HR’s going through major change as a result of demographic shifts, the growing skills shortage and millennials entering the workplace. These are driving innovation in HR technology and suppliers.
That's the view from John O’Brien, research director for business process services at analyst group TechMarketView where a large research focus this year has been on the race for change and how embracing technology ahead of competitors makes companies better positioned to disrupt established markets.
At the head of this race is HR – not an area traditionally seen as being at the forefront of technology adoption, but HR professionals are increasingly recognizing that technology such as talent management and analytics can help them contribute to the business as never before.
What’s different, from the HR perspective, is that the latest batch of HR technologies is not about making improvements or efficiencies to the internal workings of the HR department, but rather at looking beyond the HR silo, to how HR investment can add value across the business and improve competitiveness. As O’Brien says:
It’s about HR becoming more important as a business enabler.
That doesn’t just mean that HR departments are simply looking to shift existing on-premise business processes into the cloud (though many, particularly smaller firms, are doing just that). Savvy organizations are using cloud adoption as an opportunity to change those processes to better fit business requirements. Says O’Brien:
They are replacing their old HR systems, their old systems of record and replacing them with systems of engagement.
To truly be able to contribute to the business, HR needs investment – not the easiest commodity to come by in an economic climate that has yet to completely shake free of the recessionary doom and gloom. Nevertheless, O’Brien points out that chief executives are fully aware investing in people is the key to future success:
There’s definitely been a change in attitude – we have to spend to grow and to find new ways to make money.
Investing for the future
This theme of investment was also highlighted by Peter Cheese, chief executive of the Chartered Institute of Personnel and Development (CIPD). Cheese highlighted at the CIPD annual conference that there has been too much focus on the cost of HR and not enough on the value it can provide.
Contrary to its perception as a huge drain on resources, HR costs account for just 1-2% of the cost of the enterprise, according to Cheese. HR professionals have been guilty of being the proverbial “cobblers children” worrying about the organization, but not enough about themselves. But, Cheese argued that things are beginning to change:
We're moving from the paradigm of saying you have to be more efficient – I’m not denying that, but we have been under invested in.
One of the key technologies that the whole C-suite agree could be hugely influential is analytics. O’Brien cites the example of a UK utilities company that used predictive analytics to forecast future workforce requirements.
Looking at its long-term plan, it calculated that the number of engineers it would need exceeded the number UK engineering students graduating in the UK each year. By identifying this shortfall early through its analytics investment, the organization had time to come up with a strategy to cope with the shortfall.
Most companies, particularly in the mid-market, notes O’Brien, are nowhere near ready to begin this level of sophisticated analytics:
While this data is useful internally to HR, these figures do not relate directly to business requirements. HR needs to dig deeper into metrics and look at the causes behind these absentee levels and whether training is effective and improves productivity.
I think it’s early days. It’s very piecemeal and companies are using basic data inputs such as absenteeism numbers or which training module people have been on, but they are not able to join those together.
This shift in emphasis from talking HR specifics to talking in business terms is also reflected in changes to the HR supplier landscape. In particular services providers are having to reinvent themselves, as Software-as-a-Service (SaaS) providers move in on their territory.
The days of the big HR business process outsourcing deals are over. In their place are what O’Brien calls “outcome-based contracting”, where services providers pitch their ability to solve HR’s strategic business challenges, such as how to improve retention of key staff.
There are also far more partnerships, as service suppliers work with other suppliers to try and offer customers a ‘best-of-breed’ solution. While cloud opens up the possibility of faster and easier implementation, that doesn’t mean that HR departments won’t find it difficult to make changes without outside help. Says O’Brien:
It’s not just a technology problem, but process and change challenges. You have to re-engineer, train and keep supporting people. Small HR departments are going to struggle with that.
There’s a real buzz around the HR technology market, as organizations recognize that a better understanding of their employees and how to exploit that knowledge can boost the bottom line. Analytics, talent management and cloud-based delivery represent a huge opportunity for HR to make a difference across the business. But it takes investment - in time and money.