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Creating People

Advantage 2014-2015
HOW TO SET UP GREAT HR FUNCTIONS:
CONNECT, PRIORITIZE, IMPACT
The Boston Consulting Group (BCG) is a global management consulting firm and the world’s
leading advisor on business strategy. We partner with clients from the private, public, and not-for-
profit sectors in all regions to identify their highest-value opportunities, address their most critical
challenges, and transform their enterprises. Our customized approach combines deep in­sight into
the dynamics of companies and markets with close collaboration at all levels of the client
organization. This ensures that our clients achieve sustainable compet­itive advantage, build more
capable organizations, and secure lasting results. Founded in 1963, BCG is a private company with
81 offices in 45 countries. For more information, please visit bcg.com.

The World Federation of People Management Associations (WFPMA) is a global network


of professionals in people management. It was founded in 1976 to aid the development and
improve the effectiveness of professional people management all over the world.
Its members are predominantly continental federations, which are made up of more than
90 national human resource associations representing over 600,000 people management
professionals. For more information, please visit www.wfpma.org.
CREATING PEOPLE
ADVANTAGE 2014-2015
HOW TO SET UP GREAT HR FUNCTIONS:
CONNECT, PRIORITIZE, IMPACT

RAINER STRACK PIETER HAEN

JEAN-MICHEL CAYE HORACIO QUIRÓS

THOMAS GAISSMAIER JORGE JAUREGUI

CHRISTIAN ORGLMEISTER

EDDY TAMBOTO

CARSTEN VON DER LINDEN

SEBASTIAN ULLRICH

December 2014 | The Boston Consulting Group • WFPMA


CONTENTS

3 INTRODUCTION

5 KEY HR TOPICS
Survey Methodology
Non-HR Respondents Say That Capabilities Need to Improve

1 2 THE LINK BETWEEN FINANCIAL PERFORMANCE


AND HR CAPABILITIES

1 8 HR’S BUSINESS IMPACT

2 1 REGIONAL AND INDUSTRY CONSIDERATIONS


The Regional View: Leadership and Talent Management Show the Greatest Urgency
The Industry Comparison: Energy and Financial Institutions Stand Out

2 5 WHAT SETS GREAT HR FUNCTIONS APART

2 6 APPENDIX I: METHODOLOGY

2 8 APPENDIX II: EXECUTIVE INTERVIEWEES

3 1 APPENDIX III: SUPPORTING ORGANIZATIONS

3 4 FOR FURTHER READING

3 5 NOTE TO THE READER

2 | Creating People Advantage 2014-2015


INTRODUCTION

B usiness leaders today are faced with an extremely dynamic


business environment, characterized by technological innovation,
blurring boundaries among industries, shifts in customer behavior,
scarcity of talent, and huge variations in growth across regions. HR
functions need to help companies meet these challenges as true
strategic partners. To fulfill this mandate, however, HR leaders need a
clear view of their current capabilities, their priorities over the next
three to five years, and the best way to tailor efforts to improve.

This report, the eighth in The Boston Consulting Group’s Creating


People Advantage series, explores key trends in people management
by considering ten broad HR topics and 27 subtopics. We looked at
each subtopic’s future importance, companies’ current capabilities
with regard to the subtopics, the levels of effort invested in them, and
how urgently each subtopic needed action. We also explored the link
between people management capabilities and economic performance.

In this year’s survey, 3,507 respondents from 101 countries participat-


ed, representing industries including industrial goods, consumer
goods, and the public sector. In addition, we interviewed 64 HR and
non-HR executives at leading companies around the world. The fol-
lowing are among the most compelling findings:

•• HR capabilities correlate with economic performance. Companies that


have strong capabilities in HR topics—such as talent and leader-
ship; engagement, behavior, and culture management; and HR
strategy, planning, and analytics—show significantly better finan­
cial performance than companies that are weaker in those areas.

•• Analytics and key performance indicators (KPIs) give HR a seat at the


table. There is a strong correlation between the use of KPIs and
the strategic role of HR. HR leaders who want a role in strategic
discussions with the business must be able to quantify workforce
performance. This goes beyond “input” metrics, such as cost and
head count, toward more sophisticated “output” indicators, such as
productivity.

The Boston Consulting Group • WFPMA | 3


•• KPIs should link to strategic actions. Even high-performing organiza-
tions, which are generally more data driven, do not use their KPIs
systematically to formulate strategic actions. A clear prioritization
and selection of KPIs and tools is needed to achieve best-in-class
results.

•• Globally, the leadership and talent management topics are the ones in
the most urgent need of action. Across industries and regions, most
respondents identified leadership, talent management, behavior
and culture, HR and people strategy, employee engagement, and
strategic workforce planning as the topics that are most urgently in
need of action by their organization.

•• HR departments need to be more consistent in their investment deci-


sions. Many organizations need to invest their efforts in HR topics
more strategically to build capabilities. Among the three HR topics
rated as most important (out of a total of ten), companies showed
merely average capabilities, and they were not specifically target-
ing their investments to improve those areas.

•• HR needs to listen more to internal clients. Non-HR respondents re-


ported a strong need for action with regard to approximately 40
percent of HR topics, particularly in core HR capabilities, such as
staff capabilities and communication.

Fundamentally, the report identifies three hallmarks of great HR


functions:

•• They connect by partnering with stakeholders inside and outside of


the company to improve operational and financial performance.

•• They prioritize by using data-driven insights to identify and focus


on the most urgent HR priorities.

•• They create an impact by using KPIs and steering tools to support


the organization and its strategic goals.

The report also includes case studies of specific HR best practices


from Deutsche Lufthansa AG, PepsiCo, and Transnet.

4 | Creating People Advantage 2014-2015


KEY HR TOPICS

T he Boston Consulting Group (BCG)


has published an annual Creating People
Advantage report—partnering, in alternating
opment includes three subtopics: training and
learning, career models and competencies,
and assignment management. This categori-
years, with the World Federation of People zation allowed us to look at big-picture trends
Management Associations (WFPMA) and the and to drill down into specific analyses. We
European Association for People Manage- asked the survey respondents to rank each of
ment (EAPM)—since 2007. In this year’s the 27 HR subtopics by its future importance,
report, BCG and the WFPMA conducted a their companies’ current capabilities in the
survey of human resources professionals and subtopic, and the levels of effort invested in
other business leaders around the world. The the subtopic.
report summarizes the survey’s findings,
provides a comprehensive snapshot of people Exhibit 2 shows the ten HR topics ranked by
management priorities and capabilities, and respondents’ assessment of future impor-
explores their link to companies’ operational tance. The 27 subtopics are color-coded ac-
and financial performance. cording to the levels of effort invested. Inter-
estingly, while levels of effort broadly link to
This report serves as an overview, with high- future importance, there are notable excep-
lights of key findings. Follow-up reports will tions. For example, leadership, talent man-
provide more detailed findings and in-depth agement, and strategic workforce planning
analyses on specific topics. are among the highest priorities, yet they re-
ceived only average levels of investment.
Clearly, companies must be more consistent
Survey Methodology in their investment decisions.
More than 3,500 respondents from 101 coun-
tries participated in our online survey in In addition, we combined future importance
2014. (See Exhibit 1.) We also conducted 64 and current capabilities into a single metric—
in-depth interviews with HR and non-HR ex- defined as urgency for action—and ranked all
ecutives at leading companies in a variety of 27 subtopics by this dimension.1 The subtop-
regions. (For more about the survey method- ics most urgently in need of action across all
ology, see Appendix I; for a list of executive industries were leadership, talent manage-
interviewees, see Appendix II.) ment, behavior and culture, HR and people
strategy, employee engagement, and strategic
To identify HR priorities, we analyzed ten workforce planning. (See Exhibit 3.)
broad HR topics, which were further broken (For more on leadership, see the sidebar
out into 27 subtopics. (See Exhibit 2.) For ex- “PepsiCo Offers Its Executives a Master Class
ample, the topic of training and people devel- in Strategy.”)

The Boston Consulting Group • WFPMA | 5


Exhibit 1 | More than 3,500 Respondents from 101 Countries Participated in Our Survey

Finland 70

Norway 37
Denmark 16
Germany 127
Netherlands 65
Belgium 12
Switzerland 24 Sweden 63
United
Kingdom Lithuania 12
120 Russia 53
Ireland 31
Austria 28 Hungary 12 Ukraine 26
France 100
Spain 70 Romania 84
Portugal 78 Bulgaria 19
Macedonia 11
Canada 189 Italy 95 Turkey 67
Greece 24
Slovenia 43 Mongolia 10
Cyprus 28
United States 319 Croatia 19
Japan 45
Israel 44
Mexico 57 China 71
Nicaragua 43 Taiwan 156
Guatemala 22 Venezuela 29 Philippines 29
United
Panama 31 Arab Thailand 87
Dominican Republic 36 Senegal 21 Emirates 29
Ecuador 18 India 112
Bangladesh 102
Number of responses Brazil 53 Malaysia 80
Fewer than 10 Indonesia 19
10–29 Botswana 11
30–59 Chile 29 South Africa 54
60–99 Australia 172
Argentina 13
100 or more
No data collected New Zealand 91

Source: 2014 BCG and WFPMA proprietary Web survey and analysis.
Note: Only countries with more than ten responses are shown; of the total, 84 respondents did not specify a country. There were 3,507
respondents in total.

