HR can expect transformation in every sector in 2018.
By Amy L. Gurchensky
HR partnerships and engagements have remained in a stable state of predictability for years, but changes within the business landscape are now occurring at an increasingly accelerated pace. Organizations are experiencing industrywide transformation, and HR services are being forced to respond. This reaction is yielding great innovation which is happening at a fast rate. This is also driving the need for transparency and investments in technology across all HR functions.
Based on research and this year’s activity, there are key developments within each HR sector from 2017, and a roundup of trends for 2018.
In payroll, the focus is on technology first and services second. By the end of 2017, approximately 80 percent of payroll service contracts will be delivered on cloud systems. Cloud adoption is also beginning to move downstream to the small- to medium-sized enterprise market.
To support demand for cloud payroll, HR service partners are investing 15 to 20 percent of revenues on average into technology innovation, including:
- Configuration to support additional countries and compliance;
- Platform upgrades and solutions for moving to the cloud;
- Integration to external systems to simplify data migration to and from cloud platforms;
- Process automation; and
- Analytics capability.
Analytics reporting capability is becoming a standard service component, and over the next year, approximately one-quarter of HR service partners will provide a standalone payroll analytics-as-a-service offering. Investments in predictive analytics and compliance tools are also high.
Throughout 2018, HR can expect to see continual developments with enablers helping to make the move to the cloud faster, simpler, and more manageable. As cloud transformation matures, attention will center on digitalizing operating models to meet the needs of a more diverse, dispersed, and technologically savvy workforce.
Over the last several years the emphasis of the benefits administration market has been on best-of-breed services. To quantify this, nearly 70 percent of 2016 contracts were for a single benefits administration service. As a result, HR service partners have been divesting sections of their businesses to facilitate deeper investments into core areas, with the majority focused on expanding the capabilities of existing services.
A significant area of ongoing investment is around the employee experience. After a few years of introducing consumer-centric concepts, the next stage of the experience evolution is benefits optimization.
The goal of benefits optimization is to support employees with the utilization of benefits. Specifically, this involves helping participants make the most of their benefit dollars from a holistic viewpoint, which can take on one of the following forms:
- Health and wellness optimization: ensuring employees are not over-insured in major medical products and/or underinsured in other ancillary benefit products;
- Financial wellness optimization: helping employees with financial issues beyond retirement preparedness, such as budgeting, debt management, and saving for emergencies; and
- Health and wealth optimization: ensuring employees have the best health coverage that they can afford while also adequately saving for retirement.
The concept of optimization is still in its infancy, with most initiatives centered on either health and wellness optimization or financial wellness optimization. Throughout 2018, HR can expect the majority of enhancements to be around these narrow optimization approaches.
Recruitment Process Outsourcing (RPO)
Recruitment will be a continuous challenge for organizations in the next year, especially since millennials have a reputation for job-hopping and will account for nearly half of the U.S. workforce by 2020. The demand for RPO services will remain high.
NelsonHall estimates that the global RPO market will grow by approximately 11 percent in 2018, driven by a shortage of skilled labor and an aging workforce. Organizations will increasingly turn to contingent workers, especially within certain industries, to address workforce needs. In fact, the managed service programs (MSP) market will have a compounded average annual growth rate of 8.3 percent through 2021.
To manage the needs for both permanent and contingent workers, HR service partners are increasingly making investments in technology and analytics. For example, PeopleScout recently launched Affinix, a talent acquisition platform built on Amazon Web Services. The platform utilizes artificial intelligence to identify top talent quickly, deliver digital and social recruitment marketing, and provide predictive analytics to forecast cultural fit, willingness to change companies, and future tenure potential.
Over the next year, there will also be a rise in HR partners offering a total talent management model.
Throughout 2017, the performance training model, which is a mix of informal training, individualized content, and digital learning delivery, gained traction in the market. With a performance-driven approach, HR leverages learning BPS services to achieve one of five main objectives:
- Strategic transformation: for organizations undergoing a significant change and quickly seeking to align business objectives;
- Revenues and competency: for organizations seeking to increase revenues or employee competency and proficiency as a result of launching a new product or service, entering a new market;
- Compliance: for organizations seeking to manage or mitigate risks;
- Cost reduction: for organizations seeking to standardize processes while reducing costs; or
- Learner engagement: for organizations seeking to leverage technological innovations to provide continuous learning.
While each of the above performance objectives can include all or a variety of learning functions, there are common learning services associated with each one. Expect the future scope of learning BPS engagements to be small, focusing on one or two learning functions that are directly tied to a specific performance improvement objective.
More importantly, underlying each performance objective approach is an emphasis on analytics to determine the impact of the training in accomplishing the stated goal. However, the ability to actually derive insights from this data is immature, and is a key area of development over the next year.
In addition, AI and cognitive capabilities will be leveraged for adaptive learning and will likely be generally available to the market in the first half of 2018.
Multi-Process HR Services
One of the more interesting developments in HR outsourcing is the resurgence of multi-process HR services, driven by organizations seeking a transition to the cloud. The current approach to multi-process HR services includes an emphasis on either cloud-based HR services or next-generation intelligent technologies.
The cloud-based HR services approach to multi-process HR services is currently more prevalent and includes support around cloud consulting services, SaaS implementations, and/or ongoing application management services. The intelligent technology approach, on the other hand, emphasizes the use of robotics process automation (RPA), AI/machine learning, and advanced analytics to enhance multi-process HR services.
In terms of intelligent technologies, RPA developments are currently the strongest and most prevalent. RPA is utilized for several different HR processes: in payroll for forms management, in benefits for pension calculations, in recruiting for scheduling a candidate’s interview or resume scanning, and in learning for processes around training certifications.
Over the next few years, more organizations will look to incorporate intelligent technologies into their approaches, especially the first adopters that have already leveraged cloud HCM approaches. In addition, the use of RPA will be table stakes, with the focus turning toward machine learning and chatbots. Chatbots will be increasingly leveraged beyond the help desk to other time-consuming areas of HR, such as performance reviews.
The theme across the board is that HR organizations are keeping up with change more innovatively than ever before. The pace of progress within the HR industry year-over-year is at an all time high. With that evidence in mind, organizations need to keep an eye on the dynamic transformation that is bound to take place in 2018.
Amy L. Gurchensky is senior HR research analyst for NelsonHall.