Defining High-Performance HR

Transcription

1 Consulting Organization and HR Effectiveness Defining High-Performance HR HR Effectiveness Survey Report 2012

2 Table of Contents About This Survey 3 The Challenge 3 Our Approach 3 Executive Summary 4 It s a People Business 4 Study Highlights 5 Organizational Design and Strategy 5 HR Structure and Governance 6 Service Delivery and Technology 8 Organizational Programs and Design 9 HR Capabilities and Development 12 Conclusion 14 The Future of HR 14 Data 15 Contact Information 36 Aon Hewitt 2

3 About This Survey The Challenge For HR leaders, the challenge increasingly is how to do more with less. The driving force behind organizations is people. To that end, the success of organizations largely revolves around the quality of their senior leaders, support functions, and staff. The ability of leaders to drive the strategic agenda for their organizations, the innovativeness of talent, and the quality of services, products, and outcomes provided drive the success of these organizations. While HR is being asked to do more to improve talent, the impact of cost pressures, reduced budgets, and increased expectations puts downward pressure on HR budgets. Given today s pressures, how does HR deliver value and contribute to institutional success? What is it that distinguishes HR functions from one another? Our Approach In October 2011, Aon Hewitt invited HR executives from the United States to participate in the 2011 HR Effectiveness Study: Defining High-Performance HR. Study participation was open to any organization regardless of size, scope, or financial status. From those invitations, just over 30 organizations completed the 15-item on-line survey. The purpose of the study was to gauge the extent to which HR practices are progressive, practical, well executed, and effective. The study explored a variety of HR functions and practices in the areas of program management, service delivery, talent and workforce management, and HR function management. The sample size of this study impedes our ability to generalize these observations to a broader geographic or organizational demographic audience. The pages that follow highlight some key trends identified by participants in the prevalence and strategic intent behind HR practices, and the comprehensive aggregate data results from the study. Aon Hewitt 3

4 Executive Summary It s a People Business Business today is about people. Therefore, the success of organizations largely revolves around the quality of their senior leaders, support functions, and staff. The ability of leaders to drive the strategic agenda for their organizations, the innovativeness of talent, and the quality of services, products, and outcomes provided drive the success of these organizations. The demands placed on HR organizations to source, develop, and retain quality talent are greater than ever before. Our recent Top Companies for Leaders study shows the top three challenges North American organizations face over the next 1 to 3 years are business growth, cost pressures, and product/service innovation 1. Leaders at these top organizations all consider succession planning and leadership development, attracting and retaining skilled professional talent, developing capabilities, increasing diversity, and improving retention as key priorities. HR is central to achieving organizational people goals and objectives. It is the engine that helps drive the talent agenda and shapes the culture to achieve the organization s vision and mission. Yet historically, HR has been viewed as more an administrative or personnel function charged with sourcing and paying people, providing benefits, and handling employee relations. Shifting to more of a business partner role to address critical talent challenges is a tall order. It requires human resources expertise and skills to develop and change the social infrastructure, accomplish goals, and engage leaders and employees in new strategic directions and processes. It also requires senior management sponsorship and involvement to transform the way HR delivers services and engages with senior leaders to drive the talent agenda. To shift focus, HR needs significant commitment and support from the board of directors, CEO, senior management teams, and other key stakeholders to both support changes in the way HR delivers services and partner with HR to drive new talent management initiatives. Seven years after Aon Hewitt published the paper, Is HR Still Stuck in the Middle?, one question that continues to spark discussion among HR leaders concerns defining the value the HR function brings to the organization and the people it supports. In 2005, we deemed HR at many companies stuck in the middle ; that is, saddled with investments in new technology and processes, but not yet accruing the strategic and financial benefits of a 21st century HR delivery model. Our 2011 study told us that, in many cases, organizations haven t moved much. There has been significant advancement in adopting technology, standardizing processes, and creating a more efficient HR function. Yet this current study, Defining High-Performance HR, found that overall, HR functions continue to be unclear on their purpose and strategic objectives, and organizations remain unclear about how they assess, utilize, develop, and measure the impact this group has on the organization Top Companies for Leaders, Aon Hewitt. Aon Hewitt 4

5 Study Highlights Organizational Design and Strategy More than 90% of participating organizations have operations in North America. Just under half (49%) of the respondents have operations in several regions throughout the globe. Participants with operations outside North America primarily operate in EMEA and APAC, but just under half of those respondents do not track revenues in those locations. Organizations in this study could benefit from enhancing the standard tracking mechanisms related to headcount, revenues, and HR expense to better understand how enhancing efficiencies could improve their bottom lines. Traditional HR function metrics are still widely used across all types of participating organizations regardless of their geographic scope. However, many respondents reported that these functional HR metrics (e.g., HR cost, staff ratio) are not the most effective means of measuring their impact on the organization. More participating organizations are turning toward metrics involving business impact, including HR customer satisfaction, HR program effectiveness as indicated by impacts to financial performance, and line managers effectiveness as people managers. As noted in the graph below, HR customer satisfaction is rated most consistently as a heavily used and highly effective metric. Metrics Used to Evaluate Organizational Impact Increased customer usage of HR staff for more strategic interventions (rather than going to external providers or building capability outside HR) Impact on business operations/outcomes as demonstrated by verifiable business or financial outcomes 13% 16% 23% 26% Percent of open positions filled w ith succession plan candidates Processes in place to lead/facilitate organizational change 10% 13% 32% 35% Line manager effectiveness as people managers HR program effectiveness as demonstrated by verifiable business or financial outcomes 19% 23% 35% 35% HR customer satisfaction 42% 55% Percent of employees w ith performance goals 23% 52% Percent of employees w ith a development plan 13% 45% HR operational measures (e.g., transactions, error rates, service utilization) 32% 39% HR staff to employee ratio 19% 52% HR cost 19% 45% 0% 10% 20% 30% 40% 50% 60% Used regularly Most effective Aon Hewitt 5