Exhibit 2 | The Analysis Includes 10 Broad HR Topics and 27 Subtopics

10 HR topics 27 HR subtopics
High
Talent management and Talent management Leadership
leadership 13 10
Engagement, behavior, and Employee engagement Behavior and culture
culture management 9 8
HR strategy, planning, and HR and people strategy
Strategic Other HR and
analytics 5 workforce planning 14 workforce analytics 17
Future importance

Performance management
Performance management Rewards and recognition
and rewards 3 18
Recruiting: branding, hiring Employer Recruiting Recruiting
On-boarding
and on-boarding branding 16 strategy 11 processes 4 6
HR communication and
HR communication Social media
social media 7 23
Training and people Career models and
development Training and learning 1 competencies 22 Assignment management 24
HR target operating HR orga- HR HR services HR staff HR inter-
model nization 20 processes 2 and systems 19 capabilities 12 nationalization 27
Diversity and generation
management Diversity management 21 Generation management 26
Labor costs and labor Labor costs and restructuring Works councils and union management
management 15 25
Low
Effort Below median Median Above median # Effort invested rank
invested
Source: 2014 BCG and WFPMA proprietary Web survey and analysis.
Note: There were 3,507 respondents.

6 | Creating People Advantage 2014-2015


PEPSICO OFFERS ITS EXECUTIVES A MASTER CLASS
IN STRATEGY
PepsiCo has developed a well-deserved reputa- position and performance, and the relative
tion as a high-performing company that invests attractiveness of different options.
in leadership training and development. To build
on this, the company recently implemented a •• Design. Generate a solution that aligns with
strategy master class. the company’s portfolio strategy, business
strategy, and business model strategy and
The program was designed around 15 PepsiCo-­ clarify where to play and how to win.
specific case studies of major strategic decisions
over the past 20 years, such as significant •• Test. Stress-test the strategy to ensure that it
acquisitions or an expansion into developing is coherent, robust, and ready to execute.
markets. Through these case studies, the
training provides a comprehensive foundation for •• Execute. Implement the new strategy,
strategy composed of several aspects. First is a clarifying initiatives, owners, resources,
uniform set of strategy fundamentals, including success metrics, and a mechanism for
consistent definitions, building blocks, and capturing lessons learned.
guidance questions. Second is a set of tools to
help executives learn how best to lead them- The training is being rolled out in two stages,
selves, lead others, and lead the business. starting with a two-day, in-person seminar for
Third—and most important—is a set of five senior leaders, led by one of PepsiCo’s C-level
tactics that executives can use to successfully executives. A broader segment of PepsiCo
take on new strategic challenges: executives will then receive a four-hour e-learn-
ing version of the class hosted on PepsiCo’s
•• Frame. Clearly assess the problem, including the internal education platform. Although the
company’s aspiration, objectives, and scope. program is still being implemented, the benefits
are already clear: PepsiCo’s senior leaders will
•• Diagnose. Look at the current situation as soon gain additional insights and training that
well as at future scenarios, including external will help drive the company’s continued success
trends and forces, the company’s competitive in a dynamic global market.

Non-HR Respondents Say That portant subtopics for which non-HR respon-
Capabilities Need to Improve dents think their organizations show low ca-
Both HR and non-HR respondents identified pabilities.
the same HR subtopics, such as talent man-
agement and leadership, as priorities—that
is, the areas with the lowest current capabili- Connect. Great HR functions
ties and the highest future importance. How-
have a strong relationship with their
ever, there were significant differences in the
perceptions of their companies’ people man- internal clients and thus understand
agement capabilities. (See Exhibit 4.) the organization’s most urgent
needs and strategic goals. This
Virtually across the board, HR respondents connection allows them to address
rated capabilities more highly than non-HR
the day-to-day realities of business
respondents. They also did not consider any
areas to be in urgent need of action. By con- units and to meet long-term con-
trast, non-HR respondents categorized nearly siderations, such as the supply and
half of the 27 subtopics as urgently needing quality of employees.
action. This was especially true for talent
management and leadership, two highly im-

The Boston Consulting Group • WFPMA | 7


Exhibit 3 | Leadership, Talent Management, and Behavior and Culture Are Most
Urgently in Need of Action

HR subtopics according to urgency rank1


1 Leadership 11 Employer branding 21 HR organization and
2 Talent management 12 Social media governance

3 Behavior and culture 13 Rewards and recognition 22 HR processes


4 HR and people strategy 14 Other HR and workforce 23 Labor costs and restructuring
5 Employee engagement analytics 24 Diversity management
6 Strategic workforce planning 15 HR staff capabilities 25 Assignment management
16 On-boarding
7 Career models and 26 HR internationalization
competencies 17 Generation management
27 Works councils and union
8 HR communication 18 HR services and systems management
9 Performance management 19 Recruiting processes
10 Training and learning 20 Recruiting strategy

Source: 2014 BCG and WFPMA proprietary Web survey and analysis.
Note: There were 3,507 respondents.
1
Urgency is determined by calculating the difference between future importance and current capabilities, and then
multiplying that difference by future importance.

(For more on talent management, see the In many organizations, the HR function is
sidebar “Decoding 200,000 Global Talent Pro- perceived as not meeting the expectations of
files.”) Also, HR respondents attributed a its internal clients. To address this misalign-
higher importance to all subtopics—almost ment, HR departments must better align with
10 percent on average—than did non-HR re- business units throughout the enterprise, to
spondents, and they rated their capabilities increase the impact of HR and generate
as consistently higher. stronger business performance.

Equally distressing, the strongest misalign-


ment was in the area of HR staff capabilities,
HR communication, works councils and
union management, and HR processes. (See
Exhibit 5.) HR and non-HR respondents Note
agreed on the level of capabilities in the sub- 1. Urgency is determined by calculating the difference
between future importance and current capabilities,
topics employer branding, generation man- and then multiplying that difference by future
agement, and assignment management. importance.

8 | Creating People Advantage 2014-2015


Exhibit 4 | HR Respondents Rate Their Capabilities Higher Than Non-HR Respondents Do

HR respondents1
Performance management HR and people strategy
HR communication Leadership
High Behavior and culture
Training and
learning Employee engagement
Talent management
Recruiting processes
Strategic workforce planning
On-boarding
HR processes Employer branding
HR staff capabilities
Rewards and recognition
Recruiting strategy
Other HR and workforce analytics Career models and competencies
Future importance

Labor costs and restructuring HR services and systems


HR organization and governance
Social media

Diversity Generation
management management

Assignment management Need for action:

High
Works councils and HR internationalization
Low union management Medium

High Current capability Low Low

Effort invested:
Non-HR respondents2
HR and people strategy High
Employee engagement
High
Training and learning Behavior and culture Low
Leadership
Performance mgmt. Talent management
On-boarding HR communication
Rewards and recognition
Employer branding Strategic workforce planning
Recruiting processes Career models and competencies
Recruiting strategy Other HR and
workforce analytics
Future importance

HR processes HR staff capabilities


Diversity management

Labor costs and restructuring Social media


HR services and systems Generation management
HR organization and governance Assignment management

HR internationalization
Low Works councils and union management

High Current capability Low

Source: 2014 BCG and WFPMA proprietary Web survey and analysis.
1
The sample size for HR respondents was 2,909.
2
The sample size for non-HR respondents was 331.

The Boston Consulting Group • WFPMA | 9


DECODING 200,000 GLOBAL TALENT PROFILES
Over the past several years, talent management mobility is widespread, with 64 percent of job
has been consistently rated as one of the HR seekers willing to work abroad. The U.S. is the
subtopics in the greatest need of action. favorite work destination, followed by the UK
Companies are scrambling to develop strategies, and Canada. Germany is the fourth most
programs, and measures to recruit, develop, and popular country to work in and the top non-
retain their top talent and keep them motivated English-speaking market in the group.
at the same time—not an easy task.
One of the survey’s more striking findings has to
In Decoding Global Talent: 200,000 Survey do with what people say makes them happy on
­Responses on Global Mobility and Employment the job: increasingly, workers are starting to put
Preferences (BCG report, October 2014), we more emphasis on cultural aspects and less on
explored this issue in depth. We partnered with financial compensation. Out of 26 job elements,
The Network—an association of more than 50 the single most important one for all people
job boards worldwide, with more than 200 globally is appreciation for their work. (See the
million visitors per month on all its websites—to exhibit below for the top ten elements.) Good
conduct an online survey. The survey included 33 relationships at the office—whether with
questions about talent mobility and job prefer- colleagues or superiors—are critically important
ences, 13 of which looked at demographic and come in second and fourth, respectively. A
factors, such as age, work experience, gender, good work-life balance is the third most import-
education, industry, salary, and occupation. The ant job factor. The implications for companies,
result is a unique database that offers strategic economies, and individuals are significant and
insights for developing people strategies. varied; addressing them will be key for future
success.
For example, the report shows worldwide trends
in talent mobility across countries, age groups, The full report is available at
and positions, among other factors. Global www.bcgperspectives.com.

