Technology & Innovation
February 4, 2025

The “vital few” priorities: Where pacesetting organisations should focus their HCM efforts in 2025

2025 is set to become a transformative year for HCM strategies and the technologies that support them. Dayforce vice president and former analyst John Kostoulas explores the three areas where leading companies will separate themselves from competitors. 

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2025 is set to become a transformative year for HCM strategies and the technologies that support them. Expert analyst John Kostoulas explores the three areas where leading companies will separate themselves from competitors.
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After years working as an analyst, this year is the first time I didn’t have to publish any annual HCM predictions as part of my formal role. Call it curiosity or FOMO, but I nonetheless spent a great part of the last few weeks going through articles, blogs, and posts covering 2025 predictions for HCM. As we settle into the new year, I wanted to highlight the “vital few” things leading companies need to focus on for 2025.  

We need real value from AI – but HCM fragmentation stands in the way 

AI continues to be a big-ticket item for 2025. But within the past two years, we’ve swiftly moved through an era of pure hype into one of concrete value. With enthusiastic vendors proposing hundreds of use cases and solutions, C-level leaders need to prioritise which AI use cases will bring the best value on predictable adoption timelines. A lack of strategy can be a big barrier to move forward on this, but there’s another barrier that concerns me even more: fragmentation and complexity in the HCM landscape.  

Over the last 20 years, companies have typically pursued HCM technologies through a reactive “problem-to-fix” mindset. We have this problem – we buy this solution – rinse and repeat. They’ve also purchased new solutions mainly through feature-to-feature comparisons between competing options (does option A do X? Can it do Y? What about option B?). Over time, they develop a fragmented legacy HCM landscape that incorporates multiple data models, piecemeal integration, vulnerable security and privacy, clunky user experience, and unreliable analytics. All these factors already contribute to poor experience and technology adoption for (human) workers. But as AI becomes more agentic (that is, acting more like a digital worker), fast and secure access to data becomes an essential foundation for business value that a fragmented HCM landscape can’t fulfill.  

The path to AI value requires turning a fragmented HCM landscape into a true holistic platform, and this starts with simplification: gain clarity on how many systems you currently use across your HCM tech stack, then simplify, simplify, simplify. For any new HCM investments, you need to ask vendors to show their solution’s overall architecture, because when you look under the hood, it might be even more fragmented and complex than your existing landscape. This might come as a shock to some leaders, but we’ve reached a point where a single HCM solution with strong platform attributes (such as a single data model and excellent user experience, security, integration, and analytics) will defeat a fragmented HCM landscape that ticks all the functional boxes. AI makes this shift even more imperative.  

Company culture is becoming more technology-dependent 

Dayforce recently completed its 15th Annual Pulse of Talent survey of nearly 9,500 executives, HR leaders, managers, and workers from around the globe. This study showed the importance of culture towards employee engagement, wellbeing, and performance, all of which create organisational agility at scale. But only half of surveyed workers agreed that their company actively engages in improving company culture. The research also critically revealed that HCM technologies are an underestimated part of the problem – and of the solution to it.  

From recruiting to performance feedback, from our own daily tasks to collaborating with others, from communications to employee listening, technology often makes or breaks a company’s cultural promise. When we analyzed our survey results to see which investments had the biggest impact on culture, all of the top five investments were technology-related. This impact increases year after year as more technologies are used at work, but cultural impact is rarely accounted for in HCM strategies and plans.  

Leading employers will start 2025 by auditing and finetuning the role technology plays in employees’ experience of corporate culture. For example, they’ll focus their annual engagement surveys on where technology most heavily impacts a worker’s sentiment toward culture. They’ll use this same method to determine which aspects of technology support or impede efficiency, flexibility, trust, inclusion, and wellbeing. In areas of underperformance requiring action plans, they’ll determine where technology can help. When it comes to the relationship between technology, performance, and employee sentiment, Drucker’s “culture eats strategy for breakfast” has never been truer.  

HCM isn’t just HR’s job 

The definition of HCM has changed a lot over the years, from being HR- and process-centric to focusing more on business outcomes, work, and workers. Employee experience, skills-based talent management, employee wellbeing, and DEI are now significant HCM issues for most organisations whose solutions go well beyond HR’s job and its associated technology plan and budget.   

Take frontline workers across retail, hospitality, healthcare, or manufacturing as an example. A worker’s individual initiative is critical for their organisation’s performance every day. But as our global study of frontline workers revealed, only two thirds of workers agree that their executives understand their challenges. Whether you’re a leader in HR or elsewhere, it’s time for more collaboration with your peers across functions on the topic of work and workers.  

When it comes to technology, solutions are not always neatly categorised, and category definitions can vary dramatically. Workforce management (WFM), for example, is typically seen as part of HCM. But what happens if we want to combine WFM with flexible resourcing through current employees, freelancers, contingent workers, or alumni? What if such a solution requires software and services (e.g. for paying or screening contingent workers at scale)? How would we categorise that solution? Other examples include workplace learning, worker wellbeing, people analytics – the list goes on. To navigate these increasingly blurred market lines, employers need to think about their users’ day-to-day needs, not just clearly defined product categories.  

Moving forward 

There you have it – my thoughts on the vital few HCM priorities that pacesetting employers need to focus on in 2025. The explosion of AI use cases is causing an equal explosion in the number of vendors offering niche solutions with limited use cases – but don’t get caught missing the forest for the trees. AI’s true promise lies in its ability to optimise across your entire HCM landscape. To do that effectively, AI needs to move freely across the data and applications to which it’s been granted access. The same is true of company culture and workforce management. We’ve reached an age where succeeding in these areas depends on technology, and that technology needs to be built on the solid foundation of a single, secure data model, robust integration, and strong user experience and analytics. This will be the path forward for winning organisations in the coming years.

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