How Can HR Impact Productivity and Business Results? Leonardo Sforza Tartu, 7 April 2011
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1 How Can HR Impact Productivity and Business Results? Leonardo Sforza Tartu, 7 April 2011
2 Focus Underlying Trends Influencing Business and Management Economic and Social Context HR Achievements and Business Prospect HR Policy Drivers and Priorities HR Performance, Impact and Delivery Gaps HR Needs and Plans for Change 2
3 Underlying Meta Trends (Towards the 2020 Horizon) Key Challenges Economy Tough Micro-Macro Environment, Volatile, Interdependent, Multi-Speed, Multi-Polar Market TINA>TANIA, Mis(Trust), Co/Re- Regulation Social and Demographic Changes WF Diverse, Mobile, Self-Determinated Scarsity of Resources / Sustainability Key Responses Debt Reduction, Widening sources of capital and Financial Rigorousness Embedding Governance & Sustainability Refocusing on HC Development Open-end, Networked Organisations Rigorous Risk Management Policy and Tools High-Tech /High Touch Developments 3
4 HR Cannot Ignore The Broader Picture René Magritte, Elective Affinities, oil on canvas,
5 GDP Growth Fragile and At Different Speed (2012 Forecast) Source: EC, Economic Forecast, Autumn
6 Labour Productivity Key Driver (EU Potential Growth Forecast ) Source: EC, Economic Forecast, Autumn
7 EU Member States Called to Deliver, Managing Expectations No Reform 7
8 Greater But Still Cautious Optimism by HRD Looking Ahead Evolution of Expected Impact of the Crisis % 23% Impact on Business Results % 56% % % 51% 2% Impact on HR programmes % 46% 33% % 6 11% Impact on own standards % 5 31% % 50% 0% 20% 40% 60% 80% 100% Significant Moderate No impact 8
9 Back to Growth Changes in Target Revenues 50% 45% 40% 35% 30% 25% 20% 15% 5% 0% 3% 3% 31% 33% 26% 25% 20% 43% 29% 9% 7%7% 7% 35% > 20% 16-20% 10-15% 5-9% 1-0 Revenues will decrease 2% Target 2009 Target 2010 Target
10 Steady Improvement of Investment Plans Changes in Target Investments % 35% 30% 2 31% 37% 37% 3 25% 20% 15% 22% 21% % 9% 7% 5% 0% 2% 2% 2% 2% 0% 2% > 20% 16-20% 10-15% 5-9% 1-0 Investment will decrease Target 2009 Target 2010 Target % 10
11 Moderate Improvement of Employment Prospects Expected Changes in Employment 80% 70% 60% 50% 40% 30% 20% 0% 71% 46% 4 37% 21% 2 20% 26% No change Increase Decrease
12 A Successful Path of Achievements Success of measures undertaken to cope with the economic downturn 0% 20% 40% 60% We reached all target objectives 52% We reached more than half of the target objectives 40% We have not measured yet We reached less than half of the target objectives 2% We reached only few target objectives 2% 12
13 Persistent Tension on Values v Practices Tension Between Personal Values and Daily Business Practices 60% 50% 40% 42% 4 41% 3 30% 20% 7% 6% 0% Yes often Yes sometime No don't see any major tension No don't see any tension at all 13
14 HR General Dashboard Much better outlook for 2011, but post crisis effects remain Back to Growth with caution Higher investments and revenues growth targets, but shift to Asia factored in Substantial achievements when coping with the downturn Tension between values and daily practices remain 14
15 HR Agenda Influenced Mainly by Talent Gap, Change and Cost Reduction Talent shortage 17% Corporate changes Pressure on cost reduction Challenging targets 13% 16% 16% Most Influential Factors Product / Process Innovation 13% Tougher Labour Law -20% Least Influential Factor 15
16 Processes, Metrics and Competencies Under Review Most Impacted HR-Related Areas ( ) -40% -30% -20% - 0% 20% 30% HR Processes The way HR function measures its added value HR developing new business competencies HR Organsational structure HR Mission HR policies more centralised Professional profile of younger HR generation -3% - -5% -5% -6% -7% -9% 29% 26% 26% 21% 21% 19% 1 New domains of responsibility transferred to HR HR Headcount reduced Some HR activities transferred from HR to operational units Outsourcing of HR activities HR Headcount increase -26% -32% -29% -29% -3 7% 5% Other important areas that will change - 2% Most Impacted Least Impacted 16
