Humancapitaltrends 2012


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Humancapitaltrends 2012

  1. 1. Human CapitalTrends 2012Leap ahead
  2. 2. 2It’s fitting that 2012 is a leap year, since a number of converging market trends are driving HR organizations to makesignificant leaps in capabilities and performance. HR faces a critical, dual imperative in 2012 — a focus on enabling both theirorganization’s overall growth agenda and on driving efficiency in the business of HR. This dual focus demands decisive actionas the stakes are greater than ever.Why the sense of urgency? Three reasons.• Businesses are seeing light at the end of the economic tunnel, and CEOs are looking for every advantage they can find todrive growth. Talent is a key enabler of growth, of course, but it can also be a stumbling block if not managed properly.Especially in areas like salesforce effectiveness and building a leadership pipeline.• Transformative technologies such as cloud, mobile, social, and advanced analytics are upending how work gets done,though many organizations are not yet ready to exploit their potential. HR should step in to help build the capabilities touse these tools effectively.• Enterprise risk has moved firmly onto the C-suite agenda. Leaders have come to understand that people risks represent asignificant area of potential exposure.Businesses today are calling on HR to leap ahead and help to manage change in the face of complex challenges that touch somany parts of the enterprise. Understanding the 2012 Human Capital Trends — what they mean for both leading HR and forleading the business — is a great place to start.Barbara AdachiNational Managing DirectorHuman CapitalDeloitte Consulting LLPCo-AuthorDan HelfrichChief Marketing andStrategy Officer, PrincipalHuman CapitalDeloitte Consulting LLPCo-AuthorMichael GretczkoPrincipalHuman CapitalDeloitte Consulting LLPCo-AuthorJeff SchwartzPrincipalHuman CapitalDeloitte Consulting LLPCo-AuthorPrefaceWelcome to Deloitte’s annual report examining important trends in human capital. Each year we begin with a wide rangeof potential topics, then work with clients, vendor teams, academics, analysts, and Deloitte practitioners to refine the list.We select as trends those topics that have the most potential business impact over the next 18 to 24 months. This year’stheme, Leap ahead, examines the broad impacts of eight trends that are reshaping both HR in the business — and thebusiness of HR.As used in this document, “Deloitte” means Deloitte LLP and its subsidiaries. Please see for a detailed description of the legalstructure of Deloitte LLP and its subsidiaries. Certain services may not be available to attest clients under the rules and regulations of public accounting.
  3. 3. Human Capital Trends 2012 Leap ahead 3ContentsIn 2012, growth is job #1 4 Operation globalization 6 Fast-track to the top 10 People risk is risky business 14 Seeing around corners 17 #social #mobile @work 20 Clouds in the forecast 23 Stay in front with an effective sales force 26
  4. 4. 4Growth is the top priority formany CEOs in 2012. To make ithappen, HR is boosting itscapabilities in three key areas.In 2012, growthis job #11Growth is at the top of the CEO agenda for manycompanies, with many organizations today focusing onthree key strategies: emerging markets, mergers andacquisitions (M&A), and innovation. Although thesestrategies can offer significant growth opportunities, theyeach present a wide range of people-related challenges.CEOs expect Human Resources (HR) to play a much moreactive role in enabling these strategies.What’s driving this trend?• Emerging markets represent significant newopportunity. Developing economies are growingmuch faster than mature economies and are becominga primary source for revenue, profits, and talent.Understanding the capabilities, employability, andcultural implications of talent in these markets iscritical to effectively prioritizing growth objectives andleveraging the opportunities they represent.• M&A is often the fastest way to expand a business.But it’s not just a numbers game. These days, moreand more companies are using M&A to obtain specificcapabilities and talent in order to gain a competitiveedge. Sustaining that advantage through thoughtfultalent and organization planning is important to realizingthe expected strategic value of the acquired assets.• Innovation can drive growth, even in a sluggisheconomy. A more holistic approach to innovationcan enable companies to stimulate innovation broadlyacross their workforces and more effectively capture theresulting strategic advantages.Practical implicationsIn many cases, HR is no longer simply supporting the CEO’sgrowth agenda — it is actively informing and helping toshape that agenda.Emerging markets. Developing economies have longbeen viewed as a source of cheap labor. Now, they arealso being tapped for higher-value skills, such as researchand development (R&D), knowledge processing, andadvanced analytics. At the same time, their rapid economicgrowth presents new revenue opportunities by creatinga new class of consumers with money to spend and anunquenched thirst for the latest goods and services.To capitalize on these emerging opportunities, HR needsto help plan, create, and manage a truly global workforce— matching new sources of employable talent with globaldemand that is constantly shifting — and develop a strongpipeline of global leaders. HR also needs to identify andunderstand the labor and workforce challenges associatedwith entering new markets and then establish systemsand capabilities that make the process fast, efficient, andrepeatable.Mergers and acquisitions. M&A can be one of the fastestways to grow revenue and market share. It can also help acompany expand its strategic capabilities. For example, alarge technology company might acquire a smaller firm inorder to fill a gap in its R&D pipeline or product portfolio.Similarly, a company looking to enter an emerging marketmight use an acquisition or joint venture to establish animmediate local presence.
  5. 5. Human Capital Trends 2012 Leap ahead 5In 2012, growth is job #1Traditionally, HR’s role in M&A has focused on issuesrelated to compensation, benefits, payroll, and HumanResource Information Systems. While those issues are stillimportant, they have now become table stakes. HR’s newM&A mandate is to effectively leverage culture, leadership,and talent to increase the return on investment (ROI) onM&A transactions.Creating the preferred culture is one of the keys to fullycapturing the expected value of an M&A deal. Identifying,positioning, and retaining acquired talent are alsoimportant. Handling these challenges effectively is criticalfor strategic deals, where a lack of appreciation for culturaldifferences may drive out the very talent, leadership, andspirit of innovation that inspired the deal in the first place.Thoughtfully integrating and leveraging the acquiredorganization’s culture and talent is often the differencebetween value creation and value erosion.Innovation. Many companies define innovation toonarrowly, placing all of their bets on a specific teamof people and the products they develop. In contrast,today’s innovation leaders are defining innovationbroadly to include services, processes, business models,communication, and cost structure improvements acrossthe enterprise. HR can help by aligning people-relatedfactors, such as leadership, capabilities, processes,technology, and organizational structures, aroundinnovation to foster a more innovative organization andculture.Lessons from the front linesBased on our experience, here are some specific stepsHR can start taking right now to support the CEOgrowth agenda.• Manage talent with growth in mind. Growth andinnovation are heavily dependent on having the righttalent in the right places at the right time. HR needsto understand the critical skills required to execute theCEO’s growth agenda — now and in the future — anddevelop a plan for acquiring, developing, and retainingthe necessary talent in light of forecasted supplyand demand.• Help groom business leaders and managers whocan drive growth and innovation globally. Verifythat performance and compensation systems are inplace to encourage and reward innovative thinking anddevelopment of others. Design assignments and specialprojects to build the skills, experience, and trainingnecessary to support the company’s growth strategies.Identifying and developing the next generation ofleaders across the global organization is essential in thewake of imminent retirements and multiple waves ofdownsizing that have many companies facing a hole intheir leadership pipelines.• Be a “special teams” coach to executive leadership.U.S. football teams have a specialized coach whofocuses exclusively on critical plays such as kickoffs,punts, and field goals — events that often make thedifference between winning and losing. HR leaders canplay a similar role in business, preparing the executiveteam to achieve its goals in emerging markets, M&A,and innovation by counseling them in people-relatedareas, such as leadership, personal development,communications, and organizational influence.• Build and develop an HR team focused on informingand enabling growth. Continually assess the structureand capabilities of the HR team to confirm it aligns withthe company’s growth strategies and that it has thenecessary depth and breadth to execute effectively.Teaming with the CEO to drive growthCEOs are on the hook to deliver business growth,regardless of what the economy is doing. HR can helpby actively supporting the company’s primary growthstrategies. In many cases, that means preparing thebusiness to capitalize on revenue and talent in emergingmarkets; effectively integrating acquired organizationswithout losing or squelching key talent; and fostering aculture of innovation across the enterprise. Businesseswith HR functions that excel in these three areas canbetter position themselves to deliver the kind of growththat investors and shareholders expect.
