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PPMA Seminar 2016 - Future Proofing HR: Bridging the Gap between Employers and Employees

Presentation by Maude Julien, Senior Associate, Mercer and Julia Howes, Principal, Mercer UK Talent

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PPMA Seminar 2016 - Future Proofing HR: Bridging the Gap between Employers and Employees

  1. 1. H E A LT H W E A LT H C A R E E R F U T U R E - P R O O F I N G H R B R I D G I N G T H E G A P B E T W E E N E M P L O Y E R S A N D E M P L O Y E E S
  2. 2. 2 A W A K E - U P C A L L F O R H R 85% of organizations participating in the study say that their talent management programs and policies need an overhaul. Managing this amount of change will be a challenge for even the most skilled professional — and can only be achieved with support from the top. With merely 4% of the surveyed HR professionals reporting that HR is viewed as a strategic business partner in their organizations, there has never been greater urgency in getting that overhaul underway. At the same time, the study shows that even employees who are satisfied with their current organization say that they are nevertheless seriously considering a move within the next 12 months. Underlying factors include a lack of development, outdated processes and discontent with their manager’s role — all areas in which HR can play a critical role. The time for that HR overhaul is now. 2016 is shaping up to be a moderately positive year, yet many organizations still face uncertainty about the future. Geopolitical headwinds, instability in Europe, slowing economies in Asia and looming job disruptions — due to automation, digitization and globalization are all contributing to this climate of caution. One thing is clear — the future will not be a continuation of the past. And as Talent remains a C-suite concern, this places HR in the eye of the storm. The world of work has been experiencing seismic shifts: in the composition of the workforce, the skills that drive business performance, and the talent pools that will likely fuel future growth. These shifts require looking at talent development with a new lens — re-examining how we think about the nature of work, the concept of employment and what it takes to build a thriving workforce. In this Era of the Individual, employees have more options about where, when and how they work than ever before. They are demanding a new value proposition that provides greater career support, combined with new flexibility in managing their work and building their skills. Are their employers up to the challenge? To find out, Mercer gathered the views of both employers and employees on what drives today’s workforce and how organizations are responding. More than 1,730 HR leaders and 4,500 employees across 15 countries provided input. The result is F U T U R E - P R O O F I N G H R B R I D G I N G T H E G A P B E T W E E N E M P LOY E R S A N D E M P LOY E E S Mercer’s 2016 Global Talent Trends study, which highlights current issues in the world of work and identifies priorities that demand immediate attention. With a unique focus on the employee voice, the study calls out potential gaps between employees’ emerging needs and the actions being proposed by HR today.
  3. 3. 3 According to HR professionals around the world, these are the major workforce trends expected to most significantly impact their talent management priorities in 2016: Nine out of 10 employers surveyed for this report anticipate that the competition for talent will further increase in 2016 — and more than a third expect that increase to be significant (see Figure 1). TA L E N T S C A R C I T Y A N D T H E R I S I N G C O M P E T I T I O N F O R TA L E N T F R O M E M E R G I N G E C O N O M I E S Continued moderate economic growth and a shrinking working age population1 across most of the world contributes to this issue, as employers seek the talent they need to fuel growth. But the dilemma isn’t simply a lack of available talent — unemployment remains high in many countries today. Rather, the issue is a lack of the right talent where and when it is needed to drive competitive advantage and deliver results to the business. Demand continues to outstrip supply for talent with analytic, leadership and people development skills, as well as specialized technical skills in growing T R E N D I N G T O T H E T O P : M A J O R C H A L L E N G E S 1 http://www.wsj.com/articles/how-demographics-rule-the-global-economy-1448203724 2 As an advisor on the Future of Jobs Global Agenda Council, Mercer helped shape the World Economic Forum report titled The Future of Jobs. The full report is available at http://www3.weforum.org/docs/WEF_Future_of_Jobs.pdf. areas such as STEM and IT. Also in short supply are those with the skills to manage in complex, global organizations, especially in industries facing the prospect of disruptive innovation. Employers from both mature and emerging markets in this study concur that they face shortages for these critical skills. Yet not all regions are equally concerned. Organizations in Asia (most notably Hong Kong and Japan), South Africa, and the United States are greatly concerned about the impact of talent scarcity. The majority of European companies, on the other hand, are more sanguine about the availability of needed talent, with only ten percent listing talent scarcity as a concern for 2016. Their slower economic growth has led to lower turnover rates — a double-edged sword. On the one hand, this ensures stability of talent pools and helps with institutional knowledge. On the other hand, we are witnessing a “stagnant middle”, where one in four employees is staying with their employer despite dissatisfaction — citing a lack of outside opportunities as the underlying factor. F I G U R E 1 2 0 1 6 O U T LO O K O N C O M P E T I T I O N F O R TA L E N T * 56% 35% 10% No increase in competition for talent Some increase in competition for talent Significant increase in competition for talent *Percentages may not total 100 due to rounding. The WEF Future of Jobs report forecasts that over a third of what we see as core skills today will change by 20202 .
