How can companies overcome their digitalisation challenges? November 2017

Transcription

1 How can companies overcome their digitalisation challenges? November 2017 The HR contribution to digital maturity SAP has announced that in 2025 they will cease to support non-cloud solutions. Although many organisations use other technology providers, SAP's decision highlights a one-way global trend. Will eight years be enough to fully transfer to cloud? Are organisations ready? Aon's recent Digital Maturity Study highlights a number of risks that cannot be ignored. Of particular concern are the gaps that exist in priority areas for firms' digitalisation plans. Here we look at those gaps, and what organisations can do to address them. There can be no doubt that the digital journey has begun. All study participants agreed that digitalisation is towards the top of their strategic agenda, regardless of sector, size, location or geographical reach. And the level of digital maturity does not seem to depend on demographic factors. The survey findings did not reveal any major differences between companies in different countries. What is digital maturity? When talking about digital maturity, we should explain how Aon defines it. In our definition, digital maturity of an organisation is built on two foundations: technology and digital leadership. The technology foundation focuses on the use and functionality of cloud technology, while the digital leadership foundation covers areas such as a digital culture, leadership, capabilities and talent. Organisations need to master both technology and leadership to benefit fully from the advantages digital transformation brings. We were interested to see which of the two areas the companies had made more progress in. The results were quite surprising. Average scores show that organisations are equally advanced in both areas. However, when we looked more closely at the data, we saw that there is inconsistency within each foundation; organisations are often highly advanced in one area, while in other related areas they are yet to start work. In the technology foundation, the highest rated statement was 'Our HR technology is based on cloud solutions'; 84% agree with this. This was not surprising, given the trend towards digitalisation. In the digital leadership foundation, the highest score was given to the statement: 'Our employees and managers are widely and actively involved in developing solutions'. 69% agreed that this is already happening in their organisation. The challenges The study revealed that the challenges are very consistent across companies in different countries and industries, and of different sizes. Many of these challenges relate to the 'historical baggage'; the way HR functions used to work and the design principles around which they were organised. Isolated processes; fragmented take-up of technology; high administrative workloads; a focus on compliance; and digital capability gaps are among the barriers that make digital maturity difficult for HR to achieve. Some of these barriers are very closely related to companies' top priorities for digitalisation and therefore cannot be ignored: How can companies overcome their digitalisation challenges? 1

2 Achieving higher effectiveness and efficiency of internal processes Improving customer experience Building new capabilities Priorities for digitalisation in Europe and barriers that stand in their way 1. Achieving higher effectiveness and efficiency of internal processes For 53% of participating organisations, their top priority when it comes to digitalisation is achieving higher effectiveness and efficiency of internal processes. Given the trends towards automation and robotics in many industries, this is not surprising. However, while 84% of participating organisations claim their processes are already based on cloud solutions, only 23% agree that making this change has substantially decreased the amount of manual activities and input required. This mirrors our observations in the market. Too often, cloud solutions implementation projects do not give sufficient attention to the preparation phase that we call 'Setting direction'. This step is crucial as it ensures that the design of the HR business model after the new technology is implemented uses the full potential of cloud solutions. This enables the automation of nonvalue adding activities and frees up time to generate more value for the business. Although the 'Setting direction' phase involves neither a large time nor financial commitment (it usually comprises a set of workshops and a survey), it is often ignored and omitted. Unfortunately, the negative impact of this 'omission' has long-term consequences not only for the HR function, but also for managers and employees. There are several reasons why organisations ignore this key stage of the process: 1) There is little awareness of the impact that the implementation of cloud technology has on the HR business model and the ways that HR works with the business. 2) It requires some bold decisions that not every CHRO is ready to take. 3) Sometimes it can open a 'Pandora s box' around the effectiveness and efficiency of the HR function to date. Fortunately all of the above can be managed in a comfortable and 'safe' way for HR leaders and employees. 2. Improving customer experience HR's 'customers' are primarily employees current, but also future and former. Unlike in marketing, where customer s centricity is already well established and therefore often very effectively supported by new technology solutions, for HR the idea of the 'customer' is quite new. Historically, HR processes have not been designed with the primarily objective of ensuring high employee satisfaction. Their goal was mainly to secure compliance and minimise risk. So it is not surprising that none of the respondents claimed to be advanced in enabling employeecentricity, and less than half (46%) have started to do something about this. Although this may not be surprising, in the light of the changing labour market and new workforce trends, the results are very alarming. Continuing the comparison with the marketing function, external customer-centricity was not built on technology: new solutions only enabled greater effectiveness. The key factor was the ability to collect, integrate, analyse and act based on data insights to improve the customer experience. And this is exactly the capability that most HR functions lack. In our survey, the statement on 'Ability to make workforce-related decisions based on data' was rated the lowest. None of the respondents claimed to be advanced in it, and only 38% claimed to have started the processes of building analytics capabilities in their organisations. However, it is not possible to build high customer satisfaction without data. Especially once How can companies overcome their digitalisation challenges? 2