  6. 6. 6Many companies are shifting toglobally integrated operatingmodels, where the home countryis just one of many markets.Operationglobalization2Many companies around the world are moving to newglobal operating models, driven by the rapid rise ofemerging and developing economies — both as customersand as sources of talent — and by continuing pressure toreduce costs.Historically, companies doing business outside of theirhome country have tended to rely on one of twooperating models. First is a federated model (sometimesknown as an international model) in which the rest ofthe world is subordinate to the company’s home market.Second is an entrepreneurial model (sometimes knownas multidomestic) in which multiple geographies are alltreated as distinct and separate.Looking beyond these two established models, manyleading companies are increasingly shifting toward a thirdmodel, where major business operations (including bothfront- and back-office functions) are globally integrated,with the company’s home market treated as just one ofmany global markets.The move toward a globally integrated operating model islikely to be one of the most significant transformations acompany will ever face. Much of it involves people-relatedissues, such as change, talent, and HR operations — andHR has important roles to play in this transformation. Thequestion is how can HR leaders and their teams prepare tomeet the challenge?What’s driving this trend?• Rise of global customer markets. Different economiesaround the world are growing and recovering atdifferent speeds. Mature markets in North America andEurope face flat or uneven demand, while emergingand developing markets — such as China, India, LatinAmerica, Southeast Asia, and the Middle East — arewidely recognized as the primary engines for futuregrowth. In Brazil, economic growth continues on thestrength of its export economy, but also rising domesticdemand. An estimated 35 million people joined themiddle class between 2003 and 2009, and 20 millionmore are expected to be included by 2014.iIn China, themiddle class is already larger than the entire populationof the United States.ii• Rise of global talent markets. Over the past decade,the talent pool has become increasingly global — andnot just for commodity activities, such as offshoremanufacturing, transactions, and call center operations.Many companies are now using offshore resourcesfor high-value activities, such as R&D, knowledgeprocessing, and advanced analytics. The United Statesused to lead the world in the number of 25- to 34-year-olds with college degrees. Now, it ranks 12th among 36developed nations.iiiAlso, China produces 10 times morenatural sciences graduates than the United States.ivWhilethe quality of science and engineering graduates fromemerging markets may not be as high as those fromdeveloped markets, the overall trend is clear.
  7. 7. Human Capital Trends 2012 Leap ahead 7Operation globalization• Hyperconnectivity. Technology is accelerating the riseof global customer and talent markets by making it easyfor people to communicate and collaborate, whetherthey are in adjacent cubicles or halfway around theworld. In a business environment where everything isconnected to everything else, geographic distances andnational boundaries are almost irrelevant.• Cost pressure. The need to cut costs used to be themain reason for moving work to lower-cost locationsand remains a key driver thanks to a tough economythat has prompted the most significant cost restructuringin decades. However, reducing costs is now just oneof many important reasons for tapping the globaltalent pool.• Regulatory and capital requirements. In the financialservices sector, increased regulation (both nationally andglobally) and higher capital and solvency requirementsare forcing many companies to adjust their globalfootprints and change how they operate.Practical implicationsAs many companies make the leap to global operatingmodels, they are rethinking virtually every aspect of theiroperations, including how work gets done, who doesit, where people are located, and how they should beorganized. This metamorphosis is happening right beforeour eyes — and it is likely to continue, with or withoutHR’s help.The evolving vision for many is a flexible operating modelwhere work can be shifted to whatever global locationmakes the most sense, based not only on the cost of labor,but also the area’s future revenue potential and supply ofskilled talent. Companies are looking for the right balancebetween customer and talent markets. Both are shifting.Many leading HR organizations are playing a number ofimportant roles in this transformation process. In particular,they are ratcheting up their capabilities and involvement inthree areas.Designing global operating models. As we movetoward a future where home countries are less dominant,companies will need HR to help design operating modelsthat are truly global. This will require new organizationalstructures and governance models, including decisionframeworks that specify who, how, and where decisionsare made. It will also require new approaches to rolesand responsibilities — and new business processesthat can harness the full strength of a workforce that isincreasingly boundaryless, collaborative, and virtual. Thismay involve rationalizing or consolidating some businessesand functions. The biggest challenges are anticipated tobe balancing the trade-offs of global scope, scale, andcontrol versus local market responsiveness, innovation, andautonomy. Risk management and regulatory complianceacross national boundaries will also be significantchallenges.Managing global talent. In the future, it’s likely thatsome work activities will continue to be centralized inlow-cost labor markets in order to reduce costs andcapitalize on economies of scale. However, other activitieswill increasingly be done in local markets in order to alignwith emerging sources of revenue and improve productlocalization and customer responsiveness. Companieswill likely need direction and support from HR to developglobal talent strategies that provide the new skills andtalent in new places. They will also need HR to help createa pipeline of leadership that can be quickly redeployed tocapitalize on global opportunities the moment they arise.Also, companies may face challenges in managing a morediverse and complex workforce with vast differences innationality, culture, socioeconomic background, lifestyle,and education — in addition to traditional diversityfactors, such as gender, race, ethnicity, and religion.Leading change — everywhere. For manycompanies, the shift to a globally integrated operatingmodel represents a fundamental change of virtuallyunprecedented scale, complexity, and importance. Leadersand employees tend to have a hard time coping withchange of this magnitude. In fact, many companies inthe past even struggled to implement relatively simpleglobal operating models, such as offshore manufacturingand offshore administration, largely due to changemanagement challenges. HR can help by serving as aleader and change agent, working with senior businessexecutives to prepare for organizational resistance and toplan, organize, and execute a transition to new ways ofmaking decisions and working.
  8. 8. 8Operation globalizationLessons from the front linesA leading beverage company with both local and globalbrands wanted to increase its focus on global brandsand boost growth in emerging markets by leveraging itsexpertise in areas such as supply chain, HR, and finance.To do that, the company moved from an entrepreneurialmodel (based on geography) to a federated model, withstrong integration of key functions across the globalenterprise.A global financial services company had grown by settingup independent business units in various countries. Eachunit was self-sufficient and had all of the resources andfunctions of a stand-alone company, including its ownregulatory compliance group. In the wake of the financialcrisis, the company adopted a federated model to bettermanage risk. Functions such as Risk Management,Compliance, HR, Finance, and Information Technology (IT)became global functions, while sales, marketing, and localcompliance remained in country. Product development wasboth a local and global collaboration.A computer company that manufactures and sellshardware, software, and services had created a footprintof individual country operations designed to serve localcustomers as effectively as possible. However, manyancillary functions, such as IT, finance, and HR were global.In order to maintain its growth trajectory, the companydecided to focus more attention on its biggest and bestcustomers, which were also becoming increasingly global.The company shifted to a globally integrated operatingmodel so that its products, services, and geography wouldnot get in the way of serving global customers.Moving to a global operating model will likely requirestrong support from HR. Here are five actions that HRorganizations can take right now to start getting ready.• Invest in HR leaders with the knowledge, skills, andmotivation for global operations. New operatingmodels are anticipated to require new skill sets.Develop or hire HR leaders with the skills andcompetencies to be business driven and to leadand support business change.• Expand HR’s services. Rethink the services that HRprovides and how those services are delivered. Developnew services and capabilities to support strategicbusiness activities, such as M&A and new-market entry.• Align HR around a global operating model. RedesignHR’s organizational structure to align with and supportbusiness operations that are truly global. Develop newroles, responsibilities, and skill requirements for HR staff.• Ratchet up HR’s change management capabilities.Create a dedicated team with deep knowledge andexperience in managing large-scale change. Keyskills include leader and employee communication,executive coaching, transition planning, and overcomingorganizational resistance.• Harness the power of advanced analytics. Despite theproliferation of HR management and enterprise resourceplanning (ERP) systems and data, many companies stilllack important insights about people-related businessissues. Advanced analytics can help a company manageits global workforce more effectively and focus its effortson business areas with the greatest need. For example,it can help predict talent supply and demand based ona wide range of factors, including leading indicatorssuch as customer demand forecasts and new homeconstruction. It can also help identify critical workforcesegments based on current and future businessrequirements.
