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10 Ways to Prepare Human Capital Management for a New Era of Growth The Foundation for Modern HR in the Cloud 2 After five years of belt tightening and restructuring, companies around the globe are looking ahead to a period of growth. With it will come a new set of challenges for human capital management (HCM). Organizations define their customer experience strategies as an effort designed to earn their clients over and over again. Competition for talent will increase, skills shortages will worsen, and social recruiting tools will make it easier than ever for workers to change jobs. Organizations need talented workers—motivated, knowledgeable, high-performing employees—in order to thrive. That has always been true, but never more so than now, as many CEOs view their workforce as the big differentiator in today’s highly competitive business environment. After all, the winning products and services that make a company successful in the marketplace are the direct result of employees’ knowledge, skills, and capabilities. To maintain that success, HR should be doing everything possible to retain every employee possible. In this talent-centric corporate landscape, modern HR needs to refocus its strategies around the employee experience to address the business needs. With that in mind, HR leaders need to ask themselves whether they are paying enough attention to prepare HR for the new era of growth in 2014. Here are 10 ways HR leaders can form the foundation for modern HR: 1. Write a playbook for managing talent. Strategize to overcome chronic labor market imbalances. McKinsey projects a shortage of 30 million to 40 million college-educated workers by 2020.1 Already, looming capability gaps in computer science, life sciences, mathematics, physical sciences, and engineering fields are keeping top executives up at night. In its Annual Global CEO Survey for 2014, PwC recently found that 63 percent of CEOs are concerned about the availability of key skills.2 Even before baby boomers begin to retire in large numbers, human capital shortages have become Priority #1.3 According 1 McKinsey & Company, “The World at Work: Jobs, Pay, and Skills for 3.5 Billion People,” Richard Dobbs, Anu Madgavkar, Dominic Barton, Eric Labaye, James Manyika, Charles Roxburgh, Susan Lund, and Siddarth Madhav, June 2012. 2 PwC, “17th Annual Global CEO Survey,” 2014. 3 Bersin by Deloitte, “Predictions for 2014,” Josh Bersin, December 2013. THE FOUNDATION OF MODERN HR Write a playbook for managing talent. Know your employees as well as your customers. Hire “scary” people in HR. Differentiate through a personalized employee experience. Build a collaborative culture in the workplace. Recruit for continuous innovation. Gamify learning. Rethink performance management. Go global. Move to the cloud. 3 to some estimates, up to 40 percent of today’s workers will retire in the next four to seven years.4 Couple that uncertainty with rising employee turnover and you have a recipe for trouble. How well do you know your employees today, and what are your succession plans? It’s never too early to begin thinking about the workforce you have today and the workforce you need in the future. One way to address the challenge is to create a sales-like playbook that elevates the talent question within the company and documents critical aspects of the company’s HR strategy. If you give employees the same attention you give to your products and services, you will increase the employee experience and be able to retain highly skilled talent. It will become increasingly important to source and retain the best talent as talent scarcity increases. If you think of talent management as an enterprisewide system, you’ll be in a better position to compete. 2. Know your employees as well as your customers. Datafication is the name of the game. Where should you invest in the workforce? How should you answer complex workforce questions from the business? Employee insight is key to these decisions. This data exists within the enterprise, but it is not used effectively today. A dedicated analytics group can combine workforce and talent data with business and financial data to ground decisions in the facts and provide better visibility into business performance. Don’t confuse analytics with reporting here. You need to know the monthly employee turnover rate and average compensation per employee. But that data is old news by the time you issue the report. There are many more-interesting questions to ask. Some HR applications today can predict turnover and performance and model different scenarios to gauge the impact of different actions on predicted outcomes. This functionality can be deployed on mobile devices, requires no training, and delivers unprecedented decision support to frontline leaders—but this is just the beginning. To unlock even more value, look beyond traditional sources of HR information to include sources of human-generated data: location data, activity data, sensor data, financial data, and unstructured sentiment analysis, for example. Encourage employees to build internal talent profiles as a way of gathering information that can be used for networking, 4 Pew Research Center, “Baby Boomers Approach 65—Glumly,” D’Vera Cohn and Paul Taylor, December 20, 2010. BUSINESS INTELLIGENCE AND WORKFORCE ANALYTICS SOLUTIONS CedarCrestone’s “HR Systems Survey” found that “Top Performer” organizations put decision-support tools directly into the hands of managers more frequently. These organizations achieve competitive advantage, as shown by a value chain statistical analysis. They also report revenue per employee that is 26 percent higher than those organizations that do not support managers with direct access to business intelligence and workforce analytics solutions. 