The Cultural Aspects of Work Are More Important to Employees


Than Are the Financial Aspects

"How important 1 Appreciation for your work


are the following
job elements to you?” 2 Good relationships with colleagues

3 Good work-life balance

4 Good relationships with superiors

5 Company’s financial stability

6 Learning and career development

7 Job security

Compensation package 8 Attractive fixed salary


Work environment
9 Interesting job content
Job content and opportunities
Company reputation and image 10 Company values

Source: 2014 BCG/The Network proprietary Web survey and analysis.


Note: Respondents could choose from 26 job elements; this list includes only the top ten.

10 | Creating People Advantage 2014-2015


Exhibit 5 | HR Respondents Report Higher Capabilities Than Non-HR
Respondents Across All Subtopics

Current capabilities

Low High
HR staff capabilities
HR communication
Works councils and union management
HR processes
Recruiting processes
Other HR and workforce analytics
Recruiting strategy
HR organization and governance
HR internationalization
Leadership
Labor costs and restructuring
Performance management
HR services and systems
On-boarding
Training and learning
Talent management
HR and people strategy
Strategic workforce planning
Rewards and recognition
Social media
Employee engagement
Career models and competencies
Behavior and culture
Diversity management
Employer branding
Generation management
Assignment management

Capability ratings by non-HR respondents


Capability ratings by HR respondents

Source: 2014 BCG and WFPMA proprietary Web survey and analysis.
Note: There were 2,909 HR respondents and 331 non-HR respondents.

The Boston Consulting Group • WFPMA | 11


THE LINK BETWEEN
FINANCIAL PERFORMANCE
AND HR CAPABILITIES

A central finding of our survey is the


correlation between HR capabilities and
financial performance. We segregated the top
that are high performers and those that are
low performers. (See Exhibit 7.)

100 and bottom 100 companies according to This was greatest in HR internationalization,
financial performance, as measured by social media, employee engagement, career
average operating margins and average models and competencies, and behavior and
revenue changes during the previous two culture.
years (2012 and 2013), and we included only
companies with at least 50 employees. (See High- and low-performing companies also
Exhibit 6.) have different priorities in terms of future
­importance. HR internationalization, HR and
We found that companies that are stronger in workforce analytics, recruiting strategy, HR
people management have a correspondingly and people strategy, and career models and
higher financial performance. Among high competencies are significantly more import-
per­formers, no HR subtopic is designated as ant in high performers than in low per­
being in urgent need of action. formers.

In contrast, companies with the worst finan- One possible explanation for the superior
cial per­formance show a greater need for ac- HR achievement of high performers is their
tion across virtually all 27 HR subtopics, with strategic allocation of investment. (See Ex­
­seven clearly in the red zone and three more hibit 8.)
at the border.
Our analysis shows a strong relationship be-
This has been a consistent finding in previous tween the levels of effort invested and the fu-
Creating People Advantage reports and in ture importance of the subtopics being ad-
publicly available research. Looking at the dressed. That is, high performers are more
publicly listed companies that made Fortune strategic in the way they allocate their efforts;
magazine’s “Best Companies to Work For” they take a systematic approach to improving
ranking in 2014, and their share prices over capabilities; they are able to accurately distin-
the decade from 2004 to 2013, it is clear that guish high-priority topics from lower priori-
the most successful people companies consis- ties; and they can then direct their resources
tently outperformed the market, by nearly accordingly, potentially improving their finan-
100 percent.1 cial performance.

In our survey data, there was a troubling dif- We found that low performers, by contrast,
ference in capabilities between companies have a more arbitrary relationship between

12 | Creating People Advantage 2014-2015


Exhibit 6 | Companies with Strong Financial Performance Show Greater HR Capabilities

High performers
HR and people strategy
Leadership
High Behavior and culture Employee engagement
Performance management Talent management
Recruiting processes
Recruiting strategy Training and learning
Rewards and recognition
Other HR and workforce analytics
HR processes
HR staff capabilities
On-boarding Strategic workforce planning
HR communication
Future importance

Employer branding Career models


HR services and systems and competencies
Labor costs and restructuring
HR organization and governance
Social media HR internationalization
Generation
management
Diversity management
Assignment
management
Need for action:

Works councils and High


union management
Low Medium
High Current capability Low
Low

Low performers Effort invested:

Leadership HR staff capabilities High


High HR communication
Performance management Behavior and culture
HR and people strategy Low
Training and learning
Employee engagement
On-boarding
Talent management
HR processes
Strategic workforce planning
Recruiting processes Rewards and recognition
Employer branding
Labor costs and restructuring HR organization and governance
Future importance

Recruiting strategy Other HR and workforce analytics


HR services and systems
Diversity management
Social media
Career models
and competencies
Works councils and Generation
union management management

Assignment
management

HR internationalization
Low

High Current capability Low

Source: 2014 BCG and WFPMA proprietary Web survey and analysis.
Note: High performers represent the top 100 companies (with at least 50 employees), which had the highest average revenue change and average
operating margin in 2012 and 2013; low performers represent the bottom 100 companies (with at least 50 employees), which had the lowest
average revenue change and average operating margin in 2012 and 2013.

The Boston Consulting Group • WFPMA | 13


efforts invested and the importance of areas The alignment issue also arises when looking
targeted for improvement. Investments tend at the urgency of specific HR subtopics.
to be misaligned; the most important issues Again, top performers are more strategic in
don’t necessarily win the greatest investment. the way they invest their efforts, focusing on
the subtopics that they deem to be most ur-
gently in need of action.
Prioritize. Great HR functions
For example, consider Pirelli, a leading tire
identify the most important and
manufacturer, which systematically prioritiz-
most urgent HR topics—both es its HR processes to allocate investment ac-
internal and external—for a compa- cording to urgency. As Christian Vasino, the
ny’s future and then prioritize their company’s chief human resources officer, ex-
efforts accordingly. This allows them plains, “We conduct an annual internal sur-
vey to map the perceived sense of priority
to get the biggest payoff for their
and satisfaction among 12 HR processes. The
allocation of financial investments outcome of the survey was discussed within
and other resources. HR’s top management as a starting point for
developing the people strategy.” Through this
assessment, the company is now able to fo-
This suggests that low performers don’t cus on its most urgent areas, which they de-
have a rigorous process in place for improv- fine as strategic workforce planning, recruit-
ing their people-management practices. ing and on-boarding, training and
Many companies lack a way to clearly iden- development, and employee engagement.
tify the subtopics that are most important to
their organization. They struggle to imple-
ment governance that effectively targets
their resources, and they lack the discipline
to enforce alignment with need over
time—a necessity for the kind of sustain-
Note
able improvements that can ultimately im- 1. Market performance was measured by the S&P 500
pact the bottom line. index.

14 | Creating People Advantage 2014-2015


Exhibit 7 | Companies with Strong Financial Performance Report Higher
Capabilities in Almost All 27 Subtopics

Current capabilities
Low High
HR internationalization
Social media
Employee engagement
Career models and competencies
Behavior and culture
Talent management
HR and people strategy
Employer branding
Rewards and recognition
Other HR and workforce analytics
Generation management
HR communication
Recruiting strategy
HR services and systems
Leadership
Performance management
Strategic workforce planning
Assignment management
Recruiting processes
HR organization and governance
HR staff capabilities
On-boarding
Diversity management
Training and learning
Labor costs and restructuring
HR processes
Works councils and union management

Capability ratings among low performers


Capability ratings among high performers

Source: 2014 BCG and WFPMA proprietary Web survey and analysis.
Note: High performers represent the top 100 companies (with at least 50 employees), which had the highest average
revenue change and average operating margin in 2012 and 2013; low performers represent the bottom 100 companies (with
at least 50 employees), which had the lowest average revenue change and average operating margin in 2012 and 2013.

The Boston Consulting Group • WFPMA | 15


Exhibit 8 | High Performers Align HR Investments...

