ERP BASED BUSINESS PROCESS REENGINEERING IN A
HUMAN RESOURCES DEPARTMENT: A CASE STUDY
APPROACH
Konstantinos Chertouras
IT Division, “Papageorgiou” Regional Hospital of Thessaloniki, Nea Evkarpia 56429, Thessaloniki, Greece
Theodora Chatzikallia
Dipl.-Eng Mechanical Engineer, Independent Consultant, Drimos 57200, Thessaloniki, Greece
Keywords: ERP, Business Process
Abstract: Modern organizations are constantly facing new challenges regarding the reengineering of their business
departments and processes. By the term Business Process we mean the profile of specific methods that can
be employed to perform specific business tasks. In general, each Business Process is uniquely tailored to the
organization it applies. Therefore, the resolution of a Business Process related problem is typically carried
out with custom methods developed within organizations. In this paper we propose the use of Enterprise
Resource Planning (ERP), as the basis for reengineering a business department and effectively the Business
Process that it carries through. We discuss the application of ERP in the reengineering of the Business
Process of a real world organization department (a Human Resources (HR) Department), which lead to a
significant productivity enhancement.
1 INTRODUCTION
Business Process Reengineering (BPR) is a
relatively new area of the business management
scientific field. Business Process is the set of all
semantically related business tasks or units,
connected to achieve a complex business outcome
(Davenport & Short, 1990). Business Processes can
be identified in terms of (a) their beginning and end
points (where “customers” will ask for services and
collect the results respectively) (b) interfaces
(through which “customers” will ask for services),
and (c) the organization units (i.e. the business units)
involved in each process (Davenport & Short, 1990).
BPR methods appeared as the scientific tool, able
to perform critical analysis and radical redesign of
existing business processes. The rational behind the
advent of these methods, is to achieve breakthrough
improvement in terms of relevant quantitative (i.e.
productivity achieved) and qualitative (tolerance to
failures, flexibility) criteria (Teng et al., 1994).
In order to achieve this “radical change”,
corporations have to employ new technologies to
accommodate the complexity of the required
reengineering tasks. Information Technology (IT)
Systems appear to be a suitable tool for satisfying
these requirements (Hammer, 1990) with ERP
technology being the most appropriate (Parr &
Shanks, 2002). ERP systems possess several key
attributes including: (a) Integration (all the different
IT systems are interconnected and cooperate
transparently) (b) Fault Tolerance (human
intervention in data exchange is minimized) and (c)
Ease of use.
In this paper we illustrate the key role of ERP
systems in the successful reengineering of a
traditional business process employed in a real world
HR department. In section 2, we set the general
problem framework. In section 3, we briefly present
ERP systems and the merits they possess. In section
4 we examine, how a business process can be
modeled without an ERP system. We then discuss,
the major changes that ERP technology brought to
the process it implemented at hand.
78
Chertouras K. and Chatzikallia T. (2004).
ERP BASED BUSINESS PROCESS REENGINEERING IN A HUMAN RESOURCES DEPARTMENT: A CASE STUDY APPROACH.
In Proceedings of the Sixth International Conference on Enterpr ise Information Systems, pages 78-83
DOI: 10.5220/0002597900780083
Copyright
c
 SciTePress

2 PROBLEM FRAMEWORK
Let us present a real world Human Resources (HR)
department, as an example of a business process
system. HR departments (as any business unit)
incorporate organizational units (Payroll unit, Time
Management unit etc.), beginning and end-points (to
allow “customers” to access the respective business
processes and obtain results), as well as interfaces
(perceived as the instructions on how to get results
from the business process).
An HR department is responsible for the
following: 1. Personnel Administration (PA) and
Organizational Management (OM). 2. Constant
monitoring of all kinds of paid and unpaid leaves. 3.
Shift planning, individual work schedules, time
management and time evaluation. 4. Payroll and
benefits remuneration.
Taking all these factors into consideration
demands for a highly complicated business process.
