All things being equal, employers with immature Human Capital Management (HCM) processes routinely experience higher staff turnover levels, elevated costs, and increased risk.
Despite this situation, just under a third of payroll and HR leaders (30%) admit to having no clear strategy in place to improve these maturity levels by means of digital transformation, according to our research.
While two thirds (62%) claim to have a good understanding of the technology and processes needed to meet organisational objectives, a mere 49% feel confident that their existing payroll and HR providers will be able to support them in achieving their transformation goals.
A good starting point when going down this route, however, is to understand what the end-goal of digital HCM maturity actually looks like. So, here is a concise guide to each of the four main stages required to get there.
Level 1: Low maturity
When organisations are sitting on the lowest rungs of digital maturity, they tend to consider HR as a purely transactional function and provide it with only the bare minimum of investment as a result. Unsurprisingly, this underinvestment translates into significant gaps in their processes, systems functionality, and overall business strategy.
This is because there is no thought-through strategy for, or central ownership of, their HCM technology, resulting in applications that are no longer fit for purpose being the norm – despite the challenges and risks to the business this kind of approach can pose. Systems are often nearing end of life, are managed on-premise rather than using a Software-as-a-Service (SaaS) or cloud-based model, and enjoy only limited oversight from the HR, IT or even finance department responsible for their governance.
Another challenge is that payroll, people management, HR administration and other key processes are highly manual and generic. Where dedicated systems do exist, they tend to operate in siloes and are poorly integrated, resulting in there being no suitable, single store for the organisation’s HR ‘master’ data.
This means that processes are all too often simply not optimised for the task in hand and end up being costly to operate. Not only do they potentially pose a direct threat to the business due to possible regulatory non-compliance or security breaches, but they also fail to cater adequately to staff needs.
For example, access to manager and employee self-service applications tends to be limited or even absent, which means HR teams are forced to manually maintain records themselves. In a worst-case scenario, this state of affairs can leave staff feeling disempowered and distrusted by the business.
Another consequence is that data tends to be poorly managed and maintained, and fails to meet security standards, resulting in only basic, manual reporting activities being possible, most of which are of limited value.
Level 2: Medium maturity
Once companies reach medium levels of digital maturity, they have recognised the need for change and have made some progress, but still have a series of significant gaps in their HCM strategy.
For instance, while they may have set organisational objectives, these aims often fail to align with the technology and processes that are either in place or have been recently introduced. Instead organisational goals have been moulded to fit them rather than the other way around – even though technology and processes should always and without fail directly support business goals.
There is a mix of manual and automated processes, and only basic integration work has taken place between a limited number of systems, with no single source of truth relating to data. This means that, although reporting activities may be more advanced and secure than at level one, gaining enterprise-wide insights is still not possible.
A further indicator of medium maturity is the low levels of adoption and use of both manager and employee self-service applications due to a poor user experience. Another points to a hybrid mix of on-premise and cloud or SaaS deployments catering to various technology requirements.
Level 3: High maturity
At this point, employers have achieved higher than average levels of digital maturity, although there is still room for improvement. Their HCM technology deployments are well-aligned with organisational goals and investment is targeted and focused on meeting specific objectives.
Although some processes remain manual and are not fully optimised or harmonised, the most important ones have been automated. Business leaders have access to enterprise-wide reporting and analytics capabilities, but such activities are not fully integrated into the company’s wider business intelligence strategy.
Manager and employee self-service applications are robust and have an easy-to-use interface, but uptake is not yet widespread. The firm has also implemented what is for the most part a well-integrated, cloud-based HCM software suite that takes advantage of emerging technologies, such as artificial intelligence (AI).
Level 4: Advanced maturity
Only a select number of businesses could claim to demonstrate advanced levels of digital maturity, making them HCM leaders as a result. On reaching this stage, the focus is on undertaking a process of continual improvement and remaining at the cutting edge of technology trends.
HCM software is actively helping the organisation to achieve its objectives. Processes are fully automated, optimised and harmonised across the business, with intelligent workflows enabling staff to refocus their attention on strategic work that adds value.
In addition, an advanced analytics platform, which supports decision-making and provides strategic business insights, forms a key element of the company’s wider business intelligence strategy.
Manager and employee self-service tools, which sport an exceptional user interface and support mobile access, are fully adopted, while chatbots and virtual assistants help in dealing with both day-to-day queries and important processes, such as employee onboarding.
Finally, the company’s HCM system is completely cloud-based, employs sophisticated, emerging technologies, and is highly extensible. This makes it easy to add new functionality as required and to integrate it seamlessly with third party applications.