HR needs extreme makeover: business leaders

The gap is widening between what business leaders want and what HR is delivering, according to a global research report, which found that HR needs an extreme makeover driven by the need to deliver greater business impact and drive HR and business innovation.

The Deloitte 2015 Global Human Capital Trends report, which involved surveys and interviews with more than 3300 business and HR leaders from 106 countries, found that while CEOs and top business leaders rate talent as a key priority, only 5 per cent of survey respondents rate their organisation’s HR performance as excellent.

In addition, just 11 per cent of respondents feel that their organisations provide excellent development for HR.

“To put it bluntly, HR is not keeping up with the pace of change in business,” the report said. “Today, there is a yawning gap between what business leaders want and the capabilities of HR to deliver, as suggested by the capability gap our survey found across regions and in different countries.”

The research report found the most significant capability gaps for HR in Australian organisations were in the areas of HR and people analytics, reinventing HR, performance management, leadership, and culture and engagement, while the smallest capability gaps were in the areas of people data, simplification of work, learning and development, and workforce capability.

Other Deloitte research has found that only 30 per cent of business leaders believe that HR has a reputation for sound business decisions; only 28 per cent feel that HR is highly efficient; only 22 per cent believe that HR is adapting to the changing needs of their workforce; and only 20 per cent feel that HR can adequately plan for the company’s future talent needs.

The evolving role of the CHRO
In an era of rapid business change, the role of the CHRO becomes radically different and more demanding than ever, and the report suggested that today’s CHRO must be innovative and business-savvy and be able to stand toe to toe with the CEO.

“At the same time, a CHRO must know how to bring the HR team together and help it evolve into a more distributed, business-integrated function. CHROs must also be comfortable adopting and embracing technology and analytics, which are integral to HR’s future success.”

However, one sign that many organisations are expecting something fundamentally different from HR is that they are bringing in a fundamentally different kind of executive as CHRO, and the report cited research which shows that nearly 40 per cent of new CHROs now come from the business, not from HR.

A top priority: employee engagement
The report also found that lack of employee engagement is the top issue currently facing 87 per cent of HR and business leaders (up from 79 per cent last year), however, the majority of organisations are still failing to take action to improve their culture, potentially jeopardising future growth.

Some 60 per cent of HR and business leaders do not have an adequate program to measure and improve engagement, indicating a lack of preparedness for addressing this issue.

Furthermore, only 12 per cent have a program in place to define and build a strong culture; while only 7 per cent rated themselves as excellent at measuring, driving, and improving engagement and retention.

“As demand for talent picks up, the balance of power in business is rapidly shifting from the employer to the employee,” said Josh Bersin, principal and founder of Bersin by Deloitte.

“Moreover, workers are becoming more mobile, contingent and autonomous, and as a result, harder to manage and engage. In this new world of work, organisations need to reimagine the way they manage people and come up with new, out-of-the-box ideas to make themselves relevant.”

Leadership, learning and skills gaps more important
Leadership gaps continued to be top of mind for HR and business leaders, 86 per cent of whom cited it as a top issue this year. However, the number of respondents who said this was a “very important” issue jumped from 38 per cent last year, to 50 per cent this year. Interestingly, only 49 per cent of C-level executives indicate that they are committed to developing leadership skills at all levels of the organisation, according to other Deloitte research.

Recognising the fact that a general lack of skills is likely to impede business growth, 85 per cent of HR and business leaders ranked learning and development as a top issue, compared to 70 per cent last year, making this the third most critical issue in this year’s survey.

Meanwhile, 80 per cent cited workforce skills as a top issue (up from 75 per cent last year), and 35 per cent rated the lack of skills in HR as a “very important” problem, up from 25 per cent last year.

“There are significant shifts happening in the global workplace that business must actively manage,” said Brett Walsh, global human capital practice leader, Deloitte Touche Tohmatsu. “In addition to workers’ changing expectations of employers, skills needed on the job are changing faster than ever. Organisations are quickly falling behind on developing the right skills across all levels.

“There’s an urgent need for organisations to re-evaluate their learning programs and treat leadership development as a long term investment, rather than a discretionary training spend item when times are favourable.”

Organisations are missing the growth opportunities presented by analytics
The Deloitte report found that analytics is one of the areas where organisations face a significant capability gap.

Three quarters (75 per cent) of respondents cited talent analytics as an important issue, but just 8 per cent believe their organisation is strong in this area – almost exactly the same as in 2014.

“HR and people analytics has the potential to transform the way we hire, develop and manage our people,” said Jason Geller, principal with Deloitte Consulting and national managing director of the US human capital practice.

“Leading organisations are already using talent analytics to understand what motivates employees and what makes them stay or leave. These insights help drive increased returns from talent investments, with huge consequences for the business as a whole.”

Deloitte research shows has found it will take several years for businesses to develop and absorb talent analytics technology, and “the sooner HR teams start working on building this capability, the better positioned they will be to address future talent issues,” Geller said.

The Deloitte 2015 Global Human Capital Trends report is available on the Bersin by Deloitte website. Image source: iStock