23th International Scientific Conference

Strategic Management and Decision Support Systems

in Strategic Management

April 26.-27, 2018, Subotica, Republic of Serbia

Nemanja Berber József Poór Kinga Kerekes

University of Novi Sad, Faculty of Economics Szent István University, Faculty of Economics Babes-Bolyai University, Faculty of
in Subotica, and Social Sciences, Economics and Business Administration
Subotica, Republic of Serbia Gödöllő, Hungary Cluj-Napoca, Romania
Agneš Slavić
University of Novi Sad, Faculty of Economics
in Subotica,
Subotica, Republic of Serbia

THE DEVELOPMENT PATH OF THE HRM ON THE DIGITAL

TRANSFORMATION JOURNEY

Abstract: Contemporary business is largely influenced by the process of digitalization, defined as a process of
adopting new technologies in broader contexts. Usually, the term “digital transformation” is emphasized, indicating
significant changes in organizational activities, processes, competencies and models through digital technologies.
Because of these changes, accompanied by the changes in the workforce, in terms of the active presence of Y and Z
generations at the labor market, modern organizations face radically shifting changes concerning jobs, employees and
human resource management (HRM) practice. As traditional HRM activities would not be effective under new
business conditions, there is a demand for developing new focus, new approaches, and new HRM tools for the new
business generation. The aim of this paper is to explore the changes appearing in the field of HRM, influenced by the
processes of digitalization, and to detect a development issues. The methodology of the research contains a theoretical
exploration of the available literature and an empirical research of the changes in HRM processes in new digital
business, based on the available data from international and national databases. The expected result should indicate:
the main HRM changes as a result of the processes of digitalization, the new role of HRM in digital business, and how
HRM can enhance the process of digitalization of business.
Keywords: digitalization, HRM, changes, digital HR

1. INTRODUCTION
The term digitalization describes the manifold sociotechnical phenomena and processes of adopting and using these
technologies in broader individual, organizational, and societal contexts (Legner at el., 2017, p. 301). Usually, the term
“digital transformation” is emphasized, indicating significant changes in organizational activities, processes,
competencies and models through digital technologies. The digitalization is “embracing all aspects of private and
professional lives, it is becoming a priority for managers and policymakers, and has made it into the headlines of
newspapers, magazines, and practitioner conferences” (Legner at el., 2017, p. 301). Digital business transformation is
focused on accelerating business activities, processes and models in order to fully utilize the changes and possibilities of
digitization. Business transformation takes into account the factors of technological innovation, behavior and demands
of consumers and external environmental factors (Rashid, 2017). In addition to these changes, digital transformation
requires changes in the organizational nature, adaptations of employees, work processes, organizational structure and
culture, so accordingly it is necessary to perform the entire transformation of the entire organization for which
realization an adequate strategy is necessary. It must also be considered that, as a result of new digital technologies, we
have less and less demand for expert work done by doctors, lawyers and various experts – including HRM – not only in
the field of physical work but also in intellectual work (Susskind & Susskind, 2015; Geoffroy & Schulz, 2015).
Mentioned changes, accompanied by the changes in the workforce, create a different way for development of modern
companies. Organizations face radically shifting changes concerning jobs, employees and human resource management
(HRM) practice. According to some opinions, nowadays labor shortage areas will soon be abolished by the new type of
robotization (Ford, 2016). Recent research shows that 47% of jobs in the US are "in danger" due to robotization (Hess
& Ludwig, 2017). As traditional HRM activities would not be effective under new business conditions, there is a
demand for developing new focus, new approaches, and new HRM tools for the new business generation. The aim of
this paper is to explore the changes appearing in the field of HRM, influenced by the processes of digitalization, and to
detect a development issues. The methodology of the research contains a theoretical exploration of the available
literature and an empirical research of the changes in HRM processes in new digital business, based on the available
data from international and national databases.

The paper consists of three parts. In the first part the authors present the main theoretical developments in the area of
HR and digitalization. The second part of the paper present the results of the pilot research, conducted in Serbia and
Hungary related to the changes of the HRM in the process of digitalization. The last part of the research consists of
authors’ conclusions and suggestions for future research.

2. THEORETICAL BACKGROUND

2.1. Digital transformation

According to i-SCOOP (2016), a consulting company in the area of digital business, marketing, and education and
training, the digital transformation can be explained as “the profound transformation of business and organizational
activities, processes, competencies and models to fully leverage the changes and opportunities of a mix of digital
technologies and their accelerating impact across society in a strategic and prioritized way, with present and future
shifts in mind”. Beside business context, it also impacts other organizations such as governments, public sector
organizations, and organizations which are involved in tackling societal challenges such as environmental issues, and
aging populations. According to Schwanholz and Graham (2018) digital transformations have created new challenges
and opportunities even for politicians, journalists, political institutions, and the (legacy) media, and in creative
industries, too (Li, 2018). From the point of view of each individual organization, digital transformation also implies
new concepts and rules of business in both, internal and external levels (Trninić et al., 2017).