4 collaboration, and career development purposes. With access to this kind of data, you’ll open the door to insights that can shape critical business decisions going forward. 3. Hire “scary” people in HR. Welcome the data scientists. Today’s systems were designed by baby boomers for baby boomers, in an era when HR technology was handled by the IT department and the concept of analytics was yet to be introduced. Modern human capital management (HCM) requires new strategies for developing, attracting, and retaining talent. To discover the insight that predictive analytics can reveal, you need to bring new faces into the HR organization. A new breed of analytics professionals called data scientists applies curiosity and business knowledge to plot new strategies for reaching core business goals. They don’t speak the language of HR—and that is precisely why you should hire them. Data scientists ask how and why. But where do you find data scientists when you need them? Look at other business functions—finance, product development, or even the marketing department. With the right analytics guru and a database populated with HR and human-generated information, HR leaders will be prepared to turn HR into a strategic business function that drives growth instead of hindering it. 4. Differentiate through a personalized employee experience. Care for employees the same way you care for customers. No one questions the need to provide a great customer experience. But very few business leaders prioritize the employee experience in the same way. That is about to change. If yesterday’s HR was about systems and compliance, tomorrow’s HR will be about retaining good people, and that will require differentiation. By 2020, five generations will work side by side in a workplace that is shaped by cloud computing and social media. Millennials and Generation X workers will have 7 to 10 jobs and a variety of different professions during their careers.5 In a marketplace where employees have so many options to advance their careers, you will have to fight to keep the best people working for you. Most of us are not starting from a position of strength when it comes to employee engagement. A Gallup report shows that only 30 percent of US workers are “engaged,” 5 Bersin by Deloitte, “Predictions for 2014,” Josh Bersin, December 2013. “ Data scientists are the ones asking and answering the question behind the question behind the question. Using predictive models, they may identify areas in which an investment of $500,000 could cultivate new talent capable of increasing revenues by $10 million in the coming year.” —Bertrand Dussert Vice President of HCM Transformation and Thought Leadership, Oracle 5 while 50 percent are “not engaged” and 20 percent are “actively disengaged.” According to the study, the lower productivity of the “actively disengaged” workers costs the US economy US$450 billion to US$550 billion per year.6 On the positive side, companies with a “recognition rich” culture have a 31 percent lower voluntary turnover rate than their peers.7 There are a number of resources available to help companies improve the employee experience. Social listening, using communities to onboard new hires, better tools for collaboration and mobile work, customized compensation/benefits packages, and flexible work styles are just a few examples. 5. Bring a collaborative culture into the workplace. Bring social technologies into the mix. Social apps and collaboration technology have forever changed the way we live and work. Americans aged 18 to 64 who use social networks say they spend an average of 3.2 hours per day with these apps.8 When applied to the workplace, these same social technologies can improve communication and increase productivity, especially when increasing numbers of contingent workers and contractors are included. Personal productivity is no longer the most effective way to drive business performance. Most jobs are bigger than can be done by one person. Collaboration enables a network effect that makes a much bigger contribution to the enterprise. HR must embrace and support this new paradigm. The CEO needs to lead the way toward a more collaborative culture, and then HR needs to manage it. HR leaders who foster true collaboration will boost enterprise performance. 6. Recruit for continuous innovation. Get better results from talent acquisition investment. When the financial impact of hiring a top performer is 10 to 100 times the employee’s compensation, it’s important to hire the best person for the job.9 New sourcing tools, 6 Gallup, “The State of the American Workplace: Employee Engagement Insights for U.S. Business Leaders,” 2013. 7 Bersin by Deloitte, “Predictions for 2014,” Josh Bersin, December 2013. 8 Ipsos Open Thinking Exchange, “Socialogue: The Most Common Butterfly on Earth Is the Social Butterfly,” January 8, 2013. EMPLOYEE REFERRALS: AN EFFECTIVE SOURCE OF TALENT ACQUSITION Social networking is a powerful tool that allows recruiters to reach a pool of qualified candidates that might otherwise be unreachable. Establishing your organization’s presence within social networks also says a lot about your organization to potential candidates, heightening the perception that your company wants to connect with them. Don’t overlook employees as a source of recruitment leads. Approximately 24.5 percent of hires come from employee referrals, according to the CareerXroads “2013 Sources of Hire Report.” 6 including social networks, help to lower the high cost of talent acquisition and accelerate the process of finding skilled workers who will outperform their peers. Today’s job seekers have a variety of social channels to help them find a match. A 2012 publication by Meisha Rouser found that 18.4 million applicants found their jobs on Facebook, 10.2 million found their jobs on LinkedIn, and 8 million found their jobs on Twitter. 