... with the most important subtopics

High performers HR and people strategy

High Employee engagement Leadership


Behavior and culture Performance management
Talent management Recruiting processes
Rewards and recognition Training and learning
Strategic workforce planning HR communication
HR staff capabilities HR processes
Career models and On-boarding
competencies Recruiting strategy
Employer branding Other HR and workforce analytics
HR services and systems
Future importance

Social media Labor costs and restructuring


HR organization and governance

Generation management HR internationalization


Assignment Diversity management
management
ouncils and union management

Works councils and union management

Correlation = 0.92
Low
75 percent of
subtopics fall
Low performers within each
white corridor1
High Leadership
Performance management HR communication
Behavior and culture
Employee engagement Training and learning
HR staff capabilities HR and people strategy
Talent management HR processes
Rewards and recognition
Recruiting strategy Recruiting processes
Future importance

On-boarding
Employer branding Labor costs and restructuring
Strategic workforce planning
Social media
HR organization and governance
Diversity
Generation management HR services and systems
management
Career models
and competencies Other HR and work- Works councils and
union management
force analytics

Assignment management

HR internationalization Correlation = 0.67


Low
Low High
Effort invested

16 | Creating People Advantage 2014-2015


Exhibit 8 | High Performers Align HR Investments...
Continued

... with the most urgent subtopics

High performers
High HR and people strategy
Leadership
Rewards and recognition
Talent management Other HR and workforce analytics
Strategic workforce planning Behavior and culture
Career models and competencies Training and learning
HR staff capabilities Employee engagement
Performance management
Employer branding Recruiting processes
Urgency2

Social media On-boarding


Recruiting strategy
HR internationalization HR processes
Diversity management HR communication
HR services and systems
Generation management
Labor costs and restructuring
Assignment management
HR organization and governance
Works councils and
union management

Correlation = 0.70
Low
75 percent of
subtopics fall
Low performers within each
white corridor1
High Leadership
HR and people strategy
Talent management Behavior and culture
HR communication
Employee engagement
Strategic workforce planning
HR staff capabilities
Social media Performance management
Training and learning
Urgency2

Generation Labor costs and restructuring


management On-boarding
Career models Recruiting processes
and competencies HR organization and governance
Employer branding HR services and systems
Rewards and recognition Recruiting strategy HR processes
Diversity management
Other HR and workforce analytics
Assignment management

HR internationalization
Works councils and Correlation = 0.03
Low union management

Low High
Effort invested

Source: 2014 BCG and WFPMA proprietary Web survey and analysis.
Note: High performers represent the top 100 companies (with at least 50 employees), which had the highest average
revenue change and average operating margin in 2012 and 2013; low performers represent the bottom 100 companies (with
at least 50 employees), which had the lowest average revenue change and average operating margin in 2012 and 2013.
1
The white corridors indicate the strength of the relationship between a company’s level of investment and the importance
of any given subtopic: the narrower the corridor, the stronger the relationship.
2
Urgency is determined by calculating the difference between future importance and current capabilities, and then
multiplying that difference by future importance.

The Boston Consulting Group • WFPMA | 17


HR’S BUSINESS IMPACT

A nother key finding is that HR leaders


will have a seat at the table for strategic
discussions only if they can demonstrate the
forecasts) to measure areas such as workforce
productivity and personnel costs, and then
analyze and communicate the results
business impact of HR. That is, they need to throughout the organization, have a greater
be able to quantitatively establish the areas in strategic role in the organization.
which HR supports the organization’s strate-
gic decisions. Our experience has found that Yet our survey data also shows that using
data-driven, analytical HR departments are a data-driven approach is far from univer-
more likely to play a strategic role in their sal. Nearly half of the respondents (44 per-
organizations, and the survey data supports cent) said that if they use KPIs and steering
this. (See Exhibit 9.) tools, they do so only occasionally to track
workforce productivity. An even larger
HR functions that use people-related KPIs proportion (55 percent) said that, at best,
and steering tools (such as simulations and they use them only occasionally for tracking

Exhibit 9 | KPIs and Steering Tools Allow HR to Play a More


Strategic Role

Strong 1 3 0 4 1 11 8 22 8 20 12 16
0 1 2 11 3 15 11 17 10 9 6 7
3 4 9 9 13 29 17 25 20 20 7 11
Strategic role of HR1

Number of companies
2 6 8 17 21 25 22 20 12 8 1 2
2 10 9 15 18 23 17 14 2 5 0 2 ≤4 ≤ 11 ≤ 19 ≥ 20
9 12 11 14 12 16 3 3 3 2 2 0
5 13 10 15 7 12 2 2 1 0 0 0 Average (approximate)
6 10 3 5 5 6 2 0 0 0 0 0
3 5 3 7 3 3 0 0 0 0 0 0
5 6 0 4 0 0 0 1 0 0 0 0
Weak 9 3 1 3 0 0 0 0 1 0 0 0
Low High
Use of HR KPIs and steering tools 2

Source: 2014 BCG and WFPMA proprietary Web survey and analysis.
1
The strategic role was determined by the average score in questions concerning HR’s role in the company; there were 979
respondents to this section.
2
KPIs = key performance indicators; use of KPIs and steering tools was measured by the average score of responses to
survey questions concerning workforce productivity, full-time equivalents, and personnel costs.

18 | Creating People Advantage 2014-2015


personnel costs—a relatively basic output HR leaders have little to contribute to big-­
metric. picture strategic discussions.

An HR organization that does not use metrics Such results reinforce a common stereotype
and analytical techniques simply cannot play of HR: that the function is better at working
a strategic role in its organization. Without a with “softer” aspects of human capital, such
clear, data-driven understanding of how the as training and development, and is less
organization is leveraging its human capital, skilled at applying the economic logic re-
quired for higher-level areas, such as work-
“We are linking various analyses and data force productivity, planning, and forecasting.
to create true insights for a select group of
300 managers, and we regularly discuss the The use of HR KPIs and steering tools is yet
results and define activities and HR another point of differentiation between high
support. For example, we have created and performers and low performers. (See Ex­
back-tested predictors for attrition risks— hibit 10.)
based on engagement scores, turnover,
performance ratings, and other factors— That said, there is still room for improvement
which we frequently discuss with manag- among the high performers. While these com-
ers in areas that show an above-average panies were far more likely to define quanti-
risk of losing talent. The goal is to tailor tative targets and have KPIs in place, there
developmental support to mitigate the was still a noticeable drop-off in the number
risks.” of companies that take the next step—using
—The managing director those KPIs to formulate new HR initiatives.
and global head of compensation and benefits So, the low performers need to become more
at a global Swiss bank data oriented, and both high and low per-
formers need to use that data to take action.

Exhibit 10 | High-Performing Companies Are More Data-Driven

Often
Use of KPIs1

High performers
Low performers
Never
Quantita- KPIs in Actual use HR Programs Programs Quantita- KPIs in Actual use Benchmark-
tive targets place of KPIs to initiatives in place to in place to tive targets place of KPIs to ing overall
defined derive HR tracked in identify address low defined derive HR and by job
initiatives terms of and place perfor- initiatives function
impact high-per- mance against
on formers in industry
workforce key standards
productivity positions and
competitors
Workforce productivity development FTE2 and personnel cost development
Source: 2014 BCG and WFPMA proprietary Web survey and analysis.
Note: High performers represent the top 100 companies (with at least 50 employees), which had the highest average revenue change and average
operating margin in 2012 and 2013; low performers represent the bottom 100 companies (with at least 50 employees), which had the lowest
average revenue change and average operating margin in 2012 and 2013; there were 979 respondents to this section, of which 28 were high
performers and 27 were low performers.
1
KPIs = key performance indicators.
2
FTE = full-time equivalent.

The Boston Consulting Group • WFPMA | 19


Impact. Great HR functions gen- Key performance indicators are crucial in
erate a strong impact on organiza- ­assessing HR impact, yet many companies
tional performance through a solid, struggle to ensure that they’re measuring the
aspects of performance that truly matter.
data-driven approach, which in- For example, many companies look primarily
cludes implementing people-related at the “input” elements of HR, such as head
KPIs. Using tailored metrics and an- count or costs, rather than the “output” ele-
alytical techniques strengthens the ments, such as productivity. They neglect to
role of HR functions and gives them track the effectiveness of their HR spending
to ensure that it supports the company’s stra-
a seat at the table during strategic tegic orientation. (For more on KPIs, see the
discussions. sidebar “How Lufthansa Consolidated Its KPIs
to Measure the Things That Really Matter.”)

