What Is the Future of Digital HR?

Your current approach to digital HR is not enough.

Technology prevails in today’s business world. HR transformation is not exempt from adopting various digital tools. Digital HR is a concept familiar to many who want to transform their HR department and achieve better business outcomes. However, when most people think about digital HR, they define its core as leveraging digital tools to optimize HR processes, namely streamlining. They digitalize information to provide easier access. They build HR platforms for better process management. They collect data for future people analytics and select apps to offer smooth collaboration and communication.

These are all viable approaches to digitally transforming your HR department, but they are not enough as they simply all fall short of future requests of the HR function. You may feel they are adequate at the moment, but they won’t suffice in the future. The future of digital HR resides in the mindset shift to drive connections among stakeholders.

Four Phases of Digital HR Progression

The future of digital HR is a mindset that focuses on connection. This conclusion is mirrored in Dave Ulrich’s four phases of digital HR progression. The four phases are efficiency, innovation, information, and connection.

Efficiency means using existing siloed HR platforms to automate shared services so that administrative work can be done faster and easier. AI-powered robots and chatbots can also be involved to replace human efforts, streamline processes, and boost effectiveness.

Innovation asks for finding new ways to leverage technology applications to enhance people management, performance assessment, communication efficiency, and work attribution. Examples include creating online manuals for aligning expectations, using video meeting functions to broaden the candidate pool, implementing training tools for a better onboarding experience, etc.

Information is mostly associated with information management, especially asymmetry. At this stage, organizations should exploit technological resources for open access among people, leaders, and entry-level employees alike. Information should not be thought of as a power unit but as a tool for better decision-making.

Connection is defined as employees’ emotional attachment. Research shows that employees with a strong emotional attachment will have increased personal well-being, which transfers into increased personal productivity and overall organizational performance. Some technologies are further used to encourage employee connection. For example, entertainment activities like Esports, virtual visits to favorite locations, and functionalities that enable employees to build identities.

Connection is the turning point. The first three phases all serve for efficiency. Whether it is delivering faster administrative services, innovative HR practices, or a wider range of information access, they all circle back to efficiency. The phase of connection entails a different story. To have a head start in future talent battles, from now on, the main focus of your digital HR function should shift from operational efficiency to stakeholder experience. Next, we will take a look at why this shift is the future of digital HR.

What makes the connection the future of digital HR?

Needless to say, the digital revolution in HR is here to stay, but going forward, it’s not as one-off as people imagined. The future of digital transformation of HR should not be about digitalizing HR functions, it should be about establishing a new mindset — leveraging digital tools to achieve a better stakeholder experience.

Experience is the future. According to the Digital HR transformation survey 2022 for Southeast Asia, the number of people that believe in HR roles as employee experience designers, change agents, or talent developers reaches 96%. People should be at the heart of future HR technology, creating a human digital environment that highlights experience. The “HR in 2030” report by Sage shares plenty of insights on the importance of employee experience for future HR success. Co-Director of The Holbeche Partnership, Linda Holbeche predicts, “Employee-centricity and the employee experience will be a huge focus by 2030, with attention on how we can communicate as a business with our employees and how we can give them a voice.”

Connection underlies and evaluates stakeholder experience in three ways. It first helps overcome social isolation among employees, which is a big issue nowadays. Removing social isolation in the workplace contributes to stable mental health and personal well-being. Secondly, it helps create meaningful relationships among stakeholders, thus boosting engagement. Thirdly, it provides a sense of belonging, which can inspire employees and other stakeholders to find new ways to provide value.

To sum up, enhanced stakeholder experience can future-proof an organization’s success, as it transforms into optimized operational efficiency and revolutionized cohesion, which enables your organization to change from irredeemable to irresistible. Instead of just finding digital tools to automate management work and streamline operational processes, the future HR department should design digital solutions to fulfill its role as a stakeholder experience architect. With this pressing need in mind, let’s examine how to build connection-driven digital HR.

How to build connection-driven digital HR?

To build a connection-driven digital HR, we need to leverage technology to complete the following three processes.

1. Redefine HR’s role — business partner 2.0 logic

First of all, we need to redefine HR’s role. There are 13 pivots for HR professionals to act upon. They call it business partner 2.0 logic. This BP 2.0 structure outlined some central questions that shape HR’s new roles in the modern age. For instance, what are the contextual factors shaping HR’s business centrality? Ulrich pointed out that HR is about business, and it requires them to acknowledge and appreciate three uncertainties: context, which is the changes facing our world today, like STEPED trends; the pace of change, which is increasing; the needs of individuals to find belief and purpose, to become better, and to belong to a community.

Ulrich’s team also outlined a guiding principle to design and deliver HR practices, which is to center your practices around people, performance, information, and work. Some criteria include: offer HR solutions, not isolated HR practices; align your strategy inside organizations and external stakeholders; value user experience by making HR solutions easy to access and use. They also shared thoughts about how the HR department should be organized, etc. More insights on other aspects can be found here.

From the BP 2.0 logic, we can draw the conclusion that today's HR function should no longer focus on efficiency or functional excellence, but strategic design and ecosystem capability of an organization. Remember, the goal of digital HR nowadays is not a simple matter of problem-solving, but an intricate long-term process of relationship building. That means HR stakeholders have evolved from internal to external, that is, from employees, line managers, and organizations to customers, investors, and the community. This is where the second process comes in.