  9. 9. Human Capital Trends 2012 Leap ahead 9Operation globalizationTurning the corner on globalizationBusinesses have been “going global” for a long time. Butuntil recently, globalization was managed as a separateactivity, with mature markets on one side of the portfolioand emerging markets on the other. Many internationalcompanies continued to define themselves based largelyon their success in established markets. They servedemerging markets by creating local subsidiaries thatwere separate from their core business back home. Andthey treated global talent as a niche of cheap labor forcommoditized activities, such as offshore manufacturingand transaction processing.That’s all changing. In 2012, forecasts predict that morethan half of the world’s imports will be purchased byemerging markets while mature markets will likely faceuneven recoveries, flat growth, and declining talent pools.Meanwhile, emerging economies are widely recognized asthe primary engine for future growth, profits, and talent.In response, many leading companies are creating trulyglobal business and operating models that no longer treatthe home market as the center of the universe. And theyare increasingly looking to global talent pools for highvalue skills, not just cheap labor costs. This shift to newlevels of globalization is likely to be one of the biggestchanges that organizations will face this decade. For HRleaders, the shift to new global operating models is anopportunity that demands attention and focus — drawingon HR’s particular ability to lead and shape the agendaaround change, talent, and global HR operations.Endnotesi“Growing Middle Class Fuels Brazil’s Economy,” Domm, Patti, April 28, 2011, (February 1, 2012)ii“The Biggest Story of Our Time: The Rise of Chinas Middle Class,” Wang, Helen H., December 21, 2011, Forbesiii“Once a Leader, U.S. Lags in College Degrees,” Lewin, Tamar, July 23, 2010, The New York Times (February 1, 2012)ivOECD Development Centre, Working Paper No. 285, “THE EMERGING MIDDLE CLASS IN DEVELOPING COUNTRIES,” Kharas, Homi, January 2010
  10. 10. 10Developing the next generationof leaders to drive future growthFast-track to the top3The need for a stronger, deeper leadership pipeline isnearly universal. In a recent study by The ConferenceBoard, CEOs in every industry rated leadershipdevelopment as a top three priority.iYet, during theeconomic crisis, many organizations discovered theydidn’t have the depth of leadership necessary to navigatetoday’s challenging business conditions. Moreover, theylacked the data and insights to know which leadershipcandidates were truly worth developing and investing in —particularly when facing sharp budget cuts.The task of identifying and developing high-potentialleaders is nothing new. What’s different now is thatmany organizations are getting much clearer about what“high potential” really means — based on science, notanecdotes — and then investing in an integrated set ofdata-driven activities to accelerate the development oftheir most promising leadership talent.Being ranked in the highest performance category doesnot necessarily make someone a high potential employee.What really distinguishes these special leaders from therest of the pack are their critical leadership attributes andthe value they can provide to drive the company’s growth.High-potential leaders must be able to operate on a globalscale and adapt quickly to change. They also need thedepth and breadth of skills and experience to work acrossconverging industries. For example, high potentials in thetelecommunications world must be able to lead, manage,and innovate across multiple business areas — includingcomputing, entertainment, and social media — as well asmultiple geographic markets.True high potentials are a precious asset that is critical toan organization’s future growth and success. They are thebest of the best — and should be nurtured accordingly.Cultivating the right mix of personal attributes, skills, andexperience requires rapid evolution through a diverserange of leadership opportunities and career paths.Accelerated leadership development is about makingthis happen.What’s driving this trend?Aggressive growth targets in global and convergingmarkets. Rapid expansion into new markets demandsleadership that can handle the unknown. With growth as adominant business driver — and the increasing importanceof differentiation — companies require leaders who canmake change and innovation happen across convergingindustries and diverse cultures.Severe leadership pipeline shortages. High-potentialleaders are scarce — especially executive successioncandidates. Many companies are finding it increasinglyexpensive and risky to source senior leaders externally,particularly for top jobs in global growth markets andcritical product/service segments.Increased scrutiny from boards and investors.Boards, investors, and analysts are taking a closer look atleadership risks across the organization, not just at theCEO level. They are asking tough questions about thenumbers and types of leaders necessary to meet growthcommitments and navigate uncertainty. Also, they aredemanding multiple options for critical positions — andaren’t willing to wait 10 years for an organization to closethe leadership gap.
  11. 11. Human Capital Trends 2012 Leap ahead 11Fast-track to the topRising expectations and declining loyalty of top talent.Companies want more from their leaders — and leaderswant more from their companies. When next-generationleaders believe their companies are underinvesting in theirdevelopment, they will look elsewhere for opportunitiesto grow — often with competitors. They are expected todo more with less yet are not being sufficiently challengedwith the diverse set of experiences that can help themexpand their personal brand and value proposition in theenterprise. As a result, they grow impatient, especially asopportunities start to open up elsewhere.Demand for leadership ROI. Although the C-suiterecognizes the importance of developing the nextgeneration of leaders, it wants to see a tangible return onits development investments. Are the right investmentsbeing made? What are the returns? How do you measurecurrent investments when they are building futurecapabilities? Beefing up the leadership pipeline can drivea company’s growth agenda, reduce succession risk, anddeliver tangible business results.Practical implications for HRAccelerating the development of next-generation leadersrequires an integrated approach. Individual programs thatare not coordinated send mixed messages and often workat cross-purposes — which can slow down developmentand increase retention risk. Top companies are takingseveral steps to accelerate leadership development.Aligning leadership strategy with business strategy.Leading HR organizations are establishing up-to-date,forward-looking leadership strategies and models (i.e.,required capabilities and pipeline) that align with — andanticipate — their companies’ business strategies. This is“true north“ for development efforts and investments, andis specifically tied to the organization’s growth agenda,including target growth markets and product segments.Determining leadership potential using predictive, harddata. Top companies are using processes and tools thatare data driven and unbiased to identify leading indicatorsof talent with accelerated development potential and thenengaging senior executives in the selection process so theyget to know promising talent early in the developmentprocess. The goal is to identify next-generation candidateswith the potential to quickly develop the required depthand breadth of capabilities.Requiring dual ownership of development. Companiesare providing candidates with guidance and simpletemplates but are requiring high potentials to charttheir own path. Many leading companies are engagingthe senior executive team to endorse each candidate’sdevelopment plan and to make specific commitmentsto help top candidates develop faster. This collectiveownership of development and engaging at the very topof the organization help make sure this talent gets thevisibility and support required to develop at the pace thatis required.Balancing the “three Es“. Creating an integrateddevelopment ecosystem that balances experience,exposure, and education. This goes beyond traditional70-20-10iiapproaches by coordinating all three elementsand actively creating development opportunities.• Experience. Moving high potentials throughstretch assignments (such as full-time opportunities,international positions, and special projects).Assignments can be planned in advance, made availablethrough a competitive application process, or somecombination of the two — as long as the career pathsand ground rules are clearly understood. Movementcan be accelerated by putting the right governance inplace so senior executives can make the “tough calls”— clearing the path for next-generation leaders — evenwhen it means moving mediocre performers out of rolesto create space.• Exposure. Next-generation leaders need clearsponsorship from the top. Coaching and mentoring arestill important but aren’t sufficient. This requires easy andfrequent access to existing senior executives who willbe advocates and help open doors to new opportunitiesacross the enterprise. Strong sponsorship is especiallyimportant to establish and develop a diverse leadershippipeline.• Education. Leading companies are creating learningprograms that are experiential, blurring the linesbetween the classroom and the real world. Leader-ledprograms that use simulations and storytelling arepowerful methods to prepare up-and-coming talent tooperate at the next level. They also provide exposureto sponsors and accelerate the formation of personalnetworks within and across silos. Selective use of outside
  12. 12. 12Fast-track to the topexperts can jump-start thinking, share leading practices,and offer fresh perspectives — provided there is a stronglinkage between the experts’ content and the company’sleadership model and business strategy.Avoiding mixed messages. Aligning talent programs(e.g., selection and assessment, development planning,performance and rewards, and succession management)so they accelerate leadership development, rather thanhinder it. Poor alignment among development and talentprograms can slow down leadership development. Forexample, a compensation program that rewards short-term thinking and cutthroat behavior is unlikely to produceleaders who can see ahead and inspire the teamworknecessary to drive growth.Measuring what matters. Leading companies basetheir performance metrics on their leadership models andbusiness strategies — not the other way around.Strategy conditionsCapabilitiespipeline brandFigure 1: Accelerated development model for next-generation leadersExperienceSuccession managementPerformanceandrewardsDevelopmentplanningSelectionandassessmentGovernanceMetricsEducationExposureLessons from the front linesAn integrated approach is only part of the solution foraccelerating the development of next-generation leaders.Leading companies are also paying attention to severalcritical success factors:Work to avoid a leadership backlash. Changing the wayyou select and groom next-generation leaders can sendsevere shock waves through the organization. To avoida backlash, carefully manage reactions and resistanceat every level of leadership, starting at the top. Strongsupport from the CEO and board, combined with carefulmessaging, is critical.Align development activities with leadership strategy.Decide whether you will primarily develop next-generationleaders internally or hire them from the outside. This willhave a major impact on your development strategies,programs, and investments. Note that there is more thanone right answer — as long as “buy” is not an excusefor your company’s inability to “build” its own robustleadership pipeline. Leading companies optimize thebuild-buy mix.Walk the talk. Some organizations try to brandthemselves as ”leadership meccas” without creating theunderlying leadership framework, brand, and holisticdevelopment system to support their claims. This approachis especially likely to backfire with next-generation leaderswho typically become frustrated by the disconnectbetween actions and words.Committing to leadership developmentDeveloping the next-generation of leaders requires astrong commitment from the organization. This includesputting the greater good above the interests of individualbusiness areas — for example, moving promising leadersto other parts of the organization in order to broadentheir base of experience. It also includes enlightenedgovernance by a dedicated group of decision-makers whoare willing to tackle tough decisions — such as choosingthe right people and defining compelling career paths— and then backing those decisions up with adequatefunding and action so they don’t get watered down.
