HR leadership for a new business era The changing role of HR leaders in driving business transformation Employee Experience Trends 2024 © 2023 ServiceNow, Inc. All Rights Reserved. Confidential. 2EX Trends 2024 Contents Introduction 3 People-led, tech-enabled transformation: the new role of HR leaders 5 AI, data, and other digital solutions will transform talent management 16 Aligning skills and talent to future business goals 25 Driving employee satisfaction and productivity through better experiences 31 Building value through people: the road forward 38 Research background 47 © 2023 ServiceNow, Inc. All Rights Reserved. Confidential. 3 I love meeting with HR and business leaders across industries to discuss our most pressing challenges and share solutions. Our roles continue to change radically, and HR leadership is more important than ever within our organizations. This evolution means more responsibility for HR leaders, but it also means we have a once-in-a-lifetime opportunity. When we share what works, we can reimagine the HR function. These conversations with leaders cover a lot of ground, from confronting the mental health crisis to advancing progress on diversity, equity, and inclusion. And, increasingly, the discussions land on a couple of key themes. First, how can we harness AI in HR to accelerate growth? Second, how can we develop our talent and ensure our people have the right skills for the future? We need to address questions like these to help our people, and our organizations, thrive in 2024 and beyond. That’s why ServiceNow conducted a comprehensive global survey of HR executives to better understand the priorities, practices, and challenges at the top of their minds. And we’re thrilled to share the results. We know that breakthroughs in AI and other technologies—combined with systemic shifts in business goals and operating models—are ushering in a new business era. To prepare for this era, organizations are accelerating digital transformation into full-blown business transformation—under which technology fundamentally changes how they operate. But making this shift is not easy. It requires realigning the people strategy to the business strategy, a fresh organizational mindset, and future-ready talent. To drive this forward, CEOs are turning to a new kind of HR executive—what we refer to in this report as the “HR innovators.” This HR innovator has three critical strengths: the ability to foster business and organizational change; the capacity to develop the skills and talent fit for future purpose; and the agility to provide employees with the tools and experiences they will need to stay fully engaged and productive. As organizations transform, CHROs will have more than a seat at the management table. They will work hand in hand with the CEO and the rest of the C-suite to engineer wide-reaching business change and propel top-line growth. – Jacqui Canney, Chief People Officer, ServiceNow HR leadership in an evolving business world EX Trends 2024 © 2023 ServiceNow, Inc. All Rights Reserved. Confidential. 4 Surveying HR leaders To gain a better understanding of the priorities, practices, and challenges of HR leaders around the world, ServiceNow and ThoughtLab, a global research firm, conducted a comprehensive survey of 1,225 senior HR executives in February-March of 2024. To ensure a global perspective, the survey covered organizations in North America, Europe, and APAC. Survey respondents included key members of the HR leadership team, including CHROs, Chief Talent Officers, Chief People Officers, and their direct reports. It spanned seven industries: energy and utilities, financial services, healthcare, manufacturing, public sector, retail, and technology. To examine how the role of HR leaders will need to shift in the next digital era, we created a digital maturity benchmarking model that compares the experiences of HR leaders in digitally transformed organizations with those earlier in their transformation journey. Our benchmarking analysis was based on a scoring methodology that classified organizations as “advanced,” “intermediates,” and “beginners” in their digital transformation. (See research background section for details of the methodology.) Throughout this paper, we define “HR innovators” as those senior HR executives in the most digitally advanced organizations in our sample. These HR innovators offer a unique glimpse into the future role and strategies of HR leaders in a digitally transformed business world. EX Trends 2024 People-led, tech-enabled transformation: the new role of HR leaders EX Trends 2024 5 © 2023 ServiceNow, Inc. All Rights Reserved. Confidential. 