No doubt – the term ‘digital’ sums up the most eminent strategic challenges for almost any industry. In most companies though, HR is left out when digital strategies are discussed at executive level. HR is often perceived as a digital latecomer, with a reputation of being ineffective at managing data. This must be considered a failure as digital strategies offer a lot to people management. Following a recent research, companies ahead of the digital HR curve will achieve 12% better talent outcomes (source: CEB). Adding in some research by The Boston Consulting Group and the McKinsey Global Institute, digital has the potential to improve work productivity of an entire company by 9% at a 7% lower cost base. In some pockets of the business the productivity gain is as high as 25%. Some are even predicting the end of HR as a function, other’s don’t. But it’s a truism: People related business decisions will improve significantly when based on a sound and stable analytic foundation. Some HR tasks will develop into consumer-like applications for employees and managers. HR and business will be more effective at identifying employees’ individual needs by analyzing their digital trails and consequently act upon those. As a result, work in critical parts of the company will be organized by skills, not jobs – and more effectively. Let’s try to separate frenzy from the actual message and identify the real building blocks of a digital agenda for HR.
Building Block No. 1: Consumerization of HR
Digitalization endows HR with the means and the responsibility to treat each employee individually. This plays out three-fold: HR will be aware of the wants and needs of individuals and, accordingly, build specific HR services for them. HR tasks will be performed by employees and managers without having to contact HR as a function. And world growing faster and faster, building of new skills will accelerate through individualized, gamified, mobile and collaborative learning services. Let’s have a look at each of the three.
Consumerization refers to consumer-like apps with which employees and managers can digitally manage their work life. They are designed for easy use, therefore inexpensive to train. And as of today they can already take over parts of HR responsibilities. Even the more complex and valuable tasks of the HR function may not remain fully within HR. This might sound strange to traditional HR executives, but: Have you ever counted the number of apps on your mobile phone you use for business? A reasonable and common set would be: Concur for travel bookings, Salesforce One for performance of the sales team, WebEx and Skype for Business for meetings, E-Trade for the long-term incentive plan, OneDrive for file sharing, FaxApp to send documents by fax, Office 365 to edit work documents, Outlook for e-mail and calendar, and Docusign to sign contracts. Many of these are HR related, some aren’t. And there is more: With an app like ShiftSwap, employees can directly offer and swap, sometimes even trade shifts among each other – no need to busy their shift manager and shift planner. In this concept, HR, as a potential owner of such a workforce deployment process, is partly left out – or freed – of these tasks.
Hence, HR has to fully understand applification to be able to actively manage it.
In a digital world, innovation cycles come around faster. The need to deploy new skills for innovative products and approaches will grow. And companies will be pressured to develop these skills as swiftly and effectively as possible. Under this pressure, digital learning will evolve to a combination of mobile, collaborative and gamified learning. An example of traditional skills being transformed into new and more effective ability is that of Pep Boys, a U.S. $2 billion full-service automotive aftermarket retail chain with 700 stores and 7,000 service bays. Up until recently, Pep Boys, like many retail chains, focused on safety and loss prevention training with floor-level awareness programs (posters, monthly manager-led meetings, visible counter-action) for 19,000 employees trained. These traditional programs did not succeed: Although incident and shrink rates fell after coaching they quickly rose again after only two days – obviously employees did not retain and operationalize their learning. They quickly returned to prior habits, no long-term change in behavior was initiated. In their new digital learning environment, employees receive – via their smartphones – a daily reinforcement of the monthly coaching they received through their LMS system. Associates answer quick targeted questions related to risk, loss prevention, safety, operations. If they answer correctly, a slot machine game titled ‘Quiz to Win’ gives them a chance to win cash prizes. If they demonstrate knowledge gaps, the system pushes out an immediate training burst. This takes 30-90 seconds per day. The results are impressive: Through gamification, the collaborative element in it (‘Well, I won. How about you?’) and easy mobile access, the company achieved a reduction in safety incidents in stores and service centers by more than 45%. And while inventory shrink sank by more than 55%, employee acceptance of the new tool exceeded 95%.
Five to ten years ago, digital consumer marketing learned to listen to the wants and needs of individuals, even to predict these and provide products and services accordingly. Applying the same logic to the world of work, it is easy to predict that companies will get a lot out of digitally listening to their employees. A few examples:
- Companies will be able to ‘pulse check’ engagement levels and the general sentiment of employees more directly than by employing traditional engagement surveys – and they will do so in real time. A prime example is IBM: With their Social Pulse technology, the company can analyze changes in employee sentiment and engagement related to specific work events, such as a new company policy. As a main data source, IBM uses their widely used collaboration platform and Twitter accounts of their employees.
- Companies will derive performance information from in-process feedback, partly replacing annual performance cycles or – at least – enhancing them. An example: If sales reps capture the outcome of a client directly in their mobile Salesforce One app, they can ‘like’ the preparation of that visit through the sales back-office. The number of likes can be in return an interesting additional and rewarding piece of performance evaluation for sales back-office employees.
- Consequently, Employees can even give their opinion on direct leadership decisions, for example, clarify open questions in succession decisions.
