HR Digital Transformation: An HR Leader's Guide (2024)

The pace of technological developments over the past few years has been extraordinary, creating exciting opportunities and interesting challenges for HR professionals. This is why it’s no surprise thatHR digital transformation has become an evergreen hot topic in the field of Human Resources.

Let’s take a look at HR digital transformation through the lens of the current HR and technology landscape and how you can successfully navigate it.

Contents
What is HR digital transformation?
Benefits of HR digital transformation
HR digital transformation challenges
Examples of HR digital transformation
The stages of HR digital transformation
How to create your HR digital transformation strategy
FAQ

What is HR digital transformation?

HR digital transformation refers to the process of changing and digitalizing existing HR processes. The goal is to automate them, make them data-driven, and create a better (digital) employee experience.

Initially, digital transformation in HR was mainly about turning manual processes into digitalized alternatives. Think, for instance, about employee records. They were once kept as physical documents in file cabinets but are now often converted to, or recorded into, electronic formats. In today’s world of work, however, digital transformation in HR goes well beyond simply digitalizing manual processes. It now also involves using AI-powered HR tools and generative AI to better cater to employee expectations throughout the employee lifecycle and work more efficiently as a People function.

Benefits of HR digital transformation

Automating and digitalizing HR processes benefits the organization, its people, and the HR department in multiple ways. Examples include:

An improved employee experience

There are countless examples of how digitalizing HR processes can improve the employee experience. Here are a few of them:

• Chatbots: The use of HR chatbots in recruitment, onboarding, helpdesk inquiries, and other HR processes enhances accessibility as they offer employees 24/7 access to information.
• Employee self-service: Digital HR can create all sorts of employee self-service, like helping employees manage their own leave requests and benefit plans, updating their contact details, and downloading their tax forms.
• Onboarding software: Employee onboarding software can help create a more efficient and well-structured pre- and onboarding process, hence providing a smoother experience for new hires.

A more efficient and productive HR department

One of the biggest advantages of HR digital transformation for the HR department is that it makes processes more efficient and, therefore, the team more productive.

Thanks to HR automation, things that used to take a lot of time, either because they required manual interventions or were very repetitive, can now be done in the blink of an eye.

A more attractive employer brand

Employees today are accustomed to a seamless digital user experience in their personal lives. They have instant access to entertainment, food, news, and everything in between with one tap on their screen or command of their voice.

They increasingly expect the same experience from their employer. As such, a smooth digital candidate and employee experience can be a valuable asset for your employer brand and help to attract talent.

Streamlined HR processes

Another significant benefit of digitalizing HR processes for the HR department is that they can be streamlined.

Consider recruitment, for instance.HR teams can now use an Applicant Tracking System (ATS) instead of manually tracking applicants and their current stage of the process.

Systems vary in terms of what they can do, but usually they include tasks like:

• Vacancy postings on various job boards
• Connecting with and staying in touch with applicants
• Interview scheduling
• And much more.

Better data management and data-driven decision-making

Digital HR processes significantly reduce the risk of data loss when compared to manual alternatives, provided that people know where the data is stored and how to access it. An HRIS (Human Resources Information System), for example, will likely lead to better data management than a manual ‘system.’

Digitalizing HR processes has another data-related benefit. Most, if not all, HR software today has an analytics and reporting feature that comes with it, enabling HR teams to analyze internal data and, by extension, make more data-driven decisions.

HR digital transformation challenges

While HR digital transformation has important benefits, it also comes with certain challenges that can limit its effectiveness. Common HR digital transformation challenges include:

Unclear objectives

Arvato introduced a pre-employment assessment tool to address this disconnect. Candidates could take the assessment online and get a realistic job preview—a virtual peek into their future work environment and company culture.The result: Arvato’s employee turnover decreased by 63%.

HR may not have the right skills

HR is often expected to play a key role in executing the organization’s HR digital transformation roadmap. To be successful, HR professionals would need to master specific (digital) skills. However, our research indicates that organizations of varying sizes have improved HR’s digital skills by only 7% on average over a period of four years.

Some examples of these essential skills required by HR include digital agility, HRIS knowledge, knowledge of other relevant HR software, and GenAI prompting. Change management is an additional critical skill for HR professionals to master, as employees and stakeholders will need to be guided through the transformation process.

Ethical dilemmas and misuse of AI

The introduction of legislation like theEU AI Actand theNew York AI Bias law has highlighted the potential risks of using AI in HR processes. What’s more, since the advent of ChatGPT and similar generative AI solutions, employees are increasingly integrating these tools into their daily workflows.

