A study designed and carried out for the European Club for human resources (EChr) by Hewitt Associates has revealed that HR leaders foresee a better but still challenging outlook for 2010.
On the upside, HR plans to take the opportunity to measure and leverage HR’s value to the business more effectively. On the downside however, concerns remain regarding productivity gaps, workforce adequacy, and rigorousness in people management policy implementation.
Leonardo Sforza, head of EU affairs and research at Hewitt Associates and author of the study, said:
"Our study of European HR leaders shows 2010 emerging as a true year of transition during which companies are looking to improve their competitiveness and prepare for a post-crisis environment. This is leading to a greater balance between more "defensive" measures –such as those aiming to reduce production, workforce costs and capacity– and "growth" initiatives aiming to upgrade productivity, talent and leadership capabilities, or to explore new opportunities for mergers and acquisitions."
Leonardo Sforza added:
"Year on year, the needs expressed by HR leaders about the operational conditions that would increase the impact of their activity on business results is becoming a recurrent unsatisfied call that seems to remain unheard or to be difficult to apply in practice. A greater and timelier involvement of HR in strategic business decisions, the improvement of execution of HR-related activities update business expertise and board empowerment continue to be most in demand.
"Given the nature of these wishes, there is a shared responsibility between the boardroom and HR leaders to make them happen on a larger scale. Nevertheless, HR should be the initiator of that process by deploying a "total-quality" oriented culture in HR – combined with the acquisition of greater business acumen".
HR, a fully engaged business partner
This year there is a steady improvement in the level of satisfaction of HR directors with regard to their job and current employer – almost back to the pre-crisis mood. 92% of respondents do not wish to move to another function outside HR, and 87% do not wish to change the company they work for. Moreover, only 7% of them admit to often experiencing a tension between their personal values and the daily practices within the business; while the majority of respondents do not see any major conflict.
The priorities on the HR agenda for the period 2010 to 2012 remain stable with an even greater emphasis on core human capital issues, namely: leadership development (mentioned by 46%), employee engagement (39%) and talent retention (32%). As a fourth priority, the focus will be on improving the assessment of what HR does and how it adds value to the business. This is also the area where HR leaders seem to be most keen to have further support and fill their current gap in terms of delivery capacity.
When judging its own performance against business expectations, HR acknowledges that there is large scope for improvement in HR strategy and execution, and in all other 26 different people-related activities under analysis. In 16 of these activities –increased from 11 in last year’s survey– the majority of respondents admit to performing below expectations. The most frequently mentioned areas of excellence continue to be those related to statutory compliance issues, such as health and safety at work, employee data-privacy, industrial relations and non-discrimination. But also in these best performing fields, in particular in relation to non-discriminatory practices, the proportion of companies acknowledging the gap has increased from 15% last year to 36% this year.
The weakest fields where HR assesses itself as delivering below target are in relation to: HR metrics (77%), work/life balance programmes (75%), management of intergenerational diversity (62%), consistency of HR policies across countries (62%), and employee communication (59%).
The traditional range of people and internal "customer" tools are generally preferred by HR to measure the business impact of their activities. Employee engagement surveys emerge this year as the most commonly used tool. However, the proportion of companies that due to lack of resources do not use HR metrics at all, has increased from 8% to 18% this year. Meanwhile, there are 35% of respondents that are still looking for relevant quantitative tools. These results further explain the weak performance mentioned above in the same area.
A majority of respondents expect significant changes in HR capabilities and competencies within the next three years, in particular in relation to change management, processes and operations and strategic advice to management. On the contrary, only one fifth of respondents expect changes in the functional area of expertise required to handle compensation and benefits policies.
Same HR drivers and priorities but new needs and delivery gaps
Pressure on cost reduction is confirmed as the most influential factor for the second consecutive year. Challenging profit targets, changes in the company culture and organisation and talent shortage also continue to be among the top drivers of HR policies. These are all signals of the reinforced consciousness of an HR function that needs to cope with a highly competitive and fast changing business environment in terms of market and of critical work force capabilities.
These factors are expected to have an impact on new business competencies to be developed by HR – moving from sixth position last year to first this year– and, as in the past, on HR processes and on the way HR measures its value to the business. The size of HR departments seems to have stabilised and is less under question compared to last year, which is good news although challenges are clearly ahead. For those still working towards a fully business-aligned HR department, it’s important to know what that really looks like and to see clearly how the department can better align with the organisation.