Is business ready to grow? How human capital and talent technology are influencing global business

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1 Is business ready to grow? How human capital and talent technology are influencing global business Unified Human Capital Management and Talent Technology Survey Report August 2011

2 Contents 1 Key findings 2 Talent retention now trumps cost reduction as a top business challenge 3 HR and business leaders need to work together 4 Many organizations lack an effective talent management strategy 6 Holistic talent management is the new frontier for HR 10 Cumbersome systems are constraining HR effectiveness 12 Social media and collaboration tools are emerging as a new force 13 HCM technology is a growing priority 14 Ready, set, grow 15 Survey demographics

3 Key findings In October 2010, Deloitte polled senior business leaders and human resource executives to gain insight into the post-recession talent trends and challenges that are expected to influence global business over the next decade. The results, reported in Talent Edge 2020, showed that improving top- and bottom-line performance had re-emerged as the highest priority for many organizations a marked shift from their cost-cutting focus in While controlling costs continued to be a top concern, these executives reported a renewed interest in investing in innovation and R&D, expanding in global and new markets, and using technology to accomplish their goals. These findings stoked our curiosity about exactly what role human capital technology would be expected to play in a growth-oriented environment. After all, to hit their growth targets, organizations need to have the right people, in the right place, with the right preparation, and there are many technology offerings that can help. In this report, we take a closer look at how businesses are using human capital management (HCM) technology to meet their growth goals. During the spring of 2011, we joined forces with Oracle Corporation to survey 126 corporate and HR leaders, representing a broad range of industries around the world. Of the 126 respondents, 45% represented large enterprises with revenues greater than $1 billion, and the remainder represented small-tomedium-sized businesses with revenues totaling less than $1 billion. Here are some highlights from our findings: Talent retention is the leading business challenge: While cost containment continues to be a concern, talent retention is even higher on the priority list for many executives. Nearly two-thirds of the total executives surveyed identified talent retention as one of their top-two business challenges, followed by cost reduction. Many organizations don t have a plan for retaining talent: Even with talent retention looming as a major concern, most of the surveyed executives (53%) reported that they did not have a formal talent management strategy and only 19% of these expect to have a strategy within the next 12 months. Talent management initiatives are a leadership priority and HR pain point: Business leaders are asking HR to focus on talent management specifically performance management, talent assessments and reviews, recruitment, and succession planning. Unfortunately, these focus areas are also the ones that are causing HR the most trouble as they struggle to meet leadership s expectations. Cumbersome systems constrain HR effectiveness: For most organizations, the tools they currently have in place to assess talent needs are cumbersome, limited, or outdated. For the top leadership-driven talent initiatives, manual systems are commonplace. Only about one-fourth of the organizations have integrated talent and HR systems that can be used to efficiently analyze talent risks and opportunities by providing a holistic view of individual employees and workforce groups. HCM technology solutions are moving up the priority list: Expanding or implementing talent management technologies is expected to be a growing priority for many organizations over the coming years. Many of the surveyed organizations (43%) indicated that improved technology would be a high priority in As used in this document, Deloitte means Deloitte LLP and its subsidiaries. Please see for a detailed description of the legal structure of Deloitte LLP and its subsidiaries. Certain services may not be available to attest clients under the rules and regulations of public accounting. 1

4 Talent retention now trumps cost reduction as a top business challenge Nearly two-thirds of the executives (63%) who participated in this survey identified talent retention as one of their top-two business challenges, while 38% pointed to cost reduction (Figure 1). These findings represent a shift in priorities from 2010 when cost cutting and acquiring/developing talent were close competitors for management s attention. 1 This growing concern for talent retention is supported by the results of an employee survey conducted by Deloitte in early That report shows that nearly two-thirds of employees (65%) were actively or passively testing the job market. 2 Most expressed strong, negative views about employers efforts to create challenging career paths and to open up advancement opportunities. As organizations increase their focus on top-line performance while continuing to contain costs, current survey data suggests that business leaders recognize that top performers could be enticed to leave for roles at other organizations. As competition heats up, identifying and retaining top talent at all levels of the organization is likely to continue to increase in importance. Figure 1. Top business challenges (Total survey) Talent retention Cost reduction Lack of business analytics (i.e., reports, metrics, data, etc., summarizing status across the organization) Technology infrastructure/disparate systems Other Figure 2. Top business challenges (Large enterprises) Talent retention Lack of business analytics (i.e., reports, metrics, data, etc., summarizing status across the organization) Cost reduction 23% 32% 28% 38% 63% 0% 20% 40% 60% 80% 100% 39% 44% 49% Digging Deeper After talent retention, large enterprises with revenues greater than $1 billion appear to view their lack of business analytics as their second greatest challenge even greater than cost reduction (Figure 2). The results for smaller organizations were in line with the overall findings, with retention and cost reduction topping their list. Technology infrastructure/disparate systems 35% Other 21% 0% 20% 40% 60% 80% 100% 1 Talent Edge 2020: Blueprints for the new normal, December 2010, page 3. 2 Talent Edge 2020: Building the recovery together, April 2011, page 3. 2

