The Aftermath of HR Digitalization

HR Digitalization

Today the buzzword is HR Digitalization. It almost seems that if you are not in the game, you will soon be out of it. The current global pandemic has push forth the growth and need for HR Digitalization. (This article is not about the merits of HR Digitalization as much has already been written about it.) ?

There is no perfect HR operating model but one that continues to evolve with the changing times. The goal should be to reach and maintain equilibrium within the business world. Most of today’s large enterprises structure their HR organization into three groups:

-??????HR Centre of Excellence: This is where Personnel with a high level of mastery in their job expertise come together, incorporating the usage of best practices, to design and develop “fit for purpose” solutions to support the organization’s business priorities. [Examples of COE team: Global Compensation, Global Learning and Development, Global Talent Management (Recruitment)].

-????HR Shared Services: This is where all the HR administrative activities flow into a centralized “nerve centre” within the HR organization. The core HR area is where most of the HR Digitization and HR Digitalization occurs. Instead of increasing the number of HR operational staff in each location, consolidation pushes towards a leaner configuration. (The HRIS and workforce administration teams reside within the HR Shared Services.)

-??????HR Business Partnering: This is your frontline HR team that works directly with the customers (“employees”) daily. They are also responsible for deploying the solutions introduced by the HR Shared Services and Centre of Excellence team.?

The challenge is to develop an organization that is quick to respond to our volatile, uncertain, complex and ambiguous (VUCA) environment.

With the current global pandemic, coupled with a world that is filled with constant disruptions, organizations will require a HR team in the front line to provide quick assessment of the situation and respond accordingly.

More than ever, the HR function plays a very critical role in the post-covid era. The challenge is to ensure that the appropriate attention is given to each group, making sense to the business and being cost-neutral.

It’s all about Customers!

Lest we forget, HR exists because of our customers (“employees”). We have to remember that HR Digitalization’s primary goal is to automate transactional work. It is not about replacing the invaluable need for HR to engage in face-to-face interactions with customers (“employees”).

The various support functions exist (e.g., Finance, Procurement, IT), so that it allows our core business folks to focus on the business.

When we embark on HR Digitalization, the goal is to “free up” the time HR people spend on performing transactional work to move up the value chain of business partnering. The purpose of HR Digitalization should not be to eliminate or drastically reduce the size of your HR ground support!

I remember visiting a friend of mine who manages two fabrication plants in Singapore. After completing my tour of one of the plants, I asked him about his HR team.?

He smiled and proudly showed me his smartphone. “We do not need HR at this site. We have all the HR metrics at the palm of our hands. We make decisions every day without the help of HR.” We know a group of HR people in our regional centre spending a lot of time feeding data into the system that allows us to make real-time decisions.

According to him, HR is centralized at the regional office. He does not know who they are as they are seldom seen on his fabrication plant. They are like stealth planes that come and go.?

There was something wrong with this picture whereby employees ended up as “an island” and the only “connection” they have with the HR function is via the digital platform. When that happens, the HR function has forgotten the very nature of its existence.

Another case in point. One of my close relatives had just retired from a company he had worked with for more than fifteen years.

Three months before retiring, he asked me whether it was customary for someone about to retire to receive emails from the HR department (and they are in the same building).?

I asked him if any HR people had talked to him personally? He said no. Everything was done via emails and not even using video conferencing. If HR does not even have the decency to do a video call with an employee who had given fifteen years of his commitment to the company, shame on our profession.?

If our existence is only to serve the top executives, there is no need for any HR organization to exist.

The endgame of HR Digitalization

What typically happens in the aftermath of HR Digitalization is the pressure of reducing the HR costs. Organizations want to see their returns on investments. It should at least be cost neutral or in some cases, the promise of reduction in HR costs.?

Wait a minute! The only costs associated with HR should be its people. Whenever an organization adds another layer of digital solutions, the pressure to reduce the size of the HR organization increases.

When that happens, our employees will see a reduction in workforce within the HR organization. The greatest impact is usually on those who are involved in HR Operations.?Where there were sites with 4-5 HR operational staff, may eventually be reduced to just one lone HR Business Partner.?

The logic is that all transactional work can be automated via stand-alone global HR hubs. The notion is that the “freed-up” time would allow the HR Business Partners to spend more time focusing on business strategy and be increasingly involved in the various business transformation. That’s the plan, but nothing could be further from the truth!

Those that have been through several HR Digitalization exercises, know for a fact that HR Digitalization will not completely remove all transactional work onsite, especially unplanned disruptions.?HR Digitalization will also not be able to replace the amount of logistical work that is needed to carry out employee engagement, wellness and corporate social responsibility activities. All these events require onsite HR operational support.

You cannot possibly eliminate all the transactional work at all. ?Some require urgent attention and cannot wait for it to meander throughout the entire HR network.

What happens is that the lone HR Business Partner will end up doing all the transactional work which inadvertently diverts their attention from focusing on strategic business partnering or being involved in business change management processes.

