Success of HR analytics lies in the ability to trace a link from inward looking ‘people perspective' to outward looking ‘financial perspective'
The use of cloud technology is enabling HR to fundamentally change the role they play
Is the ‘War for Talent’ still a reality?
Many companies strengthen their talent management strategies as they recognise that lack of their most precious employees might confine their future growth. Therefore, the most successful and admired companies offer great working conditions and pay differentiated compensation packages. Even though employee retention is costly, talent departure and shortage puts companies in an even worse situation.
Several years of economic downturn in the subsequent years and high unemployment rates might suggest that the battle for talent will not intensify, yet in reality, in many employment categories, demand for talented workforce grossly outmatches supply. In this inconsistent world, the company’s success is restricted by how quickly they can access and deploy required knowledge at acceptable costs.
Managing employee turnover: Changing rules of the game
The old goal of HR management - to minimise overall employee turnover - needs to be replaced by a new goal: to influence who leaves and when.
Harvard Business Essentials (2004) estimates turnover cost to be about one-third the new person’s salary, while among managerial employees, estimates are in the range of one to two times the departing employee’s annual salary including costs of recruiting, interviewing, and training replacement, effect on workload and morale, customer satisfaction and last but not least, is the loss of knowledge. The most successful and admired companies offer a great a work environment that attracts and retains talent.
Managing retention costs is a fundamental step towards more successful talent management practices and provides notable payoffs for organisations. This reinforces the argument to put workforce planning and talent management at the heart of business strategy and therefore, get a bigger share in the senior management’s time budget.
A survey conducted in the United States revealed that the Generation Y (born after 1980) influenced by changes in technology, Internet and information overload poses a very particular demographic challenge. This generation demands more flexibility, more meaningful jobs, higher rewards, better work-life balance and more professional freedom in comparison to older employees. Today, they represent 12 percent of the US workforce and are substantially harder to manage than their predecessors.
Obstacles for the HR function
As no other global trend in the recent years was considered as significant as competition for talent, companies started to invest heavily in the implementation of HR processes and systems. Nevertheless, talent management is still considered as a short-term problem rather than an integral part of a long-term business strategy. McKinsey Quarterly (2008) conducted a research about the role and perceived responsibilities of HR teams by line managers (LM) and HR professionals. The researchers concluded that despite the increased efforts and time invested into proper organisation of HR functions, their impact is in decline and recognition by LM is not in line with the view of HR professionals.
In a similar survey that we conducted recently, amongst a small cross section of line managers working in the Delhi and NCR region, the results were refreshingly different and positive. A clear majority disagreed with two of the statements that we asked: HR lacks the capabilities to develop talent strategies aligned with business objectives, and HR is an administrative department, not strategic business partner. Moreover, an overwhelming majority agreed that HR function has helped their organisation face the challenges effectively during adverse conditions. The respondents also believed that HR’s strategic contribution has increased substantially today than what is was 5 years ago, and the upward trend is likely to continue. These findings paint a promising picture regarding the impact that HR professionals have started to make and are likely to make in the times to come.
The future of talent management: Cloud and analytics
Until recently, companies typically conducted performance management, career development, goal setting, compensation and succession management using paper forms, PowerPoint presentations and spreadsheets filled with half-completed, manually entered employee reviews and profiles. HR departments would often spend months pulling together data needed for compensation decisions and succession planning. This left HR in the unenviable position of trying to engage leaders in “strategic” talent conversations using clumsy paper binders full of questionable information.
However, nowadays, talent management is shifting from fixed, highly static in-house enterprise platforms to dynamic online, cloud-based systems. The use of cloud technology is enabling HR organisations to fundamentally change the role they play within their companies. But, the technology by itself does not create this change. HR leaders must effectively use the technology to drive more business relevant conversations with line leaders. Talent decisions will be the key differentiator to competitive advantage and the depth and astuteness of utilisation of HR analytics will determine the relative superiority of talent decisions. The success of HR analytics lies in whether they are able to trace a link from the inward-looking ‘people perspective’ to the outward-looking ‘financial perspective’.
HR professionals must therefore, develop the skills required to seek out connections where none exist. So, will companies where HR leverages the power of cloud analytics to align practices to strategy execution, be the ones which emerge as future leaders? It is a journey which HR in companies should embark on and see for themselves!
Author Bio - Dr. A.K. Balyan is MD & CEO of Petronet-LNG Ltd & Amit Kaul is Manager HR, ONGC