1 Discussion Question and 1 Summary

6 Trends and Their Implications for HPI This chapter offers a broad summary of current trends affecting HPI practitioners. The trends are classified into three categories. The first category consists of business and public sector trends, and that section of the chapter describes how corporations and government agencies are changing or are being forced to change to remain competitive. The second category consists of workforce trends, and that section reviews how the U.S. workforce is changing. The third category consists of human resource trends, and that section describes how the human resource function is changing. Taken together, the three parts of this chapter summarize key drivers of change that affect performance in organizational settings and how HPI practitioners can respond in a proactive way. Business and Public Sector Trends While each industry has its unique characteristics and unique responses to the global economy and other corporate challenges, there are several trends that appear to be true for most corporations and public sector agencies. This section will discuss these corporate and public sector trends and their implications for HPI practitioners. Key Trend 1: Organizations Are Placing Innovation at the Top of Their Priority Lists In the early 1990s, companies responded to increased competition by taking decisive action to reduce costs, leading to greater profits. Today, organizations realize that one of the keys to business success is innovation. Innovation is the term used to describe how organizations create value by developing new knowledge and/or using existing knowledge in new ways. Innovation can lead to growth in new markets, customer loyalty in existing markets, and a workforce culture that can respond effectively to the changes that organizations face over time. Innovation has become a vital management mandate for both private and public enterprises. A 2006 American Management Association/Human Resource Institute survey found that 67 percent of the 1,356 global business leader respondents identified innovation as either “extremely important” or “highly important” to their organizations today. More significant is that 85 percent think that innovation will be “extremely important” or “highly important” to their organizations in 10 years (AMA/HRI, 2006). Organizations can be innovative in many different ways. One way is to provide new products and/or services to new or existing customers. While this type of activity has been typically housed in the research and development division of organizations, more and more companies are looking for these types of innovations to come from throughout the organization. Another way organizations can innovate is to implement new business models that allow for reductions in time-to-market, reductions in cost-to-produce, increased customer service levels, etc. Doing things faster and smarter with less than the competition can lead to market growth and an expansion of profit margins. Meeting customer needs is the key to any company’s success. Innovations in identifying and responding to changing customer needs can have a great effect on a company’s ability to stay on top or gain additional market share. While it should be obvious that in order to become an innovative company, organizations must craft and foster a more creative corporate culture, this is something that typically gets overlooked. A creative corporate culture encourages appropriate risk taking, values teamwork and collaboration over individual heroics, and encourages open communication up and down throughout the organization. Amabile and Sensabaugh (1992) cited freedom and control, good project management, sufficient resources, and creative cultural attributes (collaborative atmosphere, a high expectation of creativity, an acceptance of failure, and a nonbureaucratic structure) as keys to providing a workplace that is supportive of innovative behaviors. Conversely, lack of freedom or choice in deciding what to do or how to do it, lack of interest or psychological support within the organization, and poor project management can lead to the minimization or elimination of innovative behaviors. The need for innovation is important for the public sector as well. As pressures to reduce taxes increase, funding for government agencies is always in jeopardy. Agencies need to find innovative new ways to meet constituent needs. Improving customer service while reducing costs will require a great deal of innovation. In a bureaucracy as large as our government, creating a culture that cultivates innovation could prove most challenging. There are many ways HPI practitioners can help organizations become more innovative. We can review the recruitment process to be sure that our organization is hiring people via personality assessments who exhibit attributes for creativity that can lead to innovation. We can ensure that our organizations are more diverse in terms of race, ethnicity, and even collegiate degree programs. We can be sure that the ability to foster creativity and innovation becomes a valued competency of all leaders in our organization. We can create succession plans in the organization to be sure that we promote leaders who exhibit management styles that encourage innovation. Performance management tools as well as simulation assessment labs can be used to identify the most effective leaders. We need to review the employee reward systems to be sure that they align with the company’s innovation strategies. That assumes that the organization has an innovation strategy. If it doesn’t, we can help them formulate one and communicate it effectively throughout the organization. We can help our organizations analyze their internal business processes, looking for ways to modify, enhance, or completely rewrite the way they do business. Reorganization and the reengineering of work processes can help companies implement innovation strategies. Communication channels up, down, and across the organization are vital for a company to be innovative. It is essential to create a culture where open communication, even sharing of mistakes and failures, is not only possible but is expected and rewarded. An innovative company will generate countless ideas for change, and our organizations will need a process for evaluating those ideas for their potential impact on the organization. HPI practitioners can help their organizations identify the key success criteria that can be used to create a stage-gate process by which “go”/”no-go” decisions can be made in an objective manner at various stages of new idea exploration. Key Trend 2: Organizations Are Faced with Increased Security Concerns We live in a post–September 11th era. That day changed not just the way businesses and governments handle security in the United States, but worldwide. Statistics confirm anecdotal evidence that corporate security has leaped to the top of many businesses to-do lists. Before the attacks and the anthrax scare, only 35 percent of the companies polled had a plan to deal with biological, chemical or nuclear contamination, according to the International Security Management Association, which surveyed its membership of corporate security executives. Since then, an additional 