Cross-Functional Coordination and Integration

Originally, ISs were designed to support the accounting function. Systems for other functions were rolled out later. This fragmented roll-out approach created data silos where information was effectively trapped in one functional area of the business and could not support cross-functional business processes. For example, accounting systems record sales, payments, customer profile information, product pricing, promotional expenses, and so on. To effectively evaluate the impact of past promotional activities and pricing decisions, the marketing department must be able to analyze the relationship between the product’s price, promotional expenditures, and sales volume during a specific time period. In addition, the marketing unit might need to analyze the revenue generated by each customer to determine how the salesforce should prioritize accounts. However, if this information is trapped in the accounting system, it may not be available to the marketing unit. In some cases, employees in marketing may not be granted access to the accounting system, or even more problematic, the system may only be programmed to use the data for creating standard accounting reports and statements and might not permit retrieval of information in ways that are useful to the marketing department or other units in the company.

In today’s fast-paced, competitive business environment, departments or functions must be able to coordinate in the development of strategic plans and the performance of operations-level actions. FBSs that do not support cross-functional collaboration are an impediment to organizational success. Workflows and data flows between departments that are not coordinated result in delays, errors, poor customer service, and higher costs. When FBSs do allow for cross-functional coordination, it becomes possible for the company to monitor and evaluate progress toward goals and objectives established during the strategic planning process. It also becomes easier to identify problems or barriers to achieving objectives and develop solutions to those problems.

The data requirements of operations-level units are extensive and relatively routine because they have fixed sources of input and tasks that follow standard operating procedures (SOPs). Functional area ISs help companies and employees adhere to SOPs, which are often easily automated. SOPs are an integral part of a quality control (QC) system because they provide individuals with information to perform jobs properly. A key benefit of SOPs is that they minimize variation and promote quality through consistent implementation of a process or procedure within the organization, even if there are temporary or permanent personnel changes. For example, SOPs are written for handling purchase orders, order fulfillment, customer complaints, recruitment and hiring, emergency response, and disaster recovery. Data that are lost or compromised have financial implications. As such, it is critical that businesses have SOPs to maintain three related data properties in company ISs:

• Data security Data security refers to the protection of data from malicious or unintentional corruption, unauthorized modification, theft, or natural causes such as floods. The purpose of data security is to maintain data integrity.
• Data validity Data validation involves tests and evaluations used to detect and correct errors, for instance, mistakes that might occur during data entry in fields such as customer name and address.
• Data integrity Data integrity refers to the maintenance of data accuracy and validity over its life cycle including the prevention of unintended modification or corruption.

Real Time and Batch Processing

Transactions can be processed in two ways: batch processing and real time. Batch processing involves the collection of transactional data over some period of time, and then all of the transactions are processed as a batch at one time. The opposite of batch processing is real-time processing where transactions are processed as they occur, which means that account balances and other related counts are kept up to date. For instance, when you purchase two tickets to a show at a Broadway theater, not only is the count of remaining tickets immediately reduced by two, but also the specific seats indicated on your tickets are blocked off so that the ticketing system doesn’t sell your seats to someone else.

Online Transaction Processing Systems

Increasingly, organizations today are employing Online Transaction Processing Systems (OTPS). These are TPSs that employ client server systems that allow transactions to run on multiple computers on a network, processing transactions in real time. Data are accessed directly from the database, and reports can be generated automatically (Figure 9.4).

Just-in-Time Inventory Management Systems

Just-in-time (JIT) and lean manufacturing are two widely used methods or models to minimize waste and deal with the complexity of inventory management. Minimizing inventory costs remains a major objective of SCM.

JIT inventory management attempts to minimize holding costs by not taking possession of inventory until it is needed in the production process. With JIT, costs associated with carrying large inventories at any given point in time are eliminated. However, the trade-off is higher ordering costs because of more frequent orders. Because of the higher risk of stockouts, JIT requires accurate and timely monitoring of materials’ usage in production.

Everything in the JIT chain is interdependent, so coordination and good relationships with suppliers are critical for JIT to work well. Any delay can be very costly to all companies linked in the chain. Delays can be caused by labor strikes, interrupted supply lines, bad weather, market demand fluctuations, stockouts, lack of communication upstream and downstream in the supply chain, and unforeseen production interruptions. In addition, inventory or material quality is critical. Poor quality causes delays, for example, fixing products or scrapping what cannot be fixed and waiting for delivery of the reorder.

