Winning the War for Talent in the

Transcription

1 Winning the War for Talent in the High-Tech Industry SAP Executive Insight

2 Executive Agenda High-tech companies face a range of complex business challenges due to global expansion, shifting demographics, and continuous competitive pressures. Within this industry context, the human resources (HR) organization finds itself at the forefront of many of these challenges, while facing unparalleled pressure to deliver. Increasingly, human capital management (HCM) is becoming a priority for high-tech senior executives. The workforce, they realize, is not only a source of competitive differentiation, but also the key to accomplishing a number of strategic goals, such as product and service innovation and process improvements as well as new channel development. This SAP Executive Insight addresses the following questions: What specific challenges do HR organizations in high-tech companies face today? What is the impact of these challenges on HR operations? What do best-run HR organizations do differently to achieve leading performance?

3 SAP Executive Insight Winning the War for Talent in the High-Tech Industry Key Challenges High-tech companies operate within an increasingly competitive and complex industry in which many segments are experiencing significant single- and even double-digit growth. Merger and acquisition activity is also high, driven by competition and segment consolidation or the need to expand product lines. In this environment, the industry faces the following three main challenges: Product excellence: Develop the right product; minimize time to market Customer excellence: Retain existing customers; present one face to the customer Service excellence: Align service portfolio with product offering; use services as a sales channel Strategic Role of HR People that is, talent are at the heart of any strategy to master the business challenges of high-tech companies. This requires the HR organization to transform from the role of service provider to that of strategic business partner to help deliver business results, which include: Improving employee productivity Reducing time to market Delivering higher customer satisfaction This transformation requires a shift both in mind-set and in approach and tools as HR is asked to integrate with research and development, sales and marketing, and production activities to drive optimal results on a global basis. At the same time, however, fierce competition in the industry extends into an equally determined battle for the most talented employees. Blueprint for Success A successful HR organization must address four imperatives if it is to win the war for talent. According to a recent benchmarking study conducted by the Americas SAP Users Group (ASUG) and SAP, leading HR organizations in high-tech companies accomplish the following objectives: Focus on results rather than effort by linking HR programs to specific business outcomes Build a performance culture by integrating the talent management process with the rest of the company s operational processes Develop a global people strategy by sharing best practices, through rapid learning, and through collaboration Establish a process for planning careers by encouraging employees to grow within the company and maximize their value for the organization at each career stage Study results are clear: HR organizations in high-tech-companies must adopt best practices for their technology, business processes, and organizational operation. Automating and integrating HR operations with business activities, supported by interdependent business processes, reduce the cost of delivering basic HR services. Additionally, this approach frees up resources to support an integrated talent management process and eliminates information and communication barriers.

