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BCG creating people advantage 2012

  1. 1. Creating People Advantage 2012Mastering HR Challenges in a Two-Speed World
  2. 2. The Boston Consulting Group (BCG) is a The World Federation of People Manage-global management consulting firm and the ment Associations (WFPMA) is a global net-world’s leading advisor on business strategy. work of professionals in people manage-We partner with clients from the private, ment. It was founded in 1976 to aid thepublic, and not-for-profit sectors in all regions development and improve the effectivenessto identify their highest-value opportunities, of professional people management all overaddress their most critical challenges, and the world. Its members are predominantlytransform their enterprises. Our customized continental federations, which are made ofapproach combines deep insight into the dy- up of more than 90 national personnel asso-namics of companies and markets with close ciations representing over 600,000 peoplecollaboration at all levels of the client organi- management professionals. For more infor-zation. This ensures that our clients achieve mation, please visit competitive advantage, buildmore capable organizations, and secure last-ing results. Founded in 1963, BCG is a privatecompany with 77 offices in 42 countries. Formore information, please visit
  3. 3. Creating PeopleAdvantage 2012Mastering HR Challenges in a Two-Speed World Rainer Strack Pieter Haen Jean-Michel Caye Horacio Quiros Vikram Bhalla Peter Tollman Carsten von der LindenOctober 2012 | The Boston Consulting Group
  4. 4. Contents 3 Executive Summary 6 The Big Picture: Global Trends in 2012 7 The World’s Top Priorities for 2012 9 Under the Radar, But in Need of Attention 10 The Perception Gap on Critical Capabilities 12 The Case for Integrated Sourcing Management 2 0 Building Up Your Critical Assets: Talent and Leadership Development 20 Building Talent: Six Essential Steps 21 How Do Companies Stack Up? 4 2 Managing People in the World’s Fastest-Growing Economies 24 Falling Short in Key HR Capabilities 25 Wanted: Strong Managerial, Leadership, and Technical Skills 25 Employee Development and Retention Strategies 8 Enabling Workforce Flexibility in 2 a Two-Speed World 29 Understanding Surpluses and Shortages 31 Coping with Contradiction: Managing the People Side of Transformation 4 3 HR Governance: Global or Local? 35 Where Global Governance Counts Most 36 When Maintaining Local Flexibility Matters 7 Appendix I: FOCUS report—From Capability 3 to Profitability 7 4 Appendix II: Methodology 8 4 Appendix III: Executive Interviewees 51 Appendix IV: Supporting Organizations 4 5 Note to the Reader2 | Creating People Advantage 2012
  5. 5. Executive SummaryB usiness leaders throughout the world continue to struggle with the complexities of a two-speed world: they face economiccrisis in Europe and weak growth in the developed economies while alsofacing rapid growth in the developing world. Volatility and uncertaintyhave become the new constant. These realities create difficult people-management challenges that range from keeping up with supply-and-demand fluctuations to ensuring an adequate talent pipeline for thefuture. Aggravating these challenges are the growing talent shortageand rising leadership deficits, which are fueled in part by profounddemographic changes and are expected to worsen significantly in thecoming years. This situation creates a buyer’s market for talentedindividuals.Many companies recognize that today, more than ever, their people havebecome their most critical competitive asset. But they need to sharpen theirefforts, integrate processes for greater impact, and manage globally whileallowing for regional adaptation. That’s a tall order—particularly consid-ering the resource squeeze that has forced many HR organizations to domore with less.This global report, the third conducted by The Boston ConsultingGroup and the World Federation of People Management Associa-tions (WFPMA), examines critical trends in people managementby exploring 22 key HR topics that our Creating People Advan-tage research has explored every year since 2007. (The first jointBCG/WFPMA report was completed in 2008. BCG has also part-nered with the European Association for People Management inthree similar surveys with a European focus.)•• We explore the topics in terms of both their current and future im- portance to companies and how they relate to companies’ existing strengths. We also probe the practices and strategies that highly capable companies have implemented to boost their people-man- agement efforts. The Boston Consulting Group • World Federation Of People Management Associations | 3
  6. 6. •• The online survey polled 4,288 executives from companies throughout numerous industries, 102 countries, and six major regions. We also interviewed 63 executives (both within HR and beyond) from well-known companies all around the world. •• This report presents our findings and analysis of the 22 HR topics that constituted the core of the survey. Also included are short case studies on individual companies. •• In addition, we have inserted in the Appendix of this report our Creating People Advantage prepublication highlighting one of the most significant findings from our research this year: the correla- tion between companies’ capabilities in people management and their economic performance. This year, the critical topics—those considered of the greatest ur- gency—remained the same as in our 2010 global survey. Three topics stand out as the most critical. •• Managing talent ranks at the top of our survey respondents’ critical list. Given the growing scarcity of talent worldwide, this is hardly surprising. •• Improving leadership development, another still-critical topic, was rated second highest in urgency. •• Strategic workforce planning maintained its ranking as a crucially important topic for the future, as companies struggle with forecast- ing long-term scenarios for workforce supply and demand. Each of the report’s six chapters focuses on the people manage- ment topics of highest relevance this year. Drawing on the survey findings and interviews, we offer analysis of the current perfor- mance and challenges, along with strategies and tactics to help leaders set priorities and take action. •• “The Big Picture: Global Trends in 2012” provides a summary of survey results, showing the topics executives consider most important today and in the future—and which ones most need improvement. •• “The Case for Integrated Sourcing Management” emphasizes the importance of a holistic approach to people sourcing, from people planning and employer branding to formulating a recruiting strat- egy and retaining employees. By integrating their sourcing activi- ties, companies can ensure consistency across their messages and achieve important synergies. •• “Building Up Your Critical Assets: Talent and Leadership Develop- ment” discusses the importance of six key—and highly interdepen- dent—steps in developing talent and leadership, from developing a talent strategy to creating a talent magnet culture.4 | Creating People Advantage 2012
