Digital transformation: HR faces a twofold challenge

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You cannot change business operations without massively affecting HR, according to Siemens' global head of people Robert Neuhauser

Speaking at the 2018 HRD Summit in Birmingham, Neuhauser explained what happened to both the HR function and the wider company when Siemens decided to digitise all parts of the business around 10 years ago.

“You cannot massively change the business without massively affecting HR twofold,” stated Neuhauser. “First of all, there is a lot of pressure from the rest of the business turning to HR for answers to the [talent] problems created by digital.

"Second, HR is in transformation itself. Some [HR] roles will just vanish as the business digitises and changes its models. When it comes to digital transformation it should be managers first, employees second, HR third. HR can sometimes be the biggest barrier."

Previously Siemens was a B2B enterprise focused around mass production. Now its products are built to order and production happens almost completely on computers before the final physical manufacturing process.

“Innovation happens at a pace never seen before,” said Neuhauser. He stated that there is a particular process when a business is digitising; parts of which are more complex than others.

First there is the introduction of new technology. Neuhauser said this was the least problematic part as most will embrace or adapt to it, particularly in a very technical business like Siemens.

Second, there are new business models. While this can be a challenge, Neuhauser explained it’s rarely much of an issue as only a handful of people will be involved in creating and implementing this.

He said the key challenge is in operations. Digitising involves “new processes, new skills, a new culture, and a new balance of power,” he said. “It’s like building a whole new company which is difficult. And you have to grow fast in digital." This was a particular challenge at Siemens, which has 350,000 employees globally.

Neuhauser highlighted how thousands of jobs evolved or even become defunct. For example: there were between 30,000 and 40,000 employees doing catalogue B2B sales. Those roles are now obsolete as the majority of customers design products to their exact specifications online.

He also pointed out how digitisation can affect roles assumed ‘safe’ from automation and digitisation, such as R&D. “Around 80% to 90% of the software used at Siemens is open source now. A couple of years ago every line of code would have been written in-house,” Neuhauser said.

Leadership also needed to adapt. “They all love traditional, predictable business – perfect planning, perfect opportunity,” he remarked. “You [HR] all know these digital opportunities are completely different. They’re unpredictable, non-linear. But leaders have grown up in environments where predictability and good planning meant success.”

He advised HR and others to “forget everything you learned in predictable environments”.

Neuhauser stressed the importance of bringing employees into the process, as Siemens did in 2014. It asked 100 experts from sales and R&D how Siemens should operate in future. “If not reinvented from the inside it will never work. The scale of change is too big,” said Neuhauser.

In some cases this means HR has to take a step back, be patient, and watch things evolve, he said. He added that traditional HR still has a place in a digital business though.

For example, new recruits needed to be able to talk about their talents in person, and see the work Siemens does in situ rather than reading about it on careers portals or in an interview. The same was true of L&D. Traditional face-to-face training was often more successful than any other form, reported Neuhauser.

Unconscious bias training was also widely rolled out, but to make it more appealing to Siemen’s technically-minded employees it was framed in a scientific way around how our brains work and how we make snap decisions about people. “Engineers don’t like learning about culture, so [by framing it this way] it’s change from the inside again,” Neuhauser explained.

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