5 HR and business leaders need to work together As organizations focus on achieving top-line growth with fewer employees, human capital concerns have become a strategic focal point. While most survey respondents (73%) reported that their HR department is aligned with their organization s goals and are helping leadership achieve these goals, a substantial 27% say their HR departments are not aligned. Results for large enterprises and smaller organizations were similar. Many respondents of unaligned organizations pointed to talent-related issues lack of talent (50%) and ineffective leadership (38%) as the key factors contributing to HR s inability to help the organization reach its goals. Others indicated planning-related issues as the root cause lack of a comprehensive business plan (29%) or HR department plan (44%) (Figure 3). These results suggest that many organizations have talent and leadership gaps that must be filled to improve effectiveness. There is also a pressing need for many organizations to develop effective strategic plans that incorporate an HR strategy as a major component of the overall business plan to achieve corporate goals. Figure 3. Factors that hinder results (Total survey) Lack of critical talent in key areas of the organization/retention issues Lack of comprehensive business plan for the HR department Ineffective leadership Antiquated technology systems or disparate systems that create data accuracy challenges Lack of comprehensive business plan for the organization 50% 44% 38% 32% 29% 18% Other 0% 20% 40% 60% 80% 100% These results suggest that many organizations have talent and leadership gaps that must be filled to improve effectiveness. 3

6 Many organizations lack an effective talent management strategy Our research indicates that organizations need a proactive plan to hold on to employees especially future leaders. But according to our survey, most organizations do not have a formal plan. More than half of executives surveyed (53%) reported that they did not have a formal talent management strategy, and only 19% of these expect to have a strategy within the next 12 months (Figure 4). Figure 4. Total survey Formal plan? If no, what s the timeline? 19% 47% Almost as troubling, many organizations that have a formal talent management strategy have not communicated the strategy with leaders across the organization (Figure 5). While 95% of respondents have shared the strategy with their CEO, other critical functional leaders have been left out of the loop, indicating that many organizations are still functioning within silos. 47% 53% 23% Results of the study indicate that large enterprises with a formal talent strategy were more likely than smaller organizations to share their strategies with their CEO (97%) and CFO (79%), but fewer were bringing their COO and CIO into the loop (Figure 7). Yes No The next 12 months The next months 3 Years Unsure Figure 5. Socialized with leaders (Total survey) Figure 7. Socialized with leaders (Large enterprises) CEO 95% CEO 97% CFO 71% CFO 79% COO 59% COO 59% CIO 55% CIO 56% 0% 20% 40% 60% 80% 100% 0% 20% 40% 60% 80% 100% 4

7 Hidden in plain sight? Employee retention and recruitment are two sides of the same coin. Global organizations are struggling to find the required/desired talent with the required/desired skills to put in particular locations. In the Talent Edge 2020 survey, 41% of participating executives listed competing for talent globally and in emerging markets among their most pressing concerns. 3 However, the required/desired talent may already be hidden within many of these executives organizations. Organizations with a comprehensive talent management plan, supported by integrated technology, are positioned to better understand, report, and mine their talent data to support organization-wide initiatives, from recruitment to project management. Digging Deeper Most large enterprises surveyed (62%) reported that they do have a formal talent management strategy in place. However, of the responding enterprises without a talent strategy, only 14% expect to have one in place within the next 12 months (Figure 6) Figure 6. Large enterprises Formal plan? The first step in developing a broad talent management plan is to establish a baseline by conducting an organization-wide inventory of existing talent that identifies high-quality performers and organizational talent gaps. From this inventory, a plan is developed that includes creating strategies for retaining existing talent, developing employees skills and leadership abilities to fill future needs, and sourcing new talent as required. Effective execution of the plan requires buy-in and functional alignment across the organization. 62% 38% Unified, integrated technology solutions can help organizations efficiently execute their plan. For example, talent and HCM software that provides employee profiles can link the individual s HR data directly to talent data, allowing management to fill talent gaps by providing insight into available talent across the organization, along with the individuals career preferences. That means, for instance, a business leader can easily identify a top performer with the required/desired skills in Africa who is willing to move into a new role in Asia. Yes No In addition, organizations with advanced talent management capabilities are positioned to anticipate future talent needs. These capabilities allow organizations to stay ahead of business demand by providing more lead time to source and develop talent to meet future needs. If no, what s the timeline? 14% 19% 57% The next 12 months The next months 3 Years Unsure 3 Talent Edge 2020: Blueprints for the new normal, December 2010, page 5. 5

