10 steps to successful cloud HR transformation

In making the shift to cloud HR, companies often lack a clear vision for the future of HR and strategic change management which bring the overall business vision to life through the integration of people, processes and technology

In making the shift to cloud HR, companies often lack a clear vision for the future of HR and strategic change management which bring the overall business vision to life through the integration of people, processes and technology, according to KPMG research.

Businesses are pursuing cloud HR computing to revolutionise the HR function with data-based decision-making, cost advantages and new value for the bottom line.

However, organisations need to overcome the common impulse to simply plug into new technology, the KPMG 2016 Global HR Transformation survey found.

It revealed an uneven landscape among businesses on the cloud HR transformation journey – one largely dominated by unmet expectations as investment in cloud HR soars.

More generally, this is a reflection of what’s happening with the Australian HR landscape said Stefanie Bradley, head of people & change at KPMG Australia.

“Expectations for cloud computing to deliver revolutionary new business benefits are largely failing to materialise,” said Bradley.

“Many are discovering that HR transformation requires much more than simply plugging into the cloud.”

She noted that barely one in four businesses said cloud HR technology is reshaping HR to deliver greater value, while only one in five reported HR becoming more evidence-based via workforce analytics.

“Enterprises plan to spend money on new technology but there’s a ‘so what’ quality to their approach that raises questions about who the winners and losers will be in a game that has high stakes for the future,” said Bradley.

The survey’s findings should serve as a tale of caution on the critical need to include organisation and change management for true HR transformation, she added.

“Without it, many firms have embarked on a journey that could be long, costly and ultimately unfulfilling,” said Bradley.

“Expectations for cloud computing to deliver revolutionary new business benefits are largely failing to materialise”

Organisations that did achieve these benefits took a more strategic approach, and dedicated time and resources to transforming the HR function and its service-delivery model when implementing the new cloud HR technology.

These companies achieved a higher level of transformation benefits, particularly if they also applied a change-management approach and capabilities to their cloud deployment.

In effect, the report showed that the “path of least resistance” leads to the least benefit.

The global survey of 854 HR executives from 52 countries, including Australia, found that a growing number of organisations that have selected new HRMS technology are opting for cloud-based solutions, while others are studying options and could opt for cloud.

In the Australian market, where HR is typically considered a cost centre, the cloud offers an opportunity to leap forward.

But the research showed that organisations are confronted by what Bradley characterises as a “fork in the road” on their journey to cloud HR.

“One road taken by many involves implementing the technology as easily and inexpensively as possible, with little or no associated change management,” she said.

Among these organisations, results achieved include increased use of manager and employee self-service (57 per cent), improved processes and process management including workflow (53 per cent), and improved access to management information (53 per cent).

But firms that adopted this approach did not generate more fundamental transformation in people management.

For example, only 24 per cent of businesses surveyed reported that cloud HR is delivering an ability to reconfigure the HR function to drive greater value, while only 20 per cent reported the HR function becoming more evidence-based via workforce analytics.

Just 13 per cent reported improved collaboration and feedback between employees.

“Some HR functions are ‘hitting the wall’ and getting stopped in their tracks due to their narrow focus on new technology”

“In Australia, investment in cloud technology continues to soar but it’s clear that many organisations still need to implement intelligently designed strategies that are crucial in maximising cloud computing’s impact,” said Bradley.

“Unfortunately, some HR functions are ‘hitting the wall’ and getting stopped in their tracks due to their narrow focus on new technology.”

This report comes on the heels of the KPMG 2016 Global CEO Outlook, which said the implementation of disruptive technology is a key priority for CEOs along with developing and/or managing talent, validating the fact that HR transformation goes beyond the HR function as a strategic business imperative.

In HR, spending on cloud business process services (BPaaS) is expected to reach US$13.7 billion in 2016, up from US$12.95 billion in 2015, and spending is expected to rise from 2015 to 2020 at a compound annual growth rate of 6.7 per cent.

“Today’s HR function can continue as a cost centre that relies on outdated practices – or it can break into the 21st century delivering data-driven insights, smarter decision-making and significant new value,” Bradley added.

“Such progress will require businesses to transcend the gap between knowing what’s needed and doing what’s needed.

“It’s a choice: how purposeful about transformational benefits do you want to be?”

Best practices for successful HR transformation
The report recommended organisations follow 10 steps in order to realise the most benefit in shifting to a cloud-based approach to HR.

  1. Start with a solid vision: The HR transformation journey needs to begin with a very clear vision of your desired destination. Never build out from the current state, or you will never achieve a significantly different level of value-add to the business from HR.
  2. Success is not automatic: Don’t expect the HCM technology, no matter how new or leading-edge, to automatically deliver the transformational benefits you are pursuing.
  3. Realising those benefits requires precise planning, resources, energy and time.
  4. Change management is crucial: The need for strategic change management is more critical with cloud HCM solutions than with traditional ERP programs because changes via cloud can be surprisingly fast and far-reaching.
  5. Data insights demand expertise: Even with embedded workforce analytics available at the touch of a button, delivering analytical insights that businesses can act upon requires new processes, roles and skills. This is particularly true in relation to the role of the HR business partner.
  6. Don’t ignore HR skills: Rethinking the operating model of HR often requires new skills and roles. The learning and development agenda for the HR function is too often overlooked. Again, the role and skills of HR business partners should also be a key focus here.
  7. Collaboration is key: Don’t expect line managers to immediately adopt an enhanced role in relation to people management using the HCM solution. It requires strategic change management if they are to become advocates for a new way of working.
  8. Challenge the status quo: Alignment to a standardised, simplified and global HR process model requires challenging the status quo. Except in cases involving regulatory, business revenue, profit or legislative considerations, differences to a standard process model must be vigorously challenged.
  9. Be bold: Businesses typically want change to happen quickly, but effective transformation takes time and puts a strain on the HR function along the way.
  10. Stay the course and deliver tangible improvements that will keep the change process moving toward success. Effective transformation is not a sprint; it’s a marathon.

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