Are Organizations Ready for Digitalization?

As the business world finds itself on a new frontier and without a proven playbook, we’ve brought together a community of changemakers in a series of five conversations. Called CHRO Connect, these conversations explore five business and people imperatives we’ve identified as changing the world of work: inclusion, digitalization, enabling experiences, agile organizations, and the skills imperative (forming the acronym IDEAS). To help HR leaders address these pressing imperatives, we’ll be sharing insights from these events. 

As part of our conversation on digitalization, Greg Pryor, executive director at Workday, spoke with Amy Wright, managing partner of IBM’s talent and transformation practice. She shared insights from a recent report, “Accelerating the Journey to HR 3.0: 10 Ways to Transform in a Time of Upheaval,” which includes results from a survey of 1,500-plus HR executives from more than a dozen industries.

Below are highlights from their conversation, edited for clarity. Watch the recording here.

Pryor: In the report, 7 out of 10 HR executives say the function is ripe for reinvention, but only about 10% of HR executives are living HR 3.0 today. Can you tell us what HR 3.0 is and the major differences to HR 2.0?

Wright: First I’d like to provide some context about how important this shift to HR 3.0 is. During the pandemic, we did two additional pieces of research. We surveyed employees about their plans, their skills, and how they were finding working during the pandemic. One surprising result is that 1 in 4 employees expect to change their employers in 2021, and 1 in 4 employees expect to change their profession in 2021. In addition to that, another bit of research showed that because of so many women leaving the workforce for reasons relating to the pandemic, our representation levels for women in the workforce are at about 1988 levels. We've lost ground, and the pipeline for women in manager and more senior leadership roles has declined by 5% just in the last two years. Those findings raise the bar on the importance of talent in the workplace—the importance of employee experience and improving it to levels that are meaningful enough that it's the reason why people stay with their company—or why they may choose to join another company.

Now to the study itself: The research shows a vast difference between companies who are outperformers and those who aren't. Outperformers are those companies who performed better from a revenue, profit, and sales growth perspective than everybody else. It showed us that only 10% of companies are at what we call HR 3.0. 

Now, what is HR 3.0? 1.0 was largely when HR—and I was in HR for many years—was lovingly called personnel management. That was more of a compliance, administrative-driven function. With 2.0 and the introduction of the internet, we shifted to shared services, and we focused on consistency in our data, being able to put in place common data and HRIS systems across the globe. It enabled us to focus on process efficiency. And 3.0 is the shift to digital—to using data to drive a very personalized, consumer-grade experience for employees. It’s the ability to use data for areas such as augmented intelligence, to not only use analytics about the past for your workforce, but using data and augmented intelligence (AI) to predict what might happen in the future.

This shift to 3.0 enables companies to have a more sustainable workforce model and also flexibility. While only 10% of companies have made it all the way to 3.0, everybody's going down that same path.

Pryor: What are the barriers? Why haven’t more people moved more aggressively to the 3.0 world you describe?

Wright: Well, it's hard, right? It's not just, "Hey, we have a project. Let's move to 3.0 this year." We’re shifting the way we work—moving the entire company, not just HR, to operate in an agile way. So those functional boundaries that exist even in what has been viewed traditionally as a not-so-hard process like onboarding, that involves the IT function, security, HR, and so on bringing down those barriers. And you're able to do that because you're operating in an agile way with design thinking at the core. Using design thinking means everything's about the employee experience, and through that lens, the organizational boundaries don't matter anymore. It's getting your data in a place where it's consistent and can be utilized in a different way. 

It also requires cultural change; leadership behaviors that are different and transparent; and the ability to interact with employees in a very different way—particularly important now that so many of us are virtual—and co-creating the future with your employees.

Pryor: In the research, you identified five critical imperatives, and one of those is a data-driven decision-making capability powered by AI. Can you give us one or two examples that might surprise us in that space?

Wright: One of the interesting research findings was that outperforming companies invest in analytics and data four times more than the other companies. That enables them to do things that others just aren’t in a position to do. Moving to 3.0 allows you to use data in a way that's predictive, versus just reporting on the past, so we can now predict things like attrition. Companies can infer skills and predict attrition based upon other individuals who have the same characteristics—location, skills, pay, the team they work in, or whatever it might be. Companies are also using data as a way to determine which of their processes, if any, have bias embedded in them. If you can use data to do that, you can then fix the underlying issues.

We can also use data and AI to identify what skill sets we need to learn. My core skills are different from yours, for example, and what I need to learn and grow in the future is different, too. We also know the half-life of skills is declining dramatically, and the number of times people need to be reskilled in their career is increasing—over 100 million people will need to be reskilled in the next three years or so. This need to gain more skills is important, and we can use data and AI as a way to not only help people stay competitive in the future, but also help organizations match skill sets of an individual with open roles. Moving from a role-based environment to a skill-based environment is critical as the skills gap becomes more and more important for us.