  4. 4. 4 Employers surveyed understand that their talent strategies are increasingly dependent on their ability to leverage people globally from different genders, ages, ethnicities and backgrounds. HR respondents chose the ability to “effectively leverage diverse talent” as the number three trend likely to impact their priorities in the next 12 months, after the rising competition for talent and talent scarcity. Managing the multi-generational workforce and sourcing talent from around the world also topped the list (see Figure 2). At the other end of the spectrum was “contingent workforce” and “machine learning and robotics,” both emerging trends but ones that do not seem to be having much impact on most organizations’ talent agendas today. These workforce trends are directly impacting organizations’ talent management priorities for the year ahead. Below are 5 priorities identified through this research and via consultation with Mercer Talent professionals around the world. These are consistent across organizations and markets. The good news is that companies are focused in the right areas; the concern is that there is still much to be done. Leveraging an increasingly diverse talent pool requires data to help organizations understand their talent flows. Organizations acknowledged the power of data by naming “big data management” as a Top 4 trend impacting talent priorities this year. By identifying the drivers that will impact promotion, retention and engagement, predictive modeling is already informing investment plans and providing early warning indicators to managers on who might be a flight risk. L E V E R A G I N G A N I N C R E A S I N G LY G L O B A L , D I V E R S E A N D M U LT I G E N E R AT I O N A L L A B O R P O O L T H E P E O P L E A G E N D A F O R 2 0 1 6 F I G U R E 2 T O P W O R K F O R C E T R E N D S I M P A C T I N G TA L E N T P R I O R I T I E S 1 Rising competition for talent from emerging economies 2 Talent scarcity 3 Leveraging an increasingly diverse labor pool 4 Big data management 5 Multi-generational workforce 6 World-Sourcing (hiring talent from locations around the world) A R C H I T E C T compelling careers S I M P L I F Y talent processes R E D E F I N E the value of HR B U I L D diverse talent pools E M B R A C E the new work equation
  5. 5. 6 With 82% of organizations saying they plan to increase promoting talent from within, development is clearly a priority. Unfortunately, current approaches are falling short. Only a quarter of employees globally believe that their organization is doing enough to keep their skills relevant, and nearly a third say their employer is doing little or nothing. Equally concerning is the fact that only 25% of companies strongly agree that they have a robust method for identifying employees with potential. In addition, the entrenched view that talent belongs to a manager or department, not the organization, holds back an organization’s capacity to build its talent capital from within. Even as the focus is on “build” over “buy,” companies are not giving up on the external market in 2016, with over half planning to increase their talent acquisition activities and two in five looking to add more contract or temporary workers (see Figure 3). P R I O R I T Y # 1 : B U I L D D I V E R S E TA L E N T P O O L S Employers in Brazil and Mexico report the highest overall alignment with employees’ views on five out of six of the areas related to the strength of organizations’ talent pools and pipelines. Mercer’s Leadership Practices study highlighted Latin America’s maturity with respect to leadership development3 , while Mercer’s When Women Thrive report indicates that Latin America is the only region on track to reach gender parity at the professional level and above in the next 10 years4 . R E G I O N A L D I F F E R E N C E S My company is failing me on the development front. F I G U R E 3 B U I L D , B U Y A N D B O R R O W Increase DecreaseMake No Changes Don’t Know Borrow — employ talent under contract and/or temporary arrangements 40 1343 4 Buy — from the external labor pool 57 1130 2 Build — a stronger focus on developing and promoting talent from within 82 414 1 *All values in %. Percentages may not total 100 due to rounding. 3 Mercer (2014). Latin America Leadership Practices Study Report 2014. (Whitepaper). 4 http://www.mercer.com/our-thinking/when-women-thrive.html The view that talent belongs to a manager or department, not the organization, holds back the capacity to build talent capability from within. Our emphasis this year will be on building rather than buying talent.
  6. 6. 7 Employers and employees mostly agree on which skills will be in highest demand over the next 12 months. Inspirational leadership and people development topped the list, along with analytical skills, innovation, and building a global mindset (see Figure 4). Last year, digital leadership and cultural literacy were areas of focus for many companies. We expect that this will continue in 2016, with an added focus on coaching and creative problem solving. Building these types of dynamic skills is about more than just theoretical knowledge; it requires application and lots of practice. If this is the new agenda for talent development, it is clear that organizations need to embrace more experiential approaches to skill development, rather than traditional classroom or online methods alone. Companies are not delivering on the development imperative. When asked about the one thing their organizations can do to improve their work experience, employees are three times more likely to name “more/ better training” than any other choice. Over 80% of employees in Italy and China feel that their organizations are not doing enough to keep their skills relevant. Employees in Europe are the least likely — 49% compared to 58% globally - to say that their leaders are engaged in championing development programs. Employers in Australia and Canada are more focused than other mature markets on developing local leaders in emerging economies. Organizations in Latin America are much more confident in their ability to develop local leaders — 73% indicate that they view this as a strength. ““Global mindset” ranks as the number one in-demand skill for companies in Italy, and number two in China and Japan. On the other end of the spectrum are South Africa, Mexico, Australia and the U.S. — where having a global mindset is viewed as less critical to business success. R E G I O N A L D I F F E R E N C E S Part of the equation is holding senior leaders and line managers accountable for development. While 74% of companies believe their leaders are engaged in championing development programs, only 58% of employees think so. F I G U R E 4 I N - D E M A N D S K I L L S E M P L O Y E E R E S P O N S E O R G A N I Z AT I O N R E S P O N S E Analytical skills Leadership/ inspirational leadership 41% 43% Coaching/ people development 37% Coaching/ people development 40% Turnaround and growth mindset 36% Analytical skills 34% Leadership/ inspirational leadership 36% Design thinking/ innovation 33% Design thinking/innovation 36% Global mindset 31% W I T H J O B D I S R U P T I O N C O M E S A S H I F T I N T H E S K I L L S T H AT A R E I N D E M A N D
