HR FUNCTION
Improving execution is top pre-condition for strengthening impact of HR
A study by Hewitt Associates reveals that the economic downturn is accelerating organisational change within HR departments. This will involve the acquisition of different skills and competencies, the need to attract new talent, establishing a leaner HR organisation, and identifying more effective tools to measure HR's value to the business.
The study was designed and carried out for the European Club for human resources (EChr) This year's HR Barometer covered 53 organisations, employing a total of 3.5 million people and explored the emerging business practices and priorities of the HR function across countries and sectors in Europe.
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Key survey findings
Economic downturn hits HR
77% of respondents said that the impact of the financial crisis and the slowdown of the economy will be significant on business results, while 47% said the impact on HR programmes will be significant.
All respondents have undertaken or decided already on a wide range of measures to cope with the downturn. The majority of them are focusing on actions that scale down production capacity and cost by reducing overall headcount (72%); by looking for new productivity gains (70%); and by closing down interim work contracts.
A third of respondents have a more comprehensive response that combines HR budget cutting with “opportunistic hiring of top talent, targeted leadership development and new business acquisitions”.
Compensation and benefit programmes, including long-term incentives are also under review in one in four of the participating companies.
Reshaped HR drivers and needs
Improving execution emerges as the main pre-condition for strengthening the impact of HR on the business (mentioned by 42% of respondents), followed by the need for a greater and timelier involvement of HR in strategic business decisions (40%), as well as the opportunity to attract new talent within the HR function itself (36%).
In terms of performance, in 11 out of 28 different HR specific activities, a majority of respondents recognised the need to improve their services to match business expectation. The negative “HR delivery gap” is most notable in relation to HR metrics, with 76% of respondents assessing as “poor” or below target their action in this area.
A majority of respondents expect significant changes in HR capabilities and competencies within the next three years. This will relate to: processes and operations to gain HR efficiency (58% think it will change the most); functional HR expertise in change management (55%); and leadership and talent development (47%).
Functional expertise related to compensation and benefits is expected to change the least, with 75% thinking it will remain mainly the same.
Since last year's survey, pressure on cost reduction has become the most influential factor of the HR agenda, jumping from seventh to first position. Challenging productivity targets, organisational change and also talent shortages remain highly influential on HR policies.
The key priorities on the HR agenda have become: leadership development (mentioned by 38%), talent retention (34%) and employee engagement (30%). The need to reduce labour costs, jumps from twelfth position in last year's priorities (only 7% of respondents mentioned it as a priority in 2008) to fourth position this year, (indicated by 28% of HR professionals).
A final word
“The results show that leading HR professionals are facing the downturn not just by scaling down employment, but also by thinking ahead to the ways they can help their organisation and its workforce to implement structural changes and to prepare them for economic recovery. The ongoing crisis will have a transformational rather than a cyclical impact on business and HR can be a crucial contributor in this process. To make this happen, HR needs to balance short-term market and operational needs with longer-term strategic people issues such as talent and leadership development – and fix them promptly." - Leonardo Sforza, head of EU affairs and research at Hewitt Associates and author of the study.
Want to know more?
Title: European HR Barometer, by Hewitt Associates on behalf of the European Club for human resources (EChr).
Survey sample: Survey participants were HR directors and HR board members from 13 different nationalities of leading companies with headquarters in Europe. A total of 53 organisations, 70% of which are listed companies, completed the survey. They employ in total more than 3.5 million people, the majority of which are in Europe.
Availability: For more details about the key findings of the study contact Marleen Van De Velde, email: m2vandev@hewitt.com.
Hewitt Associates provides leading organisations around the world with “expert human resources consulting and outsourcing solutions to help them anticipate and solve their most complex benefits, talent, and related financial challenges”. Hewitt has offices in 33 countries and employs approximately 23,000 associates. For more information, visit www.hewitt.com.
The European Club for human resources (EChr) was launched in 2001 by senior executives of global corporations with a European headquarter and which are market leaders in their sector of economic activity. The mission of the Club is to stimulate debates and exchange of practices on HR issues. Through its studies, working groups and seminars, the Club contributes to promote a European approach to the management of HR and support the strategic role of HR executives in the management of change. For more information, visit www.europeanclub-hr.eu/.