Explanatory Document

BMGT 365 Organizational Leadership Biotech Company Profile 1

Biotech Health and Life Products Company Profile

Welcome to Biotech! The assessment projects for this class will examine different facets of the leadership of Biotech Health and Life Products, Inc. You will be exploring leadership within Biotech with the driving question of “what skills does a Biotech leader need to lead the company now and in the future?”

History Wilford Barney was a young apprentice working for Peter Ulan, owner of a small apothecary shop in Yonkers, New York. During his apprenticeship, Barney created a general energy elixir that was based on a home remedy of his mother’s back in Ireland. The elixir was produced specifically for many of Ulan’s special customers. Made of all natural ingredients the elixir provided B12 and other vitamins to promote a healthy immune system. The energy boost was noticeable after only a week’s use. The reputation of the elixir grew.

In 1922, Barney took over Ulan’s apothecary shop renaming the business, Barney’s Apothecary. At that time, Barney decided to bottle his elixir and sell the formula to everyone rather than selected customers. Barney also gave bottles of the elixir to local peddlers who sold the product along with their wares receiving a commission on each bottle they sold. By 1929, the product was well known in Yonkers. Encouraged by the success in Yonkers Barney decided to branch out to New York City.

In 1932, Barney built a small manufacturing plant near the store where he mixed and bottled the elixir for sale. By 1934, Barney expanded sales by putting the elixir in a quarter of the apothecary shops in New York City. Sales were booming and customers inquired about other products that Barney’s had.

In 1936, Barney started a new product called Night Relief, another of his mother’s recipes. This product offered relief from night sweats and anxiety caused by menopausal symptoms or nerves. When this product proved a “secret success” with the ladies, Barney decided to bring his mother, Irene, from Ireland, and put her to work making new natural products. With his mother’s help, Barney grew the business into a small but successful manufacturer of natural “life products”. Barney coined “life products” because the products tracked natural life events in the human body and attempted to improve the customer’s discomfort in dealing with them.

The name of the company was changed to Barney’s Elixir and Life Products. The business continued to grow and with his mother’s death in 1938 the company had a gross revenue of $178,000 a year. The depression took a toll on company profits

BMGT 365 Organizational Leadership Biotech Company Profile 2

but people still needed the boosts to their health and were able to afford Barney’s products as opposed to the medicine offered by doctors and hospitals. During World War II the company supplied the troops with a natural caffeine (Stay Clear) product that would keep soldiers awake for long periods of time and heighten their mental alertness. Government contracts derived from Stay Clear boosted the revenue of the company considerably and ushered in a new wave of interest of natural products.

By 1950 Barney turned over the reins of the daily operations of the business to his children but remained on the Board of his family owned company. By this time, the company had expanded its manufacturing plants and sales nationally to include Detroit, Michigan, Los Lunas, New Mexico, Chicago, Illinois and Atlanta, Georgia. The revenue of the company was now close to 2.5 million dollars.

In the 1960’s the social climate in America had changed and pharmaceutical companies took on greater importance in the treatment of people’s health. The discovery of new drugs and better health care shifted the confidence in the American perspective away from natural products to traditional western medicine. Although the counter culture of America still supported natural supplements, popularity for Barney’s products waned.

In 1965, Wilford’s granddaughter, Geraldine, took over the Research and Development Department (R&D) after receiving a degree in chemistry from Harvard. She had been trained as a child by her grandmother, Wilford’s mother, and knew how the recipes should look. However, she had new ideas and with the approach of the 1970’s, was ready to join the “Anjolie perfume commercial” lifestyle depiction of a 70’s women that “they could bring home the bacon and fry it up too.”

Due to the downturn in sales by 1970, the company turned to other countries for its sales base. Starting in Germany and other European countries where natural products are highly credible, Barney began to license the sale of the company’s products to local manufacturers. The name recognition grew and by the 1980’s the company was grossing over 4 million dollars in gross sales. The company moved to overseas operations and manufactured in Germany. Wilford Barney died in 1981 shortly after seeing his first grandchild, Maximillian Barney, take over the President’s positon of the company.

Studying the trends in the 1990’s about the resurgence of natural health products “Max” as he liked to be called, decided it was time for Barney’s to focus on the new interest in homeopathic and natural products especially at home in America where sales were static. In 1996, Max, wanting to get a sleeker and more modern feel to the company’s products changed the company name and logo. No longer was Barney’s a mom and pop operation but now were part of the Biotech nutraceutical market. Barney’s Elixir and Life Products was now Biotech Health and Life Products. While the products would continue to show the old Barney logo, for name recognition the new logo would take prominence on the packaging.

By 2000 the company was grossing about 1.1 billion in sales with an increase in market share. By 2012, Biotech had a 20% market share of the supplement business

BMGT 365 Organizational Leadership Biotech Company Profile 3

with approximately $20 billions of sales. The growing interest in the bio-nutraceutical marketplace was catching the attention of the big pharmaceutical companies. Glaxo, Merke and Dupont began a massive shift to the new biotech business products.

Currently sales for the company are at $35 billion. Maximillian Barney is still President and CEO. The stock is still held by the family and all senior management positions are held by family members.

Current Company Vision: To help provide everyone with the healthiest life possible in the most natural of ways.

Current Mission: To develop products that are safe, effective, affordable and natural with the customer’s health always their primary goal.

Current Fact Sheet

Headquarters Yonkers, New York Worldwide web address www.biotechlife.com President Maximillian Barney 2016 Gross Sales US$ 35 billion Employees 35,000 in 6 countries worldwide

Manufacturer Operations

United States Detroit, Michigan, Los Lunas, New Mexico, Chicago, Illinois and Atlanta, Georgia

Europe Wittllch, Germany, Baltimore, Ireland Asia Pacific Melbourne, Australia Latin America and Caribbean Sao Paulo, Brazil Canada

Product Lines

Major Competitors

Alberta, Canada

Protein and Fitness; Personal Care, Nutraceuticals, Vitamins and Food Supplements

Protein and Fitness-GNC, Personal Care- Nestle Skin Care- Galderma, SA; Glaxo, Merke, General Mills. Vitamins and Food Supplements- GNC, Natures Plus, Natrol, Nature’s Way, Nature’s Bounty, Hain Celestial Group, Inc, Schiff Nutrition International, Nestle, General Mills, Now Foods and New Chapter

BMGT 365 Organizational Leadership Biotech Company Profile 4

BIOTECH BUSINESS PHILOSOPHY AND STRATEGY

Biotech has determined its long-term goal planning pattern should be no longer than 3 years. Three years seems more flexible than the seven-year planning pattern previously used as change in the business climate is making it imperative to be more flexible. The need for innovation and competitive advantage ideas are the main focus for the next two years along with the company’s commitment to becoming a triple bottom line company. Sustainability both for profit and planet is foremost in the minds of the leadership. The development of a triple bottom line company is in the best interest of the company because of the need to keep a strong natural product image link to the community and the desire for the company to be socially responsible. Protection of the suppliers and control over product quality is critical to the development of a sound “life product.”

Current Growth Plans

Business and Sales Biotech is looking to expand to Saudi Arabia in the next year. Currently products sold through European division but demand is great in the Arab countries. Although the company would like to sell in Israel as well, Arab countries are seen as a more lucrative expansion opportunity. Expansion of the production capacity in Sao Paulo is being considered as company can no longer keep up with sales projections.

Product Development Biotech is looking to develop its cosmetic and food lines. Currently have lip balms but seeks to make a line of lipsticks, foundation, powder, eye makeup and cleaners from natural ingredients. Development of natural flavorings and whey products are under consideration.

BMGT 365 Organizational Leadership Biotech Company Profile 5

BIOTECH’S CORE VALUES The leadership of Biotech has identified four core values. These values are used as guidance in strategy, mission, and vision creation. They are: Customer-Centricity, Innovation, Knowledge, and Sustainability. Customer-Centricity Currently there is a company-wide accountability to the customers and the entire workforce is expected to provide an extraordinary customer experience in every product made. Customer relations are considered to be both internal and external; for those located at central Headquarters, those employees “out in the field” are considered just as much a customer as the person buying Biotech’s products.

Innovation Development of organizational structure and culture changes are being made to introduce more collaborative decision making as well as bringing the divisions closer together in the area of shared resources and communication. Emphasis is to encourage the exchange of ideas, create an environment that fosters new ideas and makes change easier in implementation.

Knowledge Biotech is a firm whose foundation and history is deeply rooted in research and development. Using knowledge to lead change is at the heart of Biotech’s value system. Another aspect to knowledge is the “tribal knowledge” that is inherently known by the Barney family that lead the company, and their long-time loyal employees. Sustainability Currently, Biotech has commitments to build housing for several communities in Brazil and India where natural pharmaceutical ingredients are produced. The program reflects the company’s strong commitment to become a triple bottom line company by the year 2021, and its core value of sustainability. Biotech defines sustainability as both “for profit” and “for planet”.

BMGT 365 Organizational Leadership Biotech Company Profile 6

BIOTECH’S CURRENT CORPORATE CULTURE

Barney’s new image of a sleek, less clan-like organization has resulted in a family that is less than cohesive. Still, the family leaders are committed to maintaining the businesses’ cultural heritage because of the sense of unity and belonging, and to provide employees with a better understanding of the previous generations and to show how far the company has come. It is believed that the cultural heritage of the business demonstrates support for collaborative decision making something the company has successfully promoted throughout the organization. The family sees its employees as being customers and therefore encourages a customer-centric culture. Employees are encouraged to look at their work through the perspective of the customer and to make decisions using the customer’s viewpoint. Biotech is concerned that the stateside organization is driving the overseas divisions and that new ideas are being encouraged because of the cultural differences in staff. Customer innovation workshops ran by the various divisions have highlighted that R&D in Europe and Australia are differences in customer preferences from US customer preferences. It is believed that US controlled resources are ignoring these product preferences and are thus impeding sales overseas. Corporate leaders are examining the matter in an attempt to answer this cultural gap. Current Organizational Structure

The company has a geographical division structure. However, within each division is a functional structure with production and sales at the hub. R&D, HR, IT and Finance have small staff in each division whose primary job is to liaise with headquarters to implement the decisions made.

Executive Director South America

Division

Executive Director North American

Division

Executive Director European Division

Executive Directive

Asia Division

President and CEO Maximillian Barney

Housed in headquarters is the R&D, Purchasing, HR, IT, and Finance Divisions

Helpful Hints to Use for Study and Writing Projects PART ONE:

How to Analyze a Case Study

Knowing how to analyze a case will help you attack virtually any business problem.

A case study helps students learn by immersing them in a real-world business scenario where they can act as problem-solvers and decision-makers. The case presents facts about a particular organization or decision. Students are asked to analyze the case by focusing on the most important facts and using this information to determine the opportunities and problems facing that organization, the people within the organization or decision. Students are then asked to identify alternative courses of action to deal with the problems or decision they identify.

A case study analysis must not merely summarize the case. It should identify key issues and problems, outline and assess alternative courses of action, and draw appropriate conclusions. The case study analysis can be broken down into the following steps (FICER):

1. Facts- select the most important facts surrounding the case. 2. Issues-identify the most important issues in the case 3. Courses of action-Specify alternative courses of action. 4. Evaluate- each course of action. 5. Recommend- the best course of action.

Let's look at what each step involves.

1. Identify the most important facts surrounding the case. Read the case several times to become familiar with the information it contains. Pay attention to the information in any accompanying exhibits, tables, or figures. Many case scenarios, as in real life, present a great deal of detailed information. Some of these facts are more relevant than others for problem identification. One can assume the facts and figures in the case are true, but statements, judgments, or decisions made by individuals should be questioned. Underline and then list the most important facts and figures that would help you define the central problem or issue. If key facts and numbers are not available, you can make assumptions, but these assumptions should be reasonable given the situation. The "correctness" of your conclusions may depend on the assumptions you make.

2. Identify the key issue or issues. Use the facts provided by the case to identify the key issue or issues (or decision) facing the person(s) or organization. Many cases present multiple issues or problems. Identify the most important and separate them from more trivial issues. State the major problem or challenge facing the company or person(s). You should be able to describe the problem or challenge in one or two sentences. You should be able to explain how this

problem affects the strategy or performance of the organization or person(s). You will need to explain why the problem occurred.

3. Specify alternative courses of action. List the courses of action the company or person(s) can take to solve its problem or meet the challenge it faces. For instance, for information system-related problems, do these alternatives require a new information system or the modification of an existing system? Are new technologies, business processes, organizational structures, or management behavior required? What changes to organizational processes would be required by each alternative? What management policy would be required to implement each alternative? Remember, there is a difference between what an organization "should do" and what that organization actually "can do". Some solutions are too expensive or operationally difficult to implement, and you should avoid solutions that are beyond the organization's resources. Identify the constraints that will limit the solutions available. Is each alternative executable given these constraints? Be practical in your approach to selecting courses of action. Creating courses of action requires thinking outside the box. To do this think about all the people (company as well) involved in the action, what stake they may have in the action, and how best to meet their objectives. Sometimes “walking around in everyone’s shoes” will give you a new insight to the situation or issue and thus lead to a new course of action.

4. Evaluate each course of action. Evaluate each alternative using the facts and issues you identified earlier, given the conditions and information available. Identify the costs and benefits of each alternative. Ask yourself "what would be the likely outcome of this course of action? State the risks as well as the rewards associated with each course of action. Is your recommendation feasible from a technical, operational, and financial standpoint? Be sure to state any assumptions on which you have based your decision.

5. Recommend the best course of action. State your choice for the best course of action and provide a detailed explanation of why you made this selection. You may also want to provide an explanation of why other alternatives were not selected. Your final recommendation should flow logically from the rest of your case analysis and should clearly specify what assumptions were used to shape your conclusion. There is often no single "right" answer, and each option is likely to have risks as well as rewards.

Quick Summary

How to Analyze a Case Study FICER

1. Facts- select the most important facts surrounding the case. 2. Issues-identify the most important issues in the case 3. Courses of action-Specify alternative courses of action.

4. Evaluate- each course of action. 5. Recommend- the best course of action.

Adapted From: Pearson How to analyze a case study wps.prenhall.com/bp_laudon_essmis_6/21/5555/1422312.../index.html

PART TWO: Writing in the third person is a must for all of your projects. In case you have a hard time understanding the difference here is a short article that will help explain the differences. The article contains good examples of the way to use each voice of speech.

The Three Persons of Speech

Week 2: Oct 28 - Nov 3

BMGT 365 7981 Organizational Leadership (2198)

Week 2: Leadership Styles, Traits, Attributes, and Competencies

Theme 1: Leadership characteristics are demonstrated in a leader’s style.

Traits are characteristics that are ingrained in an individual. Traits are not easily learned or unlearned. For example, the introvert is unlikely to become the life of the party. On the other hand, leadership attributes are personal qualities or characteristics that can be learned and are typically described in the context of behaviors – values, habits, character, or motives. Leadership competence is a mix of leadership skills and behaviors that lead to an increase in performance.

Read:

Leadership: Do traits matter?

Critical Skills: Leadership - In the Library search under Comstock (author) and Critical Skills: Leadership (title).

Leadership Competencies

10 Traits of Great Business Leaders

Leaders at all Levels

Theme 2: Leadership style should fit the person, the organization, and the job. It should be situational in nature.

The way a leader sets the direction, implements plans and motivates people to accomplish a task is known as a leadership style. It cannot be emphasized enough that leadership style is not a one size fits all type of cloak. A leadership style must fit those that are led, the company and the job. The following story about leadership style illustrates theme two.

Alan Robbins started Plastic Lumber Company when he saw a way to help the planet by converting plastic milk and soda bottles into fake lumber while still making money in

doing so. Robbins had strong opinions on how to run his company. He had an expectation that decisions be made in teams with participation from everyone. Sound familiar? To accomplish this goal, Robbins spent a long time on the factory floor chatting with employees, sounding them out on how best to get the job done. Robbins soon learned that this was not working. Most of his low-skilled employees simply wanted clear direction and a set of standards and expectations for doing the work. The freedom that Robbins’ laissez-faire leadership style encouraged led to frequent confusion, employee absences, tardiness, and fights on the factory floor. Employees came to work under the influence of drugs and/or alcohol. Robbins’ style undermined his authority in the eyes of many workers (Aeppel, 1998).

Although Robbins believed in his laissez-faire leadership style, he had to force himself to adapt a direct style with factory workers to save the business and instill order.

Would Robbins style fit better at Google than on the factory floor? While reading and preparing for this week, consider the aspects of style that relate to a leader’s ability to build relationships and keep the organization competitive.

Reference:

Aeppel, T. (1998, Jan 14). Losing faith: Personnel disorders sap a factory owner of his early idealism. The Wall Street Journal, A1-A14. Retrieved from http://webcache.googleusercontent.com/search? q=cache:3yZwVDukHUQJ:info.wsj.com/college/lessonplans/mgmt_lp5.pdf+&cd=2&hl=en &ct=clnk&gl=us

In week one, we learned that a leader must define leadership both personally and within the context of the organization. A successful leader should adopt a leadership style that fits his or her definition and the organization’s definition of leader. The choice of leadership style should enhance the point of view of the leader, the culture of the organization as well as the job and situation at hand.

The following notable leadership styles will be examined this week:

Leadership Styles

Charismatic Laissez-Faire Situational

Visionary/Innovative Steward Transactional

Instructor Notes Web Page

Pace Setter Democratic Transformational

Command/Coercive Servant Participative

Many of the leadership styles have emerged from the theories discussed in week 1. Others have evolved from combined elements of different theories to create the characteristics, behaviors, attitude and values of the successful leader.

Read:

Pages 22-28 of (continued from last week):Gandolfi, F., & Stone, S. (2017). The Emergence of Leadership Styles: A Clarified Categorization. Review Of International Comparative Management / Revista De Management Comparat International, 18(1),

Are Leaders Born or Made?

8 Most Common Leadership Styles

Situational Leadership

The Impact of Leadership Style on Employee Commitment

Leadership Style, Emotional Intelligence, and Organizational Effectiveness

Organizational Effectiveness

The Effective Organization: Five Questions to Translate Leadership into Strong Management

Complete:

Team Deliverable #1: Job Announcement due in Assignment Folder by Sunday, 11:59 p.m. eastern time.

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Leadership: Do Traits Matter? Kirkpatrick, Shelley A.; Locke, Edwin A. The Executive; May 1991; 5, 2; ABI/INFORM Global pg. 48

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Critical Skills: Leadership.

Comstock, Nancy W.

Salem Press Encyclopedia, 2019. 4p.

Article

Leadership

Motivation (Psychology)

Authority

Leadership is the ability to guide, persuade, or motivate others as head

of a group or organization. It differs from management or authority in

that a positive connotation is typically attached to the concept of

leadership—especially in educational and professional situations—while

more official roles sometimes can evoke resentment or even some level

of fear. (However, it should be noted that negatively influential leaders

exist as well, such as dictators and crime kingpins.) Managers can

accomplish necessary tasks, such as planning and coordinating

projects, hiring help, and solving problems, but leaders also use social

influence to inspire others to achieve a common goal. Good leaders are

usually looked upon with respect for the role they play in influencing

others, meeting goals, and making positive changes.

2295

98402056

Research Starters

Critical Skills: Leadership

Leadership is the ability to guide, persuade, or motivate others as head of a group or organization. It differs

from management or authority in that a positive connotation is typically attached to the concept of leadership—

especially in educational and professional situations—while more official roles sometimes can evoke

resentment or even some level of fear. (However, it should be noted that negatively influential leaders exist as

well, such as dictators and crime kingpins.) Managers can accomplish necessary tasks, such as planning and

coordinating projects, hiring help, and solving problems, but leaders also use social influence to inspire others

to achieve a common goal. Good leaders are usually looked upon with respect for the role they play in

influencing others, meeting goals, and making positive changes.

Styles of leadership. Public

domain, via Wikimedia

Commons

Model of Trait Leadership By

Zaccaro, C. Kemp, & P. Bader

(Zaccaro, C. Kemp, & P. Bader,

2004) [CC-BY-SA-3.0

(http://creativecommons.org/licens

sa/3.0)], via Wikimedia

Commons

While some personality traits, such as extraversion, patience, and a passion for developing ideas can help a

person become a leader, most leadership skills can be learned. Collaboration, communication, respect, and

honesty are integral to leadership and can be honed through education and experience. Although much

attention has been paid to executive leadership in business, strong political, education, and community leaders

are also necessary to ensure human rights, justice, social development, education, and other aspects of the

common good. It is up to leaders to provide inspiration and motivation to accomplish shared goals, while

followers must be willing to make changes and take on new responsibilities as their part in achieving the end.

Leadership is not a gendered trait; however, many studies have found that in school groups comprised of both

sexes, the presence of boys inhibits the expression of leadership among the girls. Research has indicated that,

in general, men tend to assert leadership in terms of power and direct attention to tasks and goals, while

women tend to exhibit leadership in terms of personal connections and group decision making. While

traditional accounts of history have emphasized male-dominated leadership, power or authority is not in fact

necessary for leadership; the ability to look at problems in new ways, engage others, and maximize the group's

effort is the most helpful factor in working toward a desired outcome. The ability of many women to quickly and

easily form useful relationships has been recognized as one of many effective ways to lead.

Leaders within a business, organization, or religious congregation help accomplish each group's goals. While

an ambitious entrepreneur may provide a quality product or service that allows people to live more comfortably,

a charismatic community leader may change the lives of thousands, or even millions. Men and women such as

Mahatma Gandhi, Susan B. Anthony, Mary Harris "Mother" Jones, and Martin Luther King Jr. led people into

freedom, helped secure equal rights, and inspired their followers to education and better lives.

Core Skills & Competencies

Leadership positions carry with them a variety of responsibilities and expectations. The Definitive Leadership

Competencies Guide lists 121 competencies for leadership, which include both professional duties and

personal traits cited from various models used by prominent business organizations. Organizational leaders

are expected to set strategies, make decisions, solve problems, and manage personnel, projects, and

everyday assignments. They need excellent communications skills, an appreciation of diversity, and the ability

to build and maintain relationships.

Leadership also involves developing a vision and managing any changes needed to reach a goal. The leader

succeeds both by serving as an example and by guiding followers or employees. For instance, a business

leader provides staff members with individual supervision as they begin new projects and includes appropriate

follow-up to ensure they have the resources, time, and feedback needed to complete their work correctly. The

leader delegates tasks and cultivates talented employees who show interest and potential in taking on more

responsibility. For example, a manager who names a conscientious employee team leader or encourages an

administrative assistant to research new clients has assessed the workers' talents, shown confidence in their

abilities, encouraged learning, and developed a relationship with the individuals. The employees are then more

likely to embrace the challenge and feel valued and rewarded for their efforts. In a community organization or

educational situation, a leader might ask for volunteers to complete tasks for a project or request the help of

promising participants. This also requires support and follow-up to ensure work is completed on time.

