Digital Transformation Calls for a Strategy, Not Just a Fix

HR technology that is no longer meeting your needs can lead to reduced productivity, degraded employee experience, and increased compliance risk. On the other hand, investing in technology that aligns with your digital transformation road map can improve workflows and enhance the employee experience. 

“When I was in HR, I definitely had outdated technology that held me back,” said Julie Develin, SHRM-SCP, senior partner, HCM advisory & human insights, at UKG. “It wasn’t until I went through a digital transformation in my role that I felt I could make a big difference in the life of my employees and in my life as well.”  

Develin said that HR technology systems that are past their use-by date stress IT resources, require continuous maintenance, and slow down work processes.  

“The increased costs of legacy systems coupled with compliance risks is a direct dollar bleed on organizations,” she said.  

And failing to keep up with the pace of change doesn’t help move HR from the tactical to the strategic. “It’s either move forward or fall behind,” Develin said. “We see that workplaces that fail to keep pace with the changes in the business face a lot of risk, including impacts on competitiveness and sustainability. When you look at how fast technology is changing, employers have to prioritize technologies that deliver the greatest return for their people and also for the bottom line.” 

Develin encouraged HR leaders to consider their tech stack. “Think about how it could be perfected,” she said. “Understand what you currently have, what you’re using it for, and where the gaps lie. Think about the desired end state for your HR processes and technology. All of us are trying to get to HR optimization. Make sure your technology and processes are aligned.”  

Account for any challenges you’re experiencing with the technology, Develin added. “Are you utilizing it to its full potential?” she asked. “Was it implemented correctly? Are there any issues of scalability and upkeep? Maybe the issue is not having the right system in place to begin with.”  

The benefits of upgrading HR technology after assessing what you truly need include reduced operational costs, productivity gains, enhanced employee engagement, and the ability to extract valuable data insights. 

Widening Your Focus

Jessica Cheung, an HR consulting executive and industry analyst at Mercer, advised employers thinking about upgrading their technology to take a step back and consider the larger picture. 

“For most organizations, the critical question is not whether to upgrade their HR technology,” she said. “They really need to challenge themselves to articulate what their vision is for digital transformation. I get asked all the time about the right time to change technology. The reality is that most organizations adopt new technology without changing the way they work.”  

Cheung added that technology is not a silver bullet that will solve organizational problems. “If you implement new technology without fundamentally changing the way in which your organization works, then you’re just going to face the same issues with a new platform,” she warned. 

Making a change to your tech stack — the different layers of technology that work together to create a functional system — is just one component of an organization’s digital transformation. “Some leaders confuse digital transformation with upgrading technology,” Cheung said. “Digital transformation encompasses a mindset, a skill set and a toolset, which includes technology.”  

She said that Mercer research shows that less than 5% of organizations believe they have achieved their maximum potential with their current HR technology. “That being said, should companies be looking at replacing technology if they haven’t realized the potential of the technology they have?” she asked. “It’s easy to blame the technology, but what about the processes, the systems?” 

Cheung recommended HR leaders first pause and articulate a vision for digital transformation: the objectives, the mindset for success, the stakeholders who need to be involved, an assessment of the current situation, and any opportunities to harness the power of innovation, whether it be AI or some other technology solution.  

“Then you can create a road map with a governance and communication strategy to make sure that you are setting your teams up for success across the organization,” she said. “We look at it as having a strategy component, a deployment component — which could include a technology upgrade — and a systems optimization phase.”

Cheung added that once the overall transformation strategy is locked in, assessing current technology for a possible upgrade is key. That means understanding if your technology is doing what you want it to, according to your vision. Strategy and vision must also be continuously revisited. 

“Transformation is not stagnant. It continues to evolve,” she said.  

Cheung said the cost of not following a comprehensive digital transformation vision is high — hurting workflows, limiting the ability to innovate, and preventing the right environment for continuous improvement and agility. “Essentially, you’re stagnant,” she said. 

Reasons for Stalling

There are many reasons employers delay optimizing their HR technology, Develin of UKG said. A few of the most common include the perceived cost, a reliance on legacy systems, anticipated resistance to new systems, and a failure of leadership. 

“Many of these fears are unfounded,” she said. For example, “the benefits and savings you will incur by changing or optimizing systems will outweigh the initial cost investment. Think about all the hidden costs of outdated tech, including system updates, maintenance fees, support costs, integration costs, and labor costs.” 

Develin said some organizations seem to feel it’s too daunting to change a legacy system that’s been around for decades. “I’ve seen companies using homegrown technologies for 30 years. Or they are using so many systems, and it seems too hard to think of redoing everything,” she said. “That is a big problem.”  

Sometimes organizations are afraid that employees won’t use something new, but Develin said this assumption is counterproductive. “Many employees are open to new technologies if they can see the potential benefits to their work,” she explained. “Bring them into the conversation about upgrading the technology that they will use.”     

Another obstacle is a lack of vision among leadership. “I see this a lot among small and midsize businesses,” Develin said. “Executives need to better understand the value of technology adoption. HR can make the case for change by defining the problem, highlighting the benefits of change — demonstrating the ROI of cost savings and efficiency gains, and explaining the competitive advantages.”