The WHAT and the HOW of a digital HR strategy
Companies are struggling to build a digital roadmap for their HR function. But is it a good idea to implement one at all? The answer is: Yes, absolutely. We are in the midst of the 4th industrial revolution, the world of work is changing faster than ever before, it is a revolution that was anticipated by science fiction authors before economists and business leaders even became aware of it. A digital HR strategy provides the opportunity for HR to shape the future of work for their business and have a clear view on how jobs will be lost and gained. A roadmap sets course and speed for the HR function and for people priorities within the company. Companies with a distinct HR Digital Roadmap endow themselves with a foundation to not only cope with these changes but to influence them to gain competitive advantage.
The conventional way: Digital HR = HR Technology Roadmap
Of course, a digital world does not only require change from people and businesses. It also comes with new technology enhancing the activities and effects of an HR function: Technology being put into the hands of end-users, new digital listening techniques, interpreting vast amounts of social media information to better understand and even predict the wants, needs, and capabilities of people. This opportunity is mirrored by an evolving HR technology market. Gartner sees cloud-based HRIS on the ‘slope of enlightenment’, with Workday, SAP, and Oracle as market leaders, and mainstream adoption happening as we speak. The market is growing by 12% per year. And from our research we know that the average Fortune 500 company spends 10 M USD per annum on new, cloud-based HRIS. Obviously the standard approach to the digital age in HR is a heavy investment in technology that helps to ‘do what HR does, but in a digital way’. This approach often leaves HR teams very busy – and often unnerved by the major efforts, often two years of labor, it takes to implement the new technology.
The better way: Digital HR = Business Value in the New World of Work
Is there a better, more promising alternative to just trotting down the same alley as before, ‘doing what HR does, but in a digital way’? Yes, but HR has to identify the right levers that it can pull to generate business value in a digital world. TI People’s research studied this question and found that HR should set three new priorities: 1/Actively manage the customer’s experience of the function, 2/develop the organization from job-based to skill-based and 3/ provide workforce analytics insights. HR teams should focus on these three levers and not allow ‘the new HRIT system’ to dominate their agenda. And HR teams should not only change the WHAT of the digital agenda but also build new HR capabilities to operate in this new environment – and in that way shape the HOW.
The WHAT: New Areas of Focus
The ‘What’ is about incorporating these three priorities in a three-year HR strategic plan:
Customer Experience of HR (CxHR) means running HR while always keeping in mind the perspective of its internal customers. Although the use of term ‘customers’ as applied to HR is debatable, it is nevertheless a helpful shortcut to the fact that employees’ or candidates’ perception of HR at decisive moments – ‘Moments that Matter’ – shape their opinion of the company and impacts their engagement. These ‘Moments that Matter’ are aligned to the employee’s perspective and might overlap with HR service ‘silos’ (as for example in recruitment) or cut across several of them (as in relocation or career change).
CxHR is the key driving force when it comes to the future of the HR function, as we have laid out in this article. It consists of three components: 1/Agile service design – which simplified means to (re-) define HR processes fast, and from the perspective of the customer. 2/Customer Experience Management follows Kaplan’s and Norton’s statement ‘What you can’t measure, you can’t manage’. For HR executives this means: To implement changes from agile service design as a ‘minimum viable’ service, measure its impact on the customer experience of the service, then iterate to continuously improve the experience. In a final step these newly designed services should be supported by 3/ Applification & Machine Intelligence to provide the best possible experience while keeping sufficient scale and holding the cost base down.
Skill-based organization of work is the major value contribution that HR can bring to business. Following the research of McKinsey Global Institute, work and employee matching can be improved significantly by using techniques of online talent marketplaces, applied within companies and externally. These techniques will enable networking and collaboration. They require a new version of skill management, including prediction of future skill demands, detection of current skills of people in real time, and effective mechanisms to match skills and tasks. Additionally, they require a new network leadership culture, a culture in which trust and indirect management and feedback – continuously, effortlessly – is the norm.
Workforce analytics is the third key pillar supporting a HR digital roadmap. Using workforce analytics, companies will provide insights to their managers for better people decisions and talent outcomes. To do so, they need a comprehensive definition of analytics, consisting of descriptive analytics (including reporting as well!), the – pretty sexy – predictive analytics and a modern, less cumbersome and more skill-focused version of workforce planning.
The HOW: HR Innovation Culture
When executing these ‘What’-priorities, companies often face a disconnect between their own HR capabilities and the requirements to execute against the HR strategic plan. Bridging this gap and developing these capabilities is the ‘How’: Creating a new HR culture defined by a new set of behaviors, skills, technology tools, KPIs, and communities of practice:
From the HR leadership team’s point of view, this model can be specified like this:
Behaviors: As HR professionals we know our stuff. And we are the guardians of compliance with employment law, equal pay, diversity and inclusion rules. But we feel the need to be innovators as well, to act and think in new ways that cross HR silo boundaries and simultaneously support business strategies.
