Global research has revealed that HR functions are transforming themselves as they shift their priorities from enhancing internal operations to maximising their contribution to business performance.
The research was carried out by Mercer Human Resource Consulting and builds on a study carried out in 2003. Nearly 1,400 organisations across Asia, Australia, Europe, Latin America, New Zealand and North America took part.
There has been a clear shift in HR priorities – 40 per cent of respondents listed human capital strategy as a principal function of HR today but 64 per cent expect it to become a key function within two to three years.
Leadership development and talent management are other areas that are expected to become more important. Meanwhile, operational excellence is seen as a priority by 46 per cent today but only 32 per cent see it as a key function in the next few years.
“What is immediately evident from the survey is that HR transformation is a continuous process rather than a one-off event,” said Mike Theaker, principal in Mercer’s HR Effectiveness Business.
“Technology and service delivery improvements were the focus of the first wave of transformation activity, five to 10 years ago, coupled with an expectation that this would enable HR to transition into a more strategic role.
“HR functions are now challenged with delivering against the expectations set – to deliver human capital strategies and initiatives that demonstrate a significant contribution to business operations and the achievement of business goals.”
The top five challenges cited by HR leaders around the world are:
- Acquiring key talent – 43 per cent
- Driving cultural and behavioural change in the organisation – 40 per cent
- Building leadership capabilities – 40 per cent
- Retaining key talent – 38 per cent
- Increasing line manager capability to handle people management responsibilities – 26 per cent.
As a result, there has been an increase in numbers of HR leaders who report to the CEO – 67 per cent, compared to 54 per cent in 2003. In addition, 59 per cent have significant contact with the board of directors on issues such as talent management, succession planning and the human capital implications of mergers, acquisitions and other transactions.
But HR’s reliance on traditional skill sets may be holding the industry back. According to the survey, 53 per cent of organisations list the skills and competencies of HR staff as one of the most significant obstacles to enhancing the overall role of the function.
The capability of line managers to supervise staff and the business’s perception of HR value are other barriers holding back the function’s development.
“To move the HR function forward with its transformation requires the implementation of a medium to long-term talent strategy to equip HR with the range of skills and capabilities currently lacking, specifically in the areas of finance and business understanding. The sole response to this skills gap to date has been some ad hoc internal training and development which is clearly not working,” explained Theaker.