Building Digital Capabilities in HR Teams: All You Need to Know

In this article, we take a look at digital capabilities in HR teams. Why are they important, what types of digital capabilities are key for HR professionals, how do you get started and what does the upskilling process look like? Here goes!

Contents
Why digital capabilities are important for HR teams
Different digital capabilities for HR professionals
Who in HR needs which digital capability
Building digital capabilities: How to get started
The upskilling process
Metrics examples
Other core HR capabilities

This article is a round-up of a great conversation I had with Erik van Vulpen, co-founder of AIHR, during a recent episode of AIHR Live. In this interview, Erik explains one of the four core HR competencies needed to be an effective HR professional. If you’d rather watch the video, you can find the entire video here:

Why digital capabilities are essential for HR teams

Erik: I think this has to do with 2 aspects. On the one hand, over the last 40 years, we had a lot of point digital solutions that solved smaller problems but right now, digital is really coming close to us as workers, as professionals. Digital is being seamlessly integrated into the way we work. 

On the other hand, there is also a horizontal integration of different tools. For example, when you look at HR, you have an Applicant Tracking System (ATS) in which you do your hiring and your selection. But when you hire someone and you know that they qualify for 4 out of 5 criteria with the 5th criteria for example being project management – something they haven’t really mastered yet but you still think it’s a good fit so you hire this person – ideally your ATS is integrated with your Learning Management System (LMS).

If this is the case, on the first day your new employee starts on the job the LMS pops open and says ‘you need to improve your project management skills, here is a course that you can follow.’ That kind of horizontal integration between tools is one of the key driving forces and the seamless integration of digital in the way we work is the other driving force. 

This brings us to the digital capabilities that HR needs. HR needs to be able to coordinate the process, drive that process, and build digital capabilities, not just in HR to enable this, but also in the broader business. 

Can you give an example of this?

Erik: I’ll give two examples of common processes. The first example is commonly referred to when we talk about digital transformation and digital capabilities, it’s digitization. Digitization is the process of going from a pen and paper solution to a digital solution.

An example is Grolsch, which is part of the Asahi brewery group. At Grolsch, they had a compensation and benefits system which was 8 A4 papers that you had to fill in manually. It was a compensation cafeteria system so you could choose your own benefits and you would hand the paperwork to the administrator who would then type it into the system. The next month you would get it paid. If there was a mistake in the system you had to go back, etc. It was quite a tedious manual system. 

What they did, they implemented a benefits system called My Benefits about a year ago that replaced the entire process. This led to the process being much more efficient. The HR administrator, who used to be in-between, now got a more tactical role and is able to give advice to specific people on which benefits would fit them best depending on their circumstances as the administrative role is not needed anymore.

At the same time, customer satisfaction jumped by about 2 points from a 6.8 to an 8.2 (out of 10) so the specific employee experience for this part of the employee journey increased tremendously. This is a good example of digitization

Then you have automation. This is the process of making sure that a lot of the processes that are now repeatable become scalable and doing them in a fully digital way. Automation is about getting the person out of it, not because it’s a paper-based system but because you let two systems communicate with each other. Here too, you have an efficiency win that is fantastic. 

Different digital capabilities for HR professionals

Erik: At AIHR, we call the key digital capability for HR teams digital integration. Digital integration is about awareness of what’s going on in terms of technology both in and outside the organization and then embedding it in your HR practices, to create an impact in both HR and in the business. 

However, this is still a bit of an abstract definition, so I’ll make it a little bit more concrete. For us, digital integration has three elements: 

• The digital culture builder. As an HR professional, you need to build a digital culture, not just within HR but in the broader organization. If you look at the skills gap, it’s huge and the biggest skills gap throughout the workforce is on digital skills, being able to work with different digital tools.
  A recent survey has shown that for 2020, this is the biggest skills gap, and also for 2025 it was predicted to be the biggest skills gap. So there is a fantastic responsibility for HR that only HR should pick up; the digital culture builder. 
• Technology awareness. This is about knowing what’s happening when it comes to technology outside the organization. It includes both random technology that’s not HR-related, but also HR-related technology. Because if you don’t have the hyper-awareness of what’s going on in the world around you, you’re going to miss out and technology will pass you by and you will lose your competitive edge.
• Technology embedder. You need to be able to embed technology into your HR practices in order to create a more efficient HR process but also to create more HR effectiveness.
  This means that HR is not only doing HR in a faster way (more efficiency), but also in a more goal-oriented way (more HR effectiveness). We are able to reach our goals in a better way through technology and by doing so we can also create more business impact.

In short, when we talk about digital integration, it’s about the digital culture builder, technology awareness, and the technology embedder, those are the three key digital capabilities that I think are key for the future.     

Who in HR needs these digital capabilities? 

Erik: Everyone should have a minimum level of digital awareness. A good example of a digital capability that everyone should have is you need to be able to quickly adapt to new digital tooling. We’ll get more and more digital tooling that will keep updating and you need to have that intuitive sense of how do I work with digital tools. 

There are also skills that not everyone needs but every HR organization needs to have at least a few people with these skills. An example is how do you select HR technology from the tens of thousands of HR software vendors? How do you choose the solution that will work for your organization, the buying process, how do you go through it, etc. This is not something that everyone will have to learn, but it is a skill that every HR organization should at least have. 

Another example is being able to build a digital strategy and a digital roadmap of how you can advance the organization. Not everyone needs to do that but your senior leads at least need to have a clear understanding of where you are and where you want to go in terms of digital capabilities and digital efforts in the organization. 

