HR: The Leader on the Path towards Digitalisation

Digitalisation is the new reality we find ourselves living in, where it is important for every HR Manager and his or her team to demonstrate real leadership and bring change to organisations of all different sizes. On 13 March, we invited HR Directors to talk about how we, our clients and our partners are dealing with this challenge. We would like to offer you a series of articles summarising the results of this meeting.

Is Business Ready for Digitalisation in HR Management?

Every company has its own interpretation of the concept of digitalisation. Therefore, before we start comparing different approaches and results, we should define the important terms. For example, many people use the words ‘digitalisation’ and ‘automation’ interchangeably. I support an almost mathematical definition: automation is the necessary and sufficient condition for digitalisation.

What do I mean by this? If HR processes are poorly automated (e.g. reports are generated using Excel), then the business needs which HR management provides for can hardly be expected to meet a high quality. In this case, quality means a combination of speed, accuracy and cost efficiency. I find it extremely challenging to develop global strategies, make forecasts, manipulate data on business needs and market opportunities manually or using a minimal set of advanced analytical tools. Moreover, digitalisation makes it possible to achieve a new level of quality in the decision-making process, when processes are automated and serve as sources of data, and the when company understands how this data should be collected, stored and used.

In my opinion, the process of digitalising HR services may only be deemed successful when it becomes accessible beyond the companies developing the high-technology products and services. It is important to make this approach available for “offline” businesses, such as companies involved in machine building, food production clothes manufacturing, or construction, etc. These companies also starting to use online sales channels and are increasingly tapping into analytics, i.e. they are also experiencing digitalisation. They are retrieving and using data more systemically.

But who does digitalisation start with? It is widely believed that nothing can happen without the initiative and support of the owner. And the truth is that you can bombard shareholders and top managers with ideas of how to optimise HR or any other department as much as you like, but ultimately, if they are not ready to act and make changes, then all of these efforts will be in vein. This may be the reason why there is a contradiction between the complexity of the tasks set for HR and the resources that the business is willing to allocate to digitalise HR processes, which HR needs to complete these tasks successfully. For instance, HR is often called on to provide a comprehensive and accurate forecast of recruitment and employee training requirements, employee retention, and these types of predictions require analytics from right across the business, not just HR processes. If there is no common vision, even if we are just talking about HR processes, this kind of task can not possibly be solved to meet a high standard.

This does not mean that you should wait until the entire business including HR embraces digitalisation. At present, an increasing number of companies are launching digitalisation projects, and they often look like a series of local projects, a number of initiatives which then join together to create a programme to transform how the whole company does business. If you do manage to receive a budget to fund at least some of the transformations, start putting your plan into action as soon as you receive it.

I recently interviewed Vladimir Khimanych, HR Director at Raiffeisenbank. He believes that when a business is performing well, it has a good argument to say yes to the experiment. When a business is in the middle of a transformation, nobody sets KPIs, and initiative is better than inertia.

For digitalisation to happen, there needs to be an entrepreneurial culture, HR executives who are willing to be proactive in its dialogue with the business, who are prepared to experiment and introduce a transformative culture.

What are the necessary preconditions for HR transformation to be successful?

If you work with a start-up company which is at the very beginning of its development — where there are no fixed structures, processes are not yet centralised, there are no clearly defined occupational roles, and where everyone is involved in transformation and development — take advantage of this collective energy. In these kinds of companies there is usually a high level of shared responsibility, and employees have a sense of a shared cause. In this type of company, a culture of experiment and transformation (of any kind, not just digital) can take root in a swift and natural way.

The strengths of large corporations are centralisation, a high level of expertise, well-regulated processes, business development according to a plan which is linked to its development strategy, the ability to plan development (clearly specifying where there needs to be an increase or what needs to be cut back on, and by what percent). However, it is often the case that managers who are excellent at driving performance and saving on costs are not as good at making innovations, i.e. they do not have the ability to look at business from a different angle to find areas where improvements could be made and identify areas where everything seems to have already been fully optimised. Needless to say, an experienced and well established employee will always rely on his or her professional assets — experience and competencies — even when carrying out an entirely new task. But today’s market is bringing changes to each and every business domain. Setting KPIs for innovations and actually creating new ones is not the same thing. This takes the ability to recruit and support the right people, pool creative teams, manage their work, and identify and maintain valuable ideas and new practices. It is important to recognise the source of innovation, where this source is, and what is the “funnel of innovations” by analogy with the “sales funnel”. Innovations can come in any shape or form: from creating or improving products or savings on expenses and net cost, to modifying business processes, which includes processes in HR management.

