Industry 4.0 and digital transformation are terms that have become widely used in business over recent times. What do they really mean, though, particularly in relation to the HR functions in small and medium-sized businesses? What impact will digital transformation have on HR, is it something that HR teams in SMEs should embrace, and what are the challenges and advantages?
These are all important questions to grapple with, as digital transformation is here to stay. While it will have a significant impact on a wide range of functions in your business, its importance to HR cannot be understated.
After all, the old way of doing HR is increasingly failing to deliver on the business needs of today. HR teams and functions must now be proactive rather than reactive, flexible rather than constrained, and focused on constantly adding value rather than spending resources on repetitive tasks and inefficient working practices.
You’ll know this given the considerable time and resources you must spend to not only find and retain the best talent, but also deal with all the paperwork, bureaucracy, and complexities of managing HR in a small or medium-sized business.
What Is Digital Transformation?
Okay, let’s get into some of the nitty-gritty, starting with understanding what is meant by the terms digital transformation and Industry 4.0. This is important as there is a common misconception that digital transformation means doing things digitally. In fact, the digitisation of processes took place in the Industry 3.0 era with the introduction of computers, including in SMEs.
So, the introduction of HR software is not digital transformation or Industry 4.0.
Instead, digital transformation involves three key areas:
All three areas are linked, as you need to integrate systems, machines, and platforms before you can make full use of the data in your business, while proper automation (where you will make the biggest efficiency savings) requires access to high-quality data.
With these three key areas, you can start to build up a picture of what digital transformation in HR looks like. It starts with horizontal integration, where there is full integration of all the applications and platforms used by the HR function in your business. Vertical integration is next, where HR applications and platforms become integrated with other systems in the business, from accounting to production to sales to marketing.
It’s also important to note that integration is not just about digital systems, as it also involves integrating physical with digital. In HR, that means deepening and improving the integration of people with digital to move from a centralised operation to one that is people focused.
With integrated systems, a certain amount of automation can be achieved, particularly with some of the most straightforward processes.
Integration will also produce data that will empower the HR function in your business, moving it closer to the objectives mentioned earlier – flexible, proactive, and value-adding.
New opportunities for automation will then become available. These automation opportunities will drive productivity gains and efficiency savings in a way that is transformational to your business.
This brings us full circle – digital transformation in HR.
It’s Not About Technology
It is also worth noting that digital transformation in your business, whether you are looking at the business as a whole or the HR function specifically, is not about technology. Technology is a core component, and technologies will be required at every stage.
However, digital transformation success does not depend on technology. In fact, many of the technologies needed to achieve large-scale digital transformation in HR already exist – just look at the features in HR Duo by way of example.
The most important factor in digital transformation success is mindset, as Industry 4.0 and digital transformation are about taking a completely new approach.
In other words, it’s not about investing in a new HR application or system. Instead, digital transformation is about being open to changing the way your business approaches HR, with technology facilitating the change. This is where success will come.
With that success, you will achieve substantial efficiency savings. You will also develop a HR function that helps to drive your business forward, rather than one that lags behind you, trying to catch up.
This is part 1 of a 5-part series. Check back in a week or so or subscribe to make sure you receive part two – Industry 4.0 and HR Automation in SMEs – What, Why, and How?