43% of respondents believed that inefficient human capital strategies affected their company's capability to achieve key financial targets
CEOs and CFOs chose experience of emerging markets as their top skill requirement whereas CHROs voted for strategic vision
A CGMA (Chartered Global Management Accountant) report ‘Talent Pipeline Draining Growth’, shows many companies do not yet have the right human capital management systems in place
As businesses become increasingly competitive, and products and technology can be easily replicated, companies realize that people will be the defining competitive advantage. While the need for effective people strategies which can fuel sustainable business growth is being underlined by most of the studies, the report ‘Talent Pipeline Draining Growth’ released recently by CGMA, reveals a not-so-exciting picture of the ground realities. As per the survey report most companies are aware of the importance of human capital; however their talent strategies are not aligned to business goals. Here is a sneak peek on the key findings from the survey:
Lack of talent pipeline impacting growth
The negative effect of unclear human capital policies can be seen on companies’ growth agenda. Many of the respondents believed that inefficient human capital strategies impair growth and innovation strategies of their company.
Over 43 percent of the total respondents believed that inefficient human capital strategies affected their company’s capability to achieve key financial targets. At the same time, 40 percent of the total respondents said that it affected their company’s capability to innovate. Arati Porwal, Chief Representative – India Liaison Office, CIMA, sheds some light on this, “The report highlighted that the growth prospects of many firms are being blighted by their failure to make the most of their human capital. This really hammers home the fact that a weak talent management strategy hurts the competitiveness of companies, and seriously restricts their growth.”
Difference of opinion among CXOs
When it comes to understanding the key competencies required for senior roles, views of CEOs and CFOs seem to differ from those of the CHROs. While CEOs and CFOs seemed to have a common understanding on many human capital issues, including top skills and experience requirements from candidates, views of CHRO were quite different. Majority of CEOs and CFOs chose experience of emerging/fast growth market, experience of change management, etc. as their top skills and expertise requirements when recruiting; whereas, the CHROs voted for strategic vision and ability to implement strategy. This reveals the disconnect between CEO, CFO and CHRO on many important human capital issues. The report shows that this disconnect on the C-level is seen in critical areas like firm’s investment plan on training and development of human capital as well.
Building talent not a priority
Nurturing the right talent internally and creating a talent pipeline to be able to have a formal succession planning process in place is something that isn’t getting attention in majority of firms. Even if it is, there is again a huge disconnect in what CHROs believe and what many senior executives of the organization believe to be true. 36 percent of the CHROs are confident that they will not have to go externally to recruit for senior roles, while this view was supported by only 10 percent of CEOs and CFOs. 38 percent of the firms believe they will have to take external help for recruitments on C-level in the next 12 months, thus putting succession planning strategies of most of the companies in a worrying spot.
Ineffective talent management tools
Among all the talent development tools and activities used by companies, only external training is considered to be effective by most of the employees. Chief Executive of CIMA, Charles Tilley says, “I find this quite interesting that training offered externally was seen as effective, but not internal training. To me, it suggested that there was a lack of ownership when training internally and lack of commitment to people.” Half of the total respondents said that they found external training to be effective. At the same time, only a third of the total respondents said that they found tools like performance based bonuses and personal incentives to be effective. This clearly signifies that talent boosting methodologies adapted by companies are not in sync with employees’ expectations. Something we need to worry about!
Who should measure?
Respondents’ viewpoint on in-house trainings does not seem so surprising when clubbed with two other alarming findings of the survey. The survey shows that there is a divergence of views on who has the responsibility for measuring the effectiveness of talent management. 65 percent of the CEOs on the survey see CFOs as the natural lead; almost 83 percent of CHROs consider this to be their own responsibility, a view that is not supported by almost 70 percent CEOs and CFOs. This shows that there is a scope for better planning and strategy formulation in this area.
Insightful data - need of the hour
Add the lack of clarity on ownership of human capital strategies with ‘unreliable’ data and analytics on human capital, and you can easily connect the dots to understand the reasons leading to ineffective human capital strategies. Companies need relevant and accurate data on their human capital to be able to make effective talent management strategies. Results of the survey show that this area clearly requires some hard work. Out of the total respondents, only 12 percent of CEOs said that they are confident about the quality of data they receive on human capital. 34 per cent of CEOs and 40 per cent of CFOs say that though their companies have a lot of data on human capital, they are not very sure about its accuracy.
This is a loophole that companies need to fill, as formulation of the right human capital and talent management strategies, etc. depends on the accuracy of human capital metrics.
These findings indicate that managing human capital in the right way is one of the challenges that organizations are finding hard to deal with. Reason behind this problem lies within the internal organizational structure and disconnect between the C-level and misaligned HR functions. The good part is that all of this can be sorted, provided companies take the right measures and try to come up with a coherent human capital management strategy to support their business goals.
Chief Executive, CIMA (Chartered Institute of Management Accountants)
“Embed your HR strategy into your business strategy as clear objectives and make sure it is well understood inside the organization”
Chief Representative – India Liaison Office, CIMA (Chartered Institute of Management Accountants)
“Our research suggests that many organizations may be making investments into human capital development activities half blind at times, without a clear understanding of their performance or effectiveness”
THE 4 ACTION POINTS
CIMA and AICPA suggest four steps that companies can take to connect human capital to their growth agenda
1. Embed human capital strategy in the overall business strategy
2. Focus on getting credible and accurate human capital information and translate it into useful insights
3. Leverage the relevant skill-sets to bring credibility to the data, insights and subsequent actions
4. Restructure the organization to encourage collaboration and partnering