There are significant shifts in the global workplace that organizations must actively manage. Businesses are expanding to new markets. Workforce demographics continue to diversify. Disruptive innovation is creating new business models (e.g., Digital Banks, Health Exchanges). Professionals–especially millennials–are demanding more from employers than ever before. These global trends impact all facets of organizations, particularly Human Resources (HR). Specifically, companies are being forced to rethink how to better align their talent strategy to support business objectives, along with advancing the foundational elements of the HR function to keep pace.
HR technology is already playing a central role in this evolution, and the vendor marketplace is increasingly reflecting the new business realities. Technologies are expanding and emphasizing strategic capabilities, as opposed to transactional functions, and moving to the cloud. Vendors are seamlessly integrating external applications into their programs and using predictive analytics to underpin more of the decision making process. New technologies provide capabilities that can simplify and empower HR functions like never before, but these technologies also create a new set of strategically critical decisions for HR leaders.
By embracing a fundamentally different approach to implementing technologies and selecting vendors, leaders can help accelerate the evolution of the HR function. Purchasing new technology in the vendor marketplace not only provides access to cutting-edge applications, but replaces the long, arduous process of developing new applications and technical capabilities internally. Choosing a vendor and determining which capabilities are most critical to a specific company isn’t easy. HR leaders need to gain a better understanding of how new technology can revolutionize HR and its support of business priorities.
At its core, each technology decision should center on how to align each capability with a business objective. In the past, HR leaders would spend countless hours translating their objectives into a long list of requirements that the vendor would be expected to support as outlined in a lengthy response. Ultimately, the over-structured format reduced the ability of vendors to provide differentiating information, resulting in poorly informed decisions by HR leaders. Today, leading companies are having a radically different conversation with vendors.
Instead of emphasizing detailed requirements, top HR leaders are gaining alignment on critical strategic imperatives across their organizations and with vendors prior to selection. These conversations jumpstart the business case for new HR technology. While every company’s context and strategic priorities are unique, there are several common elements that are helping drive these new, effective conversations.
1. Use High Priority Scenarios
Asking vendors to respond to scenarios helps bring the discussion out of technical theory and into a company’s specific context. Questions like, “Does your HR tech solution process cross-border transfers for personnel?” are direct, but they can elicit incomplete or misleading responses. Instead, questions such as “How does your solution handle an end-to-end transfer of a U.S. Employee from New York to Singapore, including how your product addresses the impacts on US Social Security, deductions for US 401(k), and eligibility for all other Singapore benefits?” create a clear picture of the vendor’s capability. These multi-functional, prioritized questions create mini scenarios that provide the kind of nuance that will ultimately separate a good fit from a great fit.
2. Know the Vendor
The booming HR technology market has altered traditional power dynamics, with buyers wielding more influence than ever before. The proliferation of HR solutions not only means a greater choice in functionality, but more leverage for buyers when purchasing. As a result, vendors are constantly evolving their solutions and working to improve how they interact with their customers. As a current or prospective buyer, having a clear understanding of a current or future vendor’s product strategy and competitive positioning can help inform the final selection decision.
3. Consider Support Strategy in the Cloud and on the Ground
New technology requires new organizational support models. As companies increasingly eliminate customizations and simplify configurations, questions around what skills are required to maintain the new solution and where these skills will reside become both more prevalent and more acute. HR leaders must think about support beyond technical infrastructure and upgrades and consider quarterly updates from cloud providers and digital HR skilled staff to support social and analytical capabilities. Owning the solution, both in terms of the required skills for maintenance and support and through an aligned structure, will help determine that the technology’s potential impact is achieved.
4. Prioritize User Experience
HR systems have rapidly transitioned from “systems of record” to “systems of engagement.” This development is as much a reflection of the changing demands of today’s workforce as it is of the improved capability of HR. Top talent– especially top millennial talent–expects to interface with intuitive, flexible HR applications. Many technologies that vendors offer have user experiences that are consistent with mobile “apps” and promote social engagement. Additionally, many vendors are simplifying transitions and connections between applications and are ensuring that information access by employees is in real-time. The benefit goes beyond satisfied employees–intuitive HR technologies are eliminating the need for complex training programs and driving faster user adoption and engagement.
5. Incorporate Human Capital Analytics
People analytics are more important than ever. Our recent Global Human Capital Trends Report 2015 found that workforce analytics was the second-biggest HR capability gap, trailing only the need to build better leadership. The need to understand retention trends, improve employee engagement, or profile high-performers has organizations demanding strategic information about their workforce, but many still suffer from poor data quality and a lack of analytic know-how. In response, vendors–with nearly every new product release it seems–are expanding their ability to provide analytics, and are often integrating the capability directly into standard HR software. As these tools become more available, organizations need to develop the right capabilities to drive workforce insights that business leaders demand.
6. Understand Total Cost of Ownership (TCO)
Going to cloud alone is not enough to justify a reduction in TCO. Implementing new HR technologies has wide-reaching impacts across an organization, hidden costs and savings abound. For example, a simple user interface that reduces the need for training can create significant savings. On the other hand, a complex software that constantly requires maintenance from external parties can create huge, unplanned expenses. To create a clear picture, HR leaders need to carefully examine all aspects of a vendor technology and then go through the exercise of building a comprehensive business case that accounts for the competitiveness of proposed fees and for the flexibility of financial incentives.
The need for new technology to support HR is not novel. But more than ever before, new technologies are fundamental to meeting strategic objectives. Furthermore, the speed at which the technologies are evolving is creating incredible opportunity and risk for HR leaders. As companies struggle to adapt to the rapidly changing global business environment, agile, effective and enabling technologies are more important than ever.
A key take away for those embarking on a technology selection, however, is to remember that technology alone will not meet business results. Rather, technology is an enabler of the HR operating model. While the new technology will have an impact on the organization in terms of skills, roles, and responsibilities, it will not overcome operating model deficiencies. A fresh look at the overall organizational and process changes that can free HR capacity to focus on activities that deliver true business results is necessary to fully realize the impact of the business case for new HR technology.
To that end, organizations need an aggressive proactive approach to deploying and owning technology, and also must create a streamlined approach to selecting HR vendors and technologies. The HR function needs to be the driver of overall strategic priorities, and vendors are ready to provide the technological foundation.