Magazine article People & Strategy

The State of Human Capital 2012: Why the Human Capital Function Still Has Far to Go

Magazine article People & Strategy

The State of Human Capital 2012: Why the Human Capital Function Still Has Far to Go

Article excerpt

Worldwide, and in organizations of every type, "people processes" are failing to keep pace with a changing business landscape.

For human capital (HC) professionals everywhere, the new operating environment can be daunting. They must cope with the uneven pace of global economic growth; the explosion of local, national and international regulations; continuously evolving technology; new and unpredictable sources of competition; and a geographic and skills mismatch that finds many talented workers far from the job openings they are best suited to fill.

Compounding these difficulties, fiscal stalemate in the United States and persistent economic uncertainty in Europe are prompting business leaders to crimp expansion plans, cut spending and hold off on hiring. (1)

At the same time, long-standing obstacles to HC are still firmly in place. The talent shortage has not diminished: projections show that, in the United States alone, the 2020 job market will have 1.5 million fewer college graduates than are needed. (2) HC leaders still battle entrenched issues such as the "glass ceiling" for women. Some barriers seem higher and more immovable than ever, including keeping employees engaged in an environment of constant distraction, free-flowing information and increasingly heavy workloads.

Meanwhile, HC professionals are coming under unprecedented pressure to be innovative, to be strategic and to implement their programs and initiatives more efficiently. Indeed, CEOs around the world identify human capital as their number one challenge, according to the 2013 edition of The Conference Board CEO Challenge survey. Despite making strong progress in many areas--HR-related technology, workforce diversity and global focus--a 2012 report by McKinsey & Company and The Conference Board, The State of Human Capital, shows the human capital function still has a long way to go before it can claim complete relevance as a strategic business partner. In fact, business unit leaders give the HC function higher scores for transactional affairs than for more complex and value-added responsibilities like strategic planning and staff development (Exhibit 1).

This report also reveals that there is little innovation and a distinct lack of confidence within the HC function, as well as little correlation between implemented programs and impact. Few HC leaders have time to develop the innovation and strategic planning skills needed, and, even if they have a plan of attack, many lack the budget and resources to implement the necessary changes. When asked about taking action, 58 percent of HC professionals are taking action on priority items, but only 35 percent believe they are doing anything innovative and slightly less than one-third have high confidence that their actions will have the impact they desire (Exhibit 2).

In addition to a comprehensive literature review, The State of Human Capital 2012 is based on a survey of more than 500 HC professionals worldwide and insights gained from 18 focus groups consisting of more than 175 HC professionals who are members of The Conference Board Councils. The report identifies the following as critical issues holding back the progress of the human capital function:

* Human capital professionals are still unable to confidently and assertively solve business issues with line leaders.

* Many human capital departments still have a support function mindset and cannot convincingly communicate the value of their function as a strategic business partner.

* A lack of data, or access to data, prevents many human capital practitioners from relating the ROI or business impact of their function.

* A crisis of confidence in the function is leading to a lack of faith in the ability to execute the necessary changes.

With these issues in mind, The Conference Board and McKinsey & Company joined forces to help HC professionals understand and implement the necessary changes. …

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