  13. 13. Human Capital Trends 2012 Leap ahead 13Fast-track to the topWhat defines a good leader? In whom should companies invest?“If only we had better leaders, we could _________.” That’s what we hear over and over from the companieswith whom we work. Whether they fill in the blank with “expand into new markets” or “meet increasingregulatory demands” or “transform the company” — or some other pressing issue — they know that improvedleadership is critical to meeting the challenge.But what makes a good leader?While leadership at times may seem to be more art than science, data from Kaisen Consulting Ltdiiireveal six keyattributes that define good leadership. According to Kaisen’s experience, the most effective senior leaders knowhow to consistently do the following:• Drive business competitiveness and innovation• Build key relationships and win people over without using position• Set and effectively communicate vision and direction for people• Achieve results through the performance of others• Develop their people for the longer term• Inspire followership and model a true sense of collaborationAlthough these leadership capabilities can be developed over time, the rate of development varies widely. In fact,the research suggests that people with the greatest potential possess four additional attributes that enable themto develop leadership capabilities faster than others.• Change potential. Driving and responding to change; seeing opportunity in uncertainty• Intellectual potential. Thinking quickly and flexibly• People potential. Adapting to changing and complex interpersonal demands• Motivational potential. Adapting personal drive and focus to perform well in new and changing contextsIn Kaisen’s view, current and future leaders who possess these four key attributes are the true high potentials andshould be the focus of accelerated development efforts. Investing in these types of people can produce greaterROI for your organization.Endnotesi“Go Where There Be Dragons: Leadership Essentials for 2020 and Beyond,” The Conference Board, 2010.iiCenter for Creative Leadership.iiiKaisen Consulting Ltd, a team of business psychologists based in Bristol, United Kingdom, with data and insights from more than15,000leadership assessments.
  14. 14. 14In a world of black swans andgrowing uncertainty, HR’s rolein managing enterprise risk isexpanding.4 People risk isrisky businessBlack swans are low-probability events that havefar-reaching impact. Such events used to be exceedinglyrare, but in today’s hyperconnected world, they areincreasingly common and have enormous destructivepotential. The euro crisis is a textbook example of howincreased connectedness, interdependence, and scale canturn a local problem into a global threat. Other recentexamples include the following:• The 2008 financial crisis that began with subprimemortgages in the United States but eventually triggered aworldwide recession• The Gulf of Mexico oil spill that sent shock wavesthrough global energy markets• The tsunami in Japan that disrupted global supply chainsand caused countries around the world to reconsidertheir use of nuclear power• The Arab spring uprisings that are continuing to reshapethe world’s political landscape• Local flooding in Thailand that caused a worldwideshortage of hard drivesOn the surface, none of these events would be considereda people-related risk. But as organizations dig deeper, itbecomes clear that people are at the core of each majorrisk — if not as part of the problem, then as part of thesolution. To help navigate this increasingly uncertainenvironment, many leading organizations are expandingthe role that HR leaders play in managing risk acrossthe enterprise.HR’s role in risk management used to focus on the tactical,administrative, legal, and regulatory risks that weredirectly under its domain — such as ERISA (EmployeeRetirement Income Security Act) compliance, workplacediscrimination, and sexual harassment — and on makingsure its own systems and processes passed the annualrisk audit. Now, forward-thinking HR organizations arepartnering with the core risk functions — e.g., Risk, Legaland Internal Audit — to better identify, prioritize, andmonitor people-related risks, including black swan eventsthat could threaten the entire business.What’s driving this trend?Black swans are becoming less rare. In a hyperconnectedworld, small trigger events that in the past might havebeen locally isolated now have the potential for globalimpact. Also, the dizzying pace of change increases thenumber and frequency of trigger events, making it hard fororganizations to stay on top of all the risks they are facing.People risks are headline news. Whether it’s amanagement team that cooks the books or a nationwideshortage of math and science talent, the tremendousimpact that people-related risks can have on a companysbottom line, market value, and prospects for future growthis becoming better understood by business leaders.The view of human capital risks is expanding. HRrisk management used to revolve around regulatorycompliance and the avoidance of lawsuits. Now, thefocus is expanding to include the broad range of people-related risks that can undermine a company’s performance
  15. 15. Human Capital Trends 2012 Leap ahead 15People risk is risky businessand prevent a business from executing its strategy. Thegrowing significance of these risks has raised expectationsabout what HR can and should be doing to identify,prioritize, monitor, mitigate, and report on people-relatedbusiness risks.Regulation is increasing. Although regulatory complianceis no longer the sole focus of Risk Management, it remainsan important catalyst for action. In many cases, newregulatory requirements provide the initial impetus forbroader improvement efforts. Also, regulators todayare making examples of companies that fail to comply.The growing complexity of HR regulations and associatedfinancial penalties, as well as the reputational risk fornoncompliance, are raising the stakes and increasingthe degree of difficulty in managing these nonnegotiablerisks.Practical implicationsAs risk rises to the top of the corporate agenda, HRorganizations are adjusting their own priorities accordingly.Taking the lead on managing human capital risks.Responsibility for managing risk ultimately resides with thebusiness and functional leaders, managers, and employeesacross the organization — not with internal monitoringfunctions, such as the Risk Management department, Legaldepartment, internal audit team, or even HR. But given thestrategic importance of people-related risks, many leadingorganizations are looking to HR to help the businessmanage these risks as effectively as possible. This oftenrequires a dedicated team or executive within HR to focuson human capital risks throughout the enterprise and tocoordinate with other risk-focused functions.Changing how HR works with the business. In order toidentify people risks before they become problems, manyleading HR organizations are engaging the business acrossthe entire spectrum of risk-related activities, from strategyand planning to operations and compliance. They aregetting directly involved in the strategic planning processand are collaborating with the business to mitigate riskand measure effectiveness. Chief human resources officers(CHROs) also are joining risk committees and establishingpeople-related risk as a recurring agenda item at executivemanagement and board meetings.Preparing for broad risk discussions. Many leadingCHROs are preparing themselves to speak with authorityabout both strategic people risks and HR functionalrisks. In addition, HR organizations are starting to embedformal risk management and benchmarking into theirorganizations, processes, and strategies to provide abroader, more informed view of people-related risks.CHROs who aren’t doing this may miss the opportunityto contribute with their C-suite peers on theseimportant issues.Collaborating with the Risk Management function.Many leading HR organizations are treating internalrisk audits as an opportunity for useful feedback andimprovement — not as a check-the-box activity. They areproactively engaging with the risk management teamearly in the process, so auditors can understand the detailsof HR systems and processes and provide meaningfulinsights. They are also establishing a collaborativerelationship supported by ongoing dialogue. HR teams andHR executives dedicated to risk issues often have dual-reporting lines to the functional leaders in both HR andrisk management.Creating a risk mind-set for day-to-day HR activities.Leading organizations are making risk management anintegral part of HR’s operating processes. Too often in thepast, the HR processes documented by risk managementwere not the ones that HR actually used, which exposedthe organization to unnecessary risk and complicated therisk management process. Now, HR and risk managementare starting to work together to create a single set ofprocesses that are both practical and risk intelligent.Making the most of existing data. HR has a wealthof data that can help a company manage risk moreeffectively. Many cutting-edge HR organizations are usingadvanced analytics to generate new insights about currentrisks — as well as predictions about the future — so theycan stay ahead of risks, instead of chasing them downfrom behind. For example, employee turnover data arebeing used to raise a red flag about hidden risks, such asincompetent management, fraud, or sexual harassment,thereby enabling business and HR leaders to addressproblems before they spiral out of control.
  16. 16. 16People risk is risky businessUnderstanding the risk impact of HR changes. Everymodification to a business has risk implications, and asignificant change to the HR function is no exception.Although such a change might create important benefitsfor the organization as a whole, it can also createproblems. Whether it’s a new HR process, policy, system,program, or vendor, most leading organizations arerecognizing that changes within the realm of HR candirectly or indirectly affect the risk profile of the entireorganization. When undertaking a large-scale improvementto HR service delivery, for example, the potential riskimpacts need to be evaluated and documented and thenincorporated into the overall risk management process.Recognizing the importance of aligned incentivecompensation programs. Changes to incentivecompensation are especially significant from a riskperspective. Done right, they can reduce risk bycreating stronger alignment between risks and rewards.Done wrong, they can reward and encourage riskierbehavior. New regulations and increased scrutiny areraising awareness of this issue for company boards andcompensation committees, who expect their HR leadersto understand and clearly articulate the link betweenincentive compensation and risk.Helping to transform risk management. As risk exposureand complexities increase, enterprises are starting to makerisk management a core competency by embedding riskmanagement into the very fabric of the organization. Tomanage risk effectively, people need to know what to do,how to do it, and — most important — why they needto do it. This transformation requires close alignmentbetween the risk management program and HR-relatedareas, such as the organization, leadership, performancemanagement, and learning programs.Lessons from the front linesA senior audit director was preparing to audit HR forthe third time when he realized his team did not trulyunderstand the business and functional risks associatedwith HR. Although the team had performed “successful”HR audits in the past, he knew something wasn’t right.Previous audits had mirrored the company’s decentralizedstructure of the company, with individual business unitsand corporate functions each deciding for themselveswhat the key risks were and assigning their own internalaudit teams. This was a valid approach for business unitaudits but created significant gaps and inefficiency for HRaudits. Also, there was a significant learning curve as newpeople rotated into the HR audit team.The company decided to make an investment, bringingtogether the Risk Monitoring function, the HR function,and outside specialists to define and develop an improvedHR audit based on how the company was organized,the HR operating model, the responsibilities of the RiskMonitoring function, and the business risks that were mostcritical for the industry and company. Although the fix wasconceptually simple, it represented a dramatic shift fromthe status quo. Given the complexities of HR operationsand the deep technical knowledge required to evaluateHR risk — combined with the fact that HR risk transcendsorganizational silos — the company created a dedicatedteam responsible for auditing HR risk across the entireenterprise. In addition, HR appointed its own internal teamto focus specifically on assessing, mitigating, monitoring,and reporting on HR risks. Initial results show the auditsare going smoothly and providing company leaders withgreater insight about potential HR risks, while minimizinggaps, redundancies, and friction between HR and internalauditors.HR takes on riskGiven the heightened risks in today’s business world— and increasing recognition of the critical role thatpeople play in avoiding and managing risk — CHROs findthemselves in the risk spotlight as never before. As usual,they are expected to stay on top of risks in traditional HRareas, such as HR operations and regulatory compliance.But now, HR leaders are also expected to be activelyinvolved in addressing all business risks that relate topeople. That’s a big job. But it is also a big opportunity.And in a world where once-in-a-lifetime events now seemto be an almost monthly occurrence, it’s an opportunityHR can’t afford to miss.