  7. 7. 8 62% of organizations globally say that developing local leaders in emerging economies is a strength. This shows steady improvements from 2014, where Mercer’s Leadership Practices study found that only 47% of organizations had a localization strategy in place5 . Despite this growing emphasis on the importance of an inclusive culture, fewer than a third of employers surveyed strongly agree that their company is actively working toward creating a diverse workforce or that their leaders are held accountable for attracting and supporting diverse teams. Gender diversity has become a hot topic, with pay parity discussions and board diversity capturing widespread attention in the media. Outside of the United States, over half of employee respondents feel there is insufficient progress in cultivating women leaders in their organizations. Mercer’s When Women Thrive research, based on data from over 600 organizations globally, found that female representation declines as career level rises. As shown on the Internal Labor Market® (ILM) map below (see Figure 5), women globally make up 33% of managers, 26% of senior managers, and only 20% of executives. In addition to representing the current workforce, the ILM map also shows how many women and men come into the workforce, how many ascend through the hierarchy, and ultimately the numbers exiting the workforce at various career levels. The above illustration shows an increased focus on hiring and promoting women globally at the executive rank — but efforts to maintain women at other levels and build a sustainable pipeline are woefully lacking. O R G A N I Z AT I O N S C O U L D D O M O R E T O B U I L D D I V E R S E TA L E N T P I P E L I N E S F U T U R E F E M A L E TA L E N T P I P E L I N E AT R I S K The WEF Future of Jobs report indicates that women might be more negatively impacted than men by labor market disruptions, given the type of jobs slated to be in decline and the gender role biases that exist today. Identifying how to accelerate the development of key populations is a primary priority for employers and one that is difficult to achieve. International assignments are one way to provide the experience-based development employees are craving, while addressing the need to develop leaders with an agile skill set and global outlook. Historically, expatriate assignments have been the preserve of senior leaders, but we are now witnessing more innovative approaches to mobility including shorter assignments and developmental engagements to rapidly build organizational capability through career movement6 . 49% 5 1 % 38% 62% 33% 67% 26% 74% 20% 80% FEMALES 7% MALES 6% AVERAGE REPRESENTATION AND TOTAL PROMOTIONSCAREER LEVEL TOTAL HIRES TOTAL EXITS FEMALES 8% MALES 7% FEMALES 7% MALES 6% FEMALES 5% MALES 5% OVERALL REPRESENTATION: 38% FEMALE 62% MALE EXECUTIVE FEMALES: 9% MALES: 6% FEMALES: 10% MALES: 8% FEMALES: 8% MALES: 7% FEMALES: 8% MALES: 9% FEMALES: 8% MALES: 9% FEMALES: 9% MALES: 10% FEMALES: 14% MALES: 14% FEMALES: 18% MALES: 21% FEMALES: 12% MALES: 12% FEMALES: 15% MALES: 17% SENIOR MANAGER MANAGER PROFESSIONAL SUPPORT STAFF F I G U R E 5 T H E AV E R A G E O R G A N I Z AT I O N ’ S I L M M A P Note: This ILM map reflects average representation and talent flows across 350 participating organizations. 5 Mercer. (2014). Leadership Practices Study Report. (Whitepaper). 6 https://www.imercer.com/products/WorldwideIAPP.aspx
  8. 8. 9 T H E R I S E O F F R E E A G E N T S • Leverage analytics to improve talent flow for each of your key employee populations. Begin by diagnosing the talent you have today in terms of demographics, skillsets and talent flow. Then define the future talent needs over different time horizons (short/medium/long term). Identify mismatches and use causal modelling to identify the benefit that interventions will have on your talent supply. Once you have chosen the interventions to implement, use analytics to track progress and adjust the model as needed. • Broaden traditional views of the internal labor market, moving away from the narrow definition of ““people on the payroll” to a wider “talent ecosystem” that includes vendors, partners and suppliers as well as talent that is freelance, crowd-sourced, or even in partnership with competitors7 . You may also consider existing employees and unsuccessful candidates from your recruiting efforts as part of this extended labor pool. Technology innovations have changed the way we think about outplacement, making it possible to stay connected with everyone who touches your organization. There are many internal and external forces shaping your workforce. If left unattended, the mix, quantity and quality of your talent pool will drift and become misaligned with business needs. • Help your business leaders be creative in sourcing talent. For example, look at part- time inputs from downshifted or retired workers, or remote inputs from geographies with surplus workers that might contribute via virtual team arrangements. Part of the challenge here is ensuring that progressive practices are not only in place but well communicated to the workforce, and that barriers to internal mobility are removed. • Build agility into your workforce structure. With employees wanting to develop their skill portfolio through a variety of short term experiences, think differently about how you deliver this sustainably and with impact. Areas to look at include your workforce structure, career management practices and mobility arrangements. Focus on building new workforce capabilities that will drive innovation and growth, such as telling a story with data, managing a diverse workforce and employing design thinking skills. F O C U S O N E X E C U T I O N : B U I L D I N G A D I V E R S E TA L E N T P O O L The growing ranks of contingent workers is a trend predicted to further influence talent priorities, bringing with it a challenge in engaging and managing a more fluid workforce. Semi-permanent, contingent and virtual workers (often located around the world) are all part of this new talent ecosystem and are demanding a redefinition of what is a job and what it means to be an employee. To move the needle on talent pool development, organizations need to have continual insight into their oft-shifting workforce, critical skills and talent flows. Necessary to driving this effort is data that allows organizations to really understand their talent across demographics such as gender, age, ethnicity and employment relationship (part- time, full-time and contingent). Talent flow is a significant issue not just in ensuring no population is neglected, but also in creating differentiated strategies to groom and promote talent. Only when insights and interventions are data driven will organizations make progress on talent development. 7 Mercer. (2015). Talent Ecosystems: Manage Critical Capabilities To Gain A Competitive Edge. (Point of view paper)
  9. 9. 10 The demographics of the workforce are changing — and so too is the “deal” that employees expect from their employers. Millennials are now the dominant generation in the workforce, making up one in three American workers8 and, by 2020, half of the global workforce9 . More so than their older peers, these workers are seeking ways to fit work into a variety of different life models. They want more flexibility and autonomy in their work environment, as well as more holistic advice from managers and more tailored solutions for their rewards and benefits. Given these changes, it has never been more critical to listen and respond to the needs of employees. A case in point concerns flexible work practices — two in three employers believe that their flexible work practices support employee productivity, yet only half of employees surveyed say they are permitted a flexible work schedule and fewer than two in five are able to work virtually. This could suggest a true misalignment where existing policies no longer meet needs or have not been nuanced for the region. It could also be that while programs exist, organizations miss opportunities to effectively communicate and promote their existence to employees. Either way, it highlights an opportunity P R I O R I T Y # 2 : E M B R A C E T H E N E W W O R K E Q U AT I O N 8 http://www.pewresearch.org/fact-tank/2015/05/11/millennials-surpass-gen-xers-as-the-largest-generation-in-u-s-labor-force/ 9 http://www.catalyst.org/knowledge/generations-demographic-trends-population-and-workforce 10 Mercer. (2016). Say on Pay. (Point of view paper) My manager is not good at providing me the tools, coaching and support I need to improve my performance. to close the gap between how we work today and how employees want to work in the future. The “employee voice” is also having an organizational and societal impact with regard to compensation strategies. Nearly half of organizations report that they plan to make changes to executive compensation in the next year. In addition, two thirds of companies have aligned Executive Compensation with Total Shareholder Return, or are planning to do so in the next 12 months. We are certainly heralding a more balanced approach and greater transparency in rewards10 . Coaching capability is one of the Top 3 in-demand skills for managers in the next 12 months. The theme of transparency is not just apparent in the executive ranks. Employees at all levels are asking for more transparency and flexibility with regard to career paths and the resulting remuneration trajectories. In today’s climate of readily accessible information, employees expect more than just pay calculation explanations. Employees are looking for more flexible and tailored solutions for their rewards and benefits.
