The benefits of automation for human optimisation

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Higher costs and harder economic conditions – the opportunity to automate Human Capital Management.

Confirmation that the economy is now in a high inflation, interest rate rising cycle, will come as a wake-up call to businesses from every sector and every size.

Organisations, already facing challenges of skills shortages, and supply chain problems, are now being hit by the triple whammy of rising costs and interest rates.

From small professional firms, tradies, banks, retailers, logistics companies and even the mining industry, everyone will be asking themselves – how do we cut costs, increase efficiencies and productivity, and sweat every asset we have?

After many years of expansionary strategies, CEOs will be asking their senior management for ways to return profit to shareholders while growth is flat, and expenses are increasing.

In short, the good times are over.

The most obvious response would be to slow innovation.

This approach, however, would be a costly mistake. Economic history clearly shows that during times of challenge, smart organisations double down on innovation but they do it cleverly – they re-examine their asset base, look closely at how to save on costs but they also continue to innovate and give their staff tools to grow productivity.

The key role of Human Capital Management

Human capital management is the single most beneficial area for organisations looking to refine and improve their innovation strategies in these challenging times.

It remains a simple fact that in most businesses, labour, or staff, are the single most expensive line item. With unemployment at record lows, the costs of labour are actually going up, at exactly the time when demand for your services or products are slowing.

It makes sense therefore that smart businesses will focus attention during slower times of growth on getting the most out of workforce productivity and minimise costs, as well as providing customers with the contact processes which keep them loyal.

What steps can be taken to improve HCM?

Smart organisations are already focusing on introducing automation into their processes in HCM, many of which remain manual even today.

We estimate at least 60 per cent – of Australian businesses over the size of 100 employees have not yet migrated to non-manual systems of managing staff – leaving hundreds of thousands of dollars of potential savings on the table, and increasing risk of wage theft and related issues.

Across the entire HCM value chain – from recruitment, to onboarding, payroll, leave and medical systems, skills and training, shift allocation and even systems which track where staff are located, thousands of businesses are missing the opportunity to modernise their HCM systems.

What’s the cost?

Our analysis, built from working with dozens of organisations over the past five years to improve their HCM environment, indicates that for an organisation of about $100 million revenue (not a large business these days), which has up to 10 staff allocated to HCM, there are savings alone available of up to $500,000 a year if they migrate to a cloud based, automation enabled HCM environment.

What’s worse, reports show that staff are less motivated, less loyal and less productive, when they are required to undertake repetitive, low skilled tasks like manually filling in the myriad of forms associated with managing hundreds of staff. They are also more likely to make mistakes, increasing the risk of the business not complying with the most complex wages awards system in the world – Australia’s.

Worse again, chances are competitors are taking this journey. For the 40 per cent of businesses in Australia which are undertaking a process of cloud enabled, automation across their HCM environment, they are part of a wider global trend. According to research by Fortune Business Insights, “attributes such as automating repetitive tasks and reducing administrative burdens will increase the footprint of the market. Also, increased focus toward talent mobility activities and integration of robot process automation (RPA) tools will fuel the growth of the market.”

Fortune Business Insights estimates the overall global human resource technology market is projected to grow from $24.04 billion in 2021 to $35.68 billion in 2028 at a CAGR of 5.8%.

Why is this opportunity so large?

There are significant, business wide benefits from modernising HCM, and for doing it at a time of economic challenge, to set up the organisation for the next wave of expansion.

They include:

Cost reduction

Businesses that are operating their HCM environment with manual processes (sometimes with spreadsheets) or with some other form of off the shelf technology are often wasting up to two days of work a month on administration. As we said, we estimate that for a business of $100 million revenue, automating HCM could save up to $500,000 a year and improve productivity. Efficiencies in payroll alone, could be up to 15 per cent.

Move to the Cloud and Software as a Service

The emergence of pay as you go, utility-based software as a service has revolutionised many processes in business, and as the Fortune Business Insights and other research show, this is the next wave of productivity in HCM. These platforms pave the way for full automation.

Reduce Risk

The availability of SaaS and Cloud based HCM also improves an organisation’s ability to manage another key issue – compliance risk. As we have seen over the past few years, wage theft and other issues due in part to Australia’s highly complex awards environment have cost millions of dollars and caused significant brand damage. Some of Australia’s most iconic organisations have been hit by fines totalling millions of dollars because they didn’t stop wage theft, often caused by poor oversight and the use of systems which could provide the kind of flexibility required in today’s complex wages environment. Migrating to SaaS and Cloud based system, and adopting automation, helps remove manual processes and the risk of human based mistakes.

Regardless of what level of automation organisations are willing to take in their modernisation journey for HCM, the fact is, the economic environment for the remainder of 2022 and beyond, is now more challenging. With the good times coming to an end, smart businesses will innovate to grow and HCM is a core element of that opportunity.

Want to know how to automate process so that your workforce is human optimised? Contact us today!


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