Business leaders today are faced with an extremely dynamic business environment, characterized by technological innovation, blurring boundaries among industries, shifts in customer behavior, scarcity of talent, and huge variations in growth across regions. HR functions need to help companies meet these challenges as true strategic partners. To fulfill this mandate, however, HR leaders need a clear view of their current capabilities, their priorities over the next three to five years, and the best way to tailor efforts to improve.
This report, the eighth in The Boston Consulting Group’s Creating People Advantage series, explores key trends in people management by considering ten broad HR topics and 27 subtopics. We looked at each subtopic’s future importance, companies’ current capabilities with regard to the subtopics, the levels of effort invested in them, and how urgently each subtopic needed action. We also explored the link between people management capabilities and economic performance.
In this year’s survey, 3,507 respondents from 101 countries participated, representing industries including industrial goods, consumer goods, and the public sector. In addition, we interviewed 64 HR and non-HR executives at leading companies around the world. The following are among the most compelling findings:
- HR capabilities correlate with economic performance. Companies that have strong capabilities in HR topics—such as talent and leadership; engagement, behavior, and culture management; and HR strategy, planning, and analytics—show significantly better financial performance than companies that are weaker in those areas.
- Analytics and key performance indicators (KPIs) give HR a seat at the table. There is a strong correlation between the use of KPIs and the strategic role of HR. HR leaders who want a role in strategic discussions with the business must be able to quantify workforce performance. This goes beyond “input” metrics, such as cost and head count, toward more sophisticated “output” indicators, such as productivity.
- KPIs should link to strategic actions. Even high-performing organizations, which are generally more data driven, do not use their KPIs systematically to formulate strategic actions. A clear prioritization and selection of KPIs and tools is needed to achieve best-in-class results.
- Globally, the leadership and talent management topics are the ones in the most urgent need of action. Across industries and regions, most respondents identified leadership, talent management, behavior and culture, HR and people strategy, employee engagement, and strategic workforce planning as the topics that are most urgently in need of action by their organization.
- HR departments need to be more consistent in their investment decisions. Many organizations need to invest their efforts in HR topics more strategically to build capabilities. Among the three HR topics rated as most important (out of a total of ten), companies showed merely average capabilities, and they were not specifically targeting their investments to improve those areas.
- HR needs to listen more to internal clients. Non-HR respondents reported a strong need for action with regard to approximately 40 percent of HR topics, particularly in core HR capabilities, such as staff capabilities and communication.
Fundamentally, the report identifies three hallmarks of great HR functions:
- They connect by partnering with stakeholders inside and outside of the company to improve operational and financial performance.
- They prioritize by using data-driven insights to identify and focus on the most urgent HR priorities.
- They create an impact by using KPIs and steering tools to support the organization and its strategic goals.
The report also includes case studies of specific HR best practices from Deutsche Lufthansa AG, PepsiCo, and Transnet.