Provider Perspective: HCM Software Digital World Class® Matrix – Transcript

Harry Osle:                        

So by digging into the strengths and weaknesses of the major HCM vendors in the marketplace, we’re really providing our clients with this unique intelligence so they can then better determine which of these vendors is a better fit for them. And if they’re a current vendor, how do they take advantage of some of the strengths that these vendors have?

Announcer:                       

Welcome to The Hackett Group’s “Business Excelleration Podcast.” Week after week, you’ll hear from top experts on how to achieve Digital World Class® performance.

Andy Warzecha:              

Hello, and welcome to The Hackett Group’s “Business Excelleration Podcast.” I’m your host, Andy Warzecha. I’m a principal and the Advisory practice leader here at The Hackett Group. Today we’re going to be talking about our Digital World Class Matrix™ specific to human capital management. I’ve got a couple of guests that are joining me here today. My first guest is Harry Osle. Harry is a principal and our global lead for HR and Payroll. Harry also wears two hats in that he’s The Hackett Group’s chief human resources officer as well. I also have Matt Merker joining us, who’s a senior director in our Market Intelligence practice specific to the HR area. And let’s get rolling. So specifically when we look at the human capital management study, we ended up producing this study based upon a request from a lot of our clients. There’s an awful lot of studies out there that take a look at pieces of this space, but the request that we actually had from our members was to really look at this holistically.

So looking at the three core areas of reward to exit, time to pay, and talent management – and the providers that are actually providing those within their offerings – so let me start. Harry, what is unique about this study? What’s different?

Harry Osle:                        

Well, first of all, Andy, thank you for having us on this podcast. I think it’s a very unique study. I’ll first start with… I think what’s incredibly unique about this study is that it focuses on one of the key levers that HR organizations have today – to be able to drive higher engagement, increase functional capacity and really deliver strategic value to the businesses, which is always and should be always one of HR’s key focus areas, and that is really technology. That’s one of the key levers that HR can utilize to drive these higher-value activities. In a time when HR is constantly trying to really do more with less, and we’ve seen that across the numbers, and it’s really part of the study that we’re speaking about today, HCM technology – or human capital management technology – offers a platform to really address that productivity gap.

So by digging into the strengths and weaknesses of the major HCM vendors in the marketplace, we’re really providing our clients with this unique intelligence so they can then better determine which of these vendors is a better fit for them. And if they’re a current vendor, how do they take advantage of some of those strengths that these vendors have? If they’re not – if they’re looking for them to be a vendor in the future – are they a better fit for them because not every vendor is the same, right? They’re all kind of unique, and they all have their strengths and weaknesses. So it allows us to provide this intelligence to our clients and in the marketplace to make sure they understand what these strengths and weaknesses are, and which of these vendors is a better fit for them.

Andy Warzecha:              

So Matt, can you talk a little bit about the approach that we took? What kind of rigor was required?

Matt Merker:                   

Sure. Hackett was pretty thorough in its approach to gathering information. The scope of end-to-end human capital management across reward to exit, time to pay and talent management is quite broad, which necessitated quite a bit of information gathering. Hackett achieved this through four key pillars – RFIs populated by the participating vendors; in-depth briefings with those vendors; the existing knowledge base we have here in Hackett across our Market Intelligence, Advisory and Transformation practices; and perhaps most importantly, multiple customer interviews for all vendors covered in the study. So one area where Hackett targets differentiation versus the traditional analyst firm is the true deep dive into the return on investment. How are vendors truly moving the needle for their clients and performance? And through those customer interviews, Hackett was able to get a deep understanding of the impacts on key metrics, such as workload reduction, cycle times, data accuracy, among others. But truly across these four pillars of data gathering and analysis, Hackett was able to go beyond the marketing messaging of HCM providers and get to the core of their value and understand the differentiators and the similarities among the vendors covered in the study.

Andy Warzecha:              

Thanks, Matt. Harry, back to you. What were the key takeaways?