In this sense, it is important to emphasize that the 2015 Digital Business Global Executive Study of the MIT Sloan
Management Review and Deloitte (2015) identified that the strategy is the key driver in the digital transformation
processes. This project resulted in the view that strategy drives digital transformation, and not just technology.
“Maturing digital businesses are focused on integrating digital technologies, such as social, mobile, analytics and cloud,
in the service of transforming how their businesses work. Less-mature digital businesses are focused on solving discrete
business problems with individual digital technologies” (MIT, 2015). The ability to digitally transform business of an
organization lies in a clear digital strategy, supported by leaders who foster a culture able to change and invent
something new. Risk taking and employees who seek to work for companies that are digitalized are becoming cultural
norms as more digitally advanced companies seek new levels of competitive advantage (MIT, 2015).

In order to successfully transform their business models, companies are suggested to follow several directions:
 “Provide and create the right way of thinking and understanding - digital business is not directed exclusively
on the expansion in the application of technology, but the focus is on new business models for gaining
competitive advantage. Organizations should use the currently available options, and plan and design new jobs
that lead to the integration of people and organizations.
 Put the right leaders in the right place - rapid changes in the digital world point to the need for leaders who
have their roles for a certain period of time, which are then changed (strategy leader, marketing leader, etc.) so
that one leader can have several different roles that are changing in relatively short period of time.
 Create a digital business center of excellence (COE) - a team which gives its contribution through advice to
create opportunities for joint digital formation strategies, tips, innovations and opportunities for its realization.
 Formulating a digital strategy that can adequately respond both to opportunities and threats – after the
formulation of the necessary digital strategy, five elements should be addressed: (a) a new business model (b)
portfolio of products and services, which can be virtual, (v) information as means, (g) technology –bringing
personal mobile devices (BYOD - bring your own device) cloud computing and cloud-based services are
becoming more and more present, while the all types of data are increasing exponentially, (d) content, media
and channels - a successful of the digital business strategy lies in understanding of user preferences,
segmentation and other related features.
 Finding, developing and acquiring skills and roles for digital business - digital business combines knowledge,
skills and roles, not only in IT but in all segments of the organization.

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  Creating new opportunities for digital business - it is expected that digital business will be inserted in the next
three years to spread through organizations, although a large number of them recognize that it is vital, human
the resource is not ready enough, organizations will have to find ways to apply successful digital business
initiatives” (Trninić et al., 2017, p. 166, Gartner, 2014).

One very important issue in the process of digital transformation is the state of the human resources. According to
Ancarani and Di Mauro (2018) if the organizations seek to achieve the successful implementation of digitalization, it
needs to invest in employees’ training, empower employees, change the organizational culture, and have leaders who
actively support the process of digital transformation. Since the employees are presented as very most important factors
for successful of digital transformation, the authors of the paper decided to explore the changes that occur in the HRM.

2.2. Changes of the HRM in the context of digital transformation

According to Rimon (2017) and Imperatori (2017) digital transformation creates opportunities for HRM to influence
culture, employee well-being, positive employee-organization relationships, and engagement. Talent management and
training and development functions will become decentralized, becoming powerful business tools for individuals and
their managers. In the case of the role of the HRM, rather than struggling to earn the position of “business partners”, HR
will become strategic and an integral part of the business (Bajer, 2017). Deloitte (2016) pointed that the most of the
time HRM will be dedicated to the “re-structuring the organization (HR’s role to map the future required digital
capabilities and where they should be executed in the organization), embracing the digital talent lifecycle (talent plan
should be directly linked to the digital strategy supporting HR in filling the gap between current and future digital
competencies), and empowering digital leadership (equipping leaders with the required essential skills and furthering
their leadership characteristics)” (p. 3-4). The challenge for HRM is to identify actual digitally induced changes in
attitudes, qualifications, behaviors and expectation of younger employees. The strategic and operative adaptation of
HRM to a changing workforce constitutes a step necessary to support organizations, and “digital employees” constitute
a first notable area of digital challenges of the HR profession (Strohmeier & Parry, 2014).

Digital transformation of the HRM is usually based on the implementation of certain IT solutions and redesign of the
HRM activities in order to provide new and better service for employees. Although the primary motive for the
implementation of IT within the HR function was to optimize procedures in carrying out the above activities, other
positive effects such as cost reduction, better quality of services provided, productivity increase, etc., also emerged
(Berber et al., 2017). According to the researchers in Deloitte some of the themes that will occupy HRM in new digital
economy will be:
 Digital mega trends, including but not limited to, cyber, data, cloud, social and mobile.
 A multi-generational workforce including Millennials or first-generation digital citizens.
 Merging work and life with hyper-connected employees.
 Emergence of a new set of digitally skilled employees.
 Business models under stress from digital disruption.
 The employee being perceived as the first consumer of the employer’s brand (Deloitte, 2016).

