When it comes to what CEOs want from HR to help drive business value, one of their main demands is that HR help communicate the value of talent to investors, whether that means Wall Street or a lone philanthropist. At a breakout session at last week’s ReimagineHR event in London, Brian Kropp, HR Practice Leader at CEB, now Gartner, explained that the reason CEOs want this help is not because investors believe in making employees happy for its own sake, but because they are increasingly acknowledging that talent is a leading indicator of business performance and growth. Below is an overview of some ideas HR leaders should think about when approaching this opportunity:
The Growing Value of Talent
According to PwC’s annual CEO survey, the percentage of CEOs concerned about the availability of key skills as a business threat to organizational growth has risen from 46 percent in 2009 to 77 percent in 2017. This year, CEOs identified “human capital” as the second most important investment to make to capitalize on new business opportunities, ahead of “digital and technology capabilities.” Various trends, from new technologies to demographic shifts, are uprooting the core assumptions of how companies and industries operate. In our analysis of earnings calls from 1,600 of the world’s largest publicly traded companies, we found that words like “change,” “transformation,” and “disruption” have become commonplace. (CEB Corporate Leadership Council members can see the full range of insights from our Investor Talent Monitor here.)
In a recent earnings call with Volkswagen, Chairman and CEO Matthias Mueller said that “Volkswagen needs to transform. Not because everything in the past was bad, but because our industry will see more fundamental changes in the coming 10 years than we have experienced over the past 100 years.” Highlighting the value of talent is becoming one way in which organizations can gain the trust of their investors that their business still has what it takes to outperform a rapidly changing, volatile market. Jean-Paul Agon, CEO of L’Oreal, mentioned in their earnings call that they were going through a “digital transformation” whose success “stems from our very decentralized agile approach in execution with a significant investment in talent.” Conversations like these are only growing, and investors are pushing for more. Private equity firms are even taking matters into their own hands, appointing executives to oversee the talent strategies of their portfolio companies.
As we’ve observed in our Investor Talent Monitor, 46 percent of the largest public companies talked about issues related to talent during their earnings calls in 2010, but by 2016, this number had topped 60 percent. This should not be surprising: Investment firms and activists have been making the news recently for taking an active interest in companies’ talent strategies, pushing firms for greater gender diversity on boards of directors as well as for firms to publish employee compensation and pay gaps.
At our ReimagineHR summit in London on Thursday, CEB (now Gartner) Principal Executive Advisor Clare Moncrieff led a session on creating a common vision of digitalization for the business and HR. After examining hundreds of trends, our research councils serving chief HR officers and chief information officers have identified six deep shifts in the business environment that will result from digitalization. These shifts should act as the framework for heads of HR to:
- Ensure talent conversations with the line are grounded in business context
- Identify the current talent implications of these shifts, project future implications, and partner with the line and C-suite peers to prioritize and respond to each
- Improve their teams’ business acumen (to underscore the importance of this, 58 percent of HR business partners indicated in one of our surveys that building business acumen was their top development goal in 2017)
(The case studies we link to below are available exclusively to CEB Corporate Leadership Council members)
1) Demand Grows More Personal
As customers seek personalized products that align with their preferences and values as individuals (rather than as segments), companies will rely on digital channels and digital innovations in logistics and customer service to achieve personalization at scale. Customers will continue to expect lower-effort, nonintrusive service.
This could, for example, affect how HR functions look for new talent. Attraction of critical talent now requires differentiated, customized branding and career coaching. Candidates will demand a more effortless, personalized application experience. AT&T approached this shift by creating a more personalized “Experience Weekend” to show the innovation of its brand to campus candidates and make top talent more likely to accept job offers.
At the ReimagineHR summit in London on Wednesday, Brian Kropp, HR Practice Leader at CEB (now Gartner), led a benchmarking and discussion session with over 150 chief HR officers, almost half of whom manage businesses with over 10,000 employees. The group shared their thoughts on the growing challenges heads of HR face today, and one theme remained constant throughout the conversation: change.
1) Disruptive Trends Changing the Pace of Business
As heads of HR look forward to 2018, the number one priority for many in the room will be change management. One HR executive, for example, said her organization’s major challenge currently was in managing multiple, overlapping acquisitions that were doubling the size of their workforce practically overnight—and both the pace and intensity of that form of change will only increase. Historically, organizations would make one acquisition and then wait several years before the next. Over the past several years, however, organizations have begun to face acquisitions or mergers one after another. Today, however, many businesses are struggling as they confront multiple changes at the same time.
One consequence of this, as another head of HR pointed out, is that organizations can no longer manage change using the same strategies they learned through their previous experiences. Every change is different, deserves its own unique response, and must be dealt with as if it were the first time the organization was doing it. There is no “one size fits all” approach to change.
