The Future of HR Tech: How AI Is Transforming Human Resources

Human resources managers are looking to tap into advanced data analytics, artificial intelligence, and machine learning to help overall HR procedures, from improving talent sourcing to employee management.

Meanwhile, new data privacy laws for employers are introducing new approaches to the collection and storage of personal information of employees and applicants. 

John Kostoulas, vice president analyst in the Gartner HR practice, points out HR leaders must execute their plans in 2023 amidst substantial uncertainty and volatility of economic, business and workplace conditions.

“In our discussions with HR leaders, we see many find it challenging to build an effective strategy and roadmap and align HR technology investments with critical business needs,” he says. “There are a few steps HR leaders should conduct to enhance the business value of their technology investments.”

First and foremost is defining the business outcomes and value to be achieved, which requires alignment with other stakeholders on strategic guiding principles.

“Business cases that focus on the business value generated through HR technology transformation are more successful than those focused solely on direct cost savings,” Kostoulas adds.

He explains the concept of business value includes business outcomes (revenue, productivity and business expansion) and associated talent outcomes (talent sourcing and selection, talent agility, retention) that may be hard to quantify, but are crucial.

“HR leaders should use employee survey data, insights from business and talent analytics, and external benchmarks and research to drive home the current-state pain points and gaps and to describe how the go-forward technology options will help achieve the desired benefits,” he says.

Once technologies are selected and implemented, deviations between planned and actual outcomes are unavoidable, as it is impossible to predict precisely how a transformation will go.

“Prepare to manage deviations and find ways to get the transformation back on track,” Kostoulas advises. “HR leaders should create a governance model that includes regular steering committee meetings, at a minimum twice a year.”

These meetings should assess progress against the strategy and roadmap and the business case, review timelines and (if needed) shift resources in response to changing organizational or market conditions.

HR Must Keep Pace With Business

“If HR wants to have a seat at the table, we have to keep up with the pace of business today,” says Lindsay Peress, vice president of HR insights and advisory at Operations Inc. “Upgraded technology can lead to faster and better decisions. It also accelerates processes while maintaining compliance.”

From her perspective, the key to any successful implementation of new technology in HR is the time savings and risk mitigation. “The right technology should pay for itself in reclaimed time, more informed decisions, and avoidance of compliance pitfalls,” she says.

Peress says a modern human resources information system (HRIS) must be the cornerstone of any digital strategy for HR leaders. She notes many of the new platforms include an applicant tracking system and allow for seamless, paperless onboarding.

“Performance review platforms may also be incorporated into an HRIS or can be purchased separately,” she adds.

One area where technology is becoming more important than ever is leave of absence management.

“With the continued increasing complexity of state and local leave laws, HR professionals need quick answers to leave eligibility questions and must produce numerous types of documents,” Peress says. “This can all be made easier with the appropriate technology.”

Nathan Shapiro, head of platform strategy and user experience at Paychex, adds most HR systems were designed and implemented around a single user group -- the HR department --and have not evolved with the technology boom or to meet the needs of a modern workforce.

“Today’s HR systems need to enable collaboration and drive efficiency across an entire organization, whether the user is an individual contributor or an executive,” he says.

He cautions that If HR does not go through a more holistic tech upgrade, it will further compound the pressures facing HR departments to be more strategic, while simultaneously creating inefficiencies and engagement issues across the organization.

Data Analytics, AI/ML, and Predictive Models

Tools like analytics, performance management, and learning management help organizations not only measure how employees are doing, but also how employers are performing for their employees.

“This can result in more productive workforces, leading to better business outcomes,” Shapiro notes. “It can also help employers retain and develop top talent.”

He predicts that in 2023 and beyond, AI and ML will be adopted by HR in a few major ways, including the use of data science to streamline the sourcing and vetting of more qualified candidates.

“The use of predictive data models will be used to identify risks and opportunities across the organization for talent management and retention,” he adds.

Meanwhile, the use of AI to create bots to field employee questions will help free up valuable time for HR teams to focus on more strategic initiatives.

Ensuring Compliance with Data Privacy Laws

In the shadow of a growing list of maturing privacy regulations, such as the General Data Protection Regulation and the California Consumer Protection Act, HR data is regarded as highly sensitive and requires proportionally more due care and due diligence.

“Regardless of how much of the organization’s human capital management is done internally and how much is outsourced, accountability sits with the employer,” Kostoulas says. “Furthermore, with most HR applications residing in, or transitioning to, the cloud, data residency concerns arise.”

He says HR leaders must assess, monitor and manage privacy risk in HR applications by requiring vendors to demonstrate alignment with competitive personal data protection standards and regulations.

This includes the ability to independently quantify (through external audit) the privacy risk their solutions represent and how they mitigate these risks.

“Considerations such as data loss and cross-border transfers should always be taken into account during the selection, administration, and periodical review of the systems and providers that handle HR data,” Kostoulas adds.

Shapiro agrees HR departments will need to stay on top of changes to data privacy requirements.

“They must recognize that there will need to be an ongoing body of work over the next few years to calibrate how they handle and manage employee data,” he says.

He adds HR teams using evolving technologies such as AI, biometrics, and geolocation for recruiting, hiring, employee monitoring and time/attendance tracking should stay abreast of expanding associated regulatory obligations.

Attaining Executive Buy-In for HR Tech Investment

Shapiro says the key to executive buy-in for investment in tools improving HR operations comes down to three things: data, data, and data.

“HR departments have been evolving into more of an analytical arm of an organization -- which has been well-received by the C-suite,” he explains. “A lot of the data available is around the broader organization and not always data specific to the HR department itself.”

He points out a strong business case can be built by leveraging data to show where the HR department is spending its time and how that time can be reallocated with HR technology system in place.

“If executives didn’t believe in the value of the HR department, it wouldn’t be an investment in the first place,” Shapiro says.

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