Just one in 10 UK organisations rate their HR performance as ‘excellent’ and none believe their organisation provides ‘excellent’ development for HR. A further 66% said their HR functions lacked the capabilities needed to meet the rate of change across the organisation.
Released as part of Deloitte’s UK Human Capital Trends report, an annual survey looking at business priorities and concerns across organisations in the UK, the statistics paint a worrying picture of the perception of HR’s impact on business performance.
HR risks slipping further from the boardroom if it cannot rationalise what the organisation needs and provide the capability to match.
It’s not that businesses don’t understand what HR can bring – they increasingly understand the enormous value that activities that have traditionally sat with HR can bring, but in a fast-moving, frenetic world, HR must continue to push for increased investment to make a real difference.
The leadership question
Leadership came out as the respondents’ most important trend for the year ahead, with 86% of respondents citing it as one of their most important challenges. Yet just 8% feel their leadership pipelines are “very ready” to address the problem.
Developing millennial leaders was identified as a particularly tough problem across the business. Why is leadership such a perennial problem?
Part of the reason is we’re still in the middle of the debate around what leadership should look like and how it works across modern, digitally-enabled organisations filled with employees that know what they want.
“The concept of hierarchical leadership is probably on the way out,” said Anne-Marie Malley, Partner in Human Capital at Deloitte, who spoke exclusively to HRZone.
“Technology and the way we can more easily collaborate across levels, geographies and business units is helping to drive this.”
“So you have leaders with a small l in any level of an organisation, collaborating in ways that drive value.”
At the same time, the changing needs and requirements of employees makes it difficult to establish long-term succession planning initiatives – how do you know what type of leaders your employees will want in five years?
Mark Bowden, Director in Human Capital at Deloitte, told HRZone that the employee-driven talent debate is driving organisations into reactive roles. This can make it harder to drive leadership development against shifting employee demand.
“We’ve talked a lot about the war for talent being over and talent having won it.”
“As we’ve come out of the age of austerity we find there’s a lack of skills and high-performers and we’re finding the employees are driving the talent debate more. They’re demanding flexible working, demanding less complex roles, etc.”
“Employers are having to respond to that a lot more. And HR must work with the business to ensure the talent is available.”
Yet, as the definition of talent becomes increasingly fluid and defined by short-term need, this task becomes more difficult for HR.
L&D rising
Well over eight out of 10 (86%) ranked learning as ‘important’ or ‘very important’ this year, an increase of 16% since 2014. Clearly learning is clawing its way up the corporate priority list.
There are a number of explanations for this. Companies increasingly realise internal development is very important against a backdrop of increasing pressure for talent – recruiting good people externally is not easy. Additionally they see the link between targeted learning interventions and increased engagement.
“L&D is an absolute business critical issue but it’s been seen as a nice-to-have.”
And yet, the business capability needed to turn this shift into action is limited. Between 2014 and 2015, the capability gap for L&D almost doubled, from 12% to 20%.
Slow uptake of innovative technologies may help explain this capability gap. Modern learners expect on-demand technologies, again highlighting the shifting needs of employees and how they are shaping the corporate agenda.
Despite this, business leaders do not express confidence in their ability to provide a digitally-enabled experience: 8% rate themselves excellent at providing mobile learning and 15% rate themselves excellence at using advanced media, such as simulations and audio.
At the same time, companies are still rationalising their learning environments to build an integrated, consistent experience. Technology is one part but other areas – such as using internal talent to enhance the learning experience – are not being used optimally.
Outdated measurement models may be making it difficult to prove ROI and provide a sustainable picture to guarantee investment, muddying HR’s role in driving forward the talent agenda with the board.
“It’s much easier to turn off an L&D budget than it is to reduce your stock of raw materials.”
Ramping it up when the good times roll round?
One of the biggest questions is whether L&D budgets have increased because we’re coming out of recession or whether organisations are really connecting the dots on the long-term value of L&D across the organisation.
For Anne-Marie, the picture is complex.
“Companies are certainly waking up to the fact employees have much more choice and L&D is not only a way to develop the employees you’ve got but also retain it. Unfortunately, many companies still switch on and off the L&D budget depending on how business is going.”
“It’s much easier to turn off an L&D budget than it is to, for example, reduce your stock of raw materials. The lead time for many things is much more significant than L&D. So it’s one of the few areas in the organisation where we can take a decision on cost reduction and make it happen literally overnight.”
Yet there is definitely movement happening and businesses are becoming better at connecting the value that L&D brings with business objectives. Anne-Marie mentioned a couple of case studies to me where L&D initiatives were getting 4x ROI.
“In an R&D or customer environment, it would be a no-brainer. Investment would be guaranteed.”
Yet it’s not so clear cut in L&D.
“Between 2014 and 2015, the capability gap for L&D almost doubled, from 12% to 20%.”
“This needs to change if we are truly re-prioritising L&D. It’s about the voice of HR and the influence of HR. I don’t think [L&D ROI] is a hard thing to understand. I think HR vary in their ability to communicate it in a very fact-based, analytical way so the board can understand the impact of the taking out the budget of L&D and learning.”
Conclusions: to worry or to celebrate?
Re-prioritisation happens first in the mind – those business leaders who see the colossal opportunities afforded by L&D investment are leading the pack.
It’s clear that HR and the wider business are feeling the pressure of delivery, logistics, measurement, evaluation but these are expected when we re-prioritise. As long as progress is being made and these avenues are rationalised and aligned with business objectives we shouldn’t worry.
HR must push forward and put its stake in the ground more clearly. Issues like leadership and the role of L&D in operational effectiveness are baffling – HR has an opportunity to bring to the table new strategies that make sense in this new area of agility, responsiveness to employee demands and technology-enabled strategic capabilities.
