Study: New Work World Requires HR Overhaul

Leadership gap, employee engagement remain top issues for HR’s future

By Dinah Wisenberg Brin March 26, 2015
A new work world shaped by cultural, technological and generational changes, including a shift in the employer-employee balance of power, requires a new human resources playbook, the recent Deloitte 2015 Global Human Capital Trends report said, warning that “HR is not keeping up with the pace of change in business.”

Disappearing barriers between work and “life,” the use of social networking tools like LinkedIn and Glassdoor, and increasing numbers of skilled employees working on a contract basis have helped change the work landscape, according to the report by Josh Bersin and Deloitte Consulting LLP colleagues.

Today’s employees “are more like customers or partners than subordinates,” the report said, noting also that Millennials now comprise nearly half the workforce. “Their expectations differ vastly from those of previous generations. They expect accelerated responsibility and paths to leadership. They seek greater purpose in their work. And they want greater flexibility in how that work is done,” the Deloitte report said.

For HR organizations, this new world “challenges our existing people practices: how we evaluate and manage people and how we engage and develop teams; how we select leaders and how they operate.” This will be a critical year for HR teams, a time for creativity “and a fundamental reimagining of the practices HR leaders have used for years.”

The report cited “a yawning gap between what business leaders want and the capabilities of HR to deliver.”

Looming Leadership Crisis

Deloitte, a consulting firm serving large global companies, conducted surveys and interviews with more than 3,300 business and HR leaders from 106 countries, asking them to assess the importance of specific talent issues for their organizations and their preparedness for addressing them. The team found 10 major talent challenges and “substantial capability gaps” in all the areas. Among other points, the study found that:

  • Companies are struggling to develop leaders at all levels, are investing in new leadership models, and, facing increasing skills gaps, are exploring new approaches to learning and development. While almost 90 percent of respondents call leadership an important or very important issue, the data suggest that employers “have made little or no progress since last year: The capability gap for building great leaders has widened in every region in the world.”

    Business and HR executives give their HR departments barely passing grades, the report said, adding, “At a time when talent is indisputably a CEO-level issue, this should be setting off alarms in every HR organization.”

  • Companies, facing a looming crisis in employee engagement and retention, recognize the need to focus on culture and improve engagement, and are taking a more sophisticated approach to managing the workforce, including contract workers. Engagement and culture rose to become the top issue at companies worldwide. Nearly two-thirds of those surveyed are exploring ways to update or revamp their strategies for measuring, managing and improving employee engagement.

  • Eighty percent of survey respondents described workforce capability as important or very important for the coming year, indicating that skills demand “is driving a trend toward greater use of hourly, contingent and contract workers.” 
“This trend highlights the need to develop better processes, policies, and tools to source, evaluate and reward talent that exists outside of traditional corporate and organizational balance sheets,” said Deloitte.

While the on-demand workforce presents significant challenges, the report said, “The trend itself seems irreversible, driven by the networked nature of work, the multigenerational workforce, a desire for more flexible working conditions and the demands of business.” Researchers estimate 30 percent to 40 percent of U.S. workers now are contingent, and more than half of respondents reported they’ll need more contingent workers in the next three to five years.

The on-demand workforce is a critical part of virtually every large company’s talent pool, Deloitte said, recommending that HR departments consider how they can apply the practices they use for full-time workers to the contingent workforce.

“HR is undergoing an extreme makeover” to better affect business and fuel innovation. Among the changes, HR is integrating third-party data about employees from social media platforms. “Several startups now monitor social networking behavior to try to predict patterns of external job-seeking behavior and retention risk,” the report noted.

Meet Talent Where It Is

While “people analytics” could transform the way HR will work, HR departments appear to be slow in taking advantage of its potential, Deloitte said.

HR expert William Tincup, principal analyst at KeyInterval Research, was intrigued by the survey’s findings about the growing, on-demand workforce. A mix of freelance, offshore, fractional and part-time workers form a “portfolio of talent,” he said, noting that not everyone needs to be a full-time worker. “That is a huge shift,” one that has been occurring over the past 20 years, he observed.

Companies might tell their Baby Boomer leaders that rather than retiring all at once, they could spend a year working two days a week, so the employer can enjoy their advice and counsel and the workers get to pursue their personal interests, Tincup said.

“Shouldn’t we be looking at those models of how we interact with talent?” he said. HR leaders need to “meet talent where it is” and not simply look at employees as full time or part time, Tincup said. “That mentality has got to shift.”

The fact that leadership remains one of the top issues reflects the heightened anxiety that Baby Boomers are going to leave and companies aren’t going to be ready, Tincup said. Ten years ago businesses knew there was a leadership gap, then the 2008 market collapse caused many Boomers to postpone their retirements.

“Have we really done anything with the opportunity? Have we really learned how to grow our own leaders?” he asked. “Have we done succession?”

While companies are focusing on culture and engagement, it’s unclear whether this is just a fad, Tincup said. “Is it just a sign of the times or is it a sign of a new normal?” he asked. Once the economy hits a rocky point, “will we still be talking about culture and engagement? No one knows that.”

The Deloitte survey found the need for HR to “reskill” itself was the fourth most important issue among respondents. HR is going through a transformation and no one really knows where it will shake out, Tincup said.

“Maybe the goal of HR is (to become) very agile, very flexible,” to serve the needs of different companies, Tincup surmised. “Maybe there isn’t one model of HR.”

Deloitte’s Josh Bersin, founder and principal of Bersin by Deloitte, discussed the 2015 Global Human Capital Trends report in a webcast available here.

Dinah Wisenberg Brin, a Philadelphia-based freelance journalist, previously worked as a staff reporter for the Associated Press and Dow Jones Newswires.

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