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Creating People AdvantageHow Companies Can Adapt their HR Practices for Volatile Times

Monica Wegner10 March 2011Monica Wegner10 March 2011

2

2

CPA Europe 2007

1,355 participants

CPA World 2008

4,741 participants

CPA Europe 2009

3,348 participants

CPA World 2010

5,561 participants

4th study in the Creating People Advantageseries in conjunction with WFPMA4th study in the Creating People Advantageseries in conjunction with WFPMA

Note: WFPMA = World federation of people management associations

3

Global survey—100 countries, 5,500 responses,153 interviewsGlobal survey—100 countries, 5,500 responses,153 interviews

EuropeEurope

North America/Latin AmericaNorth America/Latin America

Asia/Pacific/Australia/AfricaAsia/Pacific/Australia/Africa

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4

Critical topics for Australia broadly consistent with global surveyCritical topics for Australia broadly consistent with global survey

Work-lifebalance

Workforce performance measurement

Strategic workforce planning

Shared services & outsourcing HR

Restructuring the organization

Recruiting

Performancemanagementand rewards

Managing talent

Learning organization

Leadership development

Labor costs

HR processes

HR as astrategic

partner

Globalization

Flexibility

Employerbranding

Employee engagement

Diversity & inclusion

Demographics

Corporate social responsibility

Change & cultural transformation

Low

High

Futureimportance

Current capability LowHighSource: Proprietary Web survey with 5,561 responses —220 Australian responses; BCG/WFPMA analysisSource: Proprietary Web survey with 5,561 responses —220 Australian responses; BCG/WFPMA analysis

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Top ten HR projects of high-performing companies

Top ten HR projects of high-performing companies

Low-performing companies rank five HR projects lower

than high performers

Low-performing companies rank five HR projects lower

than high performers

Improving leadership development

Managing talent

Restructuring the organisation

Delivering on recruiting

Measuring workforce performance

Enhancing employee engagement

Managing labor costs

Performance management and rewards

Transforming HR into a strategic partner

Improving employer branding

1

2

3

4

5

6

7

8

9

10

210-1-2-3-4-5

-4

-4

0

0

1

-5

0

2

-1

-1

543

Number of ranks different from high performer

High performing companies invest in leadership and talentHigh performing companies invest in leadership and talent

Source: Proprietary Web survey with 5,561 responses; BCG/WFPMA analysisSource: Proprietary Web survey with 5,561 responses; BCG/WFPMA analysis

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Key insightsKey insights

Grow the talent pie: best practice companies promote from within

Leadership development more than ever can be a competitive

advantage

The middle matters: engagement of middle managers still suffering

post financial crisis

HR can be a strategic catalyst to help move the business forward

Grow the talent pie: best practice companies promote from within

Leadership development more than ever can be a competitive

advantage

The middle matters: engagement of middle managers still suffering

post financial crisis

HR can be a strategic catalyst to help move the business forward

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2

3

4

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Note: Based on two scenarios: Scenario 1: 2020 without crisis impact (long term growth path)1; Scenario 2: 2020 with crisis impact2

Source: BCG analysis

Note: Based on two scenarios: Scenario 1: 2020 without crisis impact (long term growth path)1; Scenario 2: 2020 with crisis impact2

Source: BCG analysis

Developed countries will be affected by talent shortagesDeveloped countries will be affected by talent shortages

Shortagetrend of labor1

-1.0%

-1.8% I -1.5%

-1.6% I -0.7%

-0.8% I 0.2% -1.6% I -0.5%

-3.0% I -1.6%

-3.5% I -1.6%

-1.2% I -0.2%

-1.3% I 0.1%

-1.3% I -0.1%

-1.9% I -0.7%

-3.1% I -2.1%

Limited shortage orsurplus trend of labor 1

-0.6% I 0.7%

-0.6% I 0.0%

-0.3% I 0.9%

Surplustrend of labor1

1.8%

1.3% I 1.8%

0.6% I 1.1%

1.9% I 2.1%

-1.0% I -0.1%-2.0% I -0.5%

-0.3% I 1%

1

5

8

Big talent gap for top executive successorsBig talent gap for top executive successors

Respondents who assess the talent gap

for this group as critical or very critical (%)

