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Five critical steps for transforming HCM to future-proof your organization

Guiding principles to help companies meet the change challenge.
By: | July 1, 2020

Even before the world’s health and economic landscapes were impacted by the recent global health event, employers appeared to have hit a wall when it came to productivity.

For instance, a 2017 article at FocusEconomics.com entitled “Economic Experts Weigh In: Why is Productivity Growth So Low?” reported that the technological advances and management strategies that propelled productivity in the past were no longer working.

At the same time, a U.S. Bureau of Labor Statistics’ Business Employment Dynamics report found that one-third of new businesses fail within their first two years, and 50% fail within their first five.

While the factors behind these productivity-connected data points are complex, the technology powering much of today’s human resource efforts is among the key reasons why this troubling trend has gained steam, according to Linda Mougalian, Sr. Division Vice President, Go-To-Market Strategy at ADP, who has spent nearly 20 years in Product Management focusing on HCM offerings.

“The big challenge today is constant change. In fact, the only guarantee is change; it’s the new normal,” says Mougalian. “The ongoing global health event—with its massive shift to distributed workforces—has proven why new, innovative HR tech solutions are necessary to meet future business needs.”

Mougalian points out that even as recent as a year or two ago, 53% of overall HCM purchases in the marketplace were still on-premises solutions.

“Much of the HCM domain remains legacy technology,” Mougalian says, adding that existing HCM technology struggles to meet expectations and, based on surveys, a majority of HR leaders are not satisfied with what they have today.

The reason? Not only is change today a constant, the pace of change is rapidly accelerating. And, as the recent global health event has shown, change increasingly needs to be done under uncertain and often challenging conditions; it’s hard to tell what’s coming next or where it might be coming from.

“That’s why the workforce of today and in the future needs to be ready,” Mougalian says. “The organizations that will be successful long-term are the ones that can rapidly embrace this inevitable trend of quick and constant change.”

Regarding why existing HCM technology has remained stagnant, most major enterprise software purchases have a long shelf life and evolve over time to address specific needs. “There exist lifespans of 10, 15 and 20 years for some of these HCM systems that remain installed,” Mougalian says. “These companies need to take a ‘duct taping’ approach to keep all the systems in their HCM ecosystem running.”

That scenario can’t be blamed entirely on HR. It’s well known that organizations tend to lean in the direction of revenue-generating systems, Mougalian notes, because it can be more challenging to quantify the return on investment of HCM solutions than other enterprise applications that drive more demonstrable operational efficiencies.

To meet the “change challenge,” Mougalian offers five critical areas where HR (and HCM technology) needs to step up and power today’s businesses towards a successful future.

“These five guiding principles are the result of decades of ADP research and client experience,” she says. “We’ve found that these are the elements that differentiate successful businesses and how great work gets done.”

Understand How People Work to Improve Performance

To succeed, HR must overcome the inability of traditional HCM systems to enable holistic digital transformation across people, teams and functions to better achieve strategic business objectives. That also includes reversing stagnant productivity trends, despite ongoing HR technology proliferation.

Mougalian explains traditional HCM systems are typically designed for hierarchies and cost centers, rather than networks of dynamic teams, and this can get in the way of employee engagement, performance and the retention of top talent.

With dynamic teams, productivity is unblocked because people are able to work outside the constraints of a traditional hierarchical organizational structure. They’re more engaged, less likely to leave and, therefore, more productive. By breaking down silos, dynamic teams help create a culture of connection and collaboration.

Also, the 2019 Deloitte Human Capital Trends survey reported that 31% of respondents said they now operate mostly or almost wholly in teams. In the same study, 53% of respondents said they saw a “significant improvement in performance” from the transition to a team/network-based organization.

“The success of organizations that support cross-functional teams illustrates that HR professionals can help drive team leader performance by truly understanding their challenges,” Mougalian says.

Today, she adds, when you discuss cross-functional, global or distributed teams — and you can’t see how those relationships are happening — how can you know who your best team leaders and managers are? Or, how do you know what the attributes of your most effective teams are, or what your actual vacancy and retention issues are? HCM solutions based upon more traditional organization hierarchies cannot answer these questions.

Personalize the Employee Experience

More and more, traditional, one-size-fits-all HCM systems can’t accommodate the diverse needs of various people, teams and functions working within an organization.

What is happening instead is that organizations deploy multiple, disconnected technologies from different vendors. By some estimates, there are 1,400 HR tech vendors in the market today, which makes finding the best combination of apps for your organization a nearly impossible challenge. With different departments and leaders often working on their own chosen software and apps, it exacerbates the silo problem—not the most efficient or cost-effective way to work.

Low employee adoption of HR technologies due to disconnected user experiences is a common challenge, Mougalian says. To combat that result, employers, with HR’s help, need to build more diverse and inclusive workplaces marked by exceptional employee experiences when using HR technology.

If that does not happen, low employee usage can lead to incomplete data, which in turn drives the inability to capture efficiencies and make smarter decisions. Also, the desired need to manage the growing trend of freelancers/ contractors as part of the “regular” workforce remains out of reach. Finally, low employee adoption and a lack of enthusiasm leads to the inability to drive real-time, ongoing employee skill development.

