HR pros need an increasingly wide range of skills, not only in talent areas, but also in understanding how the business works, makes money, and competes. How are HR teams staying current and viable?
- Less than 8 percent of HR leaders have confidence that their teams have the skills needed to meet the challenge of today’s global environment and consistently deliver innovative programs that drive business impact.
- Business leaders agree: 42 percent of business leaders believe their HR teams are underperforming or just getting by, compared to the 27 percent who rate HR as excellent or good when assessing HR and talent programs.
- To become an effective business partner, HR teams need to develop deeper business acumen, build analytical skills to underwrite their leadership, learn to operate as performance advisors, and develop an understanding of the needs of the 21st-century workforce.
CEOs now see human capital strategies as one of their top priorities for growth.1
In order to meet their business goals, senior executives today are holding HR departments accountable for developing creative new ways to acquire talent, build employee skills, develop leaders, engage employees at all levels, and retain critical workers.
This challenge comes at a time when shifting demographics, rapid technological advances, increasing globalization, and the rise of new work arrangements are forcing companies to reengineer many of their people strategies. Many businesses have also told us that they are seeing a “disruption” of the CHRO role in their organizations and are refocusing HR as a “business contribution” function—a role that demands deeper skills in data and analytics as well as MBA-level business capabilities.
The critical question is whether HR teams have the skills they need to rise to the challenge. According to our global survey, more than one-third of respondents report that their HR and talent programs are just “getting by” or even “underperforming.” Twice as many respondents say that their HR and talent programs are “underperforming” (10 percent) as consider them “excellent” (5 percent) (figure 1).
When asking about organizations’ readiness to respond to the 12 global trends, our global survey revealed significant differences between business executives and HR leaders. For the five most urgent and important trends we identified, business executives at large companies (10,000+ employees) believe that their companies are less ready to address these issues than HR leaders report (figure 2):
- Leadership (the most urgent trend according to our survey): 40 percent of business leaders reported that their company is “not ready,” compared to 28 percent of HR leaders
- Reskilling HR: 48 percent of business respondents reported that HR is “not ready,” compared to 36 percent of HR respondents
- Global HR and talent management: 45 percent of business executives reported that the company is “not ready,” compared to 29 percent of HR executives
- Retention and engagement: 38 percent of business executives reported that their company is “not ready,” compared to 27 percent of HR executives
- Talent and HR analytics: 57 percent of business respondents reported that their company is “not ready,” compared to 41 percent of HR respondents
Differences in perceived readiness exist, not just between HR and non-HR respondents, but among global regions as well. Executives in Japan, Germany, the United Kingdom, and China all recognize the importance of reskilling HR, but doubt their companies’ ability to respond (figure 3).
Ramping up HR skills
What is behind this perceived lack of HR skills? The problem is relatively easy to understand at one level, yet elusive at another.
More than 70 percent of all HR professionals enter the field without a specific degree or certification in business or human resources.2 Given that many organizations do not invest in developing either the HR or the business skills of their HR teams, it is no surprise that they are falling behind.3 This lack of skills severely limits HR’s ability to impact business strategy and advance business goals. For example, a 2013 study found that only 14 percent of companies reported that their HR teams have the capabilities to utilize talent analytics—a critical function as HR becomes more data-intensive.4
This year’s global survey supports this finding. Forty-three percent of respondents stated that their companies are “weak” when it comes to providing HR with appropriate training and experiences; 47 percent rate their companies “weak” on preparing HR to deliver programs aligned with business needs; and 50 percent rate their companies “weak” when it comes to providing innovative solutions and programs (figure 4).
Companies need to challenge themselves to develop programs and professional expectations to transform HR employees into skilled business consultants. What skills does HR need to more effectively meet the demands of today’s businesses? The specific list will vary across companies, but all share the need to develop skills in three primary areas:
- HR and talent skills
- Business, industry, and global skills
- Management, leadership, and program implementation skills
HR and talent skills
- Technical HR skills. Specialists should have deep skills in training, recruiting, sourcing, organizational design, employee relations, labor relations, compensation strategies, benefits, and many other areas. These technical skills should be refreshed every year as new vendors, technologies, and strategies emerge.
- Labor market and workforce knowledge. HR teams should have a deep understanding of the labor markets and workforces where their companies operate. What cultural, demographic, and local labor market trends affect a company’s ability to hire, retain, and engage people? How do high-performing leaders in Japan, for example, compare with high-performing leaders in China or Brazil? What will attract engineers in San Jose vs. Munich vs. Bangalore?
- Managing a service operation. HR teams must understand how to manage to service levels, design service-centric systems and solutions, measure quality of service, and implement self-service technology.
- Technology and analytics. It is impossible to run or manage HR without a deep understanding of multiple technologies—from payroll systems to social sharing tools. Cloud, mobile, and social technologies are critical areas where HR professionals should develop leading skills. As big data becomes a pervasive resource and tool, HR professionals should also develop skills and comfort with data, statistics, and analytics. This area may be one of the largest gaps for HR teams as they reskill for the future.