6050403020100

40

50

50

56

Criticality of talent gapCriticality of talent gap

Emerging potentialsEmerging potentials

High potentialsHigh potentials

CEO successors

CEO successors

Top executive successors

Top executive successors

Source: Proprietary Web survey with 5,561 responses; 1,089 responses in this section; BCG/WFPMA analysisSource: Proprietary Web survey with 5,561 responses; 1,089 responses in this section; BCG/WFPMA analysis

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9

Female talent pools not fully leveragedFemale talent pools not fully leveraged

Makeup of talent pool (%)

80604020 1000

WomenWomen MenMen

4

38

31

42

44

50

49

61

90

Companies with ≤ 10% women in talent pool (%)Companies with ≤ 10%

women in talent pool (%)

Middle EastMiddle East

Established AsiaEstablished Asia

AfricaAfrica

Latin AmericaLatin America

EuropeEurope

Emerging AsiaEmerging Asia

PacificPacific

North AmericaNorth America

Source: Proprietary Web survey with 5,561 responses; BCG/WFPMA analysisSource: Proprietary Web survey with 5,561 responses; BCG/WFPMA analysis

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6

10

High performing companies fill executive positions internallyHigh performing companies fill executive positions internally

Internal fill rate (%)

80

60

40

20

0

13

Top managers

60

Senior middle managers

5147

Frontline managers

6360

High performing companies fill top executive positions more internallyHigh performing companies fill top executive positions more internally

Low performer

High performer

Source: Proprietary Web survey with 5,561 responses; 1,089 responses in this section; BCG/WFPMA analysisSource: Proprietary Web survey with 5,561 responses; 1,089 responses in this section; BCG/WFPMA analysis

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Chinese pharmaceutical giant required to double size within 5 years

High turnover in middle management ranks

Talent strategy devised to

• Forecast future demand for talent

• Align senior management and HR on key talent challenges

• Establish dedicated talent centre

Innovative model for talent centre

• Funding and staffing mechanisms smooth impact on business

• Targeted training sessions and coaching

Chinese pharmaceutical giant required to double size within 5 years

High turnover in middle management ranks

Talent strategy devised to

• Forecast future demand for talent

• Align senior management and HR on key talent challenges

• Establish dedicated talent centre

Innovative model for talent centre

• Funding and staffing mechanisms smooth impact on business

• Targeted training sessions and coaching

Example: Talent management best practiceExample: Talent management best practice1

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Example: Dedicated China Talent CentreExample: Dedicated China Talent Centre

Career Development

Client Talent Center, China

Strategic Sourcing Leadership Development

Sourcing

External:

- Campus

- Local business schools

Internal:

-XX Global offices Chinese returnees

Practices/Process

- On Board Plan (first 90 days)

-Job Descriptions

- Interview tools/framework

Talent Assessment

- Leadership Assessment

- Individual Dev Plan (IDP)

- Talent readiness data

talent pipeline and deployment of

talent

-Practices/Process

-Trained assessors

-Selection tools and Process

Fast Track Program(manager in 1-2 years)

Internal Screening

Leadership Programs

Level 3 (P&L)

Level 2 (manager of managers)

Level 1 (manager of individuals)

Leading in XX (mandatory)

Blended learning, 70% OTJ, 20%

feedback, 10% training

Build Culture

-Reward and recognition program

(eg to drive coaching and seeking

/ giving feedback)

- Set KPIs

Accelerate Development Expand Sourcing Engage

Fast Track Program

External search

Global Leadership Competency Model

Career Management:

Career wheel

Development on the Job:

-Job rotation (local + overseas)

-Short-term assignments

-Mentoring and coaching

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Executives identified the most important 21st century shiftsExecutives identified the most important 21st century shifts

Source: BCG Perspective – New Leadership Rules

% of participants

mentioning

contextual shift

80

60

40

20

0

29

4650

5761

71

Intensified global and local

competition

Increasing importance of multiple stakeholder

s

Faster speed of information

and innovation

Greater uncertainty

and ambiguity

Emphasis on corporate social

responsibility

Virtual teams transcending organization's boundaries

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8

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"Lead big" and amplify influence to drive success"Lead big" and amplify influence to drive success

Note: "Direct Team" includes employees in the working group or team of a leader, including reports, peers and managers; "Extended Team" includes all other employees within the formal boundaries of the organization. Source: BCG interviews and analysis