JIT was developed by Toyota because of high real-estate costs in Tokyo, Japan, which made warehousing expensive. It is used extensively in the auto manufacturing industry. For example, if parts and subassemblies arrive at a workstation exactly when needed, holding inventory is not required. There are no delays in production, and there are no idle production facilities or underutilized workers, provided that parts and subassemblies arrive on schedule and in usable condition. Many JIT systems need to be supported by software. JIT vendors include HP, IBM, CA, and Steven Engineering.

Despite potential cost-saving benefits, JIT is likely to fail in companies that have the following:

• Uncooperative supply chain partners, vendors, workers, or management.
• Custom or non-repetitive production.

Lean Manufacturing Systems

In a lean manufacturing system, suppliers deliver small lots on a daily or frequent basis, and production machines are not necessarily run at full capacity. One objective of lean manufacturing is to eliminate waste of any kind, that is, to eliminate anything that does not add value to the final product. Holding inventory that is not needed very soon is seen as waste, which adds cost but not value. A second objective of lean manufacturing is to empower workers so that production decisions can be made by those who are closest to the production processes.

Oracle, Siemens, and other vendors offer demand-driven lean manufacturing systems. As any IS, JIT needs to be justified with a cost−benefit analysis. And all JIT success factors apply to lean manufacturing. For example, JIT requires that inventory arrive on schedule and be of the right quality. For companies subject to bad weather or labor strikes, lean manufacturing may not be suitable.

Quality Control Systems

Manufacturing quality control (QC) systems can be stand-alone systems or part of an enterprise-wide total quality management (TQM) effort. QC systems provide data about the quality of incoming materials and parts, as well as the quality of in-process semifinished and finished products. These systems record the results of all inspections and compare actual results to expected results.

QC data may be collected by sensors or radio frequency identification (RFID) systems and interpreted in real time, or they can be stored in a database for future analysis. Reports on the percentage of defects or percentage of rework needed can keep managers informed of performance among departments. KIA Motors introduced an intelligent QC system to analyze customer complaints, so it could more quickly investigate and make corrections.

Other Production/Operations Technologies

Many other areas of production/operations are improved by ISs and tools. Production planning optimization tools, product routing and tracking systems, order management, factory layout planning and design, and other tasks can be supported by POM subsystems. For example, a Web-based system at Office Depot matches employee scheduling with store traffic patterns to increase customer satisfaction and reduce costs. Schurman Fine Papers, a manufacturer/retailer of greeting cards and specialty products, uses special warehouse management software to improve demand forecasting and inventory processes. Its two warehouses efficiently distribute products to over 30,000 retail stores.

BAE Systems Uses CIM in Its Combat Aircraft Facility

BAE Systems is a global company headquartered in London, England, engaged in the development, delivery, and support of advanced defense, security, and aerospace systems. BAE is among the world’s largest military contractors.

In September 2010, BAE opened a titanium-machining facility to manufacture components for the F-35 Lightning II combat aircraft. It took 10 months to complete the facility, during which time engineers at BAE considered a number of ways to ensure that it would be able to accommodate the high throughput of titanium military aircraft parts cost-effectively. According to Jon Warburton, BAE’s F-35 program manager, after conducting a thorough examination of numerous potential manufacturing solutions, the BAE team finally decided to deploy a highly automated CIM system (Wilson, 2011). The CIM system ensures that titanium parts for the aircraft can be manufactured on a JIT basis. To do so, it coordinates the orders received at the plant, as well as the movement of raw materials and tooling, and optimizes the use of the machine tools.

A key element of the CIM strategy was the deployment of two flexible manufacturing systems (FMSs) that can accommodate the manufacture of different parts at different volumes. When an order for a part is received, the data relating to it are passed to the FMSs, which schedule the manufacture of a part in the most expedient way by examining the current workload across each of eight machine tools. Each FMS can store up to 1,000 cutting tools in a racking system ready to be loaded into the machine tools. A series of twin robot systems deliver the stored cutting tools into each machine, as well as replenishing any worn tools. The biggest challenge faced by the team in the development of the facility was to ensure that the FMS and the machine tools communicated effectively with one another and with BAE’s CIM system.

Reasons Why Companies Invest in CIM

The benefits of CIM are as follows: (1) It simplifies manufacturing technologies and techniques, (2) automates as many of the manufacturing processes as possible, and (3) integrates and coordinates all aspects of design, manufacturing, and related functions. CIM is comprehensive and flexible, which is especially important in the redesign or elimination of business processes. Without CIM, it may become necessary to make large investments to change existing ISs to fit new processes.

