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How Human Resources
keeps its seat at the table
Insights
from the 2006 IBM Human Resources Summit
Reproduced with permission of the publisher, as it originally
appeared on the IBM website
http://www-935.ibm.com/services/us/gbs/bus/pdf/g510-6285-00-how-human-resources-keep.pdf
Author: Eric Lesser
© Copyright IBM Corporation 2006
IBM Global Services, Route 100, Somers, NY 10589, U.S.A.
Produced in the United States of America
04-06
All Rights Reserved
IBM, and the IBM logo are trademarks or registered trademarks of
International Business Machines Corporation in the United States,
other countries, or both. Other company, product and service names
may be trademarks or service marks of others. References in this
publication to IBM products and services do not imply that IBM
intends to make them available in all countries in which IBM
operates.
30 August 2007
The opportunity at hand
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“Right now, globalization has created an absolutely
screwed up, crazy world for an HR person – nothing has
been more challenging.”
– Session participant
|
The preceding quote
reflects a common sentiment among HR professionals. Faced with new
sources of competition and new opportunities for growth,
organizations are looking to the human resources function to
address two critical needs. First, the HR function must be able to
deliver strategic insights to business units, enabling the
organization to more effectively source, evaluate and motivate
employees in an increasingly turbulent business environment. At
the same time, HR needs to continue to provide administrative
services that are reliable, cost-effective and responsive to the
needs of business units around the globe. In today’s business
climate, it is no longer sufficient for the human resources
function to excel in just one of these areas; HR must perform both
roles effectively to contribute to the long-term success of the
organization.
It is this perspective
that shaped a series of discussions that took place in March 2006
with more than 25 senior HR executives from around the globe. Over
four days, HR leaders from various industries, including
utilities, financial services, retail and government – to name a
few – engaged in a dialogue to share insights and best practices
on a variety of topics. These included issues such as changing
workforce demographics, the role of workforce analytics in
developing strategic insights, and the structure and competencies
of the HR function of the future.
Across industries,
changing business conditions, demographics and globalization have
raised the need to understand and manage the dynamics of talent,
from sourcing to resource management to recognition systems. To
allow HR to focus on these more strategic issues, the next
generation HR organization must promote the use of shared services
and employee self-service to move away from its traditional role
of answering questions and resolving disputes. Further, the HR
organization needs to work more effectively with other vendors in
its extended enterprise, providing the tighter coordination that
is needed to deliver administrative services. Finally, HR needs to
look inwards at its own talent model, to ensure that its employees
have the capabilities, skills and confidence to provide strategic
guidance to the business.
Talent: The focus of
the next generation HR organization
The roundtable
participants highlighted the clear need for the HR function to
focus its limited time, energy and resources on four critical
areas:
-
Understanding the
impact of both globalization and changing workforce
demographics on the supply of talent
-
Determining the
drivers of employee retention and developing strategies for
retaining top performers
-
Engaging with the
corporate strategy process to determine the need for critical
skills and capabilities
-
Balancing the
supply and demand for talent on a dynamic basis within and
across business units.
Each of the four
critical areas is discussed in more detail below.
Understanding the
impact of both globalization and changing workforce demographics
on the supply of talent
One of the session
leaders, Jeffrey Joerres, the Chairman and CEO of Manpower, Inc (a
leading global employment services company) describes the
following scenario:
“Usually, when you
walk into the office of someone in a large multinational
corporation, you see a map of the world on the wall, with the
company’s manufacturing plants or distribution centers clearly
marked with pins… In today’s
world, companies are going to need new pins to highlight the
location of their talent.”
His comments
underscore a critical trend in today’s global economy: companies
are no longer moving operations simply to benefit from labor
arbitrage, but rather to take advantage of the increasing numbers
of talented professionals located around the world. Not only are
companies setting up back office or customer contact centers in
India, China, Brazil, Russia and other emerging economies, but in
those same places they are also setting up research and
development centers, along with other types of high-value,
knowledge-intensive capabilities. These new opportunities have
led, in some cases, to a reverse migration of talent. For example,
it is estimated that in Bangalore, the heart of India’s “Silicon
Valley,” between 30,000 and 40,000 expatriates have returned to
India in the last decade to work for both multinationals and
Indian-based companies.1 In
short, the need to tap into resources from around the globe has
dramatically changed the nature of the talent game.
