Unifying Human Capital Management in 2016

Businesses and their human resource organizations feel pressure to maximize the value of their human capital in today’s intensely competitive world. Many have made or considered investments in new applications that better exploit information to efficiently recruit, engage and retain the best talent. Advanced applications not only advance these processes but also help management assess the performance of the workforce and compensate individuals fairly so that they advance their careers and find the level of employee satisfaction in the organization. A year ago I outlined the priorities in human capital management (HCM). During the past year our research found a significant number of companies lacking a unified HCM strategy that includes processes and the applications to support it. As others advance, HR organizations that are not equipped with such skills, resources and tools risk falling behind in human capital management as it contributes to business success.

A key step toward maximizing the potential of the workforce and providing the best possible employee experience is investing in self-service systems that enable both workers and managers to perform not just administrative tasks but also activities that are essential to their jobs. These range from scheduling online learning to prioritizing tasks and tracking them to completion to aligning them to performance goals. In addition HR departments can use these systems to enable employees to easily find answers to questions about their jobs, compensation, vr_NGLearning_01_key_benefits_of_learning_managementbenefits and other issues that matter to them. Whether established employees are transitioning to new roles internally or new ones are onboarding, the use of learning management systems can help them progress; this applies also to managers who need to expand their skills to move upward. Our research in next-generation learning management finds a resurgence in the use of learning systems. The most-often-sought benefit of investment in these systems, for almost three-quarters (72%) of organizations, is to create more effective workers; following that is improving workforce training (for 65%). Learning plays a key role in helping improve performance and the resulting appraisals, as I wrote about in depth. Despite HR industry banter about annual performance appraisals going away, the reality is that organizations need some type of scoring or grading to determine who qualifies for raises and promotions, and no matter how frequent the dialogues between managers and workers they need some type of objective assessment method.

At the same time, progressive organizations are embracing collaboration across the enterprise and adopting software to facilitate that. It helps the workforce interact socially to provide information or advice on specific actions. While collaboration may be a stand-alone application, we find it more effective to embed business collaboration as part of HCM applications in order to maintain the contexts of the business application or process. A collaborative approach to HCM can also reduce the volume of requests to the HR help desk. I highly recommend that you assess your HCM efforts to determine if you have placed the right level of collaboration that is digital in nature and can engage your employees to help them contribute back to the organization.

Collaboration is natural in a people-centric discipline like this, and so is the use of mobile devices. With so many people carrying smartphones and tablets, it makes obvious sense to expand them into business, but users expect mobile business applications to be as easy to use as their personal apps. Mobile technology has expanded further, to wearable technology for a variety of uses, which can be as simple as tracking one’s health in a fitness monitor or as businesslike as being notified of important information or necessary actions through a smart watch. For HCM specifically the technology so far has been mostly oriented to wellness to help workers gain situational awareness of their health and make personal improvements in the form of a game or through collaboration as a contest to improve the overall health of the organization, which is documented to improve the productivity and engagement of a workforce. The use of wearables in this regard can help demonstrate progress to healthcare providers and potentially limit rate increases.

Another related new technology of use to HCM is video. Available on almost every notebook or laptop computer and also on smartphones and tablets, it helps people interact with others and thus facilitates collaboration and engage the workforce in ways never possible before. Video has become essential for recruiting and interviewing, being the easiest way to meet and interview applicants and conduct the selection process far more efficiently and effectively than the old approach of reviewing resumes. Here again organizations that do not embrace video in both recruiting new workers and assessing those internally for new positions are at significant risk of being uncompetitive.

It goes without saying that compensation remains paramount in human capital management at both the salaried and hourly levels, and systems are available not only to ensure fair, competitive pay for employees but also to compare the organization’s practices to others in the industry. Benchmarking compensation internally to similar peers can help ensure equal pay for equal work and addressing diversity review especially in gender and race, which is critical not just to retain workers but also to avoid negative publicity that could arise from perceived biases and lack of thorough analysis. These applications are useful also for organizations that are investing in incentives and rewards to ensure that those who work and contribute to goals and targets are compensated appropriately and recognized in the organization. Compensation management must support recruiting and performance processes and any provider who does not allow for their compensation software to be assessed by itself might not be ready for your organization to utilize. Compensation must be funneled efficiently into payroll processes that are easy to operate and accessible to each individual. Many organizations recognize the need to provide visibility of employer-paid benefits on a total compensation statement that is always up-to-date and accessible. To track progress in this complex aspect of HCM we are conducting new benchmark research into the next generation of compensation management and also are assessing vendors and products in our 2016 Value Index.