2. Expand HR’s responsibility range — Outside-in model

The next step is to expand your HR’s responsibility range with “outside-in” measurements as a guide. The concept of outside-in is a method first proposed by Ulrich to design the next generation of HR. The core value of outside-in asks for a mindset shift.

When considering elevating HR practice, most HR professionals and business leaders only think about making changes within the HR department, such as doing HR analytics, innovating hiring and training processes, and managing increased personal demands of the HR job. These areas are not the major battleground of future talent wars. The efforts spent within the HR department are important, but they can drive sustaining outcomes.

The true values of the HR department sit with their approach to outside realities, which include the context that the business operates in, the expectations of key stakeholders, and the strategies that give a company a unique competitive advantage. In order to succeed in the future, HR professionals must keep their eyes on the outside reality and breathe in what they see in everything they do. The focus should be on the whole business, not a single department.

The emphasis shifts of outside-in HR practices could be found in the following seven aspects: placement and promotion, training, rewards, performance management, leadership, communication, and culture. The guiding principles to make real impacts in these areas can be summarized into one sentence: engage stakeholders as much as possible. For example, include customers and other external stakeholders to set standards for performance reviews, engage more stakeholders in the process of training and e-learning, and build an organization identity that truly speaks to your employees, customers, and other stakeholders.

The future generation of HR is outside-in. They will demonstrate a deep understanding of external context and its influence on organizational sustainability. They will be working on elevating HR practices in terms of relationship building, stakeholder satisfaction, and organizational cohesion. It is our firm belief that by connecting internal actions with external expectations, HR professionals will continue to add sustainable meanings and values to the organizations they stand for. To yield long-term benefits and impacts, they must expand their responsibility range and learn to innovate outside-in.

3. Revolutionize HR’s function — Digital Community

The final stage of connection-driven digital is to revolutionize HR’s functions. As discussed before, the new focus of HR function is not administrative management or functional excellence, but stakeholder engagement. At present, and looking to the future, the most efficient and sustaining way to boost stakeholder engagement is to build a digital community that improves stakeholder experience and strengthens their connections.

A living example of redesigning stakeholder experience is the one at Starbucks. Earlier this year, Howard Schultz, the newly returned chief executive officer of Starbucks, and other company leaders spent a month interviewing employees from thousands of retail stores and five roasting plants to find out their frustrations, hopes, and ideas. Schultz wants to push Starbucks forward by co-creating a stakeholder experience with its employees. The outcome is a $1 billion investment targeting each key pain point. Programs like Coffee Master training and black apron returned and received immediate cheers. Average pay is increased, and more training programs and inclusive perks await. On top of that, Starbucks is planning to launch a new partner app, creating a digital community that connects 240,000 employees in the U.S to give them a voice. By building a digital space that serves as a community, Starbucks aims to strengthen human connection and co-write the next chapter of success with its stakeholders.

Having an all-in-one digital community enables all stakeholders to have smooth communication and collaboration on a unified platform, while various digital functionalities can be designed and employed within the community to enhance the sense of belonging for each individual, and undoubtedly raise stakeholder engagement to a new level. Now the question is, who will be the architect? We believe the answer is HR.

From what we’ve discussed about the HRBP 2.0 logic and outside-in model, we can see that the HR department needs to stop being a service provider to become a strategic partner. Building a digital community requires a deep understanding of each department, especially the internal and external stakeholders, and mobility to connect different departments, which makes HR the most ideal business owner of this digital community within the organization. With HR being the architect of the unified community, other teams like operation and marketing can all instill and integrate department-specific engagement activities and functionalities, thus building a holistic and efficient structure to achieve its end goal — elevating stakeholder experience and boosting belonging.

In conclusion, HR will be the one to dive into different stakeholders’ needs and design a tailored digital community for its organization. It is only through the transformation of your organization into an ecosystem, that future challenges will be transferred into opportunities.

Conclusion

New ways of life and changing business dynamics have converted people’s expectations of work. Future HR is less of a service provider for business owners, but a companion for employees, customers, suppliers, and other stakeholders alike. In order for HRs to achieve their highest potential, organizations need to reshape their roles into a new organic that responds to prevailing imperatives.

Connection-driven mindset is the action point for the future transformation of digital HR. It is a necessity for us to build a digital community that celebrates human-centric stakeholder experience and enhances business sustainability. Once you start moving in the right direction, the future will stop shadowing intangible threats to become instead, an unstoppable golden age.

Reference

1. https://www.linkedin.com/pulse/digital-hr-what-whats-next-dave-ulrich/
2. https://www.pwc.com/sg/en/publications/digital-hr-transformation-survey-2022.html
3. https://www.sage.com/en-gb/blog/hr-in-2030/
4. https://www.linkedin.com/pulse/human-resources-hr-business-partner-20-dave-ulrich/
5. https://www.rbl.net/insights/articles/the-critical-deliverable-of-outside-in-hr-is-relevance
6. https://stories.starbucks.com/stories/2022/highlights-from-starbucks-1-billion-partner-store-investments-and-the-story-behind-them/
7. https://stories.starbucks.com/stories/2022/a-historic-moment-u-s-store-partners-at-starbucks-respond-to-raises-new-investments/
8. Ulrich, Dave et al. HR From The Outside In: Six Competencies For The Future Of Human Resources. 1st ed., Mcgraw-Hill, 2012, pp. 7–9.