Pricing of Products or Services

Sales volume as well as profits are determined by the prices of products or services. Pricing is a difficult decision, particularly during economic recessions. ISs used in conjunction with data collected from online markets are able to help companies maximize profits using a variety of yield management practices. For instance, online retailers can personalize the Web pages shown to individual customers and display a combination of products and prices customized to entice that customer to make a purchase. The automated decisions about what products and prices to display to a customer are determined by a complex algorithm based on the customer’s previous purchases, Web viewing history, activity on social media, and product searches. While airlines have been charging different ticket prices for the same flight for years, the practice is now employed by many different businesses as part of a mass-customization strategy made possible by information and computing technologies. Another example of technology-driven pricing and promotional strategies includes flash sales designed to engage customers and trigger a quick spike in sales. Flash sales work by offering customers an incredible deal for a very short time, usually announced via mobile text message, e-mail, or social media.

Salesperson Productivity

The performance of salespeople is collected in the sales and marketing TPS and used to compare performance along several dimensions, such as time, product, region, and even the time of day. Actual current sales can be compared to historical data and to expectations. Multidimensional spreadsheet software facilitates this type of analysis.

Sales productivity can be boosted by Web-based call centers. When a customer calls a sales rep, the rep can look at the customer’s history of purchases, demographics, services available where the customer lives, and more. This information enables reps to provide better customer service.

Sales automation software is especially helpful to small businesses, enabling them to rapidly increase sales and growth. One leading software is Salesforce.com, which is a CRM application that is offered as a software as a service (SaaS). You will read about Salesforce.com in detail in the CRM section of Chapter 10.

Profitability Analysis

In deciding on advertising and other marketing efforts, managers need to know the profit contribution or profit margin (profit margin = sale price − cost of good) of certain products and services. Profitability metrics for products and services can be derived from the cost-accounting system. For example, profit performance analysis software available from IBM, Oracle, SAS, and Microstrategy is designed to help managers assess and improve the profit performance of their line of business, products, distribution channels, sales regions, and other dimensions critical to managing the enterprise. Several airlines, for example, use automated decision systems to set prices based on profitability.

Marketing activities conclude the primary activities of the value chain. Next, we look at the functional systems that are support activities, also called secondary activities, in the value chain: accounting, finance, and HR management.

Accounting Software Packages

Accounting software is a foundational technology for many companies, and as a business grows, powerful and effective accounting solutions are critical. Most accounting software packages offer the same basic features necessary for managing finances: accounts receivable (A/R), accounts payable (A/P), general ledger, billing and invoicing, purchase and sales orders, and reporting. In addition to basic functionality, the top accounting solutions offer additional features to give users more power, flexibility, and customization. Often, accounting solutions are closely integrated with enterprise systems, such as ERP systems that include an extensive accounting module.

Many providers offer cloud-based solutions. SaaS accounting software solutions include the features of traditional systems, with the added benefit of anytime, anywhere accessibility and updating.

Financial Disclosure

The SEC’s financial disclosure system is central to its mission of protecting investors and maintaining fair, orderly, and efficient markets. Since 1934, the SEC has required financial disclosure in forms and documents. In 1984, the SEC began collecting electronic documents to help investors obtain information, but those documents made it difficult to search for and find specific data items. To eliminate that difficulty and improve how investors find and use information, the SEC now requires public companies, called filers, to submit their financial reports as tagged interactive data files (FASB.org, 2012) formatted in eXtensible Business Reporting Language (XBRL). In addition, data in the reports must be tagged according to standards established by the Financial Accounting Securities Board (FASB). Each year, FASB updates the list of over 15,000 computer readable tags known as the GAAP Financial Reporting Taxonomy. Annual updates reflect changes in accounting standards and other enhancements designed to improve the reporting process and usability.

XBRL Tagging

XBRL is a language for the standards-based exchange of business information between business systems. Each item, such as cash or depreciation expense, is tagged with descriptive metadata or labels, such as calendar year, audited/unaudited status, currency, and so on, as defined by the GAAP Financial Reporting Taxonomy. The taxonomy is like a data dictionary that defines financial concepts and the relationships between various types of data that might be included in a financial report. The XBRL language and data tags make it possible for the reports to be read by any software that includes an XBRL processor. Interactive (tagged) data make it easier for investors to analyze and compare the financial performance of public companies, increasing the efficiency and transparency of reporting processes and the ability to consolidate financial data from different operating systems. Prior to XBRL, reports were noninteractive. Investors who wanted specific data had to manually search lengthy corporate annual reports or mutual fund documents. As more companies use interactive data, sophisticated analysis tools used by financial professionals are now available to average investors.