  17. 17. Human Capital Trends 2012 Leap ahead 17Advanced tools are turningworkforce data into powerfulinsights that help businessesnavigate uncertainty.Seeing aroundcorners5Many leading companies are using workforce reportingand analytics to help make better, more informed decisionsabout their human capital. By capitalizing on the latestanalytical tools and techniques, they are improvingacquisition, retention, and rewards; reducing labor costs;improving productivity and employee effectiveness; andmanaging risk more effectively.Workforce reporting and analytics traditionally usedhistorical data to improve decision-making and businessperformance. And it still does. But now, advancedanalytical tools and techniques, such as predictivemodeling, are also making it possible for organizations toglimpse into the future and make informed predictionsthat they can then develop into targeted solutions.For example, advanced analytics is helping leadingorganizations retain top talent and mitigate churn byidentifying employees who are potential flight risks.This kind of analysis may include everything from pastand current employee data and performance ratings tomentoring relationships, compensation levels, personalnetworking activity, and even daily commute time.Advanced analytics tools are also helping organizationsbeef up their leadership pipelines by looking deep intotheir workforces to anticipate which employees are mostlikely to reach the top.What’s driving this trend?The need to look ahead. In today’s fast-paced businessenvironment, companies need predictive solutions thatcan help address critical business issues, such as retention,before they become problems.Workforce complexity and cost pressure. As workforcesbecome more global and complex, managementchallenges increase exponentially. Advanced analyticshelp HR and business leaders cut through the complexityto control labor costs and generate more value fromthe workforce.Untapped data. Widespread deployment of ERP andother people-related systems is creating vast amountsof useful workforce data. Yet much of that data remainslocked up in organizational silos. Workforce reportingand analytics can increase the return on a company’stechnology investments by helping to turn mountains ofraw data into nuggets of valuable insight.Cloud reduces barrier to entry. Cloud services can giveHR more control over its own tools. HR can decide for itselfwhat reporting and analytics capabilities it needs and canthen gain quick access to those capabilities with a smallercapital investment and faster time to implement. Also,cloud applications are frequently updated to reflect thelatest business practices, which makes it easier for HR tostay on the cutting edge.
  18. 18. 18Seeing around cornersPractical implicationsMany organizations have been focusing the bulk oftheir reporting and analytical resources on core businessactivities — such as sales, marketing, and financialreporting — and will likely continue to do so. However, aspeople and talent gain recognition as a key differentiator,an organization needs deeper insights about its workforcein order to guide its strategy.Workforce issues, such as managing and retaining talentand controlling labor costs, are some of the top challengesfor organizations today. A company that understandsits workforce needs better than its competitors do cancompete more effectively in the labor market and canunlock more value from its workforce. Organizations thathave invested in workforce analytics supported by the rightprocesses and infrastructure — for example, integratingHR and talent systems; collecting comprehensive andconsistent information across functions; and managingoperational, management, and historical data — canuncover powerful insights.Here are some examples of specific areas where workforcereporting and analytics are having a major impact:• Forward-looking workforce planning. Using modelingto anticipate future talent supply and demand, bothlocally and globally. Identifying critical workforcesegments based on current and future business needs.These improvements touch virtually all aspects of theorganization, including finance and operations.• Managing talent acquisition. Measuring recruitingeffectiveness. Using automated resume screening to notonly guess which candidates are most likely to be hired,but which ones are likely to rise in the organization overthe long term.• Workforce performance. Analyzing and managing topperformers to confirm they are being used as effectivelyas possible. Understanding how performance evaluationsand compensation link to retention. Designing aneffective management structure.• Diversity effectiveness. Identifying diversity issuesbefore they become problems. Measuring the trueeffectiveness of diversity programs.• Talent potential and progression. Assessing thereal-world effectiveness of development programsby mapping them against actual career progression.Developing a healthy leadership pipeline by usingadvanced analytics to identify employees with strongleadership attributes deep within the organization, notjust near the top of the organizational chart.• Proactive retention. Talented people tend to leave fora combination of reasons, not just one. Many forward-thinking companies are retaining top talent by usingmultivariate predictive modeling to help identify keyemployees who may be flight risks and then applyingthe resulting insights to develop individualized retentionstrategies.Lessons from the front linesMany leading companies are starting to combine data andanalytics from a variety of business functions — as well asoutside sources — in order to sharpen their insights. Thisbroader approach is likely to be the future of workforceanalytics.For example, one company is combining CRM (customerrelationship management) data about customer buyingbehavior (what they buy, when they buy, share of wallet,etc.) with HR data in order to improve how its workforce isallocated. It is using the output of this analysis to rethink howit does business and improve efficiency. For example, insteadof having everyone work a standard eight-to-five schedule,employees are assigned different times and work locationsbased on their individual skills and the unique requirementsof the customers they are likely to be serving. The companyis also analyzing whether operating its sales force from ageographical perspective is the most cost-efficient approach.Another company is using external data — such as marketforecasts and new housing starts — to anticipate thefuture availability of local talent.In our experience, there are a number of important issues toconsider when deploying workforce reporting and analytics:• Start small and build momentum. Work in manageablechunks and use data to drive practical decisions. Effectiveefforts typically start with data integration and basicreporting and gradually work their way up to advancedanalytics. Once the organization starts to see value,additional investment will likely be easier to secure.
  19. 19. Human Capital Trends 2012 Leap ahead 19Seeing around corners• Focus on capabilities, not just point solutions. Pointsolutions for workforce reporting and analytics can helpdeliver significant value, but they aren’t the end of thestory. Broad solutions that go beyond technology tendto deliver better, more sustainable results over the longhaul. Desirable capabilities include the skills to designthe analytics, interpret the findings, and translate thefindings to action.• Leverage existing technology investments. Workforcereporting and analytics can be done using the systemsand data you already have — but with better integrationand controlled access. You don’t need to buy newtechnology in order to get started.Data and basicreportingConsolidatedreportingBasic analyticsCross-processand functionalanalyticsPredictiveanalyticsWhat is happening?HRinformationmaturityTransactional Increasing business value StrategicWhy is it happening?What might be happening?Source: Deloitte• Data integrity and quality• Basic employee lists and extracts• Compliance reporting• Process-specific analytics• Single source of data• Integrated analytics• Multiple sources of data• Organization, job, andworkforce predictive analysis• Cause and effectFigure 2: The workforce reporting and analytics journey• Consider cloud to jump-start the effort. A cloudvendor can host your reporting and analyticsinfrastructure and provide analytics support based onleading practices and industry knowledge. This reducesyour costs, lead time, capital expenditures, and internalsupport requirements.• Use what you learn. Reporting and analytics can quicklybecome shelfware if they point toward actions that youdon’t take.Seeing around cornersWorkforce reporting and analytics solutions deliver valuable insights to enable smarter decision-making. They can providepowerful reports that give business and HR leaders the integrated view necessary to effectively manage a complex, globalworkforce. And thanks to advanced predictive modeling, they can provide a glimpse into the future so companies can seearound corners and get ahead of potential workforce opportunities and risks.
