‘Smart Automation’ is Key to Successful HR Transformation, Report Says

Digital Transformation

Applying “smart automation” can reduce a typical HR organization’s costs and staff hours while improving its effectiveness and service delivery, according to a new report from the Hackett Group.

Adopting technologies such as robotic process automation and smart data capture can cut costs by 17 percent and decrease staff hours by 26 percent, the report said. Because effectiveness and employee experience would rise at the same time, the average HR function could reasonably expect to attain something close to industry-leading efficiency levels.

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World-class HR organizations operate at 20 percent lower cost, with 31 percent fewer employees than typical HR organizations, Hackett’s research found. “Smart automation”—the term Hackett uses to refer to technologies such as RPA, cognitive automation and intelligent data capture—can help even these leaders cut costs by an additional 17 percent while reducing the number of staff hours by an added 21 percent.

In both cases, the savings in time results from elimination administrative and transactional work and shifting practitioners’ attention to business and talent-related tasks.

Hackett Group describes “world-class HR organizations” as those that achieve top quartile performance in both efficiency and effectiveness across an array of weighted metrics. “Digital world class” is firm’s estimate of the additional benefits world-class HR functions can realize from full enablement and optimization of HR technology.  

Experience, Not Just Technology

Beyond measuring technology’s impact on efficiency, the Hackett Group for the first time measured the—wait for it—experience of key stakeholders throughout the organization. Specifically, it added “experience” as a separate area of analysis, measurement, and transformation focus.

Its key finding: Leading HR departments excel in areas such as business alignment, quality and talent. They also shift resources from low- to high-value activities, build and deploy sophisticated analytics capabilities and provide high-value tools, expertise and insights to business leaders. CHROs seem to recognize this: The research found more HR departments are  moving away from measuring their performance using only HR-centric metrics.

In addition, the research found that, compared to typical HR departments, world-class organizations are more than 3 times as likely to be perceived as valued business partners, and over 7 times more likely to be seen as collaborators.

Service Delivery Transformation

Hackett Group also looked at the changes necessary for HR’s service delivery to take full advantage of digital transformation. Building a truly digital HR organization requires new strategies and approaches to service delivery in six areas, the research said: technology, service design, analytics and information management, organization and governance, service partnering and human capital.

“At typical HR organizations, the majority of the people and budget go to administrative and transactional work,” said Harry Osle, the Hackett Group’s Global Human Resources Practice leader. “HR organizations who do not take advantage of what smart automation offers will be stuck delivering services in a very traditional way, which is likely to increase costs and underwhelm its customers.”

Osle said smart automation “offers a very achievable path to performance improvement for HR today, particularly for HR organizations that have not already fully optimized their HCM environment.” However, realizing the potential of smart automation’s contribution requires taking on “the harder long-term job of truly optimizing and rationalizing their overall technology environment in tandem with their smart automation efforts.”

That means reengineering processes and leveraging the full capabilities of existing core HCM systems. “It’s likely to be a multi-year journey,” he said, but in the current business environment it’s “critical.” 

Max Caldwell, principal-in-charge of the Hackett Group’s People and HR Transformation practice, noted that successful transformation encompasses more than technology. “A holistic transformation plan describing how to engage and partner with the business is key,” he said. As an example, he said HR must refine its service design to focus on improving employee experience if it’s to address recruiting and retention challenges. In addition, “analytics must play a role in strategic workforce planning, to ensure that the company’s future talent needs are met,” he said.

Finally, Caldwell said organizations should pay attention to service partnering, “basically knowing when and how to use external service providers.” Doing so can reduce costs and improve responsiveness to changes in demand by HR’s constituencies.

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