4 steps to becoming a world-class HR organization
Digital transformation will be key to HR success in the future, specifically in areas such as payroll/workforce management and total rewards administration.
The digital revolution is changing the way world-class HR organizations conduct their business. According to findings from The Hackett Group, HR organizations now spend 28 percent less on labor, have 32 percent fewer staff and spend 29 percent less on outsourcing per employee than typical companies.
“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,” says Franco Girimonte, associate principal, The Hackett Group. “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.”
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The report shows that most HR organizations have already begun the process of digital transformation and the majority of projects that have been completed are in payroll/workforce management and total rewards administration areas, which are oriented towards transaction processing and already heavily technology enabled. About a third of all companies in the research have completed digital transformation initiatives in these areas. In many cases, these projects involve cloud-based systems.
Max Caldwell, principal and leader, People & HR Transformation Practice, The Hackett Group, adds, “We’ve reached an inflection point where world-class HR organizations are moving beyond exploration and adopting new technology and analytics tools to become leaner, smarter and more customer focused. It’s the next chapter in transforming HR to operate as a true strategic partner to the business.”
“World-class” HR organizations are 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. The report offers four actions HR can take to begin transforming into a “world-class” organization. They include:
- Measure baseline efficiency and effectiveness levels, identify areas of improvement and areas where HR is falling short.
- Assess HR capabilities and pinpoint ways to use digital technology to close critical gaps.
- Take fast, incremental steps, focusing in particular on small actions that can improve the customer experience and HR performance.
- Build analytics capabilities, possibly by bringing in additional resources dedicated to data analytics. Identify important questions related to human capital in particular.