Aug 7, 2008

HR - Leaders to be ready to manage diverse workforce

Today, HR is not only grappling with issues of attrition and retention, but also of maintaining a talent pipeline, driving high performance throughout the organisation and experimenting with new compensation practices. Hewitt’s 2007 Top Companies for Leaders research shows that ‘buying’ leaders in the open market will become increasingly risky and difficult. “Building” leaders will be the only way to succeed, says Ajay Soni, Business Leader, Talent and Organisation Consulting, Hewitt Associates, in an interview with The New Manager. Over the years, HR has become strategic to business. Could you throw some light on how HR can change the economics of the business?

Hewitt’s research on Next Generation HR has placed bold bets on areas where HR can deliver most value to business:
Human capital R&D: Next Generation HR will demonstrate a causal relationship between workforce practices and business performance. This will be done through advanced data-mining and the predictive modelling of human capital processes to identify new business insights. In other words, HR would continue its focus on human capital measurement but would shift from ‘post facto’ measures to more ‘predictive’ measures allowing management to make better strategic decisions.
Talent engine: Hewitt’s experience has shown that leading companies recognise that talent management requires a disciplined and rigorous approach in the same way that organisations manage their supply chain for products and services. To drive a continuous supply of talent, HR would not only have to look at new talent acquisition, but also at articulating future critical competencies required by the business, creating mechanisms for the assessment of internal talent on these competencies, development of internal talent, creating workforce planning frameworks and determining market pay levels.
High performance: Next generation HR will be accountable for driving performance at the organisational, team, and individual levels. We believe what’s different about today’s focus on high performance is a growing recognition that many of the traditional approaches — rewards, performance management, and development — have not succeeded in driving improved productivity for many organisations.
Rather than focusing on individual motivators, HR functions will in future begin to look at driving performance as an end-to-end process that begins with goal-setting and alignment, ensures accountability for achieving results, includes thorough and consistent feedback, and ends with differentiated and targeted rewards and developmental opportunities.

Considering that HR has a pivotal role to play now, what are its responsibilities in times of a downturn/recession?

In times of downturn, leading companies begin to focus on leveraging higher performance from their workforces. This is done by better goal alignment and higher levels of stretch in targets and more rigorous performance coaching. We have seen that at such times, leading companies start paying even more attention to retaining and developing their top talent. Hewitt feels that HR technology investments, shared services, and outsourcing accelerate at such times as does a focus on the more cost-effective processes. HR professionals should also help their organisations become more nimble in adapting to change. What they do today will position their organisations to look smart as business conditions improve, or, if they do nothing, they may be playing catch-up with their more agile competitors.

Could you comment on the HR talent in the country? Do we have people with the necessary skills for a developing economy?

The HR function has gained in salience over the past two decades. It’s been a long haul from a mere support function to an indispensable asset for most companies. Given the pace at which business is changing, there is a need for HR to enhance its capabilities. There is a shortage of HR professionals today; the function is witnessing one of the highest attrition rates in the country.
In a survey for which Hewitt interviewed more than 50 CEOs and business leaders in the Asia-Pacific region, it was found that business acumen was a basic requirement expected of an HR professional. In a globalised economy, HR leaders should be prepared to manage a global workforce. Today’s talent can be sourced from across the world. HR leaders need to be proficient at developing and promoting talent from anywhere and creating the infrastructure to build a high-performing global workforce. For HR, this will mean managing new types of relationships and adapting to a diverse population in terms of needs, business requirements, and cultural expectations.

What about compensation patterns in the country?

Organisations in India are using compensation as a strategic lever to attract, retain and motivate talent. An increasing number of organisations are plagued by attrition and retention issues. Currently, organisations are trying to retain talent by keeping a closer eye on market movements. A big part of this involves frequent reviews of employee salaries. A growing number of organisations are now benchmarking salaries against best-in-class companies, leaving behind the traditional approach of benchmarking against best-in-industry organisations.

Is variable pay an accepted concept here?

Variable pay in India is an extremely well-accepted concept in India. The Hewitt Salary Increase Survey 2008 showed that 95 per cent of the participating organisations had variable pay / pay-for-performance as a component of their compensation structure. In fact, our research shows that salary increases are also performance-linked, with the highest performer, on an average, getting an increase that is 50 to 75 per cent higher than that of a performer who is rated, ‘Meets Expectations’.
Are there any innovative practices emerging in the industry?

Some of the best employers are creating organisation structures that enhance ownership and autonomy, making young managers responsible for a high level of decision-making. Leading organisations have a sharp focus on leadership development. This includes developing the top team and a leadership pipeline for the future.

They have high-potential / accelerated development programmes that offer superior development opportunities, cross-functional roles, action learning projects, accelerated vertical movement in addition to higher fixed pay and variable pay. Long-term incentives are emerging as an important retention and motivational tool for the senior and top management levels.
We find that every year, the best employer comes from the industry that is booming during the period. Does this mean that good employers only come from profitable sectors?
The Best Employers show an alignment between their people processes and business goals. The very nature of this alignment leads to engaged employees and a high level of business goal achievement.
Hewitt has seen that the Best Employers beat the rest on total shareholder returns significantly, irrespective of whether the industry is on an upswing or a downturn. The winners of the Hewitt Best Employer Study-2007 were from diverse industries: manufacturing, services, banking, IT, pharma, FMCG and retail.
Some best practices that make a company ‘best employer’ today?

This is the sixth year of the Hewitt Best Employers study in India. These studies have shown that there are clear differences between the human capital management practices followed at The Best vis-a-vis The Rest.
The best organisations have a clear focus on ensuring high-performance cultures and workplaces, supported by strong performance management and a high degree of linkage to career opportunities. For the best employers, performance assessment is an effective tool and senior leaders are not hesitant to use it. It serves the purpose of supporting the business strategy.
The board and leaders of the best are significantly more engaged in and take ownership of talent and leadership issues. They focus on performance and competency assessment as a means to segment future potential and top talent.

Best employers build processes and practices that allow experiential learning opportunities for talent and high-potentials. They also ensure a pay-for-performance culture in their organisations and use variable compensation to motivate employees.
The ‘Best Employers’ understand the employee value preposition/ employer brand. Employees join the organisation for this promise and the organisation strives to give its employees the promised experience through its structure, processes and systems. A laser sharp focus on effective implementation of HR programmes, to be able to deliver on the employer brand.

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