39 percent of those businesses have put plans in place. Most of those polled also were confident their companies would earmark more funds for security at home and overseas—with about half of the funds directed at physical security, a quarter toward IT, and the remainder for security staff (Poletz, 2002). While the airlines and other transportation modes have obvious security concerns, in general, the biggest areas of concern for most organizations are building access, business continuity, and data security. Security system enhancements are being made all over the world. HPI practitioners can be catalysts for the changes that new procedures will require. This might include training programs for all employees, measurement systems, and cultural shifts where security becomes part of everyone’s job. Does your organization have a disaster recovery plan? Chances are it does not. When asked the status of their organization’s disaster recovery plan in an online poll, 64 percent of 642 respondents answered, “Does not exist yet.” Only 7 percent said that their plan was current and complete (disaster-recovery-guide.com, 2006). (See Figure 6-1.) Business continuity in the event of a disaster is in jeopardy without a disaster recovery plan. HPI practitioners can help their organizations identify the business processes that are vital to the company or agency. We can also produce job aids that will help the company respond appropriately in the event of a natural or man-made disaster. We can be sure that our leadership development programs prepare our leaders to function in the event of a disruption to normal operations. Figure 6-1 What is the status of your disaster recovery plan? Source: http://poll.pollhost.com/ZHJndWlkZQkxMDc1MDI4MTU2CUVFRUVFRQkw MDAwMDAJQXJpYWwJQXNzb3J0ZWQJMA/. HPI practitioners can help their businesses or agencies maintain data security by working with their information technology organizations to make sure employees understand the implications of a breach of data security and the various ways that those breaches can occur unintentionally. This practice is called social engineering. Social engineering is when confidential information is obtained by manipulation of legitimate users. A social engineer will commonly use the telephone or Internet to trick people into revealing sensitive information or getting them to do something that is against typical policies. By this method, social engineers exploit the natural tendency of a person to trust his or her word, rather than exploiting computer security holes. It is generally agreed upon that “users are the weak link” in security and this principle is what makes social engineering possible. All employees who have access to data are responsible for the security of that data. HPI practitioners can help strengthen the former “weak links” in their organizations to ensure data security. Key Trend 3: Organizations Are Growing via Mergers and Acquisitions There was a near record volume of mergers and acquisitions in 2005. The value of mergers and acquisitions worldwide totaled over $2.7 trillion. According to Thompson Financial, a leading provider of financial data, this recent resurgence in M&A activity is due to increased demand for energy assets, easy access to capital, and a record amount of private equity funding. While the largest sectors affected by mergers and acquisitions during the first boom in M&A in the late 1990s were technologies and banking, today, worldwide, the industries most commonly affected include energy and power companies, financial companies, and telecommunications companies. In the United States, there has been a high rate of mergers and acquisitions in the energy and power sector, the financial sector, the media and entertainment sector, and in the health care sector (Thompson Financial, 2006). Unfortunately, many mergers and acquisitions occurring in recent years have not included HPI practitioners or other human resource personnel in the planning stages. Company leaders focus more on the financial end of the deal and neglect the key people-related and knowledge management-related issues that are so important to eventual success of the venture. According to a longitudinal study of 125 mergers that occurred between 1996 and 2000, “… there was a large and significant difference between the stock performance of companies where executives proactively tackled cultural issues during the integration process and those who did not. A proactive approach netted 5.1 percent higher stock price performance versus a minus 4.4 percent share price underperformance in deals where companies failed to identify and negotiate cultural hurdles” (Vestring, King, Rouse, and Critchlow, 2006). HPI practitioners can facilitate the identification of the desired culture for the newly formed corporation and assist in efforts to communicate about that desired culture. HPI practitioners can also play key roles in improving retention and redeployment in the wake of mergers and acquisitions as well as provide help in retraining skilled employees and leaders. HPI practitioners have the skills needed to foster teambuilding, and assist with the new organization’s design. The key is to become part of the M&A team early in the process; even assisting with the due diligence prior to the merger to anticipate the human resource challenges that lie ahead. Key Trend 4: Businesses and Agencies Are Paying Closer Attention to Business Ethics What do company names like Enron, Worldcom, and Tyco make you think of? How about the name Jayson Blair, former writer for the New York Times? Did you hear about the Pennsylvania legislature’s 2 a.m. vote for a 16 percent pay hike? Nothing can grab headlines quicker than a corporate or government scandal. In some cases, a business is unable to survive such negative publicity. In the case of the Pennsylvania legislature, it didn’t take long for the backlash to hit, and the reversal of the raise to take place, but not before the ethics of the leaders was scrutinized severely by their constituents. Organizations and individuals cannot afford these types of scandals. While most companies have a code of ethics in place, few have paid much attention to its compliance in the past. Most of the leading MBA schools have cited an increase in interest and enrollment in the Business Ethics classes. Sometimes it takes a major collapse, like Enron, to wake people up to the importance of ethics in business. But what about those leaders who are already in the workforce? HPI practitioners can be instrumental in identifying knowledge gaps when it comes to business ethics. Does the workforce know how the organization’s code of ethics applies to them? Do they know what to do if they become aware of a violation of the code of ethics? Does your organization’s code of ethics meet accepted standards? Does a code of ethics even exist? If not, as HPI practitioners we can facilitate the creation of one. As HPI practitioners, this code of ethics applies to us, too. In our work, we become privy to lots of confidential and personal information. We must uphold our confidences strongly to ensure our credibility and trustworthiness with our clients, whether we are internal or external to the organization with which we are working. Key Trend 5: Public