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Talent Management Column

Digital Transformation and HR

Recent advances in technology have made some HR tasks easier while making others infinitely more complex. So how will these digital transformations change organizations and the workplace?

Wednesday, August 9, 2017
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I confess that my eyes start to glaze over when I read terms such as "digital transformation" because writers rarely define what they are talking about, and it ends up being a mish-mash of assertions about new technology making everything different.

I've always been a fan of the studies authored by The Conference Board's principal researcher, Mary Young. I recently had her on my radio show (In the Workplace, every Thursday from 5 p.m. to 7 p.m. on SiriusXM Channel 111) talking about the reports she is writing on digital transformation, and they are the clearest statements I've seen about what is happening in this area and what it means for organizations. Here's my view.

First, the technology we are talking about is pretty specific, and it's not driverless cars or robots. It is mainly about how we interact with each other and with products and services. Some big part of this is social media -- how we interact with each other -- and some part is data collected about us, such as marketing data on what we are buying. Mary's term for this is "connectedness," and I think that's a good one.

Second, the reason this technology that connects us in different ways matters is primarily because it creates new data and information. The reason that matters is because the data can be analyzed and used to identify new opportunities for business or new ways. It is those new opportunities that are the source of change, and they aren't always so obvious.

A prominent example involves another buzzword: the "Internet of Things." It's a phrase with a nice, paradoxical ring to it, which makes it sound way cooler and more mysterious than the simple reality of what it means, which is getting and keeping data from products after we sell them. The classic example here is the ability of companies that sell machines -- the "thing" part -- to keep monitoring them after they sell them to you -- the "Internet" part -- so that the company can sell you services related to those machines: "It looks like you need some service on that pump, and we can have someone there by Friday."

Take something such as wellness plans, through which employers encourage employees to adopt healthier lifestyles. In the process, employers are often collecting new data about the changes employees are making in their lives and in their work. That data is useful to someone -- those who sell products associated with lifestyle changes, those in insurance who estimate morbidity and related risks, those trying to create social communities of people with similar diet or exercise habits. They could find ways to sell new products and services with it.

We might argue that these developments are further along in HR than anywhere else. The fact that job applicants can share information about companies online through sites such as Glassdoor has changed the nature of hiring by taking away the monopoly of information the employer used to have about how candidates see their organizations; the fact that employers can go to social media to learn all about potential candidates, in turn, takes away the control that candidates used to have over how employers saw them.

This transformation is unlike the use of robots in manufacturing or computers driving cars in that it is much more difficult to predict how it will be used. We have a pretty good idea what happens when a robot is used in manufacturing: workers are replaced, vendors that service the robots become more important and so forth. The digital transformation that generates new data and information doesn't have anything like such straight-forward implications because someone has to have the insight to figure out how to use the information to provide new services or operate differently.

Think about that above example about hiring and the new data we have on it. It's not easy to describe the implications of it as they continue to play out. It has created new companies that organize information about employers for candidates and information about candidates for employers, it has made some tasks easier (finding candidates) and others harder (sorting through all the applicants). And the changes continue.

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How will these digital transformations change organizations and the workplace? There are stories here that seem sensible: access to information and to resources outside the organization is easier, so maybe the boundary of what is done in the firm and done outside the firm will weaken. Maybe, but the boundary is already pretty weak now, driven mainly by changes in how businesses think about "employment" (that it is better to hire temps because fixed costs are bad). And it could also be that big companies, in particular, start to see their own data and workforce as a bigger asset than they do now and start to protect it: We don't want to open ourselves up to interactions with possible competitors because they will steal what we know.

We all have a huge need for certainty about the future and a desire for a roadmap that will tell us what to do to make respond to changes like those above. Unfortunately, we don't have it, and the danger of assuming we know precisely how "digital transformations" will play out is that we make investments that turn out to be wrong. About the best we can do is to say that information is becoming potentially more useful, analysis of that information is more important, and insight as to how to make use of that information remains the rare asset. Betting on all three seems like as safe an investment as we can forsee.

Peter Cappelli is the George W. Taylor Professor of Management and director of the Center for Human Resources at The Wharton School of the University of Pennsylvania in Philadelphia. His latest book is "Will College Pay Off? A Guide to the Most Important Financial Decision You'll Ever Make."

 

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