The business issues shaping HR strategy in 2012

by 01 Dec 2011

The uncertain economic outlook and challenges associated with a two-speed economy will force Australian companies to play a careful balancing act when it comes to planning their human capital resources and strategies for the year ahead, according to Mercer.

Mercer’s Human Capital business has identified the top five business issues affecting talent management and human capital strategy for the year ahead:

  1. Look for opportunities within the two-speed economy
  2. Voluntary turnover on the rise again?
  3. Avoid the two-strikes; engage shareholders early on executive remuneration
  4. Plug the leaky pipeline: make 2012 a year for action on retaining women
  5. Address the needs of the fastest-growing employee segment – older workers.

Against the backdrop of increased economic uncertainty, the human capital environment is becoming increasingly complex with companies needing to strike the right balance between building the workforce they need to grow, while carefully planning for the risks ahead.

2012 will be about being agile: HR needs to have strategies and timely solutions that align with the business strategies to respond to a range of scenarios. But there are also plenty of opportunities that businesses can tap into to enhance the skills and talent within their business.

  1. Look for opportunities within the two-speed economy

The two-speed economy translates to a two-speed workforce. Companies in the high growth resources and mining sector are still intending to hire, but are finding it hard to come by the skills and talent they need. At the other end of the spectrum, the retail and manufacturing sectors which are being squeezed as consumer confidence weakens are losing valuable staff as they manage amidst ongoing economic uncertainty. 

This presents an opportunity for companies in high growth sectors or industries. These employers need to review their hiring strategy and consider potential employees who have skills that can be transferred and developed with training. This will help to alleviate pressure felt in other sectors and open growth companies up to a potential new talent pool.

  1. Voluntary turnover on the rise again?

Australian companies are in a precarious position when it comes to predicting and planning for voluntary turnover. Employees are starting to make ‘some noise’ about leaving their jobs, Mercer’s latest data has shown that voluntary turnover is on the rise again. Data gathered from Mercer’s What’s Working research from early 2011 found four in 10 Australian workers are seriously considering leaving their employer. 

This signals a challenge for employers; if the economy shows signs of strong performance next year they should expect to see employees start to review their career options and look at external opportunities. If the future still looks wobbly, employers should avoid making any knee-jerk reactions or risk losing people who will be integral to growth in the medium term. 

Whatever the economic outlook, it’s a timely reminder that companies should have effective workforce planning in place with strategies to attract, retain and develop key employee segments and top performers. 

  1. Avoid the two-strikes; engage shareholders early on executive remuneration

One of the biggest changes affecting executive remuneration in 2011 was the introduction of the two strikes rule, which effectively grants shareholders the power to force a vote for Directors to stand for re-election should the remuneration report receive a vote of 25% or more against over two consecutive years.

The 2012 AGM season will mark the second time shareholders have had this vote. Companies should be planning now to reduce the likelihood of a two strikes vote by reviewing their remuneration strategy to ensure it aligns with the market and the internal business and talent strategy.

Shareholders need to be engaged in the process and HR has a role to play in educating the business leaders who perform this function.

The business strategy and progress updates that are regularly provided to shareholders should now also articulate the remuneration policy, and demonstrate how it is linked to business performance and ultimately helping the business to reach its goals.

They should ensure incentive plans are linked to the appropriate business objectives and payouts are aligned to strong performance, and should seek to engage with key shareholder groups to address any concerns. Although striking the balance between protecting commercial information and being transparent can be a challenge, this is one that companies will need to meet.

  1. Plug the leaky pipeline: make 2012 a year for action on retaining women

Employers grappling with the challenge of workforce planning are potentially overlooking a very important group of employees who have the ability and desire to reach leadership levels, but lack the support they need.

Mercer’s research refers to the phenomenon of the leaky talent pipeline, which shows that a disproportionate number of women drop out of the workforce at mid management levels, failing to progress to senior ranks.

Women in leadership was a much talked about topic in 2011, yet despite the talk only 1 in 4 (26%) Australian and New Zealand companies have a clearly defined strategy to attract and retain women long enough to reach senior leadership positions

2012 is an opportune time for companies to take decisive action and gain a first mover advantage on providing programs that better support the talented women in the organisation. 

Research from Mercer shows women cite work-life balance, lack of executive sponsorship and insufficient breadth of experience as the main obstacles to advancing their careers to senior leadership. Meanwhile, flexible work arrangements, mentoring, coaching, and diversity sourcing and recruiting are the programs most valued by women.

  1. Address the needs of the fastest-growing employee segment – older workers

More than 1 in 5 workers will be aged 55 or over by 2012 and the biggest increase in labour force will be amongst older females (60+).  However, research from Mercer’s 2011 What’s Working survey has found older workers are feeling left out of career development opportunities, with only 40% of 55-64 year olds feeling they have sufficient opportunities for growth and development. 

In addition to opening up greater career opportunities for Australia’s older and experienced workers, employers need to think ahead and enforce adequate succession planning as baby boomers begin to edge towards retirement age in the coming years. 

HR directors/leaders need to look at where their older employees are best placed within the organisation – and where their skills and experience can be shared and optimised to prepare the next generation of leaders/managers.  

About the author

Rob Bebbington is the head of Mercer’s human capital business in Australia and New Zealand. For more information, visit