How Digital Transformation Supercharges HR Performance
CoAdvantage- We’ve previously written about “world-class HR,” which is a term coined by consultancy firm The Hackett Group to describe the top 10% highest performing human resource organizations. These HR teams have eye-opening performance statistics that justify the description: on average, they see see 41% lower labor costs, 59% fewer involuntary terminations, 22% fewer days required to fill certain positions, and much more.
Today, we want to dive into a specific area of HR performance: digital. In a 2021 report, The Hackett Group looked at digital transformation in the HR function and found that strategic adoption of technology in HR can effectively supercharge the kinds of benefits described above, especially financial. They write in their report:
“Companies with at least one digital world-class business services function realized a financial performance premium across several key performance metrics, including net margin; earnings before interest, taxes, depreciation and amortization (EBITDA) margin; return on equity; and shareholder return.
They also note that digital world-class HR organizations are able to make better use of their people resources, with:
- 46% fewer FTEs in transactional processing rules
- 53% more FTEs allocated to activities like strategic workforce planning
- 36% more FTEs allocated to learning and development activities
In other words, digital world-class HR groups are able to dedicate more personnel and hours to high priority, high impact activities like strategic planning and fewer personnel to more transactional activities. But this begs the question of how does digital transformation make such a big difference in the HR function?
1: Automation is key
Specifically, digital world-class organizations have automated an enormous percentage of their transactional work (e.g., 94% of payroll transactions, versus 50% for peers, while 87% offer automated self-service capabilities for payroll, benefits administration, etc., versus only 53% for peers). That automation frees HR staff to focus on higher-order work that requires the application of human skill and brainpower.
2: Outsourcing plays a role here too
World-class HR organizations outsource 17% more HR services (and have 16% lower outsourcing costs). The reason outsourcing is important is because it’s how many HR teams, especially at smaller and midsize companies, access the kind of technology and automation that can fuel these tremendous benefits.
HR service delivery through groups like Professional Employer Organizations (PEOs, like CoAdvantage) not only offers access to technology platforms but also to expertise and strategy around how to put that technology to best use. Simply buying an off-the-shelf HR management tool isn’t enough; it has to be paired with smart strategy, policies, and procedures. That’s the only way to maximize the results from digital transformation and to become a truly world-class digital HR operation.
CoAdvantage, one of the nation’s largest Professional Employer Organizations (PEOs), helps small to mid-sized companies with HR administration, benefits, payroll, and compliance. To learn more about CoAdvantage’s ability to create a strategic HR function in your business that drives business growth potential, contact us today.