Why Organizations Are Struggling to Realize ROI With HR Platforms
As organizations settle into new ways of working, many are starting to assess the value of technologies that were deployed in recent years.
A 2023 ISG survey of 150 organizations with 5,000 to 50,000 employees that have deployed HR SaaS technology shows that while most recognize the investments have led to administrative cost savings, the proportion of those that have been able to measure the business value of those investments dropped 18 percentage points, to 46%, from 64% in 2021.
Failure to adapt HR business processes (35%) and service delivery model (21%) when implementing new systems is the reason for the decline, the report states. But the problem, some say, may instead lie at the root of digital transformation efforts.
Digital Transformation Isn't Just Buying Tech
Digital transformation is more than investing in new technology. It implies rethinking processes and systems from the ground up to transform the organization, not just its tech stack.
Mauro Schiavon, Americas Oracle alliance leader at Deloitte Consulting, said if companies fail to measure the value of new technology on business success, it's likely because they haven't properly identified the benefits of investing in this kind of technology as part of their broader digital transformation process.
As workforces become more dynamic, social and team-based, Schiavon said it's more important than ever that organizations consider a holistic approach when investing in HR technology. Effective digital transformation requires a long-term commitment as well as an intense focus on incremental progress.
Over the past decade, many organizations have invested heavily in HR cloud technology without identifying the anticipated benefits, he said. “Part of the reason for these disappointing results is that technology needs to be viewed as an enabler of connectivity and belonging, not jut another solution or just a driver of financial value."
He said it's time for organizations to become more agile when embarking on a business-led, digitally enabled transformation. “Increasingly, HR should consider using human-centered design to architect solutions for longevity and adaptability and for maximizing employees' purpose, potential and perspective."
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The findings are not a surprise to Adriel Sanchez, chief marketing officer at digital adoption platform WalkMe, given the number of applications — in particular, HR technologies — that organizations have had to adopt over the past three years.
These investments have been driven by the so-called "future of work initiatives" and the advent of flexible and remote work environments, which require additional technologies to keep connected, he said.
“These well-intentioned investments have created a level of friction that we refer to as ‘software paralysis,’" he said. “The result is inefficiency, slowed productivity, employee burnout and a tech overload that too often works against what the organization was trying to achieve in the first place.”
He added that to get the value they expected from those HR tech investments, businesses need to have visibility into all the software that’s running, who’s using it and whether it’s being used as intended. Only by doing that, he said, can organizations pinpoint the real inefficiencies and friction points in their workflows, manage the constant change that’s become the enterprise norm and deploy people-first experiences that help their employees when they need it most — in the flow of work and at the point of friction.
There is another issue, said Alexandre Robicquet, CEO and co-founder of AI firm Crossing Minds. Inefficient reporting metrics have become a problem for businesses struggling with ROI in HR tech.
Businesses need to measure HR initiatives at every level and at every efficiency, but long-term returns are where most companies struggle with ROI, he said. "By measuring the initiatives better, a business gets a more holistic and accurate sense of each initiative’s impact,” he said. “Doing so can also find intangible benefits better, on top of direct dollar ROI.”
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Human Intervention and ROI
Sean Thrun, strategic initiatives manager with global employee relocation management company WHR Global, has observed a trend toward HR SaaS platforms but notes two main reasons why the benefits haven’t materialized into clear business value.
1. Human Intervention
When technical issues or glitches occur with the HR SaaS technology, it often falls upon the HR team to intervene and resolve the problems, Thrun said. “This manual intervention can negate any anticipated measurable value derived from shifting to an HR SaaS platform."
While the platform aims to streamline processes and reduce reliance on human effort, Thrun said the necessity for HR teams to step in when issues arise undermines the cost-saving potential.
2. Measuring ROI with HR Platforms
Measuring value and ROI with any HR platform, including SaaS, can be inherently challenging. The business value of HR SaaS platforms is determined by the success rate in achieving business goals assignments.
But HR processes encompass various qualitative aspects that are not easily quantifiable, such as employee satisfaction, attraction, engagement and retention. “Consequently, it becomes difficult to attribute specific cost savings or business value solely to the implementation of HR SaaS technology,” Thrun said.
To overcome these challenges, he recommends businesses address the technical reliability of HR SaaS platforms and ensure they have robust (oftentimes human) support systems in place. Defining and tracking key performance indicators that align with the organization's HR goals can also help measure the impact and ROI of HR platforms more effectively.
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Keeping Up With Technology
The ISG report shows that a large number of organizations that have moved their HR technology to the cloud continue to struggle to keep up with the pace of change in the HR tech landscape.
These organizations are not fulfilling the potential of the technology because in many cases, the report said, they are failing to invest in new technology/enhancements or optimize their HR technology model.
“To achieve better business value, organizations will need to become more adept at aligning their technology strategy to their business strategy, budgeting for ongoing improvements and continually evaluate new technology,” the report reads.
About the Author
David is a European-based journalist of 35 years who has spent the last 15 following the development of workplace technologies, from the early days of document management, enterprise content management and content services. Now, with the development of new remote and hybrid work models, he covers the evolution of technologies that enable collaboration, communications and work and has recently spent a great deal of time exploring the far reaches of AI, generative AI and General AI.