Creating XBRL documents does not require XML computer programming. As requirements for XBRL reporting become increasingly common around the world, more vendors are developing software products for marking up reports, tagging data, submitting reports to various recipients, as well as receiving and analyzing tagged data from other sources. Figure 9.9 shows how XBRL documents are created. XBRL helps companies:

• Generate cleaner data, including written explanations and supporting notes.
• Produce more accurate data with fewer errors that require follow-up by regulators.
• Transmit data more quickly to regulators and meet deadlines.
• Increase the number of cases and amount of information that staffers can handle.

XBRL Reporting Compliance

In addition to the public companies required by the SEC to submit their financial reports as XBRL documents, other businesses are being required to use XBRL-formatted reporting. For instance, the SEC requires mutual funds to submit risk return summaries in XBRL format, and banks in the United States must submit certain types of XBRL reports to the Federal Deposit Insurance Corporation (FDIC). Globally, regulators in many other countries require companies to file reports using XBRL. When international firms file XBRL reports, they will oftentimes use the International Financial Reporting Standards (IFRS) Taxonomy created by the International Accounting Standards Board (IASB). We anticipate that XBRL reporting will increase over time as regulatory agencies, investors, and organizations responsible for setting accounting standards increasingly argue that XBRL reporting is good for both business and the economy.

Why Fraud Occurs

Fraud occurs because internal controls to prevent insider fraud—no matter how strong—will fail on occasion. Fraud risk management is a system of policies and procedures to prevent and detect illegal acts committed by managers, employees, customers, or business partners against a company’s interests. Although each corporation establishes its own specific procedures, fraud risk management involves assessing a company’s exposure to fraud; implementing defenses to prevent and detect fraud; defining procedures to investigate, prosecute, and recover losses from fraud. Analyzing why and how fraud could occur is as important as detecting and stopping it. This analysis is used to identify necessary corporate policies to deter insider fraud and fraud detection systems when prevention fails.

Fraud Risk Factors

Factors that increase a company’s exposure to fraud are illustrated in Figure 9.10. ISs are implemented to harden it against these factors. Companies make themselves targets because of the interaction of these four factors:

1. A high level of trust in employees without sufficient oversight to verify that they are not stealing from the company
2. Relying on informal processes of control
3. A mindset (belief) that internal controls and fraud prevention systems are too expensive to implement
4. Assigning a wide range of duties for each employee, giving them opportunities to commit fraud

When a small manufacturer was the victim of theft of intellectual property, the computer network logs identified the computer that had been used to commit the alleged crime. But there was no way to connect that computer to one specific individual. A manager’s conviction that he knew who had perpetrated the crime was not sufficient evidence. The lesson learned was that the internal control—separation of duties—is important not only to fraud prevention but also to fraud prosecution and recovery of losses. At the company, employees had shared computer accounts, so they were not able to link the fraud to the person who committed it. Designing effective fraud response and litigation-readiness strategies (postincident strategies) is crucial to be able to do the following:

• Recover financial losses.
• Punish perpetrators through lawsuits, criminal charges, and/or forfeited gains.
• Stop fraudsters from victimizing other organizations.

History has shown that if the punishment for committing fraud is not severe, the fraudster’s next employer will be the next victim, as described in IT at Work 9.2.

Trying to keep fraud hidden can mean either doing nothing or simply firing the employee. These approaches to dealing with fraud are not sustainable because they erode the effectiveness of fraud prevention measures and produce moral hazard—that is, they take the risk out of insider fraud.

One of the most effective fraud prevention techniques is the perception of detection and punishment. If a company shows its employees that it can find out everything that every employee does and will prosecute to the fullest extent anyone who commits fraud, then the feeling that “I can get away with it” drops drastically (Johnson et al., 2011). The Catch-22 is that companies may have limited resources that hinder a proper fraud diagnosis or forensic accounting investigation, even though they cannot afford unrecoverable losses either.

Financial Meltdowns Triggered by Fraud

In the early 2000s, the U.S. business economy was significantly impacted by fraud scandals that involved senior executives at a number of major corporations. Lawmakers believed that the scope of the crimes destroyed the public’s confidence in the country’s financial systems and markets. A number of laws were passed that heightened the legal responsibilities of corporate management to actively guard against fraud by employees, established stricter management and reporting requirements, and introduced severe penalties for failure to comply. As a result, fraud management became a necessary functional process. These frauds played a role in the SEC’s rule for XBRL data reporting.