  7. 7. •• “Managing People in the World’s Fastest-Growing Economies” de- lineates the specific skill shortages and capability gaps that plague companies operating in high-growth markets.•• “Enabling Workforce Flexibility in a Two-Speed World” highlights a rising challenge facing the majority of companies in our survey: simultaneous workforce shortages in some areas and surpluses elsewhere. The chapter describes useful strategies for deploying talent effectively to reconcile these imbalances.•• “HR Governance: Global or Local?” looks at the three levels of HR governance that companies currently practice across 16 key HR ac- tivities. Moreover, we also discuss what could be the most effective approach in each activity.An additional element rounds out and enhances the content ofthe report.The Focus report From Capability to Profitability: Realizing the Value ofPeople Management compares the practices of high-performing compa-nies against those of lower-performing ones in key areas and in doz-ens of activities, including talent management, leadership develop-ment, and performance management and rewards. The report findsthat companies that demonstrated proficiency in 22 key HR areas ex-perienced revenue growth that was up to 3.5 times higher and profitmargins that were 2.1 times higher than those of less capable compa-nies. Such data may provide important insights as leaders decide howbest to invest their people-management resources. The Boston Consulting Group • World Federation Of People Management Associations | 5
  8. 8. The Big PictureGlobal Trends in 2012 S ince the previous BCG/WFPMA global survey was conducted in 2010, we’ve wit- nessed improvements in capabilities across their people-management skills—a trend that recognizes and affirms the competitive advantage that people increasingly repre- some topics. (A European survey was con- sent. At the same time, several topics re- ducted in 2011.) The shaky global economy tained low ratings in both future importance and chronic business uncertainties appear to and companies’ capabilities—a situation have motivated many companies to sharpen we consider risky. As Exhibit 1 shows, 4,288 Exhibit 1 | Nearly 4,300 Executives in More than 100 Countries Responded to the Survey Finland 102 Number of responses Sample Size: Romania 82 Belarus 3 Fewer than 30 4,288 Estonia 1 Bulgaria 42 30–59 Latvia 28 Ukraine 8 60–99 Hungary 22 Greece 44 Turkey 39 100 or more Slovakia 23 Syria 3 No data collected Poland 10 Egypt 1 Czech Republic 58 Sweden 44 Russia 464 Norway 33 Germany 210 Denmark 8 Netherlands 74 Belgium 54 France 150 United Kingdom 120 Switzerland 55 San Marino 1 Ireland 48 Canada 20 Monaco 1 Kazakhstan 1 Italy 119 Uzbekistan 1 Spain 87 Kyrgyzstan 1 Portugal 108 Tajikistan 1 United States 337 Austria 10 Japan 4 Slovenia 13 South Korea 78 Malta 43 China 77 Mexico 207 Morocco 29 Tunisia 1 Taiwan 339 Belize 1 Croatia 1 Philippines 4 Guatemala 20 Albania 1 India Vietnam 2 Macedonia 17 17 Nicaragua 48 Thailand 20 Panama 29 Senegal 1 Bangladesh 1 Dominican Republic 41 Gambia 1 Afghanistan 1 Malaysia 1 Nigeria 4 Pakistan 1 Indonesia 42 Ecuador 59 Liberia 1 Cyprus 18 United Arab Emirates 37 Qatar 2 Papua New Guinea 11 Colombia 34 Solomon Islands 1 Peru 42 Bahrain 1 Brazil 32 Saudi Arabia 2 Saint Kitts and Nevis 2 Grenada 1 Mauritius 3 Paraguay 6 Uruguay 18 South Sudan 1 Singapore 4 Chile 31 Kenya 4 Fiji 1 Argentina 60 Angola 2 Tanzania 1 Tonga 1 Malawi 22 Australia 224 Botswana 7 Uganda 1 New Zealand 46 Swaziland 4 South Africa 84 Rwanda 8 Zimbabwe 1 Source: 2012 BCG/WFPMA proprietary web survey and analysis. Note: There were 59 respondents who did not specify a country.6 | Creating People Advantage 2012
  9. 9. executives from six major regions and more study looks at how challenges in HR andthan 100 countries responded to our online people management are evolving; we basesurvey this year. our analysis on 22 topics that we have iden- tified as key priorities among our survey re-The respondents, a mix of HR executives spondents. As we have in the past, the latest(88 percent of the total) and non-HR survey asked executives three questions onexecutives (12 percent), represented each HR topic: How capable was their com-companies spanning more than 15 industry pany in that topic today? How important wassectors. The services, public, and industrial the topic currently? And what future impor-goods sectors collectively accounted for tance did they assign the topic? The most35 percent of the responses. We also pressing challenges—those ranked most im-conducted 63 in-depth interviews with a mix portant in the future and in which compa-of HR and non-HR executives from well- nies also showed the lowest current capabil-known companies throughout the globe. ity—appear in the “red zone” in the matrix(For more about the survey methodology, shown in Exhibit 2.see Appendix II; for a list of executiveinterviewees, see Appendix III.) In 2012, three topics fell within the red zone: managing talent, improving leadership develop- ment, and strategic workforce planning.The World’s Top Prioritiesfor 2012 Managing talent continues to top the list ofEach year, through our survey and in-depth critical topics; it remains apparent that com-interviews, the Creating People Advantage panies still perceive their current capabilities Exhibit 2 | The Most Critical Topics Are Managing Talent, Improving Leadership Development, and Strategic Workforce Planning High Managing talent Sample Size: Improving performance management Enhancing Improving leadership 4,288 and rewards employee development engagement Trans- On-boarding forming and retaining HR into new hires a strategic partner Delivering on recruiting Strategic workforce planning Future Improving Medium Strong Mastering employer need need importance branding to act to act HR processes Managing change Managing and cultural flexibility transformation Delivering critical and labor learning programs costs Managing Low Medium work-life balance need need to Managing Actively using to act act corporate Managing social Web 2.0 for HR health responsibility Managing diversity Relevance today and security and inclusion Managing an aging workforce Restructuring the organization Integrating global people Low High Low management and expansion Providing shared services and outsourcing HR High Low Current capability Source: 2012 BCG/WFPMA proprietary web survey and analysis. The Boston Consulting Group • World Federation Of People Management Associations | 7
