Opinion: Embracing the HR cloud – why the future belongs to the bold

Authors: Jonathan Lo and Andy Lee | Date: 26 Oct 2016

Leaders need to know how to use technology to transform the HR function, say Jonathan Lo and Andy Lee from KPMG

According to the 2016 KPMG HR transformation survey, Cloud HR: the future belongs to the bold, 42 per cent of organisations surveyed plan to replace their core HR management system (HRMS) with a cloud-based solution.
 
While employees expect a ‘consumer-grade experience’ and ‘tools of engagement’ from the technologies deployed in the workplace, business leaders expect HR to be agile and data-driven, and to add value to their business.
 
HR leaders therefore need to know how to leverage technology to transform their HR function and build a new HR ecosystem.
 
The future belongs to the bold when embracing the cloud. The adoption of cloud technology in HR has become more mainstream in the last three to five years. But our survey insights provide a tale of caution: the ‘path of least resistance’ for cloud deployment will not necessarily deliver business value, and adopting the latest technology alone will not fundamentally transform HR. While almost all participants (96 per cent) said they focus on transformation (including HR technology), most said they did not achieve the expected return. Why did most HR transformations fall short of expectations? Why were they not sustainable? Are there any preconceived biases regarding HR transformation and cloud deployment?
 
Our survey shows that for the second consecutive year, 88 per cent of organisations surveyed will spend the same or more on HR technology in Hong Kong in 2016. However, management is often not aware of the radical mindset shift required when implementing cloud technology, which requires an iterative and rapid prototyping approach to make results visible faster. Traditional on-premise enterprise resource planning (ERP) solutions require that the project team exhaustively define all the requirements in advance, potentially creating a void between the project team and end user. Cloud solutions require ongoing close collaboration between the end user and project team.
 
Transformation initiatives that do not provide adequate change management support may not succeed. Technology transformation needs to address people, in addition to technology and process, with management leading change initiatives.
 
Not for the faint-hearted
There are still preconceived biases regarding implementing HR cloud solutions. Of the 39 per cent of organisations with a presence in Hong Kong planning to implement a new HRMS, just 19 per cent plan to replace their existing legacy systems with cloud solutions. Some believe that new cloud solutions require extensive resources and technical training, and the writing of detailed standard operating procedures (SOP) to support a lengthy deployment. Yet the upside potential of cloud deployment can be enormous if supported by a pragmatic, flexible and holistic operating model with a well thought-out technology road map, with business priorities taken into account.
 
Proven success
The survey shows that organisations that have successfully transformed their people function took a more pragmatic and holistic approach that embraced both technology and a new HR service delivery model. They have built HR capability through HR business partners, with optimised hire-to-retire, end-to-end life cycle processes, designed in an integrated way with the customer in mind and enabled by change management.
 
What next – reshaping HR
Doing things better? Or doing better things? There are continued debates about new HR approaches, operational processes and HR solutions. Re-engineering HR processes continues to be an ongoing initiative in the spirit of continuous improvement, and enhancing touch points and connectivity are essential to a successful HR transformation. New implementation methodologies such as agile HR may be used to speed up deployment and roll out a new HR solution to support a more integrated and efficient operating model.
 
Transformation is a journey and requires strong buy-in from management. Strong management support can orchestrate the transformation and lead change through new HR processes. This is crucial to carry on the transformation and deliver tangible bottom line benefits to the business.
 
 
Jonathan Lo is a partner at KPMG China, People & Change Advisory.
Andy Lee is a director at KPMG China, People & Change Advisory.