Another HR objective is to create an environment for expressing and processing new ideas. Employees who would like to change something need to know who they can contact, where and how they can discuss there kinds of questions. This may include face-to-face meetings, a dedicated virtual space on a corporate portal, a group in a corporate messenger – there are many convenient formats which can be used that people are familiar with today. When it comes to a job like this, not only do we value strong IT professionals or field experts, but we also value analysts, i.e. people who are capable of gathering information, recognising organisational trends, and providing guidance.

Severstal would be a good example, where a project to promote organisational innovations has just been introduced. A group of business and IT experts analysed the company’s experience that of and similar corporations operating in Russia and around the world. Internal start-up projects were set up to handle varied business tasks. The company itself acted as an investor to support the most promising start-ups. A comprehensive process for the “production of innovations” was set up there, from incubating ideas to putting them into action and evaluating their cost advantages. One of HR’s critical tasks was to identify, train and hold onto the employees to lead the company’s internal innovation.

Who will help HR professionals do the job?

There are plenty of technological innovations, but which of them are realistically feasible? What tasks are tools like chatbots or predictive analytics best suited for? It must be said that chatbots provide a good example of immediate effect technology can facilitate: they can significantly help to support HR operations, especially when it comes to recruiting millennials. Chat is the means of communication that this generation find the most convenient and familiar, not telephone calls or emails. When you are familiar with the questions that job applicants ask most frequently, you can redirect some of the communications to bots and free up employees from routine correspondence. Bots will provide a quicker and more accurate answer. And the technology of machine learning and data analytics will help us to continuously improve their performance. Moreover, chatbots are a source of accurate and up-to-date analytical data which allows us to streamline the entire recruitment process.

I would also like to note that the HR centralisation trend is still relevant. Companies are creating shared service centres, making the transition to standard processes, and collecting and organising data. Experts who have knowledge of both IT and HR are crucial in these projects. This is because the introduction or upgrade of the existing HR system is vital, whether it be a system developed by the company or a vendor’s solution.

Who does the speed and result of digitalisation depend on? Many people think that this depends on the business owner and top managers, and expect the initiative to come from them. However, the way I see it, the role of shareholders and top managers should be as sponsors, not as initiators in projects like this. The HR objective is to make the case to justify the need for investment, and approach the task from the company’s point of view, not focusing on a single process. It is important to be proactive and avoiding reducing all innovations to a set of KPIs. Digitalisation is not an end, but a means towards an end.

When introducing HR digitalisation projects, it is generally better proceed by making changes stepwise for every process. This is particularly true for companies with high staff numbers and an extensive scope of HR operations. It is important to assess which areas are most in need of change, what kind of resources these changes will require, and to move from simple to complex.

What new competencies do HR professionals acquire from digitalisation, and do specific HR priorities change?

1. Iintense integration with the business and a deeper understanding of the function of HR as an auxiliary service which is meant to support the business. All the improvements proposed by HR must be considered in terms of the extent to which digitalisation could benefit the business, how it can increase efficiency in dealing with job applicants, employees, and how digitalisation helps to build and develop the talent pool.

2. Intense IT integration: right up to setting up IT teams within HR departments, and attracting IT experts. This is crucial, as formulating the definition of the task correctly is no less important than the task itself.

3. A balance between creativity and planning. Without terms of reference, there is no plan, and nobody looks any further than one month ahead; it is very difficult and demotivating situation for everyone. On the other hand, there are a lot of projects and tasks that do not require a long-term roadmap, and handling them in short sprints is more effective.

4. Focus on user experience among employees. It is essential to understand and continuously analyse the experience that employees have had when dealing with HR, how employees rate HR processes, whether or not they find them clear, and whether the interfaces of HR services that you propose would be convenient.

5. A new level of internal communication systems. Solutions to deliver this system are not only offered by long-established IT vendors such as Microsoft, but also by Facebook for example.

6.The importance of standardising processes, which is particularly relevant for large companies.

And, of course, priorities are changing when it comes to what skills employers are looking for in their employees. For operations to be successful in the age of digitalisation, the HR leaders of today and their colleagues need to develop three key skills:

• Data management and the ability to master new technologies quickly;

• Flexible teams need to be established and developed which bring together a diverse group of employees in terms of age, experience and skills.

•  Ability to work with Agile and in the paradigm of continuous transformations
  

 And, finally, it is very important for employees to be able to think and act in the paradigm of B2C. Even if your company operates in the B2B segment, HR essentially operates in the B2C market, where its clients are represented by company employees, both existing and potential.