  10. 10. 11 Rewards that are fair and competitive matter to employees, but being valued and trusted as an individual and having the opportunity to contribute are just as important. This clearly places the manager at the center of the “value proposition” equation. Most employees, however, award their managers a C grade or below for their ability to provide resources to do the job, their skills in coaching and supporting them, and their ability to help them improve performance (Figure 6). It is no surprise that coaching capability was reported as one of the top three in-demand managerial skills in the next 12 months. Reward segmentation is common practice in Italy, Mexico and China where more than 80% of the organizations differentiate compensation for key segments such as high potentials. In a tighter economic climate, organizations are also looking towards non-cash incentives to motivate employees — a move that meets Millennials’ need for instant recognition. Nearly 80% of companies say they use a total rewards approach to formal recognition — with even more in Latin America (91%) and Asia (89%) — and over half plan to focus on non-monetary recognition this year. Technology is fast changing this landscape and enabling flexible total rewards practices. Companies are blending insurance and wellness spends and empowering individuals to make direct choices on how they use these monetary benefits, for example buying more paid days off. With mobile-enabled choices, total rewards are being tailored at the individual level. M A N A G E R S A R E I N T H E D R I V E R ’ S S E AT I N S H A P I N G T H E E M P L O Y E E E X P E R I E N C E I N D I V I D U A L I Z I N G R E W A R D S Employees in Sweden, France and Italy are least satisfied with their manager’s ability to support them. Flexible work schedules are least desired and least prevalent in Asia, where only 38% say they would improve their work situation, compared to 46% globally. According to both employers and employees, organizations in Mexico, Brazil and India are more transparent when it comes to rewards than those in other countries. France has the most divergent views, with 90% of employers but only 60% of employees stating that their organization’s rewards practices are transparent. Fifty-seven percent of Millennials agree that their organizations are transparent around rewards, compared to 43% of their Baby Boomer colleagues. R E G I O N A L D I F F E R E N C E S D I F F E R E N C E S I N R E W A R D S T R A N S P A R E N C Y Instead, they want to know pay ranges and what different career moves might yield in monetary terms over the longer term. Today, 66% of organizations consider themselves transparent with respect to pay information, yet only 50% of employees concur. This is low-hanging fruit for organizations that have competitive pay practices but might not be communicating them effectively.
  11. 11. 12 Interestingly, in this study what employees value most differs less by generation than it does by culture. Managers in the regions/countries below can use this heat map to guide their conversations, focusing on the areas that employees rated as most important to improving their work situation (noted in red in Figure 7). F I G U R E 7 E M P L O Y E E P R I O R I T I E S B Y C O U N T R Y Global U.S. Canada Brazil Mexico France Italy U.K. Ger- many Swe- den China Singa- pore Japan South Africa Aus- tralia India More/Better training opportunities Increased pay Flexible work practices A supportive manager More paid leave or additional holidays More autonomy A better designated work environment A manager that stretches my abilities More responsibilty More realistic/better allocated workload Important Somewhat Important Not Important F I G U R E 6 E M P L O Y E E S G R A D E K E Y TA L E N T P R A C T I C E S F R O M A T O F * My relationship with my team members My application/hiring experience My onboarding experience My workload/hours worked My manager’s ability to provide the tools and resources I need to do my job efficiently My manager’s skills in helping me improve my overall performance My manager’s skills in coaching, supporting and developing me My experience with HR regarding benefits questions and information requests My compensation 2 4 33 2040 2 2 5 42 1434 4 3 10 41 1231 3 4 9 42 1330 1 6 12 40 1229 2 6 13 39 1229 2 7 13 38 1130 2 6 12 45 924 4 5 15 44 827 1 9 16 41 823 3Career pathway options described to me F — Very Poor *All values in %. Percentages may not total 100 due to rounding. D — Below Average C — Average B — Above Average Don’t KnowA — Excellent
  12. 12. • Communicate a clear employee value proposition. Build your EVP from the ground up, focusing on what common terms like “flexibility” and “remote working” really mean for each segment of your workforce and across different cultures. Address the needs of specific populations by focusing on interventions that have been shown to have impact (e.g., financial wellness for women11 ). Raise employee awareness of programs that are already in place and keep listening as their needs evolve and change. • Know your talent’s skillset and interests. Beyond the basics of pay and training, employees want to be valued as individuals and empowered to operate autonomously. This places strain on the traditional supervisory roles and requires managers to learn to operate as coaches. Provide tools and resources to help managers understand their employees as individuals, and help them to adapt the organization’s EVP into an IVP — an individual value proposition — for each of their team members. The new breed of career- matching tools and strength-based assessments can also help bring in “right fit” talent into your organization from the start. • Review how line managers are incentivized and rewarded for being talent scouts and talent developers. This helps talent to be viewed as an enterprise resource to be nurtured and grown. Without the promise of a backfill of equal or better quality, it is hard to see the business rationale for managers to encourage their high performers or high potentials out of their current roles. • Strive for transparency in rewards. Take this opportunity to examine pay parity in the workplace and address banding inconsistencies. In addition, consider creating alignment between career levels and rewards so that employees can see potential career growth with the associated reward opportunities. The psychological contract at work is changing due to the advancement of technology, consumerization in the workplace and the variety of employee expectations. These factors have profound implications for total reward strategies and the employee value proposition. F O C U S O N E X E C U T I O N : E M B R A C I N G T H E N E W W O R K E Q U AT I O N 13 11 http://www.mercer.com/our-thinking/when-women-thrive.html
  13. 13. 14 Employers think they are doing a better job in supporting career growth than employees report. In this study, more than a quarter of employees (most notably Millennials) say they plan to leave because they do not see a long term career in their current organization or see better options externally. This is especially worrying given that 82% of the organizations in this study reported a focus on a “build” strategy in 2016. Mercer’s recent Careers Reimagined study suggests the challenge might be twofold: not having a career framework in place (only 50% of organizations globally have one), and failing to successfully implement career management strategies12 . In this year’s Trends study, half of employees surveyed say that career path information is available to them. This is in contrast to the employers’ view, with 68% saying that this information is in place. The disconnect hints at the second challenge — implementation — and in particular the effectiveness of communication around internal career opportunities. P R I O R I T Y # 3 : A R C H I T E C T C O M P E L L I N G C A R E E R S Employees in India, Singapore and Mexico were most likely to report that, while satisfied with their organizations, they don’t see long-term career potential so are likely to leave in the next year. On the other hand, employees in Europe were most likely to say that while unsatisfied with their organization, they plan to stay — perhaps reflecting fewer opportunities in the market. Having sufficient rungs on the career matrix for people to quantify progression is more important to employees in Asia than elsewhere, one third of whom identified this as one of their top three concerns when it comes to their careers. In 2015, two thirds of companies in Latin America (66%) and nearly half in North America (46%) made changes to their job architecture; of those, the most common change was adding job levels. In 2016, organizations in North America have shifted their focus to creating ““stepping stone” roles. R E G I O N A L D I F F E R E N C E S Even though I am satisfied with my organization, I plan to leave in the next 12 months. Unsatisfied & leaving Satisfied & leaving Satisfied Unsatisfied F I G U R E 8 E M P LO Y E E S AT I S FA C T I O N A N D R E T E N T I O N 12 Mercer (2015). Career Frameworks: The Strategic Centerpiece of Integrated Talent Management. (Whitepaper). We feel confident about filling our critical roles with internal candidates.