In that 2019 Deloitte Global Human Capital Trends survey, 84% of respondents rated employee experience important, and 28% identified it as one of the three most urgent issues facing their organization. In the same survey, only 38% said they were satisfied or very satisfied with work-related tools and technology. Clearly, there is an opportunity for improvement here, Mougalian says.

“It’s about prioritizing people: making work easier, more productive and more meaningful for them,” she says. “Creating personalized experiences is key to a people-centric approach to HCM.”

Quickly React to Changing Global Compliance Requirements

Keeping pace with new, ever-changing compliance regulations can be complex. Having a reliable global compliance plan of action, as well as access to resources and guidance, is critical.

Compliance tracking and reporting becomes very tricky when you have data in multiple, disconnected systems in different countries. Still, many multinational organizations are working with a unique HR system for each country they operate in—on average, 50 or more of those systems.

To meet the seemingly unmanageable compliance challenge, an HCM platform must be designed to provide organizations with a single, global system of record that is mindful of location-specific compliance requirements, Mougalian says.

“An HCM platform should offer rapid localization and compliance capability, which enables organizations to confidently expand into new countries and adjust quickly to evolving compliance requirements,” she explains. Plus, if HR can offer an HCM system that can meet those expectations, it will not only be seen as protecting the company, but it also makes compliance simpler for everyone and removes obstacles to growth — a clear efficiency boost.

“Effective HCM today should manage compliance requirements associated with expanding into new markets, as well as the rapidly changing requirements where employers already are doing business,” according to Mougalian, who adds that it is especially pertinent with the growing trend of remote, mobile capabilities – people working when and where they choose.

Support Better Decision-Making Based on Trusted, Data-Driven Intelligence

Hype aside, when it comes to making smarter business decisions with AI-generated insights pushed to HR and business executives in the flow of work, there is much work yet to be done.

Poor data quality and lack of HCM system intelligence, in fact, is preventing employers from making the best people decisions possible. Regardless of all the chatter about analytics, data all too often remains siloed across many disparate, disconnected tools sitting outside the flow of work. In addition, the poor HR system utilization from employees (mentioned above) lowers data quality and inhibits useful data intelligence creation.

“This can make it tough for decision-makers to get the insights they need when they need them most,” Mougalian says.

Also, Mougalian goes on to say, “In order to effectively leverage data analytics you have to be confident the data is robust and up-to-date, and that it’s being distilled down and delivered as timely, actionable insights for the people doing the work.”

While people analytics are valued, few companies are realizing the benefits. For instance, Deloitte’s Human Capital Trends report in 2017 found that while 71% of companies see people analytics as a high priority, only 4% of companies have predictive analytics capabilities.

With effective data analytics tools and capacities built into their HCM application, HR leaders can help line of business leaders drive team effectiveness; understand who on a team is at a risk for leaving; optimize workforce strategies using benchmarking data; and quickly get to the right action with a system that uses semantic search.

“Most of all, by bringing an effective analytics solution into the fold, HR leaders will be seen as enabling good decisions and as overcoming the reporting problems business line managers are challenged with,” Mougalian says.

Create an Adaptable HR Function

The potential of every organization is limited by the capabilities of its technology. The increasingly uncertain world of work requires people-centric technology that lets you adapt as quickly as your business needs do, according to Mougalian. HCM based on adaptable technology is a breakaway path from the one-size-fits-all solutions, which cannot meet today’s challenges.

Bottom line: Traditional, monolithic HR systems struggle to support the type of adaptable HR function required to meet rapidly changing business needs, making it tougher for companies to expand into new markets without incurring administrative and compliance burden. Merger and acquisition activity is a particular challenge, creating a significant IT burden when it means maintaining multiple systems that support distinct, localized business needs.

Also, manual workarounds for older systems create compliance risk and potential security issues, and more traditional systems are unable to quickly add new capabilities without introducing new security risk or siloed data pools.

More adaptable HCM systems can rapidly acquire new capabilities supported by best-in-class levels of system availability, resiliency and scalability from cloud-native architecture.

In its 2018 Key Issues Study, The Hackett Group found that 33% of organizations are looking to expand manager self-service via mobile/social applications, while the 2018 Deloitte Perspectives small business technology trends report found that digitally advanced small businesses earned twice the revenue per employee and had four times revenue growth.

“For HR leaders, moving to a next-generation HCM will be a clear signal that they are known as an innovator within both the company and industry,” Mougalian says, “leading the effort to enable great teams and great work.”

In the end, she says, it’s time for a change if an organization is struggling to meet their productivity goals while relying on traditional org charts to evaluate teams; using a generic solution for their unique organization; falling short when it comes to keeping up with rapidly changing compliance challenges; keeping data in disparate HR systems; and having trouble adapting quickly or integrating new features.

“Innovative HR leaders of today need an HCM solution that treats work as flexible, adaptable, people-centric, team-based, meaningful and engaging,” Mougalian concludes. “And that solution must engender and support the ideal flow of work, drive team performance and rapidly adapt as HR and business needs evolve.”

 

About ADP (NASDAQ – ADP)
Designing better ways to work through cutting-edge solutions, premium services and exceptional experiences. HR, Talent, Time Management, Benefits and Payroll. Informed by data and designed for people.

Learn more about ADP Next Gen HCM at FlowOfWork.adp.com