HR leaders doubt their influence

by 01 Apr 2008

HR LEADERS are deepening their partnerships with business, but continue to feel pressures associated with globalisation, changing corporate landscapes and the war for talent.

A global survey has found that while 98 per cent of HR leaders are part of the senior management team, 58 per cent believe they are an important member while 40 per cent think they have less influence than other members of the senior management team.

The survey, which took in HR leaders across 12 countries in Europe, North America and Asia-Pacific (including Australia), drawn mostly from companies with annual revenues of more than US$1.5 billion ($1.6 billion), found that 73 per cent of all European HR leaders see themselves as an important member of the management team, compared with 63 per cent in Asia and 45 per cent in North America.

“HR professionals still feel they have less influence than other key executives on long-term business strategy,” said Jacinta Whelan, Australian managing director for Resources Global Professionals, which conducted the survey.

“HR needs to improve business relationships to ensure they are at the front end of any business initiative, as opposed to acting in a supporting role.”

While few corporations measure the overall effectiveness of the HR function, and instead prefer to stick to employee-driven KPIs, she said HR leaders are gradually deepening their partnership with business, enhancing their business acumen, cross-functional exposure and aligning HR goals to business needs.

Improvement is needed in collaboration between HR, executives, line managers and employees, according to Whelan, and HR leaders recognise the need to improve their involvement in the different aspects of change management, especially communications in regards to developing messages for corporate-led initiatives or other projects.

The survey also found that 82 per cent of global HR leaders believe the war for talent is a key and enduring business issue for the next decade and beyond – yet most do not have a clear strategy to combat it. To address the issue, 90 per cent plan to hire external resources, 60 per cent are looking to source offshore talent and 59 per cent plan to increase productivity without recruiting.

“Overall HR’s top priorities of talent development, recruitment, and retention are broadly in line with the corporate priority of growth,” Whelan said.

“In a world where the war for talent is creating a shortage of skilled and experienced professionals, HR will have to play a strategic role to effectively manage the deployment of talent to ensure the right people are in the right place at the right time.”

The survey indicated that a paradigm shift is occurring, with new organisational designs and structures around competencies, increased flexibility and cost-effectiveness.

“One answer some companies are using is to tie executives’ performance-based compensation to the implementation of talent retention strategies,” she said.

Similarly, HR’s top priorities were leadership development, skills development and management and employee recruitment/retention. Work-life balance was low on the list, as was downsizing and union/employee relations.

The top priorities to maintain a high-quality organisation were: active recruitment of new talent (72 per cent); proactive succession planning (65 per cent); coaching and development (57 per cent); and employee retention programs (55 per cent).

Whelan said few HR leaders considered comprehensive training and cross-functional exposure important to enhance HR services. “We found this a bit surprising, as both these factors help breakdown internal silos, facilitate change and share best practices,” she said.

While companies are becoming more focused on reducing administrative costs and simplifying processes, they are intent on retaining control of these functions – for this reason outsourcing is not a leading focus of HR leaders at this time.

The five most centralised functions were: compensation and benefits; performance management; career development; payroll; and training.

Asia-Pacific companies showed the highest rate of outsourcing, relying more heavily on external sources for 60–70 per cent of recruitment and training.

The survey also found that respondents are integrated or frequently partner with finance/accounting (84 per cent), operations (82 per cent), legal (80 per cent), internal audit and compliance (76 per cent). The strongest link is with finance/accounting on common focuses: compensation, payroll, budgeting and planning. The weakest partnership was with supply chain.

Whelan said HR leaders demonstrated a strong desire to improve collaboration, with 91 per cent focused on improving HR’s link with the business. Only 4 per cent of respondents rated cross-cultural awareness as a priority.

“This was surprising given that all respondents were global companies and cross cultural awareness is a critical element in globalisation,” she said.


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