Furthermore it is desirable that the business process
operates with as little manpower as possible. In the
majority of cases, a traditional business process is
employed to solve such problems. In this approach,
a set of rules is compiled to cover for different
scenarios that may arise in everyday business life.
Furthermore, responsibilities are assigned among the
members of the HR team in order to implement the
business process.
The above procedure is error prone since it is
based solely upon the human factor. The solution is
to decouple the business process needs from the
human factor as much as possible. This is where
Enterprise Resource Planning technology (ERP) is
ideally suited. Through the use of ERP systems, we
can project our business needs, rules and
responsibilities, into an integrated platform that will
allow a fully computerized approach, which will
prevent a great number of common people mistakes.
In the next section the most important aspects of
ERP systems technology are presented.
3 ERP SYSTEMS OVERVIEW
Enterprise Resource Planning technology provides a
unique Information Technology (IT) platform to
cover all the business needs of a corporation
(Gattiker & Goodhue, 2002). Despite their
deployment complexity and cost (Griffin, 1999),
ERP systems became very popular due to a unique
property they exhibit; Integration i.e. the ability to
handle all parts of a business process as a coherent
whole. Before ERP systems came to life, an
organization had to employ a variety of different
systems to cover its IT needs.
These systems have been functioning as
standalone platforms, and there was not any easy
way to exchange data and expertise among them.
People were responsible for data migration from one
system to another to allow for system
interoperability. Furthermore, in order to cover for
different working positions within the company,
company personnel had to be completely retrained to
be able to use all these different systems.
ERP technology came to change all these.
Through ERP systems technology, companies have a
single platform to accommodate all the key business
parts. Data integrity and user level security are easily
achieved, facts difficult to handle with multiple
software platforms. Moreover, ERP systems allowed
the processing of all commercial and business
functions, regardless company’s size and geographic
location of the company’s components (Parr &
Shanks, 2002). Integration is the key to this success.
Integration, in this context, is the sequence of events
triggered by a user action, without the user being
informed about the details of these underlying events
(Myerson, 2001).
4 NON ERP SYSTEM BUSINESS
PROCESS APPROACH
In this section we describe a business process
modeled and deployed in our HR department
without the use of an ERP system. We will use the
term “traditional” (as was explained earlier) to
describe the non – ERP business process
implementation approach. Such a system can be
modeled easily with the use of a directed graph. In
this graph, each node (denoted by
i
where is the
i-th node representing a specific business task, e.g.
the node labeled
is the node assigned the OM
position) would represent a different, well-defined
position within the business environment, having a
predefined role. We assume that every position
i
,
is held by a single employee. We use the terms node
and employee interchangeably. Furthermore by
referring to a node
i
we also refer to the employee
accomplishing this business task. E.g. in our HR
model, there would be a distinct node, and thus a
distinct person to cover for the PA position, for the
Time Management (TM) position for the OM
position and for the Payroll position (PR) as shown
in Figure 1 (next page).
Ν i
OMN
Ν
Ν
The graph of Figure 1 consists of a set of nodes
interconnected in order to accomplish the required
business process. The numbers {1,2,3,4} are indexes
denoting neighboring nodes. The term
)1( 1
ρ
−
ERP BASED BUSINESS PROCESS REENGINEERING IN A HUMAN RESOURCES DEPARTMENT: A CASE
STUDY APPROACH
79

Figure 1: A company operating with non-ERP business logic.
Entry
flo
w
N
PA
Other Organizational
Units
N
C
N
C
1
HR department
N
ΤΜ
N
ΟΜ
N
p
ayroll
Entry
flo
w
Entry
flo
w
Entry
flo
w
1
1
1
1 - ρ
1
1 - ρ
1
1 - ρ
1
1 - ρ
1
Information flow
b
etween company
N
2
N
3
N
4
N
1
Financial
department
1
1
1
1
1-ρ
1
1-ρ
1
1-ρ
1
1-ρ
1
Entry
flo
w
Entry
flo
w
Entry
flo
w
Entry
flo
w
N
CF
1-p
1
1-p
1
1-p
1
1-p
1
departments
denotes the mean value in the loss of information
during information exchange between them (since
the value 1 represents loss-less information
exchange), a fact that we will shortly explain.