At the same time, the
changing workforce demographics in the developed world are also
starting to place pressure on finding and holding on to key
talent. As an example, a recent U.S. Census study estimates that
between the years 2003 and 2010, the number of workers between the
ages of 45-64 will grow by 7.6 million.2
Similarly, in the European Union, the number of people between the
ages of 50 and 64 will increase by 25 percent over the next two
decades, while those in the 20-29 year bracket will decrease by 20
percent.3 As the aging baby
boomer generation continues to press toward retirement age,
companies will find it more difficult to replace these exiting
workers with younger workers, who will be drawn from increasingly
smaller labor pools. While increased levels of immigration could
potentially mitigate some of these challenges, on the whole,
companies with operations in the U.S., Western Europe and Japan
will be looking for innovative ways of replacing the talent that
will be leaving the organization and preserving critical knowledge
before it walks out the door.
Companies have begun
to investigate a range of options for managing this shrinking
talent base. Some are focused on developing alternative
arrangements that enable individuals to work on a more flexible
basis, in terms of the number of hours worked or the locations
from which they work. Others are exploring how to attract and
retain women and individuals from minority groups that have been
more difficult to hold onto in previous years. In all of these
examples, companies are expanding their horizons in terms of
where, and how, to tap into new sources of talent.
Changing workforce
demographics and globalization will not only have an impact on
traditional HR activities such as recruiting and learning, but
will also require an increased focus on work design. Issues
related to collaboration across time zones and cultures, and job
sharing will start to take priority in organizations. HR
professionals will need to focus their time and attention on how
work gets accomplished in an environment where individuals can no
longer get answers by walking across the hall. These types of
issues require a deeper understanding of the organization’s
operations and a stronger ability to provide consultative and
organizational development capabilities to the internal business
customer.
-
To what
extent is your organization able to tap into sources of
talent from emerging areas around the globe?
-
How have
changing workforce demographics impacted your
organization?
-
How can your
organization’s workforce collaborate more effectively
across time zones, languages and cultures?
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Determining the
drivers of employee retention and developing strategies for
retaining top performers
While the supply of
talent is strongly influenced by external factors, it is also
driven by the ability to retain high performers. Given the changes
in workforce demographics, employee mobility and globalization,
holding on to valuable employees continues to be a significant
concern of HR executives. This is particularly true in developing
parts of the world where high economic growth rates, coupled with
limited pools of experienced workers, have caused high levels of
turnover similar to those experienced by companies during the late
1990s in North America. The 2005 IBM Global Human Capital study
indicated that there are three practices that are closely tied to
lower employee turnover: opportunities for advancement, the need
for feedback and the existence of child-friendly policies.4
David Ulrich, a
professor of business at the University of Michigan and one of the
session leaders at the roundtable, described seven factors that
should be evaluated when looking to retain high performers,
several of which closely align to the dimensions highlighted
in the 2005 Global Human Capital Study (see Figure 1).5
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Figure 1.
Factors impacting retention of high performing employees. |
|
Vision |
Do individuals see
a purpose in what they are doing? |
| Opportunity |
Do individuals see
the opportunity to advance and be recognized for their work? |
| Incentive |
Do individuals
believe they receive equitable financial and non-financial
rewards? |
| Impact |
Do individuals see
how their work affects the organization? |
| Community |
Do individuals
have a social connection to others in the work environment? |
| Communication |
Do individuals
have access to information to do their jobs more
effectively? |
| Work
flexibility |
Do individuals
have flexibility in terms of how, where and when they
perform their jobs? |
|
Source: Ulrich,
David and Wayne Brockbank.