Business, industry, and global skills
- Business and industry acumen. HR professionals should develop a deep understanding of business and industry trends: how the company makes money, what drives long-term competitive advantage, what skills are needed to maintain and drive improved profits, what new products are underway, how customers perceive value, and how to drive innovation. The challenge for HR professionals is to help the business create value through their understanding of talent, such as by identifying new sources of talent in new markets.
- Global insights. Most businesses, large and small, operate globally when it comes to customers, supply chains, and talent markets. HR professionals must be innovative in accessing talent in global geographies, determining what is required to be effective in local talent markets, and understanding how to integrate HR programs across countries and regions to provide “one source of truth” for HR and talent data and insights.
Management, leadership, and program implementation skills
- Management and leadership. HR professionals must understand how people lead, how to coach leaders, and how to lead their own teams. They should have the confidence and the leadership experience to interact with senior business professionals in a meaningful way.
- Project and change management skills. It is easier to design a “picture-perfect” program than to get managers and employees to adopt it. Focusing on the realities of change and achieving practical results should be in the crosshairs of every HR manager.
- Continuous development and knowledge sharing. Just as IT, finance, sales, and customer service invest heavily in training and certifications, HR should develop an “HR for HR” team that certifies, develops, and continuously improves the skills of the entire HR function.
Lessons from the front lines
Prioritizing skill development to raise retention and performance
A fast-growing global health care company realized five years ago that it lacked leadership capabilities, talent mobility, and managerial practices, resulting in high turnover and low levels of service.5 The CEO recruited a new CHRO to upgrade the skills of the HR team from top to bottom. Specific reforms included:
- Asking the HR team to evaluate its own performance and assessing why some areas were rated poorly
- Developing a senior peer-to-peer certification for senior HR business partners
- Establishing technical centers of excellence in talent acquisition, performance management, talent mobility, compensation and rewards, retention and engagement, and analytics
- Recruiting MBAs into the HR department
- Creating an internal research and tools group within HR focused on research and methodology development
- Pushing the team to develop small consulting groups that brought HR practices together to work on business-unit-specific programs
Today, this company is a leader in innovative HR practices and has become an employer of choice in its markets. Five years of investment in HR skills and capability have paid off in higher employee retention, better engagement, and stronger performance.
Where companies can start
The CHRO should play the role of “chief change officer,” championing the HR team’s expansion from providing HR services to business consulting.
Fifty-nine percent of respondents in a recent global report rated “increased change management” their top concern for improving their business transformation efforts.6 Business leaders are waiting for HR leaders and professionals to reskill and up their game.
Critical starting points include:
- Invest in HR professional development: Our benchmarks show that high-impact HR teams spend between $1,200 and $2,500 annually per HR professional on training, development, research, and tools, compared to an average of $500 across all organizations.7
- Elevate and deepen the business partner role: Our research shows that the future of HR consists of highly trained expert business partners coupled with networks of deep specialists, supported by service centers for transactional work.
- Focus on emerging business-critical skills: Business leaders rated analytics, workforce planning, and leadership as the most important HR skills, reinforcing that reskilling HR is not about “doubling down” on traditional HR skills but about expanding into delivering insights on analytics, business, and globalization.
- Establish a professional development team: An “HR for HR” team can apply the same level of skills assessment, development planning, and career development to HR as HR does to the rest of the organization.
- Conduct self-assessments: Define roles clearly and then honestly benchmark roles, structure, and skill levels. How proficient is the HR team compared to other companies? Where it is strong and where is it weak? Be honest with this assessment.
- Diversify HR to meet business goals: Consider HR to be an internal consulting organization and bring the strongest HR leaders together to take action where business needs demand it. At the same time, HR can be strengthened with an infusion of professionals with strong business backgrounds—as long as they master the critical HR skills necessary for their tasks.
- Break down silos within HR: Connect specialists with each other and with HR centers of excellence, encourage deep skill building and knowledge sharing, and create communities of practice. Encourage centers of excellence to work together on major initiatives like turnover, workforce planning, engagement, and leadership development.
- Change the measurement of HR business partners: Rather than measuring HR business partners by “client satisfaction,” use talent metrics (quality of hire, leadership progression, retention) so that HR feels responsible for outcomes, not just administrative services.
The global economy is poised for a growth cycle. A limiting factor will be the increasing scarcity of talent, which will only intensify the need for HR to ably lead the organization forward. HR teams that rise to the challenge will see their internal effectiveness, external market value, and overall stature climb.
Reskilling HR was rated the third most urgent and important trend in our 2014 global survey, with 77 percent of respondents ranking it as “urgent” or “important.” Businesses report that their HR teams are “not ready” or up to the job in critical areas including leadership, retention, global, and analytics. To achieve better business results, companies will need to reskill and invest in their HR and talent capabilities. Focusing on emerging HR skills, such as analytics and deep business and global skills, is a place to start.