On a personal level, a business or community leader is expected to be ethical, caring, flexible, and

approachable, as well as ambitious, decisive, politically savvy, and in possession of technical expertise. While

that can be a lot to ask of one person, in many cases the bright, ambitious beginner who is gaining experience

for a future rise to the top is more than willing to make the effort. A young leader climbing the ladder of an

organization will accept opportunities to develop his or her professional skills, whether through training, a

mentor, or simply stretching to accept every challenge and opportunity to learn. For example, the young

executive who is willing to move from location to location to receive promotions not available in the home office

enriches his or her business skills, contacts, and knowledge of the organization. He or she also is likely to rise

through the ranks more quickly than the person who declines a transfer, even when it would provide valuable

experience and new challenges. Similarly, a budding politician might start as president of the local school

board, but will volunteer for committees or campaigns on the county or state level to gain experience and make

personal connections within the political system.

Educational leaders can have a profound effect on the success of the teachers and students of their

institutions, according to a review of research conducted by the Wallace Foundation. Like other leaders, school

leaders such as principals and superintendents choose objectives, direct their completion, and help establish

motivation and teamwork among employees and members of the community. Competencies for educational

leaders fall into three main categories: strategies and purposes, working with people, and redesigning or

developing the organization's structure. The study concluded that strong leadership in both the school and the

district is vital to the successful implementation of educational reforms, and that only classroom teachers have

a greater influence on student learning than administrative leaders.

Many schools also place increasingly heavy emphasis on student leadership as a sign of distinction and high

performance. Many competitive colleges and universities expect applicants to have demonstrated some form

of leadership in school, sports or other extracurricular activities, or in the community.

Research & Theory

How a person becomes an effective leader has been debated since far back in the history of civilization. In

ancient times, philosophers believed virtue was the basis of leadership. Socrates (c. 470–399 BCE) paid with

his life for expressing his concerns that Greek leaders and citizens cared more for reputation than for real

wisdom. Plato (c. 428–348 BCE), a student of Socrates, also revered wisdom and taught that leadership tied to

virtue and justice should be valued for its own sake, rather than for gaining power and wealth as many leaders

practiced. Despite these ideas, in many cases systems arose in which leadership was considered an innate

trait and often was consolidated as power in ruling families and dynasties. Various traditions and religious

beliefs were developed to sustain such practices, such as the Christian concept of divine right of kings. Other

prominent leaders gained power through military prowess.

Many cultures attempted to instill positive elements of leadership in their kings, queens, or other absolutist

rulers, often through a traditional code of conduct for elites or a sense of duty to subjects or followers. In some

cases philosophers or other advisers helped dictate the principles of good leadership. In China, for example,

Confucius (551–479 BCE) said that the king's power came from a greater source and that he should be an

example of virtue for his people. While such efforts met with some success, many cultures experienced great

inequality as unelected leaders in government and religion often abused their power and established systems

to hand their privileges on to chosen successors regardless of their leadership skills.

Traditional models of leadership would dominate for hundreds of years, with refinements coming as societies

advanced. In addition to poor leaders empowered through hereditary systems, societies also faced effective

but ruthless leaders who used the skills and principles of leadership for their own benefit rather than the good

of the people. The sixteenth-century work The Prince by Niccolò Machiavelli served as a sort of leadership

manual for rulers of the time, advocating that power could best be acquired and wielded by influencing

followers with fear rather than admiration. It gave rise to the use of the term "Machiavellian" to describe

cunning, duplicitous ethics in leadership or other areas.

In the nineteenth century, new theories on the origins of leadership began to appear. The Scottish historian

Thomas Carlyle suggested in the 1840s that heroes—military leaders in particular—had a strong influence on

major events in history. The idea became known as the Great Man Theory of Leadership, implying that leaders

were born, not made, and were, in keeping with the times, men and not women. Further, the theory suggested

that it was these few who turned the course of history—as in the cases of Napoleon Bonaparte or Winston

Churchill—and business—as with men such as Andrew Carnegie and John D. Rockefeller. In time, Carlyle's

theory was replaced by more modern philosophies recognizing that while many of these "great men" were

undoubtedly strong leaders, they did not embody leadership in all its forms. Most scholars came to understand

that any great leader is still a product of various social forces and no one person is innately set to shape

history.

During the mid-twentieth century, the trait theory of leadership emerged as psychologists began to study what

types of personalities were associated with successful leaders. To some extent, the trait theory assumes that

there is one best way to lead, whether in military exercises, business, or education. Trait studies have

examined both physical qualities, such as height and appearance, and facets of personality, such as

motivation, self-confidence, honesty, and extraversion, in an effort to predict leadership. However, twin studies

have shown that inborn traits account for only about 30 percent of influence on successful leaders, while 70

percent remains with external factors such as environment and individual experiences.

Reactions to the trait theory include behavioral theories that claim leaders could be made by conditioning

individuals' behavior, much as Pavlov's dogs were conditioned to salivate at the sound of a bell. Later,

contingency theories argued that different people could be effective leaders in different situations. The potential

leader's success depends upon several factors, including his or her personality, the cooperation of those to be

led, and the task to be completed. Some scholars defined three categories: authoritarian, democratic, and

laissez-faire leadership. These styles differ largely in the amount of power and control delegated to followers,

with authoritarian leaders giving none, democratic leaders giving some, and laissez-faire leaders giving near-

total control.

In the late twentieth century, scholars studying the experiences of women in leadership positions in the field of

education found what they called relational leadership, in which women leaders used their feminist experiences

to stimulate change in their schools. Using vision, intuition, collaboration, caring, and courage to develop a new

approach to the familiar problems of administering schools, they found relationships the key to change.

A theory of business leadership was introduced following the economic collapse of banks and major industrial

companies in the early twenty-first century. It identified two major forms of leadership, called transformational

and transactional leadership that function in different ways. Transactional leadership is based on the leader

providing some form of reward to followers; it is seen as a highly traditional form of leadership.

Transformational leadership, in contrast, requires a high level of integrity and honesty, a charismatic

personality, and the ability to challenge followers, drawing from them creativity and collaborative efforts. In a

sense, transformational leadership brings the idea of leadership full circle, back to the ancient philosophy of

virtuous leaders.

Bibliography

Couto, Richard A. "Leadership and Values." Political and Civic Leadership: A Reference Handbook. Thousand

Oaks, California: SAGE Publications, 2010. 24-25. Print.

Kruse, Kevin. "What Is Leadership?" Forbes. Forbes, 9 Apr. 2013. Web. 23 Dec. 2014.

http://www.forbes.com/sites/kevinkruse/2013/04/09/what-is-leadership/2/

"Leadership Competencies." Society for Human Resource Management. SHRM, 2014. Web. 29 Dec. 2014.

http://www.shrm.org/research/articles/articles/pages/leadershipcompetencies.aspx

"Leadership Principles." Institute for Transformational Leadership. Georgetown University School of Continuing

Studies, 2016. Web. 20 May. 2016.

"Leadership Theories." Unit 6: Leadership. University of Leicester, 2014. Web. 29 Dec. 2014.

http://www.le.ac.uk/oerresources/psychology/organising/page‗04.htm

McCleskey, Jim Allen. "Situational, Transformational, and Transactional Leadership and Leadership

Development." Jour. of Business Studies Quarterly 5.4 (2014): 117–130. Print.

Minderovic, Zoran. "Leadership." The Gale Encyclopedia of Psychology. Ed. Bonnie Strickland. 2nd ed.

Detroit: Gale, 2001. 379-380. Gale Virtual Reference Library. Web. 29 Dec. 2014.

Regan, Helen B. and Gwen H. Brooks. Out of Women's Experience: Creating Relational Leadership. Thousand

Oaks, California: Corwin Press, 1995. 2-3. Print.

Sorenson, Georgia J., and George R. Goethals. "Leadership Theories: Overview." Encyclopedia of Leadership.

Ed. George R. Goethals, Georgia J. Sorenson, and James MacGregor Burns. Vol. 2. Thousand Oaks,

California: SAGE Reference, 2004. 867-874. Gale Virtual Reference Library. Web. 23 Dec. 2014.

Copyright of Salem Press Encyclopedia is the property of Salem Press. The copyright in an individual article

may be maintained by the author in certain cases. Content may not be copied or emailed to multiple sites or

posted to a listserv without the copyright holder's express written permission. However, users may print,

download, or email articles for individual use.

Source: Salem Press Encyclopedia, 2019, 4p

Item: 98402056

Leadership Competencies  

March 1, 2008

View SHRM’s Competency Model

SHRM’s Competency Model identifies what it means to be a successful HR professional—

across the performance continuum, around the globe, from early to executive career levels.

The competency model and the resources developed based on the model provide the

foundation for talent management throughout the HR lifecycle.

Introduction

Leadership competencies are leadership skills and behaviors that contribute to superior

performance. By using a competency-based approach to leadership, organizations can better

identify and develop their next generation of leaders.  Essential leadership competencies and global

competencies have been defined by researchers. However, future business trends and strategy

should drive the development of new leadership competencies. While some leadership

competencies are essential to all firms, an organization should also define what leadership attributes

are distinctive to the particular organization to create competitive advantage.

Essential Leadership Competencies

A focus on leadership competencies and skill development promotes better leadership.  However,

skills needed for a particular position may change depending on the specific leadership level in the

organization. By using a competency approach, organizations can determine what positions at which

levels require specific competencies.  Researchers at the Center for Creative Leadership have

identified some essential leadership competencies that are consistent among organizations. They

divide the overall structure into competencies for leading the organization, leading the self and

leading others in the organization (see Figure 1).

When selecting and developing leaders, HR professionals should consider the competencies that

the individual possesses and compare those to the ones that need further development for success

in a leadership role. By looking at his/her current competencies and comparing those to the skills

necessary to fill a leadership position, organizations can make better informed decisions in hiring,

developing and promoting leaders.

Figure 1: Leadership Competencies

2

3

4

5

Leading the organization:

-managing change

-solving problems and making decisions

-managing politics and influencing others

-taking risks and innovating

-setting vision and strategy

-managing the work

-enhancing business skills and knowledge

-understanding and navigating the organization

Leading the self:

-demonstrating ethics and integrity

-displaying drive and purpose

-exhibiting leadership stature

-increasing your capacity to learn

-managing yourself

-increasing self-awareness

-developing adaptability

Leading others:

-communicating effectively

-developing others

-valuing diversity and difference

-building and maintaining relationships

-managing effective teams and work groups

Source: Adapted from McCauley, C. (2006). Developmental assignments: Creating learning experiences

without changing jobs. Greensboro, N.C.: Center for Creative Leadership Press. Permission granted from the

Center for Creative Leadership to republish CCL's Model of Leader Competencies.

Global Leadership Competencies

Developing successful global leaders is a competitive advantage for multinational organizations.  In

addition to essential leadership competencies, global leaders face special challenges that require

additional competencies. To clarify, a global leader is commonly defined as someone that cultivates

business in a foreign market, sets business strategy at a global level and manages globally diverse

6

and diffused teams.  According to a Conference Board research report, 73% of managers agree that

domestic business leadership and global leadership differ in the skills required. Some of the

challenges that global leaders may face are managing a diverse group of employees and business

processes; adaptively approaching problems and challenges; adjusting to new values and cultures;

and adapting to different types of business and personal stressors.

To address the unique challenges of global leaders, researchers have identified global leadership

competencies that can contribute to success. Among these global competencies, developing a

global mindset, cross-cultural communication skills and respecting cultural diversity are paramount

to succeeding in the global workplace.  Morgan McCall and George Hollenback studied successful

global leaders and developed a list of common competencies specific to the global leader (see

Figure 2).  HR practitioners can use global leadership competencies to support the development of

leaders and thus the overall global business strategy.

Figure 2: Global Executive Competencies

▪ Open-minded and flexible in thought and tactics

▪ Cultural interest and sensitivity

▪ Able to deal with complexity

▪ Resilient, resourceful, optimistic and energetic

▪ Honesty and Integrity

▪ Stable personal life

▪ value-added technical or business skills

Source: McCall, M., & Hollenbeck, G. (2002). Developing global executives: The lessons of international

experience. Boston, MA: Harvard Business School Publishing.

Business Trends and Strategy Drive New Leadership Competencies

According to the 2008 SHRM report, Changing Leadership Strategies, the rise of competition caused

by the knowledge economy and globalization will bring significant changes in the leadership

strategies for organizations.  Given the future business environment trends, researchers agree that

the most important leadership competencies will include effective change management, developing

talent/teams and being an effective collaborator/network builder.  In fact, since competencies

should be driven by future business strategy, it is important to consider the major business trends of

the future.  The Center for Creative Leadership (CCL) identified some future business trends that

will affect the leadership skills needed to support business (see Figure 3).

In addition to looking at future business trends to shape the development of leadership

competencies, organizations must also look to the specific strategy and preferred business results of

the particular organization. By creating competency models that reflect the future strategy of the

business and the important results to stakeholders (i.e., customers, shareholders, investors),

organizations can successfully create a leadership brand.14 Dave Ulrich and Norm Smallwood

7

8

9

10

 11

12

13

define a leadership brand as "a reputation for developing exceptional managers with a distinct set of

talents that are uniquely geared to fulfill customers' and investors' expectations."  Researchers have

found that when investors have confidence in the leadership talent of an organization, share price

will increase.  By creating a unique leadership brand via leadership competencies that produce

results to stakeholders, organizations gain a competitive advantage.

Figure 2: Global Executive Competencies

▪ Open-minded and flexible in thought and tactics

▪ Cultural interest and sensitivity

▪ Able to deal with complexity

▪ Resilient, resourceful, optimistic and energetic

▪ Honesty and Integrity

▪ Stable personal life

▪ value-added technical or business skills

Source: McCall, M., & Hollenbeck, G. (2002). Developing global executives: The lessons of international

experience. Boston, MA: Harvard Business School Publishing.

Literature and Research

The Leadership Skills Strataplex: Leadership Skill Requirements across Organizational Levels

The authors of this article conceptualized and empirically tested a strataplex model for leadership

skills. Leadership skills are divided into four broad categories: cognitive, interpersonal, business and

strategic. The "strataplex" model refers to how the four categories of skills vary based on respective

management levels in an organization. The researchers tested the model on more than 1,000 new,

midlevel and senior managers. The results showed that higher levels of management in the

organization required greater leadership skills. The most important skill across all the levels of

leadership was cognitive skill. This skill is thought to be the basis of all leadership skills because it

encompasses the ability to acquire new knowledge and learn new ways of solving problems.

Interestingly, business skills and strategic skills were the two most important skills to acquire when

moving into high levels of leadership. This research is important because it empirically demonstrates

that leadership skills do differ at different management levels on the career ladder. Most importantly,

business acumen and strategic skills must be acquired to be effective at the higher levels of

management/leadership. HR professionals should take into account the change in competencies

required as managers move into higher level leadership positions.

Managers' Justice Perceptions of High Potential Identification Practices

15

16

17

18

High potentials are often regarded as the possible future leaders of an organization. Consequently,

the process of identifying high potentials is very important to both succession planning and

leadership development practices in an organization. The purpose of this research was to identify

the various processes that organizations are using to identify high potential leaders and how the

employees perceive the fairness of the process. Researchers distributed a survey at a leadership

conference to leaders from a variety of organization sizes and industries. The survey asked

questions about the high potential identification process as well as the perceived fairness of the

process. The findings revealed that competencies were used to identify high potentials 69% of the

time. The most important competencies used to identify high potentials were orientation toward

results, communication skills, adaptability, strategic skills and ability to make decisions. Additionally,

the survey found that the high potential identification process, the communication of the process and

evaluation were all significantly related to feelings of perceived fairness. This example illustrates how

leadership competencies can be used in the workplace. A fair process for identifying high potentials,

such as a competency approach, may lead to higher perceived fairness.

Transformational Leadership and Market Orientation: Implications for the Implementation of Competitive Strategies and Business Unit Performance

This article explores the relationship between competencies of the organization and firm

performance. The researchers hypothesize that competitive strategies link organization

competencies to firm performance. Specifically, this study investigated the link between

transformational leadership as an organizational competency and the competitive strategies of

marketing differentiation, innovation differentiation and low-cost strategies. These competitive

strategies are thought to have positive benefits to firm performance.

More than 200 organizations from a range of industries were included in the research sample. The

results showed that transformational leadership was significantly related to market orientation. In this

study, the authors define market orientation in terms of culture. The organization culture clarifies

values and norms that positively contribute to customer satisfaction and worth. Transformational

leaders are thought to impact and help form the organizational culture. Transformational leadership

was also positively linked to marketing differentiation and low-cost strategies. Further, market

differentiation was positively related to firm performance metrics. Consequently, the competency of

transformational leadership was found to have a positive impact on firm performance through market

differentiation. The results imply that one way to advance market orientation is to develop the

competency of transformational leadership. This study shows that leadership competencies can

have an impact on the bottom line of organizations through competitive strategies. HR professionals

can influence firm performance by identifying and developing key leadership competencies in the

organization.

In Closing

19

Leadership competencies can be used to effectively select, develop and promote leaders in an

organization. Certain factors such as business strategy and future trends should be taken into

account when creating leadership competencies. All business strategies are different and HR

practitioners should use the business strategy, including the global business strategy, to drive the

use of competencies in selecting and developing leaders. By effectively building a unique set of skills

for the organization's leaders, the firm will sustain competitive advantage.

Online Resources

Hay Group: www.haygroup.com

Center for Creative Leadership: www.ccl.org

The Conference Board: www.conference-board.org

SHRM Research Quarterly: Leadership Development: Optimizing Human Capital for Business

Success: www.shrm.org/Research/Articles/Pages/default.aspx

Results Based Leadership: www.rbl.net

End Notes

[1] Society for Human Resource Management. (2007). The 2007-2008 workplace trends list.

Alexandria, VA: Author.

[2] Brownwell, J. (2006, Fall). Meeting the competency needs of global leaders: A partnership

approach. Human Resources Management, 45(3), 309-336.

[3] Mumford, T., Campion, M., & Morgeson, F. (2007). The leadership skills strataplex: Leadership

skill requirements across organizational levels. The Leadership Quarterly, 18, 154-166.

[4] Garonik, R., Nethersell, G., & Spreier, S. (2006, Winter). Navigating through the new leadership

landscape. Leader to Leader, 30-39.

[5] Spencer, S., & Watkin, C. (2006). Potential for what? Retrieved January 4, 2007, from

www.haygroup.com.

[6] Caligiui, P. (2006). Developing global leaders. Human Resource Management Review, 16, 219-

228.

[7] Caligiui, P. (2006). Developing global leaders. Human Resource Management Review, 16, 219-

228.

[8] Kramer, R. (2005). Developing global leaders: Enhancing competencies and accelerating the

expatriate experience. New York: The Conference Board.

[9] Rosen, R., Digh, R., Singer, M. & Phillips, C. (2000). Global literacies: Lessons on business

leadership and national cultures. New York: Simon & Schuster.

[10] McCall, M., & Hollenbeck, G. (2002). Developing global executives: The lessons of international

experience. Boston, MA: Harvard Business School Publishing.

[11] Society for Human Resource Management. (2008).Changing leadership strategies. Workplace

Visions, 1.

[12] Barret, A., & Beeson, J. (2002). Developing business leaders for 2010. New York: The

Conference Board.

[13] Robinson, M., Sparrow, P., Clegg, C., & Birdi, K. (2007). Forecasting future competency

requirements: A three-phase methodology. Personnel Review, 36(1), 65-90.

[14] Intagliata, J., Ulrich, D., & Smallwood, N. (2000). Leveraging leadership competencies to

produce leadership brand: Creating distinctiveness by focusing on strategy and results. Human

Resource Planning, 23(3), 12-23.

[15] Ulrich, D., & Smallwood, N. (2007, Jul-Aug). Building a leadership brand. Harvard Business

Review, 85(7/8), 93-100.

[16] Ulrich, D. & Smallwood, N. (2007). Leadership Brand. Boston, MA: Harvard Business School

Publishing

[17] Mumford, T., Campion, M., & Morgeson, F. (2007). The leadership skills strataplex: Leadership

skill requirements across organizational levels. The Leadership Quarterly, 18, 154-166.

[18] Jerusalim, R. & Haursdorf, P. (2007). Managers' justice perceptions of high potential

identification practices. Journal of Management Development, 26(10), 933-950.

[19] Menguc, B., Seigyoung, A., & Shih E. (2007). Transformational leadership and market

orientation: Implications for the implementation of competitive strategies and business unit

performance. Journal of Business Research, 60, 314-321.

Project Team

Project leaders: Courtney Ledford, SHRM Research Intern; Nancy R. Lockwood, MA, SPHR, GPHR,

Manager, HR Content Program

Project contributor: Steve Williams, Ph.D., SPHR, Director, Research

Editor: Nicole Gray, Copy Editor

Disclaimer

This article is published by the Society for Human Resource Management (SHRM). All content is for

informational purposes only and is not to be construed as a guaranteed outcome. The Society for

Human Resource Management cannot accept responsibility for any errors or omissions or any

liability resulting from the use or misuse of any such information.

178,396 viewsSep 5, 2014, 11:44am

10 Traits Of Great Business Leaders

Entrepreneurs I write about the Gig Economy, entrepreneurs and the future of work.

Micha Kaufman Contributor

This article is more than 2 years old.

Whether you’re a freelancer, small-business owner, or full-timer, to climb the ladder,

you must know how to lead the pack. Are you destined to be the big boss or be bossed

around? To find out, take a look at these 10 characteristics shared by great

business leaders:

1. Persistence, Persistence, Persistence

In the 1890s, Henry Ford came up with the Ford Quadricycle, a vehicle made up of a

frame mounted on four large bicycle wheels with an ethanol-powered engine. Needless

to say, it wasn’t a success. Ford later founded the Ford Motor Company, invented

the Model T, and became one of the wealthiest men in the world. Do you try, fail, and

pick yourself back up again? Bingo!

2. Thick skin. Rhino-thick.

Walt Disney ’s editor at the Kansas City Star told him that he had no good ideas

and lacked imagination. He could have taken the harsh words to heart and given up the

creativity ghost. Instead he went on to become the most successful animator of all time,

winning 22 Academy Awards, creating characters like Mickey Mouse, and opening his

own theme park. Today, Walt Disney is one of the world’s most ubiquitous household

name brands, synonymous with creativity.

3. An Eye for Talent

It takes a village to make amazing things happen. That’s why great leaders surround

themselves with other great minds. Steve Jobs was always on the hunt for talent in

unique ways, like accepting invitations to lecture at universities so he could scout

F +0%

DIS +0%

potential employees. Jobs personally interviewed over 5,000 applicants during his

lifetime, managing all the hiring for his team.

Today In: Entrepreneurs

4. Can’t Get No Satisfaction

What do Google, Yahoo, and Facebook have in common? All are billion dollar

companies that started in dorm rooms. Great business leaders are never satisfied and

continually strive to take their business to the next level. As Ingvar Kamprad, the

founder of IKEA, said, “The most dangerous poison is the feeling of achievement. The

antidote is to every evening think what can be done better tomorrow.”

