Automated Workforce Planning: Tactical or Strategic?

Data Point Tuesday

An organization’s most critical assets are its employees. No one bothers to argue against that point any more. An organization’s workforce is also, however, its most expensive asset, and workforce management (the development of employees, retention of skilled talent, etc.) is consistently cited as one of the top issues facing organizations today. In a recent Aberdeen report, 60% of all organizations reported a need to improve workforce planning capabilities as a driver of their total workforce management efforts.

Pressures Driving TWM

Improving workforce planning capabilities took the top spot for pressures driving workforce management efforts, but better access to workforce data (in order to improve decision-making) was close behind, 60% vs. 52%. In our current “golden age of technology” there are ample workforce management technology solutions that can help organizations with workforce management, from timekeeping and leave of absence management to labor forecasting and analytics. The adoption of automated workforce management solutions though (as with other tech solutions) has been slow among organizations. Aside from the fact that the global workforce is rapidly driving towards a place where technology and automated workforce solutions will be a necessity for companies to remain innovative and successful, we have data that show – on a much simpler level – that workforce management technology is a good investment because it offers organizations multiple financial benefits.

Research shows that the use of automated time, attendance, and scheduling solutions results in 8% to 20% lower replacement costs (as a percentage of annual pay) for hourly workers, which can be attributed to the reduced cost of administration needed to manually manage such functions. Aberdeen’s research also found that average revenue per full time employee increased four times in organizations with automated absence/leave management technology and two times for organizations with automated scheduling, time, and attendance technology.

Automation Impact GraphOrganizations that automate scheduling, time/attendance and leave/absence management also saw increases in customer satisfaction levels ranging from 9.2% to 10.4% (compared to a 2.9% to 6.2% range of improvements for organizations that did not have automated solutions).

Automated workforce management solutions can also help to reduce unplanned overtime. While it’s expected of organizations to experience some overtime, having an inaccurate idea of what employees schedules will look like can quickly increase an organization’s spending. Best in class organizations experience less than 4% of unplanned overtime costs in comparison with 27% for laggard organizations. Automated solutions can help managers with critical scheduling accuracy, freeing them to give more time and attention to core business needs.

Unplanned-Overtime-Costs

Another benefit for organizations that use automated time and attendance software is greater workforce capacity utilization. These companies have employees who, on average, work at 12% more their capacity than those who rely on manual processes or spreadsheets (83% vs. 74%). Automated leave and absence management additionally helps to lower costs by accurately tracking employees’ time off, making sure PTO is recorded as it is taken (ensuring for example, that employees are not owed leave at the end of the year they’ve earned but not taken) and by providing organizations with software to properly submit and track leave and absence requests (mitigating the impact of planned/unplanned losses).

A May 2014 report by Aberdeen found that optimizing scheduling is a key attribute of leading firms. These firms experienced consecutive years of improvement in customer satisfaction by 17.8% compared to firms who did not have a focus on optimizing scheduling and actually lowered their customer satisfaction rates by an average of -3.9%. This should be the key take-away for organizations when it comes to automated workforce management solutions – we know that automated workforce management software can drastically help organizations to improve and optimize scheduling, and this is a key attribute of successful companies. And if the slow adoption of automated solutions comes from a concern that instituting such software could turn into a micro-managing nightmare, organizations should note that, as with all tools, its about how you introduce them and support their adoption. The potential benefits of automated solutions far out-way any cons, so dipping a foot in the automated solutions pool seems well worth the risk, even if it may require an investment in training and change management. We’re already witnessing the expansion of HR and administrative roles within organizations; these functions are providing organizations with instrumentally more strategic value than they have in the past. Free up these departments time and energy from consuming workforce management tasks like monitoring attendance/leave and scheduling, and see what happens when tactical, manual roles become automated and enable more strategic data analysis and insight to enter the mix!

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Why Diverse Organizations Perform Better: Do We Still Need Evidence?

You’ve probably heard that organizations with a focus on diversity have stronger organizational cultures – they have happier and more productive employees, and are more socially ethical than other organizations. You might have also heard that organizations with a focus on diversity perform better financially than organizations that do not invest energy in diversity programs, or in fostering a diverse workplace. Why, exactly, is this the case though? McKinsey & Company’s 2014 report, “Why Diversity Matters” answers just this, looking at the reasons why organizations with a focus on diversity simply do better, financially and otherwise, shining some data driven light on, well, why diversity matters.

