More and more companies are investing in cloud computing for HR. The aim is to overhaul their HR strategy by basing decisions on data ("data-based decision-making"), which must lead to lower costs and value-added generation. However, a great many companies observe that HR transformation entails much more than simply connecting your company to a cloud platform.
This was the conclusion drawn at the 19th KPMG 2016 Global HR Transformation Survey (formerly the Towers Watson HR Service Delivery and Technology Survey), which was conducted by 854 HR top managers from 52 countries (including Belgium).
Cloud HR has great potential, for example due to evidence-based and data-based decision-making.
The KPMG study shows that investment in HR management systems is increasing greatly and that an ever-growing percentage is invested in Cloud HR. However, the data shows that there are major differences regarding the approach taken, with many companies being left wanting more.
Requirements of a comprehensive approach
"Many companies (want to) invest in this new technology, but their approach raises the following issue: although their commitment is high, they have to resist the temptation to simply "plug in" to Cloud HR. Rather, companies need to formulate a clear vision of the future in advance and implement strategic change management, so that people, processes and technology are able to connect to each other seamlessly," says Bruno Vanneste, Director of KPMG in Belgium. "It is striking that only one in four companies states that cloud technology reforms their HR approach. Meanwhile, barely one in five companies declares that their HR has become more evidence-based thanks to "workforce analytics". The lesson we can learn from this study is that change and organizational management must be part and parcel of HR transformation because otherwise you – as a business – will be forced down a long and expensive road that ultimately will not produce the desired results."
From the answers provided, it turns out that many companies reach a fork in the road when incorporating Cloud HR into their processes. A number of companies opt to integrate it quickly for as little outlay as possible, i.e. without change management. Companies who go down this route see an increased use in self-service services (57%), improved processes and process management, including workflow (53%), and improved access to management information (53%).
However, these companies did not transform themselves at 'people management' level, and that has consequences. Only 24% said that Cloud HR enables them to redefine their HR strategy, leading to an increase in added value, and just under 20% stated that their HR leadership has become more evidence-based via workforce analytics. Only 13% reported improved collaboration and feedback among colleagues.
... or thoroughly
On the contrary, organizations that linked Cloud HR integration to a wider strategy from the start experienced good results. Although they had to invest more time and manpower in HR reform, they saw more benefits, especially when they linked it to change management. As the study clearly shows, the path of least resistance also leads to the fewest advantages...
"While investing in cloud technology is popular, many companies forget to implement well-thought-out strategies at the same time. Nevertheless, they are crucial for maximizing the impact of Cloud HR," says Bruno Vanneste. "Unfortunately enough, we see that people at some companies are too narrowly focused on the new technology, meaning that the integration of Cloud HR often goes awry..."
For the company in question, this results in two missed opportunities rather than one. Our recent KPMG 2016 Global CEO Outlook confirmed that the integration of disruptive technologies is a priority for CEOs, as is the development and management of talent. In other words, HR transformation clearly goes beyond the level of HR alone. It needs to acquire a strategic role within the business world.
HR: investments and added value
By 2020, USD 367 billion will be invested worldwide in cloud services. Expectations are that investments will increase in 2016 by 16% – which is somewhat more than the estimated annual growth between 2015 and 2020 (15.8%). ([i])
In terms of HR, the investments in 'cloud business process services' (BPaaS) are valued at USD 13.7 billion in 2016, compared to USD 12.95 billion in 2015. An annual increase of 6.7% per year is expected between 2015 and 2020. ([ii])
"HR managers have a basic question to answer: do I limit the role of HR to that of an expense that works on the basis of old-fashioned methods, or do I want to offer insights based on data and insights that allow the company to make better-informed decisions and create added value?", adds Bruno Vanneste. "To do this, companies must close the gap immediately between 'knowing' and 'doing'. An important lesson to take from this study is that companies must decide beforehand how beneficial a HR transformation will be. They should also be aware that they need to make this strategic decision in advance."
About this study
In February and March 2016, 854 executives from 52 countries participated in this study. Half of the respondents work at companies that are globally active. Various sectors were represented in the study, including financial service providers (19%), industrial goods and services (15%), technology/telecom/media (14%) and professional and business service providers (12%). In total, 44% of the respondents come from companies with more than 5,000 employees and 40% are vice presidents and/or heads of their respective HR departments. This year marked the 19th consecutive time the study was conducted.