  14. 14. At the most basic level, this comes down to managers conducting dedicated career conversations above and beyond traditional performance reviews. Over 70% of organizations reported that these conversations are taking place, while only 56% of employees agree. Furthermore, when asked to rate their manager on their skill in holding these career conversations, only 31% gave Companies are at different points in the continuum in structuring job levels and defining career paths. The largest proportion of respondents are recognizing the demands of employees — Millennials in particular — for rapid career progression13 and are now intending to add job levels or “stepping stone” roles into their architecture this year. These could be companies that might have gone too far in embracing broad banding and are now recognizing the need to add back promotion and progress steps. A third of companies report having too many job levels for their needs and are on a journey to collapse these into a more manageable and rational job architecture. This often stems from a desire to increase fluidity and lateral movement. These companies may be pushing toward broader bands that offer employees the opportunity to explore career options by gaining skills and experiences via unique paths rather than following rungs, levels, or roles. 13 http://www.hrmagazine.co.uk/article-details/career-progression-top-priority-for-millennials C A R E E R S B Y D E S I G N Organizations are being called upon by their employees to be more transparent around careers and the implications of career moves not only on remuneration trajectories, but also on other engagement drivers such as increased autonomy and scope of responsibility. Despite this desire for fluidity and flexibility, high potentials still want a career infrastructure and more frequent conversations with their manager to help them build their skillset and pinpoint their next move. This means thinking differently about the nature of a “job” and the units of skill and experience that indicate readiness for lateral mobility or promotion. As this is not happening organically, it must be design-driven in a way that protects talent from leaving. In today’s talent demand economy, the onus is therefore on the organization — and the direct manager — to architect and inspire career experiences that have movement built in. 1 in 3 employees are planning to leave their current organization within the next twelve months, mostly due to the lack of career progression opportunities. their manager an A or B grade with 25% awarding a D or F. According to this study, developing a career infrastructure and fostering career moves is on the list of priorities for organizations this year, but for most organizations it barely makes the top half in terms of priorities. Given that career opportunity is a significant retention driver, this area demands attention. 15
  15. 15. 16 • As you refine job leveling and rewards for your organization, take the opportunity to overlay high impact career pathways. Remember that rewards structures are not always a direct match to career frameworks as they may need to solve different workforce challenges, but the two are inextricably linked. A clear career philosophy and architecture can provide the connective tissue to bring careers to life. • Approach career pathing with a goal of facilitating movement and skills progression in a way that benefits both the employee and the organization. Pay special attention to how employees can navigate around the organization to pick up generic or portable skills, especially those that you have identified as critical for future leaders. This will ensure that employees — especially high potentials — are ready for stretch assignments and promotion opportunities when they arise, and that in the meantime they are engaged in an enriching learning experience. Develop expatriate programs that address career progression both during the assignment and upon the employee’s return, with a clear path forward for them post assignment. • Institutionalize and communicate a career culture. In order for employees to experience your career culture on a day-to-day basis, you must start by helping managers improve their ability to have meaningful career conversations. Some organizations are using development consultants or career coaches to supplement the critical role that managers play. Next, leverage employee-focused technology to help employees and their managers understand career options and preferences, allowing them to explore future career paths and build development plans to get there. Leading edge tools are often apps or other gamified solutions that keep employees engaged with in-house career paths. A compelling communication strategy, using methods such as inspirational videos and interactive blogs, can equally be leveraged to stimulate career conversations and cut through the noise. • Use real careers to inform career paths. As you make decisions about the number of job levels as part of a career framework strategy, undertake a career mapping exercise with a representative sample of the employee population (remembering to focus on key demographics). This often shows employees moving across and between bands, and uncovers unusual development pathways and mobility strategies that add value to both individuals and the organization. The results can also be used to inform alternative ways to address future talent gaps as part of strategic workforce planning. F O C U S O N E X E C U T I O N : A R C H I T E C T C O M P E L L I N G C A R E E R S Creating the “lens” through which employees can see opportunities in an organization should be a top priority for employers who are looking to build their talent pipeline. 16
  16. 16. 17
  17. 17. 18 Complexity suffers from the snowball effect, building on itself and ultimately getting out of control. HR practices have evolved in just this way, adding new processes or technology without “pruning the hedges” to ensure that they deliver the intended value in efficient ways. The result can be over- orchestrated approval chains, perpetuated by software that impedes — rather than accelerates — decision making. Companies are acknowledging this complexity, with only one in three employees and one in five HR representatives reporting that their HR processes are “simple and efficient.” There is real commercial impact to complexity, with work-related stress now the single biggest cause of long-term absenteeism14 . The demand for change is coming from the business, who want to reap more value from talent processes, as well as from employees themselves, who want better information about how they’re doing and how to progress in the organization. In fact, only 4% of employees and 5% of HR respondents describe their company’s HR processes as “state-of-the-art,” highlighting the urgent need for change. The result is a push for simplification of most talent processes. Three in five organizations have concrete P R I O R I T Y # 4 : S I M P L I F Y TA L E N T P R O C E S S E S 14 https://www.thehrdirector.com/business-news/health-and-wellbeing/stress-biggest-cause-of-absenteeism/ My company’s HR processes leave a lot to be desired. plans to change their people strategy, talent acquisition, HR technology, and performance management processes in 2016, and roughly one in three have already secured the budget for these changes. Employers tend to see career management and compensation competitiveness as lesser priorities over the next 12 months. However, these are areas where employees have concern and see room for improvement. This disconnect is significant. The employee voice suggests that changes to career management and rewards will have greater impact on talent engagement, retention and performance. An alternative way to read these results is that performance management — the traditional cornerstone of a pay-for-performance philosophy — may need to evolve to focus more on engagement and careers. For managers, this means focusing on performance and potential in the context of value creation for the organization and its implications on wealth creation for individuals. This is in stark contrast to “managing” people or performance, a concept that is increasingly feeling outdated. Pay-for-potential as a lever in growth economies has also been a part of debate this year. Our HR processes fail the test of being ‘simple and efficient’.
