, in most cases it was not clear when, or how, the information needs of line managers had been assessed. As a result, the information regularly provided to line managers was very basic. There is an opportunity for HR branches to consult line managers about their information needs, to assist them to better manage their staff, and to contribute to the effectiveness of the organisation's HR initiatives.⁸ This should include the HR Branch developing reports that:

• assist line managers to support HR initiatives adopted by the organisation; and
• are aligned to the reports provided to Executive and HR committees.

The ANAO recognises that improvements in HR data collection, analysis and reporting is not without resource implications. Nevertheless, the cost of not collecting, analysing and reporting such data may be far higher, if HR initiatives that involve considerable investment, and could have far-reaching consequences for an organisation's activities, stall or fail.

There was little evidence of the organisations regularly reviewing external reporting requirements of the HR activity.

Processes for data collection and management

Only some of the organisations had sufficient policies and procedures in place to collect the majority of the necessary HR data. For those that did not have sufficient policies and procedures in place, this deficiency limited their ability to extract, report or analyse performance in areas where information was not collected and maintained in a structured and easy to access format.

The results of the data testing carried out by the ANAO also indicated that the organisations currently had inadequate quality assurance systems. The organisations themselves were aware of many of the shortcomings in their HR data. Partly, this was the result of a number of internal audits that had been carried out in the organisations, and partly, feedback from staff and external
bodies. Issues surrounding data quality indicated that data collection policies and procedures were not always being implemented in practice.

In most of the organisations, although the systems had the capability to support particular mandatory and non-mandatory reporting requirements, the system modules had not been activated. In some cases, the organisations chose to use shadow systems to capture some information. In other cases, the information was maintained in hard copy or was not captured. All of these approaches contributed to data quality problems in the organisations. In most cases, the selection and/or development of shadow systems was not the result of a business case and a planned implementation. Often these systems were seen as a quick fix to an information gap.

Extensive use of shadow systems meant the HRISs were not being used at their full potential and that the investment in the system was not being fully realised. Many of the organisations had plans to upgrade to new versions of HRIS or to activate new HR modules in their existing systems. Careful planning is required to ensure the upgrades and new modules meet the overall HR information needs of the organisation. The organisations that took a planned and measured approach to the implementation and ongoing management of their HRIS tended to make more effective use of their systems. These organisations were better positioned to generate information for a greater range of strategic and operational HR purposes. The other organisations took a less structured, more urgent approach, as short-term HR processing requirements drove their management of the system.

There were also some important gaps in the privacy and security access arrangements, particularly in the organisations not reviewing access logs.

Processes for data extraction and reporting

All of the organisations had guides and instructions that outline the processes for extracting data and preparing reports from their HRIS or other HR systems. However, in most cases, considerable effort and resources were required to collate and arrange the data for presentation to users. In part, this was the result of the complexity of the HRISs, and also because data was spread throughout the shadow systems rather than being centralised in the HRIS.

Although some of the procedures were documented, in most cases there were no formally documented procedures which outline the complete reporting cycle that would assist in the timely and efficient production of reports.

A lack of awareness of the capabilities of the HRISs, and lack of staff training, also meant that the capabilities of the HRISs were not being maximised in the most efficient and effective manner.

In most of the organisations there were a number of significant gaps in the HR reports produced for management, including: OHS incident numbers and trends; workers' compensation case management performance indicators; performance management information; learning and development information; and recruitment information. These gaps were the result of the organisations not identifying these issues as information needs or not having policies, procedures and systems in place to capture and maintain the required information. Similarly, half of the organisations also did not have and, therefore did not report on, workforce planning strategies.

Coupled with the above was another reporting tension encountered by the organisations, namely, the need to balance privacy with the efficient and effective use of data generated by the HRIS.

Information is used to make decisions

Where it existed, all of the organisations used information from the HRIS to monitor progress in some important HR areas and to make decisions regarding key operational issues. However, in significant HR areas such as learning and development, workforce planning and OHS, although the HRISs could provide the relevant functionality, it was generally not used. Although shadow systems were sometimes used to generate additional HR data, particularly for some of the more strategic HR issues, this represented something of a missed opportunity and/or an additional cost to management.⁹ This was a reflection on the organisations' ability to identify HR information requirements, particularly strategic requirements, at the time of the implementation.

Line managers' use of HR information was properly focused at an operational level and more of the data provided was sourced from the HRIS.¹⁰ However, many managers considered that there was scope to improve the information that was provided to them on a regular basis.

Continuous improvement

Although the organisations reviewed aspects of their HR information needs, processes and data quality from time to time, it was not usually done as part of a systematic management plan and business plan. Rather, it tended to be more ad hoc and reactive.

The role of the HRIS in supporting all HR data collection and management, extraction, and reporting processes, including providing required information efficiently and effectively, was not generally monitored and reviewed on a regular basis.

There was also a lack of basic financial and operational information on costs, which made it impossible for the organisations to measure the cost-effectiveness of their HRIS, including core and shadow systems, and the return on their investment.