4 The People Challenge In this industry, HR s struggle against high employee turnover, long recruiting cycle times, and extensive employee development efforts is reflected in the following exceptional operational metrics, as compared to other, less competitive, industries: 20% higher HR costs 20% more HR staff dedicated to talent management Almost twice the investment in HR technology Nevertheless, within the high-tech industry, leading HR organizations manage not only to control operational costs and establish effective HR processes, but also to drive 16% higher employee productivity, a metric that directly impacts the bottom line. The Talent Gap During the past 15 years, the United States has developed the most intensively high-tech economy among major nations (see Figure 1). An increasingly competitive and global environment, as well as aggressive growth and productivity targets, puts significant pressure on U.S. high-tech companies to shorten time to market, increase customer satisfaction, and deliver innovative services. And more and more high-tech companies are putting people at the center of their strategies to tackle these market demands. However, that strategy can be problematic when viewed in the context of population trends. U.S. population growth a 3% annual growth rate for science and engineering staff (see Figure 2) versus a 6% annual industry growth % % of Worldwide High-Tech Output, National Science Board, Science and Engineering Indicators 2006 United States Asia-8 China Japan European Union Note: Asia-8 includes South Korea, India, Indonesia, Malaysia, Philippines, Singapore, Taiwan, and Thailand Sources: Global Insight, Inc., World Industry Service database (2005) Historical data from United Nations Industrial Development Organization, United Nations System of National Accounts, Organization for Economic Co-Operation and Development, and country sources. See Appendix 6-2. Science and Engineering Indicators 2006 Figure 1: High-Tech Output Worldwide rate (see Figure 1) is not keeping pace with industry growth. Moreover, it is clear there is only a limited group of individuals worldwide with all the desired attributes an advanced degree in engineering or sciences, strong communication skills, collaboration and customer relationship skills, the willingness to go the extra mile, and the passion to innovate who can contribute to and succeed in the high-tech sector. In response, U.S. high-tech companies are beginning to seek out talent on a global scale. Talent Acquisition and Retention These HR organizations are unleashing sophisticated, aggressive hiring tactics to acquire the most desirable personnel Estimated Number of Industrial Researchers, by Country/Region: Researchers (thousands) United States 600 OECD minus United States Smaller OECD Members China OECD = Organization for Economic Co-Operation and Development Note: Smaller OECD Members is OECD minus United States, Japan, United Kingdom, Germany, France, Italy, and Canada. Source: OECD, Main Science and Technology Indicators (various years). Science and Engineering Indicators 2006 Figure 2: Lag in Science and Engineering Growth Rates wherever they may be, while at the same time putting highest emphasis on retaining and developing internal talent. This is not easy. Developing an in-house talent pool demands more than a simple program for employee development or an infrequently updated succession plan. Establishing a strong, predictable internal talent pipeline requires: Clarity of role and expected performance Management of employees at every level Guided training, education, and career planning Assignment of eligible staff to the most exciting projects to motivate them and ensure a satisfying work experience

5 Strategic Role of HR Investing in HR To find and retain significant talent, high-tech companies invest more in HR staff, processes, and technology than the average company in other industries. Many industry key performance indicators reflect this enhanced investment. At the most basic level, SAP benchmarking studies indicate 20% higher staffing levels and costs for a high-tech business compared to the average company (see Figure 3), as well as almost twice the investment in HR technology (see Figure 4). Recruiting, managing, and retaining talent result in a distinct staffing and cost profile for the typical high-tech company. This includes an aboveaverage percentage of resources dedicated to talent management, comprised of recruiting and staffing, training and development, employee relations, and compensation planning. Improving HR s Operational Performance Given the scarcity of talent, it comes as no surprise that high-tech organizations have above-average turnover rates 14% for high-tech companies versus 12% for the average company in other industries. However, the leading high-tech businesses are able to limit voluntary turnover and thereby reduce turnover rates to 5%. These Employee Served by One HR FTE 120 First Quartile HR Cost per Employee per Year ($) 1,090 First Quartile All Industries High Tech 95 1,380 Figure 3: Investment in HR for High-Tech Companies organizations improve retention by providing: Excellent reward systems Competitive benefits and pension plans Continuous learning management systems Pride of association from working with a high-profile company The leading businesses also encourage continuous learning and achieve almost 100% participation in training and development programs (95% training participation for first-quartile organi zations 77 1,760 Average Average Average HR Technology Costs and External Expenditures As Percent of Total HR Costs (%) ,110 6 Average HR Technology Costs All Industries High Tech Average HR External Spend Figure 4: Investment in HR Technology for High-Tech Companies versus 63% for average high-tech organizations). At the same time, they are able to add new talent to the organization effectively and efficiently, reducing cycle times from 60 days on average to 44 days for first-quartile organizations and reducing employee turnover from 14% to 5%. All of this raises the question: Are higher costs and increased resource allocation a sign of greater investment with the expectation of a greater return or a necessary reaction to the high-tech industry s intense need for talent? The answer to both is Yes. While, on average, higher costs and resource allocation indicate that the industry is struggling to respond to its particular challenges, leading businesses within the high-tech industry do manage to differentiate themselves.

