All CEOs are tasked with one universal goal: To keep costs down while achieving gains in efficiency and productivity. In our increasingly digital world, many business leaders are looking to HR to lead their digital transformation to realize this goal.
Gartner research shows 67% of business leaders agree their company must become significantly digitalized by 2020 to remain competitive. According to research presented at Gartner ReimagineHR 2018 in Orlando, FL., the focus on digitalization extends to investors as well; CEO mentions of “digital” on earnings calls have increased 20% year-over-year since 2010.
Heads of HR are under extreme pressure right now to realize the promise digitalization has to offer
“HR departments are facing a tall order, to not only lead the digital transformation of their company, but to also satisfy the desires of the CEO and the workforce,” said Brian Kropp, Group Vice President, Gartner HR practice.
For many organizations, the five macro strategies the HR function is expected to employ to lead digital transformation are:
- Attract more digital candidates
- Gain better insights about employees
- Coach managers to develop the digital capabilities of their team
- Improve technology to drive employee self-service at work
- Evolve performance management
While CEOs are looking at how digitalization can improve the bottom line, employees are expecting digital advances to make it easier to complete routine tasks — from expense reports to performance reviews.
State of the labor market
Delivering on these expectations is critical given the state of the labor market, which includes decreased employee effort amid some of the lowest unemployment numbers in recent history. According to Gartner research, the number of employees who are willing to go above and beyond the call of duty in the workplace has declined significantly, both globally and in North America. In 3Q18, only 17% of North American employees reported high levels of discretionary effort, down from 26% in 2013. Globally, a mere 14% of employees reported high levels of discretionary effort in 3Q18, six percentage points lower than in 2013.
Read more: Are Your Employees Quitting in Their Seats?
“Given that the US and UK both reported a 3.9% unemployment rate in the second quarter of 2018, labor markets are the tightest they’ve been for some time,” said Kropp. “For most organizations, talent is the single biggest overhead expense — and the biggest competitive advantage. Heads of HR are under extreme pressure right now to realize the promise digitalization has to offer, both in terms of the business and employee experience.”
Avoid the pitfalls
Though the advantages of digitalization are many, there are still challenges that organizations will need to address. For example, while digitalization does make work more connected, it also pushes managers farther away from work. Responding to a Gartner survey, only 18% of employees reported having managers who understand what they do at work.
Connector managers triple the likelihood that their direct reports are high performers
Leading organizations are responding by changing how they develop managers. They’re moving from the “Always On” manager approach — someone who commits to constant employee coaching and development — to building “Connector managers,” who foster meaningful connections among employees, teams and the organization to develop an employee’s specific capabilities. Gartner research finds that Connector managers triple the likelihood that their direct reports are high performers, and increase employee engagement by up to 40%.
Performance reviews are another facet of business that digitalization can impact. If just reading the words “performance reviews” sent a shiver down your spine, you are in good company. Gartner research finds fewer than 40% of CHROs find their performance management process effective, and most employees feel similarly — only 33% of employees agree performance management keeps pace with business needs.
Rather than simply adding a new simplified performance management technology solution to the mix, HR leaders who really want to improve this area are focusing on goaling. Ultimately, ensuring employees are setting goals effectively is more than twice as impactful at increasing performance management effectiveness versus simply changing performance management processes.