Human resource issues and challenges for e-business.

• Author: Mitchell, Margaret E.
• Position: Brief Article

Abstract

E-business has changed the way in which business is conducted. In this paper these changes are analyzed for specific human resource management (HRM) functions: (HR) planning, job analysis and job design, recruitment and selection, orientation, training, and compensation. All these functions are affected by changes in the business environment, technology, and potential labor force of e-business. These changes create challenges for human resource professionals who must recognize the inherent differences between e-business and traditional brick-and-mortar business. HR professionals must adapt to these changes quickly in order to maximize the performance of e-business.

Introduction

The increasing use of the Internet and the accompanying emergence of a Web-based economy have lead to changes in business conditions and practices. Some observers have predicted that these changes will transform the nature of business (Ulrich, 2000). Attention related to these changes often focuses on changes in the way in which business is conducted. These changes include those found for customer relations, marketing, inventory control, and/or other functions clearly affecting the way in which business is conducted. However, it is important to note that all changes related to the way in which business is conducted affect employees working in these business, whether they are directly or indirectly related to the "E" side of the changing business. Effects on employees often are forgotten (or at least given lower priority) as businesses focus on the more obvious changes associated with e-business.

In this paper changes related to e-business are considered along with observed and/or recommended changes in the human resource management (HRM) of businesses that either focus on e-business or include e-business as one of the methods used to conduct business.

The Change to E-business

E-business redefines traditional business models. It uses a business strategy employing digital media and network technology in order to optimize customer value delivery. It utilizes Internet-based computing, which supports the open flow of information between systems. E-business uses business portals (established over the Internet) to interact with customers. Technology is used as the actual cause and the driver of the business strategy so that the product or service is developed, better choices are provided to the customer, and delivery options are enhanced (Karakanian, 2000).

Some of the most obvious changes found in the move from traditional business to e-business include the rapid speed of accessing information, the greater availability of information, the increasing speed with which business can be conducted, and reduction in the effects of geographical distance on methods used to conduct business. However, the move to e-business, which has been described as a move to a new economy, goes beyond using the Internet as a tool. The changes require modifying the way in which business is conducted and success is measured. These changes are reflected in words such as the following: full customer service (Siebel, 1999); profiling (Siebel, 1999); enterprise relationship management (Siebel 1999); competing on affiliation (Evans & Wurster, 1999); deconstruction (referring or new forms of industry) (Evans & Wurster, 1999); navigators (referring to those who control entry to the Web) (Evans & Wurster, 1999); ecosystems (Tapscott, 1999); digital bazaars (Schwartz, 1999); invisible inventory (Siebel, 1999); virtual integration (Magretta, 1999); e-business community (Tapscott, 1999); virtual marketplace (Siebel, 1999); and richness and reach of information (Evans & Wurster, 1999).

Effects of E-business on Human Resource Management

Human resource management obviously is affected by the move to e-business. Effects include a compressed technology cycle, growing demand for faster and better service, and greater dependence on speed as the determinant of success (Greengard, 2000). Human resource management professionals can address these effects if they recognize the opportunities and threats inherent in conducting e-business. For example, Greengard (2000) identified seven guidelines for human resource professionals who want to maximize the benefits of e-business and move at the necessary speed:

1. Understand the fact that the Internet makes e-business fundamentally different from other methods of conducting business. E-business requires identifying new ways to communicate and new business models, so there must be more creative thinking and less bureaucracy. The Internet creates new opportunities. However, the possible benefits of these opportunities can be realized only if people move quickly and effectively enough to take advantage of them.

2. Obtain the support of senior management HR needs to justify the need for specific changes and show the possible benefits of these changes.

3. Create a task force or team who can make decisions quickly. In many cases these teams must include members from different departments because successful e-business requires participation from different departments. Also, the team members must be able to communicate effectively and understand the concerns of others. All this teamwork and communication must be completed at an increasingly fast pace. Decisions must be made quickly, and recommended actions must be implemented swiftly.

4. Use Return-On-Investment (ROI) calculations different from the conventional ones. Many initiatives in e-business are so new that it is difficult to measure the ROI directly. Also, many of the required changes include costs that lead to benefits such as greater loyalty and increased retention. The potential productivity gains are enormous, but these gains are difficult to measure by traditional methods of computing ROI.

5. Work with other departments to make sound business decisions. Other departments and Information Technology (IT) staff provide needed information so that HR can see the effect of various decisions on the whole organization, not only HR.

6. Create an IT system that is flexible and scalable. The most appropriate hardware and software are needed in order to make the business run effectively.

7. Do not let fear of mistakes slow decisions and actions. The best systems can include mistakes (especially in the early stages). The correct infrastructure and strategy must be clearly defined. Specific changes can be identified later. In fact, firms should expect that the increased desire for speed will result in mistakes. The fear of making these mistakes should not prevent action. Rather, the expectation of making mistakes should be used as a justification for constantly analyzing conditions and making changes as soon as possible.

   Changing the Way in Human Resource Professionals Do Their Jobs

   The Web is changing all aspects of conducting business, but HR is one of the latest functions to be affected by the use of Web-based technology (Karakanian, 2000). The delay found in responding to Internet use is most likely due to a variety of reasons. First, the effects on HR are not so obvious as those found on functions such as sales and customer service. Second, HR's effects on a firm's profitability are not so direct or easily measured as those found for many other functions, so attempts to maximize profits by taking advantage of Web-based changes typically are not going to be directed to HR functions before other functions. Third, certain HR professionals (especially those who entered the field many years ago) traditionally are not so quantitatively and technologically oriented as professionals in areas such as finance or operations.

   Ulrich (2000) observed that HR professionals can experience a gap between understanding a Web-based economy and actually adapting systems to take advantage of the new economy. Understanding the capability offered by the Internet and designing an HR system to deliver optimal HR services in a Web-based economy may not be so easy as it sounds. Ulrich (2000) offered three guidelines for designing an HR system that becomes operational and works best in a Web-based economy:

1. Build new organizational capabilities, rather than focusing on structures or hierarchies. Capabilities can be considered the corporate DNA, culture, shared mindset, firm equity or brand, key success factors, or processes. Successful HR professionals will take the desire to succeed in a Web-based economy and transform this desire into specific capabilities.

2. Create innovative HR practices that instill the desired capabilities into the organization. These HR practices include the traditional HR practices such as staffing, training and development, compensation, and so forth. Also, these practices recognize the constraints presented by the new rules of a Web-based economy and work within these constraints.

3. Apply Web-based technology to HR practices and the HR function. This application...