Leader

Self

Extended team

Direct team

Government

Media

Lobbyists Environmentalists

Communities

World

Businesspartners

Customers

Suppliers

JV partnersInvestors

NGOs

2

15

NNNN

EEEE

SSSS

WWWW

mpathisempathise

Achieve influence andauthority through network

Achieve influence andauthority through network

in & winin & win

Deliver sustainable successto company and stakeholders

Deliver sustainable successto company and stakeholders

elf-correctelf-correct

Unlearn outmodedsuccess modelsUnlearn outmodedsuccess models

Timeless

Drive to

achieve

JudgmentCourage

Integrity

Intelligence

Vision

avigateavigate

Embrace global uncertainty and chart a clear course

Embrace global uncertainty and chart a clear course

21st century leaders excel in adaptation21st century leaders excel in adaptation

Source: Interviews; Survey responses; BCG analysisSource: Interviews; Survey responses; BCG analysis

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Preparing leaders to be more adaptivePreparing leaders to be more adaptive

• Immersion in unfamiliar markets • Temporary assignments to external groups• Immersion in unfamiliar markets • Temporary assignments to external groups

• High-potential leaders "skip a chair"• Critical assignments for high-potential and late career

leaders

• High-potential leaders "skip a chair"• Critical assignments for high-potential and late career

leaders

• Mapping external top talent in key markets • Limited-authority experiences• Frequent "after-action reviews" • Quarterly talent reviews using operational templates

• Mapping external top talent in key markets • Limited-authority experiences• Frequent "after-action reviews" • Quarterly talent reviews using operational templates

Expand

horizons

Create fast

tracks

Accelerate

skills

development

Inspire to

retain

• Social causes as part of the business • Challenging assignments and experiences• Sabbaticals to pursue passion

• Social causes as part of the business • Challenging assignments and experiences• Sabbaticals to pursue passion

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Example: 21st century leadershipExample: 21st century leadership

Indra Nooyi, Chairman and CEO, Pepsico

Reflects on the leadership role during the global financial crisis

Indra Nooyi, Chairman and CEO, Pepsico

Reflects on the leadership role during the global financial crisis

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1 2 3 4 5 1 2 3 4 5 1 2 3 4 5

Engagement of middle managersstill suffering after crisisEngagement of middle managersstill suffering after crisis

Difference in engagement before and after the financial crisisDifference in engagement before and after the financial crisis

People

manager

capabilities

People

manager

capabilities3.7

RecognitionRecognition 3.5

Performance

management

Performance

management 3.3 -8%

-5%

-5%

Engagement level of top management is slightly down

Engagement level of top management is slightly down

Top managersTop managers

3.5

3.2

3.1 -14%

-14%

-10%

Middle managers are increasingly disengaged

Middle managers are increasingly disengaged

Middle managersMiddle managers

3.4

3.1

3.1 +7%

-6%

+3%

Engagement of team members has not suffered

Engagement of team members has not suffered

Team membersTeam members

Engagement 2009Engagement 2009%Change 2007–09:Change 2007–09:

Note: 1 = strongly disagree, 2 = disagree, 3 = neither disagree nor agree; 4 = agree; 5 = strongly agreeSource: Engaging for Results database; BCG/WFPMA analysisNote: 1 = strongly disagree, 2 = disagree, 3 = neither disagree nor agree; 4 = agree; 5 = strongly agreeSource: Engaging for Results database; BCG/WFPMA analysis

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The middle matters: middle managers need new roles, responsibilities, and levers The middle matters: middle managers need new roles, responsibilities, and levers

Top

mgmt

Front-line management

~ 50-200

top managers

~ 50-200

top managers

~ 7,000

middle

managers

~ 7,000

middle

managers

~ 43,000

non-managers

~ 43,000

non-managers

Illustrative company with

a workforce of 50,0001

Illustrative company with

a workforce of 50,0001

Do we have too many

management layers?

Do we have too many

management layers?

Do middle managers

have the right levers

to manage and

engage?

Do middle managers

have the right levers

to manage and

engage?

Do middle managers

have the required

leadership skills?

Do middle managers

have the required

leadership skills?

Is middle

management

actively involved in

company affairs?

Is middle

management

actively involved in

company affairs?