  20. 20. 20#social #mobile@work6Change is happening. Again. As social media and mobiledevices quickly become essential parts of our daily lives,they are starting to influence how HR services are deliveredand the direction HR transformation efforts take. Beyondjust being the next new thing, integrating social media andmobile devices with HR service delivery can provide a realopportunity to restore some of the personal touch thatwas lost in previous pushes for improved HR efficiency.Traditionally, HR service delivery has been based onstructured and specialized interactions between theservices HR provides and its customers (e.g., employees,managers, recruits). Typical scenarios might involve anemployee who updates benefit options through an onlinea self-service system or who contacts an HR call centerwith specific questions about benefits.Now, HR has an opportunity to use social media toolsto create communities for sharing knowledge — andto support employees through direct, yet informalcommunication. Additionally, mobile devices can provideconvenient, on-demand access to this knowledge andexperience from almost anywhere in the world. Instead ofcontacting a call center, for example, an employee withbenefits questions could use a smartphone to view andparticipate in a discussion thread where specialists andother community members share their own knowledge,opinions, and questions.The introduction of social and mobile technologies is notonly expanding HR’s service delivery options, it is alsoincreasing HR’s value to the business. Although social andmobile technologies will not entirely replace traditional HRchannels, social and mobile tools are easing the burdenwhile providing customers with a richer experience that ismore engaging — and often more convenient.What’s driving this trend?Social media and mobile devices are effective tools thatcan help improve HR’s service and responsiveness.• Breakthrough technologies. Mobile devices and socialmedia are revolutionizing the way people interact,making it easy to communicate and share knowledgewithout regard to time, geographic location, ororganizational boundaries.• Business acceptance. Mobile devices and social mediahave become standard business tools. According to arecent study, less than 15 percent of business executivesstill view social media in business as a fad.i• Rising expectations. In their personal lives, manypeople have already come to expect the rich, engagingexperiences that mobile devices and social media candeliver. Now, they are looking for the same thing fromtheir interactions with current and potential employers.A recent article on featured a how to guideon using social media to land a job.iiSocial media and mobiledevices are raising the baron HR service delivery.
  21. 21. Human Capital Trends 2012 Leap ahead 21#social #mobile @workPractical implicationsThe gauntlet has been thrown down. If HR does notadapt, it may become obsolete. Fortunately, social mediaand mobile devices are sparking numerous opportunitiesfor HR to remain relevant.• Social and mobile technologies can reinvigoratepersonalized HR service. Over time, the relentless pushfor efficiency and economies of scale tended to make HRservices less personal. Ironically, technology is helping toreverse this trend by enabling HR’s customers to developreal relationships with real people in a virtual community.Customers can tap the community’s collective expertisein a highly personal and interactive way, instead of beinglimited to scripted conversations with anonymous callcenter representatives.• HR service centers can evolve into communities.Shared Services Centers can become Shared ServicesCommunities where employees, managers, vendorsand alumni help each other by sharing knowledge andfinding innovative ways to improve services, processesand policies. Similarly, Centers of Expertise can becomeCommunities of Expertise, where people are ableto access broader knowledge and insights throughcollaboration inside and outside the enterprise.• HR portals are morphing into social platforms. HRportals have traditionally been structured around staticcontent and predefined transactions. Now, they areevolving into platforms for personalized content andemployee engagement. Social media capabilities enableemployees to interact with HR and other parts of theorganization, as well as with external vendors, alumni,and colleges. Mobile devices help deliver on-demandservice through easy-to-use apps that are availablealmost anywhere.• Traditional forms of HR service delivery are stillneeded. In the same way that online and mobilebanking haven’t eliminated the need for bank branches,social media and mobile devices are not eliminating theneed for traditional forms of HR service delivery (e.g.,manager and employee interactions, phone calls andemails to a service center, recruiting via campus visits andjob fairs, and desktop and classroom learning). In somecases, users have limited access to the required tools andconnectivity; in other cases, they simply prefer the oldway of doing things.Lessons learned from the front linesFor most HR organizations, developing and implementinga strategy for mobile devices and social media is no longera luxury; it should be considered a necessity. Here’s howto do it.• Create a holistic strategy and value propositionwith other business functions. The rise of mobiledevices and social media affects a wide range offunctions beyond HR, including Marketing, Legal andPublic Relations. CHROs should work closely with otherbusiness leaders to define the benefits and execute acoherent strategy. Decision-makers will likely be lookingfor a rigorous business case and solid ROI numbers;however, many of the benefits associated with mobiledevices and social media are difficult to quantify. Thatdoesn’t necessarily mean they are less valuable; it justmeans they need to be evaluated from a strategicperspective.• Enable HR to drive social and mobile adoption.Mobile devices and social media have far-reachingimplications and require an HR function empoweredwith broad responsibilities that include direct influenceover HR processes, technology, and service delivery.Without empowering HR, companies may miss theopportunity to embed these critical technologies intothe fabric of their organization.• Consider the specific needs of each customersegment. The new model and tools should be viewedas a complement to existing HR delivery channels, not areplacement. Some people may be unable or unwillingto use mobile devices and social media. Forcing everyoneto switch could alienate or exclude key user segments.• Define success. Identify the desired outcomes for thethree main stakeholders: HR, employees, and the overallbusiness. Different organizations will have differentneeds and expectations about investing in a strategyfor mobile devices and social media: some will see it assimply a way to stay current; others may recognize it as avaluable opportunity to improve their operating models.• Develop and implement an integrated solution.Given the excitement and urgency surrounding mobiledevices and social media, it’s tempting to dive right intopoint solutions. Cloud services add to the temptation by
  22. 22. 22#social #mobile @workallowing individual process owners to acquire their ownsolutions without going through IT. This is especially truefor talent management activities, such as recruiting andperformance management, which tend to have morefunding and organizational clout and are actively beingtargeted by cloud vendors. Although individual solutionsmay work fine on their own, failing to integrate theminto HR’s overall service delivery model can lead to dataproblems and a bewildering array of user interfaces thatundermine HR’s value.• Manage social and mobile risks. Social mediaplatforms can easily become forums for spreadingrumors and misinformation. Mobile devices can weakensecurity for sensitive information that is private orconfidential. These kinds of risks are not deal breakers,but they should be actively identified and managed.• Play the role of facilitator and moderator. Socialmedia discussions tend to spring up organically;however, HR can add significant value by seedingthe dialog and helping connect the dots. Also, whilediscussions tend to be self-policed, fact checking andmoderating can help ensure they stay on track and don’tpropagate rumors and false information. The need forfact checking and moderating, which didnt exist before,has created an opportunity for HR to actively involveitself in social media.• Continue to grow and improve. Social media andmobile devices can provide a platform for ongoinggrowth and improvement. HR’s role as curator —seeding and nurturing communities and encouragingpeople to participate — is essential for the long-termsustainability of a social model for HR service delivery.These examples and insights aren’t just theories; theyare based on real-world experiences. Deloitte is just oneof many companies that are actively capitalizing on theeffectiveness of social media and mobile devices to deliverand empower HR.iiiOn the social front, we have created an internal platformcalled ”D Street” that allows our people to connectwith each other and share ideas and information. Itprovides features similar to other social media platformsbut is integrated with the knowledge repositories andcollaboration tools that support our business. Peoplecan build relationships and improve their personal brandwhile accessing the systems and information they needto do their jobs. Community managers and other controlmechanisms help maintain order and create a cleardistinction between authoritative information and opinions— a distinction that is absolutely essential in a business likeours. D Street is also integrated with our email system, sopeople can stay involved and participate without having tomake a special effort to check in.On the mobile front, we have developed a wide rangeof tablet and smartphone apps to deliver everything fromnews alerts and timesheet management to on-the-goD Street access. Custom apps address the specializedneeds of our highly mobile workforce, including a hotelingapp that enables employees to reserve office space fortimes when they happen to be in town and a travel appfor managing trip information with interactive maps forupcoming destinations.The people have spokenMobile devices and social media are here to stay. In theyears ahead, we expect to see more and more peopleusing smart devices and social media to collaborate,communicate, and conduct their daily business.Organizations that adopt a wait-and-see approachcould be forced to play catch-up as they find themselvesoutpaced and outmaneuvered by nimbler competitors.Right now, HR has an opportunity to lead from the fronton this issue by harnessing the power of mobile devicesand social media to transform how HR services aredesigned and delivered. It’s time to get started.Endnotesi“Capgemini Survey Reveals the Rising Importance of Social Media to Customer Care,”, July 25, 2011,(ttp://“How to Use Social Media Sites to Land a Job,” ,
  23. 23. Human Capital Trends 2012 Leap ahead 23Cloud services are changing theway business operates, and HRhas a key role in helpingorganizations adapt.Clouds inthe forecast7Cloud computing is changing the way people andbusinesses work, upending conventional ideas about time-to-value, service levels, infrastructure needs, and more.With cloud, systems and data are typically located outsideof an organization’s four walls and accessed through theInternet. This has fundamental impacts on many partsof the business, transforming the nature of work andaccelerating the pace of change across the enterprise.In this emerging cloud services environment, HR has aresponsibility to help the organization adjust its peopleand processes to operate more effectively. HR is uniquelypositioned to do this — not just because HR is responsiblefor the overall talent agenda, but also because manyHR organizations learned valuable lessons as early cloudadopters. Leading HR organizations are already usingcloud technology to improve how HR services aredelivered. And now, they are looking for opportunities toshare their hard-earned experience and insights with therest of the business.What’s driving this trend?Cloud offers benefits that in many cases are too compellingto ignore. The technologies and processes associated withcloud are rapidly maturing and are now gaining acceptanceas standard business practices. Recent forecasts for 2012predict that 80 percent of new software applications willtarget the cloud and that spending on cloud services willexceed $36 billion — which indicates a rate of growth fourtimes faster than the IT industry average.iKey drivers forcloud adoption include the following:• Cost reduction. Improve utilization and save moneythrough consolidation of servers and data centers.Capitalize on economies of scale by sharing resourcesacross organizations. Reduce training costs thanks toimproved ease of use and browser-based interfaces.• Reduced capital investments. Replace capital expenseswith operating expenses. Pay only for what you use.• Faster implementation. Get up and running quickly byavoiding the need to acquire hardware or to developand configure applications.• Agility. Adjust to changing demand and marketrequirements. Scale up or down as needed. Takeadvantage of vendor best practices, which are drawnfrom multiple organizations and rolled out quickly.• Smarter decisions. Take advantage of cutting-edgetools that support fact-based decision-making.Practical implicationsAs more and more businesses adopt cloud services, leadingHR organizations are taking the lead in addressing themany people and talent impacts of moving to cloud.Some of these impacts are direct and immediate. Forexample, HR is helping IT organizations tackle the massivechanges associated with cloud, which is redefining thevalue of the IT function and transforming the roles,objectives, and purpose of the IT workforce. This shiftrequires new responsibilities and skills, including anincreased focus on supplier management, businessrequirements, and customer needs. It also requiresorganizational structures that align with a technologymodel in which systems, applications, and data are nowlocated in the cloud and, in many cases, are operated andmanaged by a third party. The rise of cloud may lead toreduced staffing levels for in-house IT, especially for lower-value activities that are being commoditized by cloud.