Entry points of “customer” requests are all the
peripheral nodes
i
, while central node Ν
c
Ν
does
not accept input directly from any “customer” (but it
accepts input from other central nodes of the same
company). Consider for example the case of an
employee asking for a paid leave (from node N
OM
).
If the Time Manager is present, then the customer’s
request will be redirected to the Time Manager. If
he/she is not present, then the organizational
management responsible will try to accomplish the
business task under the guidance of
c
Ν
.
In this graph a number of keynotes apply:
1. The total number of nodes depends on the
number of posts within the working environment.
There is a central node
c
Ν
assigned the role of the
coordinator (manager). Every node is
communicating with
c
Ν
and exchange of
information is taking place among them. Node
c
Ν
accepts input from peripheral nodes, it
processes it accordingly, and produces a certain
output, as a sort of error correction feedback. The
information transmitted back as output to the nodes,
ensures (in the equilibrium state – after the error
correction procedure terminates) that the actions of
nodes are correct. A fundamental assumption is that
c
Ν
is totally aware of the correct business process,
and that is why the feedback it produces is
considered reliable. Furthermore we assume, that
there is a one to one communication between
c
Ν
and all the other nodes, therefore there is no
information loss in the information exchange that is
taking place (In Figure 1, solid lines represent the
information exchange among each of
i
node and Ν
c
Ν
). Effectively, we consider that due to this direct
communication, the two parties are able to
completely understand each other. On the other
hand, we will shortly examine why the information
exchange among all other nodes is considered noisy.
2. There is information exchange among the
peripheral nodes of the system in order to handle the
tasks in case of an expected or unexpected leave of a
business node (In Figure 1, dashed lines represent
the information exchange among
i
nodes).
Effectively, each node establishes communication
with its peer (interdepartmental), nodes. However
this communication is fractional and an amount of
business detail is lost (this is where noise is
introduced). This occurs due to the following facts:
a. Each node is aware of some attributes of all
others’ nodes tasks but it is not fully aware since it is
not its main responsibility (obviously, it is nearly
impossible for an employee to remember all the
details and business facts of a position, if this
position is not is his everyday business life). In
addition, people avoid getting assigned constantly
new tasks and responsibilities since they try to
distribute the total workload equally among them.
Effectively, people feel that learning to perform
efficiently other people tasks and responsibilities
may increase their workload (McGregor, 1960). b.
Human behavior, human likes and dislikes, as well
as personal preferences does not allow for a full
understanding of neighboring nodes interaction
(
Kinney, 1993).
Ν
3. In case of a node failure,
c
Ν
can become
overloaded. All the business tasks of the missing
node(s) that cannot be accomplished by its (their)
neighbors would be redirected to
c
Ν
in order to
keep the business process functioning. There would
be performance degradation, since the total
workload of
c
Ν
would increase due to two factors:
a. Pending customers for the missing nodes which
would be redirected to
c
Ν
- since peer nodes would
be unable to complete the requests. b. Internal
ICEIS 2004 - DATABASES AND INFORMATION SYSTEMS INTEGRATION
80

requests by all other departmental nodes, trying to
accomplish pending requests initially targeting any
of the missing. Effectively, there is a strong case that
neighboring nodes will try to accommodate requests
initially targeted for any missing node, without
being able to do so (in their effort to relieve
c
Ν
from excessive workload). Consequently, they
would not redirect these requests to
c
Ν
. As a result
of their ignorance regarding the correct business
process, they would constantly request for details in
the form of
c
Ν
feedback, and effectively increase
further its workload.
4. In case of failure of the central node
c
Ν
, the
following issues arise: a. There is a global
coordination loss in the business process. Business
tasks, outcomes and general quality of business
service, employees responsibilities and tasks
assignments, and all general management tasks,
continue to operate unattended and without
coordination by the central node
c
Ν
. Entropy, as
an uncertainty measure of outcome quality is
dramatically increased. b. There is no error
correction feedback offered to peripheral nodes
i
.
