The role of the human resources (HR) function is rapidly shifting away from solely providing routine employee-centric services. One of the consequences of this paradigm shift is the increasing focus on digital and artificial intelligence (AI) capabilities finding applications in recasting the way HR functions.
As your enterprise embarks on the HR role in digital transformation journey, it is essential to have an in-depth understanding of its meaning, strategies, challenges, and benefits.
What is HR Digital Transformation?
Digital transformation is often confused with digitization or digitalization.
Digitization refers to converting physical data or documents into digital form. It focuses on technological advancement.
Digitalization goes one step further and automates business processes using digital workflows. It focuses on process improvement.
Digital transformation is a broader concept that encompasses digitization and digitalization and extends beyond them. It focuses on the people aspect of an organization. It involves creating a shift in leadership mindset and an organizational culture that leverages digital efficiencies on an ongoing basis.
Challenges in HR Digital Transformation
Contrary to common understanding, most challenges faced in digital transformation journeys are unrelated to HR tech.
I. Low Stakeholder Buy-in
Transformational changes are successful only if driven from the top down. Top management buy-in provides the necessary budgets, approvals, and internal branding that HR transformation initiatives need to succeed.
II. Lack of Clear Objectives
Organizations must define the transformation goals clearly, and measurably in alignment with their strategic objectives. For example, if the aim is to improve employer branding to attract talent, a 20% reduction in new-hire onboarding time is a well-defined relevant goal.
III. Low Adoption
Low user adoption could result from ineffective change management, insufficient training, improper platform selection, or lack of top-management push.
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HR Digital Transformation Strategy
The goal of digital transformation is to create an agile HR function that is digitized end-to-end. However, it requires a structured approach to achieve this end.
HR Digital Transformation Roadmap
Following are the key milestones to be completed for each HR transformation initiative-
I. Assess the Current State of Maturity
According to the Gartner 2021 HR Leaders Agenda Poll survey, 48% of HR leaders stated that their existing HR digital tools hinder, rather than enhance, employee experience (EX).
The first step is to evaluate how aligned the AS-IS HR processes and performance metrics are to industry-best practices. You also need to assess if legacy enterprise systems are suitable for integration with HR automation solutions. Current state assessment may reveal process bottlenecks, for example, delays in salaries getting credited to employees.
II. Define Strategic Vision
Enterprises need to set relevant and measurable goals for the TO-BE state of their HR functions. All relevant stakeholders and the top management must collectively set these goals. For example, one aim can be to reduce the payroll processing time by 15%. Setting goals will help identify the gaps that need focus as part of the digital transformation HR strategy.
III. Identify Gaps and Define Business Requirements
Based on the identified gaps, you need to list the processes and components that need digital transformation. These would form the basis of the scope of the business requirements. For example, for the above goal, you must automate the payroll calculations through data integration with attendance, leave management, and accounting systems.
PwC Digital HR Transformation Survey 2022 reveals that 96% of HR leaders envision their teams as employee experience designers, change agents, and talent developers.
IV. Select Products and Vendors
Based on the business requirements, you can explore the HR automation products that offer the relevant features. It is advantageous to choose ready-to-deploy on cloud products rather than building in-house platforms from scratch. Cloud-based HR digital tools provide ease of use, scalability, and security without high upfront costs. Selecting third-party system implementation vendors brings the necessary skill sets and ensures a faster go-live. Most service providers offer live demos for a first-hand experience of the product. You can request proposals from multiple vendors before zeroing in on the most suitable one in terms of costs, timelines, and deliverables.
V. Experiment with POCs
Proof-of-concept implementations of small functional modules allow enterprises to generate stakeholder buy-in and prepare the HR department members for upcoming process changes. It also builds a rapport with the implementation partners and improves communication with the IT teams.
VI. Implement and Roll out Solutions
You must also prepare a phase-wise deployment plan, especially if your enterprise spreads across geographies. The processes, IT systems, and teams impacted in each phase should list in the roll-out plan. It should also include training plans, internal communication strategies, and change management initiatives.
VII. Measure and Improve
Post-implementation and roll-out, it is necessary to track the improvement in the key performance indicators (KPIs) per the goals set out in the beginning. Continuous incremental improvements based on performance data and analytics are the hallmark of an agile HR function.
Stages of HR Transformation
A research report by Altimeter, an independent strategy consulting company, identifies six stages of any digital transformation process. These are equally applicable in the case of the HR function also.
HR Digital Transformation Examples
Following are some key digital HR transformation use cases,
I. AI-based resume screening
HR executives need not spend time sifting through resumes as automated algorithms based on machine learning (ML) and natural language processing (NLP) automatically filter the most relevant profiles. They can sort the shortlisted profiles by education, experience, or other parameters and send auto-notifications for further rounds with a single click.
II. Internal communication portals and chatbots
As per Mckinsey’s research, an average employee spends one day of a workweek looking for internal information or tracking colleagues who can help with specific queries. This time can come down by 35% by deploying internal social media that provide easy search, effective collaboration, and employee engagement.
III. Self-service portals
Employees, specifically field personnel, benefit from self-service options available on their mobile devices. Modern HR self-service portals offer options to fill attendance and timesheets, access payroll data, view HR policies, track service requests, and enroll in learning and development programs.
IV. Onboarding automation
A smooth new-hire onboarding process ensures long-term retention. Digital workflows can manage documentation, introductory training, asset management, identity, and access management. It also helps create automated workforce plans, ensuring prompt project assignments and low bench time.
Benefits of HR Digital Transformation
HR digitalization is an ongoing transformation exercise that generates ROI by leveraging digital efficiencies.
I. Improved employee experience
The key benefit of seamless, digital HR workflows is an enhanced EX. EX is crucial to the overall employer value proposition (EVP) alongside salaries, benefits, and training. A superior EX results in positive employer branding that helps attract and retain top talent. Thus, digital transformation improves employee experience
II. Increased productivity
HR teams spend less time on tedious data entry, recalculations, ad-hoc phone calls, and emails. Digital workflows ensure they complete within preset turnaround times (TATs). It saves time for HR personnel, which they can utilize interacting with and supporting new hires and employees. Employees get access to self-service options and automated escalation mechanisms that save the time they spend following up with HR personnel.
III. Advanced HR analytics
A centralized database, high-quality validated data, advanced visualization techniques, and artificial intelligence (AI) based algorithms provide deep insights into HR functions. Data-driven applications include resume screening, workforce planning, predicting employee churn, and optimizing variable payouts.
IV. Agility and scalability
HR digital transformation helps enterprises imbibe agile processes that enable continuous incremental enhancements through digital technology. Cloud-based HR applications are easy to scale regarding the number of users and additional functionalities and integrations.
HR Digital Transformation Case Study
Deloitte’s research findings say that IBM, the global behemoth with over 400,000 employees, spearheaded digital talent management transformation. IBM replaced its legacy training management system with a new online platform. It enabled employees to publish relevant content, recommended role-based courses, and integrated external pieces of training across the internet. IBM also leveraged its AI investments to build an intelligent chatbot – (Cognitive Human Interface Personality) CHIP – that handles a variety of HR queries, thus reducing calls and emails to be governed by the HR teams.
Most enterprises today are in the initial stages of their HR transformation journeys. There are immense challenges along the way, most of them stemming from the people’s aspects. Enterprises must embrace agile work models and make requisite changes in their day-to-day HR operations to make the most of HR digitalization endeavors. The success of early adopter companies in the digital world shows that the benefits are worth the efforts.