As time goes by, the HR Business Partner ends up doing a heap of backend transactional work, e.g., job interviewing, handling ground zero urgent HR workforce administration and getting paid as a HR Manager. It is not surprising that the job title of “HR Business Partner” is shunned in some organizations!??

It mostly depends on how the HR world interprets the business of HR partnering compared to what a typical business leader would see in his HR Business Partner. HR assist other support functions to carry out their performance management by providing inputs in their assessment criteria. Have you ever wondered who determines the performance criteria for the HR team?

There is a lot of programs offered in the industry on the art and science of HR Business Partnering. However, there are hardly any programs to equip business folks on how they should be evaluating their HR organization. Salaries constitute one of the largest in operating costs yet our business folks still have not realized the importance in acquiring the relevant skills.

If you are the site HR Manager/Leader, inadvertently you will need to have an open-minded discussion with your Business Leader in terms of how they evaluate your worth. Most HR Business Partnering will eventually gravitate towards performing more HR transactional work and enjoy the yearly merit increment to have a decent salary as a HR professional.

One of the root causes is the lack of knowledge of the business world with regards to the evaluation of their HR Business Partner. Instead of evaluating them based on their contributions at the higher value chain, HR people are being stereotyped, as the ones who does recruitments, making sure that the HR and Finance numbers are aligned, deploying HR solutions from corporate, providing them the onsite support for all their HR Digitalization services and producing HR reports.

Due to this mindset, the business folks often wonder why they have to pay so much for a HR Manager, when all they do is mainly HR transactional work. To the business folks, they do not understand why their managers whom they assume are merely performing transactional work would refer to themselves as HR Business Partner.

The current global pandemic has shown that HR operations are needed onsite to handle any sudden disruptions. This is largely missing in most sites as the task has been taken up by the business folks who lack the necessary knowledge and skills.

The greatest loss from HR Digitalization is in the business aspect. What we do not see happening is the loss of opportunities as our business folks are not looking at opportunities in the horizon. Our core business folks are already knee-deep in combating daily disruptions from our supply chains.?How many of our core business folks are spending time working on blue ocean strategy or taking advantage of the current crisis to emerge even stronger post-covid???

Most business managers are so bogged down with people matters and at every meeting, a large portion of the meeting is dedicated on people matters rather than seeking out future opportunities.?As a result, the onus falls on the top executives to figure a way out of this pandemic.

We still subscribe to the notion that our Top Executives will be the ones who will be the saviour of the company. They are responsible to provide solutions on the crisis at hand. History have taught us that innovation does not just come from the top.?Case-in-point: The late Dr. Spencer Silver who invented the Post-It Notes at 3M and Dr. Peter Tsai who invented the N95 mask. Both of these scientists were not Top Executives at their respective institutions.?

“Now Every Process can be automated”

The first step of HR Digitalization is to define the business goals of where you want to position HR within the business, (i.e., the endgame of HR). The reality is that HR Digitalization will never totally remove all the transactional work, especially those that occur in real-time.?

The primary focus is usually the workforce administration portion, the core where we store employee records, documents and employment information. The core HR is where you get the most of your returns from automation.

The next area for consideration is a long list of people lining up to automate, (e.g., payroll, performance management, learning, analytics, compensation, benefits administration, engagement).

Air Asia slogan is “Now Everyone Can Fly”. The same goes with HR Digitalization, “Now Every Process Can Be Automated”.?We need to identify the endgame of HR Digitalization.?

There is no single formula for the endgame of the HR Digitalization drive. It depends on how the business strategy will evolve and the endgame needs to have the flexibility, to make sure that there are enough resources for each HR team to support the changes.

Of the three groups of HR organizations, HR Business Partnering are the ones who require the most face-to-face interactions, followed by the Centre of Excellence and lastly, the Shared Services function.

I am sure most of you have one of those multi-functional TV remote control at home. I only use the usual 20% of these features, (e.g., volume, channel, power on/off). Out of the remaining 80%, only 60% of the features fall under the occasional use. I cannot understand the purpose for all the additional features!

The good news is when it comes to HR Digitalization initiatives, you do not have to buy the whole suite. HR Digitalization is usually parked under the HR Information Systems group part of Shared Services.

Here is where you get your most significant returns.?

What is important is the other two-thirds of the features. You need to understand that the external digital vendor and your goals may not be completely aligned.?

What we need is a HR organization that has all three groups. You still need to have some resources dedicated to HR operations at larger sites.

They are your ground support team that can respond immediately to a crisis. The smaller site will need a hybrid individual required not just to perform HR work but all of the above. As the world continues to be more turbulent, the HR Hub concept model will need to be constantly reviewed to ensure that it is at the most optimal configuration.

?Where should our focus be?

The organization’s goal is to introduce automation, primarily to automate processes and reduce time spent on repetitive tasks. The external digital vendor's goal is to provide you with the solution and much more!

It does not help when you may have an overly enthusiastic COE or Shared Services team who might want to bring in as many features as possible within the organization. They may not be oblivious to the unintended consequences of their actions.

