HR issues top of mind for execs worldwide: study

Human resources departments under pressure to meet heightened expectations

HR issues now dominate corporate strategic priorities, putting HR departments under pressure to meet heightened expectations, according to a new global study of business executives.

Four of the five top strategic priorities most commonly identified by business executives surveyed globally in the second half of 2002 were HR-related: attracting and retaining skilled staff (1); improving workforce performance (3); changing leadership and management behaviours (4); and changing organizational culture and employee attitudes (5).

The other priority, rated second overall, was increasing customer care and service. While it’s ostensibly a problem for the head of sales, HR can have a role to play here, too.

Almost three-quarters of respondents also said people issues were more important than they were in 2001. Just six per cent said people issues were less important.

For the High-Performance Workforce Study, consulting firm Accenture surveyed 200 CEOs, COOs, CFOs, CIOs and senior HR executives in the United States, United Kingdom, France, Spain, Germany and Australia. While no Canadian organizations were include in the survey, the study was supplemented with in-depth studies of organizations including some from Canada.

Many corporate decision-makers now consider the HR department to be one of the most valuable functions in the organization. Fifty-six per cent of CEOs in the study said HR was one of their three most important functions for executing corporate strategy, more important than marketing and finance. Forty per cent of respondents also reported increasing spending on training in 2002. (A Canada-only study due out this month shows Canadian organizations are under-investing in training and development. See Canadian HR Reporter in June for more.)

The intense focus on people issues is exposing flaws in traditional HR programs and practices, said Alden Cuddihey, an Ottawa-based partner with Accenture.

Just 13 per cent of all respondents said they are very satisfied with HR initiatives. The same number said they were very satisfied with the overall performance of their HR organization. Seventeen per cent said they were very satisfied with training and development initiatives and 13 per cent said their training and development department is providing timely, relevant and cost-effective services for employers.

Business leaders have been saying for years that HR issues are important but that talk is now turning into action, albeit slowly, said Cuddihey. “We are seeing a little bit of evidence that folks are starting to spend a little money and putting their money where their mouth is,” he said. However, many remain reluctant and that is because of HR’s inability to prove the value of the investments, he said.

Executives show a greater appreciation that their workers must be highly skilled and well trained, but many respondents said their workforce lacks the skills necessary to execute their jobs at an industry-leading level. Similarly, employee alignment with corporate strategy is widely accepted as an important competitive differentiator, yet many executives said their workforce does not have a clear idea of overall strategy nor how their jobs are tied into corporate strategic objectives.

“Executives for the most part are only moderately satisfied with their HR and training initiatives,” states the study.

“A major shortcoming in many companies is lack of measurement — specifically, measurement of the business impact of HR and training and development initiatives — which is preventing executives from understanding where and how they should best apply their resources.”

There clearly is a belief out there among executives that money invested in HR or training and development has a positive effect on things like retention or employee satisfaction and maybe even on the bottom line. But showing a correlation between more training and improved retention is not enough for CEOs, said Cuddihey.

The increased interest in people issues means business leaders are going to raise the bar on HR, he said. Employee satisfaction and retention are at best proxies for bottom-line performance numbers, he says. Business leaders want more than correlational evidence on performance.

They are willing to invest in HR and training but they will demand to see the effects of those investments clearly spelled out. It is going to take a lot of hard work but it bodes well for HR, he said, because it is going to take many HR departments to the next level where they can prove they can be strategic enablers.

Laura Nashman, commission of people, information and technology for the Region of Peel, one of the organizations studied by Accenture for the report, said in the past two or three years the executive team for the regional government just west of Toronto has developed a greater appreciation of its employees.

“It wasn’t always the case,” she says. Employee matters were something managers just felt they had to deal with.

“But now there is a recognition that for any kind of change or introduction of anything new, we rely entirely on people to make that happen.”

And from a greater appreciation of the importance of people in executing strategy comes a greater interest in HR issues, she said.

“There is not one moment in time that everyone decides that people issues are important. It is an evolution and through real experiences,” she said. Each time someone on the executive team lost a high-quality employee and saw first-hand how important good people are and how difficult they are to replace, they were reminded of the importance of putting a good HR framework in place, said Nashman.

The new interest in effective HR management has sparked a number of new initiatives but the most important is a new talent management framework, said Nashman. From the recruitment process to succession planning, all the pieces of the HR framework have to be connected to, and support, the strategic direction of the organization, she said.

However, until now at least, they have not done a very good job of measuring the effects of those programs on productivity, she said. They have plans to improve the measurement of their practices but she remains unconvinced about the value of such exercises.

“I come to it with some skepticism,” she said. No matter how much measuring the HR department does, HR programs can’t on their own improve the performance of an organization if the management team isn’t committed to making them effective, she said.

HR can’t be responsible for the culture of the organization, she said. The HR function provides expertise and guidance and direction. It does the legwork and the program designs but it is up the managers to manage their own human resources effectively, she says.

There is absolutely no way HR should be held accountable for the culture of the organization, she said; that responsibility resides at the very top of the organization and with the rest of the executive team. If people think HR is responsible, “it’s no wonder people are disappointed with HR,” she said.

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