With the current economic landscape, many business leaders are wondering where to place their HR tech stack on the digital transformation roadmap. It’s no secret that the pandemic and the Great Resignation has led to an unprecedented period of disruption to business growth[1], and as a result, there are a number of technological “solutions” that have emerged touting benefits like improved employee experience to drive retention.[2]
With digital transformation continuing to be a priority for business leaders,[3] and with digital transformation being cited as only second to hiring when it comes to key growth drivers,[4] demand for work tech solutions will likely continue as businesses seek growth. This demand for growth solutions, coupled with record high investment in work tech this year[5] and last[6], has led to a proliferation of work tech / HR tech products aiming to solve the needs of our new world of work.
With no signs of this “platform proliferation” slowing down, and in the midst of a recession and continued challenges hiring and retaining employees, how should HR professionals be thinking about their technology stack and digital transformation more broadly?
To identify the key HR tech solutions in a successful digital transformation, it’s important to start with grounding in a few foundational principles.
First, identify the most critical business needs. HR teams tend to be oversubscribed to a wide array of tools that don’t directly address their organization’s most critical business needs. HR must not only identify and understand the needs of the business, but also prioritize which needs to solve. This can be particularly challenging when HR professionals are pulled into crisis management while being tasked with addressing challenges like record high attrition[7] or boosting morale in the midst of layoffs and furloughs.[8] When everything is important, nothing gets prioritized, making HR prone to reach for quick-fix, one-off solutions that often don’t address the core needs of the business.
Second, ensure that the tool fits the job. “Good” but misused tools can end up detracting value from the organization. For example, a well-intended team subscribes to a meditation app for $5 PEPM and after repeated communications and leadership support it achieves 20% utilization across the workforce. Is this app directly and meaningfully addressing retention, engagement, productivity, and well-being? Maybe. Or, would those dollars be better invested in stronger health insurance, more time off, or better employee communications? Probably. Did anyone evaluate whether that particular app was the best solution for their needs? Rarely.
“Nice to have” programs and technology platforms divert resources away from programs that can make a difference, increasing costs without any real added benefit, and ultimately slowing growth.[9] Buyer beware of tools marketed as a panacea for retention challenges particularly in a recession when resources are constrained: more tools often mean more problems.
Third, ensure that what gets selected, gets used. The ugly truth is that many, if not most, HR technology solutions are never effectively implemented or well-utilized. Even if the tool does address a real business need, many HR professionals often find themselves with a product that doesn’t do what they thought it would do in their specific use case(s). For example, the new product might integrate with your HRIS, but not pull information into a preferred display or format, resulting in errors due to manual implementation and frustrated employees and business leaders. So much for the quick fix!
Even with the most seamless integrations, it is challenging for users to adopt new systems, which necessarily come with new business processes. Each new tool changes the employee ecosystem, and change is hard – even with the product functioning as promised, it’s a new UI, UX, and tool to learn.
To get work tech right, HR teams should focus on being brilliant at the basics. They should align functional strategy with core business priorities and then thoughtfully determine appropriate resourcing (headcount, vendors, etc.) to support the key HR initiatives that align with those core business priorities. Our goal is to select end-to-end technology solutions that support achieving business objectives and measure progress over time. This process, commonly referred to as waterfall strategic people planning, ensures that resources are effectively deployed against the most critical business goals and ultimately helps drive digital transformation to successful outcomes. When HR professionals focus on proactively aligning people strategy with the most important business priorities, they are less prone to chase after the latest shiny tool or pitch a solution that may not directly address the problem.
While the basics of an HR tech stack vary by company size and goals, it starts with payroll, benefits, and employee recordkeeping. Tooling in these three core areas ensures that you are delivering the core basics: paying your employees the correct amount on time, providing them with affordable health insurance, and maintaining required employment forms and notices, while protecting personal data. It is often beneficial to consolidate these three elements within a single system up through the first 100 employees. Many companies use a Professional Employer Organization (PEO) as their payroll and benefit provider and recordkeeper at first, then implement a scalable “hub” HCM (like ADP Workforce Now) which can support many thousands of employees.
As an organization grows, it can be helpful to bolt on systems to that “hub” to help with hiring, engaging, and managing your employees. Consider an Applicant Tracking System (ATS) to scale and track recruiting efforts, as well as a survey tool (such as CultureAmp) to measure engagement, and a performance management tool (such as Lattice) to help guide employees in performing their job duties. Additional tools may be appropriate depending on the organization’s needs and priorities, but be selective. More tools does not mean the experience is better – it tends to add complexity to the employee experience, which can lead to confusion and cynicism. A few well-chosen and effectively implemented systems provide a much better employee experience, as well as much smoother business processes.
There is a huge opportunity for HR and HR tech to contribute to business success. Prior to making selections for your HR tech stack, ruthlessly prioritize your most critical business needs and then allocate resources to solve those needs. Do this well and your organization will flourish.[10] Ultimately, the winning digital transformation strategy will incorporate fewer and more meaningful, integrated solutions to address the largest challenges your organization faces in this new world of work.
[1]Challenges hiring will continue to worsen when the unemployment gap shrinks (3.6%) while the job openings continue to increase indicating we do not have enough people for jobs US Bureau of Labor Statistics
[2]Josh Bersin, HR Predictions for 2022 (p.11)
[3] 68% of CHROs say their companies plan to invest a lot in digital transformation and PwC; Gartner
[4] Companies plan on investing 60% in hiring and retaining talent and 59% in capitalizing on digital transformation initiativesPwC
[5]This year, investments have kept pace at $9.41 billion for H1, which means 2022 is on track to meet or exceed 2021’s HR tech investments. WorkTech
[6]We saw a record high investment in HR tech in 2021 of $17.9 billion across 374 deals, three times the investment in 2020, with expenditures on HR Systems up 51% from 2020.WorkTech; Sapient Insights; TechCrunch; BCG; HR executive
[7] Attrition stays at record high numbers US Bureau of Labor Statistics
[8] Jack Kelly, 98% of HR Professionals Are Burned Out, Study Shows (Apr. 14, 2022)
[10]“One of the most powerful tools to grow a company is to educate, develop and align the HR team.” Josh Bersin, New Research Shows That High Growth Large Companies Have Distinct HR Skills (Jul. 18, 2022).