HMS HR needs to break the digital deadlock if value is to be created
Digital transformation is fundamentally shifting the way organisations behave and are structured, but the shift is proving traumatic to business, says Nathan Budd, senior consulting manager at IDC Europe
Organisations are stuck in digital deadlock, with few realising real business benefits from their digital transformation attempts as they undervalue its impact on their people, skills and the way they work.
The digital shift involves everyone in the organisation, but companies are failing to get to grips with people and change management. According to research from IDC, the top four challenges are in the HR sphere: people, knowledge, financial incentives and culture.
This people piece, says IDC Europe senior consulting manager Nathan Budd, will define digital transformation success moving forward. “The reason companies can’t change is because they can’t change people.”
IDC defines digital transformation as the application of digital technologies to create new business models, enhanced experiences and improved financial performance. Budd points to examples such as the move by Philips from light fittings and bulbs to lighting as a service, or of John Deere from agricultural machinery to the creation of precision agriculture platforms using deep analytics to drive productivity.
According to Budd, only 5% of organisations are not doing digital transformation but, while more and more organisations are going through the process, more and more are getting stuck. IDC identifies five approaches to digital transformation: resister, explorer, player, transformer and disruptor. More than half of organisations are stuck between explorer and player.
“Very few are emerging out the other side. And the reason is that digital transformation is happening in islands of innovation,” says Nathan. “Initiatives are happening in isolation, away from the enterprise IT system and becoming increasingly detached from the core.”
According to Budd, there are connections but there is often no defined strategy. The danger is that core business capabilities like HR and Finance run the danger of being left behind or not keeping pace with the changing business.
“Little old HMS HR is still attached to the main IT island, but it’s old and rusty in some places. It has to ferry people between the islands. A few people are made to walk the plank, others are picked up from other islands and education establishments. But this approach needs bridges and HR needs to be the fundamental element of building these bridges,” he says.
The complexities of work and the workplace are getting more extreme, with the rise of the borderless and virtual organisational culture, changing environments impacting the tools and requirements of the workforce and a step change in the way robots and AI will work alongside human resource to deliver value.
HR is going to have to reskill existing staff to meet these digital challenges. “You can’t hire your way to transformation,” says Budd. “You will have to find the processes and capabilities to find the type of people that can fit new roles and upskill them, in the context of change and agility.”
Corporate vision, IT architecture and managing people are the three core functions of digital transformation. HR can remain relevant and keep pace with the changing business by thinking about its place in this context.
Budd suggests five key initiatives central to achieving digital transformation and business change.
- Continuous HR: moving away from the circus of annual performance reviews to continuous feedback and agility
- Contingent workforce: the ability to bring flexible and contingent workers into your central environment
- HR analytics: selecting the problem areas, for example flight risk. Data has to have a purpose
- Social learning: enable the employee to self-learn and move from student to teacher
- Total HR: pushing HR into the line. HR is business, not a department
This can only be achieved, says Budd, by becoming agile HR. “Get rid of the stuff that takes 80% of your time through automating it. Then HR will take its rightful role as manager of intellectual and human capital.”
Little old HMS HR is still attached to the main IT island, but it’s old and rusty in some places