Today’s global organizations must navigate a “new world of work” that has turned traditional assumptions about talent management upside down.
In this new world, the barriers between work and life have been all but eliminated. Talent is in high demand, and many organizations cannot keep up. Millennials will soon make up 50 percent of the workforce—and they have different values than previous generations do. From a macroeconomic perspective, the world has entered a period of stronger economic growth.
With 2015 expected to be the year of the employee, it is increasingly imperative for organizations to reimagine and reinvent the way they approach talent management—or risk falling behind.
This year’s report spotlights the 10 trends that shape the new world of work. This is one of the largest-ever longitudinal global studies of talent, leadership, and HR challenges and readiness, with more than 3,300 business and HR leaders from 106 countries responding.
We believe that 2015 is a critical year for HR leaders. These trends will serve as a guide for the new way of thinking and actions required to meet new challenges.
In this year’s report, we explore 10 major trends that emerged from our research, which reflect four major themes for the year: leading, engaging, reinventing, and reimagining.
10 human capital trends for 2015 Percentage of respondents who say the topic is “important” or “urgent”
1. Culture and engagement – Create meaningful work (87%) 2. Leadership – Develop global leaders at all levels (86) 3. L&D – Reinvent the learning experience (86) 4. On-demand workforce – Engage all workers (80) 5. Reskilling HR – Align HR with business goals (80) 6. Performance management – Shift from evaluators to coaches (75) 7. People analytics – Need long-term commitment (75) 8. Simplifying work – Focus on what matters (71) 9. Machines as talent – Look for opportunities (57) 10. People data – Leverage inside and outside data (52)
The findings In an era of heightened corporate transparency, greater workforce mobility, and serious skills shortages, the issues of culture, engagement, and retention have emerged as the top critical issues for business leaders—not simply an HR problem. Culture and engagement is the No. 1 issue companies face around the world; 87 percent of organizations cite culture and engagement as one of their top challenges, and 50 percent call the problem “very important”—double the number in last year’s survey. Given this new transparency, an organization’s culture can become a key competitive advantage—or its Achilles’ heel. Culture is now a business issue, not just an HR issue. And there’s no place for organizations to hide.
Why is this? Today’s organizations live in a transparent era. Every corporate decision is immediately exposed and debated publicly. Once-private issues are now posted online for every employee—and every potential employee—to read. Culture drives many things within an organization, most prominently employee engagement and retention. That is bad news for a lot of companies. According to the Gallup polling firm, only 13 percent of the global workforce is “highly engaged.” Research from Bersin by Deloitte found that upward of half the workforce would not recommend their employers to their peers.
What’s needed? Organizations that create a culture defined by meaningful work, deep employee engagement, job and organizational fit, and strong leadership are outperforming their peers and will beat their competition in attracting top talent.
Our research shows that, in 2014, it will be hard to keep good people. “Responsible companies” had much higher levels of engagement and retention, customer service, and long-term profitability. People want to work for organizations that fulfill a larger mission.
People want to work for organizations that are inspiring to work for – and offer a greater sense of purpose (this is even more true for Millennials – which will be 75% of our workforce in 10 years.)
People also desire flexibility or control/autonomy over workload, time and schedules, as well as opportunities to grow and contribute. All of this (plus more – inclusion, workspace design, etc.) is part of a holistic work environment.
68% of women without children would rather have more free time than make more money — even more than those with children (62%). More magazine – 2013, “Women in Workplace Study,” http://www.more.com/flexible-job-survey One of every five employees cares for elderly parents, a number that could increase to almost half of the workforce over the next several years. http://whenworkworks.org/research/downloads/FlexAtAGlance.pdf 40% of professional men work more than 50 hours per week. Of these, 80% would like to work fewer hours. We have the “overwhelmed employee” problem to address.Center for American Progress. August, 2013http://www.americanprogress.org/wp-content/uploads/issues/2012/08/pdf/flexibility_factsheet.pdf
Transition: So let’s talk about this a bit more on the next slide
The findings For the third year in a row, “leadership” appeared as one of the top three most pressing business challenges. Nearly 9 out of 10 global companies cited leadership as a top issue—with 50 percent of executives citing leadership shortfalls as “urgent,” up from 38 percent last year. Organizations around the world are struggling to strengthen their leadership pipelines, yet over the past year businesses fell further behind, particularly in their ability to develop Millennial leaders. Why is this? Too many organizations treat leadership as a short-term training program rather than as a strategic initiative that requires long-term, consistent investment. Most companies treat leadership sporadically, confining development opportunities to a select few employees, failing to make long-term investments in leadership, and neglecting to build robust leadership pipelines at all levels. For all the talk about leadership as a CEO-level priority, companies do not consistently invest in this area. What’s needed? A focus on leadership at all levels, coupled with consistent year-over-year spending in this area, is essential for organizations to remain competitive and effectively engage employees in the new world of work.
