Digital transformation projects can be daunting when looking at the big picture. They can be even more intimidating in departments that often fight for budget to make any upgrades. HR transformation faces this challenge at many companies—but that doesn’t make it impossible. Transformation projects can start small and still be effective. Our latest HR technology research found that HR teams face many challenges, but budget constraints were a limiting factor for HR technology investment at over half of respondents’ organizations. Unfortunately, that makes it tough to propose a full-scale project that addresses multiple areas of HR.

Top Barriers to HR technology Investment

Source: SAPinsider, November 2021

Starting HR Transformation with Most Critical Needs

Some companies may be able to secure a budget for significant HR transformation projects, while others struggle to prove the business case for those endeavors. How can HR groups facing budget restraints still bring positive change to their technology and processes? Successful organizations are starting small. Starting small is also a lesson on broader transformation projects from our research into enterprise transformation. Instead of an HR transformation project that includes core HR, recruiting, payroll, talent management, and more, start by identifying a most critical need that is also an achievable goal. This smaller project should be something that has a provable impact and can lead to building a business case for further upgrades down the road. Maybe your company is struggling with talent acquisition and has open positions in priority areas. Then, propose a recruiting transformation—and with modular cloud offerings such as SAP SuccessFactors, enabling the ability to pick and choose certain areas to address. Maybe your issue is retention—in that case, focus on areas of talent management such as succession planning and performance management. If you can make these smaller-scale projects successful and prove their value, then you have a stronger case for broader HR transformation.

Lessons from Broader Digital Transformation

In addition to identifying critical needs as an initial step to HR transformation, our research into overall transformation suggests companies should focus the early stages of these large-scale projects on updating the systems that will be necessary to support additional goals. From SAPinsider’s January 2022 report on transformation in the enterprise:

“With most organizations starting transformation with a move to cloud-based systems and solutions, this is the first step towards putting infrastructure and software in place that will help provide the foundation for additional transformation projects. Although some organizations are doing business and process redesign at the same time as software deployment—for example, a move to SAP S/4HANA—this is not always a potential path for every organization. Putting the right systems and software in place first should be the starting point for future transformations.”

That research also suggests focusing on being as clean as possible with early transformation steps and limiting customization as much as possible. After all, transformation is about improving processes enabled by technology—you shouldn’t be trying to fit the technology to your current process.

What This Means for SAPinsiders

Address your most critical HR need as an avenue to overall transformation. Teams are facing a wide range of challenges now—including growing skills gaps, remote and hybrid workforces, changing employee expectations, higher turnover rates, and projected end-of-life for current HR technologies. None of them are new, but many were exacerbated by pandemic disruption. Given that budget constraints are a limiting factor in HR technology investment for nearly half of respondents, it’s likely that most organizations are unable to deploy a full-scale HR technology overhaul. Instead, find your biggest need — be it recruiting, retention, payroll, employee data, or other need — and work to solve that problem first. That success may buy you some time and goodwill to continue upgrading your HR technology to meet your needs.