Internal Controls

In companies with lax accounting systems, it is too easy for employees to misdirect purchase orders and payments, bribe a supplier, or manipulate accounting data. When senior managers are involved in a fraud, preventing fraud is extremely tough. Consider Bernie Madoff, who committed a record-setting fraud scheme for many years even after the Sarbanes–Oxley Act was passed in 2002 to help prevent financial fraud.

In a much smaller but still serious fraud case involving a New York-based nonprofit, a volunteer was responsible for counting cash receipts at the annual fundraiser. The volunteer had performed this task for 30 years. One year, an accountant was assigned to assist the volunteer with the count. The volunteer offered the accountant a “cut” of the cash in exchange for her silence about the theft.

Strong internal controls, which depend on IT for their effectiveness, consist of the following:

• Segregation of duties tops the list of best practices in control procedures. When handling a company’s assets, the work of managers and employees needs to be subject to approval or authorization. For example, any attempt to issue a check to a vendor not in the database of approved vendors will be prevented by the accounting IS.
• Job rotation More than one person should be familiar with each transaction cycle in the business wherever possible. Rotation of jobs helps prevent overreliance on a single individual—and is a way to expose fraudulent activities.
• Oversight Management—whether a single owner or a team of individuals—must monitor what is actually happening in the business. Auditing ISs are part of a strong oversight function. Unannounced periodic walk-throughs of a process or review of how things are really being done can reveal existing or potential problem areas.
• Safeguarding of assets is essential to a fraud prevention program. Access to networks, financial systems, and databases must be controlled with strong passwords and other security measures. Similarly, bank checks, petty cash funds, and company credit cards need to be locked up when not in use.
• IT policies Understand your IS. Heavy reliance on IT staff can open up opportunities for fraud. Establish a computer use policy and educate employees on the importance of securing information. Strictly enforce the use of separate logins and keep passwords confidential.

Budgeting

The best-known part of financial planning is the annual budget, which allocates the financial resources of an organization among participants, activities, and projects. The budget is the financial expression of the enterprise’s plans. Management allocates resources in the way that best supports the mission. IT enables the introduction of financial logic and efficiency into the budgeting process. Several software packages, many of which are Web-based, are available to support budget preparation and control.

Capital budgeting is the process of analyzing and selecting investments with the highest return on investment (ROI) for the company. The process may include comparing alternative investments, for example, evaluating private cloud vs. public cloud computing options.

The major benefits of using budgeting software are that it can reduce the time and effort involved in the budget process, explore and analyze the implications of organizational and environmental changes, facilitate the integration of corporate strategic objectives with operational plans, make planning an ongoing continuous process, and automatically monitor exceptions for patterns and trends.

Forecasting

As you read, a major reason why organizations fail is their inability to forecast and/or secure sufficient cash flow. Underestimated expenses, overspending, financial mismanagement, and fraud can lead to disaster. Good planning is necessary, but not sufficient, and must be supplemented by skillful control. Control activities in organizations take many forms, including control and auditing of the ISs themselves. ISs play an extremely important role in supporting organizational control, as we show throughout the text. Specific forms of financial control are discussed in the next section.

Financial Ratio Analysis

A major task of the accounting/finance department is to watch the financial health of the company by monitoring and assessing a set of financial ratios. These ratios are also used by external parties when they decide whether to invest in an organization, extend credit, or buy it.

The collection of data for ratio analysis is done by the TPS, and computation of the ratios completed through financial analysis models. Interpretation of ratios and the ability to forecast their future behavior require expertise, which is supported by decision support systems (DSSs).

Profitability Analysis and Cost Control

Companies are concerned with the profitability of individual products or services, product lines, divisions, or the financial health of the entire organization. Profitability analysis DSS software allows accurate computation of profitability and allocation of overhead costs. One way to control cost is by properly estimating it. This is done by using special software. For example, Oracle Hyperion Profitability and Cost Management software is a performance management app that provides insights into costs and profitability. This app helps managers evaluate business performance by discovering the drivers of cost and profitability and improving resource alignment. Sophisticated business rules are stored in one place, enabling analyses and strategies to be shared easily across an enterprise.

