After a small uptick in 2015, HR organizations are expected to see virtually no change in budgets or staffing in 2016. Despite expectations of 3.7 percent revenue growth in 2016, both HR headcount and budgets are expected to shrink by only about 0.1 percent, according to new research from The Hackett Group.
The global research also found that many HR organizations are not well-positioned to support enterprise strategic and operational objectives. Several key areas rated as highly important by the business are low on HR's ability to address, and are strong initial focus areas for digital transformation of the HR function.
The issues with the biggest importance and readiness gaps include: improving the development of executives who can lead in a volatile business environment; adapting talent management strategies and process to deal with changing business needs; enabling successful business strategy execution; dealing with shortages of talent and critical skills; and aligning workforce strategy with business strategy.
"Top performers have long understood the role that technology plays in HR, and most companies are now realizing that digital transformation is critical," said The Hackett Group's Global HR Advisory Practice Leader and Principal Harry Osle.
"At the heart of this is using technology to improve efficiency and effectiveness, developing the ability to analyze data to gain insight and provide better support to the company, helping the company adapt to changing talent and staffing needs, and becoming more customer-centric. Top performers have understood this for some time, and are now three times more likely than their peers to have an explicit HR technology strategy."
The research also shows that the most agile human resource organizations are focusing on becoming more information-centric. They are learning to utilize data to drive analysis, planning, and recalibration that leads to insights and improved agility. World-class HR organizations focus more heavily on this than typical companies, and make 2-3 times greater use of predictive modeling.
"It's critical that HR make connections between what they're learning from their internal HCM systems and what's happening in the external market. In today's market analytical abilities are a 'must have skill set' that needs to reside throughout the HR organization," says Osle.
"Everyone has to have the ability to use data to drive insight, and turn that insight into intelligence and an improved ability to deliver HR services. In addition, HR can enable managers through technology and data, helping them develop a better understanding of who their top performers are, where problems with productivity, efficiency, and effectiveness are emerging, and how to better coach and train employees."
Finally, top HR organizations are using technology to become more customer-centric. Processes are being redesigned with the customer in mind, and technology enables direct access. World-class HR organizations provide 50 percent more on-demand access than typical companies, making it easier for employees to handle day-to-day administrative tasks and providing them with analytics that can help them be more successful.
According to Scott Leuchter, Global People & HR Transformation Practice Leader and Principal, "It's disconcerting to see that there are significant skills gaps within HR. The nature and scale of these gaps, namely analytics and forecasting for the future workforce, directly hinders HR's ability to support many of the areas that are most critical to the business.
"By increasing their overall knowledge, skills and capabilities in these areas, HR has the opportunity to strengthen alignment with the business, better understand their needs, and become more proactive in solving the human capital dimensions of business issues."
The Hackett Group's 2016 HR Key Issues research, "The CHRO Agenda: Continue to Close Gaps in Critical Capabilities Through Transformation," is based on results gathered from executives from nearly 180 large companies in the US and abroad, most with annual revenue of $1 billion or greater.