Future of HR still not certain

by 13 May 2008

THE FUTURE of the HR function still remains a matter of speculation for most companies worldwide, and as shared services take up more transactional HR work, the future of the function will rely increasingly upon its ability to establish a high level of strategic business presence.

A global human capital report has found that the concept of business partnership, as championed by David Ulrich and other HR opinion leaders, is proving challenging to implement successfully.

Furthermore, CEOs may be playing a far more active role in human capital management than previously, as a growing number recognise the importance of people to sustainable business success, according to the PricewaterhouseCoopers report.

A recent survey found that only 43 per cent of CEOs globally believe that their HR function is equipped to handle changes required to compete for talent, while a further 62 per cent of organisations believe that to compete for talent they need to change the way they recruit, motivate and develop their employees.

The report, Managing People in a Changing World, examined factors such as financial performance, productivity, outsourcing, leadership, innovation, talent management, diversity, work/life balance and the growing concept of workplace wellness.

“As the value of choosing the right human capital policies is increasingly recognised by business leaders, we are seeing a greater demand for evidence-based human capital metrics,” said Richard Phelps, partner, PricewaterhouseCoopers.

“Using these, companies are now able to ascertain how they are performing in previously uncharted areas such as succession planning, innovation and talent management, as well as using the harder metrics, such as return on investment per worker, to determine overall business performance.”

Phelps said that more and more companies are working hard to be perceived as responsible employers, to build attractive employer brands and fulfil their reputation as a responsible company. “Human capital metrics help them to throw their arms around all of this.”

The report identified an important new trend, in that companies are moving away from the identification of high performers and high flyers, towards the identification of ‘pivotal employees’.

“These are segments of the workforce that are expected to create value and determine the success of the organisation. They can range from the receptionist to the sales director,” the report said.

“Whereas high performers may break the mould of an organisation’s direction, pivotal performers set the standards that ensure the sustainability of the existing business. This employee group always plays a disproportionate role in creating company value and success.”

The report also pointed to the real and growing challenge of the ability of organisations to ensure a sustainable leadership pipeline in light of external population demographics and ageing leadership.

Part of this challenge relates to having a firm definition of what talent means in an organisation, whether it be emerging talent, succession, talent pools, key positions or how talent management connects with the HR and business strategy.

The report found that there is no evidence that the time gap between organisational needs and human capital policy development, or performance, is closing. Importantly, this is not necessarily down to the inability of HR to adapt.

“It is perhaps more related to the marketplace changing so rapidly that it is impossible to move people-related policies at the same pace. There is, therefore, always likely to be some form of misalignment between HR functional perceived performance and organisational/people expectations in the future.

“Those organisations that are best able to manage that misalignment most successfully will be the real winners,”the report concluded.

The increasingly recognised link between high levels of employee commitment and bottom line results means business leaders all over the world are exploring engagement metrics and measures, according to PricewaterhouseCoopers.

Rapid economic change and uncertainty in many markets makes such measures more relevant than ever, the report found. Levels of engagement are even beginning to be perceived by some investors as an important indicator of a company’s financial health and sustainability.

“Linked to the trend for the HR function to become more accountable in measuring the value it adds to the business, is the need to manage reputation with its key stakeholders: the board, the line and employees,” the report said.

“In order to do this well, the HR function needs to be proactively managed and a clear agreement, understanding and communication of the role of HR in the organisation is also required.”


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