  24. 24. 24Clouds in the forecastBut cloud’s impact isn’t just limited to the IT function. Themove to cloud is also changing how entire businesses areorganized by blurring geographic and physical boundaries.People can now operate as part of a cohesive unit whileworking from the field, from home, or from halfwayaround the world. It is also blurring the line betweenan organization and its service providers, enabling andrequiring new kinds of business relationships.At the same time, cloud services are accelerating the paceat which businesses operate. Organizations that usedto wait months or years for IT to upgrade their systemsare now seeing a constant stream of new features andimprovements emerge from the cloud. Also, a cloud-based technology model puts daily IT decision-makingin the hands of end users, giving business leaders andmanagers more autonomy and influence over the systems,processes, and data they use every day. This is a dramaticdeparture from the traditional top-down approach to ITdecision-making.To be effective in this new environment, organizationsmust make cloud services part of their DNA. Doing sorequires new skills and behaviors, including practices formanaging a highly distributed workforce that may includeoutside IT vendors. It also requires new learning anddevelopment techniques to help users adjust to a never-ending stream of technology changes and enhancements.Increased accountability is also important, since cloudtechnology gives business users more autonomy andcontrol over which tools they use.Lessons from the front linesA large media company that operates in more than 100countries chose a cloud-based ERP solution to replacehundreds of local HR applications and radically transformthe way HR services are delivered. The cloud solutioncreated common standards and business processes acrossthe company’s entire global footprint, which enabled HRto simplify its systems and improve performance whilehelping the business become more agile and flexible.Business leaders and managers now have access to theinformation they need to make smart workforce decisions.The cloud solution’s advanced security capabilities allowsecurity policies to be designed, administered, andenforced consistently all over the world. And its extensiveself-service capabilities allow end users to access HRservices 24/7 from a wide range of devices, including PCs,smartphones, and tablets.This experience and others revealed a number of practicallessons that can help HR accelerate cloud adoption andease the transition to cloud across the enterprise.• Mind the organization. Many cloud initiatives start outas tool swaps, replacing traditional systems with cloud-based solutions. However, significant organizationalchanges are often necessary to align the workforce withthe new strategic vision and delivery model.• Create a cloud culture. In a cloud environment,organizations have an opportunity to make betterdecisions faster. This is driving a shift away from amethodical, consensus-driven culture toward an agileorganization with clearly assigned decision-makers.• Attract, manage, and develop cloud-savvy talent.The rapid rise of cloud services has sparked a talent warfor employees with cloud-related skills. To fill the gap,leading organizations are retraining staff and developingbetter ways to attract, retain, and motivate workers withthese valuable capabilities.
  25. 25. Human Capital Trends 2012 Leap ahead 25Clouds in the forecast• Develop cloud-savvy leaders. In a cloud-enabled world,business and HR leaders are more directly involved intechnology decisions. To make the right calls, they needto improve their understanding of cloud technology andthe business value it can deliver.• Prepare for warp speed. With cloud, new features andimprovements are released on a timescale of days orweeks — not months or years — and are simultaneouslyavailable to multiple organizations. This rapid paceof innovation requires HR to strengthen its changemanagement capabilities. It also requires on-demandlearning and development techniques that can delivertraining quickly and efficiently.Taking the lead on cloudMany HR organizations have already adopted cloud fora variety of services, and this trend is likely to continue.Leading HR organizations are going a step further byleveraging their experience and expanding their role inhelping the rest of the enterprise manage and acceleratethe transition to cloud. The IT function is facing thegreatest short-term impact and requires the mostimmediate support from HR. But over the long term,cloud’s greatest impact is likely to be at the enterpriselevel, where it is literally changing how businesses work.By taking a lead role on cloud, HR is easing the transitionand helping organizations acquire and develop the cloud-savvy talent needed to capitalize on the full potential ofcloud services.EndnotesiIDC Predictions 2012, “Competing for 2020,” IDC, December 1, 2011.
  26. 26. 26A multichannel environment iscreating the need for a differentkind of sales force.Stay in front with aneffective sales force8The classic image of a sales rep is a one-man armydrumming up business through a combination of personalcharm, inside information, guile, chutzpah, and single-minded determination. But that’s not how most salesbattles are won these days.Although a sales force still needs heroes, today’s buyersdemand more. Thanks to the Internet, they now haveunprecedented access to product and pricing informationand can make purchases at the touch of a button. Also,they increasingly rely on virtual relationships built throughsocial media. In this technology-driven, multichannelenvironment, it’s hard for traditional salespeople to definetheir full value.Meanwhile, the global economy continues to sputter.Buyers are demanding more for their money, even as salesorganizations face increasing pressure to reduce costs.Also, companies in frantic pursuit of growth are rapidlyshifting their sales focus toward emerging markets, whichare widely viewed as the primary engine for future revenueand profits.These new challenges and complexities are giving rise to anew way of selling — and a new kind of sales force — ashift that has HR implications ranging from talent strategiesand organization design to learning and development,compensation, governance, and change management.What’s driving this trend?• Economic pressure. A deep recession and unevenrecovery have made today’s buyers more demandingthan ever while putting pressure on sales organizationsto work miracles.• New technologies. Technologies, such as smartphones,tablets, social media, and the Internet, havefundamentally changed how buyers gather informationand make decisions — and how salespeople sell. Buyersnow have a world of information at their fingertips,making purchases through a variety of channels andusing social media to build new kinds of relationships.Sales forces should learn to use these technologies totheir advantage, instead of falling victim to them.• Risk sensitivity. Today’s headlines are filled with storiesabout individual employees who cost their companiesbillions and put entire businesses in jeopardy throughfraud and excessive risk-taking. This development isdriving increased regulatory scrutiny and putting atighter leash on the sales force.• Globalization. For established companies in matureeconomies, developing markets are widely seen asthe primary source of future growth. Yet many salesorganizations are struggling to manage the complexityof selling in a global marketplace and are still lookingfor the right balance between local responsiveness andglobal control and efficiency.