8 Holistic talent management is the new frontier for HR Over the past decade, many organizations have streamlined their basic workforce management processes, such as HR administration, payroll, and benefits, so it comes as no surprise that nearly half of respondents used ERP systems for core HR processes (48%) and payroll (41%). Many also choose to outsource their benefits (29%) and payroll (33%) (Figure 8). Figure 8. Solutions for workforce management (Total survey) Point solution 12% 22% As a result of smart automation and outsourcing, core HR functions are far down the list of top leadership concerns (Figure 9). Now that many organizations are entering a period of cautious growth, leaders are increasingly focused on talent management issues. The leaders surveyed are asking HR to focus on performance management (48%) as well as talent assessments and reviews (45%). Those leaders also rank recruitment and succession planning high on their priority list, both at 40%. ERP Home grown 14% 17% 21% 29% 19% 30% 31% 41% 48% Unfortunately, these focus areas are also the ones that are tripping up HR as they struggle to meet leadership s expectations. Across all organizations surveyed, HR s top three challenge areas are performance management (45%), talent assessments and reviews (39%), and succession planning (36%) (Figure 9). Outsourced Unsure 6% 8% 6% 29% 33% 13% 2% Other 0% 0% 4% 0% 20% 30% 40% 50% Core HR Benefits Payroll Time management 6

9 Figure 9. Leadership priority areas vs. HR challenge areas (Total survey) Performance management Talent assessments and reviews 39% 48% 45% 45% Succession planning 36% 40% Recruitment 29% 40% Compensation 22% 28% Workforce Analytics Learning management 23% 26% 22% 25% Self-service Compliance 8% 9% 13% Employee Portal Core HR Benefits Time Management Security and HR Data Privacy Payroll Help desk 2% 2% 3% 0% 2% 1% 1% 8% 6% 8% 6% 7% 9% 8% 0% 20% 30% 40% 50% Priority Talent/HCM Areas for business leaders Total Survey Priority or Challenging Talent/HCM Areas for HR Total Survey 7

10 Figure 10. Leadership priority areas vs. HR challenge areas (Large Enterprises) Performance management Succession planning 35% 46% 46% 46% Talent assessments and reviews 33% 42% Recruitment 21% 37% Workforce Analytics 33% 39% Compensation Learning management 19% 16% 18% 28% Self-service Compliance Core HR Time Management 7% 7% 12% 9% 21% Benefits Security and HR Data Privacy Help desk Employee Portal Payroll 0% 0% 2% 2% 5% 4% 4% 5% 2% 5% 0% 20% 30% 40% 50% Priority Talent/HCM Areas for business leaders of Large Enterprise Priority Talent/HCM Areas for HR of Large Enterprise 8

11 Digging Deeper Workforce analytics is high on the large enterprise leadership priority list. One-third (33%) of large enterprises in the survey ranked workforce analytics as a top-three talent/hcm leadership focus area (Figure 10). Unfortunately, 39% of those large enterprises also see workforce analytics as one of their most challenging areas. One reason that HR is having difficulty providing useful data could lie within their technology solutions. Homegrown solutions are most commonly used by large enterprises for workforce planning (39%) and analytics (30%) (Figure 11). These results indicate that, even among large enterprises, few have integrated data solutions that allow them to easily access consolidated data. Figure 11. Planning solutions (Large enterprises) Planning Solutions Large Enterprises Point Solution 12% ERP 19% Home Grown 30% 39% Outsourced 0% 2% Unsure 23% 26% Other 16% 16% 0% 5% 15% 20% 25% 30% 35% 40% 45% Workforce Analytics Workforce Planning 9