The HR Value
Proposition. Harvard Business School Press. Cambridge,
2005, p. 116. |
One interesting angle
from the discussion on the retention issue was a renewed interest
in re-recruiting individuals who had previously left the
organization. In situations where companies are unable to retain
top-tier employees, it was suggested that companies stay close to
recently-departed high performers. In many cases, they find that
their new positions do not meet expectations. As an example, one
financial services company participating in the session noted that
when it interviewed 100 high performing women one year after they
had left the organization, approximately 70 percent indicated that
they would consider returning, given the right opportunity.
-
To what extent
does your organization understand the drivers of employee
retention and engagement among different employee
populations?
-
What does your
organization need to do to better hold onto top
performers?
-
To what extent
is your organization reaching out to company alumni and
other networks to identify talent?
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Engaging with the
corporate strategy process to determine the need for critical
skills and capabilities
While the supply of
available talent influences the choices an organization makes in
terms of where and how to source and retain talent, the demand for
talent is primarily driven by the organization’s strategic
direction. One of the core capabilities deemed critical to the
success of HR’s mission is the ability to derive the human
capital requirements from the organization’s strategic plan.
Yet, many HR organizations often find themselves passive
participants in the strategy process, if they are engaged at
all.
An HR executive from a
major telecommunications company discussed their recent experience
in playing a more significant role in the corporation’s strategy
process. In previous years, HR planning was done in parallel with
the overall strategy development cycle. During this year, however,
the HR function in the company worked closely with line executives
and the corporate strategy group to clearly articulate and address
the human capital components of long-term directives. Each effort
was evaluated on three dimensions:
–
Could the new product/service/initiative be developed and
implemented entirely in-house, or would it require the use of
partners, subcontractors or other forms of outside labor?
Capability –
Did the organization have the right knowledge, skills and
competencies to execute this new product/service/initiative?
Culture –
Did the current organizational norms and values
support a high-performance work environment?
Perhaps the most
important component of success for this integrated strategic
approach was the development of human capital measures that were
tied to the execution of the strategic plan. Further, these
measures were incorporated into the key performance indicators of
the senior executives responsible for the different initiatives.
This level of integration between human capital measures and
senior leadership compensation is not typically found in
organizations; the IBM 2005 Human Capital study indicated that
less than 40 percent of companies had any human capital measures
tied to rewards of senior executives (see Figure 2).6
-
What role
does the HR function play in your organization’s
corporate strategy process?
-
How are the
human capital implications of corporate strategy
addressed within your organization?
-
How are
executives held accountable for addressing these human
capital challenges?
|
Balancing the supply
and demand for talent on a dynamic basis within and across
business units
Once the HR function
has worked with the organization to determine the overall supply
and demand for talent at a global level, it must play a role in
balancing the needs of the business with an ever-shifting supply
of resources. Organizations that have large percentages of
employees in call centers and retail operations have been looking
for ways to balance labor costs with customer satisfaction.
Indeed, a whole breed of labor management tools and practices has
reduced the cost and effort associated with managing part-time and
contingent workforces to improve customer and employee
satisfaction, lowering costs and increasing revenue.7
However, these same
types of considerations now need to be delivered to the domain of
knowledge work. For example, how does an organization most
effectively match its cadre of 1000 software engineers located in
seven development centers around the globe with over 50 projects
at various points in their lifecycles? How does it manage the
portfolio of skills and capabilities, and allocate them depending
on changing market conditions and priorities? How does it know
when to tap into subcontractors and other marketplace partners
during times of peak demand? All of these issues fall squarely
into the realm of the strategic HR professional. The HR
practitioner of the future will need the tools and experience to
anticipate changes in demand for certain skills, bring on-demand
learning tools to enable individuals to shift among related
projects, and scour the outside world for additional sources of
full- and part-time talent.
-
How
effective is your organization in dynamically balancing
the supply and demand for talent?
-
What tools
does your organization have in place to help ensure that
human capital is allocated efficiently and effectively
across the organization?
|
Switching hats:
Implications for the next generation HR organization
For the HR
organization to take on these new responsibilities, it must be
able to shed some of its more routine tasks and revamp its
internal capability. Many organizations have moved to using
outsourcing vendors to perform routine administrative tasks, while
others have continued to retain these activities in a shared
services environment. In either case, session participants were
clear that for the profession to move forward, some of the current
roles, responsibilities and capabilities need to be relinquished.