McKinsey’s report examines the relationship between the level of diversity (defined as a greater share of women and a more mixed ethnic/racial composition in the leadership of large companies) and company financial performance (measured as average EBIT 2010–2013). Their research is based on leadership demographics and financial data from hundreds of organizations and thousands of executives in the United Kingdom, Canada, Latin America, and the U.S, allowing for “…results that are statistically significant and…. the first [analysis] that we are aware of that measures how much the relationship between diversity and performance is worth in terms of increased profitability.” Analysis of the data collected from 366 companies disclosed a statistically significant connection between diversity and financial performance, with organizations in the top quartile for gender diversity 15% more likely to have financial returns above their national industry median and organizations in the top quartile for racial/ethnic diversity 30% more likely to have financial returns above their national industry median. This pattern also held true in reverse, with organizations in the bottom quartile for gender or racial/ethnic diversity more likely to fall below the performance of the top-quartile companies and organizations in the bottom quartile for both gender and ethnicity underperforming (not just “not performing” but lagging) in comparison with the other three quartiles.

Feb 17 2015 Poor Diversity Poor Performance

McKinsey’s research also noted a positive relationship between financial performance and diversity in leadership, although this varied by country, industry, and type of diversity (gender or ethnicity). The U.S, for example shows no statistically significant correlation between gender diversity and performance until women make up at least 22% of a senior executive team. Even once that point is reached, the relationship observed for US companies is still of relatively low impact: for every 10% increase in gender diversity there is an increase of 0.3% in EBIT margin. The UK boasts a much more significant relationship between gender diversity and performance, experiencing ten times the impact for their focus on gender diversity than U.S organizations (even after they’ve reached the 22% tipping point). The correlated benefit is an increase of 3.5% in EBIT for every 10% increase in gender diversity in the senior executive team (and 1.4% for the board). It is also interesting to note that while U.S. companies have made efforts in recent years to up the number of women in executive positions (progress is limited but measurable), the data show that less attention has been given to the attainment of racial and ethnic diversity.

Feb 17 2015 Women in Executive Roles

Above-median financial performance was achieved by a higher percentage of companies in the top quartile than the bottom quartile for ethnic diversity in all the countries and regions McKinsey investigated. The message that diverse organizations perform better is clear, but as we asked earlier, why? McKinsey & Company offers the following supported hypotheses that diversity helps to:

  •  Win the war for talent
  • Strengthen customer orientation
  • Increase employee satisfaction
  • Improve decision making
  • Enhance an organization’s image

In the war for talent, diversity increases not only an organization’s sourcing pool but attracts talent that has shown to place significant value on diversity (such as Millenials). Additionally, because groups targeted by diversity efforts are usually underrepresented, they are often great sources of desirable talent. McKinsey & Company’s report cites a recent study that found, on average, lesbian, gay, bisexual, and transgender (LGBT) recruits tend to be more highly skilled and more likely to have advanced degrees. By focusing on diversity, organizations align themselves with an increasingly heterogeneous customer base, enabling stronger bonds with customers. Workplace diversity increases employee satisfaction and fosters positive attitudes and behaviors and creates better decision making through combining diverse groups of thinkers. These organizational aspects that diversity bolsters ultimately make up the foundation for organizations that perform better financially.

As the workforce becomes increasingly global, diversity is only going to increase in importance. Regulators in some European countries have already introduced diversity targets for boards, such as those set out in the UK Equality Act 2010. Despite the importance of diversity, many companies’ approaches are still very one-dimensional, opting for just a single diversity program to cover all aspects of diversity: racial/ethnic, gender, and sexual orientation. This may be why, on a large scale, companies often make progress in only one area of diversity.

Feb 17 2015 Gender and Ethnic Diversity Performance

McKinsey & Company’s research suggests that this one-dimensional approach to diversity results in a focus on a particular category rather than the opportunity as a whole. They advise that organizations should instead adopt tailored programs and make more targeted efforts within specific areas of diversity, believing that these will be necessary to make measurable progress and ensure relevance to business goals.

It does seem odd that we’re still making a statistical case for what everyone knows to be true:  diverse thought, experience, outlooks and cultures make for stronger solutions, more rapid innovation, more engaged employees and customers, and better all around performance. I guess more evidence doesn’t hurt.