Sector Organizations Are Recognizing the Need to Become High-Performing Organizations A 2005 General Accounting Office report entitled “21st Century Challenges: Transforming Government to Meet Current and Emerging Challenges,” declares that “reexamining the base of all major existing federal spending and tax programs, policies, functions, and activities offers compelling opportunities to redress our current and projected fiscal imbalances while better positioning government to meet the new challenges and opportunities of this new century” (GAO, 2005). The report calls for all agencies to become high-performing organizations. It challenges government agencies to become more results-oriented. Agencies are strongly encouraged to reexamine their business processes, organizational structures, management approaches, and even missions (see Figure 6-2). A previous GAO report identified the following key characteristics of a high-performing organization: A clear, well-articulated, and compelling mission. High-performing organizations have a clear, well-articulated, and compelling mission, the strategic goals to achieve it, and a performance management system that aligns with these goals to show employees how their performance can contribute to overall organizational results. Strategic use of partnerships. Since the federal government is increasingly reliant on partners to achieve its outcomes, becoming a high-performing organization requires that federal agencies effectively manage relationships with other organizations outside of their direct control. Focus on needs of clients and customers. Serving the needs of clients and customers involves identifying their needs, striving to meet them, measuring performance, and publicly reporting on progress to help assure appropriate transparency and accountability. Strategic management of people. Most high-performing organizations have strong, charismatic, visionary, and sustained leadership, the capability to identify what skills and competencies the employees and the organization need, and other key characteristics including effective recruiting, comprehensive training and development, retention of high-performing employees, and a streamlined hiring process (GAO, 2004). Figure 6-2 Cultural changes and key practices necessary for successful transformation. Source: GAO-05-830t. This sounds like a job for an HPI practitioner! This major transformation of government could be the largest human performance improvement project ever. We have the skills to guide the shift in leadership approaches. We can translate strategic plans into implications for the workforce. We can be sure that organizations are designed effectively. We can help design and implement effective performance management systems. We can help identify the gaps that currently exist and propose ways to fill them. This approach to government will be a huge cultural shift and will not take place overnight, but the time has come to begin to make this transformation, and HPI practitioners can play key roles in making it happen. Key Trend 6: Businesses and the Public Sector Are Experiencing the Effects of Global Interdependence From environmental factors such as the ozone layer, global warming, and acid rain to the social concerns of poverty, genocide, and human pandemics, most everyone can recognize the increase in global interdependence. Businesses and public sector organizations are not immune to these factors. Organizations have been influenced by global economies for decades, but the degree of that influence has never been greater than it is now, and there is no sign that it will lessen anytime in the near future. As such, organizational leaders need to learn how to “play” in the “global sandbox.” Hewlett-Packard is a company that has learned to leverage globalization to its advantage. They now produce printers that print in Chinese, Japanese, and Korean. They’ve also designed battery-operated digital cameras and printing systems that operate completely without electricity, to meet the needs of developing countries where an electrical grid may or may not exist. It’s no longer good enough to be number one in the United States. The race is on to be number one in the world. The Pacific Rim countries of China, Indonesia, Singapore, Thailand, Japan, Malaysia, South Korea, Taiwan, and Vietnam represent a tremendous opportunity for most businesses. Economic growth in this region is expected to at least double in the coming years. International investment in this region is great. The success or struggle of these economies will have a ripple effect around the world. Being successful in these countries could be the most obvious way to increase revenues for a business, and most CEOs would agree that revenue growth is the most important way to increase overall financial performance. The increase in the number of companies that have sent whole business functions offshore is another example of growing global interdependence. A natural disaster in India could send shock waves through the world economy. A pandemic in Thailand could interfere with supply chains around the globe. A government coup in China could send the world economies spiraling downward. No longer is a stable global economy controlled by the fiscal policy of a single country. What does this mean for HPI practitioners? First of all, interactions with different cultures will pose a challenge for business leaders. Knowing the customs and traditions of foreign nations could prove to be the difference in a deal succeeding or failing. Something as simple as how to greet a foreign leader, i.e., a handshake or a bow, can help to establish a positive atmosphere for doing business. HPI practitioners can be instrumental in developing “cultural boot camps” for executives who will be interfacing with leaders from other countries. Being able to identify the global interdependencies within an organization will help that organization be able to respond to crises when they occur or proactively, before they occur. HPI practitioners can help diagram the linkages and their implications worldwide for any organization. We can help identify those functions that are “mission critical” and make sure that these functions have redundancy in another part of the world. HPI practitioners can design performance management and reward systems that are adaptable to the various world cultures. While individual evaluations and performance-based pay is typically acceptable in a Western society, they may not be acceptable practices in an Eastern society, where “team” is more highly regarded than “individual.” Key Trend 7: Corporations Are Outsourcing Tasks and Large-Scale Functions Outsourcing is the strategic use of outside resources to perform activities traditionally handled by internal staff and resources. Outsourcing is a management strategy by which an organization farms out major, noncore functions to specialized, efficient service providers. A 1996 Fortune article cited outsourcing as one of the eight learnable skills leaders need to advance in their careers (Faircloth, 1996). Any function not directly associated with a business’s core competencies— that is, what it does better than any other organization and is key to its competitiveness—is a candidate for