5. Fearlessness

When Richard Branson was younger, his aunt bet him that he couldn’t learn to swim

during their family vacation. After failing to master the skill during the trip, on the drive

home, he asked his father to pull over the car. He jumped into a river, swam, and won

the bet. Today, Branson, the founder of the Virgin Group, which is made up of over 400

companies, believes in a philosophy of taking risks and stepping out of your comfort

zone. “You don’t learn to walk by following rules,” Branson said. “You learn by doing,

and by falling over.”

The Forbes eBook Of Motivational Quotes Discover the timeless advice that the world’s great thinkers, billionaires, writers and businesspeople have to offer.

6. Owning Your Mistakes

After Amazon deleted copies of unauthorized versions of Animal Farm and 1984 from

users’ Kindles, there was an immediate negative backlash. Not only did Amazon cop to

the mistake in an official press statement, CEO Jeff Bezos personally apologized,

admitting that the company’s solution to the problem was “stupid, thoughtless, and

painfully out of line with our principles.” He also offered, “deep apologies to our

customers.”

7. Toughness

If you want to lead in the business world, you’re going to have to stand up for yourself.

“When somebody challenges you, fight back. Be brutal, be tough,” advised Donald

Trump. Michael Bloomberg agreed, saying at a commencement ceremony that, “In the

business world, it’s dog-eat-dog,” and, “you occasionally have to throw some elbows.”

8. Winning Friends and Influencing People

But don’t take the tough act too far. People work better for managers they like. John D.

Rockefeller said, “The ability to deal with people is as purchasable as a commodity as

sugar or coffee and I will pay more for that ability than for any other thing under the

sun.” Mark Cuban put things a little more simply: “People hate dealing with people who

are jerks. It’s always easier to be nice than to be a jerk. Don’t be a jerk.”

9. Singular Vision

It all starts with an idea. Howard Schultz envisioned a single brand with coffeehouses

across the globe. He turned that dream into a reality and founded Starbucks. “I think if

I am an Internet entrepreneur, probably best known as the co-founder and CEO of Fiverr.com, my fifth venture to

date. Launched in early 2010, Fiverr is a global marketpl... Read More

you’re an entrepreneur, you’ve got to dream big, and then dream bigger,” he said. “It’s

seeing what other people don’t see and pursuing that vision.”

10. Powerfully Passionate

Above all, a true leader is passionate about whatever venture he or she is undertaking.

As Jobs said, “You have to be burning with an idea, or a problem, or a wrong that you

want to right. If you’re not passionate enough from the start, you’ll never stick it out.”

Oprah Winfrey also had some powerful words on the subject. “Passion is energy,” she

said. “Feel the power that comes from doing whatever excites you.”

Let me know what traits you think make a great business leader @MichaKaufman.

Micha Kaufman

Global Human Capital Trends 2014 Engaging the 21st-century workforce

A report by Deloitte Consulting LLP and Bersin by Deloitte

Contents Introduction | 2

Global Human Capital Trends 2014 survey: Top 10 findings | 7

Lead and develop

Leaders at all levels | 25

Corporate learning redefined | 35

Performance management is broken | 45

The quest for workforce capability | 55

Attract and engage

Talent acquisition revisited | 65

Beyond retention | 75

From diversity to inclusion | 87

The overwhelmed employee | 97

Transform and reinvent

The reskilled HR team | 107

Talent analytics in practice | 117

Race to the cloud | 127

The global and local HR function | 137

Editors | 145

Acknowledgements | 146

Global Human Capital leaders | 147

Human Capital country leaders | 148

Introduction Engaging the 21st-century workforce

AS we begin 2014, global organizations have left the recession in the rear-view mirror and are positioning themselves aggres- sively for growth. Sluggishness has given way to expansion. Retrenchment has been replaced by investment. The need for caution has been superseded by the need to take action.

Yet as the economic recovery takes hold, businesses realize that the workforce today has changed. Skills are scarce, workers have high expectations, and Millennials are now in charge. Enter the 21st-century workforce.

The 21st-century workforce is global, highly connected, technology-savvy, and demand- ing. Its employees are youthful, ambitious, and filled with passion and purpose. Millennials are a major force—but so are older workers, who remain engaged and valuable contribu- tors. Critical new skills are scarce—and their uneven distribution around the world is forcing companies to develop innovative new ways to find people, develop capabilities, and share expertise.

Awakening to a new world: After the Great Recession

Future observers may look back at 2014 as a turning point: the time when the global recession ended and businesses put plans in place for a new wave of growth. But as this growth begins, companies are finding that

they are dealing with a workforce with dif- ferent demographics, different demands, and different expectations.

The world is much more global and interdependent

Globalization is a key theme in our research. In 2013, the developing countries contributed 50 percent of the world’s GDP.1 This is expected to grow to 55 percent by 2018, a significant increase in business opportunity centering on these newer economies.2 And these countries now have a large buying seg- ment: The global middle class is expected to increase from 1.8 billion in 2009 to 3.2 billion in 2020, with Asia’s middle class tripling in size to 1.7 billion by 2020.3

Trends in leadership, talent acquisition, capability development, analytics, and HR transformation are all impacted by globaliza- tion. Companies that learn to leverage global talent markets while localizing their HR strate- gies will be poised for strong performance.

Mobile, social, and cloud computing continue to explode

Technology has transformed the workplace. At the start of 2008, there were only 3 million Apple iPhone® mobile devices in the world.4 At the end of 2013, according to a Gartner estimate, there were 1 billion smartphones and more than 420 million iPhone mobile devices

Global Human Capital Trends 2014: Engaging the 21st-century workforce

2

shipped.5 Facebook had a million users in 2004, 100 million users in 2008, and an esti- mated 1.23 billion registered users today.6 And according to Forrester estimates, cloud com- puting will grow from a $41 billion business in 2011 to a $241 billion business by 2020.7

All this technology has transformed the world of recruiting, the world of education and training, the world of analytics, and even the way we work. Today we are online 24/7 and relentlessly flooded with information, mes- sages, and communications.

Not only has technology become a critical and pivotal part of human resources, but we have also identified a new human capital issue discussed in this report: the overwhelmed employee. Organizations face an imperative to find ways to absorb more technology while simultaneously making it simple.

Demographic shifts are creating a diverse, multi- generational workforce

As the world’s population grows, the global workforce is getting younger, older, and more urbanized. Millennials are entering the work- force in greater numbers and reshaping the talent markets with new expectations. They are projected to make up 75 percent of the global workforce by 2025, and they are letting us know that they are ready to take the lead . . . soon.8 But as new research shows, Millennials want to be creative. They want to run their own businesses. They want accel- erated career growth. In the words of one manager: “They don’t want a career, they want an experience.”9

Baby Boomers, although some started to retire in 2008, are refusing to leave their field.

For both financial reasons and reasons of pro- fessional satisfaction, many are extending their working lives—benefiting from the incredible longevity dividend shared the world over.

These two trends are producing the most multi-generational workforce in history. How can companies manage this highly diverse set of employees when their needs vary widely? How can organizations change their strategy for performance management to address these new workforce dynamics?

Global social, political, and regulatory shifts are changing the focus of business

Employee engagement and retention are directly related to the social fabric of business. In the fall of 2011, we witnessed the Occupy Wall Street movement, starting in New York and spreading around the world. The bound- aries between business and social issues are blurring as corporate social responsibility and “conscious capitalism” reshape business and talent markets. Consumer and talent markets are making new demands on businesses, with social and community concerns rising to new levels of priority. Regulation, particularly in the financial markets, continues to grow as the role of regulators continues to expand.

How can companies cultivate an ethos of mission, purpose, and conscious capitalism to attract and engage a workforce highly aware of these issues?

Technology is changing how we work and the skills we need

Finally, technology has changed the nature of collaboration, expertise sharing, and the skills one needs to succeed. Collaborative

Critical new skills are scarce—and their uneven distribution around the world is forcing companies to develop innovative new ways to find people, develop capabilities, and share expertise.

Introduction

3

technologies continue to make it possible for teams to work in remote locations across the world, easily accessing experts within and out- side the organization. Machine learning and artificial intelligence are disrupting one wave of workers and opening new career opportunities in analytics, machine-assisted manufacturing, and the service industries.10 The skills we need today and in the future are dramatically differ- ent than what they were only five years ago.

2014: A time for action These changes in the workforce and

workplace are significant, disruptive, and here today. How can human capital strategies power companies to thrive in this era of rapid change?

Our research shows a significant gap between the urgency of the talent and leader- ship issues leaders face today and their organi- zations’ readiness to respond. On every critical issue—leadership, retention and engagement, learning and development, analytics— execu- tives recognize the need to take action, but express reservations about their team’s ability to deliver results.

One of the most important takeaways from this research is the fact that doing more is not enough. Today companies have to manage people differently – creating an imperative to innovate, transform, and reengineer human capital practices.

The 2014 Global Human Capital Trends report, developed after months of extensive global research, provides guidance and recom- mendations for these important strategies.

Three key areas of strategic focus

This year’s 12 critical human capital trends are organized into three broad areas:

• Lead and develop: The need to broaden, deepen, and accelerate leadership develop- ment at all levels; build global workforce capabilities; re-energize corporate learning by putting employees in charge; and fix performance management

• Attract and engage: The need to develop innovative ways to attract, source, recruit, and access talent; drive passion and engage- ment in the workforce; use diversity and inclusion as a business strategy; and find ways to help the overwhelmed employee deal with the flood of information and distractions in the workplace

• Transform and reinvent: The need to create a global HR platform that is robust and flexible enough to adapt to local needs; reskill HR teams; take advantage

Figure 1. Three key areas of strategic focus

Lead and develop Attract and engage Transform and reinvent

Leaders at all levels: Close the gap between hype and readiness

Talent acquisition revisited: Deploy new approaches for the new battlefield

The reskilled HR team: Transform HR professionals into skilled business consultants

Corporate learning redefined: Prepare for a revolution

Beyond retention: Build passion and purpose

Talent analytics in practice: Go from talking to delivering on big data

Performance management is broken: Replace “rank and yank” with coaching and development

From diversity to inclusion: Move from compliance to diversity as a business strategy

Race to the cloud: Integrate talent, HR, and business technologies

The quest for workforce capability: Create a global skills supply chain

The overwhelmed employee: Simplify the work environment

The global and local HR function: Balance scale and agility

Global Human Capital Trends 2014: Engaging the 21st-century workforce

4

of cloud-based HR technology; and implement HR data analytics to achieve business goals

One of the largest global human capital surveys

When we set out to identify the top 12 global business challenges in talent manage- ment, leadership, and HR, we drew upon more than 15 years of research to examine the range of issues and the most effective solutions in the market. We also surveyed 2,532 business and HR leaders in 94 countries around the world, making it one of the largest global surveys of its kind.

This year, recognizing that global trends vary by a company’s size, location, and growth rate, we are not only publishing our global perspectives, but also giving you access to our data so you can draw your own conclusions. In the spirit of big data and analytics, we have

created an interactive tool, the Human Capital Trends Dashboard, that allows you to drill into our survey data, investigate what it means, and apply it to your industry, your geography, and your company size.

Taking the next step The goal of this research is to give execu-

tives insight and perspective, while identify- ing solutions to help them set priorities for the coming year. We remain convinced that some of the biggest opportunities for com- panies to improve growth, innovation, and performance center squarely on how business leaders reimagine, reinvent, and reinvigo- rate human capital strategies—informed by a deeper understanding of the new 21st- century workforce.

We look forward to hearing from you as you dive into this report and reflect on what it means for your organization.

Explore the Human Capital Trends Dashboard at http://www.deloitte.com/hcdashboard.

Introduction

5

Endnotes

1. Chris Giles and Kate Allen, “Southeastern shift: The new leaders of global economic growth,” Financial Times, June 4, 2013.

2. International Monetary Fund.

3. Linda Yueh, “The rise of the global middle class,” BBC News, June 18, 2013.

4. Global Human Capital Trends 2014 is an independent publication and has not been authorized, sponsored, or otherwise approved by Apple Inc. iPhone® is a trademark of Apple Inc., registered in the United States and other countries.

5. Gartner estimates, January 7, 2014, http:// www.gartner.com/newsroom/id/2645115.

6. Facebook, “Key facts,” http:// newsroom.fb.com/Key-Facts.

7. Larry Dignan, “Cloud computing market: $241 billion in 2020,” ZDNet, April 22, 2011, http:// www.zdnet.com/blog/btl/cloud-computing- market-241-billion-in-2020/47702.

8. Josh Bersin, “Millennials will soon rule the world: But how will they lead?” Forbes, http://www.forbes.com/sites/ joshbersin/2013/09/12/millenials-will-soon- rule-the-world-but-how-will-they-lead/.

9. Deloitte, The Millennial survey 2013, http://www2.deloitte.com/global/en/ pages/about-deloitte/articles/millennial- survey-positive-impact.html.

10. Erik Brynjolfsson and Andrew McAfee, The Second Machine Age: Work, Progress, and Pros- perity in a Time of Brilliant Technologies (New York: W. W. Norton and Company, Inc., 2014).

Global Human Capital Trends 2014: Engaging the 21st-century workforce

6

Global Human Capital Trends 2014 survey Top 10 findings

TO gain insights into the 2014 global human capital trends, we conducted a survey in the last quarter of 2013 that included 2,532 business and HR leaders in 94 countries. The survey covered the major industries and all of the world’s geographies (survey demograph- ics are summarized in the appendix to this chapter). Our goal was to better understand the priorities and preparedness of executives and HR professionals around the world, and to provide insight on what leaders can do to drive the talent and HR agenda.

This chapter provides a summary of our top findings from the global survey. We are also making views of the data available through the Deloitte Human Capital Trends Dashboard tool, which will be available on our websites.

Finding 1. Leadership, retention, HR skills, and talent acquisition are the top global trends in perceived urgency

Across all respondents to our global survey this year, companies cite four issues as the most urgent: leadership, retention and engagement,

the reskilling of HR, and talent acquisition and access (see figures 1 and 2).

Building global leadership is by far the most urgent: Fully 38 percent of all respondents rated it “urgent,” almost 50 percent more than the percentage rating the next issue “urgent.” Companies see the need for leadership at all levels, in all geographies, and across all functional areas. This continuous need for new and better leaders has accelerated. In a world where knowledge doubles every year and skills have a half-life of 2.5 to 5 years, leaders need constant development. This ongoing need to develop leaders is also driven by the changing expectations of the workforce and the evolving challenges businesses are facing, including two major themes underlying this year’s trends: globalization and the speed and extent of tech- nological change and innovation.

The second most urgent issue today is retention and engagement—a topic that often has no clear owner within HR or the busi- ness. Our research shows that “we all own this issue”: HR, top leadership, and all levels of management. As we discuss in the main report, companies should redefine their engagement strategy to move from keeping people to attracting them and creating a passionate and

Explore the Human Capital Trends Dashboard at http://www.deloitte.com/hcdashboard.

Top 10 findings

7

compassionate place to work. Further, compa- nies will benefit from having a clear point of view on how business executives, line leaders, and HR can more effectively work together and address this challenge.

The third most urgent issue is the reskill- ing of HR. This finding suggests that the HR and talent functions are in the midst of a transformation. HR is not making the grade as companies move away from HR as people administration to a focus on people perfor- mance. An essential part of this change is the

upskilling, reorganization, and transformation of HR and its relationship with business lead- ers and issues.

The fourth most urgent issue is talent acqui- sition and access. This continues to be one of the most important things companies do. In a skills-constrained environment, a company’s ability to find, attract, and access highly skilled people is critical to success. This area is going through a significant disruption as a result of globalization, technology, social media, chang- ing workforce expectations, and the shrinking

Figure 2. Global trends categorized by urgency

Highly urgent (≥25% of respondents rate as “urgent”)

Urgent (20–24% of respondents rate as “urgent”)

Important (10–19% of respondents rate as “urgent”)

• Leadership • Retention and engagement • Reskilling HR

• Talent acquisition and access • Global HR and talent management • HR technology • Overwhelmed employee • Talent and HR analytics 

• Performance management • Workforce capability • Diversity and inclusion • Learning and development

Graphic: Deloitte University Press | DUPress.com

Leadership

Retention and engagement

Reskilling the HR function

Talent acquisition and access

Workforce capability

Talent and HR analytics

Global HR and talent management

Learning and development

Performance management

HR technology

The overwhelmed employee

Diversity and inclusion 16%

21%

21%

18%

11%

21%

20%

15%

24%

25%

26%

38%

43%

44%

47%

50%

59%

51%

51%

60%

51%

52%

53%

48%

30%

27%

24%

24%

24%

21%

22%

21%

20%

19%

17%

11%

11%

8%

8%

8%

5%

8%

6%

5%

5%

5%

3%

4%

Not important Somewhat important Important Urgent

2,506

2,497

2,471

2,472

2,454

2,471

2,276

2,491

2,465

2,457

2,447

2,414

Number of respondents

Figure 1. Perceived urgency of 12 global trends

Global Human Capital Trends 2014: Engaging the 21st-century workforce

8

half-life of skills and technical knowledge. Tools such as LinkedIn, Facebook, Twitter, and others are changing recruiting into a strategic function focused on marketing, branding, and new tools and technologies.

Finding 2. Companies report generally low levels of readiness to respond to the trends

Overall, survey respondents reported generally low levels of readiness to respond to the 12 global trends in our survey (figure 3).

In fact, on average across all trends, 36 percent of respondents reported they were “not ready” as opposed to 16 percent reporting they were “ready”—meaning that they were more than twice as likely to say they were “not ready” versus “ready” for the trends they see com- ing. Only in workforce capability did more than three-quarters of respondents feel either “somewhat ready” or “ready” to address the trend. These findings are sobering, given that each trend was rated “important” or “urgent” by at least 60 percent of respondents, while the top five trends were all rated “important” or

Graphic: Deloitte University Press | DUPress.com

Workforce capability

Learning and development

Retention and engagement

Diversity and inclusion

Leadership

Reskilling the HR function

Global HR and talent management

Talent acquisition and access

Performance management

The overwhelmed employee

HR technology

Talent and HR analytics 11%

15%

10%

15%

13%

16%

15%

15%

20%

17%

24%

15%

43%

40%

47%

42%

49%

47%

49%

50%

46%

52%

51%

61%

46%

45%

44%

43%

38%

37%

37%

35%

34%

30%

25%

24%2,418

2,474

2,462

2,352

2,475

2,434

2,181

2,430

2,412

2,377

2,384

2,422

Percent

Figure 3. Reported readiness for global trends

Not ready Somewhat ready Ready

Number of respondents

Figure 4. Perceived capability shortfalls

Significant capability shortfalls (>40% rate as “not ready”)

Large capability shortfalls (31–40% rate as “not ready”)

Some capability shortfalls (20–30% rate as “not ready”)

• Talent and HR analytics • HR technology • Overwhelmed employee • Performance management

• Talent acquisition and access • Global HR and talent management • Reskilling HR • Leadership • Diversity and inclusion

• Retention and engagement • Learning and development • Workforce capability

Top 10 findings

9

“urgent” by at least 75 percent of respondents (figure 1).

More than 40 percent of respondents reported their companies were “not ready” to address talent and HR analytics, HR technol- ogy, the overwhelmed employee, and per- formance management—the lowest levels of readiness among all the trends (figure 4). These low reported levels of readiness and prepared- ness are a warning signal, considering the high levels of urgency and importance attributed to the trends in the global survey.

Figure 5 maps the 12 trends according to respondents’ ratings of both their urgency and their companies’ readiness to deal with them. Urgency is shown on the horizontal axis, with higher numbers indicating greater urgency;

readiness is shown on the vertical axis, with higher numbers indicating greater readiness. The resulting grid shows a clustering of the trends in the lower right, underscoring one of the major findings in the survey: the gap between these trends’ perceived importance and companies’ readiness to address them.

Finding 3. The largest capability gaps are reported in leadership, analytics, reskilling HR, talent acquisition and access, and the overwhelmed employee

To further highlight the near-pervasive gap between urgency and readiness, we calculated an index score for each trend that we call the

Graphic: Deloitte University Press | DUPress.com

Urgency

R ea

d in

es s

Somewhat ready: 50

Figure 5. Global trends mapped against urgency (horizontal) and company readiness (vertical)

Leadership

Global HR and talent management

Diversity and inclusion

Learning and development

The overwhelmed employee

Retention and engagement

Performance management

Talent and HR analytics

HR technology

Workforce capability

Talent acquisition and access

Reskilling the HR function

30

40

50

60

40 50 60 70

70

30

So m

ew ha

t re

ad y

(5 0)

10 0

= R

ea dy

g f

0 =

N ot

r ea

dy

Somewhat important (33.3) 100 = Urgent g f 0 = Not important Important (66.6)

The capability gap grid By plotting the gaps on a grid (with readiness on the vertical and urgency on the horizontal), we can see how capability gaps vary among the different trends.

• Capability gaps at the lower right part of the grid are those of high urgency and low readiness (areas that warrant major increases in investment).

• Capability gaps at the upper right part of the grid are highly urgent, but companies feel more able to perform in these areas (they warrant investment but are lower priority than those at the bottom right).

• Capability gaps on the left side of the grid are areas of lesser importance, and those lower in the grid are areas of less readiness.

Global Human Capital Trends 2014: Engaging the 21st-century workforce

10

Deloitte Human Capital Capability Gap Index, a figure that shows HR’s relative capability gap in addressing a given talent or HR-related problem. It is calculated by taking an organi- zation’s self-rated readiness and subtracting its urgency, normalized to a 0–100 scale. For example, if an organization feels that an issue is 100 percent urgent and it also rates itself

100 percent capable and ready to address the issue, the capability gap would be zero. These index scores, which are almost always negative, provide a “weighting” of gaps to help identify the biggest areas of need.

As figures 6 and 7 show, leadership (gap of -34) and analytics (gap of -30) are the areas with the biggest gaps between urgency

Graphic: Deloitte University Press | DUPress.com

-35 -30 -25 -20 -15 -10 -5 0

-9

-12

-16

-22

-23

-24

-25

-26

-27

-27

-30

-34Leadership

Talent and HR analytics

Reskilling the HR function

Talent acquisition and access

The overwhelmed employee

HR technology

Performance management

Retention and engagement

Global HR and talent management

Workforce capability

Diversity and inclusion

Learning and development

The Human Capital Capability Gap Index Readiness - Urgency

Figure 6. Capability gap index for 12 global trends

Figure 7. Capability gaps grouped according to importance

Highly urgent (gap of -30 or more)

Urgent (gap of -25 to -29)

Very important (gap of -20 to -24)

Important (gap of -1 to -19)

• Leadership • Talent and HR analytics

• Reskilling HR • Talent acquisition and

access • Overwhelmed employee • HR technology

• Performance management • Retention and engagement • Global HR and talent

management

• Workforce capability • Diversity and inclusion • Learning and development

The Human Capital Capability Gap Index The Deloitte Human Capital Capability Gap Index is a research-based index that shows HR’s relative capability gap in addressing a given talent or HR-related problem. It is computed by taking an organization’s self-rated “readiness” and subtracting its “urgency,” normalized to a 0–100 scale. For example, if an organization feels that an issue is 100 percent urgent and it also rates itself 100 percent capable and ready to address the issue, the capability gap would be zero. These gaps, which are almost always negative, can be compared against each other.