  10. 10. to be insufficient to cover expected future de- ing programs)—or simply leave it to chance. mands. This is hardly surprising, given the Moreover, companies need to make leader- growing shortage of talent worldwide. ship planning an integral part of their people- planning efforts, rather than simply focus on CEO and senior-executive succession. “If you have the right people, the Strategic workforce planning maintained its business will be able to face any ranking as a crucially important topic for the challenge and provide the right future, as companies struggle with forecast- ing long-term scenarios for workforce supply set of services and solutions for and demand. Predicting future supply and your clients.” demand at a job-family level is challenging enough in healthy economic times; in volatile Senior executive, Asian technology times, the challenge is even greater. Increas- company ingly, strategic workforce planning calls for more robust models that integrate it tightly with other sourcing activities. Improving leadership development, another still-critical topic, was rated the second most Throughout most of the regions represented urgent in terms of current capabilities and in our survey, these three topics were consis- future importance. Top executives increas- tently ranked utmost in relevance, with man- ingly need to place greater emphasis on de- aging talent and improving leadership develop- veloping future leaders, rather than leave ment at the very top of the respondents’ list. the task to HR (and traditional formal train- (See Exhibit 3.) Exhibit 3 | Managing Talent and Improving Leadership Development Ranked High in Many Countries Matrix analysis Americas Europe Middle East Asia-Pacific & Africa United Arab Middle East Asia-Pacific Argentina Americas Germany Romania Kingdom Australia Emirates Portugal & Africa Finland Taiwan Mexico Europe France United United overall overall overall overall Russia States Korea China South South Africa Spain Italy Managing talent 1 1 1 2 1 1 1 1 1 1 1 1 1 1 1 2 3 1 1 3 1 2 Improving leadership 2 2 2 1 2 4 2 4 3 2 6 4 2 2 5 4 1 2 2 2 2 3 development Strategic workforce 3 5 7 3 3 2 5 2 5 14 2 2 7 5 2 1 6 3 3 1 3 1 planning Enhancing employee 4 3 3 4 5 6 6 16 4 15 12 3 3 7 6 7 2 10 4 5 18 15 engagement Managing change and 6 12 13 6 4 3 3 6 2 4 4 9 6 8 7 8 5 6 5 9 4 5 cultural transformation Actively using Web 2.0 7 8 5 5 6 5 8 8 14 8 5 13 10 3 8 5 10 4 6 8 9 8 for HR Transforming HR into a 11 6 15 13 8 15 16 7 6 6 16 6 4 14 4 3 15 5 15 4 5 4 strategic partner Managing work-life 5 16 4 12 10 17 7 5 15 5 14 14 11 16 3 6 9 17 17 13 11 11 balance Improving performance 8 4 14 10 12 7 9 17 9 3 13 5 5 9 12 14 8 9 9 6 12 7 management and rewards Improving employer 17 15 12 17 13 11 4 13 10 7 3 11 8 12 14 11 18 12 13 19 17 13 branding Overall Rank 1 2 3 4 5 Rank 1 2 3 4 5 Source: 2012 BCG/WFPMA proprietary web survey and analysis. Note: Data from countries with more than 75 respondents—and from Argentina and United Arab Emirates. Ranking based on combined values of future importance and current capabilities. Sorting based on number of top 5 rankings per topic across regions and countries.8 | Creating People Advantage 2012
  11. 11. Under the Radar, But in Need a presence on major sites such as Facebookof Attention and LinkedIn, few consider them effective; asRespondents worldwide rated their companies of our 2011 survey (which covered Europe),low in current capabilities in five topics—top- only 19 percent did. We suspect that manyics that they also consider of low current and companies lack a strategy for effectively us-future importance: actively using Web 2.0 for ing Web 2.0 efforts, so they use the tools onlyHR, integrating global people management and minimally. It takes training to learn aboutexpansion, providing shared services and out- the interactive nature and possibilities ofsourcing HR, managing an aging workforce, and these tools, as well as more resources. Andmanaging work-life balance. (See Exhibit 4.) both require greater commitment from sen- ior management.In our view, these perennial “under the ra-dar” topics are underappreciated even Integrating Global People Management andthough they tend to be directly related to Expansion. As more companies expandmegatrends that are of rising importance for globally and shift their focus to the newcompanies and executives. high-growth regions, they face growing skill and talent gaps. Companies must pay moreActively Using Web 2.0 for HR. Overall, HR attention to sourcing talent locally anddepartments have made modest progress redeploying talent from low- to high-growthwith Web 2.0 tools in their efforts to source markets where it’s needed more acutely. Toand retain people. But they can, and should, improve global people management so that itdo much more. Social media and other Web effectively supports global expansion, we see2.0 tools are valuable places for people to two imperatives:discover new career opportunities (bothinternally and externally), learn about •• Clarify HR roles and accountabilities. Com-companies, and exchange information and panies must specify which of these shouldintelligence about which companies are the be handled centrally, handled region-best to work for. ally, or handled locally. (See the chapter “HR Governance: Global or Local?” for aSo why is this topic still registering low on discussion about the various jurisdictionalthe radar? Although many companies have approaches to HR governance.) Exhibit 4 | Several Topics Were Consistently Ranked Lowest Topics with the lowest Topics of lowest future Topics of lowest current current capabilities importance importance Providing shared services 22 Actively using Web 2.0 for HR 22 and outsourcing HR 22 Actively using Web 2.0 for HR Integrating global people Integrating global people Providing shared services 21 management and expansion 21 management and expansion 21 and outsourcing HR Providing shared services Integrating global people 20 and outsourcing HR 20 Actively using Web 2.0 for HR 20 management and expansion 19 Managing an aging workforce 19 Managing an aging workforce 19 Managing an aging workforce Managing diversity and Managing diversity and 18 Managing work-life balance 18 inclusion 18 inclusion # Ranking Source: 2012 BCG/WFPMA proprietary web survey and analysis. The Boston Consulting Group • World Federation Of People Management Associations | 9