outsourcing. According to the Outsourcing Institute, a professional association and executive network with a mission to provide timely information exchange and services on outsourcing and related sourcing strategies, the fastest growing area for outsourcing is information technology (IT). More specifically, areas of IT that companies have outsourced in large numbers to date include application management and maintenance, helpdesks, data entry, capture, and records management (Outsourcing Institute, 2005). Non-IT functions that have been outsourced involve many of the human resource functions, including benefits, payroll, relocation, and worker’s compensation (see Figure 6-3). Figure 6-3 Processes currently outsourced. Source: www.outsourcing.com, 2005. Many more companies are considering outsourcing various noncore functions of their business. Ten percent of companies responding to a Outsourcing Institute survey indicate that they are considering outsourcing the entire human resource function. Nine percent indicate an interest in considering outsourcing their security, testing, purchasing, records, and travel functions (see Figure 6-4). In the late 1990s, companies were mostly outsourcing certain subtasks of a function, like the help desk in the IT department. Today, they are more willing to let go of entire functions. We’re seeing more and more companies outsource their entire human resource function or their entire information technology function. There are many reasons why companies choose to outsource. Dennis Rogers of Resource Outcomes says that there are strategic and tactical reasons to outsource: “Outsourcing becomes Strategic Outsourcing when the external firm provides a management function and manages the work to deliver the outcome your business requires rather than perform a task” (Roger, 2006). Resource Outcomes identified the top 5 strategic and tactical reasons for outsourcing (see Figure 6-5). The Outsourcing Institute surveys new buyers of outsourcing each year. In 2005, 1,410 new members cited the reduction and control of operating costs and the improvement of company focus as the top two reasons that they were either currently outsourcing or planning to outsource in the near future (see Figure 6-6). Gartner Inc. projects that business process outsourcing will grow from $112.9 billion in 2003 to $176.1 billion in 2008 (Gamble, 2005). With the rate of outsourcing expected to increase, HPI practitioners can help their organizations successfully identify outsourcing opportunities, select the right vendor, and manage issues associated with transitioning to a new supplier—including redeploying displaced personnel. We can also help to establish measures and procedures that will track and monitor the performance of outsourcing vendors. One of the pitfalls with outsourcing can be poor communication to the workforce. This can lead to poor morale and the loss of valuable employees. HPI practitioners can put communication vehicles in place to avoid this pitfall. In many cases, we may find ourselves being in the function that is being outsourced. We have several choices: (1) We can seek employment elsewhere; (2) We can approach the organization that is taking over our role about employment (either full time or contract); (3) We can try to reposition our role in another part of the organization, such as the operations division; or (4) We can use it as an opportunity to “hang out our shingle” and start our own consulting business or freelance. Figure 6-4 Processes in consideration for outsourcing. Source: www.outsourcing.com, 2005. Reasons to Outsource Strategic Tactical Improve business focus. Outsourcing allows organizations to focus on their business issues. Free up resources for core activities. Gain access to world-class capabilities. Specialists have expertise. Gain benefits from re-engineering. Experts take over the process and quickly deliver benefits Share risks. Let the experts manage the risk of investing in changing technology. Secure resources not available within the organization. Gain control of difficult to manage functions. Give your problems to someone who has the expertise to solve them. Reduce and control operating costs. Experts know how to lower the costs. Make capital funds available. No need to invest in noncore functions, so funds can be allocated where they will have the greatest effect on profit. Provide cash injection. Where outsourcing involves the transfer and sale of equipment, facilities, and other assets from the organization to the outsourcing provider. Figure 6-5 Reasons to outsource. Source: http://www.resourceoutcomes.co.nz/outsourcing.htm. Workforce Trends Several important trends are affecting the global workforce at precisely the same time as organizations are coping with—and trying to anticipate—the trends described in the previous section of this chapter. This section will review the workforce trends and their implications for HPI practitioners. Key Trend 1: The Emergence of a Knowledge-Based Economy Is Driving Skill Requirements Up A knowledge-based economy is one that is based on the production, distribution, and use of knowledge and information. Technology plays a key role in the capture, use, and dissemination of knowledge. It’s not surprising, then, that a knowledge-based economy would require workers to have higher skills and higher levels of education than in the past. For example, manufacturing supervisors used to be selected from veteran manufacturing employees. Today, they are recruited from two-year degree programs. In addition to strong math and other technical skills, supervisors also need to be good team builders, communicators, motivators, and problem solvers. Figure 6-6 Reasons for outsourcing. Source: www.outsourcing.com, 2005. Recruitment and retention of skilled talent will become more of a challenge. Once skilled talent is in place, it is important to create and maintain a positive culture and to keep employees engaged in the goals and objectives of the organization. This presumes that goals and objectives exist and are adequately communicated. If not, there’s an obvious role for the HPI practitioner. Today, schools are not necessarily preparing our future workforce with the skills needed to be successful. As it becomes more and more difficult to find and hire skilled workers, there will be an increased need for training to “build” a skilled workforce. This will be a shift, as fewer companies in the recent past have been willing to expand training initiatives with the exception of leadership training. Cost-effective training solutions will need to be employed and made available for all employees, not just the leaders of the company. We can also help facilitate the creation and use of formal and informal networks for the sharing of knowledge. These can be both internal to the organization and external. Caution needs to be used with external networks. Not all countries respect intellectual property rights. The sharing of any knowledge or information with those outside your organization should always be scrutinized. Just because you hold a patent doesn’t necessarily protect you in all countries. Employees need to be cautioned on the sharing of information with people from these areas of the world. Key Trend 2: We Have an Aging