6 HR Structure and Governance The majority of participating organizations manage the execution of their core programs such as corporate social responsibility, diversity and inclusion, and broad-based and executive compensation by using centers of expertise (COEs) or corporate functions. HR generalists are handing the execution of labor and employee relations and HR workforce administration. HR specialists are used most often to manage recruiting, and share equal responsibilities with HR generalists for managing HR metrics and reporting. When participating organizations employ an outsourcing partner, the partner is most commonly used for benefits administration and executive compensation management. Most companies use an internal shared service model rather than an outsourced model for their payroll, learning and development, leadership development, HR workforce administration, and broad-based compensation practices. Groups Responsible for Execution Diversity/inclus ion 54% 12% 19% 15% Corporate social responsibility 68% 18% 5% 9% HR metrics and reporting 52% 8% 20% 20% Expatriate management 56% 17% 6% 17% 6% Organizational effectiveness 50% 17% 21% 13% HR budget 55% 14% 21% 10% Leadership development 56% 26% 11% 7% Health and welfare benefits 50% 13% 13% 13% 10% Broad-based compensation 59% 19% 4% 11% 7% Executive compensation 73% 10% 3%3% 10% Centers of expertise (COE)/corporate functions HR generalists Outsourced provider Internal shared Services HR line specialist Aon Hewitt 6

7 Groups Responsible for Execution Performance management 45% 14% 31% 10% Labor and employee relations 36% 7% 43% 14% HR workforce administration (new hire setup, transfers, promotions, data changes, etc.) 31% 21% 38% 10% Recruiting 33% 10% 23% 30% 3% Centers of expertise (COE)/corporate functions HR generalists Outsourced provider Internal shared Services HR line specialist More than half (53%) of multinational organizations in the study use a two-tiered approach to structure their HR function (specific abilities reside at the corporate level, while others reside at the divisional or regional level). Domestic-based participants typically use a regional HR structure using traditional functional departments that may be supported by a small corporate HR group. This aligns with the responses that seem to balance management of execution through a COE and HR generalist model. Aon Hewitt 7

8 Service Delivery and Technology Most survey respondents that have automated fundamental practices such as succession planning, compensation management, performance and learning management, and benefits administration do so as part of their core HRMS platform. Time and attendance is the most heavily utilized point solution among study participants. Nearly half the respondents support absence management through their core HRMS, and just about the same number use a point solution to administer this program. Nearly all the companies who have a succession planning process use their core HRMS systems to support this practice. The overwhelming majority of participants are currently using Software as a Service (SaaS) to manage their core talent and administrative programs. Mechanisms Used to Support Key Processes Absence management 46% 42% 13% 67% Time and attendance 41% 52% 7% 72% Payroll 40% 30% 30% 80% Benefits administration 52% 31% 17% 76% Compensation management 68% 28% 4% 56% Succession planning 86% 14% 50% Performance management 65% 31% 4% 73% Learning management 54% 38% 8% 71% Recruiting/talent acquisition 46% 39% 14% 71% Part of core HRMS Outsourced Point solution Currently using Software as Service Note: Data reflects a multiple-response question. Employee self-service (ESS) and manager self-service (MSS) tools are available to the majority of the population at participating organizations. However, those same employees and managers do not utilize the self-service tools, systems, and processes to accomplish their tasks suggesting there is opportunity to improve the impact, training, or functionality of the tools currently in place. Aon Hewitt 8

9 Access and Utilization to Self-Service Tools Manager Self-Service 42% 65% Employee Self-Service 35% 65% 76% 100% of the employee and manager populations utilize self-service tools, systems, and processes 76% 100% of the employee and manager populations have access to the self-service tools, systems, and processes HR professionals who are not part of COE or shared services groups spend nearly half their time collecting and reporting data (48% and 45%, respectively), and less time conducting trend analysis and predictive modeling. Because they are still focused on administrative tasks, they are less likely to have the capabilities or capacity for more in-depth, strategic analyses or to partner strategically with the business to drive performance and business outcomes. Organizational Programs and Design HR Strategy: Nearly half of participating companies report that the design of their HR strategy reflects alignment with business objectives, including input from business leaders on workforce issues. Further, nearly half believe their strategy clearly identifies the workforce and organizational outcomes needed to drive the business forward across all regions. However, just over half (51%) report not using a specific quantitative framework to align human capital investments with business results. Workforce Planning: Respondents typically analyze talent needs on a global basis, incorporating their strategic and operating goals across all operating locations. Respondents were more likely to assess talent gaps, sourcing needs, onboarding, and engagement across their organizations than in the primary operating region. More than half (54%) of all respondents do not use workforce modeling tools to support their internal and external workforce planning and forecasting analysis. Aon Hewitt 9