Top 10 findings

11

and readiness, and hence the most impor- tant areas on which to focus investment. Reskilling HR, talent acquisition, dealing with the overwhelmed employee, and the need to replace HR technology are close behind, with gap scores of between -25 and -27, inclusive. These indicate areas where companies need to rethink their strategies and reengineer their current approaches.

The challenges of revamping performance management, addressing retention and

engagement, and improving HR globalization received gap scores of between -20 and -24. These areas reflect a need to rethink HR strate- gies to deal with the 21st-century workforce.

The areas of workforce capability, diversity and inclusion, and learning and develop- ment also require attention. When weighted by importance, the gap between urgency and readiness is the smallest in our index, but these areas still represent potential opportunities for improvement.

Graphic: Deloitte University Press | DUPress.com

Asia Pacific Western Europe

Central and Eastern Europe

Africa Middle

East North

America South

America

Less importantMore important

62

94

126

126

160

170

209

198

201

237

292

86

188

230

202

244

256

286

287

286

316

346

466

34

39

65

59

76

89

89

92

120

111

101

155

80

86

123

135

111

141

150

157

168

218

200

246

51

95

115

117

120

155

160

183

188

178

192

278

74

168

210

228

215

255

222

279

305

287

297

447

91

137

199

208

207

226

263

319

337

374

355

439

114

(24%)

(19%)

(19%)

(20%)

(24%)

(27%)

(24%)

(25%)

(31%)

(22%)

(24%)

(25%)

(33%)

(38%)

(39%)

(33%)

(47%)

(43%)

(41%)

(34%)

(45%)

(34%)

(36%)

(40%)

(13%)

(8%)

(11%)

(10%)

(15%)

(15%)

(13%)

(11%)

(19%)

(12%)

(10%)

(13%)

(31%)

(17%)

(21%)

(22%)

(21%)

(24%)

(21%)

(19%)

(26%)

(23%)

(21%)

(21%)

(20%)

(19%)

(20%)

(19%)

(23%)

(26%)

(23%)

(22%)

(29%)

(19%)

(20%)

(24%)

(28%)

(34%)

(36%)

(37%)

(41%)

(43%)

(32%)

(33%)

(48%)

(31%)

(31%)

(38%)

(35%)

(27%)

(34%)

(34%)

(40%)

(38%)

(37%)

(38%)

(53%)

(40%)

(36%)

(37%)Leadership

Retention and engagement

Workforce capability

Global HR and talent management

Learning and development

Talent acquisition and access

HR technology

Talent and HR analytics

Reskilling the HR function

Performance management

The overwhelmed employee

Diversity and inclusion

466 34

Figure 8. Regions where top five trends are most important

Figures in each cell represent the number of respondents who viewed the given trend as one of the top five most important, and who felt that the trend would be important in the given region. Percentages are calculated on the total number of respondents who selected the given trend as one of the five most important overall.

Global Human Capital Trends 2014: Engaging the 21st-century workforce

12

Finding 4. Leadership is the top priority in developed and growing economies

We asked our respondents to identify in which of seven global geographies their top five trends were most important. As figure 8 shows, leadership, the most important overall trend in our survey, was identified as highly important in five of seven global regions: Asia Pacific, Western Europe, Central and Eastern Europe, North America, and South America. Note also that, in these regions, retention and engagement is a high priority as well, with North America facing the most acute need in this area.

This geographic pattern of leadership’s perceived importance corresponds to global regions of business growth and opportunity. Asia and North America were rated as the two highest areas of growth in our survey, and Western Europe is undergoing a difficult economic transformation. Emerging econo- mies (Middle East, Africa, and, to a degree,

South America) also report leadership as a top priority, balanced with the need for workforce capability, HR globalization, retention, and talent acquisition.

Finding 5. While global trends are similar around the world, program needs vary by region

While most geographies have broadly similar priorities across the human capital trends, there are some variations, as figure 9 shows. North America reports the highest level of challenge from the overwhelmed employee. Asia Pacific- and South America-based com- panies report the need for improved workforce capabilities more strongly than companies in other geographies. Western Europe sees a greater need to reskill and transform HR than other regions.

This finding suggests that regional eco- nomic forces and cycles have an impact on human capital priorities. In figure 9, the high

Figure 9. Priority areas for companies across different regions (by rank, top three only)

Asia Pacific Western Europe

Central and Eastern Europe Africa Middle East

North America

South America

Above global average

(+11% or greater)

Trends are in line with global

averages

Trends are in line with global

averages

Performance management

(17%)

Diversity and inclusion (106%)

Learning and development

(64%)

Workforce capability

(47%)

Learning and development

(127%)

Retention and engagement

(58%)

Workforce capability

(47%)

HR technology (14%)

Workforce capability

(13%)

Retention and engagement

(31%)

Talent and HR analytics (25%)

HR technology (24%)

Below global average (-11%

or greater)

The overwhelmed

employee (-19%)

Global HR and talent

management (-14%)

Retention and engagement

(-12%)

Workforce capability (-27%)

Retention and engagement

(-23%)

Performance management

(-22%)

Diversity and inclusion (-50%)

Talent and HR analytics (-40%)

Global HR and talent

management (-33%)

Trends are in line with global

averages

HR technology (-38%)

Reskilling HR (-24%)

Talent acquisition and access (-21%)

Diversity and inclusion (-19%)

Learning and development

(-18%)

Workforce capability (-47%)

Performance management

(-11%)

Top 10 findings

13

urgency that companies in Africa, Latin and South America, and the Middle East report for many of the trends is striking. This under- scores the value of HR and leadership teams understanding these variations and accom- modating regional workforce priorities and dynamics as they globally hire, manage, and lead their people.

Finding 6. Human capital priorities vary by industry, with one exception: Leadership

Different industries have different talent priorities—with one major exception (figure 10): Every industry sees leadership as its top priority. Retention and engagement was almost as consistently rated a high priority: It was the No. 2 trend for six of the eight industry groups.

Differences among industries include:

• Technology companies, life sciences, health care, professional services, and oil and gas companies rate talent acquisition and access particularly high, reflecting the important need in these industries to find key people with unique technical skills.

• Energy companies, life sciences companies, and technology, media, and telecommuni- cations companies—three industries going through significant transformations—rate the need to reskill HR as a particularly high priority.

• Professional services companies, public sec- tor organizations, and energy and resources companies rate building workforce capabili- ties particularly high—in the top two or three slots.

Finding 7. “Excellent” HR companies and teams focus more intensely on the urgent global human capital trends

Our survey asked respondents to rate the overall performance of their HR and talent organizations and programs. When we looked at self-assessed “excellent” or “high perform- ing” HR and talent teams, we found that they rated the top trends higher in urgency and importance (on average, seven percentage points more) compared to those who rated themselves “adequate” or “average” performers. These trends included:

1. Leadership: Rated as “urgent” or “impor- tant” by 88 percent of high performers vs. 85 percent of average performers

2. Talent acquisition and access: Rated as “urgent” or “important” by 85 percent of high performers vs. 74 percent of average performers

3. Reskilling HR: Rated as “urgent” or “impor- tant” by 84 percent of high performers vs. 76 percent of average performers

4. Retention and engagement: Rated as “urgent” or “important” by 83 percent of high performers vs. 79 percent of average performers

5. Talent & HR analytics: Rated as “urgent” or “important” by 82 percent of high perform- ers vs. 71 percent of average performers

These findings suggest that top HR teams are even more focused on certain business and talent priorities, including leadership, talent acquisition, delivering a high-performing and highly engaged workforce, improving the HR function, and building analytics capability, than most companies’ HR teams.

Global Human Capital Trends 2014: Engaging the 21st-century workforce

14

Finding 8. Business leaders have less confidence in their organization’s readiness to deal with future trends than HR leaders

Our survey included the perspectives of both business leaders and HR leaders. For the five trends identified as most urgent overall, we observed substantial differences between

business leaders’ and HR leaders’ views on their organizations’ readiness for these trends. These differences were more pronounced for larger organizations—those with more than 10,000 employees. Among these organizations, business leaders rate their organizations’ readi- ness to address the top trends an average of 13 percentage points lower than HR’s assessment of readiness in leadership, reskilling HR, the globalization of HR, retention and engage- ment, and talent and HR analytics (figure 11).

Figure 10. Areas of priority for different industries (by rank and percentage)

Global Trend Consumer business

Energy and resources

Financial services

Life sciences and health

care Manu-

facturing Professional

services Public sector

Technology, media & telecom

1 (86%) Leadership 1 (85%) 1 (86%) 1 (89%) 1 (90%) 1 (84%) 1 (84%) 1 (84%) 1 (89%)

2 (79%) Retention and engagement

2 (81%) 2 (79%) 2 (83%) 4 (78%) 2 (78%) 2 (79%) 5 (75%) 2 (80%)

3 (77%) Reskilling the HR function

3 (76%) 2 (79%) 3 (77%) 2 (82%) 3 (76%) 4 (76%) 4 (76%) 3 (79%)

4 (75%) Talent acquisition and access

7 (69%) 3 (78%) 4 (76%) 4 (78%) 6 (71%) 3 (78%) 8 (67%) 2 (80%)

5 (74%) Workforce capability

6 (70%) 3 (78%) 6 (71%) 6 (73%) 5 (72%) 2 (79%) 2 (80%) 5 (77%)

6 (72%) Talent and HR analytics

6 (70%) 5 (71%) 6 (71%) 3 (80%) 7 (66%) 5 (73%) 6 (71%) 4 (78%)

7 (71%) Global HR and talent management

5 (71%) 4 (75%) 5 (73%) 8 (70%) 4 (74%) 7 (69%) 10 (57%) 6 (76%)

8 (70%) Learning and development

4 (72%) 7 (66%) 7 (68%) 9 (69%) 8 (64%) 4 (76%) 3 (78%) 8 (67%)

9 (69%) Performance management

8 (68%) 7 (66%) 7 (68%) 6 (73%) 9 (63%) 6 (72%) 9 (65%) 7 (70%)

10 (68%) HR technology 9 (67%) 6 (70%) 9 (66%) 7 (71%) 11 (61%) 8 (67%) 6 (71%) 5 (77%)

11 (65%) The overwhelmed employee

10 (62%) 8 (59%) 8 (67%) 5 (74%) 10 (62%) 6 (72%) 7 (68%) 9 (64%)

12 (59%) Diversity and inclusion

11 (56%) 9 (56%) 10 (63%) 10 (57%) 12 (55%) 9 (64%) 10 (63%) 10 (55%)

Percentages indicate the percentage of respondents rating each trend as “urgent” or “important.”

Graphic: Deloitte University Press | dupress.com

Top 10 findings

15

While HR teams may understand their current programs, capabilities, and readiness in these areas, these results hint that business leaders may not. If this is so, then this finding highlights the importance of HR leaders and teams improving their engagement with busi- ness line leaders, ensuring that HR is focusing on critical business concerns, and partner- ing with the business effectively to share HR’s capabilities and services. Of course, the finding may also point to underlying gaps that busi- ness leaders believe HR leaders need to address more fully.

Finding 9. HR and talent executives grade themselves a C-minus for overall performance

When asked respondents to rate their orga- nizations’ HR and talent programs on a scale from excellent to underperforming, the HR organizations in our survey showed a minor improvement over last year’s self-assessment. In 2013, 37 percent of respondents felt that their overall HR and talent programs were “underperforming” or just “getting by.” This year, that number dropped to 34 percent.

While this improvement is a positive sign, the general picture is still one of widespread perceived mediocrity. If we evaluate HR

Graphic: Deloitte University Press | DUPress.com

Leadership Non-HR

Reskilling the HR function

Non-HR

Global HR and talent management

Non-HR

Retention and engagement

Non-HR

Talent and HR analytics Non-HR 7%

12%

11%

20%

19%

18%

10%

13%

12%

16%

35%

47%

50%

53%

36%

54%

42%

51%

48%

56%

57%

41%

38%

27%

45%

29%

48%

36%

40%

28%510

185

513

179

480

180

504

185

508

181

HR

HR

HR

HR

HR

Not ready Somewhat ready Ready

Figure 11. Business and HR leaders’ perceptions of readiness for the top five trends (among organizations with more than 10,000 employees)

Graphic: Deloitte University Press | DUPress.com

2014

2013 14%

10%

23%

24%

38%

31%

21%

30%

3%

5% GPA 1.5: C-

GPA 1.3: D+

ExcellentGoodAdequateGetting byUnderperforming

Figure 12. HR’s global report card: Trending toward “C-”

Global Human Capital Trends 2014: Engaging the 21st-century workforce

16

organizations’ overall self-assessed capabilities using a traditional grade-point scale (see figure 12), where “excellent” is a 4.0 or A, “good” is a 3.0 or B, “adequate” is a 2.0 or C, “getting by” is a 1.0 or D, and “underperforming” is a 0.0 or F, then this year’s respondents rated themselves at the equivalent of a C-minus—in contrast to last year’s D-plus. In 2014, twice as many global respondents gave their HR and talent programs an F as gave them an A (10 percent versus 5 percent). While this is not intended as a criticism of HR in general, it does reflect how challenging it is to build a world-class HR function and how far companies believe they are from this goal.

Finding 10. Companies worldwide plan modest increases in talent and HR investments in 2014

Forty-seven percent of responding compa- nies expect to increase their HR investments in 2014, with 13 percent anticipating increases of 5 percent or more. Eight percent of respon- dents expect to decrease these investments,

and 39 percent are planning to invest at the same level (figure 13).

Taking the weighted average across these increases, we found that 2014 should see a gen- eral growth in spending on HR of 1.32 percent. While this is a relatively small number, it is positive, indicating that companies are rec- ognizing the need to invest in human capital and the value derived from those investments. Similar research shows a significant increase in spending in talent acquisition, training, reskill- ing, and employee engagement programs, with a flat to declining investment in HR staff and technology.

Toward a 21st-century talent agenda: Are HR and business leaders ready?

The global Human Capital Trends 2014 survey strives to present critical insights for business and HR leaders on both their HR and talent priorities and their readiness to deal with the future. Given evolving business needs and a changing global employee landscape, there is a complex set of urgent and important

Graphic: Deloitte University Press | DUPress.com

Significantly increase (more than 5%)

Increase (1-5%)

Remain the same

Decrease

Significantly decrease

Not applicable 144

44

164

987

873

320

6%

2%

6%

39%

34%

13%

Figure 13. Plans to invest in HR over next 12–18 months

Number of respondents

Top 10 findings

17

human capital challenges that require atten- tion. At the top of the list are:

• Leadership

• Retention and engagement

• Reskilling HR

• Talent acquisition and access

• Global workforce capabilities

At the same time, new challenges, including talent and HR analytics as well as the “over- whelmed employee,” are being added to the human capital agenda.

While the priorities and challenges are clear—and seem to resonate in importance across industries and geographies—the readi- ness of HR teams to respond to these chal- lenges is less certain. For almost every trend we identified, readiness scores lagged, in many cases substantially, behind the trend’s per- ceived urgency. In large organizations (those

with more than 10,000 employees), we saw the largest differences between business and HR leaders in their assessments of the readiness to respond to important trends.

Perhaps HR executives are being tough on themselves and their functions when they grade themselves an overall C-minus. But given the importance that both business and HR leaders place on the human capital and talent agenda, 2014 is a moment both to reflect on what else can be done and to take action: focusing on what more can be done, what should be done differently, and what might be improved to move the needle in this critical area.

Our findings outline an agenda that can guide business and HR leaders pivot- ing between the recession and future growth strategies. The trends discussed in the bal- ance of this report represent opportunities for improvement in leadership and development, acquisition and engagement, and transforming and reinventing HR to support business priori- ties in a changing world.

Global Human Capital Trends 2014: Engaging the 21st-century workforce

18

In the fourth quarter of 2013, Deloitte Consulting’s global Human Capital practice conducted an extensive survey of HR and busi- ness leaders to understand their priorities and readiness to address 12 global HR and talent

trends. The survey included 2,532 respondents from 94 countries around the world. The key survey demographics are summarized in the following charts.

Appendix: Global Human Capital Trends 2014 survey demographics

Top 10 findings

19

Graphic: Deloitte University Press | DUPress.com

Large (10,001+)

Medium (1,001–10,000)

Small (1–1,000) 41%

31%

28%

1,032

793

707

HR

Non-HR 33%

67%

829

1,703

Board level

C-suite

Vice president

Senior manager

Manager

Individual contributor 13%

21%

27%

15%

14%

10%

336

523

672

384

352

265

Organization Level in organization

Job function

North America

Western Europe

Asia

Africa

Latin and South

America Central and

Eastern Europe

Oceania

Nordic countries

Middle East

Not specified 1%

1%

2%

3%

6%

11%

14%

13%

23%

24%

17

32

51

74

157

276

347

337

575

612

Work region

Financial services

Professional services

Consumer business

Manufacturing

Other

Technology, media, and

telecom

Energy and resources

Public sector

Life sciences and health care

Real estate 1%

6%

7%

8%

11%

11%

13%

13%

14%

15%

35

150

178

199

283

287

333

340

354

373

Industry group

United States

South Africa

India

Canada

Luxembourg

Japan

Spain

Belgium

China

Australia

United Kingdom

Poland

Argentina

Mexico

Switzerland

Brazil

Ireland

Chile

Portugal

Germany

Kenya

Uruguay

Netherlands

All others 17%

1%

1%

1%

1%

1%

1%

2%

2%

2%

2%

2%

2%

2%

3%

3%

3%

4%

4%

5%

5%

6%

11%

19%

428

31

32

34

34

36

37

40

40

46

49

53

57

58

64

66

79

99

103

118

133

150

266

479

Country

Figure 14. Respondent demographics N = 2,532

Southeast Asia 2%54

Global Human Capital Trends 2014: Engaging the 21st-century workforce

20

Authors

Jeff Schwartz, global Human Capital leader, Marketing, Eminence, and Brand Deloitte Consulting India Pvt Ltd [email protected]

Jeff Schwartz is the practice leader for the Human Capital practice in US India, based in New Delhi, and the global leader for Human Capital Marketing, Eminence, and Brand. A senior advisor to global companies, his recent research focuses on talent in global and emerging markets. He is a frequent speaker and writer on issues at the nexus of talent, human resources, and global business challenges.

Bill Pelster, leader, Integrated Talent Management Deloitte Consulting LLP [email protected]

Bill Pelster is a Deloitte Consulting LLP principal with over 20 years of industry and consulting experience. In his current role, he is responsible for leading the Integrated Talent Management practice, which focuses on issues and trends in the workplace. In his previous role as Deloitte’s chief learning officer, Pelster was responsible for the total development experience of Deloitte professionals, including learning, leadership, high potentials, and career/life fit. Additionally, he was one of the key architects of Deloitte University.

Josh Bersin, principal and founder, Bersin by Deloitte Bersin by Deloitte, Deloitte Consulting LLP [email protected]

Josh Bersin founded Bersin & Associates in 2001 to provide research and advisory services focused on corporate learning. He is a frequent speaker at industry events and is a popular blogger. He has spent 25 years in product development, product management, marketing, and sales of e-learning and other enterprise technologies. His education includes a BS in engineering from Cornell, an MS in engineering from Stanford, and an MBA from the Haas School of Business at the University of California, Berkeley.

Top 10 findings

21

Endnotes

1. David Russell Schilling, “Knowledge doubling every 12 months, soon to be every 12 hours,” IndustryTap, April 19, 2013, http://www. industrytap.com/knowledge-doubling-every- 12-months-soon-to-be-every-12-hours/3950.

2. Eric Bloom, “Your technology skills have a two year half-life and 6 ways to stay current,” IT World, October 24, 2011, http://www. itworld.com/career/216141/your-technology- skills-have-two-year-half-life-and-6-ways- stay-current; Natalie Harp, “John Seely Brown—A new culture of learning,” https:// sites.psu.edu/natalieharp/2010/06/12/ john-seely-brown-a-new-culture-of- learning/, accessed February 17, 2014.

3. The weighted average of 1.25 percent for HR investments is calculated by assuming average increases and decreases of 2.5 percent (given the range of 1–5 percent) and significant increases and decreases of 5 percent.

4. For more information, please see Karen O’Leonard, The corporate learning factbook® 2013: Benchmarks, trends, and analysis of the US training market, Bersin by Deloitte, January 2013, www.bersin.com/library or www.bersin. com/factbook. This information is based on research that will be published throughout 2014 in a series of Bersin by Deloitte reports on the topic of high-impact HR.

Global Human Capital Trends 2014: Engaging the 21st-century workforce

Lead and develop

Leaders at all levels Close the gap between hype and readiness

FOR companies around the world, a short-age of leaders is one of the biggest impedi- ments to growth. This challenge is particularly acute today as the global recovery strengthens, companies seek to rapidly grow their busi- nesses in new markets, and older leaders begin to retire at accelerating rates.

Leadership needs today are far broader and deeper than merely developing the next CEO or even building the C-suite pipeline. Companies face leadership gaps at every level of the organization. These gaps can only be filled through a sustained and systemic commitment to leadership development that identifies potential leaders earlier, brings young leaders online faster, develops senior leaders later in their careers and keeps them on the job longer, and builds new leadership pipelines at every level of the company.

The executives in our 2014 global survey viewed leadership as the highest-priority issue of all the issues we asked them about, with

86 percent rating it “urgent” or “important.” Yet, despite the acknowledged importance of leadership, most companies feel they are not meeting the challenge (figure 1):

• Only 13 percent of companies in our survey rate themselves “excellent” in providing leadership programs at all levels—new leaders, next-generation leaders, and senior leaders

• 66 percent believe they are “weak” in their ability to develop Millennial leaders, while only 5 percent rate themselves as “excellent”

• Over half (51 percent) have little confidence in their ability to maintain clear, consistent succession programs

• Only 8 percent believe they have “excel- lent” programs to build global skills and experiences

• Companies face an urgent need to develop leaders at all levels—from bringing younger leaders online faster to developing leaders globally to keeping senior leaders relevant and engaged longer.

• Leadership remains the No. 1 talent issue facing organizations around the world, with 86 percent of respondents in our survey rating it as “urgent” or “important.” Only 13 percent of respondents say they do an excellent job developing leaders at all levels—the largest “readiness gap” in our survey.

• 21st-century leadership is different. Companies face new leadership challenges, including developing Millennials and multiple generations of leaders, meeting the demand for leaders with global fluency and flexibility, building the ability to innovate and inspire others to perform, and acquiring new levels of understanding of rapidly changing technologies and new disciplines and fields.