HOW LUFTHANSA CONSOLIDATED ITS KPIS TO MEASURE


THE THINGS THAT REALLY MATTER
Deutsche Lufthansa AG operates one of the across the entire company. Therefore,
biggest aircraft fleets in the world and employs ­ ufthansa conducted an audit of all potential
L
more than 115,000 people throughout its KPIs—such as those currently in use by
passenger and air-freight divisions, logistics individual divisions, those required to align
functions, catering operations, maintenance with the company’s overall people strategy
and repair operations, and IT. and financial-reporting requirements, and
those identified as external best practices.
But until recently, the company’s KPIs were The total tally: 461 possible KPIs.
not centrally aligned. Because of decentralized
governance, each business unit and division The process took several steps, but Lufthansa
had its own definitions and data standards, managed to consolidate the list and distill the
and only a small percentage of the several number of KPIs to the 35 most strategically
hundred KPIs used could be applied across relevant, grouping them in four main clusters:
the entire organization. financial HR indicators, workforce overview,
HR and organizational efficiency, and HR
The HR function realized that it needed to core processes. (See the exhibit below.)
align its KPIs in order to assess its impact

Deutsche Lufthansa AG Consolidated Its KPIs, Going from 461 to Just 35

External best Sorted


practices according to:
Individual Financial HR
divisions indicators
Groupwide 461 Granu- Compar- Rele- Workforce
larity ability vance Effort Coverage 35 overview
For financial KPIs KPIs
reporting HR and
organizational
For business efficiency
strategy
HR core
processes

Source: BCG project experience and analysis.

20 | Creating People Advantage 2014-2015


REGIONAL AND INDUSTRY
CONSIDERATIONS

T o highlight the biggest priorities for


companies in various regions and
industries, we looked at all 27 HR subtopics,
growth and, consequently, the growth of Bra-
zilian companies,” says Simone Cristina T.
Salsa Nunes, a corporate strategic people de-
using our urgency metric to determine those velopment manager at Queiroz Galvão, a Bra-
with the greatest need for action. zilian conglomerate with investments in in-
frastructure, energy, food, steel, and
shipbuilding industries.
The Regional View: Leadership
and Talent Management Show Notably, rewards and recognition were
the Greatest Urgency ranked as more urgent in Brazil than in most
Across most countries, the leadership subtop- other markets. This is primarily due to the
ic was ranked by far as the one most urgently country’s current economic situation, with
in need of action, and talent management relatively low productivity growth and in-
was ranked the second most urgent. Beyond creasing salaries. As Brazilian companies lose
those clear-cut results, however, we found competitive ground, they must work harder
considerable differences in the rankings of to motivate their existing employees.
subtopics across countries. (See Exhibit 11.)
The talent management challenge also exists
For example, behavior and culture, as well as for Asian countries. According to Joseph Bata-
employee engagement, were all ranked as ona, a human resources director at Indofood
more urgent in the U.S. than they were in Sukses Makmur, “Indonesia has a talent crisis
most other regions. In that market, growth is at the national level—in almost every sector,
slowly returning and unemployment is eas- including government. The shortage of talent
ing. As a result, the competition for labor— is not being addressed in higher education,
particularly in skilled positions—is becoming whereby graduates are not really ready for
tougher. Increasingly, some companies are the professional world. There is also a short-
finding that they have to manage their em- age of vocational training. Companies really
ployees on a long-term basis. have to invest more in developing people,
even at the entry level.”
In other markets of the Americas, such as
Brazil, the focus is still primarily on talent In many European countries, by contrast, de-
management, given the shortage of candi- mographic challenges, such as those posed by
dates for many positions. “The challenge that an aging labor pool, are compelling companies
we see is a huge lack of qualified profession- to adopt strategic workforce planning, which
als in Brazil, which is restraining Brazil’s was ranked as far more urgent in Germany,

The Boston Consulting Group • WFPMA | 21


Exhibit 11 | Differences in the Urgency Ranking of Selected HR Subtopics by Country

Middle East
Americas Europe and Africa Asia-Pacific

US CA MX BR FI FR DE IT PT SE ES UK TR AE ZA AU CN IN ID JP
Leadership 1 1 1 1 3 1 1 1 1 4 1 1 3 1 3 1 1 1 7 4 Very
Talent management urgent
5 5 2 2 6 5 4 2 2 3 2 7 1 5 5 5 4 4 3
1
Behavior and culture 2 4 3 3 2 2 7 3 3 1 6 2 5 1 2 5 7 5 5
2
HR and people strategy 4 2 8 5 4 3 7 8 2 3 8 3 2 4 3 9 6 1
3
Employee engagement 3 3 7 10 8 7 9 5 10 8 8 8 9 4 10 8 2 2 1 10
4
Strategic workforce planning 6 7 9 8 1 10 2 8 6 5 6 9 3 6 9 2 5
Career models and competencies 10 4 10 6 10 5 3 7 8 4 7 8 9 6
HR communication 9 10 3 8 6 4 9 7 10 8 7
Performance management 8 9 8 9 9 10 2 6 10 10 6 8
Training and learning 8 9 4 7 5 9
Employer branding 4 6 10 7 7 5 4 9 4 10
Social media 6 6 7 6 9 4 2 2 Urgent
Rewards and recognition 5 4 4 10 10 9 6 3 7
Other HR and workforce analytics 7 7 10 3 Other
HR staff capabilities 5 10 6 8 8 >10

Source: 2014 BCG and WFPMA proprietary Web survey and analysis.
Note: Urgency is determined by calculating the difference between future importance and current capabilities, and then multiplying that
difference by future importance; there were 3,507 respondents in this section.

among others, than the global average. (See specific subtopics. While leadership, talent
the sidebar “The Global Workforce Crisis.”) management, and behavior and culture were
ranked as the three most urgent across most
These dramatic shortfalls only underscore the industries, we uncovered several key insights.
importance of subtopics directly related to (See Exhibit 12.)
long-term human capital planning and prepa-
ration, such as strategic workforce planning, In the energy sector, leadership was rated the
diversity, and generation management. Yet most urgent topic. Leaders in the oil industry
most organizations in northern Europe—with are facing significant challenges, such as
the notable exception of German compa- growing demand for environmentally
nies—are not prioritizing those topics. (See sustainable processes, bad publicity from
the sidebar “Transnet Has a Clear View of recent spills and other accidents, and
Future Employment Needs.”) pressure on financial results. Because of these
factors, they have to move from traditional
Countries in southern Europe are facing a (technical) competencies in the sector to
­different set of challenges, namely sluggish more twenty-first-century skills, such as how
growth and high unemployment. In general, to manage uncertainty. Also, in the utilities
the closer a country is to economic crisis, the sector, there are significant uncertainties with
more companies in that country will need to respect to supply, which means that leaders
differentiate among their employees, to en- must navigate among, and negotiate with,
sure that they can keep the most promising multiple stakeholders. Talent management
workers in the event of staff reductions. was the second most urgent topic in the
energy sector, mainly due to the lack of
talent—especially skilled technical workers—
The Industry Comparison: needed to meet the strong demand for new
Energy and Financial Institutions oil and gas projects.
Stand Out
An industry breakdown shows similar differ- Among financial institutions, several differ-
ences among the relative levels of urgency of ences stand out. These companies are slowly

22 | Creating People Advantage 2014-2015


THE GLOBAL WORKFORCE CRISIS
In The Global Workforce Crisis: $10 Trillion at Risk Germany, for example, will likely fall 4 percent
(BCG report, June 2014), BCG examined long-term short of the country’s needs by 2020 and 23
labor issues in 25 of the world’s major economies, percent short by 2030. Brazil is expected to
looking at imbalances in supply and demand over experience a shortfall of 7 percent of its workforce
the next 10 to 20 years. As shown in the exhibit needs by 2020 and 33 percent by 2030. In some of
below, which summarizes the findings for 15 these countries—notably Germany—companies
countries, some countries are likely to experience are already feeling the pinch, struggling to find
tremendous labor shortfalls. The workforce in qualified people to meet workforce demand.

Some Countries Will Face Significant Labor Shortages by 2030


Labor shortage or Labor shortage or
surplus in 2020 (%) surplus in 2030 (%)
Europe France 6 –1
Germany –4 –23
Italy 8 –4
Spain 17 –3
UK 6 –1
Russia –5 –24
Americas Brazil –7 –33
Canada 3 –11
Mexico 6 –8
U.S. 10 4
Asia- China 7 –3
Pacific India 6 1 Shortage
Indonesia 5 0 De facto shortage1
Japan 3 –2
South Korea –6 –26 Surplus

Sources: EIU CountryData database; ILO LABORSTA database; United Nations population database; BCG analysis.
Note: A surplus or shortage is determined by subtracting the labor demand for each time period (2020 and 2030)
from the labor supply. The labor supply is the forecast of the total population (age 15 and over, divided into five-year
age groups) multiplied by the labor-force participation rate (per five-year age group). Labor demand is defined as the
number of people required to be employed to produce a desired amount of gross domestic product (GDP) based on
a given output per person (labor productivity). The demand scenario is based on the assumption of retaining the
average compound annual growth rate (CAGR) of GDP and labor productivity over the past 20 years. Russia’s GDP
CAGR is based on the past 10 years, while its labor-productivity CAGR is based on the trend from 1995 through 2012.
Mexico’s labor productivity CAGR is from 2001 through 2012.
1
A de facto shortage is defined as a surplus of 5 percent or less.