Skills: Our classic HR skillset centers around HR operations and talent management. A modern skillset adds design thinking and analytics. Design thinking will help us create innovative services for better customer experience fast and enable us to be adaptive to the speed of the business. Analytics will help us generate fact based insights for better people decisions by business leaders.
Technology Tools: Our traditional tools in HR have been first and foremost designed to automate our existing tasks, implementing new tasks having never been their main objective. That is about to change: We need a set of tools that establishes new innovative behaviors by the HR team and fosters further innovation over time. Exemplary, this could mean to measure and benchmark customer experience of HR services at touchpoint level (and in real time) to feed continuous service improvement.
KPIs: Traditionally we have measured HR by engagement and cost. As engagement is a less actionable KPI for the function, most decisions are being taken based on cost/budget allocation considerations, hence defining HR as a cost-driven function. In a digital world, we can measure our real performance – by analyzing the customer experience we provide to our employees, managers, candidates, freelancers and alumni. And by looking closely at the new KPIs describing the agility of the organization, meaning, for example, the portion of work organized by skills vs. by jobs.
Community: In a digital world, the group of people we should establish networks with is about to change as well. So far, HR employees mostly surrounded themselves with other HR specialists. In this age, we need to build a new community of like-minded peers that embark on the same digital journey; it should include out-of-the-box-thinkers and practitioners with innovation backgrounds (product design, marketing, etc.) both inside and outside our company. This will reinforce our commitment to HR innovation and inspire us to tackle the digital challenges ahead.
A Balanced Digital HR Strategy
For a successful digital HR strategy, HR executives should focus at first on balancing both, the What and the How. In collaboration with some 40 global companies, TI People has developed a template for a balanced digital HR strategy – which is already fit to be put in place. While continuing to work with these companies, this template will be updated accordingly and enriched with new components. One example of a specific application of the What and the How in a digital HR company could look like this:
Set & adjust digital HR strategy: A vital step for two major reasons: Taking it means identifying the few digital HR priorities with the highest business impact and gather the entire HR leadership team behind these priorities. A typical first step of a digital HR company is a structured, yet pragmatic look at the current digital HR maturity – ideally assessed relative to peer benchmarks, strategic goals of the company and to the company’s risk profile. In an innovation workshop attended by the HR leadership team these results will be translated into action items. Finally, a roadmap (18-36 months) for digital HR activities is going to be defined.
Manage HR by customer experience: We already identified the importance of the HR customer’s (managers, employees, candidates, freelancers, alumni) experience with HR services as the driving force of digital HR. For a useful and profitable implementation, digital HR companies usually set out on a threefold journey: First, they train HR in design thinking to establish a common ground when it comes to discussing customer centricity and agile design of HR services. Second, they redesign ‘Moments-that-Matter’ for employees or managers or candidates. It has proven extremely helpful to do this in the framework of a design thinking workshop. In this workshop ‘personas’ of HR customer groups and owners of ‘touchpoints’ and ‘channels’ of a service should serve as sparring partners for the HR team. And third, companies measure the experience of their customers at the touchpoint level in almost real time (using digital listening techniques).
Maximize HRIS returns: In 8 out of 10 large organizations, the implementation, the rollout or the selection of new HR technology is a major focus topic. For each new technology in HR it is important to understand the interdependency between the ROI of a new system and its end-customer adoption. Digital HR companies analyze this interdependency and – given its relevance – assess best practices of other companies to improve end-user adoption.
Build an HR innovation culture: An innovative culture requires constant influx of innovation into the daily routines of HR leaders in digital HR companies. As a foundation and as a starting point, digital HR companies attend meetings with innovation leaders of other companies (conferences will not do the trick – real interaction is needed!). They encourage their teams and put them under obligation to attend webinars for innovation topics. And they provide smart e-learning options to their teams to ensure a common level of understanding digital HR. Beyond these foundational activities, digital HR companies are open to creating digital HR solutions together with other companies. Breaking the silos is important – and co-creating ‘the next moment that matters’ (for example onboarding) with a handful of like-minded people from other innovative companies will make a big and decisive difference.
HR needs a digital HR agenda that focuses on the few activities that generate the biggest business value in the new world of work (the WHAT). And it needs to change the way the function works – an emphasis of innovation focus is the new HOW. Both, the WHAT and the HOW, have to be an integral part of the digital HR agenda. If not, HR is doomed to simply translate ‘digital HR’ as ‘a new HRIS’ – which is a high-risk undertaking, missing out on the great digital opportunities already on the table.