Rimon (2017) provides six elements where the HR’s digital transformation will be most impactful:
 The consumerization of HR systems – employees will use HR activities more like real consumers, not just as
employees.
 The creation of a digital dialogue between employee and manager.
 The transformation of learning.
 The impact on goal setting.
 Feedback – digital transformation also extends to feedback and hearing the voice of the employee. It can
include a weekly Q&A session between each manager and employee – collecting the answers and analyzing
those using analytics solutions.
 Analytics – all of the above can be deeply analyzed, presenting immediate actionable insights for managers and
HR professionals (Rimon, 2017, p. 102-103).

In order to succeed in the transformation in the area of HRM and in implementation of a certain aspect of e-HRM, it is
necessary to ensure the acceptance of these changes by employees and other stakeholders, and to ensure that new
processes in the HRM domain are aligned with the entire HRM system. It is necessary to train and develop staff how to
perform HR activities in a new way, by using IT and appropriate applications (Nivloue, 2014, p. 153). In their latest
report, Deloitte (2017) presented the results from their research on the changes of the HRM in new digital world – the
ideas of new and old HR rules (table 1).

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Table 1: Digital HR - old rules vs. new rules
Old rules
HR departments focus on process design and harmonization to create
standard HR practices
HR selects a cloud vendor and implements out of the box practices to
create scale
HR technology teams focus on ERP implementation
and integrated analytics, with a focus on “ease of use”
HR centers of excellence focus on process design and process
excellence
HR programs are designed for scale and consistency around the world
HR focuses on “self-service” as a way to scale services and support
HR builds an employee “self-service portal” as a technology platform
that makes it easy to find transactional needs and programs
New rules
HR departments focus on optimizing employee productivity,
engagement, teamwork, and career growth
HR builds innovative, company-specific programs, develops apps, and
leverages the platform for scale
HR technology team moves beyond ERP to develop digital capabilities
and mobile apps with a focus on “productivity at work”
HR centers of excellence leverage AI, chat, apps, and other advanced
technologies to scale and empower employees
HR programs target employee segments, personae, and specific
groups, providing them with journey maps relevant to their jobs and
careers
HR focuses on “enablement” to help people get work done in more
effective and productive ways
HR builds an integrated “employee experience platform” using digital
apps, case management, AI, and bots to support ongoing employee
needs
Source: Deloitte University Press, 2017, p. 92.

According to the latest global Cranet research report, most HRIS activities are carried out in-house-way since in the
majority of European countries, HRIS is not outsourced (Cranet, 2017, p. 37). The development of HR is determined by
the fact that companies think in the short term only on wages or other soft solutions (benefits, flexible working hours,
management style and organizational climate, etc.) or the direction of longer-term productivity increase or robotization
associated with Industry 4.0 development assignment (Bellini, 2018; The AI Paradox, 2017). Based on the above
mentioned, it is obvious that the HRM is changing under the influence of the digitalization. In the continuation of the
paper the authors presented their pilot study on changing roles of the HRM in digital transformation in Serbia and
Hungary.

3. EMPIRICAL RESEARCH
The research conducted for this purpose was a pilot study created in order to explore the changes in HRM influenced by
digitalization. The pilot research was performed in the period February – March 2018 in order to collect responses from
HR managers regarding several questions about digitalization and HRM.

3.1. Methodology
The questionnaire was developed based on the Cranet questionnaire (Cranet, 2017) and the Deloitte University Press
report (2017). The first set of questions are related to the size, sector, and industry of the organization. The second part
of the questionnaire contains question related to the HRM – the existence of HR department, HR roles of respondents,
state of organizational results (profitability, productivity, service quality and rate of innovation). The third part of the
questionnaire contains questions related to the importance of the digitalization for organizations, the usage of HR
information system for HR activities, and the rating of the HRM trends for new digital economy. The questions are
created with the predefined answers, where we used Likert scale (1-5) and dichotomous answers (0-1) in most of the
questions.

3.1.2. Sample

The sample of the pilot study consists of 35 companies from Serbia (46%, 16 companies) and Hungary (54%, 19
companies). The authors tried to explore the changes in HR and some new trends in digitalization of HRM. Picture 1
presents the structure of the sample related to the size and the sector of ownership. The largest share of the companies
have between 250 and 1000 employees (43%), followed by companies with more than 1000 employees (29%) and
SMEs (28%). Most of the respondent companies are from the private sector (77%), 11% are public (11%), 6% are
mixed (private and public) and another 6% are not-for-profit organizations. All respondents represent one company
(managers or HR managers). Best represented in the sample are companies from IT and telecommunications (20%),
followed by electricity, gas, steam, and water supply, waste management (11.4%), manufacture of food, beverages,
textiles, wood and paper, coke and refined petroleum, and related products (11.4%), and transportation and storage
(11.4%). Almost two third of the respondent companies work in the area of services (62%) while the manufacturing
sector represents 38%.

