Digital transformation is revolutionizing businesses across every industry as companies race to keep pace with technological innovation and changing customer expectations. The human resources (HR) function plays a crucial role in this transformation. To drive digital transformation forward, HR teams need to modernize their own processes while also helping transform the broader organization‘s employee skillsets and corporate culture.
In this comprehensive guide, we‘ll explore what digital transformation looks like for strategic HR leaders in the modern data-driven business landscape and provide clear, research-backed guidance on how to digitally transform your HR function leveraging the latest AI, automation and people analytics technologies.
What is Digital Transformation in HR?
Digital transformation refers to the integration of emerging technologies like artificial intelligence (AI), machine learning, automation, and advanced analytics into business operations to drive greater efficiency, productivity, and deliver enhanced customer and employee experiences.
For HR teams, this entails leveraging innovative technologies to optimize key talent management processes:
- Recruiting and hiring: Automating repetitive tasks like screening resumes while leveraging AI and machine learning to source, engage and evaluate candidates more effectively
- Onboarding and orientation: Streamlining and personalizing the experience for each new employee through chatbots and interactive multimedia content
- Training and development: Using data and analytics to understand current skills gaps at an individual and organizational level in order to facilitate more targeted, impactful upskilling initiatives scaled through online learning platforms
- Performance management: Harnessing pulse surveys, regular feedback programs and OKR tracking integrated with AI-enabled continuous performance management systems
- Internal communications: Facilitating seamless communication, transparency and access to information across distributed teams through enterprise collaboration tools
- Culture building: Using advanced analytics to deeply understand and continuously optimize drivers of engagement as well as environmental factors that motivate employees
Additionally, digital transformation provides HR leaders with unprecedented access to ALL employee data through analytics and integrated HR information systems.
These data-driven insights empower HR to enhance nearly all aspects of workforce management – from predicting attrition risk, determining which teams need support, and personalizing employee development programs to optimizing retention incentives.
Current State of Digital Transformation in HR
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According to Deloitte‘s 2022 Human Capital Trends, 86% of executives rated digital organization as a critical priority, but only 9% believe their companies are ready to compete in an increasingly digital environment. This readiness gap highlights the urgent need for digital acceleration.
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Investments into HR technology are growing rapidly as business leaders recognize the outsized impact employee experience, productivity and capability have on realizing digital transformation success. Global spending on HR technology is projected to grow over 10% annually over the next 5 years, reaching nearly $40 billion by 2027.
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Leading organizations are 2X more likely than their peers to be investing in technologies to improve workforce productivity and effectiveness as well as skill and capability development, according to McKinsey research.
Why is Digital Transformation in HR So Critical?
With technology rapidly reshaping how business gets done on global scale, HR teams that lag in digital adoption risk stunting the organization‘s competitiveness, growth trajectory and ultimately, survival.
There are several compelling reasons why digital transformation needs to a top priority for HR leaders today:
1. Winning the War for Talent
The talent shortage remains one of the biggest challenges companies face in the digital age. Advanced technologies like AI give organizations a competitive edge when it to attracting, engaging and retaining top talent:
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HR teams leveraging AI for predictive analytics improve quality of hire by 12% on average while reducing time to fill roles by 20-30%, according to IBM.
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72% of candidates are open to communicating with a recruitment chatbot if it creates a smoother application process, per Mya Systems.
With smarter talent acquisition tactics, HR leaders can build the human capital capability required to win in an increasingly digital-first business landscape.
2. Meeting Rising Workforce Expectations
Younger generations have grown up with technology fully integrated into their daily lives. They expect those same kinds of consumer-grade, digital experiences from their employers.
In order to engage, motivate and retain both rising millennial/Gen Z talent as well as tenured employees, HR must modernize systems, processes and communications across the employee lifecycle journey.
3. Turbocharging Productivity
Manual, paper-based HR processes waste massive amounts of time and organizational resources. Streamlining these inefficient analog processes with automation and AI drives significant productivity gains.
According to Deloitte, 58% of companies see increased productivity after digitally transforming HR operations. Specifically:
- Routine HR administration can be up to 92% more efficient with automation
- AI can save up to [60% of a recruiter‘s time](https://builtin.com/recruitment-marketing/ai-recruiter-assistant-Time savings) on high-volume hiring
With these massive time savings, HR staff can instead focus their efforts on more strategic, value-added initiatives aligned to business goals.
4. Unlocking Powerful Workforce Insights
Perhaps most importantly, digital transformation unlocks a wealth of previously inaccessible workforce data. When coupled with analytics, this data offers unprecedented visibility into the employee experience.
These insights allow HR leaders and business executives to course correct and optimize decisions driving productivity, retention, development and overall performance outcomes.
Consider just a few examples of how workforce analytics empowers more strategic management:
- Identify skills gaps down to the individual employee level then develop targeted upskilling programs to cultivate talent from within
- Pinpoint the key drivers of attrition by department and role to shape evidence-based retention strategies
- Quantify the ROI of HR programs/initiatives in business terms like workforce capability development and revenue impact
- Forecast future hiring needs based on business growth plans to minimize reactive recruiting
The workforce intelligence unlocked through digital transformation gives organizations of any size near real-time access to employee data that can guide more impactful investments into HR programs & technology.