6 Road Map to a Best-Run HR Organization While managing overall costs, the top businesses adopt best practices for their technology and business processes that automate and streamline transactional activities. This allows them to invest the freed-up resources in talent management and support for strategic decisions. These leading HR organizations not only run more effective processes, but also have a bigger impact on business results, as measured by employee productivity or operating income per employee (see Figure 5). Staffing Mix Impact on Company Performance (%) Intervoice Inc. Industry: High tech Revenue: US$168 million (2005) Employees: 850 Summary Intervoice Inc. s inflexible, outdated systems were unable to support future growth. Lack of real-time, accurate information and complex data administration led to higher costs for internal and outsourced processes. A recent acquisition required an easy and effective rollout. Results with SAP Software 3% to 5% increase in operating income with a 65% return on investment Support for increased headcount after acquisition, with no additional HR FTEs Reduced manual intervention thanks to a 100% self-service model that allows personnel to devote less time to administrative tasks Strategic Decision Support Talent Management Process and Transaction Support 71 Figure 5: Investment in Talent Management 16 Ops Income per Employee $79K $92K HR Costs As Percent of Revenue 0.9% 0.6% Best Practices Adoption Score (Qualitative Effectiveness Measure) We wanted a software provider committed to being the best of the best and taking the product to the next wave. Don Brown, Senior Vice President of Human Resources, Intervoice Inc. The top-performing HR organizations achieve success through: Standardizing and automating transaction processing to reduce the cost of delivering basic HR services Using freed-up resources to support an integrated talent management process Integrating HR and relevant non-hr systems to eliminate information barriers and help other areas of the business reduce time to market Giving every manager access to decision-support tools and required data on employees Delivering relevant business metrics to front-line managers, linking people processes to operational performance Benchmarking HR s performance against industry metrics and best practices Impact of Technology Early HR technology, which focused on enhancing specific HR functions, will not suffice in today s integrated environment. The time is past when HR and senior management looked at HR processes as distinct from the rest of the business. Even integration of the HR business processes alone will not do the trick today. Rather, integrated HR technology is a key enabler for the HR organization to deliver strategic business value. For example, by linking research and development processes with HR processes and enabling rapid identification of the best engineer for a project based on skill requirements, availability, and career goals, the HR organization helps accelerate time to market while encouraging retention of highly skilled engineers. Another example is the integration of manufacturing and training data, which

7 Further Reading Human Capital Management: How Top Organizations Drive Company Profit Efficiently, 2007 ASUG and SAP benchmarking study SAP Business Transformation Studies/ROI Case Studies Adobe Systems Alpine Electronics Intervoice MEI SUMCO supports improvements in training effectiveness and, ultimately, establishes a safer workplace in compliance with applicable regulations. By managing workers as a strategic asset and helping them plan and develop careers that are consistent with anticipated corporate needs, high-tech HR organizations can substantially improve retention and strengthen their companies competitive stance in the face of declining talent availability. The critical steps discussed here are fundamental to developing the top talent high-tech companies need to thrive in today s economy. About This Insight The ASUG and SAP benchmarking and best practices program holds a forum for SAP customers to track trends, share best practices, and measure value based upon key performance drivers. To date, more than 200 companies have participated in the study including more than 30 from the high-tech industry with revenues of between less than US$1 billion to more than US$10 billion. The study covers the full scope of HR business processes segmented into subprocesses such as recruiting and staffing, learning and development, and payroll administration. In addition to HCM, ASUG and SAP benchmarking programs exist for other operational areas, including finance; governance, risk, and compliance (GRC); supplier relationship management and procurement; supply chain and manufacturing; new product development and introduction; customer contact centers; total cost of ownership; and business intelligence. For more information about the ASUG and SAP benchmarking and best practices program, visit or contact benchmarking@asug.com. About the Authors Grant Bodley is a senior principal in the SAP Industry Solution Group and leads the high-tech practice for SAP North America. Zeev Gur is an SAP senior solution principal focused on HCM and is responsible for helping clients understand and leverage industry trends to optimize people-related business processes. Ashish Morzaria is an associate in the SAP Value Engineering (VE) organization and leads the HCM practice for VE India, where he works with strategic SAP customers and prospects on benchmarking engagements and business case studies. Katharina Müllers-Patel, PhD, is a senior principal in the SAP VE orga - ni zation and is responsible for the ASUG and SAP benchmarking and best practices program.

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