EMPLOYERS ARE entering a “talent decade,” according to the Conference Board of Canada.
Talent is increasingly a competitive differentiator and there is growing recognition of the value driven by a high-performance workforce and HR’s critical role in building effective talent systems. Organizations and HR functions that find, develop and deploy the right talent will likely build sustainable competitive advantage, said the Conference Board’s report Human Resources Trends and Metrics: HR Function Benchmarking, Third Edition.
“Things like a changing regulatory environment… skills shortages… the overall economy that is improving, slow labour force growth and drivers like changing technology and changing leadership choices are really pushing this focus on talent,” said Heidi Martin, research associate and network manager at the Conference Board of Canada in Ottawa.
“With the upcoming mass retirements of baby boomers, the focus is just going to be that much greater.”
In some sectors and regions, there is an emerging talent crunch. And with economic growth, the demographic profile of the country and declining rates of unemployment, we’re in the emerging talent decade, said Ian Cullwick, vice-president of leadership and HR research at the Conference Board, adding this will really hit home in the next 12 to 18 months with a bulge of baby boomer retirements.
“Organizations in those geographies and sectors that are especially knowledge-intensive and high-skilled driven, they’ve got to by progressive/proactive,” he said.
“They’ve got to be progressive in terms of an HR strategy and programs to meet the particular needs… and if they can do that, you know what, they will enjoy competitive advantage and likely great business results. If they don’t do it, they’re going to be behind the eight ball.”
It’s becoming harder to find really key talent and competition is becoming quite fierce, said Paula Lewis, senior HR consultant and owner of Strategic HR in Toronto.
“For the years to come, I think that’s just going to get worse and worse. Obviously the aging population will also have an effect on it, but everybody coming out of the downturning economy is going to have a huge impact because a lot of companies did downsize a lot, lost a lot of that talent — and to try to rebuild it is going to be really interesting and a big challenge.”
While more sophisticated technologies mean HR can focus on building workforce capacity that aligns with business needs and drives the execution of business objectives, many employers continue to focus on traditional HR management and core HR program activity, found the report, which was based on two separate surveys by the Conference Board and the University of Southern California’s Center for Effective Organizations, with a total of 239 Canadian respondents.
Fifty-one per cent of the respondents described their approach as “traditional HR management” while 48 per cent said strategic. However, large organizations with more than 10,000 employees are more likely to say strategic (63 per cent) than traditional (37 per cent).
One-third of Canadian organizations reported their HR function is a full partner in developing and implementing business strategy, compared to 21 per cent in the United States. However, more American organizations (54 per cent) than Canadian (43 per cent) said, “HR provides input into business strategy and helps implement it once developed.”
One-third is OK but we should strive for much higher, said Lewis.
“The whole profession... is sort of in that infancy stage and we have a long way to go in order to prove our strategic value,” she said. “You have to really be sitting at the table, be part of the strategic development, strategic planning, budgeting, all those key elements — HR needs to be part of and almost be a driver in some elements.”
Part of the challenge could be skills. When employers were asked to rate their HR team’s abilities with specific competencies, “traditional knowledge and delivery of HR services” was rated highest, followed by consultation skills and contract administration. Lower on the list were business acumen, the ability to drive organizational change, project management skills and statistical analysis and analytic skills.
When it comes to investments in enabling systems and infrastructure, the U.S. is leading Canada in terms of information management and workforce analytics, said Cullwick.
“Once those systems and practices are leverageable and usable and mature, those organizations that are making those investments now will then be able to, I would suggest, materially advance in terms of becoming more strategic and truly being business-driven,” he said. “They will then have an advantage over us in terms of their analytical capability, which you would think would then enable a more strategic, value-added HR function.”
And American companies are a lot more sophisticated when it comes to collecting metrics and measuring the business impacts of HR programs and processes, said Martin.
“Really, when you’re able to have that capability, that’s when you can really start proving the value of your HR function.”
Statistical analysis is important in that it contributes to determining strategic direction, said Guy Nasmyth, associate faculty member at Royal Roads University in Victoria.
“I don’t know that HR is going to be taking over a lot of business processes, but certainly in that they are becoming a full partner in establishing strategic direction, then they’re going to have to understand business.”
HR has to start focusing on and speaking numbers, said Lewis.
“We really have to get that mindset changed, really have to start utilizing the data, mining the data, the analytical skills in order to really start building, driving the success of the company through effective HR programs — that’s really the only way we’re going to be seen as true strategic partners.”
When it comes to evaluating work performance, the skills and knowledge gap, retention, workforce reductions or succession planning, all of that requires having a good understanding of what the business looks like and how it will impact the business — and that’s done through analytics, she said.
“Obviously, (it’s about) forecasting future changes and really allowing HR to become more proactive and managing the change, versus just dealing with it as it comes and being more reactionary. Without that data, we can’t really do any kind of forecasting — it really ties our hands.”
The HR function can be a trusted partner and help boards provide appropriate oversight relating to areas such as compensation, succession planning and risk management, said the Conference Board. But while boards typically seek assistance on compensation and reward practices (81 per cent), executive compensation (78 per cent) and HR policy (76 per cent), few seek help from HR on board compensation (27 per cent), change management (24 per cent) or workforce condition and capability assessments (23 per cent).
More education needs to happen, said Lewis.
“A lot of the individuals within the board are traditionalists and they are used to seeing HR as that admin function, so we just have to make sure that we are educating them in exactly the value that HR can bring, and that’s really… going back to analytics to prove our cases, to be able to speak the same language and really kind of make sure we are producing that business plan, factual-based, and just really acting much more like your CFO of the company.”
And it’s happening, slowly, with senior HR leaders becoming more involved with the boards. But any change of this nature is going to be slow because people are comfortable with the old ways of doing things and enjoy their turf and status, said Nasmyth.
Boards of directors are starting to understand that human capital is and will be the competitive differentiator, said Cullwick, citing HR committees of the board.
“As the HR function evolves, and as it must evolve in the talent decade, we will see more of those higher value-add activities and areas be a part of what the board of directors are looking for help on.”