3 employers start to realise that the old approach to an Employee Value Proposition (when it was sufficient to have a single, overarching one) is long gone. Now the only way to attract, motivate and retain talent is to have a value proposition that is segmented based on needs. And to do this, HR functions need data. This creates a tough challenge for HR, as most HR functions were not built in a way that integrates information. For a long time, 'HR data' was one of the most closely-guarded secrets, with only a few being granted access to fragmented pieces of the 'treasure'. So one of the core elements of the HR function in the past is now one of its biggest barriers to progress. That is why, when we help clients to build their analytics capabilities, we start with small steps and build, on the outcomes of those steps by adding pieces of the puzzle. When it comes to data analytics, we have found that the value and results from even the smallest piece of work are so high that subsequent steps are far easier and quicker. And as a result of these steps, HR feels increasingly equipped to support business decisions with hard, data-based evidence. 3. Build new capabilities The concept of agile working is entering the strategic agendas of most employers. With it comes the need to attract, motivate and retain 'digital' talent. While most organisations plan to go through a 'digital transformation', many do not appreciate what that actually means. Often, this problem comes from the very top of the business. Our survey results show that only 15% of participating organisations believe their leaders are digitally savvy. This gives rise to other challenges; for instance, a leadership that is not digitally aware will not fully understand the importance of access to digital talent. None of the respondents believe that they have gone through strategic workforce planning and now have a clear sourcing strategy for digital talent. However, 53% claim that they have started the process, which might evidence increasing awareness of the need for a digital talent strategy. Agile workforce planning needs to address not only the attraction but also the retention of digital talent. Again, while no respondents believe they currently do this effectively, 53% claim to have started the process. Digital maturity a challenge for today as well as tomorrow The survey showed that the digital talent gap is not only a challenge for the future, but a real problem organisations are struggling with today. This has led firms to look outside their own teams, with 61% of p participants using external networks to fill their capability gaps. The concept of agile workforce is here to stay. But without a strategic approach to planning, it will not work: ad hoc solutions have already proved to be ineffective in the longer-term. Alongside this, companies are realising that strategic workforce planning is no longer an exercise that they should carry out once every few years. The external environment is changing so dramatically that it should be treated as an ongoing process. The process that can give the HR function a key role at the table and a strategic position within the business. How can HR functions increase digital maturity? 1. Do not start to implement cloud technology without the 'setting direction' step. It can delay the process by a few weeks, but the payback will be massive. 2. Invest in building your team's analytics capabilities. But do not be overwhelmed by 'big data' start small and smart. If you do not yet have your own tool, you can use one already available in the market, like the Aon Analytics Platform [ 3. Do not take ad hoc actions to attract and retain digital talent. Use data and develop a strategy. Create a compelling EVP that is 'based on a How can companies overcome their digitalisation challenges? 3

4 true story'. Approach the challenge from a strategic perspective and you increase your chances of success. About the survey The Digital Maturity Survey was conducted between April and October 2017 in three European countries: Germany, Switzerland and the UK. The participating companies represented different sizes, sectors and geographical presence (both international and local). The main focus of the survey was HR; however the questionnaire covered the subject of digital maturity in a broader sense. The results created a baseline we aim to regularly update to track and report progress. The concept of digital maturity In Aon s definition, digital maturity is built on 2 foundations: 1) Technology foundation and 2) digital leadership foundation. The technology foundation focuses on the use and functionality of cloud technology, while the digital leadership foundation covers areas such as a digital culture, leadership, capabilities and talent. Organisations need to master both technology and leadership to benefit fully from the advantages digital transformation brings. The pictures below show that there is still a long way to go before the companies achieve their digital maturity in both foundations.. How can companies overcome their digitalisation challenges? 4

5 For more information on how Aon can help with your digitalisation or other strategic HR projects, please get in touch Contact information Joanna Chylewska People Strategy and Analytics Lead Aon Strategic Advisory Europe +44 (0) Piotr Bednarczuk Senior Partner Aon Strategic Advisory Europe +44 (0) (0) How can companies overcome their digitalisation challenges? 2

6 About Aon Aon plc (NYSE:AON) is a leading global professional services firm providing a broad range of risk, retirement and health solutions. Our 50,000 colleagues in 120 countries empower results for clients by using proprietary data and analytics to deliver insights that reduce volatility and improve performance. For further information on our capabilities and to learn how we empower results for clients, please visit: Aon Hewitt Limited Registered in England & Wales No Registered office: The Aon Centre The Leadenhall Building 122 Leadenhall Street London EC3V 4AN Copyright 2017 Aon Hewitt Limited. All rights reserved. Aon Hewitt Limited is authorised and regulated by the Financial Conduct Authority. Nothing in this document should be treated as an authoritative statement of the law on any particular aspect or in any specific case. It should not be taken as financial advice and action should not be taken as a result of this document alone. Consultants will be pleased to answer questions on its contents but cannot give individual financial advice. Individuals are recommended to seek independent financial advice in respect of their own personal circumstances. How can companies overcome their digitalisation challenges? 2