Although investment in HR technologies remained strong last year, buyers expressed more dissatisfaction with technology vendors' solutions, according to the recently released 2022-2023 HR Systems Survey from Sapient Insights Group.
The survey also found that organizations using technology to help drive strategy rather than just compliance produced significantly higher business, HR and talent outcomes.
Respondents to the Sapient survey reported that weaknesses in some providers' platforms were exposed by the demands of the COVID-19 pandemic, leading more to consider replacing systems in areas like payroll or time and attendance. Many respondents also said the "year of grace" they gave vendors amid the pandemic had come to an end.
Over half (54 percent) of companies with more than 500 employees plan to increase HR tech spending by an average of 21 percent. This continues a five-year trend of gradually growing investment in HR platforms and applications, with the only dip occurring in 2020, the pandemic's first year.
Here are additional key findings from the comprehensive annual survey, which includes responses from over 2,500 small, medium and large organizations in 65 countries.
Vendor Satisfaction Takes a Hit
The survey found a 7 percent decline in overall vendor satisfaction ratings and a 6 percent decline in overall user experience ratings. Vendor satisfaction among respondents dropped most significantly in learning, HR analytics and compensation systems.
Overall, HR users said they were looking for improved support from vendors, continued enhancements to the user experience, more-reasonable costs for things like adding new modules to platforms, and improved reporting capabilities.
The survey found that a whopping 40 percent of buyers are looking for better reporting functionality in their HR technologies, up 30 percentage points from the previous year's study.
In an interview with SHRM Online, Sapient Insights Group Chief Research Officer Stacey Harris, who oversees the annual survey, said many organizations were asked to pull together large volumes of HR data during the pandemic, a process that highlighted problems with reporting functions in their HR platforms—issues that often had been overlooked prior to those requests.
"Respondents in the study were specifically commenting that their reporting functionality wasn't flexible enough, it wasn't easy enough to share data across the organization in a secure manner and that it required more expertise to use effectively," Harris said.
The study also showed a need by respondents to more easily integrate HR data into other applications. "Many HR functions are still manually passing this data through reports versus connecting their systems directly through application programming interfaces," Harris said.
Outcome-Focused Functions Change Perception of HR
The percentage of respondents viewing HR as contributing strategic value to their organizations has grown from 38 percent in the 2014 survey to 46 percent in 2022. Despite that progress, many HR functions are still using technology primarily for compliance purposes and not to help drive business strategy.
"HR is still not seen as contributing strategic value in over 50 percent of responding organizations," said Teri Zipper, CEO and managing partner of Sapient Insights Group. "Those organizations seen as strategic focus on outcomes and experience significantly higher business, HR and talent outcomes, with the highest outcome correlations being in areas like customer satisfaction and innovation."
The study found strategic HR functions see an 11 percent increase in business, talent and HR outcomes versus those functions focused primarily on compliance issues. The top four positive correlations with being strategic are adaptable change management processes; workforce planning that includes business data and position management; a time management system that always meets business needs; and transformational processes in the areas of absence management, leave management and skills management.
More HR Leaders Consider Replacing Tech
The Sapient survey found that over 50 percent of respondents said they will consider flipping their payroll, time and attendance, and analytics applications in the next 12 to 24 months, with some respondents in that group still assessing their options. A significant 36 percent of respondents have already made the decision to replace their payroll system in the next two years, the study found.
Harris said two primary factors causing organizations to reconsider their current payroll systems are the impacts of the pandemic and the expansion of global workforces due to more hybrid work environments.
"The pandemic drove awareness that having payroll limited only to in-office or on-premise access isn't feasible because of future lockdown possibilities," Harris said.
Survey respondents said their top two perceived gaps in payroll platforms were overall functionality (42 percent identified this gap) and customization/configuration options (41 percent). "That comes back to not enough flexibility in the current systems," Harris said.
Regarding time and attendance systems, 45 percent of respondents said they plan to replace their current systems within the next 12 to 24 months, with another 14 percent assessing their options. One factor driving this dissatisfaction is limitations in leave and absence tools that often are part of these systems, Harris said.
"Many people found their current tools are inflexible regarding providing flexible leave and absence management during the pandemic and the move to hybrid work," Harris said.
But she said the desire to flip these systems in the short term may not be realistic. "Our experience says replacing applications like time management is very difficult because of their connection to time entry systems, so this time frame [for replacement] may be longer than respondents anticipate," Harris said.
The growing desire by respondents to replace or upgrade HR analytics tools is due partly to evolution in the technology and partly to growing expectations for HR to adopt analytics applications with a broader business focus.
"We're beginning to get into a second generation of systems in this category as buyers start to flip generic tools either for tools embedded in systems or HR-specific tools," Harris said.
Expectations from leaders outside of HR also are driving a growing need for enterprise business intelligence applications. "That requires HR to focus more on those tools versus HR-specific solutions or tools embedded in the HRIS environment," Harris said.
What purposes are HR analytics and planning applications most commonly used for? According to the study, 52 percent of respondents said they use the tools to benchmark HR metrics, 38 percent said they're used to manage employee retention risks, another 38 percent said they're used to improve employee engagement and 37 percent said they use analytics to manage HR costs.
Recruiting Tools Lead the Way
Reflecting an ongoing challenge to fill job openings from limited talent pools, organizations continue to spend most of their HR technology dollars on recruiting platforms and tools, followed by investments in learning/training and HR analytics.
Experts say continued strong investment in learning platforms is a result of companies using training to keep employees on board; an increased focus on "building" versus "buying" talent, given shortages of external job candidates; and training employees for new or expanded roles in the organization.
On-Demand Pay Yet to Take Off
The study found that only 13 percent of respondents were leveraging earned wage access, or "on-demand" pay options that pay employees sooner than the traditional two-week interval. But 30 percent of respondents said they had either budgeted for or were forecasting the use of on-demand pay within the next 12 to 36 months for their hourly workforces.
Dave Zielinski is principal of Skiwood Communications, a business writing and editing firm in Minneapolis.