TRANSNET HAS A CLEAR VIEW OF FUTURE EMPLOYMENT


NEEDS
Transnet—the largest logistics company in force risks both in current operations and in fu-
South Africa, with significant operations through- ture stages of the investment program.
out Africa focusing on rail, port, and pipeline op-
erations—launched its market demand strategy Transnet uses a holistic and flexible methodo­
two years ago. Right from the start, Transnet re- logy for strategic workforce planning, structured
alized that it needed to identify and respond pro- along five key steps:
actively to skills requirements to anchor that
strategy. The process was aimed at mitigating •• Skill Clustering. The company developed a
human-capital risk requirements and future em- catalog that groups employees with similar
ployment needs so that the company would have positions and skills. This approach reduced
adequate human-capital capacity to advance its complexity and allows Transnet to rotate
goals and objectives. To mitigate the risk, Trans- employees among job families and groups.
net decided to invest in strategic-workforce-­
planning tools. The goal was to establish a •• Supply Analysis. By linking the company’s
standardized process that could identify work- supply analytics to its enterprise-­resource-

The Boston Consulting Group • WFPMA | 23


TRANSNET HAS A CLEAR VIEW OF FUTURE EMPLOYMENT
NEEDS
Continued

planning system, Transnet is able to ensure individual qualifications and inherent job
consistent and reliable data and to factor in requirements. With this approach, Transnet
metrics such as historical attrition rates and quantified both the capacity and qualifica-
retirement ages. tion risks for both the current situation and
the future outlook.
•• Demand Analysis. This approach includes
models, targets, objectives, and projections •• Human Resource Measures. These efforts help
that incorporate the different requirements HR identify and appropriately manage the
of individual business units along dimen- gaps between available and needed resourc-
sions such as volume, changes in the es through structured response strategies.
company’s asset structure, productivity and
efficiency measures, and specific operational Through this methodology, Transnet has closed
skills. the loop. The company’s HR function can now
identify and even isolate the business units and
•• Gap Analysis. By combining the supply and operational areas that have the most urgent
demand picture with skills clustering, the needs—both currently and projected for the
company gained transparency into its HR future—and focus its efforts accordingly.
situation at a very granular level—down to

resuming growth after the financial crisis. dustries. Given the fact that many
­Accordingly, rewards and recognition were financial-services companies promised to
ranked as more urgent priorities than in oth- change the way they work after the crisis, this
er industries. By contrast, behavior and cul- subtopic should be a bigger priority in the
ture were seen as less urgent than in other in- sector.

Exhibit 12 | Differences in the Urgency Rankings of Selected HR Subtopics by Industry


Technology,
Professional media, and
Consumer Financial Health Industrial business Public telecommu-
goods Energy institutions care goods Insurance services sector nications
Leadership 1 1 1 1 1 3 1 2 1 Very
urgent
Talent management 3 2 2 2 2 1 4 5 3
1
Behavior and culture 4 3 6 4 5 5 2 1 5
2
HR and people strategy 2 4 4 3 3 8 3 4 6
3
Employee engagement 5 3 6 7 6 6 3 4
4
Strategic workforce planning 6 5 8 5 6 9 8 6 2 5
Career models and competencies 10 6 5 10 4 4 9 7 6
HR communication 9 8 7 7
Performance management 8 10 9 8 8
Training and learning 8 9 10 9 9 9
Employer branding 8 10 2 5 8 10
Social media 7 7 Urgent
Rewards and recognition 9 7 10 10
Other HR and workforce analytics 9 10 7 7 10 Other
HR staff capabilities >10

Source: 2014 BCG and WFPMA proprietary Web survey and analysis.
Note: Urgency is determined by calculating the difference between future importance and current capabilities, and then multiplying that
difference by future importance; there were 3,507 respondents in this section.

24 | Creating People Advantage 2014-2015


WHAT SETS GREAT HR
FUNCTIONS APART

B ased on BCG’s experience, and sup-


ported by the survey data, we see that
great HR functions are critical differentiators
focus on. Strong HR departments have
precise and trackable leadership-develop-
ment initiatives in place, along with enter-
that separate high-performing companies prisewide training measures and firm con-
from the rest. Collectively, the three ideas trol over internal mobility. These
below describe best-in-class HR functions. departments shape engagement and lead-
ership behaviors to foster a more vibrant
•• Connect. An HR department needs to con- and productive corporate culture.
nect with internal clients to ensure that its
HR and people strategies are clearly •• Impact. Robust HR departments generate
linked to the overall business strategy. A and report people-based KPIs, which pro-
fundamental component of this is getting vide the data for formulating strategic ac-
the basics right. That is, if HR is to have tions and ultimately impact the business.
credibility as a true strategic partner with This is particularly true for strategic work-
the business, it must first establish strong force planning, which is increasingly im-
processes and develop core capabilities, portant for most companies. People ana-
particularly in the areas of recruiting and lytics—defined as the increased use of
communication. data to generate insights on people man-
agement processes—is now taking off in
•• Prioritize. HR also needs to identify the terms of use and importance. Just as other
most important and most urgent priorities functions of a company increasingly rely
for its organization and then target invest- on sophisticated algorithms in areas such
ments accordingly. As the survey findings as pricing and supply-chain management,
show, talent management, leadership, and HR analytics are becoming an indispens-
employee engagement are the topics that able tool to help HR functions impact the
virtually all HR departments will need to business.

The Boston Consulting Group • WFPMA | 25


APPENDIX I
METHODOLOGY

After the first Creating People Advantage re- The online survey was conducted from March
port in 2007, we have occasionally removed through July of 2014. Using a six-point scale,
or added topics and subtopics for analysis de- respondents rated each subtopic on future
pending on the trends and shifting priorities importance, their companies’ current capabil-
in HR and people management. In this year’s ities with regard to that subtopic, and the lev-
version, we looked at 10 broad topic areas, els of effort invested in the subtopic in terms
broken out into 27 subtopics. (See the exhibit of time, money, and full-time employees over
below.) the past three years. We also calculated a

The Report Subdivides 10 Broader Topics into 27 HR Subtopics

10 broad HR topics 27 HR subtopics


HR strategy, planning, and analytics HR and people strategy
Strategic workforce planning
Other HR and workforce analytics
Recruiting: branding, hiring, and on-boarding Employer branding
Recruiting strategy
Recruiting processes
On-boarding
Training and people development Training and learning
Career models and competencies
Assignment management
Performance management and rewards Performance management
Rewards and recognition
Talent management and leadership Talent management
Leadership
Engagement, behavior, and culture management Employee engagement
Behavior and culture
Diversity and generation management Diversity management
Generation management
HR communication and social media HR communication
Social media
Labor costs and labor management Labor costs and restructuring
Works councils and union management
HR target operating model HR organization and governance
HR processes
HR services and systems
HR staff capabilities
HR internationalization

Source: 2014 BCG and WFPMA proprietary Web survey and analysis.

26 | Creating People Advantage 2014-2015


fourth metric—the urgency of individual sub- (17 percent), the public sector (16 percent),
topics—as follows: future importance minus consumer goods (15 percent), and technology,
current capabilities, multiplied by future im- media, and telecommunications (12 percent).
portance. The remaining industries represented were
health care (7 percent), financial institutions
A total of 3,507 respondents from 101 coun- (6 percent), energy (5 percent), and insurance
tries replied to the survey. The bulk of the re- (4 percent).
spondents (83 percent) were from HR func-
tions, including HR generalists, HR business We identified high and low performers
partners, members of a center of excellence through self-reports of financial performance
(such as recruiting, talent, or diversity), and overall, using operating margins over the
members of a shared-services center (such as ­prior two years (2012 and 2013) as the prima-
payroll or IT). The remaining respondents ry criterion. For companies that had similar
were from non-HR functions. operating margins, we used revenue change
over the same time period as a secondary
The biggest industries represented in the sur- ­criterion. Also, we excluded from these analy-
vey were professional business services ses any companies that had fewer than
(18 percent of respondents), industrial goods 50 employees.