Leaders at all levels

25

Developing 21st-century leadership skills

Not only are companies not developing enough leaders, but they are also not equipping the leaders they are building with the critical capabilities and skills they need to succeed.

Today’s market environment places a pre- mium on speed, flexibility, and the ability to lead in uncertain situations. At the same time, the flattening of organizations has created an explosion in demand for leadership skills at every level.

Our research shows that foundational and new leadership skills are in high demand, including:

• Business acumen: Understanding the core business well

• Collaboration: Having the ability to build cross-functional teams

• Global cultural agility: Managing diversity and inclusion

• Creativity: Driving innovation and entrepreneurship

• Customer-centricity: Enhancing effective customer relationships

• Influence and inspiration: Setting direc- tion and driving employees to achieve business goals

• Building teams and talent: Developing people and creating effective teams

A highly successful global technology com- pany, for example, discovered that it needed four leadership archetypes: entrepreneurs who can start a business; scale leaders who can build up a business; efficiency leaders who reduce costs and improve operations; and fix-it leaders who turn businesses around.

Graphic: Deloitte University Press | DUPress.com

5%

8%

8%

10%

13%

17%

28%

36%

39%

39%

43%

49%

66%

56%

52%

51%

44%

34% Providing executive involvement

and ownership of leadership development

Providing leadership programs for all levels (new, next generation,

senior leaders)

Maintaining clear and current succession plans and programs

Including global skills and experiences in leadership program

Providing experiential, role-based leadership programs

Providing focused leadership programs for millennials

1,175

1,162

1,154

1,034

1,142

1,099

Figure 1. Current leadership programs falling short

Number of respondents

% of total number of responses

HR executives’ assessment of leadership program capability levels ExcellentAdequate Weak

Today’s market environment places a premium on speed, flexibility, and the ability to lead in uncertain situations.

Global Human Capital Trends 2014: Engaging the 21st-century workforce

26

The core capabilities for leadership are well understood. Yet Deloitte’s experience over the last decade suggests that the quality of leaders is declining. This would mean that companies need to reexamine and redesign their leader- ship development programs.

Our survey suggests this has become a highly urgent challenge for corporate leaders worldwide, especially in Brazil, Mexico, and the Netherlands. Executives in few countries appeared to be prepared to meet this challenge (figure 2).

Graphic: Deloitte University Press | DUPress.com

Figure 2. Urgency vs. readiness: Who is leading, who is lagging?

Spain

Kenya

Argentina

Mexico

Chile

South Africa

Ireland

Brazil

United Kingdom

Netherlands

China

United States

Poland

Switzerland

India

Canada

Germany

Japan

Luxembourg Australia

Belgium

Portugal

All others

Uruguay

30

40

50

60

40 50 60 70 80

Netherlands

Brazil

Japan

Mexico

Belgium

Australia

Poland

South Africa

United States

Argentina

Uruguay

Canada

China

All others

Switzerland

United Kingdom

Germany

Chile

Luxembourg

India

Spain

Ireland

Kenya

Portugal-15

-21

-22

-26

-29

-29

-29

-29

-30

-32

-32

-32

-33

-34

-35

-36

-37

-37

-38

-40

-43

-48

-50

-51

Capability gap grid

Leadership

Capability Gap Index (readiness – urgency)

So m

ew ha

t re

ad y

(5 0)

10 0

= R

ea dy

g f

0 =

N ot

r ea

dy

100 = Urgent gImportant (66.6)Somewhat important (33.3) f 0 = Not important

The Human Capital Capability Gap Index The Deloitte Human Capital Capability Gap Index is a research-based index that shows HR’s relative capability gap in addressing a given talent or HR-related problem. It is computed by taking an organization’s self-rated “readiness” and subtracting its “urgency,” normalized to a 0–100 scale. For example, if an organization feels that an issue is 100 percent urgent and it also rates itself 100 percent capable and ready to address the issue, the capability gap would be zero. These gaps, which are almost always negative, can be compared against each other.

The capability gap grid By plotting the gaps on a grid (with readiness on the vertical and urgency on the horizontal), we can see how capability gaps vary among different countries and industries.

• Capability gaps at the lower right part of the grid are those of high urgency and low readiness (areas that warrant major increases in investment).

• Capability gaps at the upper right part of the grid are highly urgent, but companies feel more able to perform in these areas (they warrant investment but are lower priority than those at the bottom right).

• Capability gaps on the left side of the grid are areas of lesser importance, and those lower in the grid are areas of less readiness.

Leaders at all levels

27

Building the pipeline takes investment, time, and expertise

Building a leadership pipeline requires a high level of sustained investment. The entire industry of leadership development repre- sents a $14 billion marketplace.1 High-impact2 companies in the United States spend more than $3,500 per person each year to develop mid-level leaders and over $10,000 to develop senior leaders.3

Strong leadership programs target leaders at all levels. At the early stages in the leader- ship pipeline, potential leaders need to acquire core skills in supervision and management, with frequent assignments to round out their skills. Later in their careers, rising leaders must understand all the business functions and how to run a P&L. As executives, leaders must learn business and product strategy and gain experi- ence driving change among large teams.

It is also critical to understand that, despite the proliferation of leadership fads, there are no shortcuts to building a leadership team that is broad and deep. A new leader typically needs 18 months before feeling fully comfortable in a new role; for a mid-level leader, the time period stretches from 24 to 36 months.4

Creating new leadership paths While most companies develop somewhat

rigid leadership tracks, they may be better served by developing paths to leadership that are more flexible.5 Some leaders will move into a top role quickly due to situational needs or local talent gaps. Others will develop over the course of many years.

High-performing companies now develop leaders locally, tapping into local

cultural experiences of potential leaders in each country.

In a recent study of top leadership progres- sion at a major energy company, we found that the paths for successful leaders in China were dramatically different than those for leaders in the United States.6 US-based leaders took a more traditional path through a pre-defined set of business assignments; successful leaders in China were promoted much more rapidly. This discovery led top management to rethink the company’s traditional model and enable local teams to be more flexible in the leaders they develop.

The importance of leadership strategy

Building leaders requires more than a portfolio of training programs. Senior execu- tives should create a culture that broadens the opportunity for leaders to develop in new ways. This means putting potential leaders in positions that stretch them beyond their current skill sets, and continuously coaching and supporting leaders so they can build their capabilities as rapidly as possible. While this is increasingly well known, in our experience it is simply not widely adopted and practiced.

This process is relevant to all levels of the organization and to all generations of employ- ees. High-potential Millennial leaders are looking to be identified early and placed on accelerated development timetables. Mid- career leaders are looking for challenging roles that allow them to make capability leaps— deepening and broadening their leadership skills to prepare them for more senior roles and new business challenges.

Global Human Capital Trends 2014: Engaging the 21st-century workforce

28

LESSONS FROM THE FRONT LINES

Building a “pathway” to leadership

ANZ, a leading Australian bank and financial services provider, set out to transform itself into a “super-regional bank,” focusing on achieving aggressive growth outside its home markets of Australia and New Zealand. To meet these goals, ANZ had to ensure that its leaders had the distinctive set of capabilities necessary for the transition.

The first phase of the program built the foundation for organizational leadership in the region through the development of a unique ANZ leadership model with the full commitment of senior executives. The model identifed leaders at all levels and critical leadership transition points.

The competencies necessary for success were aligned to the new super-regional strategy and leadership model, and the company designed a “leadership pathway program,” including a set of bespoke learning programs for each leadership level, to support the development of super-regional leaders through enhanced leadership and business skills.

In the second phase, the pathway program was deepened through the adoption of an informal online learning tool implemented widely across the bank. A generalist bankers program brought the new strategy to one organizational level; an executive leader program was required for senior executives; and recommended learning was introduced for first-time managers. A speaker series brought the strategy to life for all staff.

Currently, in the third phase, the program has adopted a model of leaders teaching leaders, with a renewed focus on identifying and targeting high-potential leaders for the executive leader program. Thus far, over 5,400 people have completed programs in the pathway, logging close to 110,000 hours of learning. Business results for the bank have continued to improve throughout the strategy’s implementation. The bank is increasing its rate of internal leader promotions as well.

Thanks to a high level of commitment to the strategy throughout the company, measures of employee engagement have risen significantly, and senior executives are actively building and demonstrating the culture change necessary to achieve the strategy’s goals.

Leadership development at all levels enables mission success

Few organizations face more pressing demands for leadership than the United States Department of Defense.7

With more than 1.4 million men and women on active duty, 1.1 million serving in National Guard and Reserve forces, and 718,000 civilian personnel, the Department of Defense requires leaders at all levels capable of understanding complex security threats around the world, making split-second life-or-death decisions, and achieving mission success—all in highly volatile, ambiguous, and constantly changing environments.

To accomplish this goal, the department invests heavily in developing well-rounded leaders at all levels. Leadership training is embedded into every stage of a military member’s career. Completion of this training is typically required for promotion and advancement, so leadership is effectively built into the department’s performance and rewards system.

Prospective officers—the high-potential leaders of the military—undergo four years of progressively more challenging leadership training, either at a service academy or in an ROTC (Reserve Officers Training Corps) program, before they receive their commissions or first assignments. Officer candidates are pushed into leadership roles early and often, allowing them to continually build their leadership skills over time.

Upon graduation, officers typically receive leadership training at every stage of their careers. Those officers that reach the highest levels of command typically attend at least three formal schools, with specific leadership training that ranges from several weeks to up to nine months. During this time, officers focus solely on improving their leadership skills and are free from day-to-day assignments that distract them from their training.

At every stage in their career, officers are pushed to expand their leadership skills through training and hands-on field experience. Critical skills such as teamwork, clear communication, contingency planning, adaptability, time management, and aligning priorities and strategy are continually reinforced. The result is a leadership training program that embodies best practices and builds leaders at every level of the organization.

Leaders at all levels

29

Where companies can start

BUILDING a global leadership pipeline takes time, investment, and executive focus. Potential starting points include:

• Engage top executives to develop leader- ship strategy and actively govern lead- ership development: Focus on gaining executive commitment to the process. Two trends are gaining traction. First, compa- nies are involving their executive teams, and increasingly boards of directors, in the leadership process by providing them visibility to and soliciting their input on the leadership pipeline, gaps, and programs. Second, business leaders are recognizing that their direct involvement in leadership pipelines and gaps is critical for anticipating challenges in developing and implementing future strategies.

• Align and refresh leadership strategies and development to evolving business goals: Different business goals—growth, innovation, quality, new markets, acquisi- tions—require different combinations of leadership experiences and capabilities. As businesses, technology, and competi- tive and regulatory environments rapidly change, companies are challenged to create new types of leaders with more varied and deeper leadership experiences.

• Focus on three aspects of developing leaders:

– Develop leaders at all levels. Companies are run by first-line supervisors and middle management. Invest in these levels as well as in top leadership roles.

– Develop global leaders locally. The days of expatriate leaders are over; high-per- forming companies build local leaders from the ground up.8

– Develop a succession mindset. It takes years to build great leaders; the pipeline should be growing continuously.

• Implement an effective leadership pro- gram: Each company needs a unique lead- ership program. Successful organizations often ensure that their programs feature current leaders teaching future leaders—an idea that has been around for some time, but just not practiced widely enough. Assign a top business and HR executive to take responsibility and be prepared to spend significant time and money. In developed markets this can be in the range of $2,000 and $10,000 per leader every year. Focus on how to develop leaders more quickly by simplifying competency models, using action learning, and assessing leaders with analytics.9

Global Human Capital Trends 2014: Engaging the 21st-century workforce

30

BOTTOM LINE As in previous years, leadership continues to top the priority list in the 2014 Human Capital Trends survey. The challenge is to develop leadership pipelines that are global, broad, and deep, reaching to every level of the organization. This involves a significant investment of time and resources and a commitment to leadership from the board and executive team. Perhaps the biggest challenge is for business and HR leaders to ask whether they are confident that they are doing enough and whether they are exploring new approaches to move the needle on their business’s leadership requirements.

Leaders at all levels

31

Authors

Adam Canwell, Human Capital leader, Deloitte Australia Deloitte Touche Tohmatsu [email protected]

Adam Canwell has a strong track record of working with leadership teams on identifying priorities and leading programs to effectively deliver change. He has deep experience in the design and delivery of leadership programs to increase their performance. Canwell has an MSc in organizational change from Oxford/ HEC. He also holds master’s and bachelor’s degrees from Oxford University, where he studied philosophy, politics, and economics.

Vishalli Dongrie, Talent, Performance, and Rewards leader, Deloitte India Deloitte Consulting India Pvt Ltd [email protected]

Vishalli Dongrie is considered one of India’s most impactful leaders in talent management, leadership, and organization design. In the talent, performance, and rewards space, she has led large international assignments in leadership capability building, top management assessment and development centers, career paths, and succession planning. Dongrie holds a doctorate in human resources and organizational behavior and has worked in the Middle East, Asia Pacific, the United States, and Europe in her tenure of 15 years with Deloitte.

Neil Neveras, global Leadership Services leader Deloitte Consulting LLP [email protected]

Neil Neveras helps clients solve their most complex leadership and talent challenges in areas including strategy, competencies, assessment, program design, succession planning, coaching, career paths, and success metrics. Clients are typically CXOs in Fortune 500 companies across industries. Prior to working at Deloitte, Neveras was director of executive programs at Wharton. His global work experience includes work in China, India, Malaysia, Singapore, Czech Republic, France, Denmark, Italy, Spain, Germany, the United Kingdom, and the United States.

Contributors Simon Holland, Kim Lamoureux

Heather Stockton, Human Capital leader, Deloitte Canada Deloitte Canada [email protected]

Heather Stockton is global Human Capital leader for the financial services industry. She is a member of the board in Deloitte Canada and chair of the talent and succession committee. Through her work in developing and executing strategic plans, Stockton has become an advisor to executives who are undertaking business transformation, undergoing merger integration, and changing their operating model. She has extensive experience in talent strategy and leadership development for leaders and boards.

Global Human Capital Trends 2014: Engaging the 21st-century workforce

32

Endnotes

1. Karen O’Leonard and Laci Loew, Leadership development factbook® 2012: Benchmarks and trends in US leadership development, Bersin & Associates, July 2012, www.bersin.com/ library or www.bersin.com/ldfactbook.

2. “High-impact” learning organizations (HILOs) are those in the top 10 percent of the Bersin by Deloitte benchmarking database, measured by business outcomes, learning effectiveness, learning alignment, and learning efficiency. See www.bersin.com/library for more details.

3. O’Leonard and Loew, Leadership development factbook® 2012.

4. Consulting done for a major oil company.

5. Laci Loew and Stacia Sherman Garr, High- impact leadership development, Bersin & Associates, October 2011, www.bersin. com/library or www.bersin.com/hild.

6. Katherine Jones and Karen O’Leonard, Leadership development in China: Building bench strength in the world’s largest marketplace, Bersin by Deloitte, April 2013, www.bersin.com/library.

7. Interviews with various Department of Defense personnel.

8. Katherine Jones, Karen O’Leonard, and Josh Bersin, Global leadership: Developing tomorrow’s leaders around the world, Bersin & Associates, September 2012, www.bersin.com/library.

9. O’Leonard and Loew, Leadership development factbook® 2012.

Leaders at all levels

33

Corporate learning redefined Prepare for a revolution

BACK in 1999, Cisco CEO John Chambers predicted that the Internet would trans- form education so completely it would “make email usage look like a rounding error.”1 While it took nearly 15 years, that day has finally arrived.

The explosive growth of online learning— from the pioneering Khan Academy and edX to Coursera and dozens of MOOCs (massive open online courses)—is democratizing educa- tion for millions by putting learners at the center of the education process.2 We estimate that more than 24 million people have tried online education, and most young employees today come to work ready and excited to build their job skills through online learning.

Yet, at a time when employees should be able to access training as easily as a YouTube video, most training and development orga- nizations have not kept pace with advances in technology or the evolution toward employee- centered learning.

As figure 1 indicates, more than two-thirds (71 percent) of executives believe their com- panies are “weak” when it comes to using advanced media. Slightly more than six in ten say they are also “weak” in providing mobile

and social learning (63 percent) and using MOOCs as development tools (67 percent).

The need to rationalize learning and development spending

Traditional employee training represents a $130 billion global market.3 While most orga- nizations spend millions of dollars on training today, most are not sure exactly where this massive investment is spent or what results, if any, it delivers.

One of the biggest problems is the uncoor- dinated structure of learning and development itself. Our research and conversations with clients show a surprising lack of discipline and structure within the training function at many companies. Only 49 percent of organizations have a senior leader running the training func- tion and fewer than 45 percent have a written business plan for learning.4

With little leadership or planning, it is not surprising that most companies see a lot of waste and redundancies. One chief learn- ing officer told us the company had 7,000 courses listed in its training catalog and nearly 60 percent were duplicative. Rationalizing

• Traditional employee training is being revolutionized by flipped classrooms, learning- centric models, and an explosion of content delivered over a variety of new online and mobile platforms.

• More than two-thirds of companies in our global survey see this trend as “urgent” or “important,” yet only 6 percent believe they have mastered the content and technology capabilities needed to make online learning an accessible tool and a compelling experience for their employees.

• By empowering employees to become equal partners in the learning process, HR organizations can foster a culture of development and growth—driving performance, engagement, and career development.

Corporate learning redefined

35

and consolidating these programs is clearly a crucial first step in creating a next-generation learning environment.

Continuous learning and the move from “push” training to “pull” learning

Historically, most training programs have followed a “push” model. An employee was invited to a training session in a classroom at a specified time, listened to a series of lec- tures, and was sent back to work. Content was pushed down to employees based on the training department’s schedule and success was measured by how many employees attended the class.

Today’s employees typically have different expectations of how to acquire and develop skills. Younger Millennial and Generation X workers expect training and support to be as readily and rapidly accessible as a Google search. In this “pull” model, learning and development is a continuous process, with training pulled seamlessly through comput- ers or mobile devices anywhere, anytime. The training class schedule has been replaced by the mouse click and the screen tap.

As careers become longer and more diverse, the half-life of skills also becomes shorter and shorter, placing a premium on continuous training and development. Millennials can look forward to multi-chapter careers lasting 50 years, with career paths that cross many businesses and functions.

To address the new dynamics of the 21st- century employee, companies are replacing tra- ditional training classrooms with a tapestry of easy-to-use learning approaches and resources. These new tools allow employees to continu- ously upgrade skills by incorporating learning into everyday work experience and progressing at their own rate.

Companies in Ireland, Spain, and Luxembourg report that they are successfully making the transition from traditional train- ing to individual learning. While companies in China and Brazil understand this need, they appear less prepared to act (figure 2).

A new employee-employer contract offering tours of duty

Underlying this shift in the way people learn and acquire skills is what Reid Hoffman, founder of LinkedIn, calls the new “employee- employer contract.”5 Companies no longer

Graphic: Deloitte University Press | DUPress.com

% of total number of responses

Number of respondents

838

826

826809 809

771

732

6%

8%

8%

14%

12%

23%

25%

30%

48%

56%

71%

67%

63%

38%

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Developing a culture of apprenticeship and on-the-job training

Providing mobile and social learning

Using MOOCs (massive open online courses)

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Figure 1. Slow adoption of leading-edge learning tools

HR executives’ assessment of learning and development capability levels ExcellentAdequate Weak

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Graphic: Deloitte University Press | DUPress.com

Figure 2. Urgency vs. readiness: Who is leading, who is lagging?

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The Human Capital Capability Gap Index The Deloitte Human Capital Capability Gap Index is a research-based index that shows HR’s relative capability gap in addressing a given talent or HR-related problem. It is computed by taking an organization’s self-rated “readiness” and subtracting its “urgency,” normalized to a 0–100 scale. For example, if an organization feels that an issue is 100 percent urgent and it also rates itself 100 percent capable and ready to address the issue, the capability gap would be zero. These gaps, which are almost always negative, can be compared against each other.

The capability gap grid By plotting the gaps on a grid (with readiness on the vertical and urgency on the horizontal), we can see how capability gaps vary among different countries and industries.

• Capability gaps at the lower right part of the grid are those of high urgency and low readiness (areas that warrant major increases in investment).

• Capability gaps at the upper right part of the grid are highly urgent, but companies feel more able to perform in these areas (they warrant investment but are lower priority than those at the bottom right).

• Capability gaps on the left side of the grid are areas of lesser importance, and those lower in the grid are areas of less readiness.

provide employees a lifetime career. Instead, they offer “tours of duty”—assignments for a period of time that gives employees new skills, education, and a set of experiences that pro- vide benefits over a lifetime.

Under this new contract, skills are acquired and developed rapidly. Employees become

not only more capable, but more loyal to the organization. According to our research, employee development is one of the biggest drivers of retention and engagement.6 In other words, tours of duty create employees who are not only more capable, but also more engaged and motivated.

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LESSONS FROM THE FRONT LINES

Transforming corporate learning drives business change

In fall 2007, employee engagement at Canadian-headquartered TELUS, a national telecommunications company, sat at 53 percent. Learning took place solely at formal training events and open leadership was a foreign concept to the company’s 40,000+ employees. Collaborative technologies were nowhere to be found, and customers scored the company low when asked if they would recommend TELUS to others.

Fast forward to fall 2013: 83 percent of employees are engaged and 73 percent of customers are likely to recommend TELUS.

How did this transformation happen? TELUS took many actions to drive change.

To foster a culture of learning, in 2009, the organization launched its Learning 2.0 model, which redefined learning as equal parts formal, informal, and social. Collaborative technologies—including video- and photo-sharing, blogs, micro-blogging, wikis, virtual worlds, gamification, and instant messaging—encouraged employee alignment and the adoption of the new learning model.

To properly benchmark and assess Learning 2.0, TELUS developed its own internal “return on performance” metric system. Between 2009 and 2013, team member return on performance increased from 62 percent to 75 percent, proving that effective learning can drive performance.

In 2010, the organization launched the TELUS Leadership Philosophy (TLP)—an enterprise-wide open and collaborative leadership framework that promotes consistency in performing, managing, and leading. TLP represented an important shift in leadership strategy. Today, all team members are encouraged to take the lead.

TLP is now embedded into recruitment, onboarding, learning, succession planning, and performance development. As a result, TELUS saw its leadership engagement rise to 82 percent by 2013.

Transforming learning and development to align with business strategy

A global diversified health and well-being company with thousands of employees in over 80 countries embarked on a series of strategic restructuring programs—including operations, corporate culture, and business processes—to meet a rapidly changing business environment. The company knew that this restructuring could likely succeed only if its learning function were reshaped as well, realigning it with the company’s new strategic business objectives.

The company’s goal was both ambitious and necessary: to transform a learning program scattered across different business units into an integrated, global learning function with measureable results and cost transparency.

The company’s “as-is” assessment identified significant opportunities to increase the quality of learning and development while generating savings of up to 15 percent on total learning spending. Thousands of older, often- unused offerings were eliminated; others were reassessed to determine their alignment with business strategy and ability to advance critical skills.