Effectively, no error-free state in the business
product is reached. Business process final products
offered to customers are severely affected regarding
their respective quality. c. Noise, as a measure of
interference added in the transition of information
between the nodes is increased. E.g. for node
to transmit information to node
, flow has to
transit through intermediate node
. Since the
information exchange between peripheral nodes is
incomplete, the error inserted in the transition is
propagated and added as shown next: Total Error =
Error
+ Error . d. Connection
and information exchange with all the other business
units within the organization is lost. Only
Ν
PAN
OMN
TMN
TMPA NN → OMTM NN →
c
Ν
, the
coordinator node, is assigned the task to exchange
information with other business units. If
c
Ν
becomes unavailable, a significant problem
concerning interdepartmental business coordination,
among business units, arises.
5 ERP BUSINESS PROCESS
In the previous section, a traditional business
process and the parameters that control its behaviour
have been presented.
In this section we consider the same business
process, with ERP being an integral part of its
operation. In the ERP business market a great deal
of software packages are present. Market leaders
include SAP/R3 from SAP AG (the platform we are
employing), PeopleSoft from PeopleSoft Inc, Oracle
HRMS from Oracle Corporation and iBaan from
Baan Co to name but a few (Piszczalski, 1997).
Figure 2 (next page), shows the business process
after reengineering it to accommodate the use of
ERP. In order to obtain a better insight on the
reengineering let us take as an example the Time
Manager and the way it conducts its business tasks
using a proprietary IT system. Such a system
possesses the following capabilities: 1. Ability to
maintain for each employee only its full name and
its ID card number as master data. Through the ID
card number, the Time Manager has to understand to
which company department the employee is
working. 2. Ability to maintain a monthly time line
for each employee, presenting for each day the
employee’s working status (absent or present each
day). 3. Ability to retrieve data from the
corporation’s monitoring clocks about the entry and
leave time of each employee. The Time Manager
had to keep track in a paper full manner of the
following: 1. Shift planning of each company
department in order to compare employee’s entry
and leave time with planned working time. 2.
Organizational status of each employee within the
company, in order to assign a correct working plan
based on its position. 3. Up-to-date personal details
(master data) of each employee for the correct
assignment of working time for each case (i.e.
handicapped people should work less etc). 4.
Overtime hours of each employee in order to inform
correctly the payroll unit. 5. In addition, Time
Manager is responsible to correct mistakes and
cooperate constantly with the department manager
about problems regarding late arrivals, sicknesses
leaves etc. The aforementioned issues had to be
handled with a system able to perform only the
trivial, previously mentioned, tasks. To make clearer
the difficulties that the Time Manager had to
confront with, let us present the tasks that had to be
performed from him/ her in case of a temporary
leave of an employee: a. The Personnel
Administrator should first ask for the approval of the
HR Manager (HRM) to remove the employee from
the company’s workforce. b. The OM manager
should arrange all the necessary reassignment and
inform both HRM and Personnel Administrator
about the employee chosen to cover the vacant
position. c. Payroll should be informed of the
changes and to accordingly produce a new payroll
scheme based on the new tasks. d. Finally the Time
Manager should re-evaluate and reorganize its shift
plans according to the capabilities and personal
details and preferences of the employee assigned to
the new post.
The employment of the ERP system (SAP R/3 in
our case) allowed for several enhancements and
effectively resulted in a significantly better system
performance.
ERP BASED BUSINESS PROCESS REENGINEERING IN A HUMAN RESOURCES DEPARTMENT: A CASE
STUDY APPROACH
81

N
i
≈
≈
Entry
fl o w
N
PA
Other Organizational
Units
N
C
N
C
1
1-ρ1
HR department
N
ΤΜ
N
ΟΜ
N
p
ayroll
Entry
f
low
Entry
fl o w
Entry
fl o w
1
1
1
1 - ρ
2
1-
p
1
1 - ρ
2
1 - ρ
2
1 - ρ
2
Inform ation
fl o w
b
etween
groups
N
2
N
3
N
4
N
1
Financial
department
1
1
1
1
1 - ρ
2
1 - ρ
2
1-ρ
2
1 - ρ
2
1-
p
2
1 - ρ
2
Entry
fl o w
Entry
fl o w
Entry
fl o w
Entry
fl o w
N
C
Group
Traffic
N
i
Main traffic
N
j
N
k
N
l
Entry traffi c for each bu sines s n ode denoted wi th Ni .