(c) Bersin and Associates
Large companies, especially, are guilty of not ‘priming the pump,’ with successors identified for just 10% of their first-level leaders and 19% of their mid-level leaders. (See Figure X.) The pipeline for senior-level and executive positions also looks weak, with successors identified for just 24% and 36% of these positions, respectively. Research shows that it costs more to import senior-level leaders into an organization than to grow them internally4, which will need to be accounted for in HR budgets.
(c) Bersin and Associates
(c) Bersin and Associates
The findings Learning and development issues rocketed from the No. 8 to the No. 3 talent challenge in this year’s study, with 84 percent of survey participants rating learning as a critical or urgent problem. Despite this demand, capabilities in learning dropped significantly, and the gap between urgency and readiness is three times worse in 2015 than it was in 2014. Companies see an urgent need to build skills and capabilities and are now focused on transforming or fixing their learning and development organizations.
Why is this? Senior business leaders increasingly see shortages of skills as a major impediment to executing their business strategies. Only 28 percent of the respondents to this year's survey believe that they are "ready" or "very ready" in the area of workforce capability. As the economy improves and the market for highly skilled talent tightens even further, companies realize they cannot simply recruit all the talent they need but instead must develop it internally.
What’s needed? Faced with gaps in talent and skills, HR needs to reinvent the learning process. In the past three years, there has been an explosion of new learning offerings, including MOOCs, digital learning tools, video offerings, and training systems. More than one-third of all learning now takes place on mobile devices, facilitated by video and learning apps. This is the kind of personalized, digital learning experience that employees increasingly want. Companies that transform their learning and development organizations are not only able to accelerate skills development and more successfully build their leadership pipelines, but also to directly impact employee engagement and retention, one of the biggest challenges cited this year.
(c) Bersin and Associates
The findings HR needs to deliver greater business impact and drive HR and business innovation. Accomplishing this will require an extreme makeover. While CEOs and top business leaders rate talent as a key priority, only 20 percent of HR professionals give themselves high marks when it comes to addressing their companies’ talent needs. HR’s self-assessment showed virtually no improvement over the previous year. 39% see an urgent need to reskill the HR function.
Why is this? HR is being forced to redefine its role from “service provider” to enabler and builder of talent. HR’s traditional employee service mission is now handled through shared service centers, modern human capital management technologies, and easy-to-access online and mobile applications. This frees HR to advise and consult executives on people-related strategies.
What’s needed? HR needs to dramatically raise its game by aligning its skills and capabilities with the organization’s overall business goals. In this new world, HR is shifting from a group of generalists to a team of highly skilled business consultants. HR can drive operational value by eliminating much of the daily HR transactional work. Companies are moving beyond talk to action: revisiting the operating model, building HR universities, and modernizing relationships with business partners.
The findings Performance management processes affect each of the top business challenges: leadership, engagement, and capability. Most companies tell us that an “up or out” performance management process alone simply does not help solve these problems and, in many cases, makes them worse. Innovative new performance management models are now becoming an imperative as businesses modernize and improve their talent solutions. Change is happening: 89 percent of respondents recently changed their performance management process or plan to change it within 18 months.
Why is this? A well-functioning performance management process should facilitate good management by good managers who are trained as coaches and mentors rather than evaluators and graders. Organizations used to think of performance management as a backward-looking assessment program owned by HR. No longer. Performance management is being reinvented for a new, forward-looking purpose: to serve as an efficient, focused business process that improves employee engagement and drives business results. This redesign focuses less on evaluation and more on agile goal setting, regular feedback, coaching, and development. It shifts the focus away from forced distribution and much more toward helping managers coach people to succeed. By changing this one HR “ingredient,” it is possible to affect many others.
