New research shows that, while human resources (HR) organizations are expecting marginal increases in staff and budget in 2015, they’re failing to adapt to changing business demands for enterprise agility and tying HR functions to driving business priorities.

The good news is on the budget front. According to The Hackett Group, HR departments are expecting marginal increases in both staff and budgets for 2015 after several years of cutbacks. Budgets are expected to rise by 1.4 per cent and staff by 1.5 per cent.

However, they’re going to need those additional resources, as the study also found that HR departments are largely unprepared to address business demands workforce strategy, innovation and talent management as business needs change.

While HR departments are focusing their transformation efforts in areas such as talent, technology and analytics, the Hackett report said these transformations will take time and will require prioritization and sustained resource allocation. And while some organizations are adapting cloud technology from vendors such as TribeHR/NetSuite or Salesforce.com to help drive this transformation, the report also found that typical organizations are falling behind their more aggressive peers.

While 70 per cent of “best prepared” HR organizations called developing a digital transformation strategy for HR a top or major priority, only 25 per cent of typical HR organizations said the same. About half of the best-prepared companies called cloud-based HRE solutions a top priority, compared to 40 per cent of typical HR organizations.

“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 Harry Osle, Hackett Group principal and global HR practice leader, in a statement. “Many of these deficiencies are in two key areas – talent and technology. As a result, HR is often seen as a cost centre 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.”

The report recommends HR organizations start with a focus on optimizing their operations to free up resources that can be dedicated to more strategic initiatives such as talent management and analytics. A core competency around talent and analytics can help the business see where it has skills gaps, a focus on talent management will help address retention, and HR can also play a role developing programs to incent creativity and strategic thinking to grow the business.

“The bottom line is that despite diverse deficiencies, progress is possible,” said Nathalie Bression, Hackett Group Global HR Executive Advisory Practice Leader, in a statement. “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.”

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