Budget constraints are not the only reason for the lack of digitization in HR
Findings of the joint study HR goes digital by hkp/// group and the Business Administration/HR Management degree at Baden-Wuerttemberg Cooperative State University (DHBW)
Frankfurt am Main, December 02, 2016. The digital maturity of HR in many companies is not nearly as far advanced as expected. It has been widely assumed that the reason was the lack of funds. But in fact a number of other factors are just as important, including inadequate technical infrastructure, a lack of process standards, and inadequate knowledge and skills.
These are the key findings of the joint study HR goes digital by management consulting firm hkp/// group and the Business Administration/HR Management degree at Baden-Wuerttemberg Cooperative State University (DHBW Lörrach). The survey was carried out among HR decision-makers in Germany, Austria and Switzerland.
Key findings of the study
1) Digitization is impossible without standardized processes and digital skills
The digital transformation requires the creation of new processes, networked and highly automated, along the entire value chain for companies. This is vital in order for HR to be able to support innovative business models with HR processes, and for alternative models of cooperation to be possible. Around 39% of participants in the survey see the low level of standardization of applications and processes, or the existence of isolated solutions, as the most important barrier to the digitization of HR. This is closely followed by a lack of digital skills (38%) – three out of four companies say their HR department has a low level of digital competence.
"As a result, modern technical applications are not used in full, or in some cases not at all. Despite the large amount of money invested in them, they fail to deliver the desired additional value. Without basic digital knowledge there can be no march into a digital future," says chief author of the study and Senior Partner at hkp/// group Thomas Faltin. The danger of digitization projects failing due to a lack of knowledge is just as great as the risk of them failing due to a lack of money, he believes.
2) Lack of modern IT systems and future-proof technology
HR directors should not be afraid of employing the latest forward-looking solutions and resolving the eternal dispute between the need for differentiation and the benefits of standardization when it comes to processes, products and services. However, the reality in today's companies is different:
  • Three-quarters of participants in the study use few cloud solutions if any in their core HR processes.
  • Only half of the companies use employee self services (ESS) or manager self services (MSS) – applications that allow staff members or managers to carry out certain standard tasks themselves, such as updating their bank data, marital status, etc.
  • Just 50% of participants in the study use electronic personnel files.
  • Only one in five companies give everyone in the company a smart phone or tablet.
  • Only every second company allows all employees access to core HR applications.
"Just introducing electronic personnel files in itself will not make a dramatic difference to the level of digitization of HR, but it's a start. Ultimately companies need an integrated perspective on all their technologies and applications, as well as properly trained staff," says Colin Stein, author of the study and Consultant at hkp///.
3) Social media and recruitment are catalysts for digitization
Of the core HR processes where IT solutions can offer the most support, recruitment is well ahead in the number one position (81%), followed by learning (54%), performance management (46%), compensation (43%), and succession management (20%).
Recruitment is ahead of the other areas because handling data is less sensitive here, according to the authors of the study. The strict data protection rules that apply in Germany only really start making a difference when you get to employee data.
Another reason for recruitment being the leading area is its close integration with social media and therefore employer branding. Besides their own websites, companies are increasingly using channels such as Facebook and Twitter to raise their profile, address specific individuals and automatically direct information about vacant positions at the company to relevant target groups. Suitable HR tools can be used to collect online applications and process them efficiently.
4) IT, infrastructure and the like are not enough to create a digital champion
The study finds that "digital culture" and "the ability and willingness to change" are particularly strong drivers for the degree of digitization in HR. For the study's authors, this is evidence that commitment to digitization – not just ability – is critical for achieving greater digital maturity within HR. Moreover, part of the commitment to digitization is having a culture that tolerates mistakes when dealing with new technologies and having an awareness that it is not possible to become a digital champion overnight and without making any effort.
The cluster analyses performed by the study's authors produce some surprising results with regard to the maturity of digital culture within HR departments. For instance, a greater degree of digital maturity by no means guarantees greater efficiency. In fact, when implementing a digital culture, companies have a much worse HR ratio (number of HR employees compared to the size of the entire firm) than traditionalists, that is to say companies that are currently doing next to nothing about digitization. This shows that digitization in all its entrepreneurial facets requires initial funding and only leads to efficiency improvements in the medium term.
Surprisingly, no company in the study currently sees itself as a "digital champion" – a company with a strong IT base and a strong IT culture that combines the competence and commitment. Digital maturity doesn't just mean that a company has implemented as much expensive technology as possible: It means that it understands the value of such technology, and that depends critically on having the right culture in place.
HR must undergo digitization itself, as well as facilitating it within the rest of the firm
Senior Partner at hkp/// group Thomas Faltin summarizes the study's findings as follows: "Only if HR is able to master the challenges of digitization and digital transformation will it be able to successfully position itself as a strategic partner of management, and also position the company as a digital organization. HR must be the driving force in this process, bringing together the different stakeholders in the company and their requirements and so making a significant contribution to the digital roadmap for achieving the company's goals."
Background to the study
HR goes digital is a joint study by hkp/// group and the Business Administration/HR Management degree program at Baden-Wuerttemberg Cooperative State University (DHBW Lörrach). HR experts and decision-makers from a total of 138 companies of different sizes from various industries in Germany, Austria and Switzerland participated in the online survey. The results were analyzed using statistical methods including factor, cluster and discriminant analysis. For a summary of the results, please e-mail info@hkp.com.
* Photo by Markus Spiske on Unsplash