The more features are added, the more resources are required to staff the COE or Shared Services teams. The business will be pressuring HR to reduce HR headcounts.

You need to realize that the COE and Shared Services main priorities are not on customers (“ employees”).?Remember, we are still subjected to a fixed budget, especially if you are working in the private sector.

Don’t get me wrong. Almost everything can be considered to be urgent and important to the organization.

However, we need to know when we are approaching the point of diminishing returns. There are limits to the level of expected returns, going any further will only result in a downturn. ?Any further digitalization efforts will only result in negative returns and you will also realise a steady level of frustration at each operating site as they are not receiving enough HR support despite paying a hefty price tag for HR services.

Of course, the argument is when you go into automation, you can reduce costs further by reducing headcounts. Same analogy as when a salesperson tells you that if you take one item, it will cost you $10. If you buy two, it will cost you $18. What you don’t realize is that you have spent $8 more. In the HR Digitalization world, the $8 will come from reducing HR headcounts and curbing other costs, (e.g., travel, education).?

Unless a HR process is completely broken and hurting our employees, we need to look at automation. However, if a process is matured and customized to each site, and the employees are happy with it, we need to question the need for further disruptions.

You begin to see that beyond the point of diminishing returns when you have stripped the site down to the bare bones, the employees are starting to get frustrated because they no longer have site-level support. As we downsize the HR operational group (and in some cases, reduce the number of HR Business Partners), the frustration curve will continue to climb.

As a result, you may begin to see signs that some sites have decided to get their onsite HR resource as they do not see a return on investments. We are hitting the zone of diminishing returns where the overall HR costs have escalated and the business folks are not seeing the benefits of HR Digitalization.?

Once that happens, the organization will fall into the two-thirds of digital transformation failure at the expense of improving the company’s performance, according to McKinsey & Company.

HR deserves to be extinct

Let us revisit the purpose of the HR organization. Finance takes away the need for our business folks to do number-crunching. IT takes away the frustrations of the need to figure out the relationship between?cloudware, hardware and software. Employees expect HR to take away the need for business folks to spend too much time in mundane people matters.

Despite this, some HR leaders subscribe to the fact that all transactions can be solved by digitalization and business folks need to be involved in people matters. We are oversimplifying the situation.

Let us not fool ourselves that we can live without the HR function. Organizations or leaders who think that HR is not needed, do not realise the great potential that they could have achieved if they had the right HR team in place. Organizations that may not have ended up in the corporate graveyard had the right people at the helm and accorded them the same level of trust and respect as the rest of the functions.

The operative word here is “right”. We are not talking about a HR Business Partner who agrees wholeheartedly with the Key Executives or turns a blind eye to the plight of the people. We are also not talking about HR leaders who will make a beeline to their office and spend the rest of their day locked in their nice air-conditioned room.

There is a lot of literature on the concept of HR Business Partnering. Most talked about the “How” of HR Business Partnering but not much has been written on the “WHAT” of HR Business Partnering.?

?We have been trained and given the accreditation to be a HR Business Partner in the industry. There is extensive knowledge on the roles, responsibilities, traits, areas of focus, etc. These are big picture information on HR Business Partnering but unfortunately, these are 50,000 m above ground zero.?

Let’s take a small portion of HR Business Partnering and drill down to ground zero business broad expectations, the “WHAT”:

• Regularly challenge you on the status quo on all aspects of the organization.
• Understand costs implication and work closely with the Finance team for all HR initiatives.
• Discuss the risks and opportunities after each operational meeting.
• Provide you solutions in real-time, (i.e., demonstrating that they have already anticipated the issue).
• Demonstrate how HR deliver costs savings and avoidance.?
• Possess the courage to tell you that you may not have made the right decisions and offers you an alternative viewpoint.
• Have their fingers on the organization's pulse, demonstrating business ownership in understanding the current state.
• Constantly working on preventive and predictive measurements to ensure that the workforce stays relevant.?
• Demonstrate a high level of critical thinking by applying management science tools and processes.
• Approach from an angle of outside-in (business to HR) rather than an inside-out (HR to business) solution.
• Demonstrate high-level systems thinking and the ability to identify unintended consequences of each action.
• Inform you regularly that they have just had another crucial conversation (and at times crucial confrontation) with key people in the organization.
• Comfortable coming to you to say they have “goofed up” in some of their initiatives.
• Make an effort to understand every inch of the business.?
• Offer you several options/alternatives when faced with a business issue and the ability to identify the advantages and disadvantages.
• Manage a portfolio of critical talents focusing on talent management, even if there is no culture of talent management review.

The above is just a snippet of how a HR Business Partner could be evaluated. There is a need to identify the endpoint of “now every process can be automated”.

The more we invest in HR Digitalization, the less funds will be diverted to train, educate and develop quality HR Business Partners.?

When the HR Business Partners are working in the frontline, fully immersed in the business, it is time we take another hard look at the extent of how much we want to go in HR Digitalization.

Acknowledgement: I would like to thank @serena mosalle for help with proofreading/editing.