Why HR and Finance should be at the forefront of digital transformation (1/2)

Digital transformation is big business. In fact by 2022, in Europe alone, it is expected to be a €263 billion industry. However, while the spending on digital transformation is increasing, this is no barometer for success. Along with throwing money at the challenge, organizations will need to carefully plan their digital transformation programmes and a big part of this will be determining who spearheads the process.

A recent Accenture study found eight in ten CFOs currently lead digital transformation efforts in businesses. Yet the same research revealed that 80% of CFOs believe IT decision makers should lead the digital transformation efforts. It isn't surprising to see departments passing the ball. Many organizations still operate in silos, and there has always been a level of rivalry or misunderstanding between departments - sales and marketing is the prime example. Some are always keen to push responsibility elsewhere.

It is however surprising that the HR department, which sits at the very heart of being able to solve talent issues across the business - especially in the highly competitive tech arena - is often ignored when it comes to forming part of digital transformation projects. This brings us back to the initial question - which department should be responsible for leading digital transformation efforts within the company?

We can get the answer from those leading the digital transformation charge - from observing the organizations that are ahead of the game when it comes to digital transformation such as Netflix, Blablacar or Airbnb. It is clear that the days of leaving all digital transformation changes to the sales or marketing department - without involving essential business operation departments such as HR and Finance - are over. So are the days of a single department bearing the entire burden of digital transformation by itself. This is because, as new research by IDC and Workday reveals, those businesses that are ahead in their digital transformation efforts are those that have been able to narrow the digital disconnect.

Based on those findings and our own experience working with customers and their Finance and HR teams, here's our three-step take on how your business can replicate success, eliminate digital transformation roadblocks and become a best-in-class digital leader.

The lay of the digital transformation land

The first step in delivering a successful digital transformation programme is to understand the current state of play of digital transformation in Europe. Workday's research, Digital leaders: Transforming your business - which surveyed 400 digital leaders, reveals that while sales (77%), was the number one area undergoing digital transformation, Finance (72%) and HR (65%) were not far behind. This is important as it is clear that digital transformation is no longer an exercise solely undertaken by marketing and sales departments - it affects the whole business. The challenge is that, while there is a clear consensus digital transformation is happening across multiple departments, there is a disconnect in it actually being achieved. In particular, HR and Finance were singled out by 57% of non-Finance and HR respondents who wanted to see modernization in these areas.

Digging a little deeper into this disconnect, the overwhelming majority (77% of Finance leaders and 83% of HR leaders) of respondents characterize their HR and Finance systems as either adequate or reasonably modern. Barely a fifth (19%) of Finance and 10% of HR systems are reported to be state-of-the-art. The danger for businesses here is that, although adequate IT systems are working now, in the next year or two these systems could well be overrun thanks to the rapid rate of development in other business departments.

Taking a step back and looking at your business holistically, it will become clear that merely adequate HR and Finance systems will, in the future, hold back the implementation of digital transformation across all departments of an organization. This is because the information that needs to be seamlessly shared between different business units, departments and systems may not all be future-proofed and ready, which can end up causing bottlenecks and delays for other areas.

Forging forward with new solutions

This means there is hope for businesses so long as they are willing to update their HR and Finance systems. In fact, selecting the right technology solutions for HR and Finance systems is the second step in delivering a successful digital transformation programme. We say this because new technology solutions are often set up with APIs and integration services connecting them. If this is not done, from the outset, with interdepartmental connectivity in mind, it can create further silos in businesses. Each department would be locked in by systems that block the flexibility and agility that digital transformation should bring.

Furthermore, without changing HR and Finance systems - which form the backbone of the business - it also continues to silo information and ultimately limit the level of collaboration and digital transformation that can take place within any organization. Consequently, it is imperative that businesses select solutions that work with their digital transformation initiatives, to be able to deliver improvements on a larger scale and not just a department level.

To make this to happen, all departments have to work together. Looking back specifically to the HR and Finance system, this would mean that department heads need to ensure that any solutions selected are able to connect with the other new and legacy technologies in use within an organization.

In addition, the survey revealed that nearly half (46%) of digital leaders identified that a high-level of security and auditability was a key requirement for any Finance or HR system. As both HR and Finance solutions handle highly personal and private information, it is critically important that data is kept safe, yet must be easily accessible when it comes to auditing.

Also identified as a key requirement for the right technology solution by over a third of digital leaders is the need for a simple and intuitive user experience (37%) and continuous planning and reporting capabilities (34%). Solutions, therefore, need to work not just for the IT side of a business, but also assist with issues relating to customer, employees, data and the need to scale.

Next up - cultural change

There's one more crucial aspect to delivering new technologies, however modern and capable these systems may be. Part two of this article discusses the third and final step to a successful outcome - how an organization brings all of its teams along on the journey to digital transformation.