  18. 18. Performance management has been a key focus for organizations in 2015 and will remain so in 2016. There is a movement afoot to replace measurement and ranking with conversation and better tools for career building. While ratings remain an important part of the performance management landscape — and help to drive salary differentiation — some organizations are giving up forced rankings while 22% plan to abandon ratings altogether this year. Interestingly, 2 out of 3 employees see performance ratings as very or extremely important, primarily because ratings help them to know where they stand (46%) and encourage them to improve their performance (54%). Only 8% said that performance ratings are not valuable — with most believing that ratings encouraged them to work harder, helped them know where they stand relative to others and enabled them to earn more. However, half of the organizations in this study are considering eliminating the link between performance ratings and rewards. These findings give pause for thought — prompting questions as to who is driving the change and whether it meets employees’ needs for fair and transparent compensation. P E R F O R M A N C E M A N A G E M E N T — F O C U S O N P U R P O S E R AT H E R T H A N P R O C E S S 1 in 2 employees in France say they do not receive performance ratings. 1 in 3 in Sweden, Mexico, and the UK do not either. Eliminating ratings is most prevalent in North America (where nearly 29% of companies plan to eliminate ratings in 2016) and Asia (where 22% of companies eliminated ratings in 2015). European organizations are least focused on improving goal calibration, while four out of five organizations in Asia intend to improve goal calibration this year. Organizations in Brazil and India express the greatest confidence in identifying critical roles and job families, and filling those critical roles internally. R E G I O N A L D I F F E R E N C E S F I G U R E 9 C H A N G E S P L A N N E D I N K E Y TA L E N T P R O C E S S E S * HR technology Workforce training Leadership development No changes required Changes required, but no plan Change plan determined, but resources not secured Changes approved to imple- ment within next 12 months Don’t Know *All values in %. Percentages may not total 100 due to rounding. The majority of employees globally believe that performance ratings encouraged them to work harder, helped them know where they stand relative to others, and enabled them to earn more. Performance management Talent acquisition Talent review and succession Rewards Career management Workforce Planning Global mobility 14203132 3 14213032 3 13233230 3 17232731 2 15232831 2 14243228 3 19242827 3 16252827 4 15263026 3 23222823 5
  19. 19. 20 • Begin by evaluating processes and workflows already in place, and look for areas to reduce duplication and remove steps. If it needs too much explanation, it means the process is not intuitive and can be improved. Also consider where manual work can be automated through the use of technology to eliminate repetitive processes. • Redesign the interactions that employees have with the organization; these often pass through the HR function. Move away from siloed workflows (which suit HR’s department and technology structures) towards holistic programs that address the end-to-end employee lifecycle. Leverage design thinking to create a unified and easy experience that prioritizes the benefit to the individual employee and to people managers, from initial attraction through post-employment. Technology and outplacement services can make it easier to ensure a positive brand experience even when people are not a fit for a role. Staying connected and providing support are part of a modern Talent Acquisition process. • Simplification does have downsides. One area in particular that requires caution is performance ratings. While eliminating forced rankings is a positive step toward simplification, retaining ratings can actually aid in right sizing processes (such as those linked with an M&A integration) and meets employees’ needs for fairness in reward. Balance the need for simplicity with employees’ desire for transparency, which requires a certain level of confidence in how capability and potential are measured and how hiring, promotion, and rewards decisions are made. • Do not lose focus on service delivery optimization — because efficiency matters and transactional delivery is key for the overall perception of the HR department. The goal is to enhance the customer experience while freeing up HR for more strategic pursuits — whether through shared service centers, centralized employee helpdesks, HR portals, mobile applications, or other digital or workflow solutions. Keep in mind that technology is not always the answer, but often a catalyst for change. F O C U S O N E X E C U T I O N : S I M P L I F Y I N G TA L E N T P R O C E S S E S Simplification is needed across the entire portfolio of HR administration, talent management and human capital practices. Many companies are already underway. What emerges here is a new focus on the goal, not the score. Most companies who made changes or are planning change are focusing on the front end of the equation (i.e., how goals are calibrated) rather than the back end (i.e., how employees are scored and ranked against one another). They are re-designing performance management processes to be simpler for managers and employees to execute, while still delivering value by maintaining regular touch points. Performance management is inextricably linked to talent reviews and succession, areas where most organizations are quite positive about their current state. Three-quarters of employers report confidence that they have a strong bench of successors for senior levels, and that their talent review process extends beyond top leadership ranks. However, if talent review and succession processes are working, why are so many organizations (84%) planning to change them in 2016? Too much tinkering with the system, especially if it feels like change for change’s sake, is exhausting for managers and employees — and can add to complexity. It can also over-burden HR professionals with constant change management. This is an opportunity for HR to take a step back, re-examine its role, and define with pinpoint precision the value that it can bring to organizational success. 20
