The connection between HR effectiveness and technology just got a little clearer.
World-class HR organizations now spend 26 percent less than peers on HR and operate with 32 percent fewer staff while driving dramatically higher levels of effectiveness, according to Forging a Digital Path to World-Class HR, the latest analysis of benchmark data from The Hackett Group.
(World-class HR organizations are defined here as those that achieve top-quartile performance in both efficiency and effectiveness across an array of weighted metrics in The Hackett Group’s comprehensive HR benchmark. Its research is based on an analysis of results from recent benchmarks, performance studies and advisory and transformation engagements at hundreds of large global companies.)
So what do these high-performing companies have in common?
According to Hackett, they have gone through a digital transformation, which includes investing in cloud-based HR applications and services that are enabling them to more effectively manage their organizations.
Unfortunately, such a transformation requires more than just switching out old computers for new ones.
“In HR, as in other areas, digital transformation is a multi-year effort that requires a clear strategy, well-defined targets and a detailed roadmap of initiatives,” said Franco Girimonte, associate principal at The Hackett Group.
Girimonte says building the digital capabilities of the HR organization requires “fresh strategies and approaches” in four key areas:
- Smart technology to automate and continuously improve processes;
- AI-powered insights to drive decisions;
- New skills like the ability to analyze and interpret data for key messages and storylines to advise business decision-makers; and
- Changes in organization roles and structures to fully leverage HR brain power.
Most HR organizations have already started the process of digital transformation, according to The Hackett Group’s research. An analysis of digital-transformation progress in eight key HR areas found that, to date, the majority of projects that have been completed are in payroll/workforce management and total-rewards administration, areas that are oriented towards transaction processing and already heavily technology-enabled. Approximately one-third of all companies in the research have completed digital-transformation initiatives in these areas. (In many cases, these projects involve cloud-based systems.)
However, not all companies in this research are embracing a turn toward technology–at least not yet: While 71 percent say they currently have an HR digital-transformation strategy, just 46 percent possess the resources and skills necessary for successful execution today.
“This suggests that the slow pace of HR digital-transformation efforts may continue unless greater resources are deployed and skills are significantly upgraded,” the report states.