10 HR departments can take advantage of this trend by participating in channels that reach their target candidates. In addition to social networks, predictive ranking tools help HR automate job board processes, while databases of suitable candidates allow companies to manage their own relationships with candidates, instead of relying on third-party recruiting firms. Tools that allow prescreening of candidates can further improve the efficiency and quality of recruiting efforts. These smart sourcing strategies will allow you to recruit from a bigger pool of qualified candidates, build stronger relationships with job seekers, and earn a higher return on any talent sourcing investments. 7. Gamify learning. Make professional development more engaging. Employees need more-frequent access to learning information just to do their jobs well today, let alone to advance in their careers tomorrow. HR must support both formal and informal opportunities with a focus on career development. Short-term training can help fill critical skills gaps, but it must be adjusted to the way the new workforce wants to learn—through digital, game-like experiences that provide immediate feedback and increase engagement with the material. DDI recommends a 70:20:10 mix—where 70 percent of learning occurs on the job, 20 percent from others, and 10 percent in formal learning experiences. This helps drive a culture of continuous learning, through which leaders get the support and development they need, even when they don’t realize it.11 Research from HR.com and DDI backs up this recommendation: Only 9 percent of HR professionals rated their organization’s development program as very high when they offered open enrollment programs with a curriculum of classroom-based courses. By 9 ERE, Lou Adler, July 2012..net 10 Meisha Rouser, “Best Practices in Social Recruiting,” 2012. 11 DDI, “6 Keys to a Learning Journey.” SOCIAL LEARNING Employees often can’t take a whole day off for training. But by taking advantage of social technology, employees can connect and share information they need in order to perform their jobs. Increasingly, employees use peer recommendations and are looking for mentors to gain knowledge that can help them perform better. Leveraging technology and social media gives employees the opportunity to collaborate with each other and learn in an easy way. Organizations should leverage and harness social learning because great ideas, advice, and feedback come from all parts of the organization. 7 contrast, 91 percent of HR professionals rated their organization’s development program as very high when their programs used a journey-based approach, with continuous learning and a mix of methods.12 How do you offer continuous learning to millennials and highly mobile workers? Josh Bersin says, “Extend the learning architecture to include content, collaboration, and programs in an easy-to-understand set of offerings that will help people to learn, share information, and locate and share expertise.”13 8. Rethink performance management. Focus on business outcomes. In today’s results-oriented workplace, the success of any individual depends on an ability to work with others, much more so than how well they complete any given task. HR needs a performance management model that recognizes this shift and evaluates performance based on actual measures of work tied to business outcomes. HR practices will be aligned with the business, and business’ goals are met when HR understands what matters not only to employees, but also to customers and other business partners. HR needs to understand how the workforce can contribute to add value that touches every business decision. HR will need to help line managers to accomplish their goals, and help employees to be successful in contributing to the business. When employee and line manager behavior are linked to results that matter not only to the organization but also to customers and business partners, then HR becomes the driving force for business success. Multilayered feedback must also be linked to engagement. And HR must find ways to reduce the organizational friction that prevents employees from maximizing their potential enterprise contribution. This type of next-generation people operation will more accurately reflect employee performance. Done right, companies can achieve as much as a 30 percent improvement in employee performance, says Brian Kopp, managing director of the Corporate Leadership Council.14 12 HR.com and DDI, “Be Better Than Average: A Study on the State of Frontline Leadership.” 13 Bersin by Deloitte, “Predictions for 2014,” Josh Bersin, December 2013. 14 Forbes, “10 Trends Driving the Mandate for Modern HCM,” February 7, 2014. 8 9. Go global. Use a shared service model to manage global talent ecosystems. As the talent pool shrinks and competition intensifies, HR will become an increasingly global business function. Organizations are expanding operationally into new geographies and moving talent across the globe in order to fill regional talent needs. An effective, global HR technology foundation can support this imperative to globalize while helping to control HR’s operational costs and cater to local needs. Decisions around recruiting, deploying, and managing employees all will have global implications. This reality will introduce many new complexities for HR leaders. Reporting will span countries. HR processes will need to be consistent around the world through deliberate employee branding efforts. And a number of disparate workforce systems and tools will have to be integrated. HR leaders should consider a shared service model that can be managed centrally but delivered locally, as a way of increasing the level of efficiency in the HR organization. 