Another area in human capital management where organizations are making significant improvement is workforce management. Advanced systems help them deal more Untitledefficiently with daily time and attendance, absence and time off, labor scheduling and even time clocks. Improvements to the pay process also are common. Our payroll optimization benchmark research finds that integration with payroll and time and attendance topped the list of priorities in more than half of organizations, but the benefit most often achieved is improved efficiency, for 53 percent of organizations. This is a topic that we have researched thoroughly; it is explained in this analyst perspective. In 2016 we will be conducting new benchmark research into workforce management for human capital management, which I have written about. We are also assessing vendors and their products for our 2016 Workforce Management Value Index to determine which companies you should consider for your organization.

Workforce planning has also expanded to be more relevant and routine for your organization to utilize. HR should track a range of activities including head count, salary and organizational planning that are needed to understand the personnel budget and its impact on the organization. Workforce planning historically has a strategic focus and for many companies is focused on the annual budgeting process in conjunction with Finance, but to optimize it requires planning to be part of weekly operations, where insight on people-related activities is always available for comparing actuals vs. budget. Our next-generation business planning research shows that workforce planning is most important to 23 percent of organizations and second-most important to another 30 percent. Yet almost half (46%) of organizations use spreadsheets alone or with other applications, which our research repeatedly shows creates impediments to the planning process. But remember that workforce planning is the ability to model and plan the future and not just review information about the future.

A key tool for workforce planning is human capital analytics, which can produce metrics and key people indicators that effectively assess the processes, performance and potential risks related to the workforce. But many vendors show a dashboard of charts that maybe interesting but are not readily evident what to do and not able to take action on them which has the highest level of importance in 78 percent of our organizations according to our human capital analytics benchmark research. Look for analytics that are more than just a presentation but provide context and help make the information self-evident on what it means and what might be the steps needed to be taken. Organizations that take the engagement and retention of their workforce very seriously are applying predictive analytics to determine how likely candidates are to be engaged workers or which current workers are at risk of flight. Our latest research in predictive analytics found that only 15 percent of HR organizations use predictive analytics, but one in five said they are planning to use it by the end of 2016 and a little more than that are evaluating it. Related to workforce analytics is the use of big data regarding employees; the historical context of the workforce can be valuable, and our data and analytics in the cloud research finds that HCM or employee information is an important category in more than one-fifth (21%) of organizations.

For human capital management to progress, we believe it must become more unified with the enterprise resource planning (ERP) requirements that are led by Finance and the CFO. Having HR and finance leadership use a common set of applications and information can facilitate effective planning and performance across the organization. In many organizations, HR reports to the Office of Finance, but the two don’t work well together for a variety of reasons, in some cases due to the lack of consistency and availability of information from human capital management processes and applications. Over the last decade, the disparate nature of the applications supporting HCM has increased the need for HR and Finance to work in concert. This has led to a re-examination of the processing and supporting applications to identify a more unified and streamlined approach. Unifying the human resources management system (HRMS) and the supporting talent and workforce management applications can reduce duplication of efforts by creating a consistent employee master record and ensuring that policies and regulations are adhered to. This becomes essential especially to address a range of regulatory compliance requirements that should be more automated and a standard part of the HRMS systems. Organizations will have to look more closely to determine if the promises of vendors for an integrated approach for HR and accounting in ERP are a reality or part of a future roadmap. We expect to gain more insight on the overall direction with HRMS in our upcoming research, which I have described. One area of talent management that needs unification is the recruiting, hiring and onboarding steps that interface to the HRMS; organizations should have a seamless and engaging experience that guides a new hire to become an effective worker. Onboarding and engaging candidates and existing employees for new roles is where your organization can differentiate your employee experience and ensure you are setting a positive trajectory in your workforce. is We will investigate the next generation of talent management suites of applications that are not just more integrated and streamlined in performing activities but also how they integrate and in some cases include HRMS and payroll systems.

