Human Experience Management: The Missing Link to Higher Productivity?

[JoshEAC]

Human Experience Management, or HXM, was launched last year by SAP SuccessFactors as the next evolution of HCM. But, to be fair, the idea has been around for a long, long time. Sociologists, behaviorists, and anthropologists have long been fascinated with understanding the human experience, and much of the foundations of modern society and our systems of education, mental health, and social services are predicated on an understanding of what happens when human experience is managed with a specific – hopefully positive – societal goal in mind.

While there has been some focus on customer experience management over the past several years, what’s new is the realization that an understanding of human experience that includes the collective experiences of all employees in the business world is not only important, but can be measured, quantified, analyzed, and acted upon as a means to improve business outcomes. This paradigm shift is more significant than many realize. The success of transactional systems – like ERP, HRMS, CRM, and others – was always predicated on the fact that a core business object – a bill of material, an employee record, or a customer record - sat at the center of a set of business processes. When quantified, the transactions that involve those objects become the stories that matter: what was built, bought and sold, who was hired and fired, who bought what for how much.

But something was missing.

Until HXM came along, recording and reporting on the transactions that take place around these objects was the sine qua non of the business world. As long as a company knew what was going in its core business processes, all was good in the world. The problem, of course, is that focusing on a company’s core business transactions isn’t the same as ensuring the success of the company. This is particularly true in the consumer’s paradise we now find ourselves in, where an alternative product or service – the competition – is a mere click away. Understanding what a business’s myriad stakeholders – customers, partners, employees – are experiencing turns out to be as important, and in some cases more important, than the standard financial KPIs that have ruled corporate decision-making since the dawn of modern accounting.

The other change in the business world that set the stage for HXM was the movement known as behavioral economics, particularly as promulgated by Danny Kahneman and his partner, Amos Tversky. The essence of their revelations, which earned Kahneman the first Nobel Prize in Economics ever awarded to a psychologist, was that people are not the rational, almost autonomic actors that much of economic theory presupposed. Indeed, our interactions as economic beings are characterized more by emotions, “gut feelings,” and other behaviors that make a mockery of the notion that human behavior is predictable in a linear, clockwork fashion.

This disconnect between how businesses are traditionally run and the experiences of the humans that work for them may be responsible for one of the great paradoxes of the modern economic era: a startling lack of growth in productivity across the entire global economy.

Since the turn of the current century, and for years beforehand, the growth in the use of technology in business did not produce discernable growth in productivity. This zero-growth phenomenon is called the Solow effect, named for another Nobel prize winner, Robert Solow, who is best known for his almost infamous quote “You can see the computer age everywhere but in the productivity statistics.”

The paradox is that despite the promises of productivity gains implicit in the use of technology, real productivity growth at the macro-economic level has been largely nonexistent, hovering in the one to two percent range this century, despite huge and continual increases in the use of technology.

Granted, an understanding of the experiences stakeholders are having in the business world – which are more and more mediated by technology that is intended to digitally transform these experiences – is not a guarantee that productivity growth will immediately follow. But the more that digital transformation means that business success or failure is just a click away, the more the emotions that drive those “clicks” are an important factor in measuring failure and predicting success.

Following the lead of Tversky, Kahneman and Solow, the concept of experience management is in many ways the missing link in understanding what drives company success, and by extension, greater productivity. We know unequivocally that two companies with similar products, business models, and operational models can have fundamentally different degrees of success. Why success is so dramatically differentiated encompasses many factors, but there is no doubt that how a company is experienced by customers, partners, and employees can have an enormous impact on the difference between success and failure.

The birth of modern ERP systems in the 1990s coincided with a movement to improve how businesses are run. The ensuing business process re-engineering phenomenon swept the globe, and changed forever how businesses operate. A similar revolution, this time incorporating human experience management, is now upon us. Putting the world of business operations together with HXM will provide the best view yet of what it takes to be successful.

The demands of digital transformation mean that we also need to measure what happens when businesses transform not just their internal operations, but their interactions with the world as well. Following SAP’s lead with HXM, a new focus on the employee/workforce experience is needed so that those experiences, when blended with an understanding of the experiences of customer and partners, start to tell the full story of how to achieve better business outcomes. The companies that succeed in digital transformation will succeed precisely because they succeeded in harnessing the human experiences of their customers, employees, and partners. The missing link in business success and productivity is missing no longer.

To learn more about SAP SuccessFactors Human Experience Management Suite (HXM) tap into the HXM Digital Summit for on-demand webcasts, research, articles (including a panel discussion with myself, leading industry experts, and the SAP SuccessFactors team) here.