The Boston Consulting Group • WFPMA | 27


APPENDIX II
EXECUTIVE INTERVIEWEES

We thank the following executives for their Finland


valuable contributions in discussing the find- Jackie Cuthbert
ings of this report. (This list includes only Chief Human Resources Officer
those who have agreed to make their names Sanoma
public.)
France
Belgium Ivana Bonnet
Cécile Tandeau de Marsac Human Resources Director
Group General Manager Human Resources Crédit Agricole Corporate & Investment Bank
Solvay
Isabelle Gouyet
Laurent Yvon Director Human Resources
Senior Vice President Human Resources Crédit Immobilier de France
Lhoist
Daniel Lacabane
Brazil Vice President Executive & Talent Development
Roberto Dumani Renault–Nissan Alliance
Executive Vice President for Organizational
Development Jérôme Nanty
Cielo Secretary General
Transdev
Paulo Miri
Vice President for HR, Procurement, Business Philippe Rouxel
Excellence and Communications HR Director Western Europe
Whirlpool Latin America DBApparel

Flávio Morelli Marie-Christine Théron


HR Director Executive Director Human Resources and General
TIM Brasil Affairs
SFR
Simone Cristina T. Salsa Nunes
Corporate Strategic People Development Manager Hans Vanbets
Queiroz Galvão Head of HR Strategy, People Management Policies
& Diversity
BNP Paribas

28 | Creating People Advantage 2014-2015


Germany Christine Roth
Milagros Caiña-Andree Chief Strategy Officer
Member of the Board of Management of BMW, Thenamaris
Human Resources and Labour Relations
BMW Indonesia
Joseph Bataona
Immanuel Hermreck Human Resources Director
Executive Vice President Human Resources Indofood Sukses Makmur
Bertelsmann
Aloysius Budi Santoso
Michael König Chief of Corporate Human Capital Development
Member of the Board of Management of Bayer, Astra International
Labor Director, Human Resources, Technology and
Sustainability Italy
Bayer Luciano Carbone
Chief Corporate Officer
Kathrin Menges SEA
Executive Vice President Human Resources and
Infrastructure Services Andrea Faragalli
Henkel Director of Strategies and Resources
Intesa Sanpaolo – Corporate and Investment
Margret Suckale Banking Division
Member of the Board of Executive Directors of
BASF, Industrial Relations Director Salvatore Poloni
BASF Head of Human Resources and Organisation
Intesa Sanpaolo
Uwe Tigges
Chief Human Resources Officer and Member of the Monica Possa
Management Board Group HR Director
RWE Generali

Thomas Wessel Christian Vasino


Member of the Management Board, Chief Human Chief Human Resource Officer
Resources Officer Pirelli
Evonik Industries
Norway
Greece Mike Turner
Athina Dessypri HR manager
General Manager, Human Resources FMC Technologies, Subsea Eastern Region
Eurobank
Qatar
Vassilis Gavroglou Mohanna Nasser Al Nuaimi
Head of Human Resources Strategy Group Chief Human Resource Officer
National Bank of Greece Ooredoo

John Kollas Russia


Group HR Executive Director Natalya Albrekht
Titan Cement Vice President HR & OD
VimpelCom Russia
Tina Moutzouri
Human Resources Manager Vladimir Averin
Thenamaris HR Director Russia & CIS
Janssen, Pharmaceutical Companies of Johnson
and Johnson

The Boston Consulting Group • WFPMA | 29


Sofia Kadykova Idil Türkmenoğlu
HR Director Russia, Ukraine, Belarus Vice President Human Resources and
Pfizer Sustainability
Boyner
David Souperbiet
Human Resources Vice President Russia & CIS United Arab Emirates
PepsiCo Abdulrahman A. Al-Awar
Director General
Andrey Zhvakin Federal Authority for Government Human
Member of the Management Board and Managing Resources
Director, Organizational Development
Sibur Abdul Aziz Ahmed Saleh Al Sawaleh
Chief Human Resources Officer
Saudi Arabia Etisalat Group
Patrice Couvègnes
Managing Director United States
Banque Saudi Fransi Paulette Alviti
Senior Vice President and Chief Human Resources
South Africa Officer
Ntoti Mosetlhe Foot Locker
Group Human Resources Manager
Debswana Michael O’Hare
Executive Vice President, Global Human Resources
Nonkululeko Sishi Estée Lauder
Group Executive Human Resources
Transnet Jeffrey Hurd
Executive Vice President, Human Resources,
Abram Thebyane Communications, and Administration
Group Executive of Human Resources American International Group
Nedbank Group
Roxanne Lagano
Spain Executive Vice President and Chief Human
Victorino Anguera Gual Resources Officer
HR Leadership, Training, and Development Zeotis
Gas Natural Fenosa
Debra Palermino
Lope De Hoces Iñiguez Executive Vice President, Human Resources
HR Organization & Development Director MassMutual
Grupo Cementos Portland Valderrivas
Hilda Harris Piell
Switzerland Senior Managing Director and Chief Human
Christian Machate Resources Officer
Managing Director, Global Head of Compensation CME Group
& Benefits
Credit Suisse Kim Ryan
Vice President Human Resources
Mark De Smedt Pepperidge Farm
Chief Human Resources Officer
Adecco Group

Turkey
Bade Sipahioğlu
Chief Human Resources Officer
Oger Telecom

30 | Creating People Advantage 2014-2015


APPENDIX III
SUPPORTING ORGANIZATIONS

This report would not have been possible Bulgarian Human Resources and
without the support of the following member Development Association (BHRMDA),
organizations and partners of WFPMA, as Bulgaria
well as other HR organizations marked with
an asterisk (*), which helped with the pre­ Canadian Council of Human Resources
paration, distribution, and collection of the Associations (CCHRA), Canada
online survey.
Círculo Ejecutivo de Recursos Humanos
CERH CHILE, Chile
Asociación De Recursos Humanos de la
Argentina (ADRHA), Argentina Federación Colombiana de Gestión Humana
(ACRIP), Colombia
Armenia HR Association, Armenia *
Asociación Costarricense de Gestores de
Australian Human Resources Institute Recursos Humanos (ACGRH), Costa Rica
(AHRI), Australia
Cyprus Human Resource Management
Österreichisches Produktivitäts- und Association (CyHRMA), Cyprus
Wirtschaftlichkeits-Zentrum (ÖPWZ), Austria
The Association of Human Resource
Bangladesh Society for Human Resource Managers in Denmark (PID), Denmark
Management (BSHRM), Bangladesh
Asociación Dominicana de Administradores
Personnel Managers Club (PM Club), Belgium de Gestión Humana (ADOARH), Dominican
Republic
Asociación Boliviana de Gestión Humana
(ASOBOGH), Bolivia Asociación de Directores de Personal del
Ecuador (ADPE), Ecuador
Institute of Human Resource Management
(iHRM), Botswana Estonian Association for Personnel
Management (PARE), Estonia
Associação Brasileira de Recursos Humanos
(ABRH-Nacional), Brazil Finnish Association for Human Resource
Management (HENRY), Finland

The Boston Consulting Group • WFPMA | 31


Association Nationale des Directeurs des Asociación Mexicana en Dirección de
Ressources Humaines (ANDRH), France Recursos Humanos (AMEDIRH), Mexico

Deutsche Gesellschaft für Personalführung Mongolia HR Association, Mongolia *


e.V. (DGFP), Germany
Namibia Institute for People Management
Greek Personnel Management Association (IPM), Namibia
(SSDP), Greece
Nederlandse Vereniging voor
Asociación de Gerentes de Recursos Personeelsmanagement &
Humanos de Guatemala (AGRH), Guatemala Organisatieontwikkeling (NVP), Netherlands

Hong Kong Institute of Human Resource Human Resources Institute of New Zealand
Management (HKIHRM), Hong Kong (HRINZ), New Zealand

Hungarian Association for Human Resources Asociación de Ejecutivos de Recursos


Management (OHE), Hungary Humanos de Nicaragua (AERHNIC),
Nicaragua
National Institute of Personnel Management
(NIPM), India Chartered Institute of Personnel Management
of Nigeria (CIPMN), Nigeria
Perhimpunan Manajemen Sumberdaya
Manusia (PMSM), Indonesia HR Norge, Norway

Chartered Institute of Personnel and Asociación Nacional de Profesionales de


Development (CIPD), Ireland Recursos Humanos de Panamá (ANREH),
Panama
Israeli Society for Human Resources
Management (ISHRM), Israel * Papua New Guinea Human Resources
Institute (PNGHRI), Papua New Guinea
Associazione Italiana Per La Direzione Del
Personale (AIDP), Italy Asociación Paraguaya de Recursos Humanos
(APARH), Paraguay
Japan Society for Human Resource
Management ( JSHRM), Japan Asociación Peruana de Recursos Humanos
(APERHU), Peru
Institute of Human Resource Management
(IHRM), Kenya People Management Association of the
Philippines (PMAP), Philippines
Latvian Association for Personnel
Management (LAPM), Latvia Polish Human Resources Management
Association (PHRMA), Poland
Macedonian Human Resources Association
(MHRA), Macedonia Associação Portuguesa dos Gestores e
Técnicos dos Recursos Humanos (AGP),
Institute of People Management Malawi Portugal
(IPMM), Malawi
HR Management Club, Romania
Malaysian Institute of Human Resource
Management (MIHRM), Malaysia National Personnel Managers’ Union
(ARMC), Russia
Foundation for Human Resources
Development (FHRD), Malta Arabian Society for Human Resource
Management (ASHRM), Saudi Arabia