12 Cumbersome systems are constraining HR effectiveness Perhaps the reason so few organizations have a talent management strategy is that the tools they have available for assessing their talent needs are cumbersome, limited, or outdated. For the top leadership-driven talent initiatives, manual systems are commonplace. Many of the surveyed organizations use spreadsheets and other manual systems for succession planning (85%), talent assessment and reviews (63%), performance management (43%), and recruitment (40%) (Figure 12). A deeper look shows that many organizations use some type of homegrown talent management solution (Figure 13). These systems may include a mix of automated processes supported by manual steps that have developed over time. The findings indicate that few organizations have integrated talent and HR systems that can be used to efficiently analyze talent risks and opportunities by providing a holistic view of individual employees and workforce groups. Most of the surveyed executives (73%) reported that they are not able to automatically connect talent data with their core HR system. The responses were similar for all size organizations. Talent Processes Total Survey Figure 12. Talent processes (Total survey) Compensation 45% 55% Learning management 43% 57% Succession planning 15% 85% Recruitment 40% 60% Talent assessments and reviews 37% 63% Performance management 43% 57% 0% 20% 30% 40% 50% 60% 70% 80% 90% Automated Manual 10

13 The limits of homegrown Many organizations find that homegrown solutions are acceptable for day-to-day HR operations, but fall short when it comes to providing integrated, consistent processing and data across job titles, business units, work areas, or geographies to inform key decisions. Even organizations that outsource or use point solutions are often left without the capability to integrate talent data with their HR system and ERP to provide a consistent global view of the organization and the ability to slice-anddice data to answer strategic human capital questions. Because of the time required to consolidate data, reports could be out of date by the time they are produced, not reflecting the current state of the organization. Without integrated systems, it s difficult for organizations to execute talent strategies consistently. For example, when compensation and succession planning systems are not integrated, some organizations may find that they are not rewarding the right people adequately to keep them in their jobs. They fall short of a pay-for-performance culture that could be fostered by integrated processing and data administration combined with holistic analysis. Figure 13. Current solutions for talent management (Total survey) Point solution ERP Home grown Outsourced 0% 5% 4% 5% 13% 16% 16% 19% 21% 21% 21% 24% 33% 34% 37% 42% 43% 46% While homegrown systems may supply a custom mix of data or processes that are meeting a particular organizational need, they are often expensive to maintain. Homegrown solutions may also rely on a few skilled employees who hold the knowledge needed to make them work. This dependency can be a significant risk to the organization, even when the homegrown solution is providing value. The latest HCM systems can provide organizations with the ability to unify data across the organization improving effectiveness across human capital, talent, financial, and project management by providing real-time reports and analysis for these processes. Organizations that have the ability to create effective performance plans ones that are tied to organizational goals and that are visible to employees are more likely to identify and retain top talent and improve job satisfaction. 4% 12% 9% Unsure 16% 7% 9% Other 6% 15% 7% 0% 20% 30% 40% 50% Performance Management Succession Planning Talent Reviews Learning Management Recruitment Compensation 11

14 Social media and collaboration tools are emerging as a new force Many organizations are using internal collaboration tools to help employees organize, communicate, and execute work tasks in a global and online environment. More than half of all organizations surveyed reported using shared folders (78%) and instant messaging (63%) behind their firewall (Figure 14). While less common than internal collaboration tools, some organizations are also using online social media for recruiting employees, branding, and contacting clients. LinkedIn is used by more than half of the organizations represented (55%), followed closely by Facebook at 50%. Twitter and blogs were used by less than 25% of the organizations represented (Figure 15). Overcoming social media obstacles Organizations are likely to become more open to using social media to improve talent retention and productivity when communications can be more effectively monitored and controlled. New developments in HCM software allow social and collaborative tools to be natively embedded within HCM transactions, providing secure communications behind the organizations firewall. Employee productivity may also be enhanced by easy access to information and collaboration tools available at their fingertips, without having to leave an application. Figure 14. Collaboration tools used internally behind the firewall (Total survey) Shared folders 78% Instant messaging 63% Video chat/conferencing 52% Online discussion forums 33% Wikis 24% Web chat rooms 19% 0% 20% 40% 60% 80% 100% Figure 15. Leverage social network tools for recruiting, awareness, client contact, other (Total survey) LinkedIn Facebook 50% 55% Twitter 24% Blogs Online discussion forums 14% 12% MySpace 6% 0% 20% 40% 60% 80% 100% 12

