HR Tech Budgets Fall as Workloads Increase

DEI Budget

HR technology budgets are being cut back even as corporate leaders worry about effectively contending with talent management and retention challenges.

A review of Hackett Group research by UNLEASH found that today’s business environment “will be a critical time for businesses to extrapolate the most efficient policies while maintaining employee satisfaction.”

That may be tough to do when HR technology budgets are under pressure, UNLEASH said. It cited the Hackett Group’s survey of 350 HR executives, which uncovered an expectation that HR tech spending will decline from 8.7% in 2022 to 1.8% during 2023. That means HR executives will confront productivity and efficiency gaps as they labor to develop engaging cultures.

Specifically, the Hackett Group said it expects 1.3% growth in the productivity gap between 2022 and 2023. The efficiency gap will increase by 0.6%.

‘A Quiet Year’

At the same time, a number of analysts believe that 2023 will be a relatively quiet year in HR technology. Companies will spend less on HR tech, they say, pressured in part by the slowing number of hires being made. While roughly half of employers will spend more on tech during the year, analysts expect their per-employee spend across industries will fall.

HR’s evolution into a strategic business group has increased its workload, UNLEASHED pointed  out. Hackett Group Associate Principal Franco Girimonte believes that “cost-cutting, efficiency improvements and new technology will go some way to covering the gap.” However, he told UNLEASH, such strategies won’t be sustainable over time.

To resolve that conundrum, employers need to make better use of data and analytics, said Girimonte. These can help track key metrics such as employee satisfaction and DEI statistics to use as the basis for decision-making. They can also reveal inefficiencies across the organization, in areas such as payroll and retention strategies.

Many observers say HCM technology faces a time when dramatically enhanced systems provide both employers and employees with more flexibility, more mobility and more raw computing power to use in learning, onboarding, payroll – pretty much any area that HR touches. The specifics, of course, will vary from silo to silo and vendor to vendor, and depend largely on the health of those corporate budgets.  

Image: iStock

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