  27. 27. Human Capital Trends 2012 Leap ahead 27Stay in front with an effective sales force• Analytics. Advanced analytical tools can givesalespeople deeper insights about their customers thanever before. Using analytics, sales organizations can drivemuch more nuanced segmentation and evaluate whereto dedicate sales time and helping drive customers tothe most appropriate sales channel. Some customerswill be handled through face-to-face interaction, otherswill receive outbound calls, and others will be servedprimarily through the Internet. Analytics can also beused to anticipate which salespeople will likely be mostproductive.Practical implicationsSome buyers are looking for the lowest possible prices andaren’t willing to pay extra for personal service, althoughthey still expect to be served. Others are willing to pay apremium but expect more from a sales rep than a littlecharm and firm handshake.A well-oiled sales army sells smarter An “intelligently networked” sales organization sells differentlythan beforeSource: Deloitte• Smarter segmentation• Upskilled salespeople• Clear marching orders• Aligned and personal support• Leverages insights from a new field and ”connects/spreads” acrossthe sales team• Rethinks organizational design, incentive compensation, and datatools for leanness and to handle new challenges• Keeps the “way to win” as simple as possibleAt the high end, salespeople have become the first line ofdefense against threats of commoditization. A new typeof sales rep is emerging — one who doesn’t just pushproducts but has the business savvy to help customersimprove their companies and create business value. Thesehigh-end roles are being developed alongside teams ofmore volume-based representatives who target buyersunwilling to pay a premium for value. In addition, cross-channel integration is creating an urgent need for salesreps who can be effective in an environment where buyershave many other sources of information.The sales force is evolving toward an intelligent network,where team selling across multiple channels andcustomer segments is driven by advanced analytics anddeep insights about customer preferences. Increasedselling sophistication remains a priority, but its impact isenhanced by harnessing the entrepreneurship, insight, andnetworking capabilities of the team in the field.Figure 3: One possible 2015 scenario: from a ”well-oiled sales army” to an ”intelligently networked sales organization”
  28. 28. 28Stay in front with an effective sales forceMaking the leap to the sales force of tomorrow requiresstrong support from HR. Although many core elements ofsales force effectiveness have stood the test of time andremain a key focus — for example, improved customersegmentation, skill set development, and sales support— there are other areas where leading HR organizationsare working in new ways with the sales force to improveperformance.• Different talent for a different way of selling. Manycompanies are choosing to hire a different breed of salesrep for high-value roles. People with business savvy, notjust product pushers. Team players, not cowboys.• New skills and competencies. To be effective in thismore challenging environment, sales reps need tolearn and develop new skills. How to work with othersand sell as a team. How to operate in a multichannelenvironment. And how to leverage sales support andadvanced analytics to drive revenue and create morevalue for customers.• New organizational structures that fostercollaboration. Many leading HR organizations arehelping to develop new structures that foster teamselling and cross-channel coordination. They aredesigning global organizations that balance the needfor scale efficiencies and global coordination against theneed for local innovation and responsiveness to localmarket requirements. And they are creating centers ofexcellence for sales support that help guide local salesteams — while sharing leading practices across regions.• Rewards and incentives that drive the desiredbehaviors. New compensation models should balanceshort-term sales wins with longer-term relationshipdevelopment. Incentives might include a short-termmeasure (e.g., commission) and a periodic longer-termmeasure (e.g., quarterly growth against targets) todetermine total rewards. Noncash compensation canhelp foster desired behaviors, such as skill developmentand team selling.• Governance that balances control and flexibility.Many leading companies are developing governancestructures and internal controls that manage risk androgue behavior without stifling innovation and initiative.Intelligent risk-taking is needed.• Stronger integration across channels and functions.These days, more and more customers are buyinggoods and services without interacting with a sales rep.In this environment, many customer touchpoints —including customer service and technical support — areimportant to the sales process. All of these customer-facing activities are increasingly being integrated andcoordinated.• Effective sales management. Skilled sales managerscoordinate the various aspects of the sales process andallocate resources to improve results. They also arethe front line for measuring performance, monitoringrisk, and determining coaching needs and appropriatedevelopment strategies to identify, grow, and retaintalent in this more complex sales organization.• Overcoming resistance to change. The new approachto selling is fundamentally different and requires newbehaviors and new ways of thinking. Many salespeoplemay have trouble adapting to change of this magnitude— especially ones who have been successful sellingin the traditional model. Effective adoption requiresmanipulation of both the “carrot” (compensation) andthe “stick” (threat of replacement) to motivate thedesired behaviors. The sales force is a unique group andwill likely continue to need special handling.
  29. 29. Human Capital Trends 2012 Leap ahead 29Stay in front with an effective sales forceLessons from the front linesA financial services organization was suffering from severalyears of negative growth in most of its business units. Anassessment of its sales model and customer base revealedsynergies between products across business units, aswell as significant overlap in the types of customers eachbusiness unit serves. To improve cross-penetration, thecompany is adopting new value propositions based oncustomer segments and is using advanced analytics toidentify cross-selling opportunities. Also, it is creating newtraining and short-term compensation programs to drivedesired sales force behaviors and installing a dedicatedoffice to support sales activities across the enterprise. Tohelp the improvements stick, the company has stepped upits communication and change management efforts.Creating the sales force of the futureIn the past, many sales organizations preferred tohandle their own improvement initiatives with little orno involvement from HR. But the current transformationin selling is happening faster than most business leaderspredicted just a few years ago. It will ultimately touchnearly all aspects of the sales organization — from thetype of talent that is acquired and developed to the waypeople are organized, governed, and rewarded. Achievingthis future vision will require HR leaders who understandfront-line sales issues, the customer experience, and theparticular DNA of tomorrow’s sales force.Different organizations will have different views on whichtrends matter most for their HR and business agendas.Choose your path carefully. Attempting to “leap ahead” onall eight trends covered in this report could be a recipe forfrustration. Look instead for the two or three trends thatoffer the greatest potential for leverage in light of yourcompany’s current position and strategic business priorities.Focus there for big improvements.If your business is speeding ahead toward the postdigitalworld of cloud, social, mobile, and analytics, put thosetrends at the top of your HR agenda — and make surethey’re aligned and integrated. If your CEO is signaling anurgent new commitment to growth, get moving to addressthe trends that support that priority.Incremental improvements may still make sense, and canhave big impacts. Continuing to upgrade capabilities inworkforce analytics, for example, is always worthwhile.So is helping your business leaders become more riskintelligent.Every HR organization and every business will require aspecific combination of human capital investments tomake the leap ahead and drive breakthrough performance.By focusing on the trends that matter most for yourenterprise, you’ll be doing exactly what your businessleaders expect: creating more value.Closing
  30. 30. 30AuthorsBarbara AdachiPrincipal, Deloitte Consulting LLPbadachi@deloitte.comDaniel HelfrichPrincipal, Deloitte Consulting LLPdhelfrich@deloitte.comMichael GretczkoPrincipal, Deloitte Consulting LLPmgretczko@deloitte.comMarty DiMarzioPrincipal, Deloitte Consulting LLPmdimarzio@deloitte.comJeff SchwartzPrincipal, Deloitte Consulting LLPjeffschwartz@deloitte.comIn 2012 growth is job #1Karen BowmanPrincipal, Deloitte Consulting LLPkarbowman@deloitte.comKevin KnowlesPrincipal, Deloitte Consulting LLPkeknowles@deloitte.comAlice KwanPrincipal, Deloitte Consulting LLPakwan@deloitte.comMatt UsdinPrincipal, Deloitte Consulting LLPmusdin@deloitte.comOperation GlobalizationRobin LissakPrincipal, Deloitte Consulting LLPrlissak@deloitte.comJeff SchwartzPrincipal, Deloitte Consulting LLPjeffschwartz@deloitte.comDan RudinPrincipal, Deloitte Consulting LLPdrudin@deloitte.comFast-track to the topBill PelsterPrincipal, Deloitte Consulting LLPbpelster@deloitte.comMarc KaplanPrincipal, Deloitte Consulting LLPmkaplan@deloitte.comNeil NeverasSenior Manger, Deloitte Consulting LLPnneveras@deloitte.comPeople Risk is Risky BusinessMike FuchsPrincipal, Deloitte Consulting LLPmicfuchs@deloitte.comKaren BowmanPrincipal, Deloitte Consulting LLPkarbowman@deloitte.comRobin LissakPrincipal, Deloitte Consulting
  31. 31. Human Capital Trends 2012 Leap ahead 31Seeing around cornersRishi AgarwalPrincipal, Deloitte Consulting LLPrishiagarwal@deloitte.comRuss ClarkeDirector, Deloitte Consulting LLPrclarke@deloitte.comJohn HoustonPrincipal, Deloitte Consulting LLPjhouston@deloitte.comCarl BennettDirector, Deloitte Consulting LLPcarbennett@deloitte.comStay in front with an effective sales forceRob DicksPrincipal, Deloitte Consulting LLPrdicks@deloitte.comEd BasanesePrincipal, Deloitte Consulting #mobile @ workWalt SokollPrincipal, Deloitte Consulting LLPwsokoll@deloitte.comFrancine LebelDirector, Deloitte Consulting LLPflebel@deloitte.comPaul KhannaPrincipal, Deloitte Consulting LLPpkhanna@deloitte.comJoseph PressSpecialist Leader, Deloitte Consulting LLPjopress@deloitte.comTuan TranPrincipal, Deloitte Consulting LLPtmtran@deloitte.comDerek PolzienSenior Manager, Deloitte Consulting LLPdpolzien@deloitte.comClouds in the forecastStephen RedwoodPrincipal, Deloitte Consulting LLPsredwood@deloitte.comJeff SchwartzPrincipal, Deloitte Consulting LLPjeffschwartz@deloitte.comGarth AndrusPrincipal, Deloitte Consulting LLPgandrus@deloitte.comAuthorsContributorsA special thank you to the 2012 Human Capital Trends team and contributors:Katherine Graziano, Kathleen OBrien, Aviva Bortniker, and Gregory Vert.
  32. 32. This publication contains general information only and is based on the experiences and research of Deloittepractitioners. Deloitte is not, by means of this publication, rendering business, financial, investment, or otherprofessional advice or services. This publication is not a substitute for such professional advice or services,nor should it be used as a basis for any decision or action that may affect your business. Before makingany decision or taking any action that may affect your business, you should consult a qualified professionaladvisor. Deloitte, its affiliates, and related entities shall not be responsible for any loss sustained by any personwho relies on this publication.Copyright © 2012 Deloitte Development LLC. All rights reserved.Member of Deloitte Touche Tohmatsu Limited