Hr Challenges
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21st Century — An Outlook
Around the world, political, economic and social turmoil take their toll on companies and their HR professionals. For example, the events of 9/11 were referred to repeatedly by survey respondents. As one African representative noted, “The events of 9/11 have increased the risk of travel throughout the world and have also raised diversity issues to the forefront.” A European representative noted the slowdown in the world economy that stemmed from 9/11 and the resulting impact on personnel.
Wars and invasions disrupt operations. Health issues, from AIDS in Africa to the SARS epidemic in Asia to the cost of benefits in North America, are also a frequent concern. Issues overlap. As one European respondent commented, “The increasing threat in terrorism has meant that some governments have switched funding from healthcare to defense.”
Other referenced issues include globalization and currency devaluations, with ripple effects across economies, sectors and companies.
Today’s challenges
On a global scale, despite national and regional differences, there was remarkable unanimity. As illustrated in Table 2.1, the three issues most often chosen by the global group to representa current top-three challenge were change management (48%), leadership development (35%) and the measurement of HR effectiveness (27%). In a strong show of uniform concerns, as will be evident in reviewing the following regional breakdowns, change management was the most frequently listed issue in 4 of the 5 regions. The issues that may require change management skills may be different in different regions, but the competency to deal with change management is clearly a common skill needed for today’s HR professional regardless of location.
Change management represents a particular challenge for personnel management staff, as this expertise has generally not been a consistent area of focus for training and development of HR professionals. This may also be the reason why it is cited as the foremost issue as HR continues to attempt to help businesses move forward. An intensified focus on training may be needed to develop added competencies to deal with change management.
Leadership development also proves to be a big challenge. HR professionals continue to wrestle with understanding the best ways to keep people in the pipeline and develop leaders for future succession planning. Increasingly recognized as becoming strategic business partners within their organizations, HR professionals are expected to provide the essential frameworks, processes, tools, and points of view needed for the selection and development of future leaders. Across the globe leadership development has been identified as a critical strategic initiative in ensuring that the right employees are retained, that the culture of the organization supports performance from within to gain market position, and that managers are equipped to take on leadership roles of the future so that the organization is viable in the long term.
Measuring HR effectiveness is an interesting new top three focus for HR as it highlights the profession’s need to measure results —not only in terms of transaction management but also in terms of driving the business. HR professionals have been questioned in the past regarding their business acumen. Utilizing metrics to determine effectiveness is the beginning of a shift from perceiving HR’s role as purely an administrative function to viewing the HR team as a true strategic partner within the organization. In fact, the next section reports that survey participants believe a critical future issue for HR will be organizational effectiveness — again supporting HR’s critical role as a strategic partner to management.
Other important issues emerging from the survey include organizational effectiveness, compensation, recruitment and availability of local labor, succession planning and availability of local labor and learning and development.
Yesterday and tomorrow
Looking back three years, as illustrated in Table 2.2, the three historical issues most often cited by the global group were change management (36%), compensation (31%) and leadership development (24%). Looking ahead, the three key issues expected to pose a challenge three years from now are organizational effectiveness (39%), leadership development (33%) and change management (28%).
Change management and leadership development were, are and will be important issues for HR professionals. Compensation has moved down the list of perceived challenges while organizational effectiveness is expected to play a larger role in the years to come. Where HR departments have traditionally focused on measuring their own effectiveness, there is an evolving recognition that they can provide organizational value by measuring the effectiveness of the entire business organization. The shift is significant as it represents movement from simply counting the numbers hired to determining the ROI of collective and individual hires on a long-term basis. Going beyond measuring turnover, this new approach considers “bad” turnover and “good” turnover along with the overall cost of replacement hires.
Compensation was one of the top three issues in 2001 because of factors including mergers and acquisitions (and pay equity among new divisions), the invention of new systems for human capital management (including stock option plans), and global competition (in which attracting and retaining key employees became increasingly important). While these factors remain important in 2004, compensation has fallen to 5th place in the tier of challenging issues. The survey respondents expect it to be in 9th place three years from now. Some key issues surfacing in the survey’s look ahead include recruiting and availability of skilled local labor, succession planning, learning and development, and the measurement of HR effectiveness. In addition, outsourcing and cost of retirement benefits were mentioned in many of the comments as a concern.
Time allocation
Another portion of the survey was devoted to the way HR professionals spend their time. United States Academic David Ulrich has identified 5 distinct roles for HR. Respondents were asked, “Of the total hours worked by your HR Department, what percent of the total time would be allocated to each of these roles (e.g., 20% of the overall departments time