What’s needed? Companies leading this transformation are redefining the way they set goals and evaluate performance, focusing heavily on coaching and feedback and looking for new technologies to make performance management easier. Done well, performance management can be one of the most inspiring and developmental events in an employee’s career and drive performance improvements and organization-wide positive results.
Kelly Services offers outsourcing and consulting services, including recruitment, HR management and vendor management to companies worldwide. The organization, which had $5.5 billion in revenue in 2012, has about 1,100 permanent employees at its headquarters in Troy, Michigan, and about 6,800 more in branch offices worldwide. The company provides temporary employment to about 560,000 people each year. In 2008, the HR leadership team at Kelly decided it was time to take a fresh approach to performance management. There was a general sense that the old way was not working, but it was unclear exactly what lay at the root of the problem.
Kelly assembled a team to set a new course – purposely without a vision for what that course would look like. Open-mindedness and candor were important elements of what participants recall as a deeply introspective process. A key element of the process was a focus on Kelly’s fundamental beliefs and assumptions about its people. Specifically, Kelly looked at how policies and procedures can either communicate or undermine the core beliefs and expectations that leaders have regarding employees. For example, too much emphasis on monitoring behavior through tools like time clocks and activity logs can suggest distrust or an expectation that employees work only for their paychecks, not out of integrity or a desire to do a good job. Kelly took a step back to identify what managers and leaders believed about employees, then let those beliefs guide subsequent decisions.
Leaders at Kelly ultimately decided that past approaches to performance management had been paternalistic, rather than collegial. In examining their core beliefs about employees, leaders concluded that such a tone did not accurately reflect their expectations of employees. The leaders believed most employees cared about their jobs and wanted to do them well.
It followed that the aim of performance management should be to help employees follow through on their natural motivation. But conversation after conversation revealed that many regarded the performance management score as a hindrance.
Kelly could have renewed efforts to standardize the scoring process, but that began to seem like a case of the tail wagging the dog. What leaders and employees primarily wanted wasn’t more consistent scoring; it was more fruitful performance-management conversations.
In the end, the decision came down to what the scores represented for Kelly and its workforce. Rightly or wrongly, the scores had become emblematic of a management-driven, red-tape-laden approach to performance management. So, Kelly decided to abolish them. In one sense, abandoning scores was a tactical move. But in perhaps an even more important sense, the change was strategic and symbolic – an opportunity to redirect thinking across the enterprise.
Since Kelly has abolished performance scores, they have seen higher levels of engagement from employees and received reports that performance conversations are much more honest and effective.
The findings Companies are taking a more sophisticated approach to managing all aspects of their workforces, including the hourly, contingent, and contract workforces. More than one-third (34 percent) of all workers in the United States are contract workers, and nearly half (49 percent) of companies say their needs for contingent workers will keep growing over the next three to five years.
Why is this? The “on-demand” workforce offers companies the ability to tap into extensive networks of innovators, technical experts, and seasoned professionals. Today’s workforce is no longer a set of employees who come into the office or factory each morning or shift and go home each night. More and more of the workforce consists of contingent employees who are working variable, often part-time, engagements or schedules, are compensated hourly, are operating remotely, or are actually working for an external consulting firm.
What’s needed? Companies are now beginning to realize that contract labor is often highly talented and should be managed strategically. To engage and retain these workers, companies should think broadly about how their HR programs, strategies, and analytics tools could be applied not only to full-time employees but also to contingent and part-time workers.
The findings Data and analytics are key to solving many of the top challenges we identify in these trends: engagement, leadership, learning, and recruitment. Still too few organizations are actively implementing people analytics capabilities to address complex business and talent needs. Three in four companies (75 percent) believe using people analytics is important, but just 8 percent believe their organizations are “strong” in this area—almost no change over 2014.
