From Excel to Data-Driven HR
How SMEs can reduce HR administration and gain clarity
HR Digitalization for SMEs — Step by Step
The Best HR Solutions in V4 Countries project is an international community of business leaders, HR professionals, and academic researchers exploring how scientifically proven HR practices can be translated into everyday business operations to create HR systems that genuinely work and deliver business value. The article series launched by the community examines the most important HR areas from both SME and large-enterprise perspectives.
In Hungary, HR administration in many small and medium-sized businesses still lives in Excel spreadsheets and paper folders. At the same time, more and more companies are realizing that even digitizing a single well-chosen HR process can significantly reduce managerial and administrative burdens. Today, the question is no longer whether SMEs should digitalize HR, but how to begin without launching expensive, complex, and difficult-to-maintain systems.
Why digitalization is more urgent for SMEs than most companies realize
In many SMEs, HR problems do not appear as dramatic system failures but rather as small daily disruptions that managers themselves must resolve. Recruitment processes take too long, onboarding feels inconsistent, training records are tracked from memory, and administrative follow-up consumes excessive time. This is not primarily a leadership problem — it is the consequence of missing or fragmented systems.
According to EU digital maturity data, only 58% of SMEs across the European Union reached a basic level of digital intensity in 2023, compared to around 91% of large corporations. HR-specific research also shows that nearly 39% of organizations in the V4 region do not use any HR controlling tools at all — meaning they do not systematically track turnover, absenteeism, or training indicators.
For SMEs, this creates a double vulnerability:
- they have less time and capacity for manual administration,
- yet they also fail to benefit from the automation and analytics advantages that could generate the greatest relative impact in smaller organizations.
Typical Starting Points and Consequences in SMEs
Excel-based administration
Scattered data, difficult to search, version confusion
High turnover during probation period, low Day 1 readiness
Paper-based onboarding
Slow onboarding process, incomplete documentation, ad hoc workflows
High turnover during probation period, low Day 1 readiness
Training management through verbal communication or email
No clear overview of who completed what training and at what cost
Development effectiveness cannot be measured, mandatory trainings are missed
No HR reporting
Managers make decisions based on intuition, without seeing data or trends
Late detection of turnover, reactive “firefighting” HR operations
Typical starting point
Typical pain points
What happens without digitalization?
The Core Principle: Process First, Software Second
One of the most important lessons from the KION case study conducted within the project at a Czech subsidiary — also strongly supported by HR digitalization literature — is that digitalization is not a magic solution. If a process is disorganized, digitalization simply creates faster chaos. Real results come when organizations first clarify how a process should work and only then make it digitally trackable.
In the SME context, this begins with answering three questions:
- Which three processes involve the most manual work, follow-up, or potential for errors?
(For example: onboarding, training administration, leave management, or offboarding.) - Can these processes be described in a simple process map — who does what, when, and with what outcome?
- If yes, the processes can be digitalized. If not, the process itself must first be improved.
This approach aligns with the core principle of the HR digitalization toolkit:
“Digital HR succeeds when technology follows process clarity and data discipline — not the other way around.”
For SMEs, this means that the starting point should not be implementing a full HRIS system, but rather making the most painful process understandable, documented, and repeatable.
“HR Digitalization Maturity Mirror” – Where Does My Company Stand?
Digitalization is not a single step but a development journey. SMEs do not need to become “fully digital” overnight. The goal is simply to move from the current maturity level to the next one. This approach is more measurable, more affordable, and significantly easier for organizations to accept.
HR Digitalization Maturity Levels in SMEs
3 – Data-Driven HR
Predictive analytics, proactive interventions, AI-supported processes
Build responsible AI governance and a continuous improvement culture
2 – Connected Systems
Data flows across systems, processes are automated, basic analytics exist
Integrate HR reporting into managerial decision-making
1 – Basic Digitalization
Digital tools exist but operate in silos with low adoption
Introduce integrations and self-service functions
0 – Paper and Excel
All processes are manual, no unified data foundation
Select and digitalize one process (e.g. onboarding)
Level
Characteristics
Next Step
The most common mistake SME leaders make is trying to jump directly from Level 0 to Level 3. As a result, they become trapped in a system implementation without stable data foundations, internal ownership, or accepted processes. Sustainable digitalization is not about reaching the ideal end-state immediately — it is about taking the next reasonable step.
Four Practical Steps to Start HR Digitalization
1.
Identify and Quantify the Pain Points
The business case for digitalization should always be supported by concrete efficiency data rather than general arguments. In the KION project, the first step was not asking whether “a system would be useful,” but identifying exactly which processes consumed the most time and what their measurable cost was.