Of course, if you’re someone who’s working in compensation and benefits or in global mobility you need to know the HR tooling that is relevant in your specialization. Not everyone needs to know exactly the same but some of the basic skills you all need to have and for your different functions you need to have your basic knowledge. This is key in order to do a good job not just now, but also in 2025 and in 2030.

Building digital capabilities: How to get started

Erik: Roughly speaking, and on a very high level there usually are 4 steps:

1. Attaching it to the business and the HR strategy. Whenever you want to invest in digital capabilities, there is a reason for it – this is the first step to go for. Understanding how building these digital capabilities relates to the organizational strategy is key because if there is no hook to your strategy, you’re probably focussing on the wrong thing. 
   For most organizations, building this digital awareness, and building these digital capabilities are definitely connected to being competitive in the market and to being an innovative company. 
2. Define the core competencies that you need. When it comes to the digital or other future-oriented skills that you need to improve on you need to define what good performance potentially looks like for your organization. 
3. Do a skills gap analysis. Where are we today and where do we want to go in terms of our digital capabilities? What is the desired outcome and what is the current state? This is where the skills gap analysis comes into play.
4. Make an implementation plan. How do we go from A to B, from the as-is to the to-be? How do we do that on the one hand with the systems and the tools that we probably need to integrate but also when it comes to capability building, how do we get from A to B, and what are the steps that we need to take. 

The upskilling process

Erik: When it comes to the actual upskilling of your HR team, a good example comes from a Fortune 500 company that we’re working with at the moment on a journey exactly like this. They have a very clear strategy that is connected to this and they have a number of learning objectives specifically when it comes to digital capabilities. They have clearly stated objectives. 

The process here looked as follows:

• Create learning journeys. Based on the companies’ objectives, we created a number of learning journeys. We already concluded earlier that not everyone needs the exact same capabilities. Therefore, we specified different personas and we created learning journeys for each of these personas.
• Create timelines. The next step was to create timelines – do you want to go through the learning journey in 6 months, in 12 months, in 2 years? 
  Depending on your priority, the timeline will be different. We cut these timelines into 10 different pieces and for each part, we create different activities. So we say, for example, you first follow 5 or 6 lessons which equal two different modules.
• Assignment + application to a business problem. Then afterward you have an assignment, a moment where you all come together as different learners from the same organization. There is a facilitator, there is in-house expertise and there is external expertise and you start to evaluate what you’ve learned and – this is the most important part – you try to apply it to your business’ problems. 
  Together with the facilitators, you select a number of problems and you look at how you can take the learnings that you had in the different modules and apply them to this concrete situation. 
  That way you have a very interactive process where people ideally have scheduled time off to do the actual learning and the work on these organizational improvement plans. It is connected to internal priorities and at the end of this program – let’s say you go through it in 6 months – there is a committee and you present your different projects, you hand in your final assignment and the committee then selects one, two, three or even more tangible assignments that should be executed within the organization. 

All of this results in a fantastic learning journey that is structured and that not only enables learning but that also enables creating impact with this learning. I believe that is the most important part – you want knowledge to stick and in order to make it stick, you want to apply it to the organization. At the same time, when you apply it successfully you advance the organization.

How to measure success

Erik: Apart from the impact you can make, as I mentioned earlier, there are a few other metrics you can use:

• The number of new projects or initiatives that you have.
• The adoption rate of new tools. When you look at new tools that you have, is the adoption rate of these tools increasing as you build your digital capabilities in HR and in the broader organization?
• Engagement on existing tools. Do we see increased engagement on existing tools? That is another fantastic, more impact-related metric. 
• Organizational assessments. You can also have organizational assessments where you assess how effective the organization is at the moment in digital capabilities? With our course work at AIHR, we often do pre-and post-assessments where we assess before learners start and then afterward.
  We then try to measure what the impact of the learning journey was on how people perceived themselves as being digitally savvy but also on the projects that they.
• The impact on the company culture. There is also a cultural element that you can attach a number of success metrics too which is focused on do we actually see a change in the culture, do we see an increase in adoption, and do we see new projects.
• The rate of innovation. Do we see the number of new, innovative projects increase? And, if innovation projects don’t succeed, do we then at least see some form of ‘failing forward’ – learning from these projects – and do we see new, successful projects arise from these failed projects.

Other future-oriented core HR capabilities

Erik: There are four core HR capabilities that we have identified:

1. People advocacy. These are the more traditional HR capabilities, the role of HR as an advocate for its people. It includes culture building, people & talent management, and ethics & compliance. I think this is in general the most developed capability in HR already. 
2. Digital integration. We spoke about this quite extensively already.
3. Data-driven. Data-driven is about the ability to make evidence-based decisions and to read, apply, create, translate, and communicate data as information to, in the end, influence decision making.
   That means are you data literate, can you read the data? And are you an analytics translator, can you work with findings from, for example, the analytics team or can you read their reports and then directly apply it to your business context to create value.
4. Business acumen. Do you have the ability to understand the organization and its priorities? Can you understand the end customer, in other words, the person who is buying your product? Can you position HR in the organization and align it with what the business is doing?
   All of this involves understanding the organizational context and its external context. It also involves understanding the end customer and being able to position the HR practices and activities in a way that delivers value to the business.

Those are the four core competencies that we see when it comes to future-oriented HR capabilities.