After years of cuts, HR organizations are expecting to see marginal increases in both staff and budgets in 2015, according to the newly-released HR Key Issues research from The Hackett Group, Inc. (NASDAQ: HCKT). The study also found that HR organizations are largely unprepared to help improve enterprise agility and address issues most relevant to achieving business objectives, including workforce strategy, innovation, and talent management in the context of changing business needs.

Companies are struggling to improve in several key HR strategy areas, the research found, and are focusing transformation efforts in the areas of talent, technology, and analytics. These transformations are likely to take several years, so prioritization and prudent resource allocation is key, the research found. A clear dichotomy is also emerging in the area of digital transformation of the HR function, including adoption of cloud technology – with the best prepared HR groups moving forward aggressively while typical organizations fall behind.

“The bottom line is that many HR organizations are simply falling short when it comes to building the capabilities required to respond swiftly to changes in business demands and truly contribute to greater enterprise agility, providing strategic guidance as business objectives shift,” said The Hackett Group Principal and Global HR Practice Leader Harry Osle. “Many of these deficiencies are in two key areas – talent and technology. As a result, HR is often seen as a cost center rather than an area for investment. This is a tremendous hurdle that many HR organizations know they need to overcome. But it will take time and courage. The top HR organizations are spending their time and efforts on talent and analytics.”

For the enterprise, innovation remains a key concern in 2015. This year’s research offered more detailed insight into the innovation-led strategies companies are taking. Many are focusing on innovating new business models, products, and services offerings. But an equal number are primarily focused on innovation to expand into current markets.

In order to deal more effectively with high levels of market volatility, uncertainty, risk, and competition, enterprises are seeking to improve agility in 2015 and beyond. To enable agility and innovation, The Hackett Group believes that HR organizations should begin with a focus on operational excellence, allowing them to free up resources that can be dedicated to strategic activities such as talent management and analytics. As HR develops a core competency around talent and analytics, it provides the business with better insights into skills gaps, critical jobs, and employee performance, so that adjustments can be made as necessary. A focus on talent management is also required, to enable the enterprise to attract, develop, and retain critical staff. Finally, HR can play a key role in the development of specific programs designed to incentivize creativity and strategic thinking as well as provide critical support to key change initiatives.

After many consecutive years of cuts, HR organizations are expecting marginal increases in budgets and staff for 2015, with budgets rising by 1.4 percent and staff growing by 1.5 percent. However the increases are far from universal. In fact, only 40 percent of the companies in The Hackett Group’s study actually expect to see budget increases, with just under 30 percent saying the same for staff. In addition just over 30 percent still expect to see declines budgets and FTEs. The remainder expect no change.

Hackett research found that many HR organizations are poorly positioned to support key enterprise goals. Specifically, HR organizations identified four areas that were simultaneously rated as the high priority and low ability to address. All four areas related to agility: defining forward-looking workforce strategy to align with future demand for and supply of skills; fostering innovation; adapting talent management strategies and processes to deal with changing business needs; and improving development of executives who can lead in a volatile business environment.

According to The Hackett Group’s research, talent and technology transformation initiatives are dominating the HR agenda for 2015. Strategic workforce planning and training and development lead the talent transformation agenda. In technology, three areas are seen as top priority: self-service enablement; development of an HR technology roadmap; and expanding the footprint of a common ERP platform in HR.

The Hackett Group’s research also saw a significant gap in the key areas of digital transformation and utilization of cloud-based technologies. The best-prepared HR organizations are clearly making these areas a greater priority than typical companies. A total of 70 percent of best prepared HR organizations call development of a digital transformation strategy for HR a top priority or major initiative, the research found, while only just over 25 percent of typical HR groups make the same claim. Looking at implementation of cloud-based HR solutions, the gap is smaller, but still significant, with 50 percent of the best prepared HR organizations calling this a top priority or major initiative, but less than 40 percent of typical HR organizations making the same claim.

“The bottom line is that despite diverse deficiencies, progress is possible,” said The Hackett Group Global HR Executive Advisory Practice Leader Nathalie Bression. “We suggest that for 2015, HR organizations start by improving strategic workforce planning, focusing on critical roles and enhancing their ability to make data-driven decisions. They should prioritize talent management, and improve their ability to develop leadership skills within their company. A close look at the HR skills set is required, to assess where HR organizations need to add capabilities in key areas such as business acumen, strategic thinking, and change management. HR organizations should create a long-term technology strategy. And they should improve data and systems integration to enable evidence-based workforce decisions.”

The Hackett Group’s new study, “The HR Agenda for 2015: Major Transformation Efforts Are Planned to Close Critical Gaps in HR Capabilities,” is based on research with executives from over 170 large companies in the US and abroad, most at companies with annual revenue of $1 billion or greater. A complimentary version of the research is available with registration at this link: http://www.thehackettgroup.com/research/2015/pr/keyissueshr15/.

About The Hackett Group

The Hackett Group (NASDAQ: HCKT) is an intellectual property-based strategic consultancy recognized as the leading enterprise benchmarking and best practices implementation firm to Global 2000 companies. Services include business transformation, enterprise performance management, working capital management, and global business services. The Hackett Group also provides dedicated expertise in business strategy, operations, finance, human capital management, strategic sourcing, procurement, and information technology, including its award-winning Oracle and SAP practices.

The Hackett Group has completed more than 11,000 benchmarking studies with major corporations and government agencies, including 93% of the Dow Jones Industrials, 86% of the Fortune 100, 87% of the DAX 30 and 51% of the FTSE 100. These studies drive its Best Practice Intelligence Center™ which includes the firm's benchmarking metrics, best practices repository, and best practice configuration guides and process flows, which enable The Hackett Group’s clients and partners to achieve world-class performance.

More information on The Hackett Group is available at: www.thehackettgroup.com, info@thehackettgroup.com, or by calling (770) 225-3600.