Workforce That Is Soon to Be on Its Way Out of the Labor Pool The high birth rate that followed the end of World War II resulted in a swell of the population. This era produced the “baby boom” generation. Most define baby boomers as those who were born 1946–1964. The majority of these people will be approaching retirement age in the next 2 to 20 years. The 55-and-older age group made up 13 percent of the workforce in 2000. By 2020, they are estimated to be 20 percent of the workforce. Their exit from the labor pool has many implications. The first implication, which has grabbed headlines for many years, is the increased financial pressure on currently underfunded pension plans, Social Security, and Medicare in the United States. The worker-to-retiree ratio will shrink to its lowest point ever. This deficit between deposits and withdrawals from the social systems of our country will put increased pressure on already tight public funds. Second, certain industries could experience talent shortages. The nuclear industry, for example, will be losing many top engineers. This is not a popular field of study for those in the next generation. Most manufacturing workforces already are seeing average ages in the 50s. Health care will suffer continued nursing shortages. The airline industry is likely to have a shortage of pilots and navigators. Education could feel the effects the earliest, as most teachers are eligible to retire at age 55. Social workers and police officers both have an aging workforce with relatively fewer people entering those fields. A creative approach to the projected skilled labor shortage is to have government change the pension regulations to allow for partial retirement. This would allow workers to work part-time and collect a portion of their pension to subsidize their incomes, keeping skilled workers in the workforce longer. HPI practitioners can be supportive of these and other creative approaches to keeping the veteran talent and skills and knowledge in the workplace until we can capture and pass along this information to the next generations. While an overall growing population will help to fill these vacancies, the challenge will be to fill them with skilled workers. A lot of expertise will be departing the workforce through a revolving door. HPI practitioners can help to capture the expertise before it leaves by making sure that standard operating procedures (SOPs) are up-to-date and accurate. They can also capture the subject matter expertise and create curriculum that can be used to build skills in the next generation of workers. Establishing mentoring programs that pair younger workers with older workers can be effective at passing along necessary skills and knowledge. Having the overall workforce age poses its own set of challenges. Due to older workers remaining in the workforce longer, for the first time in history, there are four generations in the workforce: (1) The traditionalists (born 1922–1945); (2) The baby boomers (born 1946–1964); (3) Generation X (born 1965–1979); and (4) Generation Y, sometimes referred to as the Millennium Generation (born 1980–2000). Generational differences pose significant challenges to organizations: As workers reach mid-life, their concerns about child care often diminish and are replaced by concerns about elder care (for their aging parents and loved ones), savings and investment for their own retirement, health issues, and job security. Their “world views” shift as well, and they place more value on personal freedom, greater control over how they spend their time and energy, and reconnecting with interests that they’ve put off to raise a family (Weil, 2003). This realization has prompted several companies to begin to offer training for leaders to better respond to the challenges of the generational gaps. Constellation Energy currently offers a course entitled “Engaging the Generations” (see Figure 6-7). Being proactive about the challenges of the wide range of values can help an organization be more successful. Engaging the Generations For the first time in modern history, there are four generations in the workplace. And just like a multigenerational family, each group has different motivators, communication styles, and work values. Generational differences are one of the greatest challenges facing organizations today. They are also one of the greatest potential sources of opportunity and creative strength. Creating an inclusive, generations-friendly climate that will engage talented members of each generation is a business and a leadership imperative. Who should attend this course: Leaders at all levels, including Project Team Leaders and Project Managers. Also appropriate for professionals who must work closely with others to accomplish work. What you will learn: During this highly interactive workshop, you will examine the generational forces that shape individuals, teams, departments, and work groups. You will gain practical tips and tools you can apply immediately to bridge the generation gaps, build an inclusive work environment, and tap into the creative potential of our multigenerational workforce. At the end of this course you will be able to: Explain the forces that shape values and behaviors at work Identify the critical differences among the four generations in today's workforce Apply specific strategies and tactics to address generational differences Communicate more effectively to bridge the generation gap (do’s and don’ts) Create a workplace climate that motivates each generation Retain talent across the generations Figure 6-7 “Engaging the generations” course description. Source: Constellation Energy, 2006. Key Trend 3: Offshoring Is Changing the Ethnicity and Culture of the Workforce Offshoring is the relocation of business processes to another country, especially a country overseas. Initially, companies were offshoring mostly low-waged, low-skilled jobs, and the primary reason for offshoring was lower wages and benefits. However as education and skill levels increased in other countries, more and more organizations are deciding to offshore higher-skilled tasks or full processes. The reasons for offshoring have started to shift as well. Today companies are still offshoring work to save money, but they are also offshoring to reduce time-to-market, and to free up highly skilled labor for more important and strategic activities. The work is going to workforces in India, China, Malaysia, Czech Republic, Singapore, the Philippines, and many other countries. “The most important aspect of any effective offshore relationship is to treat the vendor as a true partner, rather than an independent contractor” (Klingshirn and Wisniewski, 2006). This means that a strong relationship between the process owner and the offshore provider of goods and services needs to be established and maintained. For this relationship to prosper, both parties need to understand the cultural norms and traditions of the other. They also need to have common goals and integrated work processes. HPI practitioners can help identify the cultural norms and traditions and can provide training in the work processes that will be shared. We can study any breakdowns that occur between the organization and the offshorer, to determine their root