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Technology Is Key

Benchmark research from The Hackett Group examines strategies companies can utilize to begin their journey to world-class HR performance.

By Harry Osle, Tony DiRomualdo, Franco Girimonte, and Lee Derryberry

Human resources might seem like one of the less promising business services areas for digital transformation. The “H” stands for human, after all, and human beings can always be counted on to add complexity. 

But the latest benchmark research by The Hackett Group shows that technology is playing a profound role in helping top-performing or “Digital World-Class” human resources organizations achieve excellence in a broad array of areas, including resilience, efficiency, and effectiveness. Digital world-class HR organizations are those that have scored in the top quartile in both business value and operational excellence in the in-depth benchmarks that have performed with most of the companies in the Dow Jones Industrials, Fortune 100, DAX 40, and FTSE 100. 

Let’s start with costs and staffing. These types of HR teams see operating costs that are 33% less than those of average companies – a gap that has stayed the same over the past three years, despite COVID, inflation, and other market disruptions. But they’re not just cheaper. They also operate with 40% fewer staff. And these top performers also outperform their peers across a wide range of metrics. They fill positions at least 25% faster and rely on internal placements 23% more often. They are 49% more likely to be viewed as a valued business partner by senior management. And they have 27% more time to spend on organizational and leadership development. 

They are also able to serve 66% more people per full-time equivalent (FTE) in part because they make fewer errors in areas such as time and attendance reports. And the support needed by managers and employees is more likely to be available: 82% of digital world-class HR organizations have fully deployed direct access to HR systems and functionality across the enterprise, compared to 45% of ordinary firms. 

Streamlined operations and automation of transactional work have also enabled digital world-class HR teams to spend 12% more time focusing on value-added activities. In addition, they are twice as likely to have the tools they need to conduct strategic workforce planning. Overall, staff at these organizations are simply more talented. A total of 64% of HR employees are skilled professionals, compared to 55% at an ordinary company. 

Part of what makes this transformation possible is outsourcing and investment in technology. Many time-consuming tasks have been replaced. For instance, 98% of digital world-class firms have electronic payroll systems compared to 52% of ordinary firms. This means they need 40% fewer full-time staffers and spend 33% less than their peers – an $18 million advantage for the average $10 billion company. They spend 85% more on technology per FTE than other companies. At the same time, they need to pay more to attract the highly skilled – and necessarily more expensive – professionals required to execute higher-value projects.  

For companies ready to begin their journey to digital world-class HR performance, the road is not easy, but definitely possible. Here are some good places to start. 

  1. Pinpoint the company’s value. Understand and benchmark critical key performance indicators (KPIs), assess the maturity of the operating model, and identify performance gaps. 
  2. Design the capabilities for capturing value. Develop KPIs to meet business and HR objectives. Identify the capabilities and digital tools needed to meet stated objectives. 
  3. Chart the journey to digital world-class. Set priorities based on current performance gaps. Prioritize technology-led initiatives. Develop a design for the future digital HR operating model, and consider the investments, benefits, and resources required. 

Harry Osle is principal-in-charge and chief human resource officer at The Hackett Group. Tony DiRomualdo is senior research director at The Hackett Group. Franco Girimonte is global human resources executive advisory practice leader at The Hackett Group. Lee Derryberry is HR transformation practice leader at The Hackett Group.  

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