  12. 12. •• Identify and prioritize activities that, when take these alarms in earnest and create ac- scaled up globally, can yield high returns. tion plans. Only in Germany does this top- Such activities include people strategy, ic appear among the top five most relevant talent management, performance man- topics as ranked by respondents. In fact, the agement, and leadership development. demographic shift is acute beyond Western economies. In the financial services sector Finally, our findings also indicate the lack of in Japan, for example, the number of work- a global mindset among many HR profession- ers aged 50 or older is projected to grow by als. Our 2010 report found that HR profes- 61 percent through 2020. And even in emerg- sionals generally lacked extensive overseas ing economies such as China, the number of work experience, an international education, manufacturing workers over the age of 50 is and knowledge of international labor laws. expected to double in the next 15 years. Providing Shared Services and Outsourcing Changing demographics pose significant chal- HR. Respondents’ views of these topics have lenges—indeed, risks—for all companies, scarcely changed since our previous global large and small. They compound the already survey in 2010. Many companies, it seems, significant challenges of managing the talent are either avoiding pursuing shared services pipeline. Specifically, companies face capac- or are dissatisfied with the results they deliv- ity risks—the loss of critical knowledge and er. Frequently, executives associate providing skills—as well as productivity risks. And the shared services with cutting personnel costs effects of these risks are further exacerbated and dismissing employees. But that view is by successive waves of layoffs associated with one-sided. Although cost savings are typically cost-cutting moves over the past decade and the major goal of shared services, companies beyond. (For more on this topic, see “Man- also turn to them for other benefits, such as aging Demographic Risk,” a Harvard Busi- improved quality and customer service and ness Review article written by Rainer Strack, the ability to adopt HR best practices more Jens Baier, and Anders Fahlander in February widely. A major benefit of providing shared 2008, and Global Talent Risk—Seven Respons- services is that it creates efficiencies and frees es, a joint report published by the World Eco- HR resources at the local level. In this way, nomic Forum and BCG in 2011.) HR can deal with more-strategic topics, such as strategic workforce planning, managing tal- Managing Work-Life Balance. It’s a well- ent, and improving employer branding. Ade- known fact that the millennial generation quate implementation is the key to realizing places great importance on balancing work the anticipated benefits. and private life. Savvy companies recognize the importance of having a culture that actu- Outsourcing is certainly a more sensitive is- ally promotes this balance—in actions, not sue. If cost pressures are high and the activi- merely in words. Companies that respect work- ties an external provider can assume are non- life balance do more than simply promote essential, then outsourcing is an option worth fair and reasonable work schedules; they also exploring. However, it is crucial to consider make allowances for family priorities and con- the sensitivities of the individual business, to siderations, offering flex time and job-sharing, keep core competencies within the company, maternity and paternity leave, and resources and to be able to control and steer the out- for the “sandwich generation”—those cop- sourcing partner. ing simultaneously with the demands of aging parents and their own growing children. Managing an Aging Workforce. The aging workforce can be regarded as the megatrend of all the megatrends. Many executives are The Perception Gap on aware of the major demographic shifts under Critical Capabilities way; they hear a constant drumbeat about On a number of topics, we discovered impor- the massive exodus of baby boomers from tant differences between how the survey’s the workforce and how this contributes to the HR respondents (88 percent of the total) and talent shortage. But most leaders have yet to non-HR respondents (12 percent) perceived10 | Creating People Advantage 2012
  13. 13. their companies’ HR capabilities. Generally, flict resolution. Furthermore, as people arenon-HR executives were more critical in their increasingly seen as a source of competitiveassessments than were HR executives—a advantage, HR professionals need consultingsomewhat predictable result for those judging skills and business acumen along with capa-others’ work rather than their own. bilities in change management. They need to help shape people strategies that conform toThis year, the topics in which the two groups the company’s business objectives and strat-showed the greatest disparity in perception egy. In addition, business executives want HRwere transforming HR into a strategic part- professionals to be more proactive, and morener, delivering on recruiting, and mastering HR proficient, at supporting them in becomingprocesses. (See Exhibit 5.) The disparities in better people managers—providing help forperception have largely remained constant example with recruiting, promotion decisions,over the surveys in recent years, particularly and low performers.for the topic transforming HR into a strategicpartner. These new requirements, of course, require training. And unfortunately, training has re-There may be several reasons for opinions mained inadequate: last year’s survey foundto deviate so widely on this topic: HR profes- that only 40 percent of respondents trainedsionals believe that their HR expertise is the HR professionals on business issues.most important skill to bring to the strategicpartnership. Business executives have a dif-ferent view: they see traditional HR exper-tise as being less important for HR profes-sionals today than their skills in other areas,such as business planning, analytics, and con- Exhibit 5 | Non-HR and HR Respondents Perceived HR Capabilities Differently, Especially in Three Topics High Managing talent Current capabilities assessed by HR Improving leadership development respondents Enhancing employee engagement Current capabilities Improving performance management and rewards assessed by non-HR Strategic workforce planning respondents Transforming HR into a strategic partner Delivering on recruiting On-boarding and retaining new hires Improving employer branding Ranking in Managing change and cultural transformation overall Managing flexibility and labor costs future Delivering critical learning programs importance Mastering HR processes Managing health and security Managing work-life balance Managing corporate social responsibility Restructuring the organization Managing diversity and inclusion Managing an aging workforce Actively using Web 2.0 for HR Integrating global people management and expansion Providing shared services and outsourcing HR Low Low High Current capabilities Source: 2012 BCG/WFPMA proprietary web survey and analysis. The Boston Consulting Group • World Federation Of People Management Associations | 11
