Why HR Must Change to Enable Digital Transformation
Updated: Apr 6, 2019
For the last several years, Human Resource (HR) departments have begun to participate in digital transformation. This trend has been driven by the need to replace legacy HR systems that have terrible user experiences, cannot adapt to a changing workforce, and often lack integration between disparate systems. Major technology vendors such as SAP SuccessFactors and Workday have capitalized on this trend by offering integrated cloud solutions that modernize HR applications from Hire -> Retire. While this trend offers immediate improvements and benefits to organizations who adopt these Software as a Service (SaaS) cloud technologies, there is a much broader and more disturbing HR problem that is largely going unaddressed.
It is my belief that HR's core purpose is to hire, reward, and retain top talent to meet the company's business needs. However, HR has evolved over time to prioritize risk reduction (threat of lawsuits) which has made it increasingly bureaucratic, slow, and ineffective. While this situation has been tenable for the last 10 - 20 years, the world is changing in a way that will require HR to fundamentally change. At C2 Labs, we believe there are multiple value systems within HR that need to change, to include:
1) An over reliance on experience
2) A focus on fairness over results
First, the focus on experience is being overcome by the acceleration of new technology. HR processes focus on maximizing an employee's education and experience as an indicator of future performance. This approach worked in the past when people were taught to memorize knowledge in college and then apply it over the years to demonstrate mastery. However, this approach is out-dated in today's digital economy.
Throughout industry, many companies complain that they cannot transform because they don't have the critical skills needed to support these modern technologies. For example, how valuable is 10 years of experience in a job posting for a GraphQL subject matter expert when this technology is only recently invented? How important is it to memorize technical facts and approaches in technology from a degree 20 years ago when the technology changes every 2-3 years and the information is freely available on the internet?
Experience and historical knowledge will become increasingly less relevant in the age of digital acceleration. The technologies simply change too fast to over-value experience. The skills that matter in the future will be creative problem solving, continuous learning, work ethic, communication skills, and adaptability. While HR often pays lip service to these attributes in a position description, candidates are immediately discarded if they do not meet the minimum education and experience requirements. HR must learn to prioritize what a candidate can do today over what they have done in the past in order to build a sustainable workforce to deliver digital transformation.
Once a candidate does hire into the company, this over reliance on experience carries through into new fairness criteria; often in the form of bands or grade ladders in which employees are grouped. These systems reward tenure over results with a promise of progressive responsibility and associated promotions over time. In addition, HR often forces "bell curves" to standardize performance appraisals in a way that often does not reflect true performance and de-motivates and alienates employees. This model was ideal in past times when employees often worked in one job their entire career and enjoyed the job security and predictable career path promised in these HR models. However, that world has changed.
Younger employees increasingly place little value in this model and exhibit significantly less company loyalty. How many times have you seen a promising young difference maker enter the company only to leave after a year or two due to frustrations with bureaucracy, better offers elsewhere, and lack of opportunities for job advancement? This is a symptom of a broken system. While it is easy to complain about the problem, I think it helps to see things from their perspective. If you have better technical skills and get better results than your more experienced colleagues, it must be frustrating to know that you will be under-paid relative to your skills in order to be fair to longer tenured employees. The result is the most talented younger employees often bounce around multiple companies to get the promotion and advancement opportunities not available to them within their current company's HR system. How many times have you heard that we "brought them in too low and now there is nothing we can do."
HR has to change in a way that values what you can do now over what you have done in the past. As technology rapidly changes our workplaces, business models, and environment, experience is no longer the strong predictor of future performance that it once was. The better predictors are willingness to learn, to try and fail, to take risks, to adapt to changes in technology, to communicate effectively, and to embrace change. As the fourth industrial revolution takes place, the winners in the new economy will understand and embrace this shift as they modernize not only their HR systems but the values and processes needed to facilitate a meritocracy culture.
While digital transformation will change many things in the years and decades to come, what it will not change is that the companies with the best people will win. Organizations able to modernize and transform their HR processes will be the new digital fuel that ignites transformation within their companies.
Interested in transforming your HR organization? Contact us to find out more about how C2 Labs can help.