Getting out of the
business of “answering questions”
For HR to make the
shift to dealing with issues that are more strategic, session
participants were clear that the HR function as a whole had to
spend less time in managing the routine transactions and
interactions that too often fill the days of HR professionals. For
many participating companies, moving administrative activities and
employee inquiries to a shared service center environment was an
important starting point. By placing the nexus of addressing
administrative issues in one place (either physical or virtual),
it was more likely that individuals would be able to get a
consistent response to their inquiries, and less likely for
employees to go “answer shopping.” Further, through tracking
employee inquiries, organizations can obtain valuable data as to
whether their HR policies and procedures were easy to understand
and apply, and how they
could be improved in the future.
At the same time,
employing the use of employee and managerial self-service was also
seen as a critical capability for a host of reasons. Rather than
take up the time and attention of HR professionals who have more
pressing tasks on their plates, employee and manager self-service
can enable individuals to obtain answers to their questions with
greater speed, ease and functionality. Further, as individuals are
able to manage basic changes to their own HR profiles, and are
able to use more robust decision support tools, self-service
technologies also can promote a sense of greater individual
accountability and ownership.
Developing
relationships across organizational boundaries
Many of the
organizations in the session use outsourcing vendors to handle
many of the non-core tasks of the HR function, such as payroll and
benefits administration. Others have extended the outsourcing
model to include employee service center management, recruiting,
compensation administration and HR data management. As more and
more companies look to external organizations to take over
additional administrative components of the HR function, it is
increasingly important to view these companies as part of a larger
extended enterprise.
One financial services
company that has outsourced most of its administrative HR
activities talked about the need to set up a rigorous governance
process with its outsourcing partner to help ensure a smooth
initial transition, and to handle ongoing issues quickly with
minimal disruption to the company’s operations. This includes
not only a clear set of roles, responsibilities and escalation
channels but also a common set of operating values and standards
that holds both parties accountable for successes and failures.
Co-location of senior leaders from both sides in a “war room”
makes it easier for the financial services company and its partner
to more rapidly solve problems and develop working relationships
that facilitate open dialogue and trust among both parties.
At the same time, this
company stressed the need for significant change management during
the integration process. Key stakeholders within the provider
organization, the HR function and the ultimate business client
need to be involved in the redefinition of new operating processes
and the development of the overall rollout schedule. Education for
employee service center personnel on new tools and call center
procedures, as well as end-user training on employee and
managerial self-service
tools, needs to be available not only prior to the transition, but
also to individuals while they are performing their tasks.
Further, consistent communications that stress not only the
project progress, but also the rationale for change and the
specific impact of changes in HR practices need to be repeated
through a variety of channels and venues to secure commitment and
buy-in.
Building capability in
the HR talent pool
Getting out of the
business of processing documents and answering inquiries seems
logical for HR executives as they look to focus on more pertinent
and pressing issues. Unfortunately, for many individuals, simply
walking away from the administrative side of the HR
responsibilities is not that simple. For many HR personnel, “providing
service” to their internal customers is defined by the speed of
answers they can deliver to their business counterparts, and by
the kudos they receive for knowing the answers to complex
questions. While personally satisfying to the HR professional, and
oftentimes meeting the expectation of business unit leaders,
focusing on the transactional side leaves little time for more
value-added work by the HR function.
The HR professional of
the future, while requiring the basic functional knowledge of the
HR discipline, will need to be equipped with the skills, tools and
temperament to work from a different service paradigm. Rather than
a provider of answers, the HR professional will need to
proactively produce solutions to strategic business issues facing
the organization. This need for a greater strategic orientation is
reinforced in research by Dave Ulrich and Wayne Brockbank at the
University of Michigan’s Business School. Their findings
highlight that strategic contribution and personal credibility are
the two competencies of HR professionals that have the greatest
impact on overall business performance.8
This shift in
attention will require a number of skills that are often difficult
to find in many of today’s HR organizations. First is a strong
analytic orientation that starts with hypothesis development and
ends with the ability to use data to influence stakeholders and
more importantly, generate action. This includes accessing data
from data warehouses and other information sources, structuring
analyses to identify gaps and opportunities, and communicating the
results in a way that is convincing to others.