10 Execution of Core Programs and Practices We have a clearly defined HR strategy aligned w ith business objectives 16% 32% 45% We gather input from business leaders regarding business and w orkforce issues to create the HR strategy 16% 29% 42% We clearly identify the w orkforce and organizational outcomes that HR needs to drive for the business 16% 29% 45% We assess the performance and engagement of new hires during the first year of employment 16% 35% 42% We invest in common HR systems (HRMS, performance management, training programs) to manage talent effectively 6% 35% 42% We utilize a specific quantitative framew ork to align human capital investments w ith business results 13% 23% 51% We leverage w orkforce modeling tools to support our internal and external w orkforce planning and forecasting analysis (e.g., model scenarios based on different w orkforce demographic and business trends) 16% 13% 54% Not at all/we do not have this practice In primary region in which we operate Across all regions/globally Leadership Development: From our Top Companies for Leaders research, we know organizations that focus efforts on building and cultivating a pipeline of strong leaders have better business results. In fact, over the last five years, the 2011 Top Companies in each region have had, on average, 8.76% higher total shareholder returns. This study uncovered significant gaps in the leadership and key talent practices implemented across these organizations. Nearly half (45%) of surveyed participants in the study do not conduct talent reviews on senior executives at least semiannually. Fifty-eight percent do not have a strong leadership bench with succession plans extending at least two or three people down across most leadership roles. Forty-two percent do not use developmental assignments or job rotation assignments to address specific leader development needs, and nearly half (45%) do not reward leaders (e.g., with promotions or compensation) for the strength of the talent pipeline in their business units. Aon Hewitt 10

11 2011 North America Top Companies HRE Study Participants We do not have this practice We have a sufficient pipeline at the following levels to be successful in the future CEO 96% Senior management 96% Middle management 96% We have a strong leadership bench with at least 2 or 3 successors across most leadership roles 58% Front line management 84% Development assignments offered to leaders at the following levels Senior management 72% Middle management 88% Front line management 64% We use development assignments or job rotation assignments to address specific leader development needs 42% We reward leaders for the strength of their talent pipeline 88% 45% Performance: As we outlined earlier, one of the primary functions of HR is to support the organization in developing tools and programs designed to drive high performance in the organization. It is not surprising that most of the respondents in the study execute their high-performance practices across their operating regions. Respondents clearly focus this execution on an ongoing basis, through their communications and organizational alignment of goals, training efforts for managers, and taking action to address issues of poor performance. To enhance their practices, organizations should incorporate career paths for major job groups to ensure consistent career management, identify the future critical capabilities needed to execute against the business strategy, and ensure that every employee has a development plan. Employee Environment: Most respondents have the standard elements in place to build an engaging environment for employees: well-established employment relations plans to articulate the values and behaviors they expect from employees, processes to gather and analyze data to measure employee engagement and/or opinions, and competitive benefits packages that are consistent across the organization. Yet there is room to grow. Nearly half the respondents do not have a clearly defined or communicated diversity strategy or implementation of diversity-based programs across their entire organization. Mergers and Acquisitions: More than half the participants in this study do not have practices in place related to mergers and acquisitions, including the availability of consistent tools and processes (52%), robust due diligence processes to identify human capital-related liabilities for new acquisitions (58%), well-defined integration plans that include cultural assessments of the acquired organization (61%), or consistent and systematic organizational development tools used throughout the organization for restructuring, process redesign, capability assessment, and workforce assessment (45%). The recent Aon Hewitt study Culture Integration in Mergers & Acquisitions 2 investigated how culture was prioritized both pre- and post-close, what methods were used to integrate cultures, and how successful organizations were in achieving their objectives. Participants who were unable to meet their transaction objectives and synergy targets following an acquisition cited the following reasons for deal failure: 2 Aon Hewitt. Culture Integration in Mergers & Acquisitions, Aon Hewitt 11

12 Contributing Factors to Deal Failure Top 10 drivers of deal failure percent of respondents Integration/implementation took longer than expected 41% Cultural integration issues Inconsistent/unclear communication of synergy objectives Insufficient attention/priority to workforce/people issues Poor/misinformed strategy Risks/liabilities not identified during due diligence Insufficient execution capability/competency 33% 32% 30% 28% 26% 26% Leadership "infighting" and/or buy-in Price paid for target was too high Failure to implement an appropriate organizational structure 18% 20% 22% 0% 10% 20% 30% 40% 50% Data Management: Survey participants understand the importance of technology when it comes to managing human capital and organizational data. More than half the respondents in the survey (55%) consolidated their core HR service delivery in the primary region in which they operate. Forty-eight percent have an HRMS system or data warehouse to store data within their primary operating region. Yet, when it comes to identifying the business impact of this data, there is some room for improvement. Fifty-five percent of respondents do not use an event-driven workflow in their service centers in place of a transaction-driven workflow, 42% do not have a clearly defined set of human capital reports or dashboards used consistently across their organization, 51% do not have a centralized or coordinated team focused on providing human capital analytics and insights to business leaders, and 52% do not have access to their robust data warehouse to be able to report on the human capital data across systems and businesses. HR Capabilities and Development Perhaps consistent with the old saying that the cobbler s children seem to be the ones who have no shoes, participating organizations in this study also lagged behind in the development of their own HR talent. Participating organizations develop their HR talent primarily within the HR silo. Respondents prefer to keep employees within the HR function, serving as a local resource in a single location with few opportunities to change jobs or advance throughout the organization. This may lead to issues surrounding retention and could prevent the development of the talent pipeline into the COE function, as these resources would not have broad, strategic experiences to help them contribute at more senior levels of the HR organization. In the 2011 Top Companies for Leaders study, we saw a consistent practice of rapid movement of talent outside business functions to give high-potential employees opportunities outside their areas of expertise. These insights are relevant both to leaders and to the high-potential population at large. Aon Hewitt 12