Many organizations use a disparate set of applications from different vendors that operate vr_DAC_08_types_of_data_integration_processeson-premises and in cloud computing environments for human capital management; the only path to manage across these environments is application integration accompanied by data integration that unifies employee and related data for analytics and planning. As our data and analytics in the cloud research demonstrates, such integration is a growing point of need now and into 2017. Organizations should realize there is no such thing in just turning the light switch on and converting, and that the migration and time required can take some time. In any transition of applications and the ability to operate in a mixed vendor and computing environment should have a dedicated approach to using application and data integration. Thankfully some vendors are doing more than just providing lip service to this need and have partnered and in some cased embedded dedicated integration technology.

If you have made it this far, you probably can tell that unifying HCM divide is no easy feat; most current environments offer many challenges. As pointed out in my recent digital technology business agenda for 2016, there has never been a better time to undertake a reorganization of HCM processes and systems. While many industry observers pontificate about HCM with little or no research behind them nor expertise in applying applications and information to business, we have outlined succinct steps that can help you can take immediate action to improve your efforts. It is not just about renting applications in the cloud and believing that it will magically work. As we have seen in the past with software that if it is not usable and manageable by business, it will not matter, and your evaluation and selection needs to be much more than looking at the vision and execution of vendors. If you do not have an HCM technology portfolio manager guiding your direction, please let me know. HR leaders should also work with finance and set a strategy for the right level of investment that like an insurance policy for your people will maximize the potential of your workforce. We can help ensure that your organization is not left behind in recruiting, engaging and retain the talent in the best possible employee experience  and derive the optimal performance from every worker.

Regards,

Mark Smith

CEO and Chief Research Office

Digital Technology Agenda for Business in 2016

Technology innovation is accelerating faster than companies can keep up with. Many feel pressure to adopt new strategies that technology makes possible and find the resources required for necessary investments. In 2015 our research and analysis revealed many organizations upgrading key business applications to operate in the cloud and some enabling access to information for employees through mobile devices. Despite these steps, we find significant levels of digital disruption impacting every line of business. In our series of research agendas for 2016 we outline the areas of technology that organizations need to understand if they hope to optimize their business processes and empower their employees to handle tasks and make decisions effectively. Every industry, line of business and IT department will need to be aware of how new technology can provide opportunities to get ahead of, or at least keep up with, their competitors and focus on achieving the most effective outcomes.

Let’s review the digital disruptions that are impacting businesses of every size in any industry.

Analytics is at the top of the list. It has become indispensable not just for measuring performance and efficiency but also for guiding effective actions that make critical differences in an organization. Once just an ad hoc part of business intelligence efforts, analytics now can have a continuous role in Untitledstreamlining business processes. Historical analysis – measuring the past to inform the present – is no longer sufficient; looking forward with predictive analytics can help organizations anticipate future behavior and outcomes. Our benchmark research on predictive analytics shows that nearly half (49%) of organizations expect to gain significant impact from utilizing it, and another one-third (32%) said it can have transformational impact.

However, to develop continuous analytics organizations first must prepare for use the data to be analyzed. Typically this requires significant amounts of time from analysts, data and vr_DAC_20_justification_for_data_preparationoperations professionals – time that could be used more productively. Today they can regain that time by using data preparation tools designed for this purpose. In 2016 we will perform in-depth market research on data preparation to assess the variety of ways in which it is used and where it can offer the greatest benefit to analytics and operations. Our research in 2015 found that preparing data for analysis is the most common impediment in the analytics process for more than half (55%) of organizations, as it has been for the past five years. We also will conduct and publish new research on the role of analytics in the sales, finance and human resources functions. In these and other lines of business we assert that organizations must develop competencies in analytics and begin using them continuously to improve their performance and competitiveness. Look at your own organization to determine if you have made analytics a priority and is being used effectively.