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 Picture 1: Description of the sample (N=35)
Source: The authors' own design

3.2. Results
First, the authors will present the data on the HRM function in organizations. Most of the organizations have an
independent HR department (91.4%), and 71% of the respondents work as HR managers for certain HR function areas.

Picture 2: Functional area of responsibility (N=35)

Source: The authors' own design

Those areas are benefits and compensation, diversity and inclusion, employee communication, HCM technology, HRIS,
health, safety and security, HR compliance, learning & development/training, performance management, shared
services, talent acquisition/staffing, and talent management (picture 2). In the area out of HRM, those are production,
quality assurance, risk management, and sales.

According to the data from picture 3, the most of the organizations from the sample possess all strategic documents,
from general business strategy to diversity statements.

Picture 3: Existence of different types of strategies (N=35)

Source: The authors' own design

From picture 4 it is obvious that almost all respondents (more than 95%), think that digitalization is creating important
changes in business processes in general and about 90% consider that digitalization implies changes in their companies'
business processes, too.

About 85% of the respondents believe that digitalization is creating important changes in HRM in general (picture 5).
When they are asked for their companies, about 80% of them think that digitalization also makes changes in their HRM.

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Therefore, we can conclude that managers and HR managers in respondent companies are aware of the influence and
importance of digitalization.

Picture 4: The importance of changes in business that brings digitalization in % (N=35)

(1-not important, 5-very important)
Source: The authors' own design

Picture 5: The importance of changes in HRM that brings digitalization in % (N=35)

(1-not important, 5-very important)
Source: The authors' own design

Most of the companies (80%) have some kind of IT solution implemented for HRM, which can be either a number of
separate standalone tools (34.3%), a single primarily independent HRIS (14.3%), or a system primarily interfaced into a
wider management IS (34.3%). One fifth of the respondents claim that they do not use IT solutions for HRM.

100 88.6
90
80 71.4 74.3 71.4
62.9 65.7 65.7 65.7
70
60 51.4 51.4
50 37.1 37.1
40 28.6
30
20
10
0

Picture 6: HR technology usage in % (N=35)

Source: The authors' own design

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According to the data from picture 6, more than 70%of the organizations from both countries use some kind of IT
solution for administration of benefits, compensation, performance management, and payroll. Between 60% and 70% of
organizations from the sample use IT solutions for learning and development, recruitment, HR analytics, and record
keeping. In many respects, these data are similar to the findings of the global Cranet (2017) research report. About 50%
of organizations use IT solutions for selection process and travel and expense management. The usage of IT solutions
for employee engagement, career management, and work design is present in the share of 25% to 30% of organizations.

Picture 7: The importance of HRM trends % (N=35)

Source: The authors

Data from picture 7 point to the ratings of the importance of certain number of HR trends in 2018/2019. This question
was proposed in order to explore what will be the most important issues in the HRM in new digital age that is emerging.
According to the data (more than 4.0 of mean), those are career and learning, leadership, talent acquisition, digital HR,
performance management, and employees’ experience. The respondents found that diversity and inclusion and robotics
and AI in HRM will be less important than previous mentioned areas. These results are in the line with the previous
research made by Deloitte University Press (2017, p. 6), who also explored these ten trends in the HRM.

4. CONCLUSIONS
Digitalization is a process of adopting new technologies in broader contexts and it tackles almost all areas of human
lives. The authors of this paper decided to explore the changes that occur in the field of HRM due to the influence of
digitalization. The pilot research carried out in a number of companies from Serbia and Hungary showed that:
 most of the observed organizations possess all strategic documents, from general business strategy to diversity
statements;
 an overwhelming majority of the respondent companies recognize the influence of digitalization on business
processes in general (95%) and for HRM (85%), while the share of those who admit that digitalization changes
the way their own company operate is slightly lower (90% think that digitalization change their own business
processes and about 80% consider that it changes their HRM);
 80% of the companies have some kind of IT solution implemented for HRM, either separate standalone tools
(34.3%), a single primarily independent HRIS (14.3%), or a system primarily interfaced into a wider
management IS (34.3%);
 IT solutions are frequently used in HR activities: more than 70% of the companies use them for the
administration of benefits, compensation, performance management, and payroll; 60%–70% for learning and
development, recruitment, HR analytics, and record keeping; about 50% for selection process and travel and
expense management; but only 25%–30% use them for employee engagement, career management, and work
design.
 career and learning, leadership, talent acquisition, digital HR, performance management, and employees’
experience will become very important HR areas for the future.

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