6EX Trends 2024 HR leaders in organizations that have made the most progress in digital transformation shine a light on the future role and practices of HR in a tech-transformed business world. We have termed those leaders in advanced entities “HR innovators,” since they represent the future direction of HR executives and their teams. Among the organizations surveyed, 14% qualify as advanced in their digital transformation. Compared with those in less digitally advanced organizations, HR innovators are more proficient and proactive users of technology—particularly AI and data analytics—and are further ahead in improving employee productivity and experiences across their enterprises. As a result, their workforces are better equipped to drive future business growth. Today, HR innovators are most prominent in financial services and technology firms, which tend to be ahead in their digital transformation. They can be more often found in North American and larger organizations for the same reason. 5% 7% 7% 12% 15% 21% 24% 68% 68% 74% 76% 76% 73% 74% 27% 25% 19% 12% 9% 6% 2% Financial services Technology Retail Manufacturing Healthcare provider Energy & utilities Public sector Beginner Intermediate Advanced Digital maturity by sector Digital maturity by region 14% 73% 14% Beginner Intermediate Advanced Digital maturity, all organizations 16% 14% 7% 74% 73% 69% 10% 13% 24% APAC Europe North America Beginner Intermediate Advanced Meet the HR innovator © 2023 ServiceNow, Inc. All Rights Reserved. Confidential. 7 With the pace of technological change quickening, organizations can no longer afford to undertake digital transformation in pursuit of modest goals. Today's transformers must use technology to boost overall performance through higher growth, lower operating costs, and greater workforce productivity. Our survey tells the story: Over the next 18 months, C- level executives will prioritize the acceleration of digital transformation into full-scale business transformation. This is reflected in the goals they have set for the period: according to our survey, 42% are accelerating digital transformation, 40% aim to deliver top-line growth, and 39% see this growth coming from expanded digital business. To drive this forward, almost 40% are looking to build an innovation-minded business culture. To help fund this business transformation, 44% will drive down costs and 43% will find new operational efficiencies. Most importantly, the C-suite recognizes the key role of people in business transformation: employee satisfaction (45% of respondents) is at top of their agenda for the next 18 months. Q8: What are the top C-level priorities at your organization for the next 18 months? Top C-level priorities for the next 18 months Strong business culture 39% Accelerate digital business 39% Increase employee satisfaction 45% Reduce costs 44% Accelerate digital transformation 42% Drive top-line growth 40% Increase operational efficiencies 43% We are in continuous discussion with the CEO and other board members in developing the innovative ways to retain and increase employee satisfaction.” CHRO US healthcare provider Organizations are moving into full-scale business transformation EX Trends 2024 7 © 2023 ServiceNow, Inc. All Rights Reserved. Confidential. 8EX Trends 2024 Across every industry, organizations are undertaking business transformation to boost financial and operational results. Yet the C-level priorities underpinning their efforts vary significantly by sector, influencing the goals of HR leaders. For instance, over the next 18 months, the top priority for financial institutions is to accelerate their ability to do business through multiple digital channels to meet rising expectations of customers. As a result, senior HR executives in this industry will need to focus on hiring critically needed digital talent over the next 18 months (55% of financial-sector HR executives surveyed say they will do so vs. 46% on average in all industries; see page 27). Senior HR executives in this sector also possess a better understanding of digital business practices and innovation. In contrast, the top priority for the energy industry, which is undergoing an expensive long-term energy transition, is to reduce costs. And for the public sector, which often struggles to attract and retain skilled talent, the top area of focus is employee satisfaction. Q8: What are the top C-level priorities at your organization for the next 18 months? Top C-level priority by industry for the next 18 months Public sector Build employee satisfaction 43% Healthcare Build employee satisfaction 47% Manufacturing Increase efficiencies 49% Financial services Accelerate digital business 46% Energy & utilities Reduce costs 53% Retail Raise employee productivity 48% Technology Accelerate digital business 56% HR leaders work with CXOs in each sector to achieve their goals © 2023 ServiceNow, Inc. All Rights Reserved. Confidential. 9EX Trends 2024 The transformation imperative is expanding and elevating the role of CHROs and their teams. Across sectors, CEOs are calling on CHROs, Chief Talent Officers, and Chief People Officers to work with top management to help shape and implement a strategic plan for people-led, digitally enabled business transformation. Our survey found that 45% of senior HR executives are now more involved in growth and business decisions and 36% are more focused on change management.