Delayer and create

larger, exciting

roles for middle

managers

D

Empower

managers to act

Accelerate

leadership skills

Leverage the power

of middle managers

E

A

L

Middle

management

Non-managers

1. Span of control of 7 used in this exampleSource: BCG/WFPMA analysis1. Span of control of 7 used in this exampleSource: BCG/WFPMA analysis

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20

New CEO in context of global recession

100 day plan which included organisational transformation

• Engagement survey of top 300, cascaded to over 30,000

• Reduced layers and increased spans of control (15-20% reduction)

• Role charters to clarify accountabilities

• Behaviour an integral part of performance management

• Investments in coaching, leadership and mentorship

2 years on, signs of improved engagement in upper-middle and senior

management ranks

• Higher levels of accountability

• New behaviours taking hold

New CEO in context of global recession

100 day plan which included organisational transformation

• Engagement survey of top 300, cascaded to over 30,000

• Reduced layers and increased spans of control (15-20% reduction)

• Role charters to clarify accountabilities

• Behaviour an integral part of performance management

• Investments in coaching, leadership and mentorship

2 years on, signs of improved engagement in upper-middle and senior

management ranks

• Higher levels of accountability

• New behaviours taking hold

Global airline: Empowering middle managementGlobal airline: Empowering middle management3

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Business planning and analytics rank as high priorities, but capabilities lagBusiness planning and analytics rank as high priorities, but capabilities lag

Client relationship mgmt

Policy implementation

Project management

Resource management

IT acumen

Conflict resolution

HR expertise

Contracting

Marketing

Business analytics

Business planning

1

2

3

4

5

6

7

8

9

10

11

Business managers' viewranked by perceived importance

Business managers' viewranked by perceived importance

Low High Low High

1

2

3

4

5

6

7

8

9

10

11

Policy implementation

Project management

Resource management

HR professionals' viewranked by perceived importance

HR professionals' viewranked by perceived importance

Client relationship mgmt

IT acumen

Conflict resolution

HR expertise

Contracting

Marketing

Business analytics

Business planning

Importance

CapabilitySources: Proprietary Web survey with 5,561 responses, 641 responses in this section; BCG/WFPMA analysisSources: Proprietary Web survey with 5,561 responses, 641 responses in this section; BCG/WFPMA analysis

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Build HR into a strategic catalyst for the businessBuild HR into a strategic catalyst for the business

Strategic contribution

Most HRfunctions are here

Most HRfunctions are here

World class HR functions are here

World class HR functions are here

Transactional Administration, record keeping, reporting

Core functional

Performance management, staff development, measurement, comp & benefits

Transfor-mational

Culture, leadership, engagement and employer brand management;

Strategic, value-oriented

HR grounded in business strategy,anticipating needs and

proactively generating people advantage

HR grounded in business strategy,anticipating needs and

proactively generating people advantage

Source: BCGSource: BCG

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Leadership differentiators

N

E

S

W

Timeless

Drive to

achieve

JudgmentCourage

Integrity

Intelligence

Vision

avigate What is one trend that will determine your capacity/ capability?

mpathize

Who are 3 internal or external colleagues doing somethingyou can learn from?

in & win

In what ways will your HR and business colleagues benefit from their collaboration with you?

elf-correct

What is a habit you must change – now?

How to prepare yourself as a 21st century HR leader ...How to prepare yourself as a 21st century HR leader ...

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Lead big ... understand and leverage your influence wavesLead big ... understand and leverage your influence waves

Leader

HRLeader

Extended team

Direct team

Beyond?

Businesspartners

25

... with confident risk taking and humility... with confident risk taking and humility

It's an exciting time to be in HR

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Topics for discussionTopics for discussion

What resonates with your experience of the last couple of years?

Are there any surprises here for you?

What are your immediate priorities for the next six months?

What resonates with your experience of the last couple of years?

Are there any surprises here for you?

What are your immediate priorities for the next six months?