13 Examples from 2011 Top Companies for Leaders Study If I m a high potential, I don t want to be stuck in one function, one business forever. I want opportunities. So we have to understand, to move them around and let them understand the pains of different functions, different businesses. As long as an organization can facilitate movement, employees are attracted. If you give a person all this, why would they leave and join multiple other companies? Telecommunications Company The Regional Council leverages our talent philosophy through facilitation of cross-bu movements. The various unit heads of businesses come together for this exercise to discuss and close on possible cross-bu linkages and probable talent movements. Telecommunications Company Over time, we ve seen the assessment components of our performance management process overshadow the development pieces. Our business leaders, in partnership with Human Resources, are making improvements to our performance management process that will drive a more balanced assessment and development culture, provide greater opportunities for career growth, remove barriers to greatness, and bolster the role that managers play in talent development. The improvements focus on a more consistent reward process for formalized stretch roles and a consistent definition of great people management. Financial Institution There is no overwhelming consensus concerning the confidence in the strength of their pipeline of HR talent within the participating organizations. Nearly two-thirds overall of participating organizations feel confident about their senior-level HR talent, but this result differs if broken out by company location. Nearly three-quarters (74%) of domestic respondents are confident in their senior-level HR pipelines, compared to only 47% of multinational participants. At the mid-level and below, just over half are confident about their pipelines but again, domestic respondents show more confidence (63%) than multinationals (27%). At the entry level, both multinational and domestic respondents feel confident about the pipeline of talent. Giving HR professionals greater development opportunities and movement into different HR areas would provide them with the broader experience they need to fill pipeline gaps. Aon Hewitt 13

14 Conclusion The Future of HR As HR professionals look to shift the HR function from a transactional to a transformation role, it s essential to develop a roadmap outlining a methodical plan. By focusing on those areas within HR service delivery management, talent management, and HR function management that align with the organization s strategic objectives while at the same time, building internal capability HR can charter a course that yields demonstrable value. As the landscape of respondents continues to become more global, we expect to see the use of SaaS-based data management extend into the regional operations of a global or multinational company, and the rise of a new mind-set for the HR function as a group whose goal is to have a capable, willing, and able workforce ready to run the business. Aon Hewitt 14

15 Data Industry Classification N= Percent Automobiles and Components 1 3% Banks 1 3% Capital Goods 2 6% Commercial and Professional Services 6 19% Consumer Durables and Apparel 1 3% Consumer Services 1 3% Diversified Financials 0 0% Energy 2 6% Food and Staples Retailing 0 0% Food, Beverage, and Tobacco 0 0% Health Care Equipment and Services 2 6% Hotels, Restaurants, and Leisure 1 3% Household and Personal Products 0 0% Insurance 3 10% Materials 3 10% Media 0 0% Pharmaceuticals, Biotechnology, and Life Sciences 0 0% Real Estate 1 3% Retailing 0 0% Semiconductors and Semiconductor Equipment 1 3% Software and Services 1 3% Technology Hardware and Equipment 3 10% Telecommunication Services 0 0% Transportation 2 6% Utilities 0 0% Total % Business Operation Profile N= Percent Global (operations in all regions around the globe) 7 23% Multiregional (operate in several regions) 8 26% Regional (operate in one region) 6 19% Domestic (operate only in one market/country 10 32% Total % Aon Hewitt 15

16 Employee Size (in FTE) by Region We do not have operations in this region Number of full-time equivalent (FTE) We do not track this Location N= Percent Min Max Mean Median N= Percent North America 2 6% % Europe, Middle East & Africa 18 58% % Asia-Pacific 20 65% % Latin America 27 87% % Revenues (in USD) by Region Revenues (in USD) We do not track this Location Min Max Mean Median N= Percent North America 75 3,000,000,000, ,061,992, ,375, % Europe, Middle East & Africa ,000,000, ,451,531, ,595, % Asia-Pacific 10 1,132,740, ,185, ,000, % Latin America 15,000,000,000 15,000,000,000 15,000,000,000 15,000,000, % Aon Hewitt 16

17 Annual HR Expenses (in USD) by Region HR expenses is defined as HR labor (base, incentives, and benefits) and non-labor (technology, vendor, consulting, travel, etc.) expenses related to delivering HR services, including payroll and learning and development, not including program costs (e.g., workforce benefits, tuition costs). We do not have operations in this region HR Expense (in USD) We do not track this Location N= Percent Min Max Mean Median N= Percent North America 2 15% $40 $91,000,000 $9,269,265 $1,550, % Europe, Middle East & Africa 19 68% $663 $80,000,000 $27,666,888 $3,000, % Asia-Pacific 21 72% $1,582 $2,000,000 $1,000,791 $1,000, % Latin America 24 77% $0 $0 $0 $0 7 23% Aon Hewitt 17

18 Total HR Staff (in FTEs for your most recent fiscal year) by Region North America EMEA Total HR Staff (in FTE) Min Max Mean Median Min Max Mean Median Centers of expertise (specialists such as comp analysts, recruiters, etc.) Operations (e.g., service center administration, HR operations) Field HR (e.g., HR business partners, generalists, employee relations) Other Ratio ( (Mean HR Staff: FTE) Centers of expertise (specialists such as comp analysts, recruiters, etc.) Operations (e.g., service center administration, HR operations) Field HR (e.g., HR business partners, generalists, employee relations) 1:161 1:75 1:394 1:46 1:154 1:23 Other 1:1777 0:600 Asia-Pacific Latin America Total HR Staff (in FTE) Min Max Mean Median Min Max Mean Median Centers of expertise (specialists such as comp analysts, recruiters, etc.) Operations (e.g., service center administration, HR operations) Field HR (e.g., HR business partners, generalists, employee relations) Other Ratio (/Mean HR Staff: FTE) Centers of expertise (specialists such as comp analysts, recruiters, etc.) Operations (e.g., service center administration, HR operations) Field HR (e.g., HR business partners, generalists, employee relations) 1:291 n/a 1:437 n/a 1:109 n/a Other 1:437 n/a Note: Latin America means only represents three participants (not valid). North America EMEA Asia-Pacific Latin America Total HR Staff (in FTE) N= Percent N= Percent N= Percent N= Percent We do not track this 0 0% 4 13% 2 7% 5 17% We do not have operations in this region 2 7% 16 53% 19 6% 22 73% Aon Hewitt 18