T raffi c from all other interdepartmental nodes is
accom m od ated as well.
…
Entry flow
N
l
N
k
N
i
N
j
N
p
N
q
N
r
N
s
N
i
N
n
Int erdepartm ent al traffic bet ween nodes Ni and Nn of different
b
us iness units. T hrough int egratio n, each node of one
department may have a form of cooperation with other nodes of
other departments.
Group
T r affi c
Figure 2: A business department reengineered with the employment of an ERP system.
The following keynotes apply:
1. There is a considerable increase in both the
quantity and the quality of information exchanged
among neighbouring nodes. After ERP deployment,
a single IT platform has been installed and
customized in order to accommodate all the business
process tasks. Through the customisation procedure,
corporations are allowed to customize the
deployment of the ERP platform to a sufficient level
of detail, to meet their specific business needs. This
single platform exhibits two important attributes that
enhance information exchange:
a. A common Graphical User Interface (GUI)
environment used in all business parts of the system.
Through a common GUI interface, users can
perform a variety of tasks without the need to know
a number of completely different platforms.
b. Integrated cooperation of all the business
modules of the IT system. Effectively, employees
are allowed to work within the limits of different
business process areas, without the need to be aware
of the underlying business details. For example, a
change in the OM module could trigger a change in
the TM module. Thus the employee responsible for
the OM module could potentially perform TM tasks.
Transparency is achieved as well: after the
reengineering, “customers” can be served by more
than one beginning and end point. Effectively, ERP
technology helped employees to reduce the overall
assigned workload and interpersonal contact for
trivial business issues, facts that were sometimes the
source of interpersonal problems.
2. The total workload of central node
c
Ν
is
reduced significantly. In the non-ERP business
process approach,
c
Ν
had an important role in the
coordination of all of its assigned business nodes.
After the deployment of business logic within the
ERP platform,
c
Ν
is granted the duties of a
concustomizing ERP sultant. Moreover,
c
Ν
lost its
role as the business process problems solver. This
means that
c
Ν
, is now the central source of
business kno dge during the ERP deployment
phase and the embedding of new methods and
enhancements regarding business logic into the ERP
system. And since business processes adhere to a
well-defined path after the employment of ERP
technology, fewer problems appear and less
workload is assigned to
c
wle
Ν
.
c
Ν
retains its role as
a central coordinator, wit t b g concerned with
trivial business tasks.
3. The property of in
hou ein
tegration shield overall
sy
ers” for any kind of
bu
er
fo
department business process) could reduce the salary
s the
stem against temporary node failures. This is due
to the fact that all the business nodes are aware of all
business process tasks, and can accomplish partially
the duties of the failed node.
4. Requests from “custom
siness task can be accommodated by a number of
different servers. In the non-ERP business
environment, there is a key person responsible for
each business component (Personnel Administrator
for personnel data, Time Manager for time
evaluation etc). After the reengineering, a number of
people are capable of performing the same tasks (to
a certain extend, since only the responsible
employee for each post is totally aware of all the
tasks of its assigned post). For example, Time
Manager can update personal details; Personnel
Administrator can inform about remaining paid
leaves quotas; Organization Manager can update
payroll by changing the organizational status etc.
5. In the ERP based system, it has become easi
r departments within the same organization to
exchange business information. E.g. the Materials
Manager (part of the Materials and Warehouse
ICEIS 2004 - DATABASES AND INFORMATION SYSTEMS INTEGRATION
82

of another employee (part of the HR department
business process) by a certain quota, if this
employee was found in debt in materials.