causes and propose solutions to those issues. We can establish measures that can be used to evaluate the performance of the offshorer. We can help our organizations modify their organizational structures and assist with manpower planning. We can be sure that the leaders in our organizations have the additional skills required to manage a remote workforce, especially one from a different part of the world where time zones and languages could add to the challenge. We can help establish an internal communication strategy. We can help to redesign the new jobs that will be created as a result of the offshoring. We also have the skills to manage the overall change process. Key Trend 4: Workers Are Increasingly Considering Job Changes A 2004 Society for Human Resource Management survey found that 35 percent of current employees are actively seeking a new job; an additional 40 percent are keeping their eyes open in case something better comes along (Burke and Collison, 2004). Intentions are one thing; actuality quite another. According to a Watson Wyatt Data Services study, the percent of voluntary separations overall was 11.4 percent—a far cry from the 35 percent that are actively hoping to change jobs. Some industries fare better than others. The retail and wholesale industry leads the rest with a 35 percent voluntary turnover rate. The most stable workforce is in the utilities and energy industry, where the voluntary turnover rate is only 6.5 percent (see Figure 6-8) (Watson, 2000/2001). These numbers are cause for concern, as the difficulty to recruit skilled labor increases. Rebecca Clark, an advisor for Chartered Institute of Personnel & Development in London, states that 93 percent of organizations in the UK are citing difficulties with recruiting. Companies are responding by implementing special retention strategies. Salary, promotions, and career development opportunities top the list of the strategies most used to keep talented employees in organizations (see Figure 6-9) (Clark, 2003). Figure 6-8 Percent of voluntary separations by industry. Source: Watson Wyatt Data Services. HPI practitioners can help their organizations hire the right people in the first place. We can study the top performers in any given role and determine what it is that makes them succeed. Then we can make sure that these qualities and skills are sought during the recruiting process. Once we’ve hired the best people, the focus shifts to retaining them. Google recruits and retains its employees using its company culture. Employees have access to free beverages and free lunches, and bean bags and large balls are available as alternate chairs. A desk at Google isn’t complete without a lava lamp; and that’s just the beginning. The conference rooms are named after famous rock stars, including John Lennon and David Bowie. And what would a Friday afternoon be without a company happy hour, complete with subsidized beer? And don’t forget the free massages. Google has found an effective way to retain its workforce. HPI practitioners can help their organizations respond to the needs of their workforces. It might not be lava lamps and beer that keeps your employees happy. Figure 6-9 Percent of companies using retention strategies. Source: Society for Strategic Human Resource Management. Perhaps it’s flex-time, opportunities for advancement, and telecommuting. Some companies are offering compensation incentives. For example, an energy company offers quarterly bonuses to its workers. There’s always incentive to hang on for three more months, then three more months, and so on. Human Resource Trends Several important trends are also affecting human resource functions at precisely the same time as the other trends, described previously in this chapter, are also occurring. These trends and their implications for HPI practitioners will be discussed in this section. Key Trend 1: The Training and Development Industry Is Spending a Greater Percent of Their Budget on External Services (Including Tuition) The 2005 State of the Industry Report from the American Society for Training and Development (ASTD) (Sugrue and Rivera, 2005) compared three groups of U.S. corporations, which they refer to as Benchmarking Survey, Benchmarking Forum, and BEST Award Winners. Their Benchmarking Survey group consists of 281 companies that participated in the benchmarking survey process. The Benchmarking Forum is a select group of 24 companies that represent very large global organizations, most of which are based in the United States. The 29 BEST Award Winners are a group of organizations that have demonstrated a clear link between learning and performance. Many organizations are utilizing resources external to the training function to meet the growing demand for training—including nontraining staff employees, outside training firms, independent training consultants, product suppliers, community colleges, other educational institutions, unions, trade or professional associations, and government organizations. Typical companies are spending slightly more on external resources, while the Forum and BEST Award companies are spending about the same or less (see Figure 6-10) (Sugrue and Rivera, 2005). In the past, the top learning and performance organizations were utilizing external resources in greater numbers than then general population. Today, the best of the best seem to be doing a higher percentage of their work by utilizing internal practitioners. This could be explained by the fact that larger organizations tend to have more internal practitioners to call upon when projects are identified. However, a 2005 ASTD and IBM survey of 174 learning executives indicates that learning organizations anticipate increasing the amount of external resources utilized in the future (see Figure 6-11). Executives cited operating cost reductions, lack of internal capability, and access to best practices and talent as the primary reasons for utilizing external resources (see Figure 6-12) (Deviney and Sugrue, 2005). This trend has many implications for HPI practitioners. Internal HPI practitioners must be skilled to effectively select and manage external providers of training and other performance improvement services. Utilizing external practitioners for most of the learning development and delivery will free up the HPI practitioners to focus on strategic performance improvement. External HPI practitioners should see an increase in demand for their services, especially for learning design and development and learning technology infrastructure. Skilled internal HPI practitioners might consider entrepreneurship. Figure 6-10 Percent of external expenditures. Source: ASTD 2005 State of the Industry Report. Figure 6-11 Average percentage of learning activities outsourced. Source: ASTD/IBM Learning Outsourcing Research Report, 2005. Figure 6-12 Primary reasons to use external resources. Source: ASTD/IBM Learning Outsourcing Research Report, 2005. Key Trend 2: Human Resources Is Being Innovative with the Methods for Delivering Services Throughout Their Organizations Classroom training has always been the primary method of training delivery utilized in the American workplace. The ASTD 2005 State of the Industry Report confirms that it is still the primary method, but technology-based