Organizations need to develop a clear stance on using AI to avoid ethical dilemmas, productivity issues, and the misuse of generative AI and other AI technologies. At the same time, they must manage these risks in a way that doesn’t prevent the company from benefitting from these tools.

Getting users on board

For any tool or technology to be effective, those who will use it regularly must understand its purpose and recognize its value. Without their support, your initiative is unlikely to achieve the desired outcomes.

This underscores the importance of having a robust change management plan and involving a knowledgeable member of the HR team or an external consultant who can effectively guide people through these transitions.

Securing sufficient resources

Implementing software or tools demands both financial and human resources. Before starting the process, securing sufficient budget and people support is crucial for an HR digital transformation to succeed.

However, this can be challenging due to potential budget constraints and difficulties finding skilled personnel to execute the transformation. Additionally, aligning the HR digital transformation goals with the overall business strategy and getting buy-in from stakeholders can further complicate the process.

Examples of HR digital transformation

Digital transformation in HR can impact a range of HR functions, from recruitment and onboarding to payroll, benefits, and beyond. This transformation can vary in scale, occurring in just a few days or unfolding over the course of a year.

The following HR digital transformation examples highlight three types of of ‘transformations’ that occur.

Example 1: ATOS

At Atos, an IT and consulting firm, a disconnect existed between the data in the company’s core HR system and that in its employee document management function. To bridge this gap, the organization wanted a tool that would facilitate seamless end-to-end HR service delivery for employees, managers, and HR personnel alike.

Atos chose a cloud-based solution that was rolled out simultaneously in 70 countries. This software integrated the organization’s Employee File Management system with the recruiting module of its HRIS, allowing for streamlined HR operations and automation of the offer letter process.

As a result, managers can now access the HRIS directly and generate an offer letter with the push of a button, eliminating the need to email HR for approval of new hires.

Example 2: Healthcare digital transformation

A leading healthcare provider in the UK previously operated with three separate HR systems, each used differently across its 120 locations. To enhance efficiency, the organization wanted to consolidate these disparate systems into a single solution that would meet its specific requirements.

They introduced a new HR system featuring employee self-service capabilities, providing training for all 120 site administrators to familiarize them with the updated platform.

This digital transformation has successfully transitioned all HR processes online, leading to reduced costs. One of the biggest advantages has been that employees can book their annual leave remotely, saving administrators significant amounts of time each month.

Example 3: Nikkei Inc.

Nikkei Inc.,a media company, faced the challenges of intense competition, a new generation of talent with varying interests, and new media formats. In response, the company looked to transform its organizational structure and employee mindset, among other things.

To drive this change, Nikkei established a Digital Transformation Committee comprising HR, IT, and corporate teams, and chose to implement Workday HCM along with the HR component for managers, partnering with Accenture for the rollout.

This resulted in Nikkei’s HR department now leveraging training data to match its employees with the best programs and gain relevant new skills or boost their current skills. Employees can also share tips regarding internal training on a forum, enabling Nikkei to create new offerings.

Through this ongoing digital transformation, Nikkei is now well-positioned to nurture the next generation of talent.

The 6 stages of HR digital transformation

A typical digital transformation involves six different stages, as defined by research done by Brian Solis for Cognizant and Altimeter. In HR. These stages are:

1. Business as usual

In this stage, HR operates as if the solutions it currently uses will stay relevant in the future.

This stage is often characterized by:

• A lack of awareness among leadership about the need for a shift toward digital
• An almost non-existing impact of technology on the business and HR processes and a scattered HR technology landscape
• HR processes that aren’t streamlined or standardized yet.

2. Present and active

In this stage, various (groups of) people start to experiment, hence boosting digital agility and creativity within the HR organization.

Actions during this stage include:

• Developing a shared vision of digital HR together with the organization’s leaders
• Building an HR technology roadmap for the future
• Identifying your key objectives to redesign existing HR processes.

3. Formalized

During the third stage, experimentation becomes intentional and garners more support from leadership.

Elements that are important in this stage include:

• Support from executive leadership to secure resources required to start building a formal digital HR strategy
• Buying or building software solutions to start replacing existing systems and determining whether to proceed with the assistance of an implementation partner
• A systematic clean-up of existing HR processes. This means, among other things, automating and eliminating time-consuming (non-essential) steps.

4. Strategic

During this stage, HR departments recognize the power of collaboration, and most digital HR initiatives are executed by multidisciplinary teams.

Actions to take during this stage include:

• Aligning the HR technology roadmap with the organization’s overall digital roadmap
• Training (part of) the HR team in design thinking and the lean startup experimentation method
• Integrating digital skills within all HR roles and, if necessary, attracting key digital talent.