17 Even Stronger Focus on Leadership, Engagement and Talent Retention Top HR Priorities for % 20% 30% 40% 50% 60% Building a pipeline Building a of pipeline leaders of leaders for the for future the future 3 46% 5 Improve employee Improve engagement employee engagement and satisfaction and 30% 39% 50% Improve talent retention at every level of the Improve talent retention at every level of the organisation organisation 32% 3 4 Implement an integrated Implement an HR integrated IT system HR IT system through through out out the organisation the organisation Change the Change way HR the wdelivers ay HR delivers its services its services 13% 13% 17% 1 17% 17% Support innovation Support in the innovation way people in the wwork ay people together w ork together and interact and across interact across countries countries and and operations Better measuring and rew arding employee Better measuring and rewarding employee performance performance 13% 9% 13% 17% Improve the assessment Improve of the what assessment HR does of w and hat HR how does it and adds how it adds value to the business value to the business Develop a w ork force planning model to anticipate Develop workforce planning model to anticipate business needs business needs Reduce Reduce labour labour cost cost 1 27% 25% 2 Transform HR Transform to overcome HR to overcome its fragmented its organisation by activity by activity Implement a w ork force planning model to anticipate Implement workforce planning model to anticipate business needs business needs Staffing Staffing HR HR 3% 11% 11% 11%
18 Explicit HR Demand For Support Most Important HR Delivery Gap Building a pipeline of leaders for the future Better assess HR activities and their added value 0% 20% 22% 2 Improve talent retention at every level of the organisation Improve employee engagement and satisfaction Better measuring and rewarding employee performance % Innovation in the way people interact across countries and operations Implement an integrated HR IT system through out the organisation Develop a workforce planning model to anticipate business needs 16% 16% 1 Implement a coherent global HR policy framework Transform HR to overcome its fragmented organisation Improve overall working environment (i.e. reduce stress at work) Reduce labour cost % Reduce HR headcount in transactional activities Change the way HR delivers its services Develop a risk management policy related to people issues Design and implement a total reward policy at regional and global levels Work force planning to anticipate business needs Integrate and apply socially responsible principles into HR practices 6% Review HR practices to comply with non-discriminatory legislation Improve health and safety at the workplace Redefine compensation policy for executive board members 18
19 HR Drivers and Priorities Talent shortage, changing corporate culture / organisation and cost pressure influence HR agenda Securing HC key assets Refreshing HR processes, metrics and competencies Deeper focus on leadership, engagement and talent retention HR under-equipped to deliver alone Timely involvement and HR-IT integration most on demand 19
20 Core People Concern Remain Most Impactful HR Activities HR Activities and their impact on business performance 0% 20% 40% 60% Performance evaluation and rewarding 52% Leadership development 46% Talent management 4 Organisational effectiveness people empowerment 35% Learning and development 31% Succession planning 27% Evaluation of employee engagement/satisfaction 15% Employee Communication 15% Workforce planning 13% Industrial relations Comp. & Ben. policy 6% Comp. & Ben. administration 2% 20
21 HR Performance Improves, But Best performing HR specific activities (>50% of respondents on target and above) 0% 20% 40% 60% 80% 100% HR Due Diligence and post merger integration 6% 46% 31% 6% Management of financial risks underlying corporate pension plans 47% 2 Industrial relations 13% 73% Performance evaluation and rewarding 62% 35% Leadership development 4 40% 2% Corporate governance 20% 47% 27% 2% Review and implementation of non-discriminatory HR practices 16% 53% 25% 6% Health and safety at work 27% 4 23% Executive remuneration 1 70% Corporate Social Responsibility 53% 25% 2% Employee data privacy policy implementation 1 59% 16% Overall HR strategy 5 35% Overall HR execution 51% 39% Excellent On target To be improved Poor 21