Recommendations

The ANAO made six recommendations aimed at improving the management and use of HRISs in the Commonwealth.

It was recommended that APS organisations: develop a systematic approach to consultation and identification of HR information needs; develop and apply policies and procedures to collect, record and maintain critical HR data; review compliance of their systems administration manuals with their Information System Security Policy; develop a coherent reporting summary of timeframes, responsibilities, recipients and data sources for HR; undertake a skills audit, develop a skills inventory and provide support and training to relevant staff; and develop and implement a HRIS management plan.

Responses from the organisations

Pursuant to section 19 of the Auditor-General Act 1997, the organisations that participated in the audit (the Australian Sports Commission [ASC], the Australian Securities and Investments Commission [ASIC], the Attorney-General's Department [AGD] and the Department of Education, Science and Training [DEST]) provided comments on the proposed report prior to its finalisation. Overall summary comments from these organisations are provided below.

ASC

The recommendations in the audit report, and the general comments raised in the proposed audit report provide a good basis upon which the ASC can continue to improve the provision of valuable HR information to stakeholders, in particular the Executive and line managers, from both strategic and operational perspectives.

In the implementation of the audit recommendations the ASC will give consideration to the appropriate balance required in achieving the ASC's core goals, with the available resources, and the effectiveness of our processes required in the use and management of the HRIS. The report will also provide a good basis for the ASC to ensure that the ASC's recent upgrade of the HRIS continues to provide return on investment through increased reporting capability and trend analyses.

ASIC

ASIC agrees the recommendations made in the report are appropriate given the overall assessments made by the ANAO.

However, in assessing the specific audit outcomes for ASIC it is important to understand that, in the final report to the Commission, the conclusion to be drawn from the recommendations of the ANAO was that the HRIS in ASIC was being used to satisfy the Commission's information requirements and for all but one of the ANAO's Key Areas of Examination, there was either no recommendation for improvement or the recommendations were to continue to apply the processes and procedures that had been developed.

ASIC does agree with the ANAO that, if it is to continue the transition from a transactionally oriented HRIS to one that fully supports a more strategic HR approach, it must continue to review its processes, and continually assess progress against its HRIS Management Plan.

ANAO Comment

The ANAO notes the above view. However, for ASIC to satisfy the recommendations made in its management letter, it would need to ensure that it:

• reviews and consolidates HRIS documentation, including developing relevant guidance for
  the ongoing management of security in the HRIS (Recommendation 2, Key Area of
  Examination 2);
• applies policies and procedures for data collection, recording and maintenance
  (Recommendation 3, Key Area of Examination 2); and
• reviews the HRIS management plan (Recommendation 5, Key Area of Examination 5).

AGD

AGD has reviewed the report and notes the ANAO's recommendations and agrees with those recommendations.

DEST

DEST was pleased that the ANAO enabled it to participate in this review. This process has afforded the Department an opportunity to focus on its use of the human resource information system (HRIS) and shadow systems. Participation in the review has reinforced DEST's view that DEST's system processes are, on the whole, sound.

Footnotes

1 This information was captured as part of a survey of 50 agencies undertaken for Audit Report No.12 of 2001–2002, Selection, Implementation and Management of Financial Management Information Systems in Commonwealth Agencies. This figure does not include the cost of the Department of Defence's HRIS implementation.

2 Such as the creation of a single point of capture, maintenance and reporting for all HR information, which ensures consistent standards and terminology are used when referring to different HR activities and enables the combination of information from different activities to support the development of more strategic reports across HR activities.

3 Such as staff commencements and separations, staff numbers by Divisions/Regions, and leave balances. Sometimes this is supplemented with additional data such as the various types of leave taken.

4 Such as staff turnover, OHS and rehabilitation statistics, performance management, management of long-term leave, upgrading the HRIS, Certified Agreement (CA) and Australian Workplace Agreement (AWA) negotiations, and rewards and recognition initiatives.

5 For example, ANAO Audit Report No.50 2002–2003, Managing People for Business Outcomes, Year Two, identifies that organisations need to improve the use of performance management information to contribute towards measuring business outputs and outcomes.

6 KPIs that consider operational processing efficiency and effectiveness should also be developed.

7 One organisation achieved this by identifying a number of key result areas that were seen as critical drivers to achieve future organisational success.

8 For example, ANAO Audit Report No.50 2002–2003, Managing People for Business Outcomes, Year Two, found that there was little evidence that HR functions were actively supporting and coaching line managers, as well as measuring or assessing the effectiveness of and impact on business outcomes of people management strategies, systems and processes.

9 For example, ANAO Audit report no. 50 2002-2003, Managing People for Business Outcomes, Year Two, found that organisation were moving to a more centrally managed learning and development framework to address problems such as learning and development was occurring in an ad hoc fashion and there was a lack of systematic approaches to managing on the job development. The centrally managed framework should be supported by a strong information system to support the identification of skills and capability requirements and gaps.

10 For example, ANAO Audit Report No.50 2002–2003, Managing People for Business Outcomes, Year Two, found that there was little improvement in the application of workforce planning in agencies' line areas for decision-making.