While there are HR
professionals who have these skill sets, there are others who have
not had the opportunity to gain the necessary experience in these
analytic approaches. In fact, many session participants suggested
that only 20-30 percent of their organizations have reached the
level of expertise needed to provide the strategic guidance their
companies require. For organizations that find themselves running
short of these capabilities, there are four options:
-
Bring in
professionals from outside the company
-
Attract existing
employees from outside the HR function to join the HR team
-
Provide education
to existing HR professionals
-
Foster
opportunities for outside development.
While recruiting
experienced talent from the outside can bring instant skills and
capability, a lag time is typical when finding talent in the
outside market and getting them up to speed in their new positions
and environment.
Many firms find that
the talent they need often exists within the organization, but in
functions outside of HR. In fact, over three-quarters of the
senior executives participating in the session had either come
from, or spent significant amounts of time, outside of the
HR function. This point is reinforced by Dr. Peter Cappelli,
professor and director of the Center for Human Resources at the
University of Pennsylvania’s Wharton School, who in a recent
article stated that, “…it is already the case that
people taking higher level HR jobs are coming from other
functional areas where they have a more financial orientation.”9
Given their knowledge of the business and their comfort with
analytics, financial and audit personnel were identified as
potential candidates for HR advisory positions. As one HR
executive from a financial services company indicated, “More of
our HR people are starting to come from metrics and systems
backgrounds where people are more facile with technology.”
However, participants recognized the need for individuals from
outside the function to rapidly come up to speed on the
fundamentals of HR management to be effective in their new roles.
Continuing education
for HR professionals was also viewed as critical to taking the HR
discipline to the next level. This education can take several
forms. In one organization, a structured set of distance learning
modules was developed, addressing business skills, global
resourcing strategies, industrial relations and analytic decision
making. This organization required that all HR staff at a certain
level complete each of these modules and pass certification exams.
Other companies used outside training courses to improve the
ability of their HR staff to think strategically and provide
consulting services to their internal business unit clients.
Finally, also
considered an important development step was identifying
opportunities for HR professionals to broaden their skill bases
beyond the classroom. In one organization, HR professionals were
required to spend a set amount of time with external customers to
better understand the company’s overall business challenges and
the specific issues faced by field personnel. The value of sitting
on the boards of not-for-profit and community organizations was
seen as another important way of obtaining business acumen.
Whether developed
through education, mentoring, or trial-by-fire, it is critical to
communicate the expectations for HR professionals in the future.
Many participants highlighted the importance of clearly
articulating such goals, how these goals differed from those set
in the past and what services they were expected to deliver to
their internal clients. Without a clear understanding of what is
expected of HR professionals in their new roles, and without
methods for tracking both their actions and accomplishments, it is
unlikely that companies will enact the changes necessary to bring
HR to a new level of capability.
Conclusion
Changes in business
conditions, demographics and globalization have created new
opportunities for the HR function. These changes have raised the
need to understand and manage the dynamics of talent, from
sourcing to resource management to recognition systems. To prosper
in this new environment, HR professionals need to take a more
strategic perspective on their services and capabilities. Simply
being effective in dealing with administrative issues is no longer
the yardstick by which the value of the
HR function will be evaluated. Rather, value will lie in using a
fact-based, analytic approach to solve business problems, while
also providing a longer, more futuristic viewpoint regarding how
the business needs to adjust to environmental changes. The window
for evolving into a more strategic HR organization is now – miss
it, and more than the power and prestige of the HR function will
be at stake.
References
-
Kalita,
S. Mitra. “A Reversal Of The Tide In India.” The
Washington Post. February 28, 2006.
-
He,
Wan, Manisha Sengupta, Victoria A Velkoff and Kimberly A.
DeBarros. “65+ in the United States: 2005.” Current
Population Studies: Special Reports. U.S. National Institute
for Aging and the U.S. Census Bureau. December 2005.
