Heeding HR’s New Digital Mandate

In the ongoing battle for top talent, digital technologies play an increasingly prominent role. Seismic changes in the workforce and workplace, driven by demographics, alternative work arrangements and various distance-busting technologies, are rewriting the rules of engagement. While digital tools accelerate that shift, they also offer new ways for human resources teams to attract great talent, then motivate and equip them.

Falling behind

Yet many companies are falling behind on the digital front, Bain & Co.’s new survey of 500 HR executives and managers in the U.S., the UK and Germany shows. Some 87 percent of respondents believe that digital will fundamentally change HR, but 75 percent acknowledge that their IT systems and technology have not yet achieved optimal performance or the business outcomes they desire. For the laggards, the window of time may be closing, as 57 percent of respondents plan to increase their IT budgets by 1 percent to 10 percent over the next two years, and 25 percent plan to increase budgets by more than 10 percent.

Many new technologies appear to have reached an inflection point for broad adoption over the next two years. Artificial intelligence, in all its forms–from robotic process automation to machine learning to natural language processing–has already demonstrated promising results. For example, machine learning can be up to 17 times more accurate than other methods at predicting who will resign. AI-based candidate screening in talent acquisition can improve hiring accuracy and, at Unilever, cut the time to hire by 75 percent. And the Bain survey finds that roughly half of companies are now using or piloting RPA in at least one HR process, with adoption expected to reach 74 percent within two years.

Indeed, the appetite of HR leaders for more digital tools may outpace their ability to absorb the tools. Depending on the HR process in question, 23 percent to 31 percent of HR departments still use manual, Excel-based or paper-based processes as their primary method for delivering different HR services. Over the next two years, respondents anticipate a sharp shift from manual to digital: For instance, from 23 percent of HR departments primarily using manual processes in recruiting to 4 percent.

That’s a hugely ambitious program. HR executives may be overconfident in how quickly they can make the shift, given how rocky the road has been so far in most HR departments. Which issues have caused the most aggravation? Respondents cite too many digital tools, especially unintegrated tools; interfaces that users find difficult to understand; and tools that are missing critical functions.

Now, combine those problems with the most commonly cited reasons for increasing IT spending: replacing older systems, upgrading existing HR management systems and new functionality from current vendors. In fact, a significant share of HR leaders is planning to buy more technology through HRMS suites rather than through third-party standalone tools or custom, in-house tools. Not only do these responses signal big expectations of HRMS vendors, they suggest that HR departments could face even more complexity as they adopt new applications, unless they make a concerted effort to integrate functionality into their existing HRMS. The challenge will be to integrate all of the new technology on top of already disparate tools.

Leading HR teams have found ways to navigate these challenges. Their experiences, combined with insights gleaned from our survey, suggest how companies can take the reins of their digital transformation rather than be overwhelmed by it.

Measure success based on business outcomes.

Historically, HR used its technology to improve the productivity of HR processes. Today, companies turn to technology for reasons far beyond cost savings. For areas other than payroll and recruiting, reducing process-level costs is a much lower priority than broader business outcomes such as speed, accuracy and quality.

Bring rich, consumer-grade experiences to the workplace.

HR’s customers across the lifecycle–including candidate, new joiner, retiring employee, manager and contractor–increasingly expect an experience as easy, convenient and personalized as they encounter with the best retailers or service providers. Leading companies are using digital technologies to meet these expectations. In 2016, Ford launched the HRRev program to streamline its people processes with technology. A seven-person People Lab gathered input from employees and devised experiments to improve processes. Multiple digital initiatives flowed from the experiments, including development of user-friendly HR tools, multichannel interaction models with HR, and real-time feedback tools.

Raise the game on analytics.

Analytics is proving to be a critical means of informing HR decisions. Google fields a dedicated People Analytics team to improve decision making in HR. People Analytics has helped Google on how to contain the number of required candidate interviews; what the best size and shape of a given department should be; how to reduce defections after maternity leave; and how to spot hidden gold in the millions of engineer candidate applications.

Test and learn.

Companies can get a lot of mileage out of technologies even at the experimental stage. Take chatbots, for instance. Online retailer Overstock relies on a bot named Mila to field notifications from call-center employees who are too sick to come to work. Mila passes on the information to managers and adjusts schedules automatically. This system replaced an outdated call-in hotline, saving Overstock time and money on lengthy phone conversations.

Fix and simplify processes, data and systems.

RPA and machine learning have a broad range of valuable applications. Often, though, it would be better if companies could simplify and standardize underlying business processes, data and systems. Take offer letter administration. RPA can conveniently draft offer letters for new employees that are tailored, accurate and compliant, by automating manual checking of data across diverse databases and regulations. However, some companies write offer letters in such a way as to create more questions than they answer, and there may be too many versions of the letter. Redesigning the offer letter template and moving to fewer versions, or to a single one, would reduce the manual work in need of automation through RPA in the first place.

To be sure, a chatbot or algorithm cannot address all HR issues. Human judgment remains valuable for assessing and motivating people. But the range of applications for digital continues to grow, and the mandate for HR executives is clear: They have a clear opportunity to create a portfolio of digital bets that will transform the workforce experience, make better talent decisions through analytics, automate processes, free up time for higher-value activities, reduce costs and, most important, improve business outcomes.

Michael Heric
Michael Heric is a partner with Bain & Company’s Performance Improvement practice and leads the firm’s support functions capabilities globally. He is based in New York. Send questions or comments about this story to hreletters@lrp.com.