Why Every HR Department Needs To Digitally Transform—Now

No matter how focused a business leader is on their digital transformation, if HR is overlooked, the full potential of their efforts will never be realized. Yet too many HR departments aren’t yet a part of corporate digital transformation efforts.

Indeed, while many companies may be more than halfway through with digital transformation, according to research from technology analysis firm Valoir, less than 20% of organizations are adopting modern digital capabilities in key areas like reskilling and coaching, mentoring, real-time analytics, and training. Yet, Valoir claims, a company’s digital transformation progress on all levels correlates directly to both revenue and margin growth.

What modernizing HR means

Digital transformation in HR is more than shifting paperwork and recruitment activities to the cloud. Modernization extends to everything HR does, including recruitment, hiring, and training, as well as the ability to steer an organization through crises like the pandemic, manage pay and benefits, and build worker engagement and organizational culture.

Digital transformation can accelerate and expand HR’s ability to meet the challenges of today’s labor market. That includes the rise of remote work and the Great Resignation—in which more than 4 million Americans are quitting their jobs each month (many with their eyes on independent career paths). It also enables HR leads to address administrative tasks more quickly and efficiently so they can focus on strategic matters.

This all makes good business sense, right? So, why isn’t HR transformation happening faster? There are several reasons.

HR has to wait in line

HR can’t modernize on its own. HR digital transformation requires resources from other departments, most notably IT. But those resources are always in high demand and tend to go first to revenue-generating departments such as sales and marketing.

HR teams often prioritize other initiatives

At the same time, digital transformation can be deprioritized with the HR department itself. According to a 2022 Gartner survey of CHROs' priorities, 59% of HR leaders are focused on building critical skills and competencies, 48% on organizational design and change management, and 45% on strengthening the bench of current and future leadership. These same priorities have topped the list for three straight years. It’s hard to make progress on lower-level initiatives when leaders feel progress still needs to be made in these key areas.

HR-specific technology is lagging

As the Valoir research notes, human capital management (HCM) and workforce management software vendors have been slow to evolve to cloud-based solutions. But the tide is starting to change. More funds are flowing to HR. Indeed, a SHRM survey found that HR tech spending increased 57% in 2021, and that trend is expected to continue this year.

Three steps to success

HR leaders can get past all these obstacles with some careful planning and a little courage. Here are a few suggestions for kicking off a successful digital transformation.

Identify skills gaps

The authors of “The Technology Fallacy” studied 400 companies pursuing digital maturity. What they found was surprising. Success or failure wasn’t dependent on technology. It was dependent on having access to people with the skills to execute the dozens of projects required to make modernization happen.

Successful HR transformation requires a combination of talent. You need systems integration specialists to connect new tools to existing HCM software. Data analysts are also required for building reports and dashboards that aid decision-making and forecasting. Many organizations will also need programmers to create mobile interfaces and workflows for better user experiences. And you’ll require technologists with robotic process automation (RPA) and machine learning (ML) skills to help with automation.

Embrace on-demand talent

How do you access the talent you need? Through on-demand talent marketplaces like Upwork.

These marketplaces can help you find experienced people—freelancers and other contractors, agencies, and even virtual teams—to fill skills gaps related to digital transformation, including specialty areas like cloud computing, artificial intelligence, and machine learning (ML). In fact, 53% of all freelancers provide skilled services such as computer programming, IT, and business consulting. And on-demand is flexible. You can scale up or down as needed.

Look at your core employees as generalists. They bring their organizational knowledge and understanding of business-specific needs and challenges. On-demand talent brings specialized skills. And focus. They can give their full attention to the project because they're not distracted by other duties and responsibilities. They're focused on the outcome; that’s generally how their role is defined and how their performance is measured. On-demand professionals can also bring tremendous diversity of thought from their previous experience working with other companies on similar projects.

Start small, then get going

Don’t view transformation as an overnight effort. It can’t be. Digital transformation is a step-by-step process, occurring over months and years.

The key is not to try to do it all at once; it’s to just get started. The sooner you start, the sooner you’ll begin to notch small wins. And the more comfortable you’ll become taking on larger and more complex projects. It’s a virtuous cycle that eventually leads to big wins and organizational change.

A faster and more flexible tomorrow

HR is the lightning rod for the electric talent every organization tries to find and retain. But too many companies are moving ahead with digital transformation efforts without making HR an  integral part of those processes. By taking these three steps to success—gradually—it is possible for any organization to change that dynamic and better prepare for the future of work.