The Digitization vs. Digitalization of HR: Why the Difference Matters


Knowing the difference between digitization and digitalization can help you prepare a clear HR transformation strategy. In this article, we look at:

  • The definition of these two terms
  • Three reasons why the distinction is so critical for HR
  • Questions to ask when leveraging these ideas toward digital transformation in 2020

With technology now playing a central role in most HR functions, HR practitioners can no longer ignore the nuances of implementing HR tech. One of the questions frequently discussed is whether digitization and digitalization are really that different? If yes, where do they figure in your larger HR digital transformation blueprint? Let’s consider digitization vs. digitalization in detail and explore why you need to prioritize both for successful digital transformation.

Learn More: 4 Thought-Provoking Insights from Deloitte’s 2019 Global Human Capital Trends ReportOpens a new window

The Difference Between Digitization and Digitalization of HR

Digitization is the first step when implementing technology in any function, and this applies to HR as well. It involves the conversion of physical assets into a digital format to optimize existing processes – not alter/improve them dramatically.

Digitizing paper employee records in an HRIS Opens a new window database is a classic example of digitization in HR.

Digitalization, on the other hand, adds value through the use of technology in HR. For instance, cloud-based collaboration on G-suite makes it possible for HR stakeholders to work in a way that was impossible in the pre-digital era.

When onboarding an employee, for example, compliance, compensation, and talent management experts situated in different corners of the world can work together on a cloud platform to create the perfect onboarding experienceOpens a new window .

While digitization only makes current processes incrementally better, digitalization changes the operating model for HR processes.

As you can see, digitization moves toward digitalization, culminating in the holistic digital transformation in HROpens a new window . Starting with digitization and progressing to value addition through digitalization, companies can outline long-term strategies that factor in technologies’ optimization and transformation capabilities.

Learn More: The C-Suite’s Powerful Role in Empowering Digital TransformationOpens a new window

Why Knowing the Distinction Between Digitization and Digitalization Is Essential

In the last few years, HR has adopted multiple point solutions to replace paper-based/manual processes. But it is still lagging in the digitalization side of the conversation.

“In HR, digitalization is changing everything, from core functions like the way we hire and develop talent, to introducing new burdens such as raising performance,” said Opens a new window Brian Kropp, Group Vice President, Gartner Research & Advisory, in a recent report. “Two-thirds of business leaders told us that if their company does not digitalize more by 2020, it will no longer be competitive.”

Staying aware of the difference between digitization and digitalization is essential, considering that 88% of CHROs want to invest in multiple technologies over the next two years, according to Kropp.

Specifically, the need to distinguish digitization from digitalization boils down to three reasons:

1. It lets you visualize a sequential digital transformation strategy

Given that foundational digitization comes first, you can define a clear step-by-step blueprint for introducing technology in HR. To take a simple example, the digitization of employee records can be followed up by moving them to the cloud, adding real-time collaboration capabilities, and finally embedding an analytics layer to monitor usage – which marks the beginning of the digital transformation process of HR.

2. It enables smarter prioritization of tech investments

Not every paper/manual process needs to be retained in a digital-first company. You can replace physical candidate photos at the time of onboarding with scanned copies, but is this step necessary? Why not have the candidate send in a selfie that your HRMS automatically processes to create candidate records? Knowing the difference between digitization and digitalization helps to understand the opportunities to reduce the number of steps in a process and invest in associated technology smartly.

3. It makes your HR key performance indicators (KPIs) more accurate

Once you understand what digitization is vs. digitalization and how they fit into your larger roadmap for digital HR, you can set more accurate KPIs for transformation. For instance, instead of measuring outcomes in terms of the hours saved by using recruitment technology, your intended KPI could be to measure the increased ease of hiring or the quality of hireOpens a new window of new recruits. In other words, knowledge of the nuances of digital transformation in HR lets you better align HR processes to business performance.

Learn More: Fostering HR Digitization with an Entrepreneurial ApproachOpens a new window

Final Thoughts: Why It Is Vital to Balance Both Arms of Digital Transformation

Paper processes continue to be a staple for most companies – Xerox found Opens a new window that 65% of 1,000+ companies in the U.S., U.K., and Germany spend $1,000–$5,000 every month on paper processes. 46% of respondents said that this leads to a significant waste of time. So, digitization continues to be necessary, even as we enter a new era of digital maturity.

On the other hand, research also suggests that revenue generation is the biggest problem for companies going digital. The goal of digitalization is to open up new business models and boost revenues. Given that revenue generation emerged as a roadblock to digital transformation in five out of nine industries surveyed by McKinseyOpens a new window , a stronger focus on digitalization is also necessary.

In 2020, take stock of your HR technologiesOpens a new window to find out exactly where you stand on the digital maturity curve. Ask the following key questions:

  • Are there processes that can be digitized, or even replaced?
  • Can existing digitized processes gain from a digitalization viewpoint?
  • What value are these two types of initiatives adding to the company?

The goal is to define and contextualize every HR tech project, linking it to a business objective.

How is your organization progressing from digitization toward digitalization and digital transformation in HR? Tell us on FacebookOpens a new window , LinkedInOpens a new window , or TwitterOpens a new window . We’d love to include your insights in our next update!