HR Digital Transformation: Benefits, Stages, Digital HR Strategy and Common Challenges

The inefficiencies of paper-based processes and disconnected systems, as well as the routine administrative work for HR departments, can hinder their progress toward business development. HR Digital Transformation offers businesses a way to automate, provide integration via technology, and make decisions based on data to help them move past such barriers. 

In this guide, you will find answers to several questions regarding HR digital transformation, which includes its benefits, stages of digital HR transformation, and some typical challenges businesses will experience in the transition phase. 

What is HR Digital Transformation?

The definition of an HR digital transformation can be summed up as the use of technology to transform human resources into a highly effective and data-driven system. 

The actual process of how HR does their job changes, rather than which tools they use. Traditional methods of working for HR include using paper-based applications, spreadsheets, and filing employee documentation physically. Digital transformation eliminates those processes by creating integrated systems. Instead of having to have each piece of information located in separate places, all of this is now contained within the same system. 

If you are requesting time off from your employer, the approval process simply requires a single mouse click. That one action will also update your payroll records, so there is no need to send out an email chain.

Benefits of Digital Transformation in HR

The main advantages include faster processing by HR, less opportunity for error, more effective use of HR information to make informed decisions, and a better employee experience. 

Time Saved on Repetitive Tasks 

Onboarding documents, the leave approval process, requesting documents, and running payroll that took several business days can now occur within minutes. 

For example, a new hire completes their onboarding paperwork prior to their start date as opposed to spending the majority of their first morning completing paperwork. Multiply this time savings per month into hundreds of hours of HR time available annually. 

Fewer Human Errors 

Manual data entry into multiple spreadsheets is the largest source of payroll and compliance problems. One single typographical error in a pay rate field or failure to update a record can create payroll disputes or generate compliance flags. 

Automated systems pull from one database, so the numbers are consistent. 

Data-Based Decision Making 

With accurate and centralized HR data, HR professionals are able to identify possible trends or patterns indicative of future employee turnover or lack of required skills before those issues become a crisis. With the help of digital guidance, HR can spend time developing strategies for retaining employees that actually work. 

Enhanced Employee Experience 

Digital portals allow employees to review their remaining paid vacation time and pay slips and help them to modify personal data without having to send an email request to the HR department. It cuts down the time spent messaging in a dedicated group regarding some information and waiting forever to respond. 

HR Shifts from Administrative to Strategic

When routine work is automated, HR teams get the space to focus on culture, retention, and workforce planning, which actually moves any business forward. Additionally, HR demonstrates that its work positively impacts business operations through documented data. 

4 Stages of HR Digital Transformation

There are about four general stages an organization would go through. The first is digitizing their documents or employee files, then automating the processes they used for those documents or employee files; the third is integrating all of these different systems together. Last but not least, utilizing the data from those integrated systems to make strategic decisions utilizing AI. 

Stage 1: Digitization

Digitization is simply taking paper files, manual attendance books, and any other non-digital forms of employee records and putting them in digital format. Just having your employee files digitally formatted does not save you much time; it only allows the information to be searched for and backed up, as opposed to being stored in a filing cabinet.

Stage 2: Automation

Once your employee records have been put in a digital format, the next step is to automate the workflow associated with them. For example, leave approvals, onboarding checklists, payroll runs, and reminders via email. At this point in time, the HR department will begin to see real-time cost savings from automation since the majority of the repetitive tasks no longer require a person to perform them.

Stage 3: Integration

Automating within individual tools is great; however, automation is only effective when those tools can collaborate with each other. Integration ties all of the various tools that the HR department uses, such as an applicant tracking system, payroll, performance management, etc., together, allowing smooth data flow. 

For example, once a promotion has been approved within the performance management system, the payroll should be updated automatically without requiring someone to enter the same numbers into two separate systems.

Stage 4: Data-Driven and AI-Enabled HR

This is the final stage in the development of HR technology and utilizes to help predict turnover, project future workforce requirements, and provide support to the senior manager in making strategic decisions. According to research conducted by the Hackett Group, AI usage in HR is expected to increase to approximately 47% in shared services and 42% in talent & performance reviews

How to Create your HR Digital Transformation Strategy?

Building an effective HR digital transformation roadmap requires a lot of planning, a human-centric approach, and more. The following step-by-step guide for building your roadmap from scratch is 

Assess your Current State

Document all current processes and identify areas where there are issues, what technology may be outdated, and how many man-hours are being spent doing each task. 

Establish Clear Goals

Connect your digital initiatives to company-wide goals. It should be clear, based on your objectives, as to what software solutions will best meet those needs.

Find the Right Technology Partner 

Select software vendors that align with your company’s size, budget, and security requirements. Additionally, choose software that has a clean interface and is user-friendly so your employees don’t need extensive training to learn. 

Drive Change Management & Upskilling

People have to use the technology, and tell them why you are making the change. Train your employees completely on the new technology and provide support to those employees who are having trouble using the new technology. 

Track and Refine

Use system adoption rates, monitor key performance indicators (KPIs) and regularly solicit feedback from your employees to continuously improve your workflows. 

HR Digital Transformation Challenges and Solutions

Organizations frequently encounter several hurdles along the way during the transition phase. Check out the challenges and solutions that can help you navigate them. 

Challenges	Solutions
Transformation challenges: Employee resistance to change	Involve your staff in the process of selecting and testing new HR digital solutions. This gives them an opportunity to develop some level of ownership. Develop examples showing how the new tools will eliminate tedious paperwork, minimize mistakes, and generally make day-to-day work easier.
Enterprise-grade HR software can require a significant financial investment.	Define and measure the financial benefits you expect from the implementation, including the reduction of administration costs, compliance fines, and employee turnover. Document and display how much you are able to save by increasing productivity in terms of the number of days it takes to fill job openings or hours to process payrolls.
Storing sensitive employee digital data requires a high level of protection through robust cybersecurity processes.	Limit access to sensitive employee information to only those authorised to review and eligible to modify specific data elements. Use full, end-to-end encryption for all employee data and conduct routine security audits and assessments.

Check this out: What is the Employee Life Cycle? 7 Stages, Optimization, Challenges, and More

Conclusion 

The purpose of HR digital transformation is to remove barriers for the HR team and the employee by creating a better experience for all parties involved in HR. Instead of focusing on the next big thing with new technology, begin at the beginning and then focus on solving the actual issues you have with your current processes. 

Those who will see value through this transition are those who view it as an evolving process and not a single event. So start with one manual process this month with Managetrix, and document how many hours you spend doing this process each week. Begin your journey here. 

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