22 Still Many Gaps to be Fulfilled Least performing HR specific activities (>50% of respondents below target) 0% 20% 40% 60% 80% 100% Consistency of HR policies and practices across countries 40% 46% Transparency and control of compensation and benefits practices 6% 42% 4 Organisational effectiveness support and advise 39% 51% 6% Mapping and management of competences 41% 37% 22% Management of Talents 6% 2 59% Management of inter-generational diversity due to ageing 29% 47% 16% Anticipate business needs from a people management perspective 33% 51% Anticipate employee expectations 31% 59% Anticipate demographic changes 3 52% Employee communication 40% 50% 6% Work-Life balance programmes 71% Diversity of work force and management 2% 2 67% HR metrics 45% 36% 15% Management of people-related risks 45% 45% 6% People empowerment 40% 4 Excellent On target To be improved Poor 22
23 Employee Engagement Most Popular Metric Tool Measurement of business impact of HR activities 0% 20% 40% 60% Measuring the rate of engagement of employees 50% Days of training delivered per employee 40% Through structured people-related indicators decided jointly by HR and business operations 33% Diversity of the workforce 33% Still looking for relevant quantitative metrics 29% Talent attraction score/rate 23% Using same standards and metrics in place for all business supporting services 21% Through internal client satisfaction survey 19% Cost of hiring 19% Diversity of management 19% We do not measure it for lack of resources 23
24 Early Involvement, Integrated ITS, and Business Acumen Will Make The Difference Top HR Needs 0% 20% 40% 60% Greater and timely involvement of HR in business strategic decision 40% 46% 4 Integrated HR-related information technology system 23% 25% 40% 35% Gain business related expertise 25% 26% 31% Attract new talents within HR 23% 36% Improve the execution of its activities 29% 35% 42% Get more financial resources 13% 21% 1 Develop new indicators of performance 21% 21% 23%
25 Competencies on Functional and Strategic Expertise Will Change Expected Changes in HR competencies and Capabilities by % 20% 40% 60% 80% 100% HR Strategic Advice to Management 52% 35% 13% HR Efficiency (Operations/Processes) 4 31% 25% Functional HR Expertise - Leadership and Talent Development 60% 21% 19% Comp. & Bens 20% 45% 35% Change Management 57% 27% 16% Risk Management 19% 52% 29% Change Most Ch L Stays the Same 25
26 HR Impact and Performance Performance evaluation and rewarding most impactful HR area Improved HR performance but still under-delivering against expectations Tackling engagement Biggest gaps when dealing with emerging issues / needs Employees satisfaction and engagement surveys lead communication plans and metric tools Upgrading HR competencies 26
27 HR - CEO Close Partnership Confirmed Level of co-operation and partnership of HR -40% -20% 0% 20% Chief HR Officer and CEO HR and Lines of Business HR and Finance 1 2-3% 3 20% 19% 27% HR and Legal Counsel % Within HR among different HR activities -1% 5 15% HR with employees' representatives 6 15% Within HR, between corporate HR and HR in subsidiaries HR and PR -5% 7-7% 8 HR with external consultants - 9 HR with public administrations -23% 10 11% HR and IT HR with professional associations -37% 12 HR with universities and business schools -37% 13 9% HR and Marketing % HR and Investor Relations -25% 15 Very High (Rank 1 +Rank 2) Very Poor (Rank 4 +Rank 5) 27
28 HR Self-Perception Is High How HR is Perceived Within the Organisation 0% 20% 40% 60% 80% 100% CEO 35% 4 17% CFO 16% 55% 20% Other members of the board 17% 5 29% Other executives 60% 21% Lines of business Managers 50% 37% 2% Employees 2% 41% 47% Very High High Average Low Very Low 28
29 Great Levels of Loyalty and Engagement, But Declining Wishes for Change 0% 20% 40% 60% 80% 100% Change company 29% 71% Change role (no more in HR) 22% 7 Change country of residence 27% 73% No change, I like my current role and employer 73% 27% Yes No 29
30 In Conclusion No More time for Complacency It is Not Business as Usual HR Can Be Key Driver of Change If He/She is Ready to Change 30
31 Thank You Leonardo Sforza Head Research Europe and EU Affairs 31
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