KPMG’s DiClaudio on digital HR innovation, analytics and cost-justification
Organizations are using new technologies to transform the way they manage their workforces. But what software and systems are they implementing, how successful are these projects and what benefits are they seeing from these initiatives? KPMG tried to provide insight into those questions in its recently published “HR Transformation Survey.” Employee Benefit News recently discussed the results with Mike DiClaudio, a KPMG principal and the leader of the firm’s HR Transformation consulting practice. Edited excepts follow.
Employee Benefit News: According to KPMG’s latest HR Transformation Survey, 59% of employers lacked a business case or metrics to measure results of HR technology initiatives. Did that surprise you?
DiClaudio: Many people build capital budget requests that don’t have a business case tied to them. Not every company requires a success measure or ROI tied to that request. The bigger ah-ha moment for us has been that this is a skill set HR is going to need to build — their ability to communicate value and costing in a way that talks about return and future potential. At its core, that’s what a business case is all about.
EBN: When you segmented that response data by industry, did you see any patterns?
DiClaudio: Capital-heavy industries like industrial manufacturing and pharma were more prone to providing business cases. There is a correlation between organizations doing a business case, and the success of the initiative.
EBN: With or without a business case to justify a funding request, do executives who acquire cloud-based HR systems strengthen their ability to link their initiatives to business success?
DiClaudio: The short answer is yes. The HR function should be looking at new technologies and new skill sets that correspond to those technologies as their way of proving strategic value. If you as an HR leader can produce strategic insight that nobody else in your organization can, you should absolutely do that. We see a lot of new leaders come into an organization, and they’re disruptive, but they are also respected because they’re showing the value of HR where their predecessors couldn’t do that because they were just doing what the organization asked of them — but the organization doesn’t always know any better.
EBN: That ties in with another finding of your survey: 60% of companies have reengineered their HR processes. What does that mean?
DiClaudio: Today everybody is looking at talent processes — recruiting, onboarding, succession planning, career development processes — either to tweak or completely overhaul it. And a lot of that is driven from a recognition that the skills businesses need aren’t necessarily the skills that they have right now. They’re hearing, “We need new skills,” and the HR function is saying, OK, what does that mean? Let’s describe that using the existing terminology we have around competencies or career frameworks. And a lot of companies are finding that their existing talent infrastructure won’t work in a technologically disruptive world. So they’re having to revisit a lot of how they think about work, and how they think about skills and how they think about value, and that trickles all the way into a process change.
EBN: You have written about companies that are “mapping out a transformation journey” in HR. What does that look like?
DiClaudio: Those organizations take a step back and think about what HR delivers from the perspectives of employees, managers and recruits — customer design centricity. They match up people’s commercial experience with their internal corporate experience. People expect performing a transaction on the HR system to be easy. Some have characterized this as just the demand of millennials, but I have seen it from Gen-Xers and baby boomers. Strategically savvy HR, finance and IT leaders are saying, “I want there to be a consistent way for me to interact with employees, managers, recruits and retirees that makes them feel valued with a streamlined experience that’s no more difficult than buying a book on Amazon.”
EBN: Have you seen any patterns regarding the kind of HR people who are driving this process?
DiClaudio: I’m working with a CHRO right now whose history is in marketing. When she thinks about the experience that she wants employees and managers to have, she thinks about it the same way as a marketer would. She segments the market, she looks at brand attributes, tries to use tools and connection mechanisms to drive an experience that’s consistent with the overall employment brand she’s trying to create. This particular executive works for a 100-year-old company in a very traditional industry – executives like this aren’t just found in Silicon Valley. There is a model for a CHRO who’s willing to push the boundaries and let go of the way things have always been done.
EBN: Let’s talk about utilization of HR systems’ latest strategic analytical capabilities…
DiClaudio: Data and analytics have emerged as the Holy Grail of HR strategic objectives, right? Some research suggests that having really robust data and analytics, and leading the way on intelligent automation conversations inside your organization, are hallmarks of strategic functions. Some companies are pushing hard on the data button because it actually takes a lot of effort for them to get any sort of analytics through the mix. Or they’re spending more time on the hypothesis model, and trying to understand the drivers of different business changes that are people drivers. We’ve had long-standing notions of things like a direct correlation to employee engagement and earnings per share. OK, well what are the direct correlative points to employee engagement and how do I actually influence those things, as opposed to just talk about them? Or, I need better managers; well, what makes a better manager? The ability to drill down to get these answers is what people are looking for.
EBN: What about longer-term predictive capabilities?
DiClaudio: It’s not HR’s job to be a meteorologist and just kind of loosely predict the weather. It’s HR’s job to loosely predict the weather and then dress the company appropriately based on what the weather is going to be. It’s going to rain, here’s an umbrella, right; it’s going to be cold, here’s a jacket. And, you know, you can’t just do one or the other, you have to do both.
EBN: Speaking of predicting, your survey found that few people achieved their ROI goals with their cloud HRMS initiatives. What’s up with that?
DiClaudio: Yes, we found that 75% said they didn’t achieve their ROI objectives. But as we discussed earlier, a lot of them didn’t do a business case in the first place. So it’s like, “I didn’t achieve it but I didn’t know what it was, so I answered the question that way.” But one lesson for people who are planning on doing a transformation is, whatever vendors are telling you, it’s important to budget more. Most successful projects have a budget that’s greater than the sum of the sticker prices of all of the technologies and the implementation partners, and the backfill costs, and the whatever.
EBN: Can you offer any standard parameters for how long one should expect it will take to recoup the investment?
DiClaudio: Our models always look at three- to five-year windows. There will always be organizations that exist on the fringe, whose cost structure is so amortized or is so embedded in other business variables that it’s difficult for them to get to a payback window of three to five years. But the majority of companies we’ve worked with have fallen into that three- to five-year window. But while the cost side is important, the value side is more important. And the message we’re trying to give to business leaders now is not to get wrapped up in the dollars and cents around a deployment of a new technology or a changing of a model or an infrastructure, but to really focus instead on the value that it’s going to bring.
EBN: So cost isn’t that important?
DiClaudio: To some degree, you’re going to have to spend the money anyway. Either the licensing on your current system is going to run out, or the support is going to run out, or the technology stack this stuff sits on is getting retired. The cost isn’t really going to be the differentiator — it’s going to be a small difference between option one, option two and option three — it’s going to be the value. So it’s important for organizations to describe the value in their business case.
EBN: How do you do that?
DiClaudio: Use cases can describe what new kind of value the function would be able to bring, and some of those use cases are based in data. Like, wouldn’t it be great if I had access to real-time data to help make these types of decisions? You could extrapolate things like, if I can make better hiring decisions, I could decrease the number of people who I have to terminate in the first six months for cause, losing all of that salary that I paid them for those six months when I realized they weren’t a good hire. So I could make that money back if I never spent it in the first place because I had good analytics about what a good new hire looks like.