Another precursor to continuous analytics is collecting and processing what is commonly called big data, the huge volumes and broad variety of data that organizations encounter. Advances in computing technology including in-memory processing and storage of big data are now cost-effective and can be readily accessed and used through cloud computing. Because not all data is the same, ranging from structured data to unstructured content, documents and text, how businesses vr_DAC_07_importance_of_external_data_sourcesmanage their information assets is just as important as the guidance they receive from analyzing them. To further investigate the impact of big data on business, we will perform new benchmark research to determine where investment can have the greatest impact in terms of value and time savings. Managing data effectively enables organizations to optimize their information, and there are other sources of data that can add to what they know. My colleague Robert Kugel has named this “cryptic data”; typically it is out of reach of business users, tucked away on the Internet and in external sources, but accessing it could enrich the value of existing information and analytics. Last year our data and analytics in the cloud benchmark research found that Internet information sources are important to 42 percent of organizations.

It is important to remember that big data is not just about data management but also about how it is interconnected and used for business purposes. Industry jargon that isolates it in “data lakes” and other ridiculous terms do a disservice to its full potential for analytics and any range of applications, extending even to advances in the Internet of Things (IoT), which connects whole networks and myriad devices to each other.   Beyond this data science has intersected with expert systems to produce cognitive computing systems that can learn from past and present decisions and interactions to answer questions in natural language and guide decisions to optimal results.

In the excitement over big data and analytics it’s easy to forget that they are useful only when people work with them, and businesses rely on their people to interact and collaborate to reach agreement or better understand opportunities and situations to be resolved. Through a new generation of digital technologies, workers and managers alike can engage in discussions interactively online, through videoconferences that can share applications and presentations and with mobile technologies that make it simpler to collaborate at any time from any place. Our next-generation learning management benchmark research found that social collaboration is critical for more than half of organizations to share learning socially through activity streams. Technology enables even digital “town hall” meetings in which workers anywhere on the planet join in interactive scdiscussions. But collaborative technologies must be used in context of business processes that rely on business applications in which information must be shared, assessed and acted upon to achieve specific goals. Thus the idea of embedding collaboration in business application is taking hold among large application providers, although some just make it available separately. Our research in the past several years has identified collaboration as one of the most widely recognized digital technologies to advance business processes; for example, more than one-third (38%) of participants in our data and analytics in the cloud research are using it, although fewer than that (30%) are satisfied with how they collaborate, which is not surprising when many are still using email as the primary mode of collaboration. The good news is that new methods are gaining traction: Almost half (47%) are planning to use or are evaluating discussion forums, and nearly as many (48%) are interested in wall posting. New research we’ll produce in 2016 will identify the further adoption of collaboration and best practices in contact centers, sales, human resources and finance groups. Furthermore, to better engage workers in the organization, a new generation of digital feedback techniques used in consumer applications for easy-to-rate feedback is migrating into business. In general collaboration using digital techniques is still one of the most underutilized methods in organizations, but it can have large returns on investment since it engages and should motivate workforces to interact with others and management.

Another major new digital technology that has reshaped the way organizations use information is cloud computing, which enables applications or services to operate beyond an enterprise’s own premises. It can help organizations simplify access to and use of software by removing barriers of resources and vr_DAC_04_widespread_use_of_cloud_based_analyticsskills, allowing any size of organization to exceed its previous computing capabilities. Simplifying the ability to onboard a range of software whether business applications or other tools and to manage them easily in any area of business in conjunction with IT policies provides a radically faster time to value. We have also seen this in the use of analytics, as almost half of organizations in our data and analytics in the cloud research already use cloud-based analytics in some manner and another one-fifth (19%) will use it in the next year. Now organizations are shifting to integrating business applications in the cloud and in the enterprise, a process that requires integration software designed to help streamline interoperability. Underlying this transition of business computing is a movement toward the platform as a service (PaaS) and messaging that interconnects business and consumers in a range of cloud environments – public, private and hybrid. The enterprise architecture of the future is centered in the cloud; much of the software industry has shifted to this approach, and business organizations will be required to adapt or be left using and managing their own software. It is only a matter of time until they will not have a choice as new applications are rapidly becoming available only in the cloud.