learning is rapidly gaining widespread utilization (see Figure 6-13). Examples of technology-based delivery methods gaining broader acceptance and use include CD-ROM–based training, video teleconferencing, satellite broadcasts, and Internet-based training (both synchronous and asynchronous). HPI practitioners must be ready to manage, design, develop or select, and use learning technologies that support learning and development for their organizations. Figure 6-13 Percent of learning hours via technology-based learning systems. Source: ASTD 2005 State of the Industry Report. In addition to technology-based training delivery vehicles, nontraditional structured learning approaches are finding favor with U.S. businesses. Groupware and knowledge management systems are innovative technological approaches to putting information and knowledge into the hands of the workforce. Action learning and large group interventions, such as open space technology, are new approaches that can accomplish business objectives while at the same time provide a structured vehicle for learning (Rothwell and Sensenig, 1999). Self-directed learning, group-based instruction, job rotation, mentoring, and coaching programs all can be effective in the right circumstances (Rothwell and Sensenig, 1999). As a result of this trend, HPI practitioners will need to be able to study the circumstances of a particular learning, and challenge, make appropriate recommendations for the approach to learning, and design, manage, and in some cases, facilitate the learning event. The HPI practitioners must be comfortable selecting and implementing a full range of high-quality training and nontraining solutions. Key Trend 3: Organizations Are Making More Demands to Demonstrate Measurable Results and ROI for Human Resource Initiatives Our customers are increasingly asking us to prove that the services that we provide produce the results that they seek. Using the terminology of Donald Kirkpatrick and Jack Phillips, no longer are our customers satisfied with success at Level 1 (Did they like it?) and Level 2 (Did they learn it?) evaluations. Now we’re asked to demonstrate success at Level 3 (Did they use it?), Level 4 (Did it make a difference?), and Level 5 (Did the outcome justify the cost?). According to the ASTD 2005 State of the Industry Report, HPI practitioners are still not routinely completing Level 2 and above evaluations (see Figure 6-14). This is not cause for alarm. There can be many explanations as to why only 2.1 percent of us calculate actual Level 5, return on investment, figures. First of all, making this sort of calculation can be time-consuming and, with current workloads, finding the extra time to calculate this figure may not be the best use of your time if you’re not being asked for it from management. Secondly, it is often difficult to isolate the effect of the intervention to determine the true impact to the organization. Knowing this, many executives categorize ROI calculations that are shared with them as “fuzzy math.” Still, there are many times when this measurement is not only easy to obtain, but it’s in our best interest to calculate and publicize it. Figure 6-14 Percent of organizations using evaluation. Source: ASTD 2005 State of the Industry Report. Key Trend 4: An Increasing Percent of Learning Function Resources Are Being Used for Human Performance Improvement Trainers have long recognized that simply providing workers with new skills and knowledge in a classroom will not necessarily result in those new skills being applied in the workplace. Many other factors in the workplace—such as appropriate tools, practice, feedback, reward, work processes, and other factors— should be in place for new skills and knowledge to transfer from instructional to work settings. Beyond that, trainers have also realized that training cannot solve all performance problems identified in the workplace. In fact, very few performance challenges can be met by training alone. That’s why it’s great to see that more and more formerly training resources are being used to do performance improvement analysis and interventions (see Figure 6-15). In many organizations, HPI practitioners are helping to create workforce strategies (Rothwell and Kazanas, 2004). Their input is being sought on how to establish and achieve organizational goals and their metrics, how to cascade those goals down through the organization, and, ultimately, how to enable the workforce to achieve those goals. This level of consulting requires a rigorous understanding of how the business operates, what the long- and short-term strategies are for achieving organizational goals, recognizing the current challenges to success, and identifying the intervention(s) necessary to enable workers to perform in line with organizational performance goals. Figure 6-15 Utilization of learning function resources. Source: ASTD 2005 State of the Industry Report. The other related trend is that HPI practitioners aren’t necessarily part of the human resources function. Many are strategic partners and serve on the management teams in the business operations units. This is happening for various reasons, but one major reason is that sometimes training executives are reluctant to allow their traditional training personnel to step outside of the box to try their hands at performance improvement. Another reason is that many human resource executives are more compensation- and benefits-oriented, rather than performance improvement–oriented. When we put our HPI practitioner hats on, we begin to speak in the language of our customers. We can build our own credibility with our customers, even if we can’t manage to build it with our own function’s leadership. On the other hand, there are many examples where learning organizations are spinning off a team of internal practitioners to tackle the large-scale performance improvement projects in the organization. In many cases, human resources is 100 percent supportive in this shift in roles. Key Trend 5: There Is an Increasing Demand for Employee Development Several trends cited earlier in this chapter result in an increase in the demand for employee development. Skilled labor is increasingly in short supply. Workers are demanding that career development opportunities be a condition of employment. New technology creates a constant demand for skill-upgrading efforts. Increasing skill requirements for most jobs provides an endless source for employee development opportunities. Our educational institutions are not expected to be able to meet the demands for skilled labor in the future, in part because those demands are so quickly changing. Organizations will need to bridge this skill gap with programs of their own or to work with educational institutions to supply the future talent. Employees will also need to take charge of their own development and will exert greater pressure on their organizations than they have traditionally done in the past to provide planned and unplanned learning opportunities. HPI practitioners need to be prepared to meet this increase in demand for employee development by providing access to employee development tools and resources. These can take many forms, including onsite and offsite training seminars, structured