As the ink dries on HR budgets for 2024, one thing is clear: the HR technology line item is on the rise. According to a recent Gartner survey, "89% of HR leaders plan to increase or maintain their HR technology budget in 2024". Is this a reflection of technology's increasingly critical role in HR, or does it stem from the proliferation of technology options? We often see that the rush to adopt new technology in the hopes of “fixing” enduring HR challenges like process efficiency, actionable analytics, and the digital employee experience can result in an expensive and fragmented HR technology ecosystem.
The business tolerance for any lack of tangible ROI around HR investments is likely to be especially low in 2024, as many companies buckle down to manage costs in an uncertain economic environment. If you are one of the HR budget holders with exciting and ambitious plans for your HR technology ecosystem in 2024, make sure you are set up for success and maximize your ROI by incorporating these strategies as you plan to implement any new or enhanced HR technology.
1. Understand Your Organizational Appetite for HR Technology
Every company culture is different, but what is true across the board is that leadership sets the tone for behavioral expectations, and that includes how the organization is expected to leverage technology for communication, collaboration, and increased efficiency. At the outset of any HR technology implementation, HR leaders and their executive teams must determine their organization's appetite for HR technology investment and expectations for its utilization.
For some it is worth the investment because it supports the company culture and the likelihood of adoption is high. For others, the ROI simply might not yet be there if the investment does not align with the industry, size, and culture of the organization. Either way, the leadership team needs to stack hands and drive the adoption needed to achieve ROI.
2. Make Sure Your Leadership is Aligned with Your HR Technology Strategy
Establishing a strategy and guiding principles provides an anchor against which to make HR technology decisions and ensures you can justify your investment choices. Areas to get alignment early on include:
When to choose best-of-breed solutions versus leveraging core Human Capital Management (HCM) systems like Workday.
The desired employee experience and the degree of employee self-help and technology-enabled processes versus more high-touch service or equipping managers to be the front-line support for employees.
The level of shared enterprise systems and/or integration with systems such as your ERP, financial systems, and IT systems like active directory.
3. Be Prepared for the Cost of Complexity
HR leaders need to be upfront with their leadership about the costs associated with complex HR processes. More complexity and variety in HR policies, processes, and programs across the enterprise often leads to more complexity in technology requirements, resulting in higher costs to build and maintain, so it's important that business leadership understands the implications on your technology investment or is willing to do the hard work to reduce complexity as much as possible.
4. Build for the Future
Whether you are implementing a new Core Human Capital Management system or a technology dedicated to a specific part of the employee journey, the investment can be significant not only in terms of cost but also time and resources. The last thing you want to do is build something for today that you then need to spend more to change for tomorrow.
Make sure the choices you make today consider the changes you expect in the future, such as global growth, structural changes to your compensation programs, expectations for enterprise data integration, etc. For example, how you build foundational infrastructure components such as your organization, location, cost center, and job hierarchy can have significant implications on your technology agility in the future.
5. Don’t Forget About the People Investment
The achievement of technology ROI has just as much to do with the investment in the team and resources to support the system as it does with a successful implementation. A system can rapidly fail to meet expectations if it hasn’t been properly maintained and managed. The unseen costs associated with a poorly implemented system, or worse the need for a “re-implementation” can be exponentially higher than making the right investment in the resources to maintain and continuously improve. Make sure you have the right skills and capability in your team and governance in place to protect your investment.
As we look towards 2024, the strategic management of technology investments will play an increasingly pivotal role in the success of the HR function. HR leaders must embrace this requirement and develop the skills and strategies needed within their teams to capitalize on technology investments so that their organizations remain competitive, efficient, and responsive to the changing dynamics of the modern workforce.