Professional Documents
Culture Documents
Advantage 2014-2015
HOW TO SET UP GREAT HR FUNCTIONS:
CONNECT, PRIORITIZE, IMPACT
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CHRISTIAN ORGLMEISTER
EDDY TAMBOTO
SEBASTIAN ULLRICH
3 INTRODUCTION
5 KEY HR TOPICS
Survey Methodology
Non-HR Respondents Say That Capabilities Need to Improve
2 6 APPENDIX I: METHODOLOGY
•• 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.
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.
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.
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-
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.
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
Diversity Generation
management management
High
Works councils and HR internationalization
Low union management Medium
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 internationalization
Low Works councils and union management
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.
7 Job security
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
Source: 2014 BCG and WFPMA proprietary Web survey and analysis.
Note: There were 2,909 HR respondents and 331 non-HR respondents.
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
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
Assignment
management
HR internationalization
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.
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
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.
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
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
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
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.
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.
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.
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.
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
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.
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.
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.
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
Source: 2014 BCG and WFPMA proprietary Web survey and analysis.
Turkey
Bade Sipahioğlu
Chief Human Resources Officer
Oger Telecom
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
Hong Kong Institute of Human Resource Human Resources Institute of New Zealand
Management (HKIHRM), Hong Kong (HRINZ), New Zealand
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
Thomas Gaissmaier
Partner and Managing Director
BCG New York
+1 646 448 7600
gaissmaier.thomas@bcg.com
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