on-the-job training programs, job-specific training curricula, job rotation initiatives, career counseling, and the creation and application of knowledge management systems. Key Trend 6: Leadership Development Is Seen as Critical to Organizational Success Decisions on how to respond to all the trends identified in this chapter have to be facilitated by today’s leaders. HR practitioners—including HPI practitioners—have an important role to play in this process (Rothwell, Prescott, and Taylor, 2005). It should come as no surprise that U.S. corporations, as well as their global counterparts, are recognizing the key role that leadership development plays in competitive success. With the help of HPI practitioners, organizations can identify the individual competencies and the organizational factors contributing to leadership success within unique corporate and national cultures and lines of business. They can then propose leadership development initiatives that support this vision of leadership (Rothwell and Kazanas, 1999). These can take the form of training programs, coaching, action learning, and developmental assignments. One critical factor remains constant for the success of a leadership development program— dedication and commitment from the top of the organization. Jack Welch, former CEO of General Electric, attended workshops and planning sessions and conducted biweekly sessions with managers for the last 16 years of his career. PepsiCo’s former CEO, Roger Enrico, believes that proven leaders are the best developers of other leaders and devoted a great deal of his time to PepsiCo’s leadership development programs. This is what support from the top of the organization looks like. Albert Vicere and Robert Fulmer (1995), from Pennsylvania State University, believe that leadership development programs are becoming more customized and strategic, shorter and more focused, and are being done on a larger scale and then cascaded down to all levels of the organization. They are seeing more action learning projects being assigned with measurable results. The idea is to provide people with opportunities to learn from their work rather than taking them away from their work to learn. Leaders who are hesitant to take the necessary business risks, are arrogant and insensitive, demonstrate a controlling leadership style, and are reluctant to tackle difficult people issues will not survive in organizations in the future. The successful leaders of the future will be master strategists, change managers, relationship/network builders, and talent developers (Barrett and Beeson, 2002). Key Trend 7: HPI Projects Will Be More Focused on Business Results Traditional performance improvement case studies typically involve a performance gap for a workgroup or small part of the overall organization. Today, we can no longer settle for just picking the low-hanging fruit. We need to take on larger-scale projects and really go after improving overall business results that are directly aligned with the organizations goals and objectives. Increasingly, our customers should be senior level management and our results should be clearly measured at all 5 levels of evaluation—reaction, learning (if applicable), transfer, results, and ROI. Key Trend 8: HPI Certification Is Available Both the American Society for Training and Development (ASTD) and the International Society for Performance Improvement (ISPI) have established certificate and certification programs that HPI practitioners can use to add skills and knowledge and build credibility with their peers and customers. ASTD offers both a Human Performance Improvement Certificate Program and a certification program for Certified Professional in Learning and Performance (CPLP). The HPI Certificate program consists of five core courses. These can be taken at local college campuses or at a host of other locations. The CPLP designation can be obtained by passing a rigorous test that demonstrates your level of expertise and qualifications to work in the workplace learning and performance field. Self-study test preparation materials are available for purchase. ISPI offers a certification program to become a Certified Performance Technologist. The application process is rigorous and follows a set of ten standards of performance technology. Applicants must complete at least seven performance improvement projects while adhering to the standards. Both project documentation and customer contact information for verification must be submitted to a review board. Whether you should pursue an advanced degree, a certificate, or certification will depend on your career goals and what qualifications your future employers and customers seek. In conclusion, the future is bright for those in the HPI field. We have our work cut out for us. The challenges are ample and large, but we have the skills and knowledge necessary to lead our organizations to greatness. Use the worksheet appearing in Figure 6-16 to structure your own thinking about what these trends will mean for HPI practitioners. Summary This chapter summarized key trends in three areas that affect HPI practitioners. The trends were classified into three categories: (1) business and public sector trends, (2) workforce trends, and (3) human resource trends. The key business and public sector trends identified in the chapter were: Key Trend 1: Organizations are placing innovation at the top of their priority lists. Key Trend 2: Organizations are faced with increased security concerns. Key Trend 3: Organizations are growing via mergers and acquisitions. Key Trend 4: Businesses and agencies are paying closer attention to business ethics. Key Trend 5: Public sector organizations are recognizing the need to become high-performing organizations. Key Trend 6: Businesses and the public sector are experiencing the effects of global interdependence. Key Trend 7: Corporations are outsourcing tasks and large-scale functions. The key workforce trends identified in the chapter were: Key Trend 1: The emergence of a knowledge-based economy is driving skill requirements up. Key Trend 2: We have an aging workforce that is soon to be on its way out of the labor pool. Key Trend 3: Offshoring is changing the ethnicity and culture of the workforce. Key Trend 4: Workers are increasingly considering job changes. Directions: Use this worksheet to structure your thinking about the trends described in this chapter and how they may influence the competencies needed by HPI practitioners to help their organizations cope with these trends. For each trend listed below, brainstorm what you think the most important competencies will be in order for you to help your organization react to the trend or even to take competitive advantage of the trend. There are no “right” or “wrong” answers in any absolute sense. Figure 6-16 Worksheet for trends and competencies needed to cope with these trends. The key human resource trends identified in this chapter were: Key Trend 1: The training and development industry is spending a greater percent of their budget on external services (including tuition). Key Trend 2: Human resources is being innovative with the methods for delivering services throughout their organizations. 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