  14. 14. The Case for IntegratedSourcing Management T he demographic data show un- equivocally that companies face major challenges in filling their job pipelines with their current capabilities in strategic workforce planning, improving employer branding, deliver- ing on recruiting, and on-boarding and retain- well-qualified employees. The most desirable ing new hires. We then compared companies candidates aren’t making things any easier: that respondents said had high capabilities top talent today seeks—indeed, demands— in these topics against those that had report- career opportunities, the freedom to work ed low capabilities across a range of specific anywhere, diversity in the workplace, an measures. In Exhibit 6, we highlight our find- inspiring working environment, and generous ings by activity rather than topic—that is, compensation and benefits. on strategic workforce planning, employer branding, recruiting strategy, recruiting proc- Most companies, irrespective of industry, con- ess, on-boarding, and retaining employees. centrate on isolated aspects of this overarch- ing talent challenge. They put effort and in- Strategic Workforce Planning. Our research vestment into new recruiting activities—using shows that strategic workforce planning, along social media, for example—or build programs with improving employer branding, are the to retain their “A” players. What they tend not two topics on which companies need to fo- to do is approach people sourcing in a holistic cus the most. At companies that had lower- way. As a result, crucial synergies are lost. rated capabilities in these topics, executives have not yet adopted the tools and the mind- We advocate that companies take an inte- set needed to manage the workforce for the grated approach to managing people sourcing long term. Leaders at these organizations amid all the complexities of today’s dynamic, tend to react to short-term trends and act on fast-changing environment. Put simply, this an ad hoc basis. But such an approach will approach addresses the entirety of the ac- become increasingly untenable. Unless work- tivities needed to acquire and keep top tal- force planning tools are developed and put ent. (For more on one company’s end-to-end into action now, organizations will have trou- talent-sourcing organization, see the sidebar ble filling critical gaps for professionals, tech- “Thinking Globally, Acting Locally: Samsung nicians, and managers in 2020 and beyond. Group’s Talent Incubator.”) Strategic workforce planning involves model- To understand how companies are approach- ing the labor supply and demand for differ- ing the various processes that comprise sourc- ent job families in order to understand cur- ing, we asked our survey participants to rate rent and future imbalances and to develop12 | Creating People Advantage 2012
  15. 15. strategies for addressing them. Alarmingly, workforce planning, only 32 percent of re-however, strategic workforce planning re- spondents indicated that they have a mid-mains an uncommon practice, used by only term supply-and-demand model in place.a minority of the companies covered by our Fewer than half that number—15 percent—survey. use a long-term model.Just as a sales strategy requires a customer To model supply, a company first assesses itssegmentation, we believe, a people strategy existing internal capacity, then looks at nat-requires a people segmentation. Therefore, ural attrition, retirement, and other trendsthe prerequisite step in strategic workforce (such as potential workforce reductions driv-planning is creating job families. Having clas- en by the economic outlook or companysifications of job families fosters transparen- projections). Supply modeling also entailscy throughout all the units of a company, yet, surveying labor sources—for instance, deter-less than half of survey respondents report- mining how many new MBAs and engineersed that their companies used job families as the education system is producing. Demanda part of efforts in strategic workforce plan- modeling is significantly more complicated,ning. (See Exhibit 7.) The next step is supply- for many reasons. For one thing, it dependsand-demand modeling, which enables a com- on understanding the corporate strategy sev-pany to simulate the labor pool a company eral years out, and from that, extrapolatingexpects to have—as well as the amount that human-capital needs. Among those surveyed,the business environment is expected to re- 37 percent said their companies had a clearquire. Although it’s the central element of view of capacity gaps for each job family. Exhibit 6 | Strategic Workforce Planning and Employer Branding Are Sourcing Activities Requiring Focus Integrated Strategic Employer Recruiting Recruiting sourcing workforce branding strategy process On-boarding Retention management planning A speedy initial Systematic analysis response to Personal Forecasting is The importance of Retention measures Main to understand each interested development difficult, online channels is must be established targeted groups candidates is opportunities challenges especially over specific needs is frequently should be offered to track personal the long term underestimated crucial—and development often lacking often lacking early on 3.3x 2.5x 1.4x 1.6x 2.3x 2.0x ...more likely ... more likely ... more likely to ... faster in moving ... more likely ...more likely to Compared with to implement to conduct regard social media from an unofficial to identify the define career tracks companies with long-term quantitative as a valuable position opening to development for individuals low-rated forecasting and qualitative channel approval needs of new hires development research on target early on capabilities, groups companies with highly rated 2.4x 2.8x 1.3x 1.7x 1.8x 1.8x capabilities ...more likely to ...more likely to have ... more likely to ... faster in moving ... more likely to ...more likely to are...1 provide transparency an established consider the from position assign mentors to implement 360- for capacity gaps process for refining companys web approval to the initial new hires degree feedback per job family the employer brand site an opportunity recruiting action processes Demand-driven The employers Targeted groups Interfaces to the On-boarding begins Clear development people planning is value proposition are mapped with businesses are right after the paths are discussed based on business is defined using job-group needs clearly defined offer is accepted at the interview Best scenarios research on stage targeted groups The talent pool Recruiting Cultural practices Capacity planning strategy includes channels are on-boarding Trainee programs is tailored to skill Communication push and pull tracked (Boot-camp events, span the clusters is targeted to approaches buddy programs, organization specific groups mentoring) Source: 2012 BCG/WFPMA proprietary web survey and analysis. 