19 Which of the following does your organization use regularly (at least 80% of the time) to measure the effectiveness of the HR function, and which are the most effective? Used regularly (check all that apply) Most effective (check up to three) N= Percent N= Percent HR cost 14 45% 6 19% HR customer satisfaction 17 55% 13 42% HR staff/employee ratio 16 52% 6 19% HR program effectiveness as demonstrated by verifiable business or financial outcomes 11 35% 6 19% Line manager effectiveness as people managers 11 35% 7 23% HR operational measures (transactions, error rates, service utilization, etc.) Impact on business operations/outcomes as demonstrated by verifiable business or financial outcomes Increased customer usage of HR staff for more strategic interventions (rather than going to external providers or building capability outside HR) 12 39% 10 32% 8 26% 5 16% 7 23% 4 13% Processes in place to lead/facilitate organizational change 11 35% 3 10% Workforce productivity 9 29% 5 16% Shift to HR staff time spent on higher-value-added activities 5 16% 1 3% Percent of employees with a development plan 14 45% 4 13% Percent of employees with performance goals 16 52% 7 23% Percent of open positions filled with succession plan candidates 10 32% 4 13% No specific measures 5 16% 4 13% Other 0 0% 0 0% Aon Hewitt 19

20 At what geographic level are each of the following practices consistently executed? Unable to rate Consistently executed (check one only) Globally Regionally Locally N= Percent N= Percent N= Percent N= Percent Executive compensation 1 3% 13 43% 9 30% 8 27% Broad-based compensation 4 13% 6 22% 15 56% 6 22% Health and welfare benefits 1 3% 4 13% 15 50% 11 37% Retirement (pension) benefits 1 3% 4 13% 16 53% 10 33% Payroll 2 6% 1 3% 15 52% 13 45% Recruiting 1 3% 3 10% 17 57% 10 33% Learning and development 2 6% 3 10% 15 52% 11 38% Leadership development 4 13% 6 22% 14 52% 7 26% HR workforce administration (e.g., new hire setup, transfers, promotions, data changes) 2 6% 4 14% 13 45% 12 41% HR budget 2 6% 5 17% 13 45% 11 38% Succession planning/ talent review 2 6% 8 28% 13 45% 8 28% Performance management 2 6% 6 21% 13 45% 10 34% Organizational effectiveness 7 23% 5 21% 14 58% 5 21% Labor and employee relations 3 10% 3 11% 13 46% 12 43% Expatriate management 13 42% 8 44% 6 33% 4 22% HR metrics and reporting 6 19% 6 24% 11 44% 8 32% Corporate social responsibility 9 29% 7 32% 8 36% 7 32% Diversity/inclusion 5 16% 6 23% 14 54% 6 23% Other 2 6% 0 0% 0 0% 1 100% Aon Hewitt 20

21 Who is primarily responsible for managing their execution? Managed by the (check one only) Centers of expertise (COE)/corporate functions Internal shared services HR generalists HR line specialists Outsourced provider N= Percent N= Percent N= Percent N= Percent N= Percent Executive compensation 22 73% 3 10% 1 3% 1 3% 3 10% Broad-based compensation 16 59% 5 19% 1 4% 3 11% 2 7% Health and welfare benefits 15 50% 4 13% 4 13% 4 13% 3 10% Retirement (pension) 14 47% 5 17% 2 7% 3 10% 6 20% benefits Payroll 14 48% 9 31% 2 7% 1 3% 3 10% Recruiting 10 33% 3 10% 7 23% 9 30% 1 3% Learning and development 14 48% 9 31% 3 10% 3 10% 0 0% Leadership development 15 56% 7 26% 3 11% 2 7% 0 0% HR workforce administration 9 31% 6 21% 11 38% 3 10% 0 0% (e.g., new hire setup, transfers, promotions, data changes) HR budget 16 55% 4 14% 6 21% 3 10% 0 0% Succession planning/ talent 13 45% 7 24% 6 21% 3 10% 0 0% review Performance management 13 45% 4 14% 9 31% 3 10% 0 0% Organizational effectiveness 12 50% 4 17% 5 21% 3 13% 0 0% Labor and employee 10 36% 2 7% 12 43% 4 14% 0 0% relations Expatriate management 10 56% 3 17% 1 6% 3 17% 1 6% HR metrics and reporting 13 52% 2 8% 5 20% 5 20% 0 0% Corporate social 15 68% 4 18% 1 5% 2 9% 0 0% responsibility Diversity/inclusion 14 54% 3 12% 5 19% 4 15% 0 0% Other 1 50% 0 0% 0 0% 1 50% 0 0% Aon Hewitt 21

