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A study designed and carried out for the European Club for human resources (EChr) by Hewitt Associates, a global human resources consulting and outsourcing company, has revealed that Human Resource (HR) leaders foresee a better but still challenging outlook for 2010. On the upside, corporate growth plans are putting back more focus on selected human capital development measures - including the prospect of newly created qualified jobs - as well as the opportunity to measure and leverage HR's value to the business more effectively. On the downside however, concerns remain regarding productivity gaps, workforce adequacy, and rigorousness in people management policy implementation.
Leonardo Sforza, head of EU affairs and research at Hewitt Associates and author of the study, presenting the results at a conference in Brussels said:
"Our study of European HR leaders shows 2010 emerging as a true year of transition during which companies are looking to improve their competitiveness and prepare for a post-crisis environment. This is leading to a greater balance between more ‘defensive' measures - such as those aiming to reduce production, workforce costs and capacity - and ‘growth' initiatives aiming to upgrade productivity, talent and leadership capabilities, or to explore new opportunities for mergers and acquisitions."
Leonardo Sforza added:
"For many HR leaders the ‘exit' strategy from the crisis does not (yet) mean the ‘entry' into new models of management, but rather a greater focus on operational performance. However, a rigorous and timely execution of HR policies is not enough to support long term business success. The competitive advantage of an organisation will also depend on its ability to articulate innovative people management policies in anticipation of emerging business paradigms that affect the world of work and change the way business operate."
Jean-Pascal Arnaud, Vice President for HR and Communication at Chantelle Group, commenting on the results of the Barometer at the Brussels' conference, said:
"This 5th survey reveals a clear reinforcement of the HR function in its ability for addressing most of the business and financial expectations, by solving short-term requirements and still maintaining globally the coherence of corporate engagement vis-à-vis employees. The question remains: what do we learn from this financial turmoil experience? We have to increase our strategic partner position with consolidated ‘measuring' capacities, with a stronger leadership on communication and innovation. HR leaders' leitmotiv for the year ahead should be: let's work better together!"
Key findings of this year's study include:
Overcoming the downturn
While respondents have a more positive outlook for 2010 they still remain very cautious on the prospects of expansion. The proportion of companies foreseeing a reduction in their workforce remains high (44%) - but it is significantly less than in last year's survey (71%). Meanwhile, companies that expect to add new jobs have increased from 8% in 2009, to 20% in 2010, with 37% expecting to maintain the same level of employment.
Revenues and investment are expected to grow at a better pace than last year, but for the majority of companies these remain in the single digit range. Companies planning investment increased from 4% last year to 16% in 2010, while those planning a contraction in new investment decreased from 34% to 16% in 2010.
The sentiment of respondents on 2010 business results has improved by 20% compared to last year's survey. However the impact of the economic downturn and the uncertainty around the timing and scope of recovery were expected to continue affecting business results (56%), their HR programmes (38%) and, to a lesser extent, their own standard of living (15%). Only 8% said that the slowdown of the economy will have no impact on HR activities in 2010.
The impact of measures taken in 2009 to face the recession has been assessed by almost all respondents and results seem to match the plans. 62% of respondents claimed to have reached more than half of their planned objectives, while 27% of companies have achieved all targets. Only 4% of companies said that they had missed the majority of target objectives.
Although work force reduction is still underway for approximately half of survey respondents, the identification and implementation of productivity improvements is at the top of the list of post-recession measures - chosen by 59% of respondents. The reinforced interest shown for opportunistic hiring of top talent (52%), and targeted leadership development (49%) gives a sense of the change of emphasis in business plans. These two measures now top the list of improvements with both having grown by 20% compared to last year's results.
Pressure on cost reduction continues to influence HR agenda
Pressure on cost reduction is confirmed as the most influential factor for the second consecutive year. Challenging profit targets, changes in the company culture and organisation and talent shortage also continue to be among the top drivers of HR policies. These are all signals of the reinforced consciousness of an HR function that needs to cope with a highly competitive and fast changing business environment in terms of market and of critical work force capabilities.
These factors are expected to have an impact on new business competencies to be developed by HR - moving from sixth position last year to first this year - and, as in the past, on HR processes and on the way HR measures its value to the business. The size of HR departments seems to have stabilised and is less under question compared to last year.
HR's priorities
The top three priorities on the HR agenda for the period 2010 to 2012 remain stable with an even greater emphasis on core human capital issues, namely: leadership development (mentioned by 46%), employee engagement (39%) and talent retention (32%). As a fourth priority, the focus will be on improving the assessment of what HR does and how it adds value to the business. This is also the area where HR leaders seem to be most keen to have further support and fill their current gap in terms of delivery capacity.
When judging its own performance against business expectations, HR acknowledges that there is large scope for improvement in HR strategy and execution, and in all other 26 different people-related activities under analysis. In 16 of these activities - increased from 11 in last year's survey - the majority of respondents admit to performing below expectations. The most frequently mentioned areas of excellence continue to be those related to statutory compliance issues, such as health and safety at work, employee data-privacy, industrial relations and non-discrimination. But also in these best performing fields, in particular in relation to non-discriminatory practices, the proportion of companies acknowledging the gap has increased from 15% last year to 36% this year.
The weakest fields where HR assesses itself as delivering below target are in relation to: HR metrics (77%), work/life balance programmes (75%), management of intergenerational diversity (62%), consistency of HR policies across countries (62%), and employee communication (59%).
The traditional range of people and internal "customer" tools are generally preferred by HR to measure the business impact of their activities. Employee engagement surveys emerge this year as the most commonly used tool. However, the proportion of companies that due to lack of resources do not use HR metrics at all, has increased from 8% to 18% this year. Meanwhile, there are 35% of respondents that are still looking for relevant quantitative tools. These results further explain the weak performance mentioned above in the same area.
A majority of respondents expect significant changes in HR capabilities and competencies within the next three years, in particular in relation to change management, processes and operations and strategic advice to management. On the contrary, only one fifth of respondents expect changes in the functional area of expertise required to handle compensation and benefits policies.
HR, a fully engaged business partner
This year there is a steady improvement in the level of satisfaction of HR directors with regard to their job and current employer - almost back to the pre-crisis mood. 92% of respondents do not wish to move to another function outside HR, and 87% do not wish to change the company they work for. Moreover, only 7% of them admit to often experiencing a tension between their personal values and the daily practices within the business; while the majority of respondents do not see any major conflict.
HR Leaders look for innovative EU measures to foster people employability
The greatest emphasis and demand from HR leaders to the new EU institutions in office is for the launch of a new European growth plan that would foster innovation in education and research (66%).
The second most compelling request is related to the review and modernisation of the European Union labour laws into a consolidated and simplified EU labour code (56%).
The third priority to beef up the EU policy agenda for HR is for a new initiative that would promote the acquisition of new skills and workforce mobility to reduce unemployment (48%).
The majority of HR executives (63%) continue to hold a generally positive perception of the impact of the EU on their country's economy, but that positive perception has declined by 12% compared to last year while the negative sentiment has increased from 9% in 2009 to 21%. More limited is the proportion of those that see a positive effect of the EU on their company (also declined from 57% to 48%) and on their own life (from 58% to 52%).
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