32 | Creating People Advantage 2014-2015


L’Association Nationale des Directeurs et Chinese Taipei—Chinese Human Resource
Cadres de la fonction Personnel du Sénégal Management Association (CHRMA), Taiwan
(ANDCPS), Senegal
Personnel Management Association of
Singapore Human Resources Institute (SHRI), Thailand (PMAT), Thailand
Singapore
İnsan Yönetimi Derneği (PERYÖN), Turkey
Slovak Association for Human Resources
Management and Development (ZRRLZ), Human Resource Managers’ Association of
Slovakia Uganda (HRMAU), Uganda

Slovenian Association for Human Resource HRForum, Ukraine *


Management and Industrial Relations
(ZDKDS), Slovenia Chartered Institute of Personnel and
Development (CIPD), United Kingdom
Institute of People Management (IPM), South
Africa Society for Human Resource Management
(SHRM), U.S. and its affiliates: SHRM China
Asociación Española de Dirección y (China), SHRM India (India), and SHRM
Desarrollo de Personas (AEDIPE), Spain MENA (UAE)

Institute of Personnel Management Sri Lanka, Asociación Venezolana de Gestión Humana


Sri Lanka (AVGH), Venezuela

Institute of Personnel Management— Human Resources Association (HRA),


Swaziland, Swaziland Vietnam

Centrum för Personal and Utveckling, Zambia Institute of Human Resources


Sweden Management (ZIHRM), Zambia

HR Swiss - Schweizerische Gesellschaft für Institute of Personnel Management of


Human Resources Management, Switzerland Zimbabwe (IPMZ), Zimbabwe

The Boston Consulting Group • WFPMA | 33


FOR FURTHER READING

The Boston Consulting Group has Decoding Global Talent: Shattering the Glass Ceiling:
published other reports and articles 200,000 Survey Responses on An Analytical Approach
that may be of interest to senior Global Mobility and Employment to Advancing Women into
human-resource executives. Recent Preferences Leadership Roles
examples include those listed here. A report by The Boston Consulting A Focus by The Boston Consulting
Group and The Network, June 2014 Group, August 2012

The Global Workforce Crisis: From Capability to Profitability:


$10 Trillion at Risk Realizing the Value of People
A report by The Boston Consulting Management
Group, June 2014 A Focus by The Boston Consulting
Group and the World Federation of
Conversations with Leaders People Management Associations, July
About Thriving amid Uncertainty: 2012
Leading in a Complex World
An article by The Boston Consulting Four Ways to Stop Worrying
Group, March 2014 About Talent in China
An article by The Boston Consulting
Creating People Advantage 2013: Group, May 2012
Lifting HR Practices to the Next
Level The Making of a Talent Magnet:
A report by The Boston Consulting Lessons from Singapore’s Public
Group and the European Association for Service
People Management, October 2013 A Focus by The Boston Consulting
Group, May 2012
Growing Pains, Lasting
Advantage: Tackling Indonesia’s Is Your Team Stuck? Inject
Talent Challenges Boldness by Unlocking Leaders’
A Focus by The Boston Consulting Emotions
Group, May 2013 An article by The Boston Consulting
Group, April 2012
Leadership in a Two-Speed
Economy: Conversations with Winning Practices of Adaptive
CEOs on Straddling Different Leadership Teams
Worlds A Focus by The Boston Consulting
A report by The Boston Consulting Group, April 2012
Group, December 2012
When Growth Outstrips Talent:
Creating People Advantage 2012: Five Strategies for Emerging
Mastering HR Challenges in a Markets
Two-Speed World An article by The Boston Consulting
A report by The Boston Consulting Group, March 2012
Group and the World Federation of
People Management Associations,
October 2012

34 | Creating People Advantage 2014-2015


NOTE TO THE READER

This publication is part of BCG’s Acknowledgments Egloff, Maxim Fedotov, Alessandra


Creating People Advantage series of We would like to thank the many Ferraro, Gabriele Ferri, José Antonio
reports, which provides companies, executives who shared their Gil, Alberto Guerrini, Tatu Heikkila,
economies, leaders, and individuals thoughts during interviews, as well Jörg Hildebrandt, Adrian Hofer, Jens
with insights on today’s and as the respondents who completed Irion, Chryssos Kavounides, Meg
tomorrow’s people challenges. the online survey. The insights and Kedrowski, Klaus Kessler, Ivan
The next publication in the series expertise of these individuals have Kotov, Daniel López, Manuel Luiz,
will be on leadership and talent. greatly enriched this report. A list of Jussi Mattsson, Stéphanie
interviewees who were willing to be Mingardon, Riccardo Monti,
Additional publications of interest named is provided in Appendix II. Matthias Naumann, Mikko
include The Global Workforce Crisis: We thank Jacqueline Betz, Nico Nieminen, Gözde Yalazi Özbek,
$10 Trillion at Risk (BCG report, Geisel, Katrin Jaskiewicz, Julie Christina Paraskevopoulou, Knut
June 2014), and Decoding Global Keveny, Charlotte Pallua, Cleo Race, Olav Rød, Michael Seeberg,
Talent: 200,000 Survey Responses on Samuel Schlunk, Susanne Schrader, Alexander Schudey, Achim
Global Mobility and Employment Carlos Tielesch, and other BCG Schwetlick, Michael Shanahan, Art
Preferences (BCG report, October colleagues for their research and Uprety, and Jan Dirk Waiboer.
2014), which are available at analysis, as well as Jeff Garigliano
www.bcgperspectives.com. for his help in writing this report. Finally, we thank the members of
the editorial and production team
The authors also thank the who worked on this report:
members of the BCG and WFPMA Katherine Andrews, Gary Callahan,
steering committees for their help Lilith Fondulas, Kim Friedman,
with this project. From BCG: Jens Abby Garland, Sara Strassenreiter,
Baier, Vikram Bhalla, Grant and Ellen Treml.
Freeland, Pappudu Sriram, Peter
Tollman, Dean Tong, and Roselinde
Torres. From WFPMA: Max Becker,
Izy Behar, Patrick Belpaire,
Stephanie Bird, Even Bolstad,
Catherine Carradot, Joe Gerada, Ute
Graf, Soli Johansson, Roberto Luna,
Leena Malin, Kim Staack Nielsen,
Vanda Pecjak, and Svetla Stoeva.

Moreover, we are grateful for the


support we received from various
BCG colleagues in coordinating and
conducting interviews and for their
expert advice: Alfonso Abella,
Alexandre Amoukteh, Vassilis
Antoniades, Monique Baars, Jens
Baier, Julio Bezerra, Massimo
Busetti, Davide Corradi, Emanuele
Costa, Guido Crespi, Christopher
Daniel, Filiep Deforche, Camille

The Boston Consulting Group • WFPMA | 35


For Further Contact Christian Orglmeister Pieter Haen
If you would like to discuss the Partner and Managing Director President
observations and conclusions of BCG Sao Paulo World Federation of People
this report, please contact one of +55 11 3046 3533 Management Associations
the authors listed below: orglmeister.christian@bcg.com Past President
European Association for People
Rainer Strack Eddy Tamboto Management
Senior Partner and Managing Director Senior Partner and Managing Director +31 343 578 140
Central Europe, Middle East and Africa Asia Pacific Leader, People and pieterhaen@duurstedegroep.com
Leader, People and Organization Organization Practice
Practice; BCG Jakarta Horacio Quirós
Global Topic Coleader, HR; +62 21 3006 2888 Past President
Coleader, Creating People Advantage tamboto.eddy@bcg.com World Federation of People
Research Management Associations
BCG Düsseldorf Carsten von der Linden +54 11 4309 7448
+49 2 11 30 11 30 Principal hquiros@grupoclarin.com
strack.rainer@bcg.com BCG Munich
+49 89 231 740 Jorge Jauregui
Jean-Michel Caye vonderlinden.carsten@bcg.com Secretary General and Treasurer
Senior Partner and Managing Director World Federation of People
Global Topic Coleader, Leadership and Sebastian Ullrich Management Associations
Talent; Project Leader +52 1 55 3222 4901
Coleader, Creating People Advantage BCG Düsseldorf jorgeandres.jauregui@gmail.com
Research +49 2 11 30 11 30
BCG Paris ullrich.sebastian@bcg.com
+33 1 40 17 10 10
caye.jean-michel@bcg.com

Thomas Gaissmaier
Partner and Managing Director
BCG New York
+1 646 448 7600
gaissmaier.thomas@bcg.com

36 | Creating People Advantage 2014-2015


© The Boston Consulting Group, Inc., 2014. All rights reserved.

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