22 How does your organization currently structure HR? (Choose the description below that best fits your structure.) N= Percent Divisional HR: Traditional functional departments replicated in major divisions or business units (may be 4 13% supported by a small corporate HR group) Regional HR: Traditional functional departments replicated in major regional hubs (may be supported by a 5 16% small corporate HR group) Global HR: Centers of expertise that manage program strategy and design for a number of functions. Also 6 19% includes global HR operations group that manages centralized regional HR service centers and/or outsourced providers. Program execution handled by regional/divisional business partners Two-tiered: Specific abilities reside at corporate level (e.g., leadership development) while others reside at 11 35% the divisional or regional level (e.g., compensation) Other 5 16% Total % Aon Hewitt 22

23 Which of the following areas are supported by systems? For each system used, indicate whether you are currently using or considering using Software as a Service to manage the following programs. (Software as a Service: The vendor hosts and operates the technology platform at its facility. The application is offered in a multi-tenant architecture with all the vendor s customers accessing a single code base.) We do not have this practice Part of core HRMS How are programs supported? Point solution Outsourced N= Percent N= Percent N= Percent N= Percent Recruiting/talent acquisition 3 10% 13 46% 11 39% 4 14% Learning management 7 23% 13 54% 9 38% 2 8% Performance management 5 16% 17 65% 8 31% 1 4% Succession planning 9 29% 19 86% 3 14% 0 0% Compensation management 6 19% 17 68% 7 28% 1 4% Benefits administration 2 6% 15 52% 9 31% 5 17% Payroll 1 3% 12 40% 9 30% 9 30% Time and attendance 2 6% 12 41% 15 52% 2 7% Absence management 7 23% 11 46% 10 42% 3 13% Aon Hewitt 23

24 Which of the following areas are supported by systems? For each system used, indicate whether you are currently using or considering using Software as a Service to manage the following programs. (Software as a Service: The vendor hosts and operates the technology platform at its facility. The application is offered in a multi-tenant architecture with all the vendor s customers accessing a single code base.) Intent to use Software as a Service Currently using Adding in 2011/ 2012 Adding in next 3 5 years Not considering at this time N= Percent N= Percent N= Percent N= Percent Recruiting/talent acquisition 20 71% 2 7% 1 4% 5 18% Learning management 17 71% 4 17% 1 4% 2 8% Performance management 19 73% 4 15% 0 0% 3 12% Succession planning 11 50% 3 14% 1 5% 7 32% Compensation management 14 56% 3 12% 3 12% 5 20% Benefits administration 22 76% 2 7% 1 3% 4 14% Payroll 24 80% 2 7% 0 0% 4 13% Time and attendance 21 72% 3 10% 0 0% 5 17% Absence management 16 67% 2 8% 1 4% 5 21% Aon Hewitt 24

25 To what extent is HR self-service accessed/utilized in your organization? (Overall, indicate what percentage of your employee and manager populations have access to the self-service tools, systems, and processes that have been made available for use in your organization.) 76%-100% 51%-75% 26%-50% 1%-25% Not at all Unable to rate Employee selfservice Manager selfservice N= Percent N= Percent N= Percent N= Percent N= Percent N= Percent 20 65% 1 3% 1 3% 4 13% 3 10% 2 6% 20 65% 0 0% 2 6% 3 10% 4 13% 2 6% (Overall, indicate what percentage of your employee and manager populations utilize self-service tools, systems, and processes.) 76%-100% 51%-75% 26%-50% 1%-25% Not at all Unable to rate Employee selfservice Manager selfservice N= Percent N= Percent N= Percent N= Percent N= Percent N= Percent 11 35% 4 13% 4 13% 5 16% 3 10% 4 13% 13 42% 3 10% 4 13% 4 13% 4 13% 3 10% Aon Hewitt 25

26 How much time do HR people outside the centers of expertise or shared services spend on the following data activities? A significant amount of time A moderate amount of time A limited amount of time Not at all Collecting: Gathering and standardizing current workforce data N= Percent N= Percent N= Percent N= Percent 10 32% 5 16% 10 32% 6 19% Reporting: Slicing and dicing current workforce data 5 16% 9 29% 9 29% 8 26% Trend Analysis: Using historical data to conduct analysis 4 13% 10 32% 10 32% 7 23% and build projections Predictive Modeling: Using advanced analytics to predict future behavior 3 10% 5 16% 9 29% 14 45% Aon Hewitt 26

27 To what extent does your organization consistently execute on the following practices? Not at all In primary region in which we operate Across multiple regions Across all regions/ globally We do not have this practice HR Strategy We have a clearly defined HR strategy aligned with business objectives We gather input from business leaders regarding business and workforce issues to create the HR strategy We clearly identify the workforce and organizational outcomes that HR needs to drive for the business We communicate and execute our HR strategy We conduct workforce planning broadly across all divisions, operating companies, or business units We utilize a specific quantitative framework to align human capital investments with business results Talent Supply We identify the critical roles and capabilities that create the most value for our business and ensure that the required talent is available to fill those roles Our strategic business planning involves a review of our existing and future talent needs We leverage workforce modeling tools to support our internal and external workforce planning and forecasting analysis (e.g., model scenarios based on different workforce demographic and business trends) We have business leaders and managers who actively source and attract new candidates to the organization We attract, develop, and retain people of color, women, and other minorities We use our competency model to assess candidates for positions We have a formal process for onboarding employees who are new to their role N= Percent N= Percent N= Percent N= Percent N= Percent 0 0% 10 32% 2 6% 14 45% 5 16% 2 6% 9 29% 4 13% 13 42% 3 10% 2 6% 9 29% 3 10% 14 45% 3 10% 2 6% 10 32% 3 10% 12 39% 4 13% 2 6% 13 42% 4 13% 9 29% 3 10% 6 19% 7 23% 4 13% 4 13% 10 32% 2 6% 12 39% 2 6% 11 35% 4 13% 2 6% 11 35% 5 16% 11 35% 2 6% 6 19% 5 16% 5 16% 4 13% 11 35% 3 10% 11 35% 3 10% 10 32% 4 13% 0 0% 14 45% 3 10% 13 42% 1 3% 5 16% 10 32% 1 3% 12 39% 3 10% 0 0% 12 39% 2 6% 13 42% 4 13% Aon Hewitt 27