In the course of these changes, learning became more employee-centric and more mobile. Content is no longer prescribed for each employee. Instead, employees and their managers construct individualized programs based on career plans and performance goals.

By transforming corporate learning, the organization laid the foundation for a global corporate university. Today it offers specialized academies and shared services that are fully focused on building the critical capabilities the company needs around the world.

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Reinvent learning and development by putting employees in charge

As employees become active drivers of the learning experience, HR’s role in the process becomes both more interesting and more critical.

Today’s effective learning and develop- ment organizations should strive to become facilitators of learning and curators of con- tent, not just developers and deliverers of training programs. They bring to this task a deep understanding of the capabilities and skills companies need to successfully execute their business plans and achieve their performance goals.

Employees are asking—and being asked— to take responsibility for developing their skills continuously over the course of their careers. In a “pull” learning environment, workers take it upon themselves to find information, educate themselves, and share their own expertise. In fact, our research shows that creating this type of learning culture, where employees willingly share skills and knowl- edge, is now one of the most important factors in business success.7

Companies are experimenting with strate- gies that enable employees to share what they learn on the job—and they are getting positive results. BT, for instance, encouraged video sharing by field service agents over the last five years and found that customer service quality improved threefold.8

Where companies can start

HOW can organizations reengineer their learning strategy to address an explo- sion of content and a flipped model in which employees are more empowered to manage their careers? Starting points include:

• Rationalize training: Know where the training budget is being spent and use this knowledge to rationalize training. Categorize training spending, identify areas of overlap, bring in a senior leader to accel- erate the transition, and set up standard services for technology, content manage- ment, authoring tools, and other parts of the learning architecture.

• Redesign training roles: Embrace leader- led training and subject-matter authored content and bring social and collaborative learning into every program offered.

• Create content curators: Establish HR as curators of content and facilitators of experiences, not merely content archivists. Experiment with the fast-growing areas of employee-authored content, mobile learning, gaming, and other advanced learning techniques.

• Standardize, simplify, and integrate learn- ing technology: Employees want a single place to access content, share experiences, and find formal programs. Simple, inte- grated, mobile-enabled learning platforms drive adoption.

• Assess your learning culture: Do your managers help develop people or just drive the numbers? Does your organization stop and reflect? Are your leaders open to bad news? Is employee development truly important and valued in your organization?

Corporate learning redefined

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BOTTOM LINE Corporate training today requires content, context, and deep expertise. Companies should rationalize their HR spending, develop a global learning architecture, and shift the focus from “delivering training” to “developing capability.”

Many leading companies focus on putting the learner in charge (flipping corporate training in the same way schools are experimenting with flipped classrooms), building mastery, improving time to autonomy, and unlocking the power of expertise to ensure it is shared throughout the firm. Effective corporate learning encourages a culture of growth, empowering employees and driving performance, engagement, and career development.

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Authors

Josh Haims Deloitte Consulting LLP [email protected]

Josh Haims brings more than 15 years of consulting experience to the clients that he supports. He leads Deloitte’s Learning Solutions practice and is the co- lead of the global Learning Solutions team. Haims specializes in delivering talent, performance, and rewards projects, including enterprise learning strategy and training program design, strategic change management, and talent strategies in a variety of industries.

Contributors John Hagel, Jen Stempel

Bill Pelster, leader, Integrated Talent Management Deloitte Consulting LLP [email protected]

Bill Pelster is a Deloitte Consulting LLP principal with over 20 years of industry and consulting experience. In his current role, he is responsible for leading the Integrated Talent Management practice, which focuses on issues and trends in the workplace. In his previous role as Deloitte’s chief learning officer, Pelster was responsible for the total development experience of Deloitte professionals, including learning, leadership, high potentials, and career/life fit. Additionally, he was one of the key architects of Deloitte University.

Josh Bersin, principal and founder, Bersin by Deloitte Bersin by Deloitte, Deloitte Consulting LLP [email protected]

Josh Bersin founded Bersin & Associates in 2001 to provide research and advisory services focused on corporate learning. He is a frequent speaker at industry events and is a popular blogger. He has spent 25 years in product development, product management, marketing, and sales of e-learning and other enterprise technologies. His education includes a BS in engineering from Cornell, an MS in engineering from Stanford, and an MBA from the Haas School of Business at the University of California, Berkeley.

Bernard van der Vyver, global Learning Solutions leader Deloitte Consulting BV [email protected]

Bernard van der Vyver is a leading advisor on human capital matters, focusing on learning and development. By merging his background in technology and its effective use with the development of people, he brings a unique strength to the HR domain. As global Learning Solutions leader, he aspires to grow and strengthen the global learning community by leveraging knowledge and expertise to deliver learning solutions that bring unique value to clients.

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Endnotes

1. Anna Muoio, “Cisco’s quick study,” Fast Company, September 30, 2000, http://www. fastcompany.com/41492/ciscos-quick- study, accessed on January 27, 2014.

2. Josh Bersin, “The MOOC marketplace takes off,” Forbes, November 30, 2013, http://www.forbes.com/sites/joshber- sin/2013/11/30/the-mooc-marketplace- takes-off/, accessed on January 27, 2014.

3. Karen O’Leonard, The corporate learning factbook® 2014: Benchmarks, trends, and analysis of the U.S. training market, Bersin by Deloitte, January 2014, www.bersin.com/ library or www.bersin.com/factbook.

4. David Mallon, Janet Clarey, and Mark Vickers, The high-impact learning organization series, Bersin & Associates, September 2012, www. bersin.com/library or www.bersin.com/hilo.

5. Reid Hoffman, Ben Casnocha, and Chris Yeh, “Tours of duty: The new employer- employee compact,” Harvard Business Review, June 2013, http://hbr.org/2013/06/ tours-of-duty-the-new-employer-employee- compact, accessed on January 27, 2014.

6. Josh Bersin, High-impact talent management: Trends, best practices and industry solutions, Bersin & Associates, May 2007, www.bersin. com/library or www.bersin.com/hitm.

7. David Mallon, High-impact learning culture: The 40 best practices for creat- ing an empowered enterprise, Bersin & Associates, June 2010, www.bersin. com/ library or www.bersin.com/hilc.

8. David Mallon, “Dare2Share: BT’s experience with learning 2.0,” Bersin & Associates, webi- nar, April 15, 2009, www.bersin.com/library.

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Performance management is broken Replace “rank and yank” with coaching and development

TRADITIONAL performance management —the annual process of rating employees’ performance and ranking them against their colleagues—is widely considered to be broken.

These “forced curve” evaluations became popular under the influence of the GE model during Jack Welch’s tenure, but they were origi- nally conceived around the turn of that cen- tury—the turn of the 19th to the 20th century, that is. At that time, employees were viewed strictly as “workers” whose performance could be accurately measured by output: the num- ber of railroad ties installed, hours worked, or other numeric measures.

Today, more than 70 percent of all employ- ees work in service or knowledge-related jobs. Their performance is driven by their skills, attitude, customer empathy—and by their abil- ity to innovate and drive change by working through teams. These skills must be built over time, and successful performance management must be focused on constantly developing these capabilities rather than ranking them at a moment in time.

In addition, today’s business climate and business priorities seldom follow the annual evaluation cycle. Goals shift, strategies evolve, and employees often switch between multiple projects under various team leaders. Given this dynamic, it is hardly surprising that our research shows that organizations where employees review their personal goals quar- terly—or even more often—were nearly four times more likely to score at the top of Bersin by Deloitte’s Total Performance Index.1

Many of today’s employers understand that it is time to reassess their performance management systems. Fully 70 percent of our survey respondents stated that they are either “currently evaluating” or have recently “reviewed and updated” their performance management systems (figure 1).

In a world where employee retention and workforce capability are significant indicators of business success, the performance manage- ment process should focus on continuous coaching and development, rather than com- petitive evaluation. Managers who provide reg- ular feedback and opportunities to improve are

• Today’s widespread ranking- and ratings-based performance management is damaging employee engagement, alienating high performers, and costing managers valuable time.

• Only 8 percent of companies report that their performance management process drives high levels of value, while 58 percent said it is not an effective use of time.

• Leading organizations are scrapping the annual evaluation cycle and replacing it with ongoing feedback and coaching designed to promote continuous employee development.

Performance management is broken

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far more likely to field high-performing teams than those who retain once-a-year rankings.

Why grading on the curve consistently fails

Perhaps the fundamental aspect of tradi- tional performance management is grading by the curve or forced ranking of employees. This process, widely known as “rank and yank,” has been found in many companies to demoralize

employees, create animosity, and spur good people to look elsewhere for work.

At Microsoft, which recently abandoned the practice, the ranking process resulted in “capricious rankings, power struggles among managers, and unhealthy competition among colleagues.”2

The distribution of employee performance more often follows the “long tail” rather than the traditional “bell curve,” especially at talent-intensive companies that thrive on expertise and innovation. In other words, some

Graphic: Deloitte University Press | DUPress.com

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Graphic: Deloitte University Press | DUPress.com

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Figure 2. HR executives’ assessment of performance management

HR executives’ assessment of performance management capability levels ExcellentAdequate Weak

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LESSONS FROM THE FRONT LINES

A continual and collaborative approach to performance development

Prior to radically reforming its performance management system, managers at multinational software company Adobe spent over 80,000 hours per year on traditional performance evaluations—a process one manager described as “soul-crushing.”8

Adobe, a company of 11,000 employees, 54 percent of whom work in North America, tried for five years to modify the traditional performance management system before abandoning it as inconsistent with Adobe’s strong culture of teamwork and collaboration.

Today, Adobe has a far simpler, but far more effective, system.

Either an employee or a manager may request a “check-in” every three months. Before the actual meeting occurs, a group of employees provides feedback on the employee’s performance.

The results form the basis of a conversation about performance improvement, rather than a zero-sum dispute about compensation or ranking. The goal is to make coaching and developing a continuous, collaborative process between managers and employees—a far more motivating outcome.

Importantly, Adobe’s new system focuses on both ends of the performance curve—keeping high performers happy and offering practical advice for lower performers looking to improve. Group performance is also evaluated, leading to a more rational determination of group compensation.

The results have been profound: Since rolling out the new approach worldwide, Adobe experienced a 30 percent reduction in voluntary turnover in a highly competitive talent environment.

employees are hyperachievers, while many oth- ers work at the middle level of performance. In industries such as software, a top performer can often outperform a mid-level performer by as much as tenfold.

In these companies, the performance management system should treat high per- formers very well, while encouraging mid-level employees to improve through coaching and development. A forced bell curve diminishes the value of the top performers and pushes many mid-level performers into the bottom. In the process, it inadequately rewards top performers and fails to motivate middle-of- the-road employees.

Many corporate executives acknowledge that their current performance systems are not working (figure 2). More than half of executives surveyed believe their current performance process does not drive employee engagement and high performance (58 per- cent) and is not an effective use of anyone’s time (58 percent). Just under half say their per- formance processes are “weak” in improving

development (48 percent) and driving business value (48 percent).

A new role for managers

Shifting away from annual performance evaluations toward a process of continuous coaching and improvement requires a new role for managers.

The days when managers could lead from a position of command and control are over. In today’s high-performing teams, employees must take ownership of their performance and act on their own to improve their capa- bilities. Managers become coaches, rather than evaluators.

Decoupling compensation from evaluations

A critical feature of the new “coaching and development” model of performance man- agement is separating feedback provided to employees from compensation decisions.

Performance management is broken

47

Graphic: Deloitte University Press | DUPress.com

Figure 3. Readiness vs. urgency: Who is leading, who is lagging?

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Capability gap grid

Performance management

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The Human Capital Capability Gap Index The Deloitte Human Capital Capability Gap Index is a research-based index that shows HR’s relative capability gap in addressing a given talent or HR-related problem. It is computed by taking an organization’s self-rated “readiness” and subtracting its “urgency,” normalized to a 0–100 scale. For example, if an organization feels that an issue is 100 percent urgent and it also rates itself 100 percent capable and ready to address the issue, the capability gap would be zero. These gaps, which are almost always negative, can be compared against each other.

The capability gap grid By plotting the gaps on a grid (with readiness on the vertical and urgency on the horizontal), we can see how capability gaps vary among different countries and industries.

• Capability gaps at the lower right part of the grid are those of high urgency and low readiness (areas that warrant major increases in investment).

• Capability gaps at the upper right part of the grid are highly urgent, but companies feel more able to perform in these areas (they warrant investment but are lower priority than those at the bottom right).

• Capability gaps on the left side of the grid are areas of lesser importance, and those lower in the grid are areas of less readiness.

Neuroscience research shows that con- versations about compensation provoke an almost primordial “fight or flight” reaction among employees, which obviously inhibits the coaching process.3 Rather than directly linking ratings and salary increases or bonuses, compensation decisions should be based on

the critical nature of an employee’s skills, the cost of replacing them, their value to custom- ers, and the external labor market.

While employees need to be held account- able for the results they produce, most people perform best when they are given tools to succeed and coaching to improve performance.

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Companies like Juniper Networks,4 New York Life,5 Motorola Solutions,6 Kelly Services,7 and others have all reengineered their pro- cess, eliminated ratings, and found sub- stantial improvements in engagement and

performance as a result. Companies in other countries like Brazil, Germany, the United Kingdom, and Japan are eager to follow their lead, and recognize that they are far from ready (figure 3).

Where companies can start

A SUCCESSFUL shift to leading-edge performance management—replacing annual ranking and yanking with continuous feedback, coaching, and development—begins with a frank determination of whether rigid performance evaluation systems are advancing a company’s business priorities. If not, as many organizations increasingly recognize, it is time to take action. Potential starting points include:

• Get senior leaders involved—and keep them involved: Hold a senior executive- level conversation about the strategy and philosophy for employee performance in the company. What does the organization hope to achieve as a result of performance management activities? What system will best reinforce the organization’s talent management strategy?

• Use performance management to build skills: Switch from rigid performance reviews to flexible performance conversa- tions aimed at providing employees at all levels with practical steps they can take and the skills necessary to reach the next level of achievement within the organization.

• Teach managers to give better feedback: Boost the skills of managers to enable them to have productive yet less formal conver- sations about performance that will drive

improvement rather than drive employees to look outside the organization.

• Simplify the process: Separate the perfor- mance coaching and evaluation process from determinations of compensation. Reduce the number of forms and make them very simple and easy to use. Ignore the advanced features in performance management software.

• De-link performance scores and compen- sation: Consider revising compensation structures to include broader consider- ations, such as how the outside talent market would compensate an employee or how difficult the employee would be to replace. Analyze the extent to which the organization can take a broader approach to total rewards by offering growth opportuni- ties to employees who have outperformed their peers.

• Coach everyone: Search for opportunities for employees in the “broad middle” of the performance distribution to see themselves as valued contributors to organizational success, rather than merely looking up to the perceived superstars. Hold everyone accountable, but give everyone coaching, development planning, and training to improve.

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BOTTOM LINE Today’s workers expect to be held accountable for results—but they also expect coaching, development, and regular feedback. Look carefully at the performance management process to see if it truly drives performance today or is merely an artifact of the past. In many cases, a shift from “evaluation” to “development and performance improvement” will drive appreciable results.

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Stacia Garr, vice president, Talent Management research Bersin by Deloitte, Deloitte Consulting LLP [email protected]

Stacia Garr leads Bersin by Deloitte’s talent management research practice. Her areas of expertise include talent strategy, workforce planning, performance management, and leadership development. Previously, she worked for the Corporate Executive Board and also served as an adjunct history professor at Northern Virginia Community College. Garr holds a master’s degree from the London School of Economics and bachelor’s degrees from Randolph-Macon Woman’s College.

Andy Liakopoulos, Talent Strategies leader, Deloitte US Deloitte Consulting LLP [email protected]

Andy Liakopoulos has more than 20 years of experience in areas including talent management (talent strategy, acquisition, performance management, succession management, leadership development, and employee engagement and retention), organization strategy, change management, human resource transformation, and learning development. His consulting engagements include a variety of projects such as workforce transformation, M&A, process outsourcing/ offshoring, organization restructuring, and corporate culture transformation.

Contributor Terry Patterson

Authors

Lisa Barry, global Talent, Performance, and Rewards leader Deloitte Touche Tohmatsu [email protected]

Lisa Barry is the Talent leader for Global Consulting, and is also the global leader for Talent, Performance, and Rewards. She is considered to be one of the most impactful leaders in the human capital field, championing the need for businesses to reinvent relevance and create a powerful people-centered strategy to propel a company’s growth trajectory. A true citizen of the globe, Barry has lived and worked in the United Kingdom, Europe, the United States, South East Asia, New Zealand, and Russia.

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Endnotes

1. This information is based on current research by Bersin by Deloitte on the topic of goal-setting and revising, the report for which is due to be published in 2014. The Total Performance Index is determined by an organization’s score on 12 variables that cover employee engagement, employee productiv- ity, customer satisfaction, cost structure as compared with competitors, market leadership position and profitability, hiring the best people, developing great leaders, developing employees, retaining top perform- ers, planning for future talent needs, and having the right people in the right jobs.

2. Shira Ovide and Rachel Feintzeig, “Microsoft abandons ‘stack ranking’ of employees: Software giant will end controversial practice of forcing managers to designate stars, under- performers,” Wall Street Journal, November 12, 2013, http://online.wsj.com/news/articles/ SB10001424052702303460004579193951987 616572?mod=WSJ_hps_MIDDLENexttoW- hatsNewsFifth, accessed on January 27, 2014.

3. David Rock, “Managing with the brain in mind,” Oxford Leadership Journal 1, no. 1 (December 2009), http://isites.harvard.edu/fs/ docs/icb.topic1331850.files/Social%20Dynam- ics/Managing%20with%20the%20Brain%20 in%20Mind.pdf, accessed on January 27, 2014.

4. Stacia Sherman Garr, How Juniper moved beyond performance scores to align per- formance management to organizational values: Part 4 of the Abolishing Performance Scores webinar series, Bersin by Deloitte, December 5, 2013, www.bersin.com/library.

5. Stacia Sherman Garr, How New York Life focuses employees on performance, not just compensation: Part 3 of the Abolishing Perfor- mance Scores webinar series, Bersin by Deloitte, November 12, 2013, www.bersin.com/library.

6. John Pletz, “The end of ‘valued performers’ at Motorola,” Crain’s Chicago Business, No- vember 2, 2013, http://www.chicagobusiness. com/article/20131102/ISSUE01/311029980 ?template=mobile&X-IgnoreUserAgent=1, accessed on January 27, 2014.

7. Stacia Sherman Garr, Abandoning performance scores: Kelly Services shares soul-searching that guided its performance management evolution, Bersin & Associates, March 2012, www.bersin.com/library.

8. Stacia Sherman Garr, Reengineering for agility: How Adobe eliminated performance appraisals, Bersin by Deloitte, Septem- ber 2013, www.bersin.com/library.

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The quest for workforce capability Create a global skills supply chain

ORGANIZATIONS around the world are experiencing disruptive change in the demand for critical skills. Not only are specialized skills increasingly scarce, but they are also unevenly distributed across the global economy.

As a result, companies are often looking in the wrong places when it comes to building workforce capabilities—and coming up short. In fact, according to our global survey, execu- tives rank building workforce capability as one of the top three challenges facing their organi- zation over the next 18 months.

This trend helps explain the “talent para- dox” that has emerged in recent years: High unemployment rates point to a surplus of labor, yet companies report great difficulty finding and keeping the skills most important for their growth.

The global competition for skills is even tougher in fast-growing new business areas. The supply of skills in software engineering, mobile computing, big data analytics, life sciences, advanced manufacturing, and new energy technologies is struggling to keep up

with demand. Engineers, life scientists, statisti- cians, geophysicists, and others with technical skills are in short supply.

At the same time, these skills are in demand over a broader range of industries. Auto manu- facturers now compete with Silicon Valley for software talent; retailers battle manufacturers for IT skills; and large pharmaceutical compa- nies recruit against fast-growing startups for life scientists.

Moreover, the capabilities gap is actu- ally far broader than a lack of engineers and scientists. In addition to the need for technical skills, companies are also facing shortages in first-line supervisors throughout sales, cus- tomer service, manufacturing, finance, and other business functions. Retailers, hospitality companies, software firms, and all manner of service providers need people who understand how to sell, communicate, serve customers, and solve problems.

The expected shortage of 38 to 40 million college-educated workers by 2020 further fuels this challenge.1

• Corporations now compete globally for increasingly scarce technical and professional skills.

• While 75 percent of survey respondents rate workforce capability as an “urgent” or “important” challenge, only 15 percent believe they are ready to address it.

• Companies that succeed in building a global “supply chain” for skills will be positioned for success in innovation and performance.

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Deep capabilities drive performance—and take years to build

One of the ways to assess a company’s competitiveness is to understand its talent and workforce capabilities.2 Companies that

can attract, retain, and develop deep, special- ized technical skills are generally well posi- tioned to outperform their peers—in nearly every industry.

Apple and Samsung succeed by attracting leading skills in engineering, innovation, and marketing. Amazon drives performance by

Graphic: Deloitte University Press | DUPress.com

Figure 1. Urgency vs. readiness: Who is leading, who is lagging?

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30 40 50 60 70

Spain

Kenya

Argentina

Mexico

Chile South Africa

Ireland

Brazil

United Kingdom

Netherlands

China

United States

Poland

Switzerland

India

Canada

Germany

Japan

Luxembourg

Australia

Belgium

Portugal

All others

Uruguay

9

0

-5

-5

-5

-6

-7

-8

-9

-9

-11

-12

-13

-14

-16

-16

-16

-18

-21

-22

-23

-24

-30

-47 Japan

Brazil

United Kingdom

South Africa

United States

Netherlands

Canada

Australia

Belgium

Chile

Poland

All others

Portugal

Kenya

Ireland

India

Argentina

Mexico

Switzerland

Luxembourg

China

Uruguay

Germany

Spain

Capability gap grid

Workforce capability

Capability Gap Index (readiness – urgency)

So m

ew ha

t re

ad y

(5 0)

10 0

= R

ea dy

g f

0 =

N ot

r ea

dy

100 = Urgent gImportant (66.6)Somewhat important (33.3) f 0 = Not important

The Human Capital Capability Gap Index The Deloitte Human Capital Capability Gap Index is a research-based index that shows HR’s relative capability gap in addressing a given talent or HR-related problem. It is computed by taking an organization’s self-rated “readiness” and subtracting its “urgency,” normalized to a 0–100 scale. For example, if an organization feels that an issue is 100 percent urgent and it also rates itself 100 percent capable and ready to address the issue, the capability gap would be zero. These gaps, which are almost always negative, can be compared against each other.

The capability gap grid By plotting the gaps on a grid (with readiness on the vertical and urgency on the horizontal), we can see how capability gaps vary among different countries and industries.

• Capability gaps at the lower right part of the grid are those of high urgency and low readiness (areas that warrant major increases in investment).