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Candidates First, Employees Second and Customers Third?

Data Point Tuesday
The candidate experience is a growing priority. Between 2013 and 2014, organizations increased their amount of focus on building strong relationships with candidates by more than five times. But the Aberdeen Group opines in their recent report, “Why the Candidate Experience Needs to be a Priority ASAP,” organizations still need to up their ante. No matter the industry, a candidate’s application experience should be a top priority simply because their perceptions of the process (whether they get the job or not) can have a serious impact on an organization’s brand, customers, and success. In this hyper-connected age of social media, it can take only one voice to significantly damage a big brand…

The importance of the candidate experience is not lost on Best-in-Class organizations. These companies are 30% more likely to invest in new technologies such as social, mobile and video to make recruiting engaging for candidates, in comparison with all other organizations (60% vs. 46%).

Game Changing TechIt’s also more likely that Best-in-Class organizations (compared with all other organizations) will focus on the development of a talent community to reach candidates and improve the candidate experience. Talent Communities, groups of active potential candidates that can regularly engage with the organization through technology (online portals, email, mobile etc.) are one of the fastest growing areas of talent acquisition. Aberdeen reports that 40% of organizations (respondents from a recent talent acquisition survey) plan to increase their investment in talent communities over the next twelve months.

Aberdeen’s research finds that besides overcoming the skills gap in today’s talent pool, improving the candidate experience is ranked by businesses, overall, as the most critical talent acquisition issue. How this knowledge is reflected within organizations, however, is a different story. Just 21% of companies in Aberdeen’s report indicated that the candidate experience/building strong relationships with candidates were a top priority for 2014, although this was a significant jump from 2013 where only 4% of organizations reported this.

Besides the perception of an organization, having a great candidate experience process can also mean improved cost-per-hire. Aberdeen’s study found that organizations prioritizing the candidate experience are twice as likely to improve their cost-per-hire and are expected to have a larger budget for talent acquisition efforts in the coming year (compared to organizations who do not prioritize the candidate experience).

 Budget ImpactCandidates expect much of the same things as consumers, for example, in ease of use and clear user-interfaces. In a 2013 study by Aberdeen, 62% of Best-in-Class organizations reported giving candidates visibility into their application status through resources like automated emails and online platforms like candidate career portals (although just 33% of organizations feel they have an engaging career portal). According to another 2013 study from Aberdeen, candidates who start as customers of the companies they apply to are 3.2 times more likely to describe their relationship as an applicant as positive rather than negative.

A good way to think about whether or not your organization is prioritizing the candidate experience may be to ask if candidates are treated with a comparable amount of respect and attention as customers. If they are, it likely means that the candidate experience it something that’s planned ahead for, as an organization would plan for potential customers. Most organizations do not plan ahead when it comes to the candidate experience however, with Aberdeen citing 60% of organizations only recruit talent when there is an opening, instead of having a talent community of active candidates that can be tapped into as needed. Organizations should take heart that creating a focused and engaging candidate experience does not need to be a difficult process. Contemporizing the process with technology (building a talent community and active pipeline) is an important step, but organizations can start also to prioritize the experience by changing the system they have in place now. This could mean catering to the highly connected, tech savvy candidates of today by not only reaching out to them post-application and interview, but also soliciting feedback from them during the application process (helping organizations better understand holes in their candidate experience). Sometimes it’s the simplest aspects of an application process that have the most impact. Respondents of a recent candidate experience survey by Aberdeen reported that the best, candidate friendly companies:

  • Send a thank you note after an application is completed
  • Ensure candidates can effectively exhibit their qualifications
  • Share next steps (whether that’s moving forward or a courteous decline)
  • Allow candidates to provide feedback about the overall experience

The work that Gerry Crispin, Elaine Orler and Ed Newman have done notwithstanding, does your organization really care about “the candidate experience”? Does creating a talent community really matter when you need to fill positions? Will treating job applicants like customers really make a difference in your ability to attract, hire and deploy the talent you need to meet your organizations strategic objectives? The data are beginning to provide clear evidence that, to paraphrase Vineet Nayar, perhaps candidates come first, employees second and customers third….