15 HCM technology is a growing priority Expanding or implementing talent management technologies is expected to be a growing priority for many organizations over the coming years. Many of the surveyed organizations (43%) indicated that improved technology would be a high priority in The percentage of participant organizations that plan to implement or expand talent technology increases to 54% over two-to-three years, and 56% beyond three years (Figure 16). This indicates that organizations recognize the need to implement technology to support HR and business objectives. As the struggle for talent continues, it will likely become even more important to put integrated talent technology in place to remain competitive in the market for talent. Figure 16. Implementation of new talent technology Total Survey (Scale of 1 5) Implementation of New Talent Technology Total Survey (scale of 1 5) 4 5 (High) 43% 54% 56% 3 (Moderate) 29% 30% 29% 1 2 (Low) 16% 15% 28% 0% 20% 30% 40% 50% 60% How much of a priority is Workforce Management technology in 2011? How much of a priority is Workforce Management technology in the next 2-3 years? How much of a priority is Workforce Management technology beyond 3 years out? Expanding or implementing talent management technologies is expected to be a growing priority for many organizations over the coming years. 13

16 Ready, set, grow As organizations anticipate the return of a growing economy, many executives recognize that one of their highest hurdles will be retaining and developing the talent they need to compete. Leadership is looking to HR to focus on initiatives that will address their employee-related concerns, especially performance management, talent assessments, recruitment, and succession planning. Unfortunately, these focus areas are also the ones that are causing HR the most pain as they struggle to meet leadership s expectations. One factor that limits HR s effectiveness is outdated systems and processes. The good news is that many organizations recognize that they are not ready to take advantage of potential growth opportunities, and are making plans to address their technical and strategic limitations. Leadership is looking to HR to focus on initiatives that will address their employee-related concerns, especially performance management, talent assessments, recruitment, and succession planning. 14

17 Survey demographics During the spring of 2011, Deloitte joined forces with Oracle Corporation to survey 126 corporate and HR leaders, representing a broad range of industries around the world. Of the 126 respondents, 45% represented large enterprises with revenues greater than $1 billion, and the remainder represented small-to-medium-sized businesses with revenues totaling less than $1 billion. Almost one-fourth (22%) of the respondents had more than 25,000 employees (Figure 17). Figure 17. Size of organization Size (Total of Organization survey) Total Survey More than 25,000 22% 10,000-25,000 5,000-10,000 14% 2,500-5,000 12% 1,000-2,500 14% 500-1,000 2% Fewer than % 0% 5% 15% 20% 25% 30% Figure 18. Job title (Total survey) HR/Talent Director or Manager 39% SVP/VP/Director 18% Manager 15% CHRO/Chief Talent Officer CFO/Treasurer/Comptroller CEO/President/Managing Director Other HR or talent executive Other c-level executive Other 2% 1% 9% 6% 6% 5% Board Member 1% 0% 20% 30% 40% 50% 15

18 Thirty-nine percent of the respondents had the title of HR/Talent Director or Manager, with 18% holding a Senior VP or Director title. (Figure 18), and 69% of respondents work in HR/Talent department (Figure 19). More than one-half (58%) are located in the Americas (Figure 20). Figure 19. Functional role in organization (Total survey) Human resources/talent 69% Corporate management Business operations Information technology Finance Sales and marketing 8% 7% 6% 6% 4% R&D/Other 0% 0% 20% 40% 60% 80% 100% Figure 20. Location by region (Total survey) Americas 58% Europe, Middle East, and Africa 20% Asia Pacific 16% Other 6% 0% 20% 40% 60% 80% 100% 16

19 17

20 This presentation contains general information only and is based on the experiences and research of Deloitte practitioners. Deloitte is not, by means of this presentation, rendering business, financial, investment, or other professional advice or services. This presentation is not a substitute for such professional advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified professional advisor. Deloitte, its affiliates, and related entities shall not be responsible for any loss sustained by any person who relies on this presentation. Copyright 2011 Deloitte Development LLC. All rights reserved. Member of Deloitte Touche Tohmatsu Limited

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