Real-World Examples of Digital Transformation in HR
Now let‘s explore some specific digital transformation examples showcasing how HR teams drive impact leveraging the latest technologies:
Mars Accelerates Recruiting Efficiency by 75% with AI-Powered Chatbots
Mars HR leaned heavily into chatbot and automation technology to overhaul talent acquisition. By deploying AI-enabled chatbots, they reduced application completion times by 50% while accelerating candidate response rates six-fold. Overall, their digital hiring strategies drove a 75% improvement in recruiting productivity.
Adidas Creates Personalized, Gamified Digital Onboarding Journeys
Human Resources at the apparel giant Adidas aimed to inspire and immerse each new hire. They developed a mobile-first digital onboarding experience enabled through automation.
New hires progress through a series of gamified modules and quizzes to learn about the company culture and brand values. The interactive course content keeps engagement high while automation handles all back-end paperwork. Since launch of their digital onboarding platform, quality of hire and retention has improved by 15%.
Unilever Uses Predictive Workforce Analytics to Get Ahead of Key Talent Loss Risks
Unilever partnered with workforce intelligence platform Faethm to leverage predictive analytics. By analyzing a spectrum of internal and external factors from business growth rates to exit interviews, Faethm‘s AI accurately predicts the highest risks roles and sourcing channels for unwanted attrition at Unilever.
These predictive insights allow Unilever to quantify expected talent/skill deficits and proactively upskill employees to minimize future churn. Since implementing the Faethm partnership, they‘ve cut hiring cycle times by 30% for hard-to-hire roles that previously saw high attrition like research scientists.
Steps & Best Practices to Lead Digital Transformation in HR
Legacy systems and analog processes have no place in modern HR organizations needed to support constantly adapting business demands. However, digital transformation can feel overwhelming for resource-constrained HR teams.
Where do you even start on such a complex change initiative impacting numerous interconnected programs and processes?
Follow these best practices for sustainable, effective transformation grounded in workforce analytics:
1. Build an Employee Data Foundation
Break down data silos by first consolidating employee information across all existing HR systems into a cloud data warehouse. With holistic workforce data all in one place, you gain ability to benchmark and optimize.
2. Pressure-test Priorities with Analytics
Before making investments, pull workforce analytics leveraging your unified data to validate where transformation will drive the greatest efficiency and performance lift. Quantify the current state issue in full context – what‘s the loss in productivity hours? How is this negatively impacting retention benchmarks? Then size the expected ROI. This business case fuels buy-in.
3. Take an Agile, Iterative Approach
Once you‘ve secured executive sponsorship and budget, focus initial efforts on the few top priorities surfaced through analytics then scale. Adopt agile ways of working: Design, prototype, gather user feedback, continually enhance.
4. Secure Involvement from Stakeholders
Include HR program owners, IT, business unit leaders and end-users from the start when evaluating solutions to ensure alignment. Collaboratively review what‘s working well versus new pain points discovered after each iteration to keep improving.
5. Invest in Change Management
Proactively lead employees through the transformation journey. Provide training on new technologies/processes and have vocal change champions across the organization reinforcing wins to drive adoption.
6. Rigorously Track Value Realization
Link all HR technology solutions to key performance indicators tied directly to business objectives – like improved quality of hire or higher workforce productivity. Monitor solution performance through regular analysis to guarantee an ROI.
Key Takeaways & Next Steps
The modern workforce is spread across locations, generations, personalities and work styles. Digital transformation allows HR leaders to develop cohesion across all that diversity through curating common positive, engaging experiences for every employee powered by data.
Truly reimagining the role of HR in the enterprise takes courage, conviction and an innovative vision. While adopting technologies like AI and automation is merely tablestakes, the real competitive advantage comes from activating the workforce intelligence unlocked through digital HR and synchronized systems.
These unprecedented insights around the end-to-end employee journey allow for informed, strategic investments into the capability and experience building that catalyzes peak workforce performance, agility and, ultimately, unlocks an organization‘s greatest potential.
To learn more about how leading HR organizations leverage talent analytics and AI to accelerate transformation initiatives explore the additional resources below or connect with an expert.
Additional Resources
McKinsey‘s Digital HR strategy overview
https://www.mckinsey.com/business-functions/mckinsey-digital/our-insights/hr-goes-agile-how-human-resources-can-learn-from-the-software-playbook
MIT Sloan Research on data-driven transformation culture & practices
https://sloanreview.mit.edu/article/seven-ways-organizations-can-take-advantage-of-data-and-ai-based-talent-management/
Business Harvard Review Article: HR Digital Transformation for Future Success
https://hbr.org/sponsored/2021/01/hr-digital-transformation-is-powering-businesses-into-the-future
Aimultiple Executive Briefing: AI in Human Resources Guide
https://www.aimultiple.com/ai-in-human-resources/