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Key Drivers & Changes in New Ways of Working

Data Point Tuesday“New Ways of Working,” a report released last month by The B Team and Virgin Unite, offers up some provoking insights by businesses and The People Innovation Network (a group of 30+ global businesses passionate about re-defining work) on better ways of doing business, for the wellbeing of people and the planet. The report explains the key drivers that are changing the way we work, and the key changes resulting from those drivers. These “key drivers” for new ways of working should likely come at no surprise, as they are: The Tech Revolution (allowing us to work anytime/anywhere, massively redefining scale, and creating new ways to problem solve), Global Changes (population growth, climate change/resource degradation, megacities and shifting economic powers) and the Multi-Generational Workforce (Millennials expected to make up 50% of the workforce by 2020; mature workers staying in the workforce longer than ever). However while these key drivers may come as no surprise, some of the key changes resulting from these drivers (and their implications) may not be as obvious, making this report a great read for anyone interested in workplace trends and organizational culture. Let’s explore a few key changes…

Drivers and Changes

One key change will be the need for organizations to adopt a “life-long growth” mentality about skills and talent vs. traditional qualification based, fixed ability concepts. The B Team describes this as a shift from a push model of learning to a pull model of learning. Where traditionally organizations have employees engage in training and development programs where skills development is “pushed,” today’s generation source skills and knowledge as needed by leveraging technology (search engines and MOOC’s – massive online open courses). For the younger workforce traditional methods of training and development will quickly seem antiquated/unnatural and future training will move towards a continuous process versus planned or remedial courses. The B Team cites Charles Jennings’s book The 70:20:10 Frame Work Explained as an example of this approach, which considers that 70 percent of learning comes from doing tasks on the job, 20 percent from other people’s feedback and peer-to-peer learning, and 10 percent from formal training.
Skills NeededAs training and development shifts to a more continuous process, it’s likely that employees will also desire more continuous feedback, talking performance at an annual review will no longer cut it. The B Team also anticipates that the sharing economy in tandem with increasingly people-centric organizations will see mentoring as a major part of skills development in the future. Mentoring is a significant way to empower employees, and in the multi-generational workforce it won’t be traditional one-way mentoring. Young employees will mentor older colleagues (as much as the other way around), mentors may not even belong to the same organizations, and as CSR continues to increase in importance, the mentorship of students at schools and colleges by organizations will also increase.

“Tearing Up the Org Chart” is another interesting key change that The B Team’s report looks into. In the past, organizations have assumed a one-size-fits-all, top-down structure to be the most efficient but this is already changing, with the evolving workforce exposing new methods of information sharing and collaboration. While The B Team’s report cautions that we’re still not at a point where traditional hierarchical organizations no longer exist, forward-thinking companies are already changing shape and flattening out, allowing better channels for innovation, decision making, and making sure everyone’s voice is heard. For most organizations “Flattening” won’t mean removing all structure, but certainly giving employees more ways and power to communicate and make decisions across the company. The report offers a radical example of flattening – building a Holacracy, a model being implemented now by Tony Hseih at Zappos.

This is defined as a distributed authority system that uses a set of rules to knit the empowerment of individual employees into the core of an organization. Teams organize themselves by using regular task and governance meetings to identify backlogs and conflicts and employees find which projects need their support based on their agreed job role, not by their job title or by being assigned projects.
Company Structure on a Sliding ScaleA final key change that I’ll mention from the report is “Minding the Gap,” an important point that may be considerably less discussed than others among the ways technology is re-shaping work. The workforce of the future envisions a huge demand for high-skilled tech talent, and not everyone can fill this role. This presents a troubling opportunity for the disparity between “good” and “bad” jobs to grow rapidly and leave little middle ground. It will be essential for organizations to innovate to make sure this chasm doesn’t widen. Ideas must work to not just make “good jobs” great, but to reframe roles around people versus accepting the trade-off between low prices and good jobs. The B Tem sums it up well: “As businesses get ever-more Purpose-driven, making sure the benefits and innovations they offer filter down to all levels of the workforce will become essential.”

Make sure to check out Team B’s full report to learn about more key changes in the ways of people and work and organizations.

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The Global Workplace of 2030

Data Point Tuesday

CBRE and Genesis recently released a report “Fast Forward 2030: The Future of Work and the Workplace,” which provides meaningful insight on the behaviors, ideas, and trends, that will shape work and the workplace in 2030. Their report analyzes responses from 220 experts, business leaders and young people from Asia Pacific, Europe and North America who shared their views on how the current workplace is evolving. That report’s focus was to look towards the future and identify trends that will change the way we work over the next 15 years globally, with a key focus on China and Asia. CBRE and Genesis aimed to capture the thoughts and aspirations of this next generation by holding focus groups, instead of traditional surveys or interviews, in 11 cities worldwide, where “more than 150 corporate youth between the ages of 23-29 gave their frank opinions about current work practices, and in particular, what is and isn’t working for them and more importantly how they would like this to change in the future.”

