U.S. Public Sector Adapts to Change by Modernizing HCM

U.S. public sector agencies have accelerated their adoption of advanced human capital management (HCM) software platforms in the face of multiple changes that have impacted the sector in the past few years, according to a new research report published today by Information Services Group (ISG) (Nasdaq: III), a leading global technology research and advisory firm.

The 2023 ISG Provider Lens HCM Technology Platforms report for the U.S. Public Sector finds that changes in the composition and location of workforces, new employee and constituent expectations and a wave of retirements have forced agencies to modernize human resource management. Two of the steepest challenges today are attracting and retaining talent and promoting diversity, equity and inclusion, but agencies recognize other challenges will emerge.

“Public sector organizations are turning to centralized HCM platforms so they can take a more holistic approach to staff management,” said Nathan Frey, partner and lead, ISG Public Sector, in the U.S. “What affects one aspect of human resources can influence others, and they want the agility to address future needs.”

State and local governments and educational organizations in the U.S. are seeking improvements in HR operations, management and efficiency, the report says. Their goals span several functional areas, many of which have languished in these organizations due to outdated systems, tools and interfaces.

Typically, public agencies begin by buying and implementing a core HCM platform, which may be decades ahead of the systems it replaces but still have limited built-in capabilities, ISG says. Later, the agencies add modules for specific functions. Many projects involve purchasing software and then outsourcing implementation and maintenance, for which most agencies lack the resources.

To address challenges around talent, organizations are implementing solutions that automate processes and use analytics to make data-driven decisions about recruitment and retention, the report says. In payroll management, new HCM solutions are automating routine tasks and providing better oversight and regulatory compliance, reducing the risk of costly errors and penalties.

“Transparency is critical for taxpayer-funded organizations,” said Jan Erik Aase, partner and global leader, ISG Provider Lens Research. “New HCM platforms provide real-time access to data, which can help agencies increase accountability and public trust.”