The Outlook for HR in 2019

Talent and technology gaps threaten to hold back HR’s performance and contribution to the business

Our 2019 Key Issues Study findings indicate that HR organizations are making progress on improving some critical capabilities. But large gaps remain. Established and emerging digital technologies are being explored as ways to help, although most organizations are off to a slow start. A majority, however, expect to have accomplished their digital transformation in two to three years.

Key takeaways from the study:

1. Margin improvement is the top enterprise financial priority: The percentage of respondents rating margin improvement as a top priority jumped 70% since last year. With growth prospects diminishing, companies will be scrutinizing all aspects of their operations to squeeze out greater profits. For HR, this means making sure it is visibly contributing to increasing the enterprise bottom line.
2. HR budgets and headcounts remain flat: HR budgets and headcounts are expected to decrease .02% and .04% respectively. This means HR must find ways to do more with less or to find ways to redeploy resources performing lower value activities to higher value work. Technology is a big lever.
3. HR organizations remain largely behind the curve in addressing issues that are central to achieving the most important enterprise goals: HR is falling short in tackling important people-related business issues pertaining to the characteristics of leaders, successful pursuit of business goals, enterprise change and marketplace initiatives and critical skills.
4. HR technology, talent and processes need critical development: HR’s most critical development areas are wide ranging including technology, skills, process excellence, talent management and analytics. The good news is that HR recognizes these shortcomings; the bad news is that less than a third have major improvement initiatives planned to close these gaps.
5. Major planned improvement initiatives fall short: Supporting enterprise digital transformation is the only improvement priority targeted by a near majority of respondents for major initiatives in 2019. Others such as finding solutions to critical skills shortages, retaining key staff and strategy execution will not receive the attention they need.
6. Digital transformation has yet to have a major impact on many HR organizations: About one-third of HR organizations have used digital transformation to significantly improve their service delivery models and performance. This number is expected to rise to well over 50% in the next 2-3 years.
7. The pace of digital technology adoption is expected to increase: The biggest gains are projected in core ERP platforms, robotic process automation and virtual digital assistants/chatbots. Cloud-based business applications, mobile computing and social media/collaboration are all in use by more than half of respondents. Their adoption is slated to rise to the 70% range in the next one to two years.

Overall, HR organizations continue to struggle to keep up with persistent demands for upgrades in a wide range of critical capabilities. Most do not have the capacity to implement all the improvements needed. Fixing these shortcomings will take a multiyear effort, making it essential to have a long-term plan of action aimed at addressing the full range of improvement opportunities. While priority should be given to closing the most critical gaps, attention should also be paid to high-leverage change enablers – including technology, information, process, skills and culture – that can accelerate improvements across multiple critical development areas.

Note – The Hackett Group’s 2019 HR Key Issues research is available on a complimentary basis, with registration, at this link: http://go.poweredbyhackett.com/keyissueshr19q1blog