28 Not at all In primary region in which we operate Across multiple regions Across all regions/ globally We do not have this practice We assess the performance and engagement of new hires during the first year of employment We invest in common HR systems (HRMS, performance management, training programs) to manage talent effectively Leadership and Key Talent Capability We use assessment tools to identify capability strengths and gaps for critical talent We clearly define leadership competencies and capabilities and use them as the basis for performance reviews and developmental activities We conduct talent reviews on senior executives on at least a semi-annual basis We build customized training programs for critical talent We ensure that leadership development programs are grounded in issues affecting our organization (e.g., innovation, execution, globalization) We use formal succession management to fill executive positions throughout the organization We have a strong leadership bench with succession plans extending at least 2 to 3 people down across most leadership roles We ensure that the leadership succession planning process takes into account diversity of gender and people of color We use developmental assignments or job rotation assignments to address specific leader development needs (including developing global capabilities) We ensure that equity rewards are performance-based and performance criteria are clearly defined We reward leaders (e.g., promotions, compensation) for the strength of the talent pipeline in their business unit(s) N= Percent N= Percent N= Percent N= Percent N= Percent 3 10% 11 35% 2 6% 13 42% 2 6% 0 0% 11 35% 5 16% 13 42% 2 6% 6 19% 7 23% 3 10% 10 32% 5 16% 3 10% 10 32% 0 0% 16 52% 2 6% 4 13% 7 23% 2 6% 8 26% 10 32% 3 10% 12 39% 2 6% 7 23% 7 23% 0 0% 12 39% 2 6% 12 39% 5 16% 3 10% 6 19% 0 0% 14 45% 8 26% 7 23% 8 26% 0 0% 5 16% 11 35% 3 10% 11 35% 0 0% 8 26% 9 29% 1 3% 7 23% 3 10% 8 26% 12 39% 1 3% 11 35% 2 6% 14 45% 3 10% 4 13% 8 26% 3 10% 6 19% 10 32% Aon Hewitt 28

29 Not at all In primary region in which we operate Across multiple regions Across all regions/ globally We do not have this practice High Performance We view performance management and career development as an ongoing management responsibility rather than a once-a-year process We ensure that all employees understand organizational priorities and align their individual performance goals with them We ensure that managers have the skills and capabilities needed to provide effective performance feedback and coaching, set aligned goals, and develop their teams We use a consistent and systematic performance management process to assess all employees across the entire organization We promptly address and take action on poor performance We hold managers accountable for effectively differentiating pay based on performance We provide career paths for major job groups and ensure that a consistent career management process is used across the organization We clearly identify the future critical capabilities needed to execute the business strategy and use this to inform the training strategy We provide opportunities for learning and development through special work projects and problem-solving opportunities Every employee has an individual development plan We ensure that rewards and recognition are linked to attainment of organizational and individual performance goals We build compensation plans based on up-to-date competitive market data We utilize equity programs to differentiate pay N= Percent N= Percent N= Percent N= Percent N= Percent 2 6% 11 35% 1 3% 15 48% 2 6% 2 6% 11 35% 3 10% 13 42% 2 6% 4 13% 12 39% 1 3% 13 42% 1 3% 3 10% 10 32% 2 6% 14 45% 2 6% 1 3% 12 39% 3 10% 15 48% 0 0% 1 3% 11 35% 4 13% 11 35% 4 13% 3 10% 11 35% 5 16% 4 13% 8 26% 7 23% 8 26% 3 10% 8 26% 5 16% 2 6% 12 39% 4 13% 6 19% 7 23% 5 16% 8 26% 1 3% 8 26% 9 29% 2 6% 11 35% 3 10% 13 42% 2 6% 3 10% 10 32% 4 13% 13 42% 1 3% 3 10% 9 29% 4 13% 10 32% 5 16% Aon Hewitt 29

30 Not at all In primary region in which we operate Across multiple regions Across all regions/ globally We do not have this practice Employment Relationships We have an employer brand that provides a clearly differentiated competitive advantage helps to attract and retain the best talent We align workforce programs and practices to support the employer brand (i.e., company lives its brand) We have employees who are very engaged and passionate about our employment brand, internally as well as externally We have a clearly articulated set of values that are consistently exhibited in the behaviors of employees We gather and analyze data to measure employee engagement and/or opinions We hold managers accountable for the engagement results of their team(s) We have a clearly defined and communicated diversity strategy and programs employed across the entire organization We ensure that we provide competitive pension and/or 401(k) programs to help employees accumulate money for retirement We provide competitive health and welfare benefits to employees (in applicable countries) including medical, dental, and vision insurance, life insurance, etc. Organizational Effectiveness We have consistent and systematic M&A tools and processes in place that are used throughout the organization We use a robust due diligence process to identify human capital-related liabilities for new acquisitions We establish and execute well-defined integration plans that include cultural assessments of the organization being acquired N= Percent N= Percent N= Percent N= Percent N= Percent 3 10% 9 29% 3 10% 12 39% 4 13% 2 6% 9 29% 5 16% 9 29% 6 19% 3 10% 8 26% 5 16% 12 39% 3 10% 1 3% 9 29% 2 6% 16 52% 3 10% 3 10% 10 32% 1 3% 15 48% 2 6% 5 16% 7 23% 4 13% 9 29% 6 19% 5 16% 8 26% 3 10% 6 19% 9 29% 0 0% 12 39% 4 13% 14 45% 1 3% 0 0% 11 35% 3 10% 16 52% 1 3% 3 10% 6 19% 2 6% 7 23% 13 42% 3 10% 4 13% 2 6% 7 23% 15 48% 2 6% 4 13% 2 6% 6 19% 17 55% Aon Hewitt 30

