Falling birth rates and poor metrics in performance management means many companies will face serious skills-shortages.
Many European companies face key shortages in skills as the double whammy of falling birth rates and rising numbers of baby boomers entering retirement shrinks the size of the workforce.
According to The Boston Consulting Group, a global management consulting firm and advisor on business strategy, and the European Association of People Management (EAPM), 47 per cent of European companies do not plan their work force requirements more than a year in advance. They warn that companies who reduced headcount during the recession may struggle to find the people they need when growth eventually returns.
The people pool is shrinking
Companies need to consider the long-term impact of their actions, even – or especially - in times of crisis.
“In ten years, the scarcest resource for a company will be people,” said Rainer Strack, co-author of the report and BCG senior partner. “Companies should understand how their workforces will develop, which job categories drive the business, and how demand will evolve… and analyse different scenarios to figure out whether and how to find, hire, retrain, outsource, or lay off employees.”
Stephanie Bird, Board Member of EAPM and Director at the Chartered Institute of Personnel and Development (CIPD), said: “These findings support our recent research into talent, which found employers recognised the need to retain top performers, and also to plan for the skills and talents they need, now and in the future. We know many organisations are weathering the storm by placing greater emphasis on selecting and developing high performing individuals, based on clear and robust criteria.”
Not keeping the right employees
She added: “Unfortunately our research also shows this is not yet being felt by employees themselves. For employer strategies to attract, retain and develop the people they need for the future to be truly effective, they need to be well communicated in a way that generates enthusiasm and motivation.”
The report, Creating People Advantage: How to Tackle the Major HR Challenges During the Crisis and Beyond, analyses the results of one of the most comprehensive HR surveys conducted in Europe. The survey was conducted from November 2008 through January 2009, receiving 3,348 responses from HR and other executives in more than 30 countries. This was supplemented by 109 interviews with senior executives, conducted between December 2008 and April 2009.
Execs say people are top priority
The executives were asked to rate the future importance of 21 topics and despite the economic crisis, managing talent remained the most urgent future topic in 2009, as it was in 2007, when the previous survey was conducted. “This topic is vital for companies… but other topics, such as managing work-life balance and managing corporate social responsibility, are viewed as luxuries these days,” said Rudolf Thurner, president of the EAPM.
Among the 21 topics, improving leadership development and enhancing employee commitment have risen significantly in importance since 2007, indicating that in the current economy, leaders have to show that they can lead in stormy weather to maintain employee commitment.
BCG said that companies need to calculate how different strategic scenarios will affect the demand for specific job categories, and determine whether there is an adequate supply of employees - either internally or in the job market. Strategic work force planning, however, requires fundamental changes in HR practices.
Businesses need to use metrics
Jean-Michel Caye, co-author of the report and a partner in BCG’s Paris office, commented: “Besides engaging in strategic work force planning, companies should also tightly link their overall corporate strategy with their HR practices and rely on metrics that track and prove the performance of people and HR processes.”
Few non-HR executives believe that the HR department acts as a partner with business units. One remedy would be to rotate executives in and out of the HR department, said BCG, but in half of the HR departments surveyed, only 3 out of 10 employees had experience in the business line. “Many companies struggle not only on metrics but also on delivering HR business partnership and meeting the customer’s needs,” says Pieter Haen, vice president of the EAPM.
Best practice
The report contains more than 20 case studies and best-practice examples of companies that are looking beyond the crisis to achieve long-term success. Four, in particular, stand out: linking people and business strategy; seeing strategic work force planning in action; measuring people performance; improving performance through HR best practices. A German bank, for example, created an HR cockpit for business executives that identifies strong and weak performance at the branch level, including employees’ productivity and the value added per person.