State of HR Transformation Study

Name of Publication: Nuest

In Asia-Pacific we have very few credible sources of information about HR transformation. The Alight solutions Asia Pacific HR transformation survey in its 2nd edition, has proven to be a great source of information on key trends in the region. We will look at this report from the lens of implications particularly for HR Tech solutions and draw inferences for both buyers and sellers. This short summary gives you key points from this 76-page report. If you still don’t want to read the whole thing, go right to the end for 7 key takeaways for buyers and sellers.

HR Transformation

If you look at the 6 key trends from this report it is very clear technology is already a strategic choice for companies in APAC. Technology evaluation and adoption coupled with HR service delivery is likely to deliver greater organizational value. Analytics, AI and automation all seem to gain momentum and are high on the agenda of companies over the next 18 to 24 months.

The report particularly talks about a model of low effort high impact HR and indicates it’s a journey. The six enablers to drive this transformation are:

  • Thinking of the HR operating model in an integrated manner
  • Ability to navigate and manage changes within HR
  • Executive sponsorship and ROI on the outcome
  • Platform evaluation beyond functional specifications
  • Domain led evaluation than IT led
  • Plan and execute on change management

HR:FTE ratio in mature organizations, that have their HR operating model complimented by a digital strategy, is almost 50% lesser than HR:FTE ratio of ad-hoc organizations, the ones where there is limited or no clarity on HR operating model.

The organization archetype and impact plot indicate mature organizations are more focused on strategic aspects while it also appears that those organizations need to continue to focus on cost aspects like productivity and talent costs.

Based on organizations size it is clear that larger organizations need more focus on critical skills, leadership, and diversity while smaller organizations are more focused on costs, leadership, and retention.

The report clearly states the burden of employee transaction and program administration on HR has to reduce. Technology needs to be leveraged far better to deliver employee services. It goes on to state, over-reliance on platforms as a silver bullet for program administration leads to lower satisfaction. HR will need to design programs with an adoption mindset.

Changing Skills, Structure, and Roles within HR

In this part of the report, we look at key capability gaps across typical HR roles. In typical HR COE roles Analytics, Critical thinking, Creative solutions, facilitating change and leveraging technology are top 5 gaps. This can be interpreted as once the functional knowledge and expertise become table stakes, HR leaders in COE’s would need to step up to these skill areas to deliver on HR transformation.

Collaboration across multiple HR roles and functions is a key success factor for a successful HR transformation. The report clearly identifies the need for redefining the role of HRBP and separating the consulting /advisory from the transactional support requirements.

HR service delivery is a key component in the overall HR transformation journey and the report identifies various design principles at play by organization archetypes. While adhoc organizations are more focused on cost and compliance, mature organizations are more focused on operational excellence and effectiveness. The organization archetypes provide a good sense of the typical journey most organizations are likely to take, one can look at these design principles and ascertain what they need to do to change the conversation internally.

The report clearly indicates the scope for increasing the footprint of shared service organizations while emphasizing on the importance of UX, analytics, and automation in driving the effectiveness.

Skill gaps in HR transaction roles could mean the merging of operations and technology. It clearly builds the case for completely automating highly standardized processes with predictable outputs.

Automation and Robotics

The report identifies 17% of the 678 respondent organizations as either mature or advanced in the use of process automation. This indicates tremendous growth potential for RPA within HR service delivery. To enable the same, HR processes have to be designed and redesigned for user experience and HR professionals designing HR processes will have to spend significant time with the HR transaction processing units. This underlines the need for collaboration across various HR organizations.

Process automation and machine learning are the top 2 planned adoptions across the region with chatbots a close third. Most of the technology solutions are however clearly in the early adoption stage with an average of 25% planned adoption across multiple such technology solutions. The functional level planned usage is however at 16% thus indicating a gap in what is being planned and what might finally impact a particular functional area within HR.

The report clearly identifies specific areas within HR like Payroll, Analytics, Virtual assistant and Talent management where an increasing interest and use of robotics and cognitive technology exists. The report predicts that adoption of these technologies will continue to grow in silos until these tools become mainstream via large global HR technology platforms.

The Story of HR technology

This section starts off by telling us that user satisfaction with HR technology has dipped in APAC by 6 basis points as compared to last year survey. The report, however, does not elaborate on possible reasons for this dip.

An interesting trend reported here is of HR technology consolidation where organizations are looking to consolidate one or more areas of HR technology solutions into a single vendor. The report clearly indicates a declining trend for best of breed solutions in the APAC market. 75% of the market seems to have this figured out while 25% of the overall market still seems to evaluate what to do. One trend that seems to prevail is of companies looking to maintain two separate core technology platforms for core and talent needs.

This seems to indicate that buyers want to keep the operational systems like payroll separate from other talent management applications like performance and learning. This can also be interpreted as there are no strong vendors who can effectively satisfy the diverse needs of both these areas and hence organizations are looking to keep these separate. This trend seems to be size agnostic which is surprising as typically smaller organizations would tend to have a lower number of vendors as compared to large organizations.

How companies are evaluating HR technologies is also changing with most companies looking at the total cost of ownership of solutions and focusing on analytical capabilities and user experience as top 3 evaluation parameters. In line with the consolidation requirement stated above comprehensive suite has jumped 5 basis points as compared to last year. What is unclear here what trade-offs companies are willing to make in favor of consolidated offering vs a string of best of breed solutions.

The report makes interesting recommendations when it states that focus on outcomes and not requirements. It asks companies to do away with RFP’s and instead focus on live configurations to test experience and ease of adoption. It also asks companies to staff their execution teams with their best resources across strategy and business partnering.

The report argues that feedback of analytics into governance programs is a key missing link in enabling the success of HR transformation. The biggest roadblocks on this journey of analytics-driven HR are lack of consolidated data, inability to connect analytics to business outcomes and capability of the team, followed by inability to make a business case for investing in analytics and under-utilization of current platform.

7 Key Takeaways for HR Tech Buyers

  • Identify where you are in terms of maturity and determine your next steps
  • Consider your HR operating model as an integrated whole and critically evaluate all parts
  • Reconsider HR processes, roles, structures and align them with your technological landscape
  • Identify opportunities for improving HR shared service footprint
  • Consolidate and integrate various HR technology platforms for analytics-driven governance
  • Evaluate technologies based on total cost of ownership and focus on outcomes
  • Consider robotic process automation for highly standardized and predictable processes

7 Key Takeaways for HR Tech solution providers

  • Spend time understanding the maturity of customer process organization and accordingly change your dialogue
  • Change the conversation from functionalities to outcomes
  • Identify integration and consolidation drivers for the customer and address them effectively
  • If you are best of breed forge effective partnerships with broad-based solution providers
  • Focus on Total cost of ownership of your solution and invest in improving customer experience during and after implementation
  • Understand that technology is more about HR and less about IT – talk and address the functional drivers than focusing on AI, RPA and others – these are just tools
  • Support data-driven decision making and governance structures of customers to forge a long-term relationship

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