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Human Resources Processes with ERP
the employee sues the company for wrongful termination, the company may have
problems substantiating the termination decision.
Because Fitter does not have an effective information system, it is difficult to manage
performance evaluation data. This makes it more challenging for the Human Resources
Department to identify problems with an employee and take corrective action (such as job
performance counseling or a transfer) before the problems lead to termination. With
Fitter’s paper-based system, an employee’s file can be viewed by only one person at a
time, and it is possible to lose track of an employee’s file—temporarily or permanently.
Also, it is difficult to maintain proper control of sensitive personal information when it is 165
maintained in paper files.
Employee turnover can be a significant problem for a company. The cost of hiring an
employee has been estimated from thousands of dollars to over $50,000. When evaluating
the cost of hiring an employee, a company should consider both the direct costs of hiring an
employee and the less tangible costs that occur during a new employee’s first year or so. For
example, while new employees are learning their jobs, other employees have to take time
from their normal jobs to train them, which can negatively impact their productivity.
Another cost that is difficult to quantify is an employee’s experience and job
knowledge, which is lost when he or she leaves a company. For example, if a purchasing
manager leaves a company, then all of the manager’s knowledge about supplier relations
may be lost. The company would have records of the contracts signed with various
suppliers, but details of the negotiations that led to each contract may not be documented.
Such details can be crucial in successfully negotiating the next contract. The manager may
have developed good relations with a certain supplier and know whom to contact when
problems arise. These relationships are not specified as part of the purchasing manager
position but accrue over time with the individual holding the position. When companies
experience high rates of turnover, they lose knowledge and skills that may be crucial to
keeping them competitive.
Employee turnover is strongly tied to job satisfaction and compensation. If employees
have satisfying jobs and are well compensated, they are less likely to leave the company.
Human resources can help maintain a satisfying work environment through a number of
means, such as by holding training programs for supervisors and managers, conducting
periodic employee satisfaction surveys, and gathering data from employee exit surveys.
Human resources also has a critical role to play in compensation, which should be related
to the skills and tasks required by the job and the performance of the employee. One
important function of a human resources department is to make sure compensation levels
are competitive and are applied fairly to all employees. Failure to do so can result in high
rates of turnover as well as discrimination lawsuits.

ANOTHER LOOK

At Novartis, Reputation Did Not Match Reality
After 10 years of being on Working Mother magazine’s “100 Best Companies for Working
Mothers” list, Novartis pharmaceutical settled a gender discrimination class action
lawsuit in 2010 for $175 million dollars. The settlement covered more than 6,000 female
(continued)

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