Last month, I wrote a blog comparing globalization with localization in cloud HCM. In it, I defined the key differences between the two terms and also shared how SAP SuccessFactors addresses localization. The feedback I received on that post showed how important this topic is and also how many questions still remain about the importance of localization in HCM.
Having defined localization in the previous post, I wanted to drill down a little bit further this time by reviewing two of the major facets of localization – Awareness and Reaction – and discuss why both are critical to a best practice solution.
If you recall from my last blog, localization solutions identify changes to local or country-specific regulations and laws that impact HR processes like hiring, wages and employment. HR professionals must understand and comply with these changes in order to help their organizations avoid potentially costly fines and other penalties, as well as protect the organization’s reputation. A best practice HR function is at the forefront of regulatory compliance.
Quite simply, awareness refers to the method in which a localization provider alerts HR organizations or HR system administrators of impending changes. This will usually include an explanation of the scope of the change that allows the administrators to review and determine if the change will impact them. Some vendors use third party services for notification of changes and some larger customers may have internal legal teams doing the same for them. Awareness is a reasonable expectation from any localization solution but, while some software vendors may stop here, there is another even more critical component to localization.
Once you are notified of an impending change, what happens to your HCM system processes, data and reports? Many regulatory changes impact functionality or core business processes, so awareness is only half of the answer. If you are relying on a third party for notification of changes, you are most likely going to be on your own to implement them in your system to keep up (if that’s even possible).
The most challenging part of localization in HCM systems is not the awareness, but the configuring or coding of the change into the system. Not only must these changes be made, but they often must be made on short notice. To add complexity, some countries frequently make changes retroactively or just prior to year-end, leaving little time for analysis and coding changes.
Let’s look at a hypothetical example. A government agency announces a mandatory regulatory change will impact your HCM processes and you have a short time to comply. Depending on the scope and timing of the change, you might have to address some or all of the following in your system in order to comply with the change:
- Changes to functions such as eligibility
- Changes in workflow to ensure the correct data fields are presented to the user at each stage of the employee life cycle (hire, term, transfer, life event, etc.)
- Changes in the database to add or modify existing data fields
- Changes in the user experience so the right information is captured at the right time by the right user
- Changes to reports for operational/day-to-day and compliance purposes
That’s a lot of work for one regulatory change. If you support a larger multinational HCM system, you could be looking at up to 1,000 changes a year. Assuming you had access to the source code or proper systems to execute the changes, that’s an unreasonable or even impossible effort for an HR team to undertake.
SAP SuccessFactors addresses this by incorporating the system updates in its localization solution. When changes are announced, SAP’s holistic solution not only addresses notification but also covers system changes. This removes the unrealistic burden of system updates from the customer.
In conclusion, if you are moving to cloud HCM you must strongly consider how effective the vendor’s localization solution is before moving down that road. SAP SuccessFactors offers localization benefits by actively monitoring changing local requirements and incorporating updated functionality, reports and rules in its regular release cycles for more than 80 countries today. That goes a long way toward lowering compliance risk for HR.
AJ Whalen has more than 25 years of experience in HR and Payroll systems, including 20 years as an SAP HCM consultant, project manager and marketer.