All this sounds reasonable and even easy, but don’t be mistaken: It’s not going to be a walk in the park. The jury is still out to assess compliance and ethics boundaries for this building block: Can companies apply the concept of HR listening on a global scale, can they manage their compliance issues to a broad variety of national data privacy regulations? And yes, applying the system to such an extent might affect the employment brand in a negative way – if perceived by employees as an attack on their individual freedom and privacy. It’s certainly absolutely important that companies endow the listening approach with the positive notion of ‘We listen to what you say’.
All this needs to be considered thoroughly when defining a company’s approach to HR listening. Yet, being able to ‘listen’ to wants and needs of employees can get companies close to being a ‘workforce of one’ (a term coined by Accenture in 2015): They can specify HR services in the broader sense to individual needs without drowning in chaos.
Building Block No. 2: Workforce Analytics
No doubt – HR is not exactly a data savvy function: Between 80% and 100% of CEOs require strategic decision support from HR data, yet less than 20% of them receive such information from the HR function. That message is well understood by HR: In CEB research conducted late 2015, European Heads of Analytics report that they would like to significantly increase their analytics maturity. So Analytics is constantly climbing up the ladder of priorities when it comes to Heads of HR. Much has been written (find here one of the better compilations of meta research and blog posts), a lot less has been implemented. Yet the business case for advanced workforce analytics is clear: If set up correctly, mature analytics companies achieve better talent outcomes and produce higher business impact. To set the agenda for Workforce Analytics – which encompasses descriptive analytics, workforce planning and predictive analytics – companies need to consider various aspects:
Analytics Services & Data Lake
First and foremost, companies need to think hard about how to allocate their limited analytics resources to the most critical people related business issues. Understanding what matters most is easier said than done, especially if you are perceived as a ‘soft’ function whose data can hardly be trusted. In a next step, companies need to create a service catalogue for the business to pick from. And the company will define the data sources needed to build a dynamic ‘data lake’ to analyze. Many of these data sources will be external, like profile databases (LinkedIn, etc.) or talent intelligence databases (TalentNeuron, etc.). Others will be owned by functions outside HR, like SharePoint databases, ‘owned’ by IT or even by each single business unit that has set up ‘their’ SharePoint. In many companies, up to now HR has not had the mandate to manage or co-own so many and diverse data sources, this in itself being a stretch. So focusing on the most business critical questions is the only way to not create an overwhelming complexity from the outset.
Analytics Delivery, Technology & Governance
Usually the services mentioned will be tested in pilots, which are ideally co-owned by the business. But after a successful pilot, the next phase of workforce analytics awaits: Transforming the pilot result into a sustainable and reliable service. To do so is, again, not an easy task: Handling multiple data sources of external or various internal owners creates compliance issues (data privacy, data protection, collective labor agreements, etc.) – specific governance model will probably be needed. Additionally, a sustainable delivery of the services will require the setup of a new HR Center of Excellence and an effective HR business partner community. To impact the business, the latter needs to be able to translate business issues into workforce analytics requests, after it comes to delivering and explaining the outcomes of the analysis. Finally, various pieces of analytics technology need to be implemented. A CEB model is segmenting workforce analytics technology in four categories:
- In-suite functionality: Functionality of talent and master data platforms for integrated “one-click” analytics
- Out-of-suite functionality: Analytics functionality of additional providers, not limited to workforce data, mainly for machine learning, statistics, intuitive use and decision impact
- External data platforms: Tools to collect external, unstructured people data, aggregate it to a legally compliant level and validate
- BI functionality: Functionality to integrate, structure, store and deploy people centered data from various sources for analytics purposes
Analytics Capability and Credibility
As HR rarely had the mandate to build sophisticated analytic infrastructure, HR function usually lacks the required data analysis skills. After having spoken to some 30 thought leaders of workforce analytics, we have built an end-to-end role model for analytics:
- Business Challenger: Business challenging and influencing skills, combined with ownership of analytics policies, service delivery model and projects
- HR Domain Expert: Deep business and HR skills to analyze business needs, paired with basic analytic skills to understand limitations of statistic models
- Data Scientist: Classic planning, reporting and analytics skills plus advanced big data analytics skills
- Programmer: Advanced database design and programming skills to retrieve data from various sources and make it available for data scientists
Even with the most distinct analytics capabilities there remains another aspect that requires attention when building a digital agenda for HR: The credibility of the HR function. Today, very few business leaders believe that the HR function is effective at supporting decisions with facts and figures. Hence to achieve the original aim of workforce analytics – improvement of business decisions – HR needs to gain acceptance of their analytics work. Some of the best practices of companies that have successfully increased HR’s credibility include the building of very-easy-to-use scenario tools for business managers to play around with and see the effects of their assumptions on talent outcomes. Others have given ownership of significant analytics projects to business senior leaders, ultimately benefitting from great analytics results. This building block alone requires a significant change management effort.