What will work look like in 2030? Through questions considering the nature of society and corporations, CBRE and Genesis ask respondents to identify what the big game changers will be for shaping the workplace between now and 2030. Major game changing trends and ideas included:

  • The Holistic Worker
  • Lean, Agile, and Authentic Corporations
  • The Sharing Economy

“The Holistic Worker” was an idea echoed many times throughout respondents’ answers. This is a trend that we’re already seeing today, probably most prominently in the increasing attention to social responsibility among organizations. CBRE and Genesis report that “The Holistic Worker” will continue to be a significant influencer of change in the workplace. Their research shows an increasing belief that work should be “joyous and more full-filling,” and that within work there should be many opportunities to make meaningful contributions to the organization as well as society. Essentially, the data show that lines between work and life are blurring. People are more and more often expecting the freedom to choose how, where, and when they work, and these attitudinal shifts are slowly, but surely, creating a major change in workplaces and societies.

In CBRE and Genesis’s report, 78% of youth indicated that happiness was as important as financial success. 70% of Korean parents felt happiness for their children was more important than educational and financial success and in Japan, young employees in the focus group echoed the same sentiments, talking about a way of work totally different than the traditional ways of their parents. They spoke to workplace flexibility, going home to spend time with family, and working at many organizations over their career. Thai participants in youth focus groups said they would be willing to be paid 20% less if they could work in vibrant environments with the freedom and choice about how and where they get work done. Workplace flexibility and the desire for CSR are global trends, and certainly not limited to western culture. With the desire for work to having meaning and purpose, quick impact will be key. CBRE and Genesis anticipate that in 2030: “most work will be broken down into small, discreet, comprehensible components. Each component will have a clear purpose and teams delivering will have significant autonomy and control, responding to the many of the desires of the holistic worker.”

Another game changer for 2030, will be the need for organizations to be lean, agile and authentic – specifically, authentic. If organizations cannot be true to their values and contribute to society beyond the bottom line, their main source of talent, the holistic worker (and by virtue, also holistic consumers) will be extremely limited. CBRE and Genesis predict that technology and “artificial intelligence” will be huge game changers for organizations that can leverage them correctly. Organizations with 20-40 people can be just an impactful as large corporations, and by leveraging technology while being “unhindered by legacy processes and mindsets,” they will easily disrupt existing corporate models. The growth of technology, while being extremely beneficial for workplaces, is also a worrisome concept. CBRE and Genesis’s report points out it’s predicted that 50% of the occupations in corporations today will not exist in 2030, and points to evidence that in the U.S technology is already destroying more jobs than it is creating:GDP vs. Employment Growth

“The Sharing Economy” was another major underlying theme in CBRE and Genesis’s research. They define this as a socio-economic system built around the sharing of human and physical resources, whose emergence reflects changing attitudes in societies about ownership and collaborative consumption, fuelled by technology and apps that allow people to rapidly match supply and demand – person to person. Expert respondents in Beijing reported that the sharing economy would have significant impact to the future of work and the workplace in 2030, and used a research study by consultancy Latitude in the US71 as a framework for discussing how the sharing economy might impact real estate: Jan 27 2015 New Opps for SharingCBRE and Genesis also asked respondents about competitive advantage in 2030, and although answers covered a wide range, 10 top sources emerged, with attraction and retention of key/top talent as the number one source of competitive advantage followed by innovation. Jan 27 2015 Top 10 Sources of Competitive Advantage

When talking about innovation, respondents reported that for the future of the workplace “there will be constant innovation and support of entrepreneurial behaviors: micro-innovation within the organization”.