Why is this? Leading companies are using analytics to gain a competitive advantage by understanding all elements of the workforce, including to: Understand and predict retention Boost employee engagement Expand talent sources and improve quality of hires Profile high performers in sales and customer service Yet, our survey confirms that most organizations have been slow to get started, showing very little progress in implementing analytics. In fact, this year’s study shows that there has been little year-over-year improvement in analytics capabilities.
What’s needed? People analytics, a capability built over years, is one of the biggest differentiating factors for high-performing HR organizations today. Without early, substantial investments, it is difficult to get traction. Companies must therefore make a serious commitment to this discipline, search for robust solutions from their core system vendors, and hire people into HR who have an interest and background in analytics and statistics.
We just completed two years of research in this area and found that yes, a small number of HR organizations (14% in fact) are well ahead of the curve and have effectively “datafied” their operation. These unique companies are seeing tremendous improvements in business performance: they are two times better at recruiting, twice as capable of building the right leadership pipeline, their HR organizations are typically 3X more efficient, and their stock prices rose 30% higher than the average of the S&P 500 over the last three years. The question one has to ask is who are these companies and how did they get here?
The findings Organizations are simplifying work in response to employees feeling overwhelmed by increasing organizational complexity, growing information overload, and a highly stressful 24/7 work environment. More than 7 out of 10 organizations rated the need to simplify work highly, with more than 25 percent citing it as an urgent problem. Ten percent of companies have a simplification program; 22 percent are working on one.
Why is this? Technology, globalization, and compliance needs continuously add complexity to work. Left unaddressed, this leads to an organizational environment that damages employee engagement, lowers quality, and reduces innovation and customer service. Some steps are already being taken. Some companies are waking up to the need to “simplify the work environment,” reduce workloads, eliminate steps, and engineer simpler applications that don’t require lots of training or time to use.
What’s needed? In 2015, successful companies will continue to take steps to simplify work, reduce administrative burdens, and streamline complex processes. Business and HR leaders should put “simplification” on the agenda for 2015 and focus on individual, organizational, and work-specific programs that reduce complexity and help people focus on what really matters. Taking these steps will ultimately help drive engagement and productivity.
“Softer” areas such as culture and engagement, leadership, and development have become urgent priorities Increasing competition for talent has driven these to the top of the HC agenda Consistently top 3 important issues across regions and industries
Leadership and learning have dramatically increased in importance, but the capability gap is widening With economic recovery, accelerating demand for leadership at all levels, especially Millennials Only 6% very ready to deal with leadership issues, only 10% have strong succession programs, and only 7% have programs to build Millennial leaders Learning importance has quadrupled; The capability gap tripled from last year when it was the smallest
HR organizations and HR skills are not keeping up with business needs Capability gaps have increased for virtually every issue Business and HR leaders continue to give HR a failing grade Only 5% rate HR as “excellent”
HR technology systems are a growing market, but their promise may be largely unfulfilled HR spending increased 4% in 2014 over 2014, much of this dedicated to technology 6 in 10 companies are planning to increase HR spending in next 12-18 months HR technology solutions market has grown by 50% to a $10 billion industry in last yearn, but HR organizations have not transformed fast enough Tools without redesigning process and programs does not solve talent programs
Talent and people analytics are a high priority and a tremendous opportunity, but progress is slow ¾ rate talent as important or very important Only showing small improvements in analytics capabilities: 35% reported HR analytics under development, and only 8% are excellent at HR Outside data is now integral to the HR solution
Simplification is an emerging theme; HR is part of the problem Last year the overwhelmed employee emerged as a significant problem 74% rate their work environment on as complex or very complex and half have programs to simplify work HR is simplifying – for example streamlining performance management We see beginning of major movement to apply innovative approaches and techniques like design thinking
The full Human Capital Trends 2015 report goes much deeper. You’ll find stories of how leading companies are leveraging these trends for competitive advantage. And if this all seems overwhelming, we’ve incorporated practical advice for companies and HR leaders on where to start.
Our advice is straightforward: Jump into the fray with enthusiasm. Seize ownership of these trends and exert leadership in addressing them. Make 2015 a year of boldness in your human capital strategies. Innovate. Reinvent. Reimagine.
The New World of Work: Leadership and HR Imperatives for 2015 and beyond