HR Report Reveals Gulf Between Digital Readiness Haves and Have-Nots

digital readinessIs your HR department acting decisively with data, predictive insights, and AI?

“Those that ‘get it’ are acting decisively, viewing HR as a new value driver and turning to data, predictive insights and AI. The rest are either limiting themselves to changes that show some progress, perhaps through data and analytics initiatives, or simply clinging to a static approach that’s perilous,” says Robert Bolton, Head of People and Change at KPMG in the UK.

This quote perfectly synopsizes The Future of HR in 2019: In the Know Or in the No, a KPMG report that minces no words in its findings about an emerging digital readiness gulf in HR departments. In its survey of 1,200 global HR executives, KPMG found that inertia and action were either strong in HR departments, or virtually non-existent.

HR and Its Vital Role in Digital Transformation

Forty percent of HR leaders are confident in their ability to transform the workforce and HR and move them forward with key capabilities like analytics and AI. Another 37 percent are very confident. Common characteristics of “very confident”:

  • Delivering predictive insights
  • Believing in and driving digital agenda
  • Reshaping the workforce
  • Enhancing the employee experience

Twenty four percent of HR leaders are less confident or not confident in their ability to transform the workforce and HR. Common characteristics:

  • HR not seen as value driver
  • HR not using predictive insights
  • Generally timid of AI
  • No digital plan in place (and not planning one)

About two-thirds of HR executives agree that HR has undergone or is undergoing a digital transformation. Only 40 percent of HR leaders said they have a digital work plan in place at the enterprise or HR level.

Most HR executives — 70 percent — recognize the need for workforce transformation.

About 74 percent agree to some degree that the HR function is considered a core value driver by their senior leadership. Data from KPMG’s 2018 CEO Outlook Survey suggests CEOs are indeed increasingly viewing their workforce/HR capabilities as effective (47 percent agree).

Workplace culture is considered a top barrier to digital transformation for 41 percent of respondents and 35 percent said their current culture is more task-oriented rather than innovative or experimental.

HR execs who believe HR has a strategic role in their business are more likely to be pursuing digital transformation, at a rate of 67 percent, compared to 48 percent who view the HR role as unchanged.

Despite data’s remarkable ability to deliver new insights and enhanced decision-making, just 20 percent of HR leaders believe analytics will be a primary HR initiative for them over the next one to two years. Fewer still — 12 percent — cite analytics as a top management concern.

Recent and projected technology investment has been highest for cloud and human capital management software: 49 percent of HR executives invested in HCM over the past 2 years and 32 percent invested in cloud capabilities. More are planning investments in

  • 60 percent predictive analytics
  • 53 percent enhanced process automation
  • 47 percent AI

“The gulf between HR leaders pursuing transformation and those on the sidelines is real.”

Those leading the pack on transformation recognize how AI and machine learning can drive significant value for HR but they are in the minority by far. Only 36 percent of HR functions have started to introduce AI and just 14 percent have invested in AI over the past two years.

“You can fall perilously behind before you realize what’s happening.”

Of organizations yet to adopt AI within HR, half remain uncertain that they will do so in the next year or two, with 50 percent admitting to being “not at all prepared” to respond strategically as AI and ML emerge.

Among those who have invested in AI to date, the vast majority — 88 percent— call the investment worthwhile, with the focus primarily on learning and analytics.

The State of the Employee Experience

While 50 percent of HR leaders strongly believe EX is valuable to the organization at large, only 25 percent rank EX as a top initiative for the next year or two. And this is largely because only 16 percent of their senior management have communicated that EX should be a top focus area for HR.

Creating modern employee value propositions (EVP) fared not much better, with only 23 percent of HR executives calling it “very valued” by their enterprise. Indeed EVP is not deemed a top initiative by 80 percent of organizations. However many HR leaders themselves do see it as a critical area for the future, with 37 percent selecting it as among HR’s top three required capabilities.

Further, 45 percent of CEOs said appointing senior leaders who can better relate to millennials is one of their biggest challenges. Encouragingly, interest in EX and EVP appears to be growing among some CEOs, with 38 percent acknowledging the need to reposition their business to better meet the needs of Millennials.

HR Must Meet the Challenges of AI, ML, and Robotics Head-On

More than half of the HR executives surveyed — 60 percent — believe AI will eliminate more jobs than it creates. Conversely, KPMG’s 2018 Global CEO Outlook Study revealed about the same number of CEOs — 62 percent — believe AI will create more jobs than it eliminates.

Certainly, no one doubts AI and ML will have an immense impact on workforces everywhere — with 42 percent in the HR survey agreeing it’s the biggest challenge HR will face in the next five years. Of those HR leaders who are not planning to adopt any AI or ML anytime soon, half confirm they are not at all prepared and barely a third feel somewhat prepared.

HR functions who are currently undergoing or have recently completed a digital transformation consider capability (51 percent) and capacity (43 percent) to be the key barriers to transcending the initial phases of transformation.

Conclusions

KPMG suggests HR leaders adopt a new mindset to recognize the speed of change in the digital era and how it is reshaping the HR function and its business value, as well as how it needs to reshape the workforce. It is inevitable that at leading employers in every sector, technologies like AI and ML (machine learning) will integrate into a collaborative workforce. HR leaders should be moving toward the vanguard of exploiting the value of these technologies. At the same time, HR should be helping to mold the employee experience (EX) and employee value proposition (EVP) to suit the needs of millennial employees.

To better assess where your HR department fits on the digital readiness spectrum, survey your own professionals using the questions highlighted in the KPMG report.