In several past posts I’ve discussed how the workplace is going increasingly global, yet to date most of the research in the area of work and the workplace remains from a western perspective. CBRE and Genesis’s report specifically widens the research to include not only western perspective but also those of developed and developing Asian nations, providing new and unique perspectives on a geographic level. Such perspectives can provide surprising results, such as the determination and excitement of young employees in Shanghai, Beijing and Tokyo to rethink the experience of work and push their superiors to change, vs. more conservative opinions than expected in New York and London. Youth Appetite for Change

The bottom line? The youngest cohort of our employees – worldwide – are describing their preferences for work and the “office” of the not so very distant future as radically different than most work environments today. Those organizations desirous of developing their cultures to attract and retain today’s Millennials might take these findings into account. We Baby Boomers won’t be around forever. And that’s probably a good thing.

Be sure to check out CBRE and Genesis’ full report here.

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Which Comes First, Economic Performance or Best in Class HR?

Data Point Tuesday

The Boston Consulting Group recently released the eighth report in their Creating People Advantage series. This year’s survey report, “Creating People Advantage 2014-2015: How To Set Up Great HR Functions: Connect, Prioritize, Impact” included responses from 3,507 people in 101 countries across industries such as industrial goods, consumer goods, and the public sector. 64 HR and non-HR executives from leading companies across the world were also surveyed. The result was a report that explores key trends in people management by considering 10 broad HR topics and 27 subtopics. Key findings from the report included the following:

  • HR capabilities correlate with economic performance
  • Analytics and key performance indicators (KPI’s) give HR a seat at the table
  • KPI’s should link to strategic action
  • Globally, leadership and talent management topics are reported as in most need of urgent action
  • HR departments must be more consistent with investment decisions
  • HR needs to listen more to internal clients

HR topics ranked by urgencyAn important central finding of BCG’s survey was the correlation between HR capabilities and financial performance. BCG isolated the top 100 and bottom 100 companies based on financial performance and found that organizations stronger in people management have respectively higher financial performance than those organizations without strong people management. Among these high performers no HR subtopic was reported as in need of urgent action, which directly contrasts with the organizations with the worst financial performance, which reported need for urgent action across nearly all 27 HR subtopics. BCG points out that this has been a consistent finding among their past reports as well as in publically available research, referencing the share prices over the last decade of publicly listed companies that have made the FORTUNE 100 Best Companies to Work For List, produced by Great Place to Work. The most successful people companies regularly outperform the market by nearly 100%. One offered explanation for the superior HR achievement of high performers is their strategic allocation of investment. BCG’s report found that high performers strategically allocate their efforts, making sure to accurately distinguish between high and low priorities and distributing resources accordingly. Low performing organizations had a more unreasoned approach to allocating importance and often-misaligned investments, with the level of importance not necessarily correlating to their biggest areas of investment. Organizations should make sure they have a process in place to clearly identify HR subtopics/people management practices that are most important to their organization.investment methods

HR leaders looking to have “a seat at the table” for strategic discussions within their organizations must demonstrate the business impact of HR, providing executive management with quantitative evidence of how HR supports business strategic decisions. BCG’s research finds that organizations using people-related Key Performance Indicators, or tools such as simulations and forecasts, have greater strategic roles in their organization than companies that don’t utilize such tools. Such tools allow HR functions to measure and analyze areas such as employee productivity and people costs. High Performing Companies Data Driven

Simply put, HR functions that do not use metrics and analytics cannot play a strategic role in their organization, and furthermore, perpetuate the stereotype that HR functions should, or are better suited to work with, softer aspects of human capital management.

BCG looked at responding organizations’ perceived importance of 27 HR subtopics by region and industry, using an urgency metric to better understand those with the most need for action. In the majority of countries leadership was ranked (by a wide margin) as the most urgent subtopic, followed by talent management. Beyond these two subtopics, importance varied considerably by region. In the U.S, behavior and culture, along with employee engagement, ranked as more urgent than in most other countries. When breaking subtopics down by industry importance, the results were similar, with leadership, talent management, and behavior and culture ranking as most urgent across the majority of industries.

Differnces in Urgency by Country Ultimately, BCG’s report highlights three hallmarks of a great HR function that prove as critical differentiators between high and low performing organizations:

  • Connect – clearly linking HR and people strategies with business strategy
  • Prioritize – identify most urgent priorities and invest resources accordingly
  • Impact – generate and report people-based KPI’s, providing data to formulate strategic actions

Organizations that can collectively institute all three ideas create HR functions that we can describe as “best in class.” The real question to be answered, though, is “which comes first, best in class HR or strong economic performance?” If you’re in HR, I know what I hope your answer is!

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Why Aren’t We Developing More Global Leaders?