31 Not at all In primary region in which we operate Across multiple regions Across all regions/ globally We do not have this practice We have dedicated organizational development resources or strategic HRBPs with required skills and capabilities that typically plan and lead organizational development initiatives We have consistent and systematic organizational development tools and processes that are used throughout the organization (for restructuring, process redesign, capability assessment, workforce assessment, etc.) We partner with business leaders as part of annual business planning to identify and develop human capital plans for executing business strategy Hr Operational Efficiency and Effectiveness We consolidate core HR service delivery (benefits administration, payroll, workforce administration, leave administration, etc.) We have an HRMS system or data warehouse that houses workforce data globally or within regions We have integrated HR systems (e.g., core HRMS system integrated with performance management, recruiting system, performance management system, learning administration system) We utilize an integrated HR portal that employees can use to access information about HR-related policies, practices, career development, and information about other aspects of the employment relationship We assess and continuously monitor HR processes to both improve value to the customer and to reduce costs We utilize HR service centers to provide a single point of contact to answer and resolve employee questions and to support employee transactions We utilize event-driven workflow in our service centers rather than transactiondriven workflow We have a clearly defined set of human capital reports and dashboards that are consistently used throughout the organization N= Percent N= Percent N= Percent N= Percent N= Percent 3 10% 12 39% 2 6% 5 16% 9 29% 4 13% 9 29% 6 19% 2 6% 10 32% 3 10% 11 35% 4 13% 8 26% 5 16% 2 6% 17 55% 3 10% 8 26% 1 3% 1 3% 15 48% 5 16% 9 29% 1 3% 7 23% 9 29% 5 16% 5 16% 5 16% 1 3% 16 52% 4 13% 9 29% 1 3% 2 6% 13 42% 1 3% 10 32% 5 16% 3 10% 11 35% 6 19% 6 19% 5 16% 4 13% 7 23% 4 13% 3 10% 13 42% 4 13% 8 26% 1 3% 9 29% 9 29% Aon Hewitt 31

32 Not at all In primary region in which we operate Across multiple regions Across all regions/ globally We do not have this practice We have a centralized or coordinated team that is focused on providing human capital analytics and insights to business leaders We have access to a robust data warehouse to conduct analysis on human capital data across systems and businesses We ensure that HR programs, practices, and policies are compliant with laws and regulations N= Percent N= Percent N= Percent N= Percent N= Percent 6 19% 9 29% 1 3% 5 16% 10 32% 7 23% 10 32% 0 0% 5 16% 9 29% 0 0% 10 32% 3 10% 17 55% 1 3% Aon Hewitt 32

33 What best describes the development philosophy for your HR talent? N= Percent N= Percent Change jobs often 7 23% vs. Change jobs rarely 24 77% Growth within specialty (e.g., compensation) 21 68% vs. Rotation between specialties (e.g., compensation, benefits, learning and development) 10 32% Growth within functional HR (e.g., centers of expertise) 26 84% vs. Rotation between functional and field HR (e.g., HRBPs) 5 16% Advance quickly 9 29% vs. Advance slowly 22 71% HR talent is treated as a 21 68% vs. HR talent is treated as a global talent pool 10 32% local/business unit asset Growth in a single location 22 71% vs. Growth through geographic mobility 9 29% Aon Hewitt 33

34 To what extent do you agree with the following statement? The organization currently has a sufficient talent pipeline at the following HR levels to be successful in the future at the following levels: Strongly disagree Slightly disagree Neither agree nor disagree Slightly agree Strongly agree Senior-level HR (HR leader and his/her direct reports) Mid-level HR (manager of HR professionals and/or HR programs, HR business partners) Entry-level HR (individual contributors, generalists, service center employees) N= Percent N= Percent N= Percent N= Percent N= Percent 4 13% 2 6% 6 19% 12 39% 7 23% 5 16% 5 16% 7 23% 7 23% 7 23% 3 10% 6 19% 4 13% 9 29% 9 29% Aon Hewitt 34

35 To what extent does your HR organization consistently do the following? Not at all In primary region in which we operate Across multiple regions Across all regions/ globally We do not have this practice Use HR competencies/capabilities as part of the performance management evaluation process Use HR competencies/capabilities as part of the recruitment process Use assessment tools to identify capability strengths and gaps in HR Offer formalized training programs to build HR capabilities Utilize cross-functional project teams and/or rotational assignments to build HR capabilities Align HR capabilities to broader competency frameworks within the company (e.g., enterprise-wide, leadership) N= Percent N= Percent N= Percent N= Percent N= Percent 2 6% 11 35% 1 3% 13 42% 4 13% 3 10% 13 42% 1 3% 9 29% 5 16% 8 26% 6 19% 1 3% 8 26% 8 26% 7 23% 8 26% 2 6% 7 23% 7 23% 4 13% 10 32% 3 10% 7 23% 7 23% 4 13% 10 32% 0 0% 10 32% 7 23% Aon Hewitt 35