5. Converged

In the fifth stage, a dedicated digital transformation team is created to guide the digital support of the HR strategy and operations.

Elements to keep in mind during this stage:

• Regularly align with business developments and needs
• Work towards an integrated set of platforms and tools and ensure that all relevant HR tools are easily accessible for everyone involved
• Use pulse surveys to collect feedback from employees and business stakeholders on the effectiveness of your processes and optimize where necessary.

6. Innovative and adaptive

By now, digital transformation has become a continuous process in the organization and the new ‘business as usual.’

Actions to consider at this point are:

• Optimize your employee experience so that HR processes are virtually invisible
• Assign a dedicated individual or a small team to oversee the growth and ongoing delivery of innovation within the HR department.

How to create your HR digital transformation strategy

While all of this sounds great in theory, initiating the journey toward an HR digital transformation strategy can still feel daunting.

Here are a few ingredients for a successful start:

1. Evaluate your current HR processes

Before you initiate any changes, whether digital or not, it’s important to assess the current situation within the HR department.

Begin by evaluating the tools or HR software currently in use, such as an ATS and an HRIS. Create an overview of all existing HR solutions used within the company and identify whether they can communicate with each other and how they do so.

Identify the areas where digital HR can have the most significant impact. For example, implementing a digital performance management system can streamline employee evaluations and improve feedback mechanisms, leading to better talent development.

Also, investigate who is responsible for maintaining the technology—whether it is HR or IT—and whether updates occur automatically.

2. Get stakeholders on board, define objectives & metrics

Share the outcomes of your audit and prioritization exercise with the key stakeholders in the company and use this as an opportunity to get them on board with your digital transformation plans.Examples of key stakeholders include senior management, HR leaders, IT department heads, and representatives from key business units.

Once everyone is on board, you can determine your objectives and priorities together and define success metrics. These will differ from one organization to another.

For example, you may want to reduce the time to hire, improve the candidate experience, and decrease new hire turnover. The following metrics could help you gauge the success of your initiative:

• Time to hire: This is one of the most well-known recruitment metrics. It measures the number of days between a candidate applying for a job and the moment that same person accepts a job offer.
• Candidate Net Promoter Score (cNPS): The cNPS indicates how likely candidates are to recommend a company based on their experience during the recruitment process. It provides HR insights into people’s overall satisfaction with the process.
• First-year attrition rate: A high turnover rate within the first year of employment can indicate inconsistencies in talent acquisition techniques.

3. Create an HR digital transformation roadmap

With your priorities and objectives in mind, and in collaboration with your stakeholders, you can develop a comprehensive HR digital transformation roadmap.

The benefits of using an HR digital transformation roadmap include:

• It allows you to adopt a phased approach where you can start small, test, and refine your HR digital transformation strategy
• It enables you to plan for the potential scaling of certain HR software or tools if the organization grows
• It serves as a guide for everyone involved that outlines timelines, key milestones, and responsible parties, hence creating clarity and structure.

4. Develop digital HR skills

To successfully execute your organization’s digital transformation strategy, it’s essential for at least one member of the HR team to master the necessary digital HR skills – even if you plan to collaborate with an implementation partner or external consultants throughout the process.

Start by assessing the level of digital competencies within your team (for example, through our free T-Shaped HR Assessment) and create personalized employee development plans for your HR employees to improve their skills.

5. Draft a change management plan

Digital HR transformation has an impact on most, if not all, people in the organization. HR should create a digital change management plan to prepare everyone for upcoming changes and boost the chances of adoption and successful transformation.

6. Focus on building an integrated HR tech stack

One of the key aspects to consider when embarking on your HR digital transformation strategy is the creation of a well-integrated HR tech stack. Over time, it’s highly likely that your organization’s HR tech stack will consist of a blend of software and tools from various categories:

• Core HR solutions like HRIS and payroll software
• Recruiting tools, for example, ATS
• Employee experiencesoftware such as learning management systems and employee engagement platforms

You need to ensure that the various elements of your HR tech stack are integrated and can communicate with each other, allowing smooth data flow and reducing the need for manual interventions.

7. Assess performance

With the objectives and metrics established in your HR digital transformation strategy, you can critically evaluate what is effective and what isn’t. More importantly, you’ll be equipped to make timely adjustments wherever necessary.

On a final note

HR digital transformation is a continuous journey rather than a one-time event. Once a new solution is implemented, it’s crucial to stay agile and responsive to changing business needs and technological innovations. This ongoing commitment to improvement not only fosters long-term success but also creates a significant competitive advantage.

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