10. Move to the cloud. Partner with IT to deliver HR as a service. As part of the move to modern HR, you need to give employees access to HR apps that are relevant, personalized, and accessible on the device of their choice. The best way to deploy and support these capabilities is through the cloud. Cloud-enabled HR management systems require one-third the staff of on-premises solutions, according to CedarCrestone. Implementation times also are faster when solutions are hosted in the cloud. The average length of time for a cloud human resources management system (HRMS) implementation is 8.4 months, compared to 14.6 months for a licensed on-premises HRMS.15 Perhaps the strongest argument for considering the cloud is to achieve faster user adoption and an improved user experience. According to the same CedarCrestone survey, cloud-based HRMS solutions have the highest user adoption, and as organizations add more users, they are able to achieve increased value from the solution. HR as a service is a given in the workplace of the future. The question is not if, but when. Conclusion 15 CedarCrestone, “2013–2014 HR Systems Survey,” Figures 10 and 11. ONE SIZE DOES NOT FIT ALL FOR ALL COUNTRIES Many organizations have standardized processes and consolidated costs through a shared service model. This transition was enabled in part by a common global technology platform, surfaced in local languages. That platform also laid the foundation for the next development cycle of HR process maturity: a slight swing of the pendulum back toward localization, as HR leaders realize that one size does not fit all for HR shared services. 9 Acquisitions, new product launches, and new markets and geographies all create an exciting yet challenging environment for HR. Organizations are constantly evolving as they drive for innovation and growth. The twenty-first-century economy is service driven. Companies that win today are focused on two things: taking care of their employees and taking care of their customers. Winning and keeping loyal and engaged individuals— both employees and customers—is a challenge. These high-value individuals are savvy. Customers are enabled by myriad choices in their purchasing decisions, and key talent has many opportunities for career advancement. To refocus HR in a new era of growth around the employee experience, we need to move beyond transactions to address business needs. These needs include a talent- centric view of the workforce, tools and policies that encourage collaboration, applications that are engaging and mobile, and the insights that enable management to predict the business impact of modern HR efforts. Oracle Corporation World Headquarters 500 Oracle Parkway Redwood Shores, CA 94065 U.S.A. Worldwide Inquiries: Phone: +1.650.506.7000 Fax: +1.650.506.7200 oracle.com Copyright © 2014, Oracle and/or its affiliates. All rights reserved. This document is provided for information purposes only, and the contents hereof are subject to change without notice. This document is not warranted to be error-free, nor subject to any other warranties or conditions, whether expressed orally or implied in law, including implied warranties and conditions of merchantability or fitness for a particular purpose. We specifically disclaim any liability with respect to this document, and no contractual obligations are formed either directly or indirectly by this document. This document may not be reproduced or transmitted in any form or by any means, electronic or mechanical, for any purpose, without our prior written permission. Oracle and Java are registered trademarks of Oracle and/or its affiliates. Other names may be trademarks of their respective owners. Intel and Intel Xeon are trademarks or registered trademarks of Intel Corporation. All SPARC trademarks are used under license and are trademarks or registered trademarks of SPARC International, Inc. AMD, Opteron, the AMD logo, and the AMD Opteron logo are trademarks or registered trademarks of Advanced Micro Devices. UNIX is a registered trademark of The Open Group. 0414 ern HR, you need to give employees access to HR apps that are relevant, personalized, and accessible on the device of their choice. The best way to deploy and support these capabilities is through the cloud. Cloud-enabled HR management systems require one-third the staff of on-premises solutions, according to CedarCrestone. Implementation times also are faster when solutions are hosted in the cloud. The average length of time for a cloud human resources management system (HRMS) implementation is 8.4 months, compared to 14.6 months for a licensed on-premises HRMS.15 Perhaps the strongest argument for considering the cloud is to achieve faster user adoption and an improved user experience. According to the same CedarCrestone survey, cloud-based HRMS solutions have the highest user adoption, and as organizations add more users, they are able to achieve increased value from the solution. HR as a service is a given in the workplace of the future. The question is not if, but when. Conclusion 15 CedarCrestone, “2013–2014 HR Systems Survey,” Figures 10 and 11. ONE SIZE DOES NOT FIT ALL FOR ALL COUNTRIES Many organizations have standardized processes and consolidated costs through a shared service model. This transition was enabled in part by a common global technology platform, surfaced in local languages. That platform also laid the foundation for the next development cycle of HR process maturity: a slight swing of the pendulum back toward localization, as HR leaders realize that one size does not fit all for HR shared services. 9 Acquisitions, new product launches, and new markets and geographies all create an exciting yet challenging environment for HR. Organizations are constantly evolving as they drive for innovation and growth. The twenty-first-century economy is service driven. Companies that win today are focused on two things: taking care of their employees and taking care of their customers. Winning and keeping loyal and engaged individuals— both employees and customers—is a challenge. These high-value individuals are savvy. Customers are enabled by myriad choices