December 10, 2019

The Hackett Group: Smart Automation Can Enable Typical HR Orgs To Improve Effectiveness & Customer Experience While Cutting Costs By 17%, Achieving Efficiency Close to World-Class Levels

The Hackett Group: Smart Automation Can Enable Typical HR Orgs To Improve Effectiveness & Customer Experience While Cutting Costs By 17%, Achieving Efficiency Close to World-Class Levels

Typical HR organizations can reduce costs by 17% and operate with 26% fewer staff hours – while also improving effectiveness and customer experience – by adopting smart automation approaches, including robotic process automation and smart data capture, according to new world-class research from The Hackett Group, Inc. This would enable them to achieve previously unattainable efficiency levels close to those seen by world-class HR organizations.

The research unveiled The Hackett Group’s new “Digital World Class” analysis, an estimate of the additional benefits that world-class HR organizations can achieve through the combination of operating model changes, full technology landscape optimization, and the successful adoption of digital technologies. World-class HR organizations currently operate at 20% lower cost and with 31% fewer employees than typical HR organizations, the research found. Smart automation, including robotic process automation, cognitive automation, intelligent data capture, and other leading-edge technologies, can enable world-class HR organizations to cut costs by an additional 17%, and reduce the number of staff hours needed to perform existing administrative/transactional work by an additional 21%, freeing up resources that can be directed to higher-value business and talent-related tasks.

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The research also sets a new bar for digital world-class performance for HR. Through comprehensive digital transformation and technology optimization, world-class HR organizations can further improve their efficiency and operate at nearly half the cost of their typical peers, with 66% fewer staff hours.

The research emphasized that in the digital era HR organizations are moving beyond the inward-focused metrics of efficiency and effectiveness to also measure the experience of key stakeholders. As a result, The Hackett Group has added “experience” as a separate area of analysis, measurement, and transformation focus. In addition to seeing lower cost and higher productivity, world-class HR organizations excel in many other key areas, including business alignment, quality, and talent, shifting resources from low- to high-value activities, building and deploying sophisticated analytics capabilities, and providing high-value tools, expertise, and insights to business leaders.

The research includes a comprehensive look at the changes required to HR’s service delivery model to fully realize the benefits of digital transformation. Building the digital capabilities of the HR organization requires fresh strategies and approaches to service delivery in six areas: technology, service design, analytics and information management, organization and governance, service partnering, and human capital.

World-class HR organizations demonstrate higher effectiveness, looking beyond error rates and standards compliance to track key performance indicators that reflect the increased value contribution from the perspective of the customer. These can include metrics tracking the quality of decision support, the effect of HR decisions on time to market or inventory turnover, or even the hire-to-revenue cycle time for a salesperson. World-class HR organizations see dramatically lower percentage of transactions requiring rework in key areas such as compensation administration, time and attendance, and reporting and compliance. They also fill open positions up to 28% more quickly than typical HR organizations. One key to improving effectiveness is a focus on standardization of end-to-end processes.

For 2019, The Hackett Group has begun breaking out customer experience as a separate performance metric, rather than embedding it as part of effectiveness. The research found that world-class HR organizations are more than 3x as likely to be seen as valued business partners, and over 7x more likely to be seen as collaborators than typical HR organizations.

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“Smart automation offers a very achievable path to performance improvement for HR today, particularly for HR organizations that have not already fully optimized their HCM environment,” said Principal in Charge, Global Human Resources Practice Leader Harry Osle. “At typical HR organizations, the majority of the people and budget go to administrative and transactional work. Smart automation can help address this, by streamlining and automating inefficient, fragmented processes, so that staff can be redirected to higher-value activities. HR organizations who do not take advantage of what smart automation offers will be stuck delivering services in a very traditional way which is likely to increase costs and underwhelm its customers.”

“But to capture the entire opportunity available to them, HR organizations must take on the harder long-term job of truly optimizing and rationalizing their overall technology environment in tandem with their smart automation efforts,” said Osle. “This includes reengineering processes and leveraging the full capabilities of existing core human capital management systems and best-of-breed applications. It’s likely to be a multi-year journey. But in the face of challenges that include intensified competition, economic uncertainty, and disruptive technologies, it’s truly critical for HR organizations to embark on this effort.”

According to Principal-in-Charge of The Hackett Group’s People and HR Transformation Practice Max Caldwell, “It’s important to keep in mind that technology alone will not get HR organizations to digital world class. A holistic transformation plan describing how to engage and partner with the business is key. For example, to address talent shortages and retention difficulties, HR must adjust its service design to focus on improving the employee experience. Analytics must play a role in strategic workforce planning, to ensure that the company’s future talent needs are met.”

“A focus on organization and governance is also important, to make processes more efficient and effective, increasing the amount of time available for strategic efforts,” said Caldwell. “Service partnering – basically knowing when and how to use external service providers – can help HR reduce costs, and also respond more quickly to changes in demand. Finally, HR organizations need to closely track human capital, to ensure that HR staff have the skill set required to think strategically, truly lead, and align with company strategy.”

World-class HR organizations are those that achieve top quartile performance in both efficiency and effectiveness across an array of weighted metrics in The Hackett Group’s comprehensive HR benchmark. Digital world class is The Hackett Group’s estimate of the additional benefit that world-class HR organizations can derive from full technology enablement of execution of HR work and optimization of the HR technology landscape. The Hackett Group’s world-class HR research is based on an analysis of results from recent benchmarks, performance studies, and advisory and transformation engagements at hundreds of global companies.

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