This is the second part of a series on the business value of a digital HR agenda. This blog focuses on how HR technology, specifically ‘applification’ and machine intelligence, will lead to a more effective HR function.
Cloud computing has triggered a huge investment wave for HR technology. The average Fortune 500 company spends 10 Million USD each year for cloud HR technology. Gartner’s ‘magic quadrant’ shows a range of providers, with three of them leading the pack.
These substantial investments are primarily aimed at making HR a more data driven function. Yet, three important risk areas have already been identified by the early adopters of cloud HR technology. (They are laid out in this blog entry.)
HR Tech Risk 1: The illusion of easiness
It is an old song often sung: HR is cumbersome. It is awkward to ‘do business with’. It is acting as the watchdog of legal compliance and has always been a highly specialized function. This assessment was commonplace when Workday and other cloud-based systems came along and offered new, ‘mobile first’, end-user focused technology, looking very sleek and very cool. Would a sizeable but still manageable investment in this technology transform good old, but a little dusty HR into a sleek and cool function as well? A very tempting thought, absolutely. Yet, compelling simplicity in architecture, functionality and usage does not necessarily mean simple implementation of a new technology. The new systems do not only support HR processes, but also serve as global backbones for employee master data. It requires integration with many local systems, and new interfaces which in turn incur a run-rate of maintenance costs. When implementing cloud computing technologies companies are looking at a broad and comprehensive IT infrastructure change – which cannot be paid for with petty cash.
HR Tech Risk 2: The new HR Tech business case
Then there is the business case of HR tech investment which has to be justified beforehand, its advantages have to be clear from the outset. Priced in benefits are traditionally based on two categories: Reducing total cost of ownership of the technology and reducing process cost, the latter breaking down into three sub-categories: 1/ More self-services for employees and managers, 2/ Enablement of shared services and 3/ Replacing manual with technology, mainly through integrated data lakes. When we looked at the confidence levels of HR executives within the first 12 months after go-live of their new system, we found that 67% are ‘highly confident’ that they will replace manual with technology. But only 19 to 34 % of HR executives report the same confidence level for the other aspired benefits. In short: HR process cost and HR tech cost improvements do not justify the investments in new HR technology. We will need an additional benefits category – the ‘business benefits’ (details under ‘the better way’ below).
HR Tech Risk 3: The end-user adoption
Lower-than-expected end-user adoption can jeopardize IT infrastructure investments – along with faulty project execution and wrong business functionality. Wherever users do not embrace the new system as expected, infrastructure investments get stranded. With new HR technology relying its performance on (many) employees and managers (rather than comparatively few HR professionals) using the system, the risk of failing grows disproportionally. End-users’ expectations of technology are constantly rising – especially since millennials have entered the labor market. In other words: It is more crucial than ever to deliver what end-users demand.
All three risk areas relate to a data point that goes back to a study by CEB in 2015: The average technology infrastructure investment of 100 expects a return of 115. In reality it will only yield a return of 74. Two shocking insights: On the way from plan to reality, we are losing 41% of the total investment. And the majority of that (22 points) is due to lower than expected end-user adoption of the new technology. Hence, of our three risk areas, end-user adoption is the biggest, followed by the new HRIS business case (relates to ‘business specifications’) and the illusion of easiness (relates to ‘project execution’).
What can we do to minimize these risks and make HR tech investments a success in large organizations?
The conventional way: Use ‘agile’ methods of tech providers
The world we live in is VUCA – volatile, unpredictable, complex, ambiguous. In this world new technology must be developed in a faster, more adaptive way. The response of the software industry is the move from ‘waterfall’ to ‘agile’ development: In ‘waterfall’ approaches (dating back to 1956!), progress in software development flows from the top to the bottom, like a cascading waterfall, from preliminary design to detailed design to coding and unit testing, from there to integration, and finally to system testing. ‚Waterfall’ became the standard for defense software development in 1985 and subsequently the one and only standard of software development methodologies. But it doesn’t fit into the VUCA world.
The radical change came in 2001, with the ‘manifesto for agile software development’ by 17 software development thought leaders. It states: “Individuals and interactions over processes and tools. Working software over comprehensive documentation. Customer collaboration over contract negotiation. Responding to change over following a plan.” It became the new standard for software development, an integral part of each HR tech providers internal software development process, and more important, also the foundation of their cloud HRIS software implementation methodologies. Workday’s Accelerated Deployment Method promises improved time to value with a better match to needs. And SAP Activate as the method to implement SuccessFactors software is similarly promising – and, not surprisingly, it refers directly to the ‘manifesto’.
At first sight, ‘agile’ provider toolboxes minimize the end-user adoption risk and may even support the new HR tech business case. But is it sufficient? The answer is ‘no’, for two reasons:
1. The adoption of new HR technology by employees depends on their ‘experience’ – regarding to an end-to-end journey and not to the technology as such. This is the major insight that wrecks the approach of providers: Their deployment method may be as ‘agile’ as it can be, they still will not be able to cover end-to-end journeys with their technology and non-technology touchpoints for employees.
2. ‘Experience’ – again: in a VUCA world – is an ongoing process and requires continuous improvement. The deployment methods by nature focus on a one-time event, the software implementation. And hence, will fail to serve as an ongoing experience management system. In short: Agile software deployment is mandatory, but insufficient to generate a satisfactory HR technology ROI.
