The Hackett Group’s 2018 Key Issues Study
Also Finds Shortfalls In HR’s Ability to Support Enterprise Goals,
Plus Gaps in Critical HR Capabilities
Despite another year of flat to decreasing budgets and
headcounts, HR organizations are focused on helping their companies
unlock the value of digital transformation this year, according to
2018 Key Issues Research from The Hackett Group, Inc. (NASDAQ:
HCKT). But while most HR executives recognize the future potential
of digital technology to transform the enterprise as well as HR
roles and operating models, less than half feel their organizations
have the resources and capabilities in place to execute and support
their company’s digital transformation strategy.
The research also found that urgent shortfalls exist in HR’s
ability to support critical goals, including developing executives
who can lead in volatile environments and enabling business
strategy execution. In addition, there are significant internal
gaps, with limited ability to address some of the most critical
development areas. On the upside, HR organizations are now
targeting many of these same areas for improvement initiatives in
2018.
A complimentary version of the research is available for
download, following registration, at this link:
http://go.poweredbyhackett.com/keyhr1801sm.
Overall, HR budgets are expected to decline by 0.7 percent in
2018, significantly more than the 0.2 percent actual decline in
2017. In the context of projected revenue growth of 3.6 percent,
this creates productivity and efficiency gaps that HR must
overcome. Adding to the challenge, HR staffing is expected to
decrease by 1.0 percent in 2018, much more than last year’s actual
decline of 0.1 percent
Over 90 percent of HR executives in the study agree that digital
transformation will fundamentally change the way HR services will
be delivered over the next three to five years. In addition, 86
percent believe that digital transformation will drive improved
performance in cost, quality, cycle time, and other areas.
But most HR executives don’t think they are fully prepared. Only
46 percent say they have the resources and competencies in place to
execute their company’s digital transformation strategy. Although
this figure is up somewhat over last year, it still indicates that
a majority of organizations are still not yet ready to fully
execute their digital transformation strategies.
Overall, the research also revealed that many HR groups are
simply not prepared to provide capabilities critical to helping the
enterprise accomplish its strategic and operational objectives. The
research assessed HR’s ability to support the business agenda and
achieve its own performance goals, and found large gaps in many key
areas. The most critical among these is enterprise digital
transformation, which jumped to the top of the list of key
development areas in 2018, but where the study found that HR’s
ability to address is very limited.
Development of executives who can lead effectively in a volatile
business environment is another area that has been at or near the
top of HR critical development needs for the past three years. HR
organizations have significant room for improvement in bridging
this leadership gap.
The research identified several other areas where capability
gaps exist between strategic enterprise objectives and HR’s ability
to address them: ensuring that staff have the right skills,
behaviors and mindsets for successful business strategy execution;
providing effective, programmatic change management; and supporting
the retention of staff in key positions with critical skills.
“Suddenly, companies are getting much more serious about
enabling digital transformation in 2018. But HR simply isn’t
ready,” said Tony DiRomualdo, senior research director, Global
Human Resources Executive Advisory Program, for The Hackett Group.
“It must step up its game in areas that can directly affect the
success of these programs, such as leadership, culture, skills and
change management. And talent has been a top priority for some
time, yet many HR organizations are still struggling to develop
leaders who can succeed in today’s often frenzied and uncertain
global business environment.
“Taken together, the gaps in these areas represent a tremendous
challenge,” said DiRomualdo. “Unless HR can find a way to overcome
these deficits, they are likely to hold back their company’s
digital transformation efforts, and hamper their companies’ overall
ability to compete.”
The Hackett Group’s research found similar gaps in HR’s ability
to address critical capabilities within its own organization. The
ability to mine, analyze, model and forecast human capital data to
improve business and workforce decisions is a widely recognized
priority, but most HR organizations have not effectively developed
the skills, tools, and technology/data infrastructure needed. HR
organizations are also finding it very difficult to respond to the
volatility of the business environments in which they operate.
Whether the issue is cost structure, service mix and value-added
capabilities, or alignment to business objectives, many HR
organizations lack the capacity to rapidly change their priorities,
programs, and capabilities to keep pace with changing business
demands.
Three other critical areas where HR’s own capabilities were
extremely limited were also spotlighted in the research: talent
management; HCM applications platform modernization; and HR staff
skills alignment.
HR organizations appear to be focused on addressing their
capability gaps in 2018, the research found. This encouraging trend
started in 2017 – previously, HR’s priorities for change did not
address areas with the greatest need for improvement. But with more
than a dozen critical development areas and limited resources, it
will be difficult for HR to make progress in all of them.
“HR organizations need to seize the opportunity that digital
technologies offer to reinvent themselves and permanently elevate
their role and status in the enterprise,” said Franco Girimonte
associate principal and North American Human Resources Executive
Advisory Program Practice leader with The Hackett Group. “To do
this most effectively, we believe they should focus in three areas.
Improving fundamentals like technology and process are a key
starting point. At the same time, they need to take at least small
steps to create or extend advanced capabilities in digital
technologies, analytics, and more.
“Finally, HR must find ways to more effectively help the
enterprise achieve its strategic goals,” said Girimonte. “Some good
ways to do this include focusing on supporting the culture change
that accompanies digital transformation strategic, and ensuring
that people executing strategy within HR have the right skills,
behaviors, and mindset. HR staff require exposure to business
strategy and training in business acumen to deepen their
understanding of the enterprise.”
The Hackett Group’s 2018 HR Key Issues research, “Enabling
Enterprise Digital Transformation Takes Center Stage But Gaps in
Critical Capabilities Persist,” is based on results gathered from
more than 160 executives in the US and abroad, most at large
companies with annual revenue of $1 billion or greater. A
complimentary version of the research is available for download,
following registration, at this link:
http://go.poweredbyhackett.com/keyhr1801sm.
About The Hackett Group
The Hackett Group (NASDAQ: HCKT) is an intellectual
property-based strategic consultancy and leading enterprise
benchmarking and best practices digital transformation firm to
global companies, offering digital transformation including robotic
process automation and enterprise cloud application implementation.
Services include business transformation, enterprise
analytics, working capital management and global
business services. The Hackett Group also provides dedicated
expertise in business strategy, operations, finance, human capital
management, strategic sourcing, procurement and information
technology, including its award-winning Oracle and SAP
practices.
The Hackett Group has completed more than 15,000 benchmarking
studies with major corporations and government agencies, including
97% of the Dow Jones Industrials, 89% of the Fortune 100, 87% of
the DAX 30 and 59% of the FTSE 100. These studies drive its Best
Practice Intelligence Center™ which includes the firm's
benchmarking metrics, best practices repository and best practice
configuration guides and process flows, which enable
The Hackett Group’s clients and partners to achieve world-class
performance.
More information on The Hackett Group is available at:
www.thehackettgroup.com, info@thehackettgroup.com, or by
calling (770) 225-3600.
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The Hackett Group, Inc.Gary Baker, 917-796-2391Global
Communications Directorgbaker@thehackettgroup.com
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