Sapient Insights Group’s annual HR Systems Survey, now going into its 26th year, reveals all sorts of interesting data about trends in HR technology. We use this information to help buyers make informed purchasing decisions and help vendors understand how the market views their solutions. But the survey also includes questions unrelated to IT—and the answers help us uncover important trends about the HR profession.
One such question is whether HR is perceived as contributing strategic value in the respondent’s company. When I compared the answers to this question from last year’s survey to the data from previous years, I was floored by what I found: The needle moved significantly from 2014, when 38% of respondents said HR was viewed as “strategic,” to 2017 when 44% said HR was viewed as “strategic.” However, from 2018 to 2022, the percentage hovered between 45% and 46%. When I dug deeper, I saw very little difference in responses by region, company size, or industry segment.
So, the big question is why—after the Herculean work done by HR organizations worldwide, particularly throughout the pandemic years—hasn’t this perception changed?
My colleagues and I have spent much time discussing what’s keeping the perception of HR so stuck. Ultimately, we came up with five general explanations. One reason is that HR professionals are likely to judge themselves and their organizations harshly. We know we can always do better. Susan Richards, my business partner and the founder of our company, believes another reason is that HR professionals and leaders are just not great about telling their stories. I agree: HR professionals and leaders spend so much energy fighting brush fires—ensuring paychecks are correct, addressing employee issues, and managing and offboarding with care—it can feel like there is no time left for promoting success.
The lack of HR analyst training leads to a shortage of those who know how to put HR data into a compelling context. And too often, HR teams don’t have their own established best practices—tailored to the individual business model, budget, and culture—to lean on. This can put an HR team into a reactive mode, especially when compared to HR organizations in much larger or very different companies.
And finally, consultants and vendors also have a stake in the problem. Too often, consultants are looking for long-term engagements and therefore are reluctant to share expertise with HR teams; it’s often easier (and more time-efficient) to do the work for clients rather than helping them build internal capabilities. HR technology vendors could also do much better at helping their customers fully leverage their products’ features to save time and better utilize available data and reporting. Good vendor partners ensure their clients have the tools and knowledge to achieve the business goals that funded purchases in the first place.
Perception can be more important than reality
Let me be clear: Incompetence is not the cause of this perception problem. The HR people we talk to and work with daily are skilled and highly knowledgeable about their jobs. But, since perception can be just as important as reality (or more so), it’s important to address the perception issue and figure out how to move the needle.
The primary reason is that when HR is viewed as a strategic partner, talent, HR, and business outcomes all dramatically increase. Here’s what we saw from last year’s data:
- Strategic HR organizations had 10% higher outcomes in areas such as attracting and retaining talent, developing high-quality workforces, and using workforce data for decision-making. Those HR organizations rated as “on their way to strategic” by respondents saw only 2% higher outcomes.
- In areas such as employee engagement, employee and manager productivity, alignment with business strategy, and cost efficiency, HR organizations rated as strategic had 13% higher outcomes. HR organizations rated “on their way” saw 4% higher outcomes.
- When it came to business outcomes such as market share, competitive advantage, profitability, and customer satisfaction, strategic-rated HR organizations had 10% higher outcomes compared to the almost-strategic organizations, which saw only 1% higher outcomes.
- It’s important to note that those HR organizations perceived as compliance-focused saw declines (around -5%) in talent, HR, and business outcomes.
How to get unstuck with HR and strategy
The survey data gives us a clear idea of what types of actions can drive perceptions of HR as strategic. On the surface, these actions may seem too simple to have strategic value, but they all profoundly impact the business and workforce.
The action with the highest correlation is adaptive change management. This is not too surprising, given that businesses are constantly changing at increasing speeds. Change success depends largely on how readily people respond and adapt to change. HR is uniquely positioned to lead and guide change, especially now with the data from HR, payroll systems, and survey tools. This is an area HR can lean into and make a big impact.
The next area is around continual workforce planning that utilizes both business data and position management details. Position management means objectively digging into the specifics of the job—such as the range of skills needed, and when and where the roles need to be filled—independent of how the job might have been filled in the past. When we anticipate and solve the workforce needs of functions across the organization, operational leaders take notice.
Other areas for focus are around time management solutions that always meet business needs and ensuring the processes around managing absences, leaves, and skills development are streamlined—for employees and managers alike. These areas impact people at all levels in your organization daily. When they experience problems or have to deal with clunky systems, HR’s reputation is hit hard. These processes impact employees’ finances, ability to care for family members, and opportunities to succeed and grow in an organization.
Of note, survey data also revealed some issues that had the highest correlation to a negative perception of HR. These included reactive HR processes and approaches to employee health and wellbeing, poor HR data management practices, and a lack of efficient mobile access for HR-related activities.
Where do we go from here?
Recent news stories tell of layoffs in multiple industry sectors, including HR staff. While some of these layoffs seem to make short-term sense—for instance, if a company is closing open job requisitions and laying off functional staff—reducing the number of recruiters or training professionals follows. But staff cuts and budget reductions in areas such as benefits management, employee relations, DEI, and performance and talent management will have a significant negative impact.
In the war for profit margins, too many business leaders look to their IT functions to digitize the work and build automation and finance functions to reassess spending and investment models—yet, they don’t think through workforce impact and long-term strategies. HR is the only function that can help companies build unique, lasting differentiators. We do not get innovation, continual growth, or deep customer relationships through HR cost-cutting. Instead, we get frustrated employees and more attrition.
We at Sapient Insights believe that solving HR’s perception problem requires involvement and action from the entire HR community and its vendors and consultants. Our goal is to see 55% of our survey respondents rating their HR organizations as strategic by 2025.
In the coming months, my colleagues and I will host webinars, workshops, and discussion forums to offer guidance and allow HR professionals to share their stories and ideas. Meanwhile, we invite you to download the comprehensive details of the 2022-2023 survey so you can see the results and analysis for yourself. And please take a minute to sign up for the next survey, which will open this month. Your participation will ensure we can continue sharing objective, statistically validated data and analysis with the HR community.