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BackupBackup

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Planning horizon for strategic versus workforce planningPlanning horizon for strategic versus workforce planning

% of respondents

Time horizon for strategic planningTime horizon for strategic planning

Time horizon for workforce planningTime horizon for workforce planning

Time horizon often shorter for workforce planning than corporate strategyTime horizon often shorter for workforce planning than corporate strategy

Note: Values below 1% not shownSource: Proprietary Web survey with 5,561 responses; 833 responses in this section; BCG/WFPMA analysisNote: Values below 1% not shownSource: Proprietary Web survey with 5,561 responses; 833 responses in this section; BCG/WFPMA analysis

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Basic workforce models prevalent,sophisticated simulations rarely usedBasic workforce models prevalent,sophisticated simulations rarely used

Derive actions from

a supply-and-demand model: 6%3

Have a supply-and-

demand model:

9%2

Have a supply model:

15%1

(%)

47

53

57

77

39

45

47

53

70

33

36

36

42

47

62

72

Consider age of current workforce

Consider current job groups

Consider current job groups

Simulate different scenariosDerive workforce demand for the

entire company along job Simulate productivity increases

Simulate technology changes

Simulate new hires

Simulate retirement

Staff reductions

Derive workforce supply for the

entire company along job

Apprenticeship actions with

quantified goals

Recruiting actions with quantified goals

Simulate different scenarios

Simulate attrition

Qualification actions with quantified goals

1. Subgroup is asked to further specify workforce supply model 2. Subgroup is asked to further specify demand model 3. Subgroup is asked to further specify actions derived.Source: Proprietary Web survey with 5,561 responses; 883 responses in this section; BCG/WFPMA analysis

1. Subgroup is asked to further specify workforce supply model 2. Subgroup is asked to further specify demand model 3. Subgroup is asked to further specify actions derived.Source: Proprietary Web survey with 5,561 responses; 883 responses in this section; BCG/WFPMA analysis

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Example: Structured Strategic Workforce ApproachExample: Structured Strategic Workforce Approach

6Establish annual process

Define Skill Clusters

I

Planning level

Simulate workforce demand per skill cluster

Future demand

3

Workforce demand logic

Strategic scenarios

Assumptions, e.g.,• Asset strategy• Technological changes• Productivity etc

2010 2020

Simulate workforce supply per skill cluster

Future supplyCurrent workforce

Development scenarios

Assumptions, e.g.,• Attrition• Retirement• Phased retirement etc

2

Headcount

20202010

Identify gaps and costs

Gap/risk analysis

4

Costanalysis

Develop HR measures

Recruiting Targets

Training

Transfers

In-/Out-Sourcing

5

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Example: Detailed identification of capacity risksExample: Detailed identification of capacity risks

201120102009 20162015201420132012

-9%-10%-10%-10%-10%

24%21%15%9%8%

-12%-1%-2%-1%16%

-21%-20%-19%-16%-16%

-25%-17%-10%-2%8%

-64%-64%-52%-46%-45%

-62%-49%-49%-44%-30%

-3%-3%-12%-23%-30%

-6%-8%-10%-12%-15%

-31%-31%-31%-32%-23%

-4%1%3%6%9%

-31%-25%-21%-20%-18%

15%13%9%5%2%

-15%-13%-11%-9%0%

-15%-16%-20%-23%-25%

-42%-42%-33%-25%15%

-31%-24%-22%-16%-14%

-53%-29%-29%-27%-22%

-10%18%12%

16%16%8%

14%-3%-3%

3%11%10%

11%13%12%

-24%-19%-6%

-9%-9%-9%

15%19%20%

-18%-14%-9%

-23%-23%-23%

18%17%16%

-19%-18%-19%

0%5%9%

8%9%0%

12%15%15%

19%16%17%

12%13%9%

-12%16%18%

Development technician

Assembly technician

...

Mining engineer

Molding specialist

Development engineer

Machine supervisor

Specialised molder

Machine operator

Production IT expert

Technical worker

Quality supervisor

Metalworking mach. op.

Refinishing worker

Commercial clerk

Worker mech. eng.

Logistic planner

Skilled tech. worker

Qualification

Sur-

plus

Short-

fall

Demand vs. supply

Source: Project exampleSource: Project example

1

17

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• Innovation and smart business practices with a small company feel

• Mission universally known

• Company benefits drive community, interaction and efficiency

• Keeps a pulse on how employees are feeling

• Innovation and smart business practices with a small company feel

• Mission universally known

• Company benefits drive community, interaction and efficiency

• Keeps a pulse on how employees are feeling

Google: the best practice employerGoogle: the best practice employer