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The Top Three Overlooked Lessons in HR Digital Transformation

Digital transformation of business processes is more important than ever. Mulesoft's 2021 Connectivity Benchmark Report, a global survey of IT leaders in collaboration with Deloitte Digital, revealed that while digital transformation has accelerated across industries in the past year, some 77% of respondents say failure to complete digital transformation projects will impact their revenue over the coming year, up from 74% in 2020.

So, what are the secrets to a successful digital transformation in compensation processes?

In the HR and Sales space, particularly at financial services firms with complex rewards schemes and increased compliance factors, digitizing the total rewards process can seem particularly overwhelming. With an expanding range of compensation elements available and increasing demands from employees, HR and sales leaders are challenged to streamline the compensation process while attracting and retaining top talent, supporting business strategy, and maintaining regulatory compliance.

While many of the core HR talent suites don’t support total rewards management at the level of sophistication financial services teams require, technology does exist to fully automate these processes. Unfortunately, several overlooked considerations can derail firms as they move off an entrenched legacy system.

Here are the top three overlooked lessons in HR digital transformation:

1. Successful digital transformations don’t try to recreate the legacy system.

Foreseeing a negative reaction to change as you face down a legacy compensation system that’s the product of years of custom development, you may be tempted to exactly replicate your old process in a new system. But the less you give in to this temptation, the more successful and future-proof your end product is likely to be.

When firms fall into this trap, trying to force a new system to operate in the same way as the previous system, the result is a new implementation that falls short on achieving best practices and fails to take advantage of features not previously available.

As you map out your process, ask yourself not only “how?” but “why?” Firms that have the most successful HR transformations six or 12 months down the line began by defining a new operating model at the outset and then building processes around that model.

2. Digital HR leaders future-proof capabilities for regulatory and compliance requirements.

A total rewards system is essential for effective governance, risk management, and compliance. Arguably, you cannot ensure full compliance without an integrated and capable total rewards management system.
Today you must comply with rules around gender pay and diversity equity, data privacy (General Data Protection Regulations - GDPR), transparency and compliance reporting (Sarbanes Oxley, CRD IV), revenue recognition rules (ASC 606, IFRS 15), and other regulatory scrutiny and auditing.

While those rules will undoubtedly shift and new regulations will arise, the key to answering all of these is access to real-time compensation data with in-system simulations, which enables you to manage regulatory compensation requirements for covered employees throughout the year and to mitigate any legal or reputational risk by being proactive on pay equity and other compensation-related matters.

3. The best digital transformations create new opportunities for employee engagement and performance.

Moving out of a legacy system or files and onto an integrated data platform can unearth new lines of reporting not previously available. Each group of stakeholders, from individual employees to the C-suite, can suddenly access data that can drive all levels of the organization to make more effective decisions. With this functionality, users and administrators can easily access total rewards statements, annual total compensation statements, employee compensation history, and pay-for-performance reports, such as seatbelt charts driven by title and gender.

Managers gain access to dashboards like employee performance review completion status, divisional summaries, and pool versus spend. Most importantly, managers win access to a holistic total rewards view of their teams, making it easier for them to use compensation to align and drive employee behavior.

If you are wondering whether the digital transformation of your compensation processes might be right for your business, check out our free eGuide, 8 Signs Your Compensation System is Holding Back Your Business.

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Editor's note: This article has been updated from the original published in 2019.

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