HR budgets remain flat in the face of growing expectations

HR departments are facing increased expectations on a flat budget. To advance, they need to reallocate HR budgets to support digital initiatives, The Hackett Group reported.

HR departments are having trouble shifting out of a back-office role. Only about a third of HR organizations are fully utilizing data and advanced analytics, The Hackett Group reported.

The difficulty in transforming HR into a front-office role may come down to finances. While expectations for HR are increasing, HR budgets are flat. Indeed, operating HR budgets at firms with revenues of more than $1 billion will average 0.2% less this year, according to The Hackett Group's "2019 CHRO Agenda: Closing Critical HR Capabilities Gap." The management consulting group also reported a 0.4% decline in headcount in its survey of 150 U.S. and global organizations.

Hackett's survey results also show a clear trend by HR organizations to address key priorities. They include: modernizing core ERP platforms, adopting robotic process automation (RPA), deploying data visualization tools and using virtual digital assistants or chatbots. Successful firms are reallocating funds, or the savings they achieve through technology.

But they are facing constraints. Many HR organizations don't have the data and analytics. Their leadership doesn't have the tools to move ahead. And even if they had the software, "many HR organizations struggle to leverage these capabilities," Hackett reported.

Organizations also lack leadership that can "lead in volatile environments." This includes the pressing problem of filling critical skill needs, Hackett said.

Sounding the alarm for HR

"That's what we're trying to sound the alarm around," said Harry Osle, principal in charge and Hackett's global human resources practice leader. "A lot of organizations are not even prepared to take advantage of digital transformation."

A lot of organizations are not even prepared to take advantage of digital transformation.
Harry Osle Principal in charge, global human resources practice leader, The Hackett Group

Although staff growth in HR budgets is also flat, Hackett doesn't see HR automation replacing people. But it does see HR organizations shifting away from administrative jobs to positions that require analytical skills. Employees who can take on analytics will be able to use and develop the technologies that HR is adopting.

Even small-scale deployment of RPA and chatbots "can free up significant numbers of FTEs [full time equivalent employees] that you can redirect," said Tony DiRomualdo, senior research director of The Hackett Group's global human resources executive advisory program.

Hackett found that only about 11% are using RPA either broadly or in a limited way, but that's expected to rise to 28% over this same period.

HR chatbots and virtual assistants and chatbots are used in about 12% of the organizations, but Hackett believes that will rise to 29% in the two years.

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