As a child of the late 1970s/early 1980s, I was surrounded by the latest and greatest that home gadgets had to offer. We had the original Pong, an Atari 2600, the Osborne Executive portable computer, and anything else we could get our hands on. If it didn’t exist yet, we were bound to create it.
I remember one Thanksgiving, during the annual showing of The Wizard of Oz, when my dad wanted to record it on our Betamax but didn’t want any commercials. VCR remotes hadn’t come out yet, so he wired a light switch that he could flip to pause recording during the breaks.
During dinner, he had one ear to the TV in the living room, holding a turkey leg in one hand and the light switch with a wire running from the VCR in the other, listening intently for that all-important commercial break. This was the ’80s version of divided attention.
That’s not to say that every tech choice was a homerun. That Betamax, despite being technologically superior to the VHS format, slowly faded into obsolescence. And I wouldn’t take it personally if you had no idea what an Osborne Executive was until you clicked the link. Our next computer was a Compaq, which fit the pattern of buying a promising new technology that didn’t make it in the long run.
In a lot of ways, my childhood prepared me for the work I do today—helping organizations transform and optimize their business processes—because so many companies fall in love with a technology that seemed so promising at the beginning, only to see it fail to live up to its potential. This concept of “technical debt” has been growing in prominence over the past few years, accelerated by rapid changes in legislation, innovation, employee and customer expectations, and how we work.
Human resources faces a difficult balancing act of cutting costs while improving the employee experience. Per Sapient Insights, the average tech spend for HR in 2022 ranged from $221 to $481 per employee, with Gartner reporting that 9% of the overall HR budget is allocated to technology alone.
In fact, HR tech spending increased 66% between 2020 and 2022. But that spending is slowing down, and companies are facing budget cuts, which means organizations will either need to figure out how to get more from their existing systems or stop using some of them altogether.
How does tech debt happen, and how do we prevent it?
Tech debt seldom happens all at once. In many cases, it’s a culmination of several smaller factors that only become apparent when someone focuses attention on them. Reasons HR may acquire tech debt and some suggestions on how to counter them include:
A complex regulatory environment
Problem: HR processes often involve compliance with various labor laws and regulations. Adapting technology to meet changing compliance requirements can be difficult and costly, leading to delays in technology upgrades or over-reliance on short-term Band-aids that somehow become permanent.
Solution: Ensure your HR department stays current on potential legislation to plan for changes needed in your technology. This should include talking with your providers to ensure they are similarly informed and can help you navigate the challenges brought on by the evolving legal landscape. More specifically, ensure you understand exactly which areas of compliance your HR technology providers can truly support. Even if you receive updates within your release cycles, you and your organization are likely accountable for activating them within the system.
Complacency and capacity
Problem: Many HR departments have been using legacy technology for years. These systems may be outdated, lack necessary features and have limited integration capabilities. Furthermore, HR departments may be locked into contracts that automatically renew each year without a formal review of the provider’s roadmap, HR’s needs or even whether the contract is still appropriate for the organization’s size. Of course, all of this requires time, and HR continues to get smaller while the demands have exponentially increased.
Solution: Never settle. If legacy technology isn’t meeting your needs, it’s OK to investigate options with your key internal stakeholders. Conduct a tech gap assessment to document exactly what may be missing to determine whether your existing technology can meet your needs or if you will need to look for other solutions.
If you are not getting the support you need from your provider, have a candid conversation with them. Also, don’t be afraid to renegotiate the contract. But first, you need to locate the contract (and all subsequent amendments) and actually read the fine print. Secure assistance from your sourcing and legal partners and hold your providers accountable for their responsibilities. Oftentimes, you’ll find that solutions may, in fact, exist, yet no one is talking about them.
A lack of governance
Problem: A huge part of what drives tech debt is a lack of internal governance for evaluating and implementing new releases or systems. It’s not uncommon to encounter an organization where software solutions have been purchased by different teams without regard for how those systems may impact each other or different business processes. This can be particularly true in decentralized HR operating models, where technology is purchased at the local level, resulting in multiple redundant systems.
Additionally, HR departments may prioritize short-term needs, such as immediate hiring or benefits administration, over long-term technology planning. This can lead to focusing on quick fixes rather than strategic technology investments. It’s also incredibly easy to “set it and forget it” by only absorbing required enhancements from your provider ecosystem. Remember, you’re leasing a research and development budget that should pay dividends.
Solution: Establish a cross-functional governance process to help ensure visibility across the organization’s entire ecosystem—technology, business processes, policies and strategic goals. This should also include a means of reviewing requests for new purchases to limit redundancy and overspending. If your family is like mine, a new app shows up on your phone all the time without any conversation around its utility, and organizations are no different.
The “HR transformation office” is emerging for many as the go-to funnel to avoid technical collisions, overlaps in feature functionality, the establishment of a process-led approach and a rollup of all spend and third-party relationships. If you’re a smaller organization, that may be an office of one, but still a very critical role.
Problem: HR leaders often lament that their system can’t do something they need it to do. And while it’s true that there are limitations within every solution, there are times when it’s not the system but the way it was implemented that’s the issue.
We often see this challenge when new systems are implemented with a “lift and shift” mentality, when HR doesn’t fully understand the new system’s capabilities, or when HR doesn’t have a point of view on how the new system will be used to improve the business.
Solution: Ideally, HR should not even consider a new technology until they have undergone process optimization: identifying pain points and designing a system-agnostic future state to establish a strong point of view of what the process should be, then working with a provider to help bring that process to life.
In the case of a legacy system, this can mean working with a third-party provider to help reconfigure or reimplement the technology. A smaller investment in the short-term that results in better use of a larger tech investment is worth it.
As HR continues to bring innovative solutions to the employee experience, it has never been more important to ensure leadership makes sound investment decisions and creates the framework to protect them going forward. While I may miss our old Betamax video player, when it came time to replace it, we finally jumped on the VHS bandwagon and never looked back. If my obscure tech-loving family can adapt, so can HR.