1 Companies with highly rated capabilities in a topic were those averaging a rating of 4 or 5 on a scale from 1 to 5; companies with low-rated capabilities averaged 1 or 2 on a scale from 1 to 5). The Boston Consulting Group • World Federation Of People Management Associations | 13
  16. 16. Thinking Globally, Acting Locally Samsung Group’s Talent Incubator In the late 1990s, as part of its global begins with a panel consisting of an inter- growth strategy, Samsung Group undertook viewer from Korea and an interviewer from various HR initiatives to strengthen its abroad; the pair assess the appropriateness global leadership. As part of these efforts, it of the candidate’s background and person- established a new unit, the Global Strategy ality. In the second step, a case interview Group (GSG), in 1997. The expectation was is conducted to evaluate the candidate’s that GSG members—high-potential em- general problem-solving capabilities, and ployees recruited from the world’s top MBA a presentation session tests for leadership programs—would provide a fresh global potential, presence, communication skills, perspective and innovative ideas to help and intellectual abilities. enhance the company’s performance. In return, Samsung would offer these employ- New GSG hires receive considerable ees a stimulating career in a dynamic and on-boarding support, beginning with an fast-growing Asian conglomerate. intensive two-week orientation program designed to provide an introduction to At its core, GSG seeks to satisfy two over- Samsung, its key industries, and South Ko- arching goals. First, it assembles a group rean culture. Additional sessions over the of foreign talent that can serve as strategic subsequent six months include a detailed advisors to executives in Samsung’s affili- introduction to the operations of Sam- ates and subsidiaries. Second, it develops sung’s affiliates, training in problem-solving and positions members to assume signifi- and project management, and an overview cant leadership positions upon their transi- of core consulting skills. GSG prefers that tion from GSG, and to, eventually, become its members stay with GSG for at least one leaders in Samsung’s headquarters and year, during which time they participate overseas subsidiaries. in in-house consulting projects and are mentored by senior GSG members and As GSG has grown in size and complexity, GSG alumni. The GSG employees also work considerable attention and effort has fo- with Samsung’s affiliate companies to learn cused on core aspects of the management more about the various businesses. of human capital at the company, including people planning, recruiting, on-boarding, GSG employees are asked to choose be- and retaining employees. Over time, GSG tween one of two career tracks: consulting has emerged as an example of an inte- or industry. Those on the consulting track grated, end-to-end recruiter and developer act as generalists and provide advisory of global talent. services—such as corporate strategy and business development work—to Samsung In order to create a focused and inte- affiliates. After two years with the company, grated human-capital action plan, GSG members can choose either to stay in GSG receives the affiliate companies’ global or to transition to affiliate management. By talent requirements annually, including contrast, those opting for the industry track the skills needed to support the specific work on industry-specific projects—such corporate strategies at each of the compa- as developing marketing strategies for new nies, and it incorporates them into GSG’s products—for the affiliates that they would people planning. ultimately like to transition to when their year at GSG is complete. As an initial step in the recruitment proc- ess, GSG screens candidates for both their In addition to finding strong candidates, global orientation as well as their local Samsung concentrates on retaining its best “fit.” Next, a two-step interview process performers. For example, GSG employees14 | Creating People Advantage 2012
  17. 17. Thinking Globally, Acting Locally transitioning to affiliate companies are and it has been engaged by nearly every sometimes sent as a team—or are sent affiliate company and by all of the busi- to affiliates that already have a number of ness units within Samsung Electronics. GSG alumni. The idea is that the cultural As a leadership program, GSG has seen cohesion and solidarity that these employ- the number of its alumni quadruple over ees forged in GSG will motivate them to the last four years, and they are having a stay together as a leadership team. As one significant impact in domestic and over- GSG member explained, “GSG’s culture is seas business operations. One top execu- like that of business school. When you first tive said of GSG, “Their project work never come to Seoul, you join a diverse group of fails to give me new perspectives.” These people with whom you develop deep bonds new perspectives, have, in turn, added to through work, exploration of a new place, Samsung’s success and continue to further and numerous group activities.” globalize Samsung. GSG has been successful at bringing fresh ideas to Samsung’s many business units,Once supply and demand scenarios based less-capable ones was considerable: compa-on those classifications of job families are nies deemed by respondents to have highin place, companies can begin identifying capabilities in improving employer brandingthe gaps that exist and uncovering poten- were 2.5 times more likely to carry outtial capacity risks by business unit and pos- quantitative and qualitative research onsibly by department, as well. A driver-based target groups than low-capability companies.model enables companies to calculate differ- Proficient companies were also 2.8 timesent scenarios and thus adequately respond more likely than lower-capability counter-to the uncertainty accompanying future pre- parts to