Until recently many businesses have worried about the security of systems they don’t deploy and control themselves. Our data and analytics in the cloud benchmark research vr_DAC_13_impediments_to_deploying_cloud_based_analyticsshows that lack of confidence in security is still the most frequent impediment to deployment cloud-based analytics, in more than half (56%) of organizations. Arising from these worries is new digital technology designed to ensure cybersecurity and protect intellectual assets (systems, internal data and customer information) from being hacked and compromised. More than a few large-scale incidents have shown that such attacks can significantly impact not only financial profitability but an organization’s credibility. Alert organizations now realize that just protecting the network that connects their computers and systems is insufficient to ensure that the full range of threats is mitigated. For example, most organizations have not effectively inventoried and assessed their IT assets to identify outdated software that might have known cyber exposures that can create wormholes that work from inside the organization to the outside. Building on IT asset management is the ability to identify legacy systems that increase threats and put data at risk in databases or from systems and tools that access them from more than one location. Such vigilance requires a sophisticated set of technology that not only detects and responds to threats but can recommend and even act on cyber exposures before situations reach crisis levels. The data within databases and analytics also needs to be secured. This challenge will require a new generation of cyberintelligence that is managed directly by the CIO’s office and understood by business management.

As if all this was not complicated enough, now we have the Internet of Things (IoT) emerging. Devices, machines and networks that are interconnected to the Internet through sensors and messaging are no longer just for monitoring but also for interactive dialogues that notify and take action on threats or malfunctions. As we evolve to this technologically sophisticated world, even things we wear, from watches to certain types of clothing, also can provide information on business and personal activities that range from responding to requests to the wellness of individuals. The underlying connectivity comes from the use of Bluetooth and RFID for cellular or WiFi connections directly onto the Internet. As we find ways to miniaturize and embed sensors and related technology that can provide data, we also find that the processing is operating at the edge of the network and within machines, even automobiles. These Internet-level bots do not just operate at the edge of the network but can also transport themselves to where processing needs to happen. IoT will require applications that can monitor systems and also be used to manage monetization as in subscription to services and interact across any range of services. Such a change will require advanced skills in IoT analytics and capabilities for real-time processing; we call this the next generation of operational intelligence and are conducting new market research to determine the rate of innovation and emerging best practices in adoption of the technologies.

As we all can see, smartphones and tablets are vr_DAC_17_mobile_access_to_cloud_based_analyticseverywhere, connecting people and the Internet. The potential for businesses is enormous, and it will be a necessity for them to equip and support their workers and managers with applications that can easily operate on these devices. Unfortunately so far many business software applications and tools provide only lip service to using their capabilities; few of these vendors have a “mobile first” approach to supporting workforce effectiveness. Working across devices from Apple or Android has plenty of nuances, and many applications require a lot of “pinching” to interact with them rather dynamically sizing in response to the device on which it operates. Additionally, a new generation of notebooks that operate through touch screens and tablets that use Microsoft Windows is emerging. Giving ineffective software to mobile-enabled workers can lead to employee dissatisfaction and become a factor in why they leave an organization. Ensuring that mobile apps provide a contemporary user experience and easy usability is more important than just the app’s capabilities; don’t listen to analyst firms that rate them on the number of customers or amount of revenue they have generated. Such recommendations have led many organizations to select the wrong software and weaken themselves for years to come. With new research in 2016 we will continue our decade-long analysis of the mobile revolution and its impact on business; we advise that embracing mobile-ready applications is essential to maximize the value of the workforce.

Mobile technology advances have paved the way for a new generation of wearable devices, most evidently the new kind of watch, which is now ready for businesses to use to consume and act on information and make decisions. Wearables can support business productivity by increasing the responsiveness of individuals in any role. A new generation of smart watches that are easier for technology providers to integrate with business applications is available and will begin to establish new workflow and interactivity capabilities. Our upcoming research into the new generation of human resources management systems (HRMSs) and into workforce management will assess the demand for these applications. This generation of wearables will come with location information that can be used to promote situational awareness and be optimized for a variety of uses. For many organizations and workers, using wearables provides immediate visibility on the wellness of individuals that not just helps the individual maintain personal health but helps organizations ensure that workers are able to conduct their job responsibilities in ways that minimize risk and ensure safety.

As you see, this will be a big year for technology and potentially just as big a one for business in learning to take advantage of these advances. We have put together a formalized set of research agendas covering all of these areas for more depth on our direction in 2016. Please rely on Ventana Research to help guide you in understanding the challenges and making the decisions that will serve your organization best.

Regards,

Mark Smith

CEO and Chief Research Officer