• Capability gaps at the upper right part of the grid are highly urgent, but companies feel more able to perform in these areas (they warrant investment but are lower priority than those at the bottom right).

• Capability gaps on the left side of the grid are areas of lesser importance, and those lower in the grid are areas of less readiness.

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constantly building its capabilities to lever- age technology, the user experience, and data. Google has become a market leader by turning itself into a destination employer for talented people with scarce innovation, technology, and business model skills.

As the environment in which businesses operate becomes more complex, skills evolve and become obsolete more rapidly.

Our global Human Capital Trends 2014 survey suggests that respondents clearly under- stand this challenge, with 75 percent rating workforce capabilities as “urgent” or “impor- tant.” However, only 15 percent believe their companies are “ready” to address the chal- lenge. This gap is particularly wide in many major economies, including Japan, Brazil, the United Kingdom, South Africa, and the United States (figure 1).

Why the capability gap? First, many organizations are looking in

the wrong place, believing they can fill their capability gaps by “hiring the right person” in their current markets. Yet this traditional approach is increasingly a zero-sum game with as many losers as winners. Even if companies can identify the right people, they must then attract them, compete with others to hire them, and train them further once they are on the job. The reported backlog of skills gaps appears to suggest the old way is no longer working.

Second, it takes many years to develop deep skills within the workforce. One major oil company explained that, because of its long- standing investment in proprietary processes and technologies, a new engineer requires five to seven years on the job to become fully autonomous and productive.3

Third, many companies have not built development programs that create capabili- ties in a continuous way. Traditional learning

and development programs, which typically sprinkle training across the organization, are simply not dynamic enough. Robust capabili- ties are not built through episodic training, but through continuous education, experi- ence, exposure, and the right environment.4 Companies have the opportunity to build more integrated development strategies that include formal and informal training, expertise shar- ing, apprenticeship, management support of learning, and ongoing performance support and coaching.

Succession planning: Beyond the C-suite

Given the competitive challenges of finding talent in the marketplace, coupled with the long lead times needed to build deep skills, succession management should expand well beyond the C-suite.

Traditionally, succession planning has concentrated on identifying high-potential leaders and developing them for senior roles in the organization. Rather than just focusing on these managerial positions, this process should be expanded to include other key roles as well—including key technical specialists, people in critical customer-facing roles, and expert operations and project managers. Oil companies, utilities, and manufacturers, for example, now regularly develop succession plans across a range of technical professions.

Creating a global skills supply chain

Given the scarcity of skills and the high level of demand, the annual training and devel- opment planning cycle is being replaced with a “supply chain” approach to developing work- force capabilities. This involves a systematic,

Traditional learning and development programs, which typically sprinkle training across the organization, are simply not dynamic enough.

The quest for workforce capability

57

continuous process rather than a “once and done” annual event.

Under a supply chain approach, compa- nies examine their capabilities at all levels and project gaps into the coming years. Once these gaps are visible, companies can focus on which

skills they will need and where they might need them.

As figure 2 shows, executives in our global survey generally believe their companies are doing an adequate job of identifying skills gaps and understanding where skilled workers are located. However, they are struggling to access

Number of respondents

929

926

927

765

891

Understanding current skills and capability gaps

Understanding where skilled workers are located

Understanding future skill requirements

Moving people to work (global mobility)

Redesigning work to access skills in different places

5%

9%

9%

14%

14%

33%

43%

49%

56%

60%

62%

48%

42%

29%

27%

Figure 2. Companies struggle to close skill gaps

Graphic: Deloitte University Press | DUPress.com

% of total number of responses

HR executives’ assessment of performance management capability levels ExcellentAdequate Weak

LESSONS FROM THE FRONT LINES

German apprenticeship model champions early workforce training

The German apprenticeship model has become a standard for workforce training programs. Seen as a driver of Germany’s impressive export growth, the apprenticeship model relies on a close working relationship between secondary schools and local businesses and factories. Now, some elements of that model are expanding abroad, including to the United States,5 as German companies such as Siemens and Volkswagen seek to ensure a strong school-to-workplace link in US regions where they have built factories.

Oil and gas industry takes charge of workforce development

The rapid evolution of the oil and gas industry creates a constant pressure to develop new workforce capabilities and skills. As mentioned above, one industry executive told us that training an already-experienced petroleum engineer to its company’s specific standards takes five to seven years—nearly the equivalent of earning a second doctorate.

In order to address a chronic shortage of skills, the oil and gas industry has pioneered efforts to extend workforce training back into the classroom. Starting in secondary school—and even at the elementary school level— companies are dedicating resources to spur broader interest in math and science.

The idea is to build a broader potential talent pool of people with the scientific background and technical skills the industry requires for future growth.6 Some companies are targeting these programs at local markets where oil and gas is extracted in order to develop talent locally, rather than relying on expatriates to fill capability needs.

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those skills, particularly when it comes to mov- ing talent to the work and redesigning work to access skills in new places.

To overcome this challenge, organiza- tions can search internally and externally for capabilities by exploring new approaches for

accessing talent, building continuous learning programs, and turning leaders into “capability development champions” with a responsibility for producing deeper levels of talent on their own teams.

Where companies can start

BUSINESSES react in a variety of ways when building their supply chain for talent. Here are a few starting points:

• Understand skills gaps today and into the future: Begin by identifying key talent segments, then project needs and expected supply into the future. Factor in company growth, retirement, and attrition.

• Bring the work to the skills: Conduct a broader global scan of technical and specialist skills around the world and in your own country. Investigate new skill pools, such as part-time or retired work- ers. Explore relationships with colleges and schools to build a deeper pipeline and help educational institutions prepare workers for the business’s evolving requirements.

• Extend the global supply chain: Study the extended supply chain: Identify where key skills are located, where they are going, and

where and how to source or locate work to tap into talent hubs. Develop new talent centers in emerging markets. Partner with local colleges, institutes, or global uni- versities to build a pipeline of candidates. Consider “acqui-hire” strategies that enable companies to acquire talent by purchasing specialized firms.

• Extend the time horizon: Recognize how long it will take to fully develop key skill sets—the “time to proficiency”—and model the education, experience, and exposure necessary to build these capabilities.

• Foster continuous skill development: Build an environment and a culture of continuous learning. Encourage everyone in the organization to become a talent manager and their own “chief skills officer.” Measure leaders and employees by their ability to produce rather than merely to “consume” skills and talent.7

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BOTTOM LINE Given the complexities and continuous disruptions in the global economy, it is no surprise that building global workforce capability emerged as one of the top three challenges in our global survey. The issue is skills: finding them, accessing them, developing them, and bringing the work to them.

Companies that develop a deep understanding of their capability gaps can then build a global skills supply chain to address critical needs. This supply chain can be filled by tapping into new skills pools in new locations, creating innovative new ways of working that provide access to a broader range of talent, and developing skills throughout the workforce—from the youngest recruits to the most experienced employees.

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Contributors Udo Bohdal-Spiegelhoff, Bill Pelster

Authors

Jen Stempel Deloitte Consulting LLP [email protected]

Jen Stempel is a leader in the US Human Capital Learning Solutions practice. Her learning experience includes strategy development, governance, process improvement, vendor optimization, and curriculum rationalization, as well as the design and development of learning programs. Stempel leads large-scale assessment and transformation projects to rationalize and optimize the learning function. Her focus is on the transformation of learning operations to support and advance business goals.

Bernard van der Vyver, global Learning Solutions leader Deloitte Consulting BV [email protected]

Bernard van der Vyver is a leading advisor on human capital matters, focusing on learning and development. By merging his background in technology and its effective use with the development of people, he brings a unique strength to the HR domain. As global Learning Solutions leader, he aspires to grow and strengthen the global learning community by leveraging knowledge and expertise to deliver learning solutions that bring unique value to clients.

Josh Bersin, principal and founder, Bersin by Deloitte Bersin by Deloitte, Deloitte Consulting LLP [email protected]

Josh Bersin founded Bersin & Associates in 2001 to provide research and advisory services focused on corporate learning. He is a frequent speaker at industry events and is a popular blogger. He has spent 25 years in product development, product management, marketing, and sales of e-learning and other enterprise technologies. His education includes a BS in engineering from Cornell, an MS in engineering from Stanford, and an MBA from the Haas School of Business at the University of California, Berkeley.

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Endnotes

1. Richard Dobbs, Anu Madgavkar, Dominic Barton, Eric Labaye, James Manyija, Charles Roxburgh, Susan Lund, and Sid- darth Madhav, The world at work: Jobs, pay and skills for 3.5 billion people, June 2012, http://www.mckinsey.com/insights/ employment_and_growth/the_world_at_work.

2. David Mallon, Janet Clarey and Mark Vickers, The high-impact learning or- ganization maturity model®, Bersin & Associates, August 2012, www.bersin. com/library or www.bersin.com/hilo.

3. Deloitte client conversations with a variety of oil and gas, pharmaceuti- cal, and manufacturing executives.

4. Ibid.

5. Vanessa Furhmans, “Germany’s New Export: Job Training,” Wall Street Journal, June 14, 2012, http://online.wsj.com/news/articles/SB10 001424052702303665904577452521454725242.

6. American Petroleum Institute, “Local commu- nity and career development programs,” http:// www.api.org/environment-health-and-safety/ environmental-performance/public-private- partnerships/educational-partnerships/ local-community, accessed January 27, 2014.

7. Organizations with strong management that focuses on learning outperform their peers by two to three times in customer service, innovation, and financial results. David Mal- lon, High-impact learning culture: The 40 best practices for creating an empowered enterprise, Bersin & Associates, June 2010, www.bersin. com/library or www.bersin.com/hilc.

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Attract and engage

Talent acquisition revisited Deploy new approaches for the new battlefield

TODAY, talent, especially people with the most desired and in-demand skills, is scarce. Employees with high-demand skills have choices, and a company’s employment brand is easy to ascertain without even step- ping into the office. At the same time, the Internet has revolutionized the way people learn about companies and apply for jobs.

In many ways, acquiring and accessing tal- ent is among a company’s most critical goals.

Without critical talent and skills, companies cannot grow their businesses. Yet in today’s new environment, the old ways of recruiting, acquiring, and accessing talent are no longer effective. Companies that fail to adapt will likely be on the losing end when it comes to attracting the people they need.

Executives appear to be aware of the chal- lenge, with 58 percent saying they are “cur- rently revamping” (31 percent) or “considering

• Companies looking to recruit and acquire talent must now compete on a new battlefield—a battlefield shaped by new global talent networks and social media and defined by employment brands and changing views of careers.

• Sixty percent of respondents to our global survey have updated or are currently updating and revamping their talent sourcing strategy, and another 27 percent are considering changes.

• Faced with a scarcity of key skills and rapidly evolving talent demands, companies that fail to adapt will likely be on the losing end when it comes to attracting and accessing the people and skills they need.

Graphic: Deloitte University Press | DUPress.com

Updated in past 18 months

Currently revamping

Considering changes

No plans to review

Not applicable 2%

11%

27%

31%

29% 489

535

454

185

40

Figure 1. Most companies reviewing or changing sourcing and recruiting

Number of respondents

“When did you last revamp or reengineer your talent acquisition process and strategy?”

Talent acquisition revisited

65

changes” (27 percent) to their talent sourcing and recruiting strategies (figure 1).

Nonetheless, few HR and corporate lead- ers report that their companies are currently capable of adapting to today’s new talent acquisition realities. Executives in Brazil, the United Kingdom, Japan, South Africa, and Canada are acutely aware of the urgent need to change strategies, but are especially behind

other countries in terms of putting capabilities in place (figure 2).

To be successful in this new environment, companies should constantly attract new talent and “re-recruit” the talent that is already in place. The traditional “staffing” team is being replaced by a strategic “talent acquisition” function, focusing on building an employ- ment brand, sourcing people in new places

Graphic: Deloitte University Press | DUPress.com

Figure 2. Readiness vs. urgency: Who is leading, who is lagging?

30

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Capability gap grid

Talent acquistion and access

Capability Gap Index (readiness – urgency)

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Spain

Kenya

Argentina

Mexico

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Ireland

Brazil

United Kingdom

Netherlands

China

United States

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Switzerland India

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Australia

Belgium

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-16

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All others

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Switzerland

Netherlands

Luxembourg

China

Mexico

Belgium

Argentina

India

Germany

Australia

Spain

Ireland

Kenya

Portugal

The Human Capital Capability Gap Index The Deloitte Human Capital Capability Gap Index is a research-based index that shows HR’s relative capability gap in addressing a given talent or HR-related problem. It is computed by taking an organization’s self-rated “readiness” and subtracting its “urgency,” normalized to a 0–100 scale. For example, if an organization feels that an issue is 100 percent urgent and it also rates itself 100 percent capable and ready to address the issue, the capability gap would be zero. These gaps, which are almost always negative, can be compared against each other.

The capability gap grid By plotting the gaps on a grid (with readiness on the vertical and urgency on the horizontal), we can see how capability gaps vary among different countries and industries.

• Capability gaps at the lower right part of the grid are those of high urgency and low readiness (areas that warrant major increases in investment).

• Capability gaps at the upper right part of the grid are highly urgent, but companies feel more able to perform in these areas (they warrant investment but are lower priority than those at the bottom right).

• Capability gaps on the left side of the grid are areas of lesser importance, and those lower in the grid are areas of less readiness.

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using social media tools, creating opportuni- ties for internal candidates, and leveraging the huge network of referral relationships within the company.

Talent acquisition is also being expanded as companies look for new ways to access and engage people, including through joint ventures, contracting, freelancers, and open source talent.1 These approaches are pushing the boundaries of talent acquisition to include new models of employment and new types of relationships for accessing skills and ideas.

High-performing companies build unique and powerful ways to source and access top employees. One innovative tactic is the use of social networks to build talent “communi- ties” supported by full-time employees, retired workers, independent contractors, and every- one in between. AT&T’s talent community, for example, attracts potential team members by providing a forum to talk about mobile com- puting and telecommunications in a fun and exciting way.

Many companies are also leveraging LinkedIn, Facebook, Twitter, Glassdoor,

Google, and other social networks to build a compelling employment brand, find talent, and market their companies to passive job candi- dates. They aggressively deploy referral mar- keting programs and send their key executives to universities and other critical sources of new talent around the world.

Slightly more than six in ten executives (62 percent) participating in our global survey report that they rely on social tools for sourc- ing and advertising positions. Organizations also report that they are beginning to utilize analytics for recruitment and staffing, though a majority (54 percent) say they are still “weak” in this area (figure 3).

The transition from recruiting to marketing

As the battlefield for scarce talent continues to shift, talent acquisition is becoming more like marketing every day.

Candidate relationship tools market a company through stories and products aimed at drawing in new prospects and cultivating

Graphic: Deloitte University Press | DUPress.com

% of total number of responses

Number of respondents

691

682

687

642

604

684

Building strong and localized employment brand

Ensuring recruiters are highly trained

Using social tools for sourcing and advertising positions

Accessing part-time, freelance, and third-party employees

Leveraging integrated recruiting processes and systems

around the world

Using analytics for recruitment and staffing 7%

8%

10%

12%

9%

17%

39%

43%

47%

50%

54%

47%

54%

50%

43%

38%

37%

36%

Figure 3: Mixed levels of talent acquisition capabilities

HR executives’ assessment of talent acquisition capability levels ExcellentAdequate Weak

Talent acquisition revisited

67

them from the point of initial interest through their decision to apply for a job and join the company. Companies like Ford and Delphi, for example, produce blogs to attract car fans, engineers, and manufacturing workers who may want a career in the auto industry.

Talent acquisition leaders use a variety of other marketing techniques to source talent— and are increasingly partnering directly with corporate marketing in their outreach efforts. They visit and advertise at colleges and educa- tional institutions, buy targeted ads on social media sites (LinkedIn, Facebook, Google, Yahoo) to attract employees from old and new competitors, and strategically target veterans, minorities, and other groups.

Just as marketing produces sales, candi- date marketing produces hires. Recruitment

marketing also reduces staffing costs, attracts higher-quality candidates, and improves internal employee retention. It also helps build a network of part-time workers and ultimately makes the job of the recruiter and hiring man- ager far easier.

On the employee side, social networks have made the employer brand fully available to the public. If recruiting is difficult, it is not just HR’s problem; it is the executive team’s prob- lem as well.

Employers of choice treat their employment brand like their consumer brand. They ana- lyze it, understand it, cultivate it, and carefully manage it. And they localize it for each major market where they do business.

LESSONS FROM THE FRONT LINES

Auto manufacturer uses talent communities to source skills

As General Motors sought to ramp up the production of its flagship electric vehicle, the Volt, the company faced a significant talent challenge—a shortage of engineers and scientists with a background in electronics.

Drawing talent from Silicon Valley and other technology centers to Detroit proved difficult initially. GM’s answer was to enhance its recruiting process by building talent communities, drawing more and more people with the required skills into its network.

To help build these communities, GM enlisted engineers and technical staff to write about their jobs, highlighting the exciting work; the rewarding, socially important job opportunities at the company; the high quality of life and relatively low cost of living in Detroit’s suburban neighborhoods; and the many cultural attractions and professional sports teams in the city.

Starting gradually, the company built a growing talent network, amplifying it through social media. New facts and insights about the company were shared among wider circles of talent, creating a positive ripple effect and a more robust talent network. This approach helped GM attract the talent needed to meet deadlines, hiring requirements, and project demands.

Company ambassadors provide a creative solution to talent needs

Red Hat was the first open source software company to reach $1 billion in annual revenues. With plans to hire an additional 600 to 800 employees this fiscal year, Red Hat is on an aggressive search for new talent. A key component of its sourcing strategy is its employee referral program.

The employee referral program, called Red Hat Ambassadors, is a tiered reward system where eligible employees can receive cash bonuses and Red Hat-branded memorabilia for every new hire they attract. Red Hatters who refer five employees to the company receive the title of “Ultimate Ambassador.” These employees earn two generous cash bonuses as well as Red Hat-branded memorabilia and a slot on the company’s Red Hat Ambassador advisory board. Additionally, referrals that come from Ultimate Ambassadors get priority treatment by the company’s talent acquisition team. The program has resonated with employees, and today, more than half of all new Red Hat hires come in through employee referrals.2

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Where companies can start

BEFORE the explosion of social media and mobile computing—nearly 45 percent of job candidates now apply for jobs on mobile devices3—companies simply posted openings on the “careers page” on their website. This is no longer nearly enough. Creative companies are discovering new ways to access talent. Starting points include:

• Treat recruiting like marketing: Partner with corporate marketing to build an inte- grated branding and communications strat- egy that attracts candidates and employees, not just customers.

• Innovate—who and where: Extend the targets for strategic recruiting. Who are you looking for? Are there new talent pools? Ones you can develop? Perhaps talent you can access (such as freelancers) but not hire? Also consider where you are looking: Search globally as well as across industries and functions.

• Go beyond Facebook—way beyond: Nearly every company uses social networks to post job openings. Innovative companies also leverage social media to build broader,

more robust talent communities—networks of people interested in the company’s prod- ucts or the company itself who might turn into high-quality recruits.

• Use big data to deepen talent networks: Organizations can now leverage big data tools from vendors such as LinkedIn, Facebook, Entelo, Gild, TalentBin, Work4, Identified, and others to identify and source quality candidates around the world.4

Leverage new scientific assessments and big data tools to locate and assess high-quality candidates who fit the style and type of workers needed.5 Apply talent analytics to identify the company’s top sources of talent, understand effective interviewing tech- niques, and determine “goodness of fit” to improve the quality and efficiency of hiring.

• Maintain an active and deep candidate bench: Use candidate relationship manage- ment to cultivate prospects and keep people engaged throughout their careers, turning them from passive to active candidates.

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BOTTOM LINE Talent acquisition and access has changed in fundamental ways due to shifts in global talent markets, skills shortages, new ways of working, and the growing importance of social media and employment brand. To compete for talent in 2014, HR teams must move to more marketing- oriented, innovative, social media-savvy, and global approaches to talent acquisition. This demands innovation on the front end of recruiting, coupled with the need to “re-recruit” employees, managers, and leaders every day.

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Contributors Stuart Agtsteribbe, Christina Brodzik, Peter MacLean

Authors

Udo Bohdal-Spiegelhoff, Human Capital leader, Deloitte Germany Deloitte Germany [email protected]

Udo Bohdal-Spiegelhoff is recognized in the market as a thought leader in change management, strategy execution, leadership and organizational development, large-scale facilitation, and HR advisory capabilities. He has led many complex global transformations such as large-scale reorganizations, HR and people strategy implementations, and post-merger integrations for clients in a variety of industries.

Kim Lamoureux, vice president, Leadership and Succession research Bersin by Deloitte, Deloitte Consulting LLP [email protected]

With more than 200 works published, Kim Lamoureux is a recognized thought leader and a frequent speaker on leadership. She has more than 20 years of experience in talent management. As the leader of Bersin by Deloitte’s Leadership Development practice, Lamoureux helps clients to solve their most complex challenges, including leadership strategy, leadership and executive development, high potential identification, leadership assessment, career management, succession management, and talent mobility.

Lisa Barry, global Talent, Performance, and Rewards leader Deloitte Touche Tohmatsu [email protected]

Lisa Barry is the Talent leader for Global Consulting, and is also the global leader for Talent, Performance, and Rewards. She is considered to be one of the most impactful leaders in the human capital field, championing the need for businesses to reinvent relevance and create a powerful people-centered strategy to propel a company’s growth trajectory. A true citizen of the globe, Barry has lived and worked in the United Kingdom, Europe, the United States, South East Asia, New Zealand, and Russia.

Robin Erickson, vice president, Talent Acquisition research Bersin by Deloitte, Deloitte Consulting LLP [email protected]

Robin Erickson leads Bersin by Deloitte’s Talent Acquisition function, where she researches best practices, develops frameworks and tools, conducts industry surveys, and writes reports. Drawing on over 20 years in human capital consulting and her academic research, Erickson is a frequent speaker and writer on talent management issues, including talent acquisition, retention, and employee engagement.

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Endnotes

1. Deloitte, The open talent economy, Human capital trends 2013: Leading indicators, Deloitte, April 2013, http://www.deloitte.com/view/ en_US/us/Services/consulting/human-capita l/268bfb80ddbcd310VgnVCM2000003356f7 0aRCRD.htm, accessed on January 27, 2014.

2. Robin Erickson, Using data-driven alternative sourcing solutions to find high-tech talent: How Red Hat’s talent acquisition team lever- ages new high-tech tools to identify highly skilled global candidates, Bersin by Deloitte, January 2014, www.bersin.com/library.

3. Bersin by Deloitte client interviews.

4. LinkedIn, Facebook, Entelo, Gild, TalentBin, Work4, and Identified are examples of vendors who offer big data sourcing tools to tap into workforce skills and find people through advanced queries, advertisements, and reports.

5. Josh Bersin, The science of fit: Using psychol- ogy to replicate high performance, Bersin & Associates, May 2011, www.bersin.com/library.