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  21. 21. 22 In a climate of unprecedented skepticism about the impact of HR, it is time to re-evaluate the contribution of the HR function to the business. To maintain its value to the organization, HR must reconcile the break between the business and talent strategy, and work harder to demonstrate Globally, “Big Data” management is trending upwards: it was identified by organizations as one of the top five workforce areas that will impact their business in the next 12 months. HR is often at the center of this discussion, and applied big data — especially predictive analytics — offers a way for HR to deliver value to the business. There is consensus that many barriers exist and the journey is slow. Rather than focusing on the value-adding predictive analytics, companies are instead still figuring out how to handle large amounts of data and get basic reporting right. Only 10% of companies believe they have the ability to leverage predictive analytics in making human capital decisions, and only one third say they can do “cause and effect” analyses of key workforce trends against business outcomes. Delivering strategic insights requires, first and foremost, quality data. But a major problem plaguing many HR functions today is just this — leading to “garbage-in, garbage-out” concerns. P R I O R I T Y # 5 : R E D E F I N E T H E V A L U E O F H R L E V E R A G I N G P R E D I C T I V E A N A LY T I C S A N D U P S K I L L I N G H R It’s hard for me to get good answers and information from HR. HR is not viewed as a strategic business partner. how HR systems, processes, and insights can positively contribute to business outcomes. As a true strategic partner, the redesigned HR function should be a technology- and data-driven people organization that sits at the intersection of business strategy and execution. Further exacerbating this dynamic is the fact that data is often spread across multiple software systems and cannot be easily integrated for analysis. Although two-thirds of organizations surveyed have invested in HR technology in the past three years, more are disappointed than are pleased with their new HCM implementation, and two in five report that they need additional technology to integrate data from across the business. This problem is particularly acute for global organizations, as they are unable to take an enterprise-wide view of their current workforce. A lack of analytic skills contributes to the inability to extract actionable insights from HR data. While most HR professionals are comfortable with structured data such as compensation statistics and engagement surveys, many do not have the same comfort level with unstructured data or the inferential statistics needed for predictive insights. Given that this is a specialty area currently in incubation, organizations may want to consider a dedicated team responsible for workforce
  22. 22. Integrated technology, quality data, and people with the analytical skills to draw data insights are crucial to HR’s ability to provide strategic value. While it is clear that these three elements need to be addressed in order to drive the desired changes, organizations have put investments in technology ahead of HR skill development — making it challenging to capture the value of their system implementations. More than half (59%) of organizations plan to make changes to HR technology in the next 12 months, while only 36% plan to invest in HR training and development. Only 13% of companies currently have a curriculum for developing HR professionals, while 42% report gaps in their HR skills but have yet to begin planning for how to address them. These figures underline the perennial problem of HR as “the cobbler’s children” — investing in talent development for everyone but themselves. As economic and workforce trends heighten the importance of the talent agenda, HR will inevitably play a critical role in shaping the strategic direction of the business and executing on key priorities. In order for this to be a true partnership, organizations must stop putting HR skill development at the bottom of the list, and HR leaders must be vocal about the skills and tools their teams need to succeed in the new talent ecosystem. M A N Y C O M PA N I E S A R E AT T H E B EG I N N I N G O F T H E H R D E V E LO P M E N T J O U R N E Y 23 analytics and invest in skills associated with analytics, such as how to tell a story with data. Despite these data limitations and technology challenges, large organizations cited the lack of a specialized team and related expertise as the number one roadblock to better leveraging workforce analytics. Companies in Asia are most likely to invest in HR upskilling in 2016, with 44% in the region and 53% in China having plans in place. North American companies are lagging behind — despite gaps in their HR skills, they are least likely to be investing in 2016. Use of workforce analytics varies significantly across the globe. Organizations in North America and Latin America lead the way, with nearly one-third reporting that their HR departments leverage analytics to a great extent. Companies in Asia are just beginning to use workforce analytics. R E G I O N A L D I F F E R E N C E S
  23. 23. 24 • Rethink the structure that delivers value. Consider redeploying the skills and expertise of total rewards, talent management, learning & development and employee relations Specialists into more fluid Business Partner roles that can solve broad human capital problems and think across the value continuum. Expand HR professionals’ line-of-sight through analytics to help take an enterprise-view of talent. Analytics can help move away from geographic or departmental silos to mobilize talent across the enterprise. Recognize that one size does not fit all, especially in large multinationals with a diverse workforce. One of the benefits of leveraging analytics is that it allows a data-driven approach to determine when a broad-based initiative will meet need or when a more tailored approach is required. Be prepared to create targeted micro interventions for pockets of the organization when required. • Build HR’s professional capabilities to meet the needs of the evolving talent landscape. Focus on a few key areas that will have maximum impact, such as analytical skills and change management expertise — both of which are required to justify HR spend and deliver true business value. Acting on the message of analytics will further reinforce value. Data that are ignored will fast become untrusted and devalued. • Stay abreast of technology innovations. HR leaders and software vendors have been talking about integrated talent management systems for years. We are now at the tipping point where robust cloud-based HRMS and talent platforms provide end-to-end coverage, but companies have not yet fully harnessed the power of these systems to both deliver day- to-day operational support as well as strategic and actionable insights. If you have been piecing together a solution and find yourself with a potpourri of bolt-on systems, consider investing to tighten the connections between talent management, total rewards and careers programs. Recognize that it can take time to plan and implement technology and achieve the related staffing and service level objectives, so develop short- to mid-term plans to bridge the ROI gap. • HR transformation is not just HR’s responsibility. The CEO and Executive Team play a critical role. And there may be talent — such as data scientists — that can be borrowed from outside of HR. In fact, if HR could do this by itself, many more organizations would have done so by now. Transformation has an element of process, information and tools — but to drive real change, this has to be an enterprise commitment, sponsored from the top. F O C U S O N E X E C U T I O N : R E D E F I N I N G T H E V A L U E O F H R Redefining how the HR function adds value requires its leaders to be business experts, not generalists; and to shift the core skills from operational HR to talent strategy expertise. 24