6. The aspect of the business process on which
the introduction of ERP had a significant impact is
co
6 CONCLUSIONS
e traditional business
process approach and the reengineering achieved
nsistency. With ERP, it is harder for an employee
to enter invalid data since error handling is
embedded. E.g. consider the situation where an
employee was on a paid leave from the Time
Manager and the payroll employee was trying to
approve overtime hours of work for that day.
Without ERP technology, this class of conflicts
would be highly possible due to the absence of
integration of individual departments.
Having examined thus far th
after the employment of an ERP system, a number
of conclusions obtained about the superiority of the
ERP based solution, summarized in the following: 1.
Increased the system’s fault tolerance in case of
business nodes failures. 2. Increased the
performance achieved in terms of the number of
business process requests that can be served at any
given time period. 3. Allowed better
interdepartmental cooperation through the use of the
same unified IT – ERP platform by all team
members. 4. Significantly decreased errors in the
business process. 5. Decreased errors in the
information exchange among business nodes. 6.
Significantly reduced the workload of the Central
Coordinator Node
c
Ν
. 7. Allowed easy adaptation
of new business methodologies by using standard
software engineerin rocedures. g p
7 SUMMARY
outlined, how a corporation
could enjoy significant benefits from the use of ERP
In this study we have
technology. Specifically, through a case study HR
business department, we have shown that ERP
systems could bring a revolution to the way business
processes are implemented compared to traditional
paper full and proprietary IT systems
implementations. Moreover we have shown that
ERP technology, allows the pure computerization of
a corporation’s business processes, a fact that
provides significant performance advantages and
economic merits.
ACKNOWLEDGMENTS
Konstantinos Chertouras and Theodora Chatzikallia
would like to thank deeply a former colleague and
very precious friend from both the Elec. & Comp.
Eng. Department at the Tech. Univ. of Crete, Greece
and Imperial College, London, Dr. Ioannis
Georgiadis for his nearly epic review, sharp
suggestions and moral support. Also they would like
to deeply thank Mr. and Mrs. Chertoura as well as
the Board of Executives of the “Papageorgiou”
Regional Hospital of Thessaloniki, for the full
financial support they have provided.
REFERENCES
Davenport, T.H. & Short, J.E., 1990. The New Industrial
Engineering: Information Technology and Business
Process Redesign. In Sloan Management Review, pp.
11-27.
Grover, V.J., Kettinger S.R., & Teng W.J., J.T.C. 1995.
The Implementation of Business Process
Reengineering. In Journal of Management Information
Systems, 12(1), pp. 109-144.
Hammer, M., 1990. Reengineering Work: Don't
Automate, Obliterate. In Harvard Business Review,
pp. 104-112.
Myerson, J.M., 2001. Enterprise Systems Integration,
Second Edition. Auerbach Pub., ISBN 0849311497.
Griffin, J., 1999. Information Strategy: Where's the Beef?
In DM Review Magazine, July 1999, US.
McGregor, D., 1957. The Human Side of Enterprise. In
Adventure in Thought and Action, Proceedings of the
Fifth Anniversary Convocation of the M.I.T. School of
Industrial Management, pp. 23-30.
Kinney, J.A. & Johnson, D.L., 1993. Breaking Point; The
Workplace Violence Epidemic and What to Do About
It. In National Safe Workplace Institute, 3008 Bishops
Ridge, Monroe, NC 28110 [phone])].
Gattiker, T. & Goodhue, D., 2002. Organization Structure
and Enterprise Systems: An Empirical Study of Intra
Organizational Interdependence and ERP Impact.
www.terry.uga.edu/~ekarah/goodhue.doc
Parr, A.N., & Shanks G., 2002. Taxonomy of ERP
Implementation Approaches. In Proceedings of the
33rd IC on System Sciences Hawaii 2002.
Piszczalski, M., 1997. Lesson’s Learned from Europe SAP
Users. In Production, Jan, 109:1, 54-56.
ERP BASED BUSINESS PROCESS REENGINEERING IN A HUMAN RESOURCES DEPARTMENT: A CASE
STUDY APPROACH
83