Harry Osle:                        

The key takeaways are that there are differences across the HCM vendors – the human capital management vendors – in the areas of workload reduction. Really, how does the software help HR work smarter? No. 2 is cost reduction in optimized processes. That’s really around how well does the HCM platform help automate and increase optimization through its inherent workflow. And No. 3, improve the integrations and data reliability. How well does the HCM platform help drive accurate data and key information to provide insights to do HR for HR and HR for the businesses? Those are really the key takeaways. And in those differences is how we then utilize that – to Matt’s earlier point – to decipher whether these vendors are in that Digital World Class® stage, which ones are in that kind of innovative stage, and which ones are in that challenger stage and emerging stage. It starts to differentiate these vendors, again, with their specific strengths and weaknesses across those three dimensions of workload reduction, cost reduction and optimized processes, and improved integrations and data for reliability.

Andy Warzecha:              

So let’s continue to drill on that a little bit. Matt, can you talk a little bit more about how the providers are differentiating themselves?

Matt Merker:                   

Sure. So some key criteria that was derived as differentiating includes areas such as the ability to scale solutions for both global and local clients. So a true understanding of a client’s needs and not simply throwing the kitchen sink of solutions really resonated with customers and demonstrated a genuine interest on the part of those vendors to do right by their clients. This promotes brand loyalty and really helps them build their customer base as they’re really thinking about what do their customers really need? Are they providing everything that they need or are they providing too much, too little, etc.? A really important piece for the customer, and perhaps something that is often not given the attention it deserves, is the quality of the user interface as well. Solutions may be in-depth and effective, but if navigating those solutions is cumbersome, it hurts adoption among the user base, and ultimately the optimal ROI potential it has. So vendors that took the time to think about the user journey and usage of the platform really stood out to customers. And the last thing I’ll touch on is the usage of emerging technologies. So improved automation, intuitive processes, and the embrace of new technology applications in artificial intelligence – among other things – really made a difference for customers in their vendor selection, and ultimately their satisfaction.

Andy Warzecha:              

So let’s keep on that theme in terms of emerging technology. There’s an awful lot going around on generative AI and AI from these solution providers today, and actually well beyond the payroll and human resources area as well. We at The Hackett Group believe this is an organizational imperative where really the executives – the leaders in the organizations – need to take a stance and lead and not follow what’s happening. What we mean by that is really going beyond just what the vendors are applying in terms of their own technology and looking for opportunities to not just have incremental changes, but look at where things could be transformative or breakthrough in terms of the benefits being provided.

So there’s a general desire to capture knowledge around use cases, but really looking at those use cases strategically, prioritizing across the organization or in a domain, for example, a chief human resources officer really leading the opportunities around the HR functions and looking at what’s going to make the biggest difference, and be able to help transform the organization as these technologies become available – both through the vendors that we’re talking about in the study and other techniques that may be possible as well.

So let’s go a little bit deeper on that. Matt, if you wouldn’t mind, spend a few minutes talking a little bit about what we saw from the vendors and what they’re providing in the generative AI and AI domain.

Matt Merker:                   

Sure. So on the front end, I definitely agree, Andy. I think that there’s a ton of potential for AI applications within HR, and I feel like it’s only just now really starting to roll and get started. Hackett research has shown that HR professionals workload is continually increasing year over year, when in many cases, the operating budgets for those divisions is remaining flat, if not reducing. So the usage of AI can really be a game-changer here for HR professionals that are getting buried with administrative tasks. And while we are seeing AI applications cropping up across the end-to-end HCM technology suite, they appear to be most prevalent in the talent management space, which includes areas such as talent acquisition, learning and development, and employee engagement – really the employee experience as well. So a few examples of use cases that we’re seeing include utilizing generative AI for job descriptions, skills assessment questionnaires, and course materials for learning.

AI-enabled chatbots are another area that continues to expand and evolve, providing employees with a means to quickly find information regarding their own employee records, as well as their HR company policies. Rather than reaching out to an HR business partner, for example, to understand PTO policies, an employee can simply ask the chatbot who can either answer the question directly, lead the employee to a document that outlines the policy, or even both. Now, our listeners may be saying, “Hey, chatbots have been around for quite some time. This isn’t new.” And they’d be right, but what’s changing is the improved accuracy of those chatbots that not only respond to direct requests, but can also intuit what some of the follow-on questions may be, thus improving the experience for the end-user employee.

