Less than half of CEOs recognize HR for its capability and competence, and less than 40 percent of HR executives believe they have the right mix of HCM technology applications “to effectively execute against business goals.” That’s one of the findings of Mercer’s 2017 HR Transformation Study–How HR Needs to Change.
While more than half of HR leaders plan to address that imbalance, it remains to be seen is whether the right mix of technology will have a meaningful effect on how CEOs view HR. Certainly, they have a big opportunity in data: In that area, 45 percent of C-suite executives says HR doesn’t provide them with actionable analytics, but 73 percent of HR leaders have plans to improve their capabilities there.
Still, only 35 percent of organizations around the world use an HR service delivery model that includes the three components of what Mercer calls “high-performing HR functions”–Centers of Expertise, HR Business Partners and HR Shared Services. On top of that, the study says, only 17 percent have plans to change the way they’re currently delivering HR services.
That strikes us as serious: HR’s slow transformation doesn’t align with the C-suite’s plans for more change and support. Mercer says 93 percent of executives plan to redesign their organization in the next two years, and 41 percent expect to move support functions to shared services. Meanwhile, organizations with HR functions that continuously evolve their service delivery, build their team’s capabilities and invest in technology perform significantly better than those that don’t. Boiled down, that means when HR lags, it has a direct impact on the organization’s business. Yet, as we’ve said, only 35 percent of organizations now employ those three key HR components.
“Organizations are making changes in the interest of greater efficiency and increased agility, which requires a combination of technologies,” said Karen Piercy, a partner in Mercer’s HR Transformation practice, in a press release. “Those that have been expanding shared services and business partnering skills have had the best success aligning HR to business needs.”
Invest to Align
One of HR’s top priorities should be to invest in technology that can provide the workforce analytics necessary to driving strategic decision-making and delivering a consumer-based HR experience for both managers and employees, Mercer believes. Interestingly, only 35 percent of CEOs in the study say their HR organization provides a digital experience for employees. Whether that’s because HR isn’t providing that experience or CEOs just aren’t aware of it isn’t clear.
What is clear is that high-performing HR departments have embraced technology and realized significant results from their use of analytics. Specifically, Mercer says, they:
- Delivered exceptional customer value (94 percent).
- Reacted proactively to disruptive change (83 percent).
- Drove innovation (89 percent).
- Are viewed as great places to work (86 percent).
- Attract the talent needed to excel (91 percent).
Despite all that, the number of these HR organizations embracing technology is still limited. Some 69 percent have employee self-service in place, but just 36 percent have manager self-service and only 27 percent have mobile talent applications. “Clearly, there is significant opportunity for the HR function to grow its digital presence,” Piercy said. Indeed, since HR departments have long advocated for their business impact, we have to wonder why so few are going all-in when it comes to pursuing their effectiveness.
What Business Leaders Need to See
Mercer’s study did find that more than two-thirds—68 percent—of high-performing HR departments have restructured themselves within the last five years to centralize HR administration and decision-making, and ensure consistent practices across multiple locations.
They’re also doing more to match COE and HR practices with their company’s overall business strategy. Mercer says 69 percent of CHROs or other HR executives meet with their CEO or COO to discuss business and HR strategy at least twice a month to ensure strategic alignment.
“When business leaders see HR programs aligned to the business strategy, they understand the value and importance of those programs, which is particularly significant since less than half of CEOs recognize HR for its capability and competence,” commented Denise LaForte, North American Leader of Mercer’s HR Transformation practice.
True enough. But technology is just one part of the equation, as Mercer points out. Ensuring your HR model and capabilities are as up-to-date as your technology is as important. As in so many other areas, it’s not just about having the right tools—it’s about having the skills to use them well.
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