Globalization puts focus on HR

Study finds emerging markets tying HR to business results, North America too focused on costs, administration
By Susan Singh
|Canadian HR Reporter|Last Updated: 09/14/2006

The current challenge to human resource practitioners can be summed up as: adopt an entrepreneurial outlook and connect programs to business outcomes, or lose out to competitors in Asia and Latin America.

That’s according to a global study of 320 organizations conducted by IBM Business Consulting Services. In interviews with 106 corporate heads of HR worldwide, the

2005 Global Human Capital Study

probed for ways organizations are supporting employees in delivering organizational performance.

The study found a clear association between increased business profitability and the use of performance measures, management development and workforce planning. It concludes there is a need to forecast, plan and manage the workforce in a much more dynamic way than is the case today.

Teresa Lister, partner of human capital management at IBM Business Consulting Services, says for her, the most surprising finding from the study was the positive outcomes for emerging countries that Canada regards as competitors.

“We think we have everything here, but looking at HR programs elsewhere makes me wonder if we have been running HR for HR’s sake,” says Lister.

“Human resources has done a good job in delivering the basics and there are many foundation pieces that will continue to be important. But we have to ask if all of these HR practices are adding value.”

The study data on business indicators show that human resource practices, taken together, do not add up to good business performance.

The strengths and weaknesses in HR practices differed across the geographic regions sampled. Where there were emerging and growing markets, companies demonstrated greater attention to human capital than in maturing or declining ones, leading to the conjecture that the investment in human capital was potentially driving business success.

Through the 1980s and 1990s HR managed for efficiency. North America, the study found, has the highest percentage worldwide of access to self-service for employees and managers. There is also a focus here on individual learning, on succession plans that are limited to the senior executive level and a need to justify human capital programs.

Other parts of the world have less in the way of self-service tools for employees and managers. Latin America has the highest number of learning days and more management development and succession planning for mid-level staff. Asia excluding Japan, pays more attention to the attraction and retention of key staff and to linking staff development to leadership compensation. Asia also has the greatest flexibility in staffing.

The interviewed HR leaders recognize the importance of mobilizing talent in achieving business goals, but are concerned about their capacity to do so. They identified improving skills and competencies, and increasing flexibility as two of the highest business objectives. However, few of the organizations surveyed are holding their executives accountable for improving and retaining human capital, nor are they measuring the effectiveness of human resource programs.

The second key study finding for Lister was the challenge of the aging workforce in mature business environments such as Canada.

“We have probably deluded ourselves that we can continue to go to the open market and buy the skills we need in mid-career without developing from within. Through the era of downsizing we got more efficient at delivering routine programs. Now we need to help organizations engage and orient the talent they need, and help employees deliver business results. We have to enable managers to engage their workforce.”

The study speaks of the need for a new human capital agenda. For Lister this means a shift to valuing the workforce as a contributor to the business and not just a cost.

“If we talk about people as expendable cogs who are responsible to manage their own careers then we cannot be surprised when they leave for other opportunities. If the strategy is to buy what you need when you need it, then everyone potentially ends up in the contingent workforce — and procurement replaces human resources,” says Lister. “You lose the benefits of the cohesiveness, coherence and connectivity that come from a resident workforce.”

North America also has the oldest overall workforce and the highest level of voluntary employee turnover.

Taken together, these findings point to the need for a retention strategy that is aligned to employee needs and business objectives. The study found that the common elements contributing to lower turnover rates are promotions from within the organization, regular performance feedback, flexible hours or telecommuting, and work and family supports.

These findings were echoed in a University of Windsor study released last November that looked at the retention of older workers from the perspective of the workers themselves.

The survey of more than 600 members of CARP, Canada’s Association for the Fifty-Plus, found that the most important HR practices to hold older workers are: showing appreciation, recognizing skills and experience, offering feedback, showing respect and recognizing the part that older workers can play.

An important factor in attracting retirees back into the workforce is educating managers on the effective use of older workers. Skills development, part-time work and new roles for the older worker — including phased retirement and retirement call back arrangements — are important.

Looking ahead, Lister contends that it is not a case of simply replacing the aging workforce. It is a matter of re-inventing the workforce to be more agile in addressing business needs.

“The overwhelming influence of the baby-boom has affected the way we think about work. We have forgotten how to engage young people in our workforce. Jobs can be designed differently. Older workers can be engaged as mentors. It is a question of balance. We have to keep up with what the organization needs and not just get caught up in our own processes.”

The IBM study makes the case that companies that have the keys to competitive change are those that invest in their human capital, work to retain valued employees, and measure and hold people accountable for that investment.

It concludes with three areas for action. The first is to connect investments in employees with performance outcomes. This means looking at such things as the growth of key staff, employee satisfaction, and staff training.

The second is to deploy the optimal strategies to promote the retention of key people. This includes tailoring practices to the dynamics of the workforce.

The final area for action is to define the next generation of HR programs and how they will support the needs of the organization for talent, flexibility, performance and growth.

Susan Singh is a Toronto-based freelance writer.

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