The better way: Build HR technology to improve Customer Experience of HR (CxHR)
In search of a better way to make HRIS investments pay back, it is sensible to take a look at the sales and service function. Fifteen years ago, both functions started their heavy cloud investment wave with the move to Salesforce.com and other providers of cloud-based CRM (‘Customer Relationship Management’) systems – creating yet a new standard. In another turn there is now a big shift going on from CRM to CXM – ‘Customer Experience Management’. This article describes the details: With the shift in control from seller to buyer, sales organizations concentrate more on the customers’ experience with the sales and service process (an ‘outside-in’ view) than on control and governance of customers and sales activities (‘inside-out’). This is a striking analogy to the situation in HR today: The lack of skilled workers due to demography and economy in the U.S., Germany, the UK, Switzerland and elsewhere is shifting the control over attraction and retention from company to talent. HR IT systems should in response focus less on control and governance of employee data and talent management activities (again: this would be ‘inside-out’) and more on designing and providing HR services for a better employee experience – which then leads to attraction and retention.
With this analogy in mind and with our underlying research, we can prove that the HR tech business case is under massive pressure. The only way to address this problem is to build HR technology for a better ‘Customer Experience of HR’, and that way put a positive spin on all other aspects of HR tech benefits as well. Three reasons:
1. CxHR does not stop at technology touchpoints
To drive end-user adoption of new technology, we need to do more than what we did for 30 years: Ask a sub-set of users of new systems questions like “Do you like the look-and-feel of the new system?” and “How many clicks did you need to get your task done?”. This approach does not yield actionable results: Does our plan of action really change if the answer on the number of clicks is 14 or 4?
Here is an example of what would change with CxHR:
We created a persona model together with and across 22 Fortune 500 companies, with ‘Pedro, the inspiring sales manager’ representing one workforce segment. And we drew a generic, full, end-to-end candidate journey map for one ‘moment that matters’ that we called ‘When I change jobs’:
Two interesting observations: First, the (‘outside-in’) journey from Pedro’s viewpoint starts when he considers a new job. And not with a hiring manager’s job requisition (which would be a typical starting point of an ‘inside out’ recruiting process). Hence, CxHR brings in new touchpoints outside the recruiting process, but inside the candidate journey, e.g. ‘talking to former colleagues’. And second, our journey template has a total of 54 touch-points. Of these, only 17 are applicable to Pedro, and of these only seven are ‘magic’ – touchpoints that really make a difference for Pedro. Five of them are non-tech-touchpoints, and only two are tech-enabled touchpoints, in this example HireVue as a pre-screening tool and the effortlessness of signing up to the career website. Already this brief analysis shows that what matters to Pedro goes beyond what our new system is supporting.
2. CxHR tells you straight from customer’s view where technology is needed
Let’s assume we took in lesson 1, mapped the journey and identified the magic touchpoints for each persona. The second step CxHR will have to take is solidifying the HR tech business case to have end-users directly inform the functionality of the system.
Just think of it for a minute from the perspective of the Head of Application Development from your IT team, accountable for functional specifications of a 10-Million HR IT system. From their perspective, specifications by end-user’s voice are priceless: “Wow. This time it’s not primarily HR folks elaborating on what they think about the new system. And it is not about how much standardization I need. This time it is the end-user’s direct voice directing us. What a relief!”
In our digital model (see beginning of this article) we have labeled the technology part (‘Applification and Machine Intelligence’) as the third building block of ‘Customer Experience of HR’ (CxHR). First comes an agile design of HR services., followed by our CxHR approach, described in full detail here. And only as a result will we know which piece of technology can actually help build a better CxHR.
Let’s take a look at a tricky HR service – skill detection – and let’s re-build it under CxHR. That is what a European telecom company did in 2016: Visibility into available skills in the technology talent pool (persona: ‘Alice, the smart data analyst’) was crucial for them. And the touchpoint ‘updating my skill profile’ was the no. 1 ‘magic’ touchpoint for Alice Alice’s expectation for a skill profile update is not an ‘in-person’ white glove service or a smart system assessing her skills in an inspiring environment. Instead, she expects an ‘effortless service experience’: Easy, logical and fast. Effortlessness is measured by the ‘Customer Effort Score’ (CES). And for the telecom company, the CES showed a huge gap between Alice’ service expectation (‘effortless’) and her actual experience (‘no value for me and time-consuming’).
With this simple insight, the re-design of skill detection at that telecom company could be focused on improving the CES for one touch-point – ‘skill profile update’. And the project team found a technology solution to radically improve it: ‘Ask-the-Brain’, a machine-intelligence fueled question-and-answer tool for technical employees. Here is how it supports skill detection:
With the tool, all employees could ask questions anonymously (e.g. ‘How do I react to error code XYZ when implementing software update ABC?’) and post these questions on the intranet. Then it observes who picks up which questions and which answers get what quality ratings. This way, the system ‘learns’ how to direct questions to knowledgeable persons and thus provide a better Q&A service. But at the same time, the system also understands the skill profile of the teams. And thus, skill profiling for Alice becomes obsolete, because the system detects skills through this simple Q&A machine.
What this example shows: CxHR directs technology investments where they can improve the experience at touchpoints with HR services.
3. CxHR enables effective change communication for new technology
Eventually, CxHR can also enable an effective change management and communications approach for new HR technology deployments. Once we know which touchpoints are ‘magic’ and measure the touchpoint experience, we know what to tell all our stakeholders: With the new system we will follow one overall goal – improving the customer experience of what HR does. And we will evaluate the new system before (‘baseline’) and after go-live – and thus be very transparent about whether and how much the new system has reached its goal.
This is a compelling change story: Clear purpose (‘better experience’) where it actually matters (‘magic’ touchpoints), together with full transparency (measuring and benchmarking). It will work for CEOs, CHROs, business HR and product owners in HR alike.
HR tech investments are expensive and risky. Building them to improve the Customer Experience of HR (CxHR) will significantly reduce the risk of failure. To put it more bluntly: Only when HR technology is built for better CxHR will the investment yield a positive ROI – a simple and beautiful insight. Many, many millions in stranded HR tech investments could have been saved in recent years – let’s start doing it now.