For SMEs, this can be done through a simple internal assessment: ask key employees to track for one week how much time they spend on HR administration (searching onboarding documents, updating training records, preparing exit documentation, etc.). The results are often surprising and provide strong justification for change.
The outcome should be a short, one-page “pain map” containing:
- the three most time-consuming HR processes and their weekly/monthly workload,
- the direct and indirect costs resulting from them (time spent × labor cost, repeated work caused by errors, late detection of resignation intentions, etc.),
- the easiest first step to digitalize.
2.
Pilot a Single Process – Onboarding as the Ideal Starting Point
In most SMEs, onboarding is the most visible and measurable process, making it an ideal candidate for early digitalization with fast and tangible results. In the KION case study, this was also one of the highest-value improvements: new employees clearly understood their responsibilities during the first weeks, managers could monitor progress with a single click, and the system automatically sent reminders.
An SME onboarding pilot can be launched with minimal tools:
- A standardized onboarding checklist (using Google Docs or a simple HR tool) containing the tasks, required documents, and mandatory training sessions for the first 5–10 days.
- Automatic notifications (even through Outlook calendar reminders) for responsible individuals regarding tasks and deadlines.
- A simple status tracking system: completed / in progress / delayed — visible to managers in real time.
A key lesson from the KION case applies here as well: do not choose the software first. Define the process first, then select the tool that best supports it. In many SMEs, even a well-structured spreadsheet or a low-cost HR tool can generate significant improvement if the underlying process is clear and consistently applied.
3.
Involve IT and Security from the Beginning
One of the most important — and most expensive — lessons from the KION project was that IT and data security considerations must not be added later. Security validation delayed the project by six months. While the risk is smaller in SMEs, it is still significant.
GDPR compliance is a basic requirement: employee data protection regulations apply to SMEs even if they do not have dedicated data protection officers or IT departments. When introducing digitalization, organizations should review a basic data security checklist:
- What employee data is stored, where, and with what access rights?
- Does the new system comply with GDPR requirements (data processing records, access management, retention rules)?
- Who is responsible for data security? If there is no internal IT specialist, which external partner supports this area?
SMEs do not necessarily need to build their own IT teams. However, they do need a reliable software provider or external partner with adequate data protection expertise, as well as a clearly assigned internal owner responsible for HR data management.
4.
Communicate Personal Benefits — Not Digitalization as a Goal, but as a Tool
Change management is just as important in SMEs as in large enterprises — often even more sensitive, because employees know each other more personally and trust can be more fragile. Eva Hrůšová, HR Director at KION, summarized one of the key communication lessons clearly:
“I should have communicated the personal benefits more concretely — what it means for the employee. That they save six hours every week.”
For SME leaders, this means communicating not the digitalization itself, but what employees and managers personally gain from it. Not “we implemented an HRIS,” but rather:
- “You no longer need to spend hours searching for who completed mandatory fire safety training — it’s available with one click.”
- “New employees no longer need to ask what they should do during their first week — they always see their task list.”
- “Vacation requests no longer require email chains — one approval and it’s done.”
Concrete personal benefits are the most effective change management tools — both in SMEs and large organizations.
What Can SMEs Realistically Expect from Digitalization?
The impact of digitalization should neither be underestimated nor exaggerated. Based on the HR toolkit and the KION case study, the table below summarizes the realistic improvements SMEs can expect and how these improvements are perceived in everyday operations.
Expected Impacts in the SME Context
Early turnover (0–6 months)
5–15% reduction
Fewer unsuccessful hires, lower rehiring costs
Employee satisfaction
10–20 point increase
Clearer communication, fewer misunderstandings, better first impressions
Data quality and compliance
Significant improvement within 6–12 months
More transparent documentation, lower legal risk, more auditable processes
Onboarding lead time
20–40% reduction
New employees become productive faster, managers receive fewer questions
HR administrative workload
30–50% reduction
Less follow-up work, faster administration, fewer emails
Area
Typical Improvement
How SME Leaders Experience It
However, these results only appear when digitalization is supported by genuine process improvement and consistent usage. Technology alone does not create value; value is created when employees and managers use the system as a natural part of daily operations.
Do Not Buy a System — Digitalize a Process
HR digitalization is therefore not a large-enterprise privilege, nor is it an unreachable investment for SMEs. The most important insight — also highlighted by the KION project — is that success does not depend primarily on software selection, but on whether the organization first makes its own processes transparent and then digitalizes them consistently: starting small, communicating clear personal benefits, and involving IT security from the very beginning.
SMEs that follow this logic do not merely reduce administrative burden. They build data-driven decision-making, transparent onboarding, and measurable HR effectiveness — creating long-term competitive advantage in an increasingly challenging labor market.
In the coming years, the key question will not be who has an HR system, but who can turn HR digitalization into real business value within their own organization.
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