Financial Performance Improves When HR Participates in Transformation

Transformation Leadership

While the momentum of workplace automation continues to gather speed, relatively few North American employers have developed a formal digital transformation strategy. And while one report indicates those that have are leaving HR out of the loop, another shows that companies that prioritize workforce issues turn in stronger financial performances.

As we recently reported, a study by ISG found that HR is often only “tangentially involved” in workplace transformation discussions. About 43 percent of ISG’s respondents said HR has little to no involvement with their organization’s efforts.

Most employers need a 'breakthrough in leadership development' in order to address the consequences of workplace automation, digital transformation. #HR #HRTech #HRTribe @WTWhr Share on X

Now comes a survey by Willis Towers Watson that discovered that, while many organizations have been slow to develop formal plans, most need a “breakthrough in leadership development” if they’re to address the consequences of workplace automation. That includes the increased use of contingent workers that accompanies it.

HR departments are taking the challenge “very seriously,” Tracey Malcolm, WTW’s global Future of Work leader, told the HCM Technology Report. Many of WTW’s clients, he said, are working to “advance leadership capability as the leadership profile is changing.”

The profile of business leaders is changing because the nature of the workforce is changing. Over the last three years, the proportion of work completed through automation doubled among North American workers, from 6 percent to 12 percent, WTW’s survey said. The company expects that figure to nearly double again, to 23 percent, over the next three years. In the same timeframe, 95 percent of the survey’s respondents expect to somehow use automation, including AI and robotics.

“With such widespread change, companies must address how they’ll get work done,” Malcolm said. “Those companies that understand the impact of automation and digitalization on their workforces and organizations will be best positioned to gain competitive advantage.”

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Transformation Breakthroughs Needed…

We can’t imagine many executives would argue with that. Yet only 14 percent of employers have developed an integrated digital business strategy and road map. Instead, WTW found, about half of organizations either react to changes with “rudimentary digital capabilities” or have a digital strategy that’s not aligned with their business strategy.

According to the survey, Pathways to Digital Enablement, 75 percent of companies said they need “breakthroughs” in leadership development in order to successfully navigate the challenges of automation and digitalization.

Among those challenges: a dramatic change in workforce dynamics. As automation expands, employers expect to use more contingent and other “nonemployee” workers while reducing their full-time headcount. Contingent workers will comprise 5.2 percent of the North American workforce in three years, WTW estimates, up from 4.2 percent today. Meantime, the proportion of full-time workers will decline to 76 percent from 80 percent today and 82 percent three years ago.

…to Transform the Workforce

And many companies are struggling to make this changing mix of workers mesh. Only 41 percent said they’re effective at integrating contingent workers with specialized skills into their existing teams. Just 14 percent effectively combine automation with talent. Less than half, 45 percent, believe they’re effective at retaining employees and contingent workers with necessary technology skills.

Forming different types of workers into a single workforce is critical, said Malcolm. “We know from our research that organizations that successfully integrate contingent workers with automation and their teams are reaping benefits in the form of cost savings and less disruption in the short term,” he said.

For many leaders, a particularly daunting challenge is balancing the need to explore new ideas with the C-suite’s aversion to risk. “It’s important to recognize that leaders can operate in both this agile, experimental way but recognize when there is zero tolerance for mistakes,” Malcolm said. HR must help boards and management think differently about leadership and succession and “recognize that increasingly diverse ways of working and collaboration will be required.”

Which brings us back to HR’s involvement. Malcolm notes that nearly a third, 31 percent, of digitally transforming organizations report financial performance that outpaces their peer group (by more than a factor of 2). In their approach to transformation, these companies have included leadership, culture, human capital management and structure as well as the more commonly considered areas of technology, digital strategy and business process changes.

“They have recognized that talent is central to digital transformation, and as a result are including HR,” he said.

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