Two of the most important trends in HR today are the growing importance of technology within the HR function and its increasingly strategic role within the organization. In fact, a new survey from Paychex finds that these trends are closely linked, Nick Otto reports at Employee Benefit News:
According to the inaugural Paychex Pulse of HR Survey, more than two-thirds of HR leaders at small and mid-sized companies say they have grown beyond serving a traditional administrative function to taking on a more strategic role within their respective organizations. And technology is helping to drive that shift. A growing number of HR leaders (41%) are meeting with their CEO or CFO — or both — on a weekly basis, according to the survey, while close to one-third have access to top management when they need it.
Three-quarters of respondents said that HR technology has enabled them to become more strategic and efficient on the job. In addition, 60% of respondents considered their HR technology to be very effective for payroll, retirement and benefits administration, and time and attendance tracking, indicating they feel that technology is allowing them to maximize their effectiveness when it comes to the administration of critical business functions.
These findings are great news for HR leaders, and not at all surprising; new technologies are driving innovation and disruption in every facet of the working world, and HR is no exception. Technology is a key factor driving the increasing pace of change, which challenges HR to keep the workforce aligned. Furthermore, with digital talent playing an ever more important role in shaping the organizations of the future, a strategy-focused HR function is a vital parter in preparing any organization for a digital transformation.
At the Harvard Business Review, John Boudreau, a research director at the Marshall School of Business and Center for Effective Organizations at USC, highlights the fundamental challenge most HR functions have when it comes to analytics: They are making significant investments, but not getting returns from those investments. The work that we are doing at CEB (now Gartner) has found the same result: More than 70 percent of organizations are increasing investments in talent analytics, but only 12 percent feel like they are getting results.
Boudreau offers up a set of push and pull strategies to improve the effectiveness of talent analytics by making it more “user friendly.” Looking at the pull situation, he lays out the following conditions, which he argues must be present for an analytics program to succeed. The HR function, he writes, must:
- receive the analytics at the right time and in the right context,
- attend to the analytics and believe that the analytics have value and that they are capable of using them,
- believe the analytics results are credible and likely to represent their “real world,”
- perceive that the impact of the analytics will be large and compelling enough to justify their time and attention, and
- understand that the analytics have specific implications for improving their own decisions and actions.
While it’s certainly helpful advice to invest time, energy, and thought into how the consumer of that information will use it, there is still a fundamental problem—alluded to in the third item above—that heads of talent analytics must tackle first, and that’s improving data quality. In fact, poor data quality is the number-one cited reason why talent analytics leaders feel that they aren’t having the impact that they want.
topform84 / istock
Automation is coming to the HR function fast, and most employers expect entire HR roles to be taken over by machines within the next decade, according to the results of a survey CareerBuilder released last week. In the poll, conducted late last year among HR managers and recruiters at a variety of private sector organizations with more than 250 employees, 72 percent of respondents said they “expect that some roles within talent acquisition and human capital management will become completely automated within the next 10 years.” CareerBuilder also took a look at how many organizations are already adopting automated HR processes:
The rate at which companies with 250-plus employees are adopting automation varies considerably. Although more are turning to technology to address time-consuming, labor-intensive talent acquisition and management tasks – that are susceptible to human error – the study shows a significant proportion continue to rely on manual processes. One-third of employers (34 percent) don’t use technology automation for recruiting candidates, 44 percent don’t automate onboarding and 60 percent don’t automate human capital management activities for employees.
Paul King argues in Workforce that HR needs to adopt a new mindset when it comes to cybersecurity:
Despite the increased vulnerability of HR systems, many HR professionals still view themselves in the traditional role of workforce management, choosing to leave cyber risk management to other departments, notably IT.
According to a recent IBM security study released this year, 57 percent of chief human resources officers globally have rolled out employee training that addresses cybersecurity. However, the respondents’ positive percentages dropped noticeably when asked if they provided cybersecurity training that included measurable, results-based outputs, or if there was reinforcement throughout the year that provided more than a once a year cybersecurity training. …
The IBM report urged key executives in human resources, finance and marketing departments to be more proactive in security decisions, coordinate plans internally and to be more engaged in cybersecurity strategy and execution with the C-suite and IT. This means HR personnel should not only stay abreast of proper security processes when it comes to accessing sensitive employee data, but they should be able to communicate updates about cyber threats effectively to the enterprise, to current and new employees, and contractors.
From my perspective, the implication here is that the CHRO-CIO relationship needs to become closer. King hints at this notion at the end of his article, but it merits more discussion.