HR Digital Transformation: Step-by-Step Strategy with Examples

A survey shows that 87% of senior business leaders think that digitalization is a priority in a company.

Digitalization uses digital technologies to improve business processes. This process is related to digital transformation, a more holistic change that is creating a buzz, especially in HR functions.

Digital transformation for HR is not only focused on improving the process, but also the entire business strategy. Its goal is to have data-driven and employee-centric HR decisions and practices.

Read on to learn more about HR digital transformation, its stages, benefits and challenges, examples, and steps on how to create a digital HR strategy.

What is HR digital transformation?

HR digital transformation is the process of converting manual HR operations into digitalized versions. This enables faster, smoother, and more efficient handling of tasks for the HR department.

Digital transformation has several components. Here is a list of them:

• Using AI technology to automate repetitive tasks and processes

• Having data analytics to gain insights on the current job market and employee trends for strategic decisions

• Centering on employee experience for a smoother and satisfactory transition

• Enhancing skills and capabilities in digital tools and data analytics to effectively leverage the HR digital strategy

• Practicing effective leadership to ensure the digital plans prioritize company objectives, a better HR system, and a good employee experience

To ensure seamless integration of HR information systems, use the HR Technology Integration feature of Compensation Software. It is a compact solution with up-to-date data, secured portals, comprehensive documentation, and insights to current job market and pay practices.

Stages of HR digital transformation

Digital transformation in HR goes through several phases before it becomes an asset in the company. Here are six stages of digital transformation for HR:

• Stage 1: Business as usual

  This is the initial stage where HR relies on manual and paperwork processes, such as for recruitment, payroll, and administrative tasks.

• Stage 2: Present and active

  HR is starting to recognize and apply basic digital tools and platforms for employee records, performance evaluation, and communication.

• Stage 3: Formalized

  Experimentation and investment in more digital tools and transformation processes are supported. HR uses data analytics to understand job market trends and formulate roadmaps and data-driven decision-making.

• Stage 4: Strategic

  In this stage, there is an intensive incorporation of automated HR processes and data analytics. Digital HR initiatives are a collaboration between multidisciplinary project teams.

• Stage 5: Converged

  The overall company strategy is now integrated with digital transformation. There is an exclusive team for digital transformation and a use of AI for succession planning and predictive analytics.

• Stage 6: Innovative and adaptive

  Digital transformation has become the new “business as usual” and digital processes are now a fundamental part of the company’s system. Opportunities for improvement and technological developments are being identified.

Benefits and challenges of HR digital transformation

Digital transformation comes with both advantages and disadvantages. Here are some of them:

Benefits

• Boosts employee experience: Employees can access HR services with the ease of digital tools, leading to a faster response, support, and information for the workforce.

• More efficient processes: Automation of HR processes mean letting go of manual and repetitive tasks, giving way to more effective allocation of time, effort, and resources.

• Enhances productivity: HR can do multiple tasks side by side. They can do other functions while using self-service systems for employees through digital tools.

• Data-driven decisions: Reporting and analytics provide workforce insights that can help HR make improvements and strategic decisions about recruitment, talent, and performance management.

• More attractive branding: When HR processes are seamlessly digitalized, it gives convenience to users, employees, and potential candidates. This enhances branding and attracts talent.

Challenges

• Inadequate HR skills: Handing digital tools requires skills to achieve its efficiency. Lack of qualified expertise can lead to unsuccessful digital transformation.

• Misuse of technology: HR professionals might only rely on generative AI for all their tasks, which may lead to ethical issues and improper usage.

• Overwhelming changes: The transition to a digital HR strategy might swamp employees with constant changes in workflow and technologies, causing change fatigue.

• Security and data concerns: Digital platforms are prone to security and data breach issues that can cause doubt about the integrity of the digital transformation.

• Outdated information systems: System updates are regularly needed, or else data will be inaccurate, and the supposed streamlined process will be slowed down.

Examples of HR digital transformation

Successful HR digital transformation is not only a concept. It has already been applied to many established companies. Here are some of its real-life examples:

• Microsoft

  Microsoft has integrated AI in their HR processes and started to build an HR tech ecosystem in 2023. They have tools that handle HR queries, aid in talent and recruitment strategies, and create summaries for HR agents to quickly resolve cases.

  By using their AI-powered solutions, they achieved a streamlined HR system and gained data insights that bring value to HR teams and create efficiency and employee satisfaction.

• IBM

  IBM has innovated its blockchain technology in 2023 to secure employee credentials. This information is only accessible to permissioned network participants with a tamper-proof system for all business processes.

  This tool provides trust and transparency as employee credentials are auditable, traceable, and verifiable with just a click on the platform.

  
• Salary.com

  Salary.com’s Compensation Management Software helps companies analyze pay practices through a reliable HR-reported database. HR professionals can create, edit, ang model salary structures that accurately reflect the current market.

  This AI technology allows the recruitment of talents through benchmarked salaries, swift decision-making through streamlined workflows, and easier participation through automated survey management.

How to create digital HR strategy

Digitalizing your HR processes is not an easy job. It takes careful steps to make the transition successful. Here is how to create a valuable digital HR strategy:

1. Step 1: Assess the current HR system.

   Visualize and map how the existing HR system works, including the management of work and data flows, recruitment, onboarding, performance, and employee records. Determine the weak spots of the process and identify which parts need the most digitalization.

2. Step 2: Establish objectives and metrics.

   Be guided by clear company goals to know the direction of your digital transformation. If the objective is to have an organized employee database or increasing worker’s productivity, align these with how you are going to go about the transition.

3. Step 3: Design a roadmap.

   A roadmap is a strategic and visual outline of company objectives, timeline, and key milestones. This serves as a guide on the step-by-step approach in digital strategy, where you do trial runs, gather data, and refine processes to ensure successful digital transformation.

4. Step 4: Build HR skills and team.

   The digital tools and technologies have no use if they are not adequately handled. To get the most out of the transformation, digital competencies must be guaranteed. Train HR employees to be comfortable with the tools and promote continuous learning to be constantly updated.

   After enhancing HR skills, build a multidisciplinary team, such as HR leaders, project managers, and IT specialists to reflect diverse functions and offer a holistic approach to digital transformation.

5. Step 5: Use data and analytics.

   HR data and analytics will optimize management in HR processes. For example, Compensation Software’s Analytics lets you collaborate across organization, locate and save reports, and access data and insights to make strategic talent, salary, and company decisions.

6. Step 6: Evaluate the performance.

   Digital strategy does not end with implementation. The digital HR transformation must be studied to measure its success and continuous improvement. Assign key performance indicators (KPI) that correlate with your company objectives and adjust HR strategies based on gathered data and feedback.

When you establish an effective digital transformation, it provides your company with a more robust business strategy that makes data-driven and employee-centric HR planning and decision- making.