Data Point TuesdayThe Institute for Corporate Productivity (i4cp) recently released its 5th iteration of their GLD (Global Leadership Development) study. The report, “Global Leadership Development: Preparing Leaders for a Globalized Market”, examines opportunities and challenges for organizations working to develop “global leaders,” or leaders who have global expertise and can perform in an international environment. With factors like technology making the workforce increasingly global, this is an area of leadership development that organizations should consider adding to their focus. As i4cp discusses in the report, “The purposeful development of global competencies and capabilities among leaders is essential to organizational effectiveness and competitive edge.” Attention is certainly shifting towards GLD. However, despite that the number of organizations focusing on global leadership (through either general leadership development programs or specific GLD programs) has grown from 31% in 2010 to 44% in 2014, this figure still equates to less than 50% of organizations addressing global leadership development. Even among large corporations who may have greater resources to dedicate towards GLD programs, less than 54% report addressing GLD.

I’ve discussed the current importance placed on leadership development in previous posts (here and here), and this holds true in i4cp’s study. Organizations perceive leadership development as a critical area of focus right now, and yet, most organizations report few programs and/or low effectiveness when it comes to their current approach to leadership development. From i4cp’s study of human capital issues specifically, it is reported that organizations are not only ineffective at leadership development, they are increasingly getting worse at it, with 27% reporting effective leadership development in 2010, versus 25% in 2014. This holds true for global leadership development as well, with only 21% of large employers stating they are effective at GLD, despite that 60% view developing global skill in leaders as “highly important.”

Importance vs. effectiveness GLDAdditionally only 53% of large organizations report making an effort to develop global leaders. However on a positive note, those organizations that have either dedicated GLD programs or GLD programs embedded within general leadership development programs, report an increase in focus on GLD (up from 48% in 2013).

Dedicated vs. embedded global leadership development chartOne of several key findings from i4cp’s 2104 study is that for organizations to develop an effective GLD program, they must connect the curriculum to the business at a local level. Leaders should understand how the business is different in relation to region – an example being that one region may have a completely different sales approach than another region. Competencies to include as outlined by i4cp’s report for GLD effectiveness are:

  • Knowledge of cultures/customs in specific markets.
  • Ability to be conversational or fluent in prominent languages within specific markets.
  • Knowledge about customers and/or prospective customers in specific markets.

It should be pointed out that for leaders to gain local perspective or knowledge, they do not necessarily need to physically immerse themselves in a region. Instead, organizations can leverage technology like webcasts, audio/video conferences, and social media, to bring leaders regional-specific learning without incurring the potential costs (both monetary costs like transportation and non-monetary like the impact of relocation on a family) of removing a leader from their current role. I4cp’s study also found that for GLD, consistency in program delivery on global basis, in combination with local customization, correlated to successful GLD programs.

Other key findings included that high performing organizations were more likely to define leaders by influence rather than authority (for example: by their ability to consider/adopt a point of view or excellence in work performance), and that GLD participants should be selected on behavior-based evidence rather than through recommendations by senior leadership or an employee’s direct supervisor. Close to two-thirds of respondents (both LPO’s and HPO’s) currently rely on these methods for selecting GLD participants. However, neither of these selection methods has been proven to increase market performance or GLD effectiveness. Instead, organizations should look to documented evidence of skills, competencies, and performance, when selecting participants, methods that have been correlated to market performance and demonstrate even higher correlations in GLD effectiveness.Evidence Graphic

I4cp’s study also suggests that organizations should develop GLD programs with a focus on the future. Several future focused practices for creating curriculum had strong correlations to both market performance and effective GLD:

  • Determining future-focused critical roles
  • Conducting an internal skills inventory to determine the longer-term gaps in critical roles
  • Identifying the specific skills needed in future-focused critical roles
  • Conducting environmental scanning to determine external skills shortages in future-focused key markets

Of course, as with looking at anything long-term, regularly reviewing assumptions is very important.

No one doubts that every day our businesses, our customers, our stakeholders are getting more global. And in most cases, they are getting more global at high rates of speed. What can explain the lack of speed and focus organizations are employing when developing global leadership competencies and effectiveness? With the current state of global worker demographics and educational readiness for employment in general, it is mystifying that leadership development programs in general – and global leadership development programs in specific – are not among the fastest growing and highest priority issues being dealt with.

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