Building Block No. 3: The New Organization of Work
The third building block is probably most important to get HR a seat at the executives’ table of digitalization: A major driver of digital change is ‘Networked, Searchable, On-demand Expertise’. The example of Joe, a fictional networked, searchable, on-demand expert, is a great illustration (taken from a recent research by Andrew Karpie, The Research Platform):
In a future work environment, an important portion of a large company’s workforce is organized like Joe: Not by position filled by the most suitable candidate, but by a virtual pool of internal and external experts deployed in projects. McKinsey Global Institute has run a great piece of research in June 2015 to check out the opportunities of this modern way of organizing work. From a macro-economic perspective, this new way of work will be beneficial for 540 million workers around the globe by 2025, adding 2.7 trillion USD or 2.0% to the global GDP, increasing employment by 72 Million full-time equivalent positions. On a micro-economic level, work productivity of companies will increase by 9% – at a 7% lower cost base. Let’s look closer at what this means for the digital HR agenda:
Networks and Collaboration
Networks integrate internal skill pools and contingent workforce, managed via collaboration platforms. Most importantly, HR needs to understand how a skill pool is working. In each large organization, we will find workforce segments that are already very close to a skill pool organization. Usually, these segments are a sub-section of the so-called STEM workforce: Science, technology, engineering, mathematics. Typical job families are researchers and software developers plus industrial engineers in some industries. It will be crucial for HR to accept, that a (smaller, yet mission critical) part of the workforce will need to be managed differently from the majority of workers which stays organized by position. For these two groups HR will need to find two separate ways to manage the employee lifecycle, plan personnel cost and even report headcount
By integrating rare skills from contingent workers with the internal skill pool, a blended total workforce comes to life and is subject to ongoing change as projects require new skills, which can not be developed or acquired internally. To manage the blended workforce throughout their project-lifecycle incl. sourcing, performance management, reporting and payment, new collaboration technology is needed.
Accordingly, the traditional way of re-organizing work will be amended: Since the early days of industrialization, we have learned that economies of scale are the leading driver of work productivity. The more similar or matching work a company can bundle, standardize, in the best case automate or at least outsource and offshore, the better. We will need to accept that for some critical parts of the workforce the cost and value of skill will be the stronger lever. Making sure that a person with rare ‘Alpha’ skills is doing only ‘Alpha’ work will be more impactful on work productivity than simply focusing on economies of scale. Yves Morieux of the Boston Consulting Group adds another thought in a recent TED talk: Reorganizing for skills rather than scale will decrease complexity of work and add to productivity. One of his quotes is: “Complexity causes 60% of the work to have no value.” In short: It’s definitely worth looking after ways to organize the work by skill pools.
Of all workforce segmentation criteria, the most overlooked and least developed will dominate businesses tomorrow: skills. They need to be detected and deployed faster, at lower costs and more flexible than ever. The traditional way to manage skills is a static skill catalogue. That concept has fundamentally failed: Either a skill catalogue is too generic to be of help for deployment decisions. If, on the other hand, the skill catalogue is too detailed and complex, it will be extremely time-consuming to be updated and maintained. Today, the most advanced way of organizing skills is probably that of the leading freelance marketplaces like Upwork. They offer a skill pool of more than 10 million freelancers in 18 countries, presenting their skills in multiple ways and getting quite close to real-time skill management: Upwork , on a first level, offers skill catalogues per job family. Secondly, they add a qualitative description of skills provided by the freelancers themselves, describing what matters most to them when presenting their abilities. Thirdly, Upwork shows customer ratings and references, enabling us to predict the quality of the skills. Then there are work samples – as most of the Upwork resources are working on computers, they produce virtual results that they can – and do – share via Upwork. Finally, freelancers show their efforts to upskill themselves: If they learn new skills and achieve ‘nano degrees’, they will share and even include their individual ratings.
That is overwhelmingly more skill information than is available to most companies regarding their internal workforce. And the whole system is close to real-time. Managing skills in this multi-source way will certainly lead the way.
Research shows that the performance of teams, lead by ‘Network Leader’ (combining classic leadership competencies with network leadership skills) gain up to 12% more revenue, with team members being 35% more engaged and up to 68% more innovative. Instead of solely presenting strategies to maximize their business unit results, network leader foster cross-functional partnerships and allocate resources to business unit objectives that align with organizational goals.
The network leader establishing connections between individuals and teams that may be of mutual benefit to each other. He introduces new ideas and challenges and then allows team members to find creative ways to resolve the tension within the network. He builds a culture that encourages team members to seek guidance, support and development from each other and cross-functional. But there’s a catch to it: only one in ten leaders are network leaders.
Impact on the HR Function
If all three pillars of a digital agenda (consumerization of HR, the advancement of workforce analytics and the new way to organize work) kick in, the HR function will face disruptive change – structure and size of the function will be different, core activities will shift. Here are some hypotheses to describe the change ahead:
- HR tasks will move to managers and employees (via easy-to-use mobile apps)
- HR transactions will move to service centers (and will be automated / robotized)
- Remaining HR tasks will be more project-oriented and collaborative with business and IT
- HR will act more like consumer marketing
- Analytics will be the key capacity of the HR business partner function
- HR will become a cultural advisor
After having discussed the 9 building blocks of a digital agenda for HR, the digital impact leaves one question for each head of HR to answer: What will our HR function do to survive or to strive in the digital age?