The Use of Enterprise Resource Planning Applications in Finance and HRM

The Importance of ERP Software

In previous articles on Finance and Human Resource Management, we discussed how the finance and HRM functions have evolved to become important support functions in organizations and not just appendages to the core processes of the organization. For instance, in earlier decades when manufacturing was predominant, finance and HRM were like a corollary to the existing organizational functions and this trend continued with the advent of the services sector as well. However, the fact that organizations had to have cost control and people enabling policies, which began to be appreciated from the 1990s, meant that these functions rose in prominence in organizational theory and practice. Further, with the advent of the IT and the BPO sector where even though finance and HRM were seen as non-core functions, the introduction of ERP or Enterprise Resource Planning applications like SAP, PeopleSoft, Oracle Apps, and CRM (Customer Relationship Management) software resulted in synergies between the different organizational processes and efficiencies accrued to the organizations as an advantage. Of particular importance is the fact that this software had finance and HRM modules that were critical to the success of enterprise wide deployment meant that the top management started to take finance and HRM more seriously than before. Added to this is the fact that many IT and BPO companies (especially the large ones like Microsoft, Apple, Infosys, and Google) actively hedge their foreign exchange exposure lent greater importance to the finance department.

Synergies, Efficiencies, and Cost Control Apart from Visibility

The deployment of this ERP software in these organizations meant that they no longer were standalone as far as the alignment of different units and business processes were concerned. Instead, the integration of the business processes and the resulting coordination and control of the support functions along with the core business processes with centralized focus and command resulted in the top management having greater visibility over these processes. Further, with the increased focus on the HRM function managing people enabling and people empowerment and the finance function managing the cash flows and the hedging and investing functions, the ERP applications like PeopleSoft for HRM, Oracle Apps for Finance, and SAP for the entire organization were deemed to be sources of competitive advantage. In the decades prior to the 1990s, there was little integration and less centralization of control and command. However, the explosion in the activities of the mega corporations like Unilever, P&G, GM, Apple, Microsoft, and the TATA group in India created a demand for organizational processes to be monitored by top management and for greater visibility for senior management over these functions. The result was that the deployment of this ERP software greatly accelerated the advent of centralization and top down decision making coupled with autonomy at the unit level and incorporation of feedback from the bottom. These evolutionary changes meant that finance and HRM were no longer the sideshows to the organizations but instead, emerged as support functions that were important in their own right.

The Benefits of ERP Software for Employees

The benefits of deploying ERP applications to the employees were many and these included access to software that automated routine tasks like applying for leaves, conducting appraisals, booking transport and accommodation while on travel, and budgeting for different activities within the project teams. Indeed, in many multinationals, the norm for whatever ERP software they use to have everything done through automated processes instead of manual or even sending emails was the case earlier. This workflow management meant that employees could focus their time and energies on project activities instead of chasing the finance and HRM staff for budgetary activities, closing out on expense claims, and arranging visa and other formalities for overseas travel. Indeed, many IT and BPO companies have the ERP software integrated with their everyday transport functions as well that greatly reduces the stress on employees to run around for cabs and other routine activities. Finally, the fact that the ERP software results in synergies is evident from the way in which different organizational processes are integrated and the way in which project managers have a high altitude view of the different processes. This also enables the project managers and top management to exercise cost control and devolve authority to the middle management.

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The article is Written By “Prachi Juneja” and Reviewed By Management Study Guide Content Team. MSG Content Team comprises experienced Faculty Member, Professionals and Subject Matter Experts. To Know more, click on About Us. The use of this material is free for learning and education purpose. Please reference authorship of content used, including link(s) to and the content page url.