-
Von
Nordheim, Fritz, “EU policies in support of Member States
efforts to retain, reinforce and re-integrate older workers in
employment,” in Buck, Hartmut and Bernd Dworschak eds.,
Ageing and Work in Europe. Stuttgart: 2003, ISBN#
3-8167-6321-9. Available at http://www.management-issues.com/display_page.asp?section=blog&id=671,
p. 11.
-
“The
capability within: The 2005 IBM Global Human Capital
Management Study.” IBM Corporation. http://www-1.ibm.com/services/us/bcs/html/2005_human_cap_mgt_gen.html?re=ibvhome
-
Ulrich,
David and Wayne Brockbank. The HR Value Proposition. Harvard
Business School Press. Cambridge, 2005, p 116.
-
“The
capability within: The 2005 IBM Global Human Capital
Management Study.” IBM Corporation. http://www-1.ibm.com/services/us/bcs/html/2005_human_cap_mgt_gen.html?re=ibvhome
-
For
additional information on this topic, see “GoodTiming:
Realizing Value from Investments in Labor Scheduling,” IBM
Institute for Business Value. 2005. http://www-1.ibm.com/services/us/index.wss/ibvstudy/imc/a1022943?cntxt=a1000074
-
Ulrich,
David and Wayne Brockbank. The HR Value Proposition, p.
223.
-
Rodriguez,
Robert. “HR’s New Breed.” HRMagazine. January 2006.
About the author
Eric Lesser is
an Associate Partner with over 15 years of research and consulting
experience in the area of human capital management. He is
currently responsible for research and thought leadership on human
capital issues at the IBM Institute for Business Value. He is the
co-editor of several books and has published articles in a variety
of journals including the Sloan Management Review, Academy
of Management Executive,
and the International Human
Resources Information Management Journal. Eric
can be contacted at elesser@us.ibm.com.
IBM
Institute for Business Value
IBM
Global Business Services, through the IBM Institute for Business
Value, develops fact-based strategic insights for senior business
executives around critical industry-specific and cross-industry
issues. This executive brief is based on an in-depth study by the
Institute’s research team. It is part of an ongoing commitment
by IBM Global Business Services to provide analysis and viewpoints
that help companies realize business value. You may contact the
authors or send an e-mail to iibv@us.ibm.com
for more information.
About
IBM Global Business Services
With consultants and
professional staff in more than 160 countries globally, IBM Global
Business Services provides clients with business process and
industry expertise, a deep understanding of technology solutions
that address specific industry issues, and the ability to design,
build, and run those solutions in a way that delivers bottom-line
business growth.
Short summary
Thought leaders and key HR executives discussed the future role of
the HR function in the organisations, looking at influences such
as an aging workforce, globalisation, outsourcing of non-central
HR functions and acquiring the necessary skills and critical
capabilities to enhance business strategy.
Keywords and relevant phrases
Accountability, administrative services, advancement, analytic
orientation, audit background, baby boomer, benefits
administration, best practices, business performance, business
skills, business strategy, business units, change management,
child-friendly policies, commitment, communication, community,
company alumni, consultative function, corporate strategy,
credibility, critical capabilities, critical skills, customer
satisfaction, data management, data warehouses, development,
employee populations, employee self-service, engagement, external
clients, feedback, financial background, financial orientation,
flexibility, full-time, globalisation, goals, human capital, human
capital measures, HR executives, HR function, HR management, HR
policies, human resources, hypothesis development, immigration,
impact, incentive, integration management, internal clients, key
performance indicators, knowledge-intensive capabilities,
knowledge work, KPI, labour costs, labour pools, learning,
motivation, open dialogue, organisational development function,
organisational strategy, outsourcing, ownership, part-time,
payroll, performance management, recruitment, retention, shared
services, senior leadership compensation, service centre
management, skills shortage, stakeholders, strategic business
skills, strategic contribution, strategic insights, talent
management, talent network, talent supply and demand, top
performers, trust, training, turnover, workforce demographics.
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