We are in an age of disruption where businesses across multiple industries are being disrupted. Many companies and sometimes entire industries are succumbing to disruption faster than before: The average lifespan of a company listed in the S&P 500 index of leading US companies has decreased by more than 50 years in the last century, from 67 years in the 1920s to just 15 years today.1 Our rapidly changing world places a tremendous amount of pressure on organizations and HR leaders to improve business performance and productivity through innovation and people. As part of enabling performance through people, organizations have turned to investing in HR technology, with the promise to improve HR’s impact on the business. But many are finding that’s just not enough.
Focusing on people as a means to improve business performance puts HR in a position to drive both a better employee experience and sustainable HR performance that impacts business imperatives. Technology is an obvious enabler. Typically, companies are spending over 10 percent of their HR budget on HR technology and tools, and this increased growth has fueled huge market growth in HR technologies. The entire HR software market is over $10 billion in size, and many segments are growing at double-digit rates.2
In the 1980s and 1990s, HR invested in on-premises enterprise resource planning (ERP) systems based on the promise they would move the needle on both the employee experience and HR’s performance. But as implementation costs increased and cloud and digital technology emerged, gaps in ERP’s actual impact started to be revealed. In today’s world, a majority of HR organizations are rushing to cloud-based HR technologies and digital solutions in an attempt to fill the gaps often left by ERP’s performance. In fact, 56 percent of organizations indicate they are redesigning the HR organization to leverage HR digital and mobile tools.3 Additionally, they hope the move to the cloud and digital will help them reach their ultimate goal of delivering a differentiated employee experience and improving HR’s performance.
While cloud and digital technologies do improve the employee experience and HR’s performance over many legacy ERP platforms, unfortunately technology alone falls short of enabling organizations to achieve High-Impact HR. Only 60 percent of companies indicate that their HR technology is meeting their business objectives.4 CEOs support this claim, with 72 percent of business executives stating their HR organization is not as productive and effective as needed.5 So what’s going on? It’s likely a case of missing essential ingredients.
One of this post’s authors, Gary, likens it to an experience he had in Spain as a summer college intern. The hosts wanted to make the students a homemade cheese pie on their last night. The graham cracker crust was perfectly baked, the blueberry and strawberry toppings were fresh and made the pie look delicious and satisfying. But as the students took their first bites, almost simultaneously, everyone started choking and tried to politely spit the pie into their napkins. The problem? The host made the filling out of blue cheese instead of the usual cream cheese. As good as the crust and toppings were, they couldn’t mask the taste of the blue cheese. It’s the same with HR technology—as good as it is, it can’t effectively overcome outdated HR operating models, processes, and programs.
Simply put, technology implementations, without investing in other parts of the HR organization, can’t effectively drive the ultimate business outcomes organizations are looking for. Technology alone isn’t enough to completely overcome antiquated HR operating models, obsolete or overly complicated processes, or outdated approaches to driving results through people.
Instead, organizations should broaden their investment to include not only HR technology but also the HR organization itself, and sharpen its focus on the HR customer. When the HR organization, its people, capabilities, and programs are transformed along with the implementation of HR technology, maximum impact can be achieved.
Source: Deloitte Consulting LLP
This involves a series of shifts for HR…
…a shift in mind-set to pivot to a new role that leads the business through disruptive times, puts the HR customer at the center, and influences business strategy.
…a shift to a new vision of HR’s future state, where HR’s operating model, processes and programs are modernized to meet today’s business environment and 21st century workforce characteristics.
…a shift to HR engaging the world and the organization from a business perspective, constantly looking for ways to anticipate, understand, and adapt to future trends and dynamics.
…and finally, a shift in capabilities, so that HR is enhanced with researched, validated, business-relevant HR programs, and both the organization and its people are equipped to sustain performance into the future.
Just as for a prized recipe, all ingredients are key for an investment in HR transformation to achieve the desired results.
1 Kim Gittleson, “Can a Company Live Forever?” BBC News, New York, January 19, 2012, http://www.bbc.com/news/business-16611040.
2 Josh Bersin, “Spending on Human Resources is Up and Why It Really Matters This Year,” JoshBersin.com, January 16, 2015, http://joshbersin.com/2015/01/spending-on-human-resources-is-up-and-why-it-really-matters-this-year/.
3 Erica Volini, et al., “Digital HR: People, platforms and work,” Rewriting the rules for the digital age: 2017 Deloitte Global Human Capital Trends, Deloitte University Press. https://dupress.deloitte.com/dup-us-en/focus/human-capital-trends/2017/digital-transformation-in-hr.html.
4 Stacey Harris and Erin Spencer, Sierra-Cedar 2016-2017 Systems Survey, 19th Edition, 2016, http://www.sierra-cedar.com/wp-content/uploads/sites/12/2016/10/Sierra-Cedar_2016-2017_HRSystemsSurvey_WhitePaper.pdf.
5 Dave Mallon, et al., High-Impact HR: Building Organizational Performance from the Ground Up, Bersin by Deloitte, Deloitte Consulting LLP, 2014, http://www.bersin.com/Practice/Detail.aspx?id=17743.