have an established process fordictions. Only then can a company begin to refining their employer brands.plan concrete measures to fill gaps and miti-gate specific risks. Among our respondents, A sound employer-branding process consists32 percent institute such actions (such as of five steps. (See Exhibit 8.) The first is con-transfers, vocational retraining, specific re- ducting an employer brand audit. As Janinetention strategies). Stewart, group director of people and culture at News Limited, the Australian media con-The other half of the demand picture, and glomerate, explained, “You want to know:the final step in strategic workforce plan- ‘What is our current brand positioning—andning, is aligning recruitment targets with the current talent market’s perceptions? Arefuture needs and adapting existing recruit- the two aligned? What do candidates experi-ment and market strategy accordingly. Many ence when they engage with us?’” An essen-companies, however, recruit in isolation; an tial audit practice—holding focus groups toaligned approach is used by less than half analyze a company’s brand image as an em-(48 percent) of the companies covered by ployer—was applied by only 27 percent ofour survey. the companies covered by our survey.Employer Branding. Companies that are Next, companies need a clear picture of thesuccessful in people management recognize needs and beliefs of their targeted talentthat they cannot afford to be passive about groups: what they seek in an employer andmanaging their employer brands. Among our in their jobs and careers. This calls for therespondents, the gap between the generally second step, market research on internal asproficient companies and the generally well as external employee groups. Of all the The Boston Consulting Group • World Federation Of People Management Associations | 15
  18. 18. Exhibit 7 | Only a Minority of Companies Used Strategic Workforce Planning A systematic approach to strategic workforce planning 1 Definition of and 2 Implementation 3 Transparency on 4 Measures to 5 Alignment of assignment to of a supply and capacity gaps overcome gaps recruiting targets job families demand model • Job families are • Simulate workforce • Analysis of different • Internal • Define recruiting defined based on supply per skill clus- scenarios for supply optimization: needs required ter (e.g., based on and demand transfers, cross- • Adapt recruiting and Description qualifications attrition, retirement) • Identification of qualification, marketing strategies retention, and other • Relevant employees • Simulate workforce capacity gaps initiatives are assigned to job demand per skill – Overall families cluster (e.g., based – Job family on the strategy, technology changes) » Job families are » Model for supply » Transparency is » Measures to over- » Recruiting targets defined; employees and demand is provided on capacity come gaps within are aligned with selected practices are assigned to them implemented gaps per job family job families are strategic workforce Usage rate of in place planning 15 32 37 32 52 48 63 52 48 68 85 68 Medium term Long term % of companies % of companies not following practice following practice Source: 2012 BCG/WFPMA proprietary web survey and analysis. Note: The pie charts reflect responses to the question, “Which of the following steps are executed in your company to plan workforce needs?” key steps, companies ignored this one the files ranging from untrained to senior profes- most: only 23 percent of respondents per- sionals) for certain entry-level positions via formed such research. different channels (from employee referral programs to career fairs). Our survey revealed that most companies overlook these first two steps in the brand- Increasingly, companies are recognizing the ing process—the key analytical steps. (For power of technology to amplify their re- more on the critical role that analysis plays, cruiting efforts. Our respondents assigned see the sidebar “Analyze First: The Right high future importance to online-recruiting Way to Achieve Your Recruiting Targets.”) channels. All four online channels that we Like the people-sourcing process, the brand- asked them to assess—company websites, ing process also involves an integrated ap- job portals, online advertising, and social proach, so any one step can be truly effec- media pages—were ranked among the sev- tive only when all the steps are carried out. en most important recruiting channels. (See Thus, companies that pour resources into Exhibit 9.) the third step—employer brand position- ing—without having first conducted a base- Recruiting Process. In today’s hypercom- line audit and market research are under- petitive age, the recruiting process itself has mining their existing efforts. to be fast and effective. Companies deemed by respondents to have high capabilities in Recruiting Strategy. Within any integrated delivering on recruiting significantly outper- sourcing-management process, the challenge formed their counterparts with lower-rated for any company is receiving an adequate capabilities at every stage of recruitment. amount of applications from a sufficient They moved 1.6 times faster from the un- number of high-caliber candidates. A recruit- official opening of a position to approving ing strategy should specify the initiatives that that position, and they were 1.7 times quick- target specific labor pools (groups of people er at moving from approval to the first re- with similar educational backgrounds or pro- cruiting action.16 | Creating People Advantage 2012
  19. 19. Exhibit 8 | Companies Overlook Most Steps in Employer Branding Five steps for developing an employer branding strategy 1 Employer 2 Market 3 Employer brand 4 Employer 5 Employer brand brand audit research positioning brand levers organization • Understand current • Develop and • Develop credible • Assess the • Describe processes positioning and conduct a market positioning for the performance of and interfaces with perception of the research program employer brand levers and prioritize other departments Description brand for internal and actions • Estimate FTE and • Derive specific external groups messages for • Define initiatives for marketing budget • Establish a baseline of current marketing • Understand the targeted groups prioritized levers, • Set up a monitoring activities needs and beliefs timelines, and goals system of targeted groups • Identify and prioritize recruiting demands » Analysis of employer » Market research on » Definition of » Adoption of channels » Process for refining brand through focus the needs of targeted targeted groups to target talent the employer brand selected practices group