And what this ultimately leads to is a reduction of administrative workload for HR, which allows that division to elevate itself within the organization by enabling more time to strategically think about the workforce. A critical goal identified by HR organizations in the past several years – and it’s been pretty constant – has been to elevate within their companies as strategic advisors, and we believe AI will be a powerful enabler for that goal.

Andy Warzecha:              

Harry, I’m curious, what do our customers think about this technology coming in?

Harry Osle:                        

It’s a great question. I would tell you, Andy, that they’re looking at the technology as a way … first, they’re a little timid about the technology. They don’t fully understand it. So one of the things that we’re helping out with our clients is, what does AI mean within the realms of HR? And Matt made some very, very good points, which is a lot of the vendors and some of these HR organizations that are a little bit more progressive on AI are looking at chat as one of the areas to drive more optimization and more engagement. It’s an easy enough use case to stand up. They have been around for a little bit, but to Matt’s earlier point, it can be a lot more intelligent, and it does drive 24/7 access to normal questions that associates or employees may have. So the engagement scores that we’re seeing out of those organizations is much higher – No. 1.

So it does increase the capacity for HR to do more strategic aspects. To the earlier point, which both Matt and I have made, HR organizations and their budgets have been flat. So what HR needs to be doing and what HR is struggling with is how do I increase the capacity of my team? And one of the ways to do that is through AI. Some of the use cases that Matt did point out are very, very prevalent, specifically around the talent acquisition side. I would say that there’s two areas – one in acquiring talent and finding talent out in the marketplace. That’s No. 1. And No. 2 is scheduling. One of the things that HR struggles with and where they lose great candidates is in the ability to schedule interviews in a very reliable, consistent way. And what we found even in our organization is that we we’re losing some great candidates in that process.

And AI is … there’s a specific use case and a great use case around how AI allows you to engage with these candidates early on, schedule them in a way that’s very engaging, and make that cycle a lot more efficient. So from what I’m seeing in the HR community is first a need to understand what this technology can and cannot do, and we do a great job in helping our clients educate them through this process. And then No. 2 is understand where are some use cases that are specific and small enough that they can at least get started and get a win through that process? Those are the two things that we’re seeing – how do I educate my team, and then where do I get started in a way that it’s easy enough for us to get a win?

Andy Warzecha:              

Thanks, Harry. And our listeners probably want to know where to find this research, so let me respond to that. For our existing customers, Hackett Connect™ has this readily available. You can search under the content type and look at Hackett Digital World Class Matrix™. These will all come up. For those of you that are not clients, you can go out to our public website – www.thehackettgroup.com. And on the main page there, you can look for Market Intelligence. Click on that tile, and you’ll see, as you scroll down, all of our reports that are available there. That is an abridged version of the report, but it will take you through the major findings that we have in the report – just not all of the metrics. Harry, I’m going to leave this last question to you. What actions should our listeners take away from this report?

Harry Osle:                        

Andy, I would say the actions to me are very, very clear. First, read and understand the study by diving into each of the solution profiles that are of interest to you. They may all be of interest, but there might be one that’s specific. Well, we’ve outlined the placement of each of the human capital management vendors, along with the product assessment across the three functional areas – reward to exit, time to pay and talent management. Second, formulate a set of questions you need further clarification on – on whether the vendor is a current HCM vendor that you have or a vendor that you may review in their capabilities for the future. And lastly, engage with us. Engage with The Hackett Group. If you’re a current Hackett client, please work with your account managers to set aside some one-on-one time session, and we’ll be happy to do a deep dive with you on a specific vendor and go through a study with you to understand, again, what are some of the needs that you have currently or in the future, and how do these vendors match up?

If you’re not a current client, please go to our website – www.thehackettgroup.com. And hey, contact me, and we’ll be happy – more than happy – to set up a one-on-one call to go through it with you as well.

Andy Warzecha:              

Matt and Harry, thank you for your time today. For our listeners, please feel free to engage, and thank you again for your time today.

Announcer:                       

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