If 2020 was a test, HR technology passed with flying colors.
By Stacey Cadigan
If there was ever an examination of the value of the HR function as a whole—and the value HR technology can add to an enterprise—it’s been the past 12 months. More than a year into the COVID-19 crisis, HR teams have had to contend with a host of people and policy issues in a workplace that has been radically changed by the pandemic. Cloud-based HR and other technologies have played an important role in helping enterprises survive. In fact, one could say HR technology finally came of age and made the grade in the midst of this crisis.
The outlook for HR technology, however, was not always so positive. When ISG conducted its 2019 Trends in HR Technology and Service Delivery survey, a concerning result showed that while organizations were making large investments in new HR technology, less than half could articulate the value. ISG’s new 2021 Trends in HR Technology and Service Delivery survey paints a much different picture.
As illustrated in Figure 1, the 2021 survey found that 64% of companies say they are achieving measurable business value from their investment in HR software as a service (SaaS) platforms, up 23 percentage points since 2019. Business value is determined by a range of metrics, including productivity, cost savings, and employee retention. In 2021, the business value metric most often cited was productivity. Additionally, 70% of organizations were able to achieve HR cost savings of 10% or more.
The pandemic brought the need for agile HR cloud technology front and center, and that need is not going away anytime soon. According to the survey, most organizations expect between 20% and 40% of employees to continue working from home in 2022 and beyond.
HR teams have faced many challenges during the pandemic, including furloughs, layoffs, and mass virtual onboarding and offboarding. HR teams had to quickly adjust their policies, track COVID cases, and develop safe return-to-work programs while training and upskilling employees and effectively supporting a suddenly virtual workforce. Technology was expected to improve productivity, monitor remote performance, enable a more agile HR model, and help teams stay connected and engaged.
Cloud-based HR platforms are widely seen as critical in helping address these issues, and this year’s survey showed that organizations that implemented new technologies were better positioned to address the challenges of the pandemic with speed and confidence. In addition to improved productivity, they cited better user satisfaction and quicker access to data, among other factors.
Even with these measurable gains, HR technology continues to get better and better. Leading HR SaaS platforms are expanding the depth and breadth of their offerings and focusing on improving the user experience, including capabilities around mobile, chat, voice, and self-service. Leading HCM platforms are making significant investments in each of these areas.
Achieving Lasting Success
While technology has made huge strides in the past year, success requires more than technology alone, and organizations have become aware of the critical steps that need to happen to create lasting impact. True transformation requires a comprehensive approach to technology, process, and people. The survey sent a very strong message: Organizations that approached the move to HR SaaS as a transformation were much more likely to achieve success.
Underscoring this dynamic, Figure 2 cites the reasons given by survey respondents who did not achieve business value. For the 36% of organizations that did not achieve business value, a little more than a third said a mismatch or gap in expectations with the technology itself lessened the technology’s impact, and a full 57% attributed the failure to not materially changing their HR service delivery model or business processes.
One of the greatest opportunities for transforming HR delivery in a new technology implementation is in harmonizing and streamlining HR business processes. Approximately two-thirds of organizations have had some success in driving material process harmonization and efficiency across the organization. For others, the pressure to continue to operate “the way it has always been done” or cater to disparate business needs and local market practices often derails this intent. Ensuring proper deployment timelines, capability around process optimization, and a collaborative, employee-centered, and future-oriented approach to process redesign efforts are critical.
Realigning the overall service delivery model can range from refinements to the current model, structure, and roles to larger changes, such as new strategies around shared services and outsourcing. The move to HR SaaS platforms often provides an inflection point for organizations to reassess work that should be delivered in a shared services or outsourcing environment versus in the business.
In recent years, internal shared services has been the prevalent model, though trends show a continued migration to HR outsourcing over our past three surveys. HR outsourcing is often chosen when organizations are seeking foundational change, particularly in cases where businesses are looking to enable a fast transition, leverage additional technologies, achieve resource efficiencies, or experience cost reduction or certainty.
The most recent survey shows that outsourcing prevalence is now at 40% to 60% across a range of HR categories, compared with 25% to 40% two years ago. Even with this increase, 40% of the organizations surveyed say they intend to further increase their use of outsourcing in the years ahead.
Whether organizations shift to internal HR shared services or outsourcing, combining the transactional efficiency, scale, and expertise of shared services and outsourcing can improve the success of HR transformation. For the organizations that did not achieve desired success in these areas as they deployed new technology, it is not too late. Many organizations are pursuing additional efficiencies through a second wave of transformation, which may include changes to the delivery model, additional process optimization, or even additional technology (such as an experience suite) to better bring together aspects of the HR delivery model.
Regardless of whether an organization was able to leverage the fruits of an earlier transformation to survive the pandemic or is now primed to adopt technologies and a comprehensive change program to pivot to future success, more and more organizations are moving in the right direction with HR transformation. Indeed, their grades are improving all the time.
Stacey Cadigan is a partner with ISG.