groups groups Usage rate of 27 23 33 31 53 47 73 77 67 69 % of companies % of companies not following practice following practice Source: 2012 BCG/WFPMA proprietary web survey and analysis. Note: The pie charts reflect responses to the question, “Does your company’s employer brand encompass the following aspects?”On-Boarding. From its boot-camp events and ly, companies seem to underestimate thebuddy programs to early assignment of value of cultural and development-relateddefined tasks, the on-boarding stage is crucial on-boarding activities: companies with highlyfor employee retention. Among organizations rated capabilities in on-boarding were 2.3we surveyed, efforts in on-boarding clearly times more likely than those with lower-ratedhad a positive effect on retention. Interesting- capabilities to identify the development Exhibit 9 | In the Future, Four of the Seven Most Important Recruiting Channels Will Be Online Future importance of recruiting channels Employee referral/advocacy marketing Company website Job portals Partnerships (e.g., schools, universities) Top 7 Online advertising Support programs for targeted groups Social media pages On-campus advertising Friends and family Headhunters Job fairs Company-sponsored events Temporary workers Work agencies Online channels Newspaper advertising Other channels Low High Importance Source: 2012 BCG/WFPMA proprietary web survey and analysis. Note: The bar chart reflects responses to the question, “Please rate the future importance of the following recruiting channels.” The Boston Consulting Group • World Federation Of People Management Associations | 17
  20. 20. Analyze First The Right Way to Achieve Your Recruiting Targets Brand awareness is important for recruit- and the public’s view, and forge a strategy ing new employees—but only if it can be that would reach and resonate with its translated into corresponding recruiting targeted groups. performance. High recruiting demands posed a challenge for Deutsche Bahn With these valuable insights in hand, recently. The leading German transporta- Deutsche Bahn was ready to undertake tion and logistics company (and operator the remaining steps in the new process for of one of the worlds’ largest rail networks) employer branding and recruiting. To calculated that it needed approximately develop a credible brand strategy, the 7,000 new full-time employees annually project team defined targeted group across all major employee segments in segments, identified core brand attributes Germany alone over the next years. The and positioning options, and developed a tightening of the labor market was brand vision for each targeted group. Next, perceived as an increasing threat to the the team analyzed the performance of the company’s prospects of attracting the existing recruiting channels to define a quality and numbers of talent it needed to new recruiting strategy including a fulfill its strategy. systematic planning of source and in- take means. Before attempting to find solutions, leaders recognized the importance of Because online channels were identified understanding the needs of potential as the most potent ones for recruiting, the applicants: “You have to deeply under- team focused on building an integrated stand why your target groups in the labor recruiting system online. Finally, the team market see you as a potential employer for built a bona fide employer brand and them—or why not.” Ulrich Weber, member recruiting organization with clearly defined of the management board for Human responsibilities. Strategic aspects of Resources at Deutsche Bahn, told us. recruiting and employer branding were “This knowledge is the essential founda- bundled in the corporate center, interviews tion for creating a winning approach.” and assessment centers were covered by regional units, and standardized tasks To attain a better understanding of these such as the screening of applications were needs, Deutsche Bahn conducted an taken over by a shared service center. external web survey of approximately 5,000 people from across all its targeted The new strategy for employer branding groups; it also conducted 80 in-depth and recruiting has already had a positive focus group interviews. Knowledge of inter- impact: in Universum’s 2012 employer nal—that is, current employees’—percep- brand survey, Deutsche Bahn rose 20 tions was just as important as external spots in the rankings from the previous perceptions. The internal perspective was year’s survey. As Deutsche Bahn’s story captured by a web survey of approximately shows, rigorous analysis is an essential 1,000 recently hired people and another first step in employer branding and recruit- 80 in-depth focus group interviews. This ing. It not only provided valuable insights extensive analysis phase was designed to for strategy-setting but also generated the help Deutsche Bahn capture diverse awareness needed at top management perspectives and then to use the insights levels to advance the entire effort. to define its brand positioning and recruit- ing strategy, assess the gap between the employees’ perception of Deutsche Bahn (broadly and by targeted employee group)18 | Creating People Advantage 2012
  21. 21. needs of new hires early on, and they were Retention efforts powerfully underscore1.8 times more likely to assign mentors to the integrated nature of people sourcing:new hires. without them, all the preceding planning and recruiting steps will be for naught. At SkyRetention. Our results show that in most Italia, executives clearly understand this: keyregions of the world, the lack of retention talent retention is their primary indicator formeasures related to personnel development measuring the effectiveness of their talentis typically the primary reason employees management. “We are a young company,give for leaving. According to our survey, and we realize that outside our walls therecompanies with highly rated capabilities in are many other opportunities availableretention were twice as likely as those with to talent,” said Ilaria Dalla Riva, formerlower-rated capabilities to define career executive vice president of HR, organization,tracks for development. Only about a quarter and facility management at Sky Italia. “Highof the companies surveyed worldwide em- retention rates are our way of measuringployed 360-degree feedback processes when whether we are winning our battle forplanning their workforce needs, yet compa- talent.”nies whose retention capabilities were ratedhighly were 1.8 times more likely than theircounterparts with lower-rated capabilities touse 360-degree feedback processes. The Boston Consulting Group • World Federation Of People Management Associations | 19