Benefits of SaaS for HR

Three real-world examples illustrate the benefits of tying SaaS to global HR transformation efforts:

• A global medical device manufacturer needed to create an independent HR system as it divested from its parent company. Cloud computing was at the core of its new global HR delivery model, which reduced the demand on internal business and IT resources. The company was able to establish fully independent HR operations within 10 months.
• A national nonprofit foundation with a fast-growing employee population wanted to improve the effectiveness of HR operations. The organization selected a cloud-based solution, which dramatically improved time to value without overstretching internal IT resources. Because little front-end investment was required, the foundation hit its budget target.
• A global entertainment company needed a learning management system that could deliver content varying from instructor-based training to 30-second video how-to snippets. It chose to deploy a new learning management system in the cloud. With this approach, it quickly got the new system up and running.

Figure 9.11 illustrates how IT facilitates the work of the HR department. The figure summarizes the role HR plays in acquiring and developing talented people in organizations.

Recruitment

Recruitment is the process of finding potential employees with the skills and talent needed by the company, testing them, and deciding which ones to hire. Most companies are flooded with applicants, but might still have difficulty finding the right people. LinkedIn is a primary social media site for recruitment and headhunters. Some reports suggest that over 90% of U.S. companies use LinkedIn as their primary source of identifying job candidates. HR managers using LinkedIn must become familiar with the website’s search tools for finding candidates that meet certain criteria for the position they are trying to fill. Using the advanced search features, HR managers can develop search queries that screen user profiles on the basis of things such as current job title, current industry, seniority level, and years of education. Keywords can be used to find candidates with specials, training, or experience. Job hunters should consider the search strategies HR professionals are likely to use when searching for candidates and include information in their profiles that will increase the chances of being included in search results.

Performance Evaluation

Employees are evaluated periodically by their immediate supervisors. Peers or subordinates may also evaluate others. Evaluations are usually recorded on paper or electronic forms. Using such information manually is a tedious and error-prone job. Once digitized, evaluations can be used to support many decisions, ranging from rewards to transfers to layoffs. For example, Cisco Systems is known for developing an IT-based human capital strategy. Many universities evaluate professors online. The evaluation form appears on the screen, and the students fill it in. Results can be tabulated in minutes. Corporate managers can analyze employees’ performances with the help of intelligent systems, which provide systematic interpretation of performance over time. Several vendors provide software for performance evaluation, such as HalogenSoftware.com and Capterra.com.

Training and Human Resources Development

Employee training and retraining are important activities of the HR department. Major issues are planning of classes and tailoring specific training programs to meet the needs of the organization and employees. Sophisticated HR departments build a career development plan for each employee. IT can support the planning, monitoring, and control of these activities by using workflow applications.

Personnel Planning and HR Strategies

The HR department forecasts requirements for people and skills. In some geographical areas and for overseas assignments, it may be difficult to find particular types of employees. In such cases, the HR department plans how to locate sufficient HR or develop them from within.

Benefits Administration

Employees’ contributions to their organizations are rewarded by salary/wage, bonuses, and other benefits. Benefits include those for health and dental care as well as contributions for pensions. Managing the benefits system can be a complex task, due to its many components and the tendency of organizations to allow employees to choose and trade off benefits. In large companies, using computers for self-benefits selection can save a tremendous amount of labor and time for HR staff.

Providing flexibility in selecting benefits is viewed as a competitive advantage in large organizations. It can be successfully implemented when supported by computers. Some companies have automated benefits enrollments. Employees can self-register for specific benefits using the corporate portal or voice technology. Employees self-select desired benefits from a menu. Payroll pay cards are now in use in numerous companies, such as Payless Shoes, which has 30,000 employees in 5,000 stores. The system specifies the value of each benefit and the available benefits balance of each employee. Some companies use intelligent agents to assist employees and monitor their actions.

Employee Relationship Management

In their effort to better manage employees, companies are developing human capital management, facilitated by the Web, to streamline the HR process. These Web applications are more commonly referred to as employee relationship management. For example, self-services such as tracking personal information and online training are very popular in ERM. Improved relationships with employees result in better retention and higher productivity.

Ethical Challenges and Considerations

HRIS applications raise ethical and legal challenges. For example, training activities that are part of HRM may involve ethical issues in recruiting and selecting employees and in evaluating performance. Similarly, TPS data processing and storage deal with private information about people, their performance, and so forth. Care should be taken to protect this information and the privacy of employees and customers.

The federal law related to workplace substance abuse, the Drug-Free Workplace Act of 1990, requires employers with federal government contracts or grants to ensure a drug-free workplace by documenting and certifying that they have taken a number of steps. Dealing with alcoholism and drugs at work entails legal risks because employees have sued for invasion of privacy, wrongful discharge, defamation, and illegal searches. Employment laws make securing HR information necessary for the protection of employees and the organization.