  24. 24. 25
  25. 25. 26 1 . B U I L D D I V E R S E TA L E N T P O O L S • Expand the use of analytics to identify talent flow opportunities and pinpoint the drivers of change • Rethink talent acquisition through innovative sourcing strategies, informed skill matching and new worker profiles • Build for tomorrow via experience-based development interventions focusing on diverse population pools and emerging competences 2 . E M B R A C E T H E N E W W O R K E Q U AT I O N • Recognize “one size fits one” and build a growth culture that supports flexibility, development and autonomy • Create an environment where employees feel valued and have transparency around pay, feedback and progression • Rethink how managers are incentivized for identifying, developing and exporting of talent 3 . A R C H I T E C T C O M P E L L I N G C A R E E R S • Design career frameworks to reconcile the succession needs of the organization with the expectations of the individual around career direction and velocity • Stimulate talent movement in intentional and systemic ways through making careers fun and focusing on mobility and development programs • Enable managers to hold meaningful career conversations with their employees 4 . S I M P L I F Y TA L E N T P R O C E S S E S • Challenge existing talent management processes and technology to reduce duplication and be short and intuitive • Align performance management fundamentals with the organization’s business model and rewards philosophy • Reimagine employee interactions with HR processes to promote a positive employer brand 5 . R E D E F I N E T H E V A L U E O F H R • Reassess how the HR function delivers HR operations, strategic talent insights and the employee experience • Commit to investing in HR capability building, specifically around analytics, workforce planning and strategic partnering skill • Establish the vital role of managers and executives in promoting a Talent-driven environment and sponsoring change The workforce challenges identified in Mercer’s 2016 Global Talent Trends study are substantive, but certainly addressable. Faced with a global, diverse workforce in a period of rising skill shortages, organizations will need to rethink their talent infrastructure and day-to-day talent practices. The workforce of today may be the most career-oriented in history, forcing a new level of transparency between employers and their employees. Successful companies will navigate these changes by challenging how work has been done in the past, and considering how it could be done in the future. HR is front and center in this discussion. To deliver on the new Talent imperative, there are five priority areas to consider. The main themes and actions from Mercer’s 2016 Global Talent Trends study are summarized in the table below. C O N C L U S I O N : T H E P E O P L E A G E N D A F O R T H E Y E A R A H E A D
  26. 26. 27 Mercer is a global consulting leader in talent, health, retirement, and investments. Mercer helps clients around the world advance the health, wealth, and performance of their most vital asset — their people. Mercer’s more than 20,000 employees are based in more than 40 countries, and the firm operates in over 130 countries. Mercer is a wholly owned subsidiary of Marsh & McLennan Companies (NYSE: MMC), a global professional services firm offering clients advice and solutions in the areas of risk, strategy, and people. With 57,000 employees worldwide and annual revenue exceeding $13 billion, Marsh & McLennan Companies is also the parent company of Marsh, a leader in insurance broking and risk management; Guy Carpenter, a leader in providing risk and reinsurance intermediary services; and Oliver Wyman, a leader in management consulting. For more information, visit www.mercer.com. Join the conversation: On Twitter: @Mercer On LinkedIn: www.linkedin.com/company/mercer www.linkedin.com/company/ mercer-talent Core Team • Kate Bravery • Tamar Hudson • Katherine Jones • Karen Shellenback • Joana Silva Noted Contributors and Subject Matter Experts • Garry Adams • Jamie Barrette • Thorsten Barth • Angela Berg • Ilya Bonic • Antonis Christidis • Darrell Cira • Karen Cygal • Konrad Deiters • Will Ferguson • Mario Ferraro • Stefan Gaertner • Dion Groeneweg • Steve Gross • Martin Ibanez-Frocham • Natalie Jacquemin • Jackson Kam • Hans Kothuis • Denise LaForte • Raphaele Nicaud • Gregg Passin • Mary Ann Sardone • Ilene Siscovick • Ephraim Spehrer-Patrick • Puneet Swani • Javier Tabakman • Yvonne Traber The authors wish to extend a special thank you to Margaret Chabowski, Tonushree Mondal and Shari Fryer for their support. A B O U T M E R C E RC O N T R I B U T O R S
  27. 27. 28 United States A P P E N D I X D E M O G R A P H I C S S I Z E O F O R G A N I Z AT I O N S * LO C AT I O N * *all results are in percentages *all results are in percentages Singapore Mexico Japan Italy India Germany France China Canada Brazil Australia South Africa Sweden United Kingdom 500 to 999 employees 1,000 to 4,999 employees 5,000 to 9,999 employees 10,000 to 19,999 employees 20,000 or more employees 16 20 35 9 20 13 13 12 8 7 6 6 5 4 4 1 C O M B I N E D I N D U S T R Y Manufac- turing Financial Services Trade (Retail and wholesale) Healthcare Real Estate & Con- struction Mining & Utilities Entertain- ment & Hospitality OtherEducationTechnology & Commu- nications Adminis- tration & Manage- ment Professional, Scientific & Technical Services 21 *all results are in percentages Please note that data was weighted based on the 2014 GDP of each country, as reported by the World Development Indicators database (World Bank, 29 December 2015) (http://databank.worldbank.org/data/ download/GDP.pdf) 5 3 7 4 48 2 1 1 1 43 32 6 19
  28. 28. E M P LO Y E E G E N E R AT I O N B R E A K D O W N *all results are in percentages E M P LO Y E E G E N D E R B R E A K D O W N Female Male 39 61 *all results are in percentages E M P LO Y E E J O B L E V E L B R E A K D O W N Individual contributor or performer Manager of others Manager of managers Manager of departments or functions Executive Other 51 23 11 10 4 1 *all results are in percentages 23 Baby Boomers (1946-1964) 40 Generation X (1965-1980) 36 Generation Y/Millennials (1981-2000) 29
  29. 29. For further information, please contact the Human Capital Media office or visit our website at: www.humancapitalmedia.com Copyright 2016 Mercer LLC. All rights reserved.

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