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Beyond retention Build passion and purpose

IN recent years, large employers have learned the logic of improving employee retention. They know that as jobs in most sectors become increasingly knowledge-intensive, the cost of replacing capable workers is high. Human resources functions have focused tightly on attrition rates and worked to discover effective managerial interventions to limit turnover. Indeed, in an era of growing enthusiasm for workforce analytics, the very ease of objectively measuring retention has helped to make it a focal point.

Beyond the fact that retention metrics are a lagging indicator, though, the ques- tion is whether “retention” is the right place to focus. As some HR leaders are now real- izing, focusing so intently on retention can lead to additional investments in some tools and initiatives that aren’t proving very valu- able—while neglecting others that may be much more so. Part of the problem with today’s thinking about retention is that it seems to reflect a military-style model, with its assumption that people decide to “re-up” periodically—but infrequently and on a fairly predictable schedule.

Today’s reality is that people continually make choices, consciously or not, as to how

committed they are to their work and the enterprise. Their levels of engagement and motivation are subject to constant fluctuation in response to micro signals—small indications of whether the company is committed to their growth, whether it really believes in serving a higher purpose, what kinds of behavior are rewarded, how much can be learned from working there, and more.

In knowledge-based businesses, people should increasingly be enticed to “re-up” every day—and HR leaders are in a position to reframe the retention and engagement chal- lenge and lead the ongoing “reenlistment” process. The best of them already know this and are finding ways to continually monitor, encourage, and respond to people’s enthusiasm for their work.

The challenge of multiple generations in the workforce

Attracting and retaining Millennials is a vexing challenge. The younger employees who comprise the Millennial generation make up 34 percent of the global workforce and will swell to 75 percent by 2025.2 They also come to the job with a very different set of

• Companies around the world agree that employee engagement is vital. Our global survey showed that executives rate “retention and engagement” their No. 2 priority.

• A focus solely on retention, however, may be misplaced. Companies should shift from strategies to “hold people here” to “attracting and engaging people” through measures that build commitment, align employee goals and experience with corporate purpose, and provide engaging work and a culture of development and growth.

• Employees make the decision of whether to “re-up” every day when it comes to motivation and productivity. Millennials in particular are looking for work that inspires passion and allows them to fulfill their professional, personal, and social goals.1

Beyond retention

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aspirations than their Generation X and Baby Boomer colleagues.

About 70 percent of Millennials want to launch their own businesses at some point in their careers. Only 20 percent want to work in companies with more than 10,000 employees. With corporate hierarchies flattened, nearly half (45 percent) are already in leadership roles, while their Baby Boomer and Generation X peers were likely to serve in less senior posi- tions at this age.3

Just as with earlier generations, Millennial attitudes toward work are driven by their cultural and educational experiences growing up. They are comfortable with technology and have been raised with the tools of transparency, hardly remembering a time when instant mes- saging, Twitter, Google, and Facebook were not a part of their lives. They value and thrive on innovation, with more than three-quarters (78 percent) stating that they are strongly influ- enced by how innovative a company is when considering employers.4 Millennials also want to work for organizations that provide flexibil- ity and that are purpose-driven, tackling broad societal challenges such as resource scarcity, climate change, and income equality.5

The influence of Millennials is already pushing companies to redefine leadership development programs and redesign the work environment. Sixty-six percent of the respon- dents in our global survey reported that they have “weak” capabilities when it comes to providing focused leadership programs for Millennials. Further, 58 percent of executives reported “weak” capabilities in “providing pro- grams for younger, older, and multi-generation

workforces,” underscoring that Millennials are not the only challenge.

Increased longevity and health, and the aftermath of the Great Recession, are encour- aging greater numbers of older people to remain longer in the workforce. By 2025, the number of workers aged 55–64 is forecast to rise by 89 percent, while for those aged 65 and above the percentage is even higher.6

And Boomers, too, are subscribing to younger attitudes toward work, with 70 percent citing career-life fit as a top priority. This Boomer trend may be a silver lining, given concerns by HR and business line leaders about the looming brain drain.7 Employers across both private and public sectors express worry that a significant proportion (anecdotally, 40 percent is the most consistently stated percentage) of their workforce is eligible to retire over the next five years, taking with them the relation- ships, skills, expertise, and knowledge of the informal networks and systems that make their organizations work.

What’s (really) behind this retention-to-reenlistment trend?

Despite the unfortunate reality of high unemployment rates across many economies, most corporate employers would agree that there is still a talent paradox. In California, a global center for the technology industry, unemployment hovers around 9 percent—yet there are 840,000 jobs available.8 The highly educated knowledge workers employers require are in short supply. In light of this talent scarcity, companies have awakened to

“CFO asks CEO: “What happens if we invest in developing our people and they leave?” CEO: “What happens if we don’t, and they stay?”” — Source: “Peter Baeklund resourceful leadership,” http://www.peterbaeklund.com/.

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% of total number of responses

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Aligning our employees; personal goals with corporate purpose

Integrating social, community, and corporate programs

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Figure 1. Companies struggle to instill passion and purpose

Graphic: Deloitte University Press | DUPress.com

HR executives’ assessment of retention and engagement capability levels ExcellentAdequate Weak

the fact that “unwanted attrition” is extremely costly and have begun the search for the keys to retention.

By their own admission, most executives have a long way to go. In our global Human Capital Trends survey, they tended to rate themselves as either “weak” or just “adequate” in several key retention capabilities. More than a third (38 percent) report they are “weak” at integrating social, community, and corporate programs, the same number as those who say they are “weak” at aligning employee and corporate goals. Four in ten (40 percent) state their organization is “weak” in helping employ- ees balance their personal and professional lives (figure 1).

People today don’t choose whether to “re- up” their employment contract once every few years, or only when a life event unfolds. In the emerging open talent economy,9 employ- ees—particularly those with highly relevant and contemporary skills—make that decision every day. Any workplace that lags in inspiring passion and purpose will suffer by losing key employees—and at an increasing rate as the global economy picks up momentum.

Metrics for business and HR For the rapidly professionalizing field of

human resources, retention is a particularly tempting goal because, unlike so many aspects of human experience, it is objectively measure- able. Performance metrics within businesses can include retention numbers and trends that are as valid as any financial results. And now with the advent of human capital analyt- ics, other measureable phenomena, such as compensation histories, performance ratings, and participation in training programs, can be correlated with retention trends. Most HR departments also use engagement surveys to better understand what factors people value most in a workplace and what might motivate them to leave. Statistical analysis can show how changes in these factors of engagement translate into higher or lower retention—and therefore guide thoughtful interventions. The challenge is to link retention and engagement insights to business results—for example, by finding a way to lower turnover in traditional high-churn but mission-critical teams, such as technical sales. This clearly requires more than an annual engagement survey.

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Graphic: Deloitte University Press | DUPress.com

Figure 2. Urgency vs. readiness: Who is leading, who is lagging?

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The Human Capital Capability Gap Index The Deloitte Human Capital Capability Gap Index is a research-based index that shows HR’s relative capability gap in addressing a given talent or HR-related problem. It is computed by taking an organization’s self-rated “readiness” and subtracting its “urgency,” normalized to a 0–100 scale. For example, if an organization feels that an issue is 100 percent urgent and it also rates itself 100 percent capable and ready to address the issue, the capability gap would be zero. These gaps, which are almost always negative, can be compared against each other.

The capability gap grid By plotting the gaps on a grid (with readiness on the vertical and urgency on the horizontal), we can see how capability gaps vary among different countries and industries.

• Capability gaps at the lower right part of the grid are those of high urgency and low readiness (areas that warrant major increases in investment).

• Capability gaps at the upper right part of the grid are highly urgent, but companies feel more able to perform in these areas (they warrant investment but are lower priority than those at the bottom right).

• Capability gaps on the left side of the grid are areas of lesser importance, and those lower in the grid are areas of less readiness.

Increasing flexibility One of the earliest and broadest changes

resulting from the quest for higher retention has been the corporate embrace of “flexibil- ity.” There is no question that flexibility has emerged as a matter of utmost importance to many workers—both women and men.

In a recent survey, professionals were asked what organizations could do to meet their career needs. Among generational bands from Boomers to Millennials, a top response was “provide flexible working conditions and better work-life integration.”10 Their voices add to a rising chorus, signaling important shifts in

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the cultural dynamics of the workforce. One out of every five employees, for example, now cares for an elderly parent.11 Women, who tend to report a preference for more free time over more money, now make up nearly 60 percent of the US workforce.12 Men’s attitudes about long hours seem to have changed as well: 80 percent say they would like to work fewer hours.13

The power of purpose While increasingly important, a flex-

ible work environment alone is not enough to ensure engagement. The 21st-century employee, at whatever level in the organiza- tion, is looking for more than the right bal- ance between hours and pay. People now look for “good work” in the sense that authors and educators including Howard Gardner, Mihaly Csikszentmihalyi, and Bill Damon use the term—meaning work that benefits the broader society.

In other words, engagement isn’t only about doing work on acceptable terms. It’s the work itself.

A growing body of literature aimed at business practitioners reflects this change of

heart. Conscious Capitalism, for example, by Whole Foods founder John Mackey and Raj Sisodia, makes a strong call for engaging in commerce only in ways that leave the world better off.14 Sisodia’s earlier book Firms of Endearment (with Jagdish Sheth and David Wolfem) offers compelling evidence that more socially responsible and valuable companies outperform their peers in terms of engagement and retention, customer service, and long- term profitability. The book’s subtitle sums it up: How World-Class Companies Profit from Passion and Purpose.15 Today’s most talented people want to join organizations whose work engages their interests and deserves their pas- sion. Companies endure when they manage to endear.

Executives around the world agree that making work matter drives employee engage- ment and retention. Yet only respondents based in the Netherlands, Switzerland, Spain, and Belgium report that their organization’s readiness to address retention—by redefining engagement to align with personal, corporate, and social purposes—is close to matching their sense of urgency in this area (figure 2).

HOW A TAX SERVICE PROVIDER SEES RETURNS ON FLEXIBILITY From its 1991 founding to the mid-2000s, tax service provider Ryan LLC enjoyed a continual history of revenue and headcount growth, as well as high client satisfaction scores. The culture at Ryan was historically hard-driving, and until 2008, obsessed with tabulating and rewarding long hours logged at the office.

Despite its generous compensation packages, the firm was developing a reputation as a highly skilled sweatshop, making it difficult to recruit new talent. Turnover rates were rising while employee satisfaction scores fell. To combat these issues, Ryan developed a flexible work environment program, dubbed myRyan, that eliminated its metric of hours logged, replacing it with a set of financial targets and performance measurements. Employees can now work where, when, and how they want, as long as they hit their benchmarks. Flexible work does not mean “work in a vacuum,” however. Teams establish work blueprints, creating guidelines for how they will work together.

Since implementing myRyan, the company has restored high customer and employee satisfaction scores, reduced turnover, and lowered the associated costs of hiring and training new employees. These improvements have helped make it once again a desirable place to work. By one internal estimate, 85 percent of new hires join the company at least partly because of the myRyan program. Ryan’s revenue has doubled since the program’s debut.

— Brenda Kowske, The flexible workplace delivers results: How Ryan, LLC transformed its workplace culture to increase earnings and retain its highly skilled employees, Bersin by Deloitte, August 2013, www.bersin.com/library.

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LESSONS FROM THE FRONT LINES

Making flexibility pay off

In response to the need for flexibility, innovative companies have revamped schedules and invested in tools to open up possibilities for when, where, and how work gets done. Some organizations let employees take as much vacation as they want. Companies in high-demand industries routinely offer free food, onsite gyms and other wellness benefits, and even laundry services and ping-pong tables—all to relieve workers of personal stress because of the hours they put in at the office. (For an example of how flexible work arrangements pay off, see the sidebar on the previous page , “How a tax services provider sees returns on flexibility.”) In some firms, the “have it your way” ethos has extended to flexibility in surprising areas. Netflix famously allows employees to decide their own expense policies and select their preferred mix of salary and stock options.

A premium on personal development

People also value workplaces that contribute to their personal development as professionals. Young workers in particular—but Boomers, too—prefer working for companies that invest in developing their capabilities and keeping their skill sets relevant through constant learning and development opportunities:

Talented people seek out opportunities to grow, and they will flock to organizations that provide ample opportunities to do so. Retention also becomes a non-issue; if people are developing more rapidly than they could anywhere else, why would they leave? If companies are truly serious about attracting, retaining, and developing high-quality talent, they need to view themselves as growth platforms for talent where people can develop themselves faster than they could elsewhere. This, in turn, can create a self-reinforcing cycle as talent creates more opportunities for growth.16

Deloitte’s focused research on Millennials shows that this rising generation of business leaders has a relatively high desire to be entrepreneurial, to move into leadership roles, and to have the opportunity to innovate and create. Very few expect to work for any one company for a long time; they see work as a series of experiences that help them develop over time. Today’s most talented people of all ages want to work for employers that are committed to developing their skills and capabilities by providing continuous training as well as enriching “tours of duty”—to use a phrase being popularized by Reid Hoffman, founder of LinkedIn—that allow them to work on projects in different parts of the company.

The need for affirmation

People value being valued—and not only, or even primarily, in monetary terms. Companies are learning to reward and recognize employee achievement in more meaningful ways. While every employee would like to earn more money, research has shown that a more important driver of retention than above-average compensation is a “high-recognition culture.” Companies that have built a strong culture of “thank you” and “recognition” have a 31 percent lower turnover rate than their peers, driving higher productivity and tremendous savings in turnover costs.17

It’s a finding that Dan Pink, author of the best-selling Drive, would second. He asserts that high-performing employees want three things: autonomy, mastery, and purpose. Rigid goals and “pay for performance” plans, according to Pink, can in many situations actually lead to lower performance and less innovation. The company where people want to work allows employees to work independently, focus on their strengths, and align themselves with well-understood corporate goals.

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Where companies can start

BUILDING a work environment in which passion and purpose among employees can flourish is a noble though tricky busi- ness. Several new practices and priorities are emerging:

• Ask your employees what matters: Survey employees regularly—not just annually about how they experienced the organiza- tion over the past year, but frequently and “in the moment” through pulse surveys and roundtables—to find out what makes them passionate about work and what parts of the environment are irritating or too bureaucratic.

• Remember: It is the work: Make sure the organization is feeding employees’ needs for purpose and meaningful work. While there is a necessary focus on benefits, compen- sation, and workplace flexibility, research suggests that these are table stakes. A more important dimension for retention is the work itself.

• Make development part of the job, not a perk: Opportunities for challenge and development may be the most overlooked element of retention and engagement. Give every employee—not only high performers or leadership candidates—opportunities to build networks within the organization, along with skills and career development opportunities. Chances may be that the organization already is, so be sure these opportunities are couched so individuals see them as such and value them more.

• Study retention continuously: Keep your finger on the pulse of the organization— regularly, not just annually or periodically. Use exit surveys and manager interviews to understand what was missing. Provide open blogs and communication tools to help people talk openly about what they need— and what they particularly value.

• Build a proactive retention model to identify potential problems before they occur: Adopt talent analytics to uncover the hidden drivers of retention. Several of our clients have now built statistically validated retention models that help predict why and when an employee will leave. Design work environment solution sets around the find- ings to drive greater performance, passion, and retention stickiness.

• Collaborate with other top leaders: The CEO’s executive committee should play a role in developing and nurturing a compel- ling corporate mission, including determin- ing how to integrate social and community goals into the work and daily activities of the company.

• Challenge the performance manage- ment process: Is it timely enough? Does it provide actionable feedback? Is the focus disproportionately on areas for develop- ment, giving short shrift to strengths and contributions?

• Understand and improve diversity and inclusion: People want to work in an envi- ronment that respects them and customers are looking for companies that reflect their diversity and perspectives as well.

• Focus on your employment brand and talent experience: When competing for customers, companies relentlessly focus on differentiating their products, services, and customer experience. The same should be true for the talent experience—and, in today’s socially driven, transparent world, the line between the two is blurring. Challenge your business and HR leaders to structure work, jobs, and development so they are interwoven with what people do— and the company’s employment brand.

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BOTTOM LINE Companies already recognize that success depends on three things: keeping good people, keeping them engaged and productive, and understanding that these two aims are not one and the same. As Deloitte’s 2014 Human Capital Trends survey points out, the challenge of retention and engagement ranks in the top echelon. But framing the challenge according to the traditional binary view of retention vs. attrition is proving inadequate. The secret is designing a suite of systems (work, culture, flexibility, and social and community purpose) that supports a talent experience that makes it easy for individuals to continually reenlist for their tour of duty.

Already, today’s most successful employment brands align business and corporate objectives with the professional, personal, and social goals of their employees. They provide an environment where employees believe they are making a difference, not just clocking their time. To reach new heights in retention and engagement, world-class managers will focus on growing a talent brand that weaves together the critical elements of work itself, the desire for personal growth and development, the power of passion, and the intrinsic reward of serving society as part of a brand of which employees can be proud.

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Authors

Cathy Benko, vice chairman and managing principal Deloitte Consulting LLP [email protected]

Cathy Benko is internationally renowned for being among the first to design and implement a systemic response to the changing workforce. She holds dual roles as Deloitte Consulting LLP’s talent game-changer and the leader of Deloitte’s corporate citizenship agenda, driving the firm’s collective societal impact. Benko is a US patent-holder and the bestselling co-author of several books, including The Corporate Lattice (Harvard 2010) and Mass Career Customization (Harvard 2007).

Robin Erickson, vice president, Talent Acquisition research Deloitte Consulting LLP [email protected]

Robin Erickson leads Bersin by Deloitte’s Talent Acquisition function, where she researches best practices, develops frameworks and tools, conducts industry surveys, and writes reports. Drawing on over 20 years in human capital consulting and her academic research, Erickson is a frequent speaker and writer on talent management issues, including talent acquisition, retention, and employee engagement.

John Hagel Deloitte Consulting LLP [email protected]

John Hagel has nearly 30 years’ experience as a management consultant, author, speaker, and entrepreneur. He is the co-chairman of the Deloitte LLP Center for the Edge. He has served as senior vice president of strategy at Atari, Inc., and is the founder of two Silicon Valley startups. Hagel is the author of The Power of Pull, Net Gain, Net Worth, Out of the Box, and The Only Sustainable Edge. He holds a BA from Wesleyan University, a BPhil from Oxford University, and a JD and MBA from Harvard University.

Jungle Wong, Human Capital leader, Asia Pacific Deloitte Consulting (Shanghai) Co. Ltd, Beijing branch [email protected]

Jungle Wong is the practice leader of Deloitte Consulting’s Human Capital practice in China. Based in Beijing, he has extensive experience working with multinational enterprises located in China, as well as state-owned enterprises, on solving talent and HR issues. He is a frequent speaker at HR conferences, and is an assessor for the Chinese Business Leaders’ Awards as well as a regular writer for HR magazines in China.

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Endnotes

1. Deloitte, Big demands and high expectations: The Deloitte Millennial survey, January 2014, http://www2.deloitte.com/content/dam/ Deloitte/global/Documents/About-Deloitte/ gx-dttl-2014-millennial-survey-report.pdf.

2. Ibid.

3. Ibid.

4. Ibid.

5. Ibid.

6. University of Notre Dame, Working longer: A potential win-win proposition, December 2003.

7. Karen Bowman, Jason Flynn, Tom Ged- des, and Jeff Sumberg, The aging workforce: Finding the silver lining in the talent gap, Deloitte, March 2013, http://www2. deloitte.com/global/en/pages/human- capital/articles/aging-workforce.html.

8. California Economic Summit, “California bill requires state to attack skills gap,” July 12, 2013, http://www.caeconomy.org/ reporting/entry/california-bill-requires- state-to-attack-skills-gap.

9. Jeff Schwartz, Andy Liakopoulos, and Lisa Barry, The open talent economy: Beyond corporate borders to open talent ecosystems, July 24, 2013, http://dupress. com/articles/the-open-talent-economy/.

10. Barbara A. W. Eversole, Donald L. Ven- neberg, and Cindy L. Crowder, “Creating a flexible organizational culture to attract and retain talented workers across gen- erations,” Advances in Developing Human Resources 14 (November 2012): pp. 607- 625, doi:10.1177/1523422312455612.

11. Work/Life Pursuit, “Associations,” http:// www.workingparentcafe.com/community- groups/, accessed on February 27, 2014.

12. United States Department of Labor, The US population is becoming larger and more diverse, http://www.dol.gov/oasam/ programs/history/herman/reports/future- work/report/chapter1/main.htm#20.

13. Center for American Progress, Workplace flexibility: Allowing employees some leeway is good for business and the economy, http://www. americanprogress.org/wp-content/uploads/ issues/2012/08/pdf/flexibility_factsheet.pdf.

14. John Mackey and Rajendra S. Sisodia, Conscious Capitalism: Liberating the Heroic Spirit of Business (Boston: Harvard Business School Publishing Corporation, 2013).

15. Rajendra Sisodia, David B. Wolfe, and Jagdish N. Sheth, Firms of Endearment: How World-Class Companies Profit from Passion and Purpose (Upper Saddle River: Wharton School Publishing, 2007).

16. John Hagel III, Talent development: A key to attracting and retaining highly skilled people in your industry, Deloitte University Press, December 20, 2012, http://dupress. com/articles/talent-development-a-key-to- attracting-and-retaining-highly-skilled-people- in-your-industry//, accessed February 2, 2014.

17. Bersin by Deloitte, Bersin & Associates unlocks the secrets of effective employee recognition, June 12, 2012, https://www. bersin.com/News/Content.aspx?id=15543.

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From diversity to inclusion Move from compliance to diversity as a business strategy

IN 2014, promoting diversity is an expected commitment; like workforce safety, it’s now a ticket to play. And while unwavering support is claimed, far fewer organizations can talk to the benefits of diversity beyond the attraction of talent and reputation. Why is that? Surely a focus on diversity is the way to uncover and optimize talent? Is it focus, effort, a failure to move diversity from the fringe to the center, or level of difficulty?

One clear factor, according to our global survey, is that only one company in five (20 percent) believes it is fully “ready” to address this issue. The gap between the urgency of this trend and companies’ readiness to address it is particularly wide in Japan, South Africa, and China (figure 1).

Why are so many companies falling short? One view is that many companies still treat diversity primarily as a matter of compliance— a regulatory box to be checked. Not enough organizations take the next essential steps of creating a work environment that promotes inclusion in all its variations. Taking a step back from individual organizations to a more

country-based analysis, we can see that most countries do not have a strong sense of readi- ness and most hover around a medium sense of urgency.

Using this lens, we see two major themes emerging that can help companies transition from simply meeting minimum regulatory requirements for diversity to building an inclu- sive workplace that inspires all employees to perform at their highest level:

1. Diversity of thinking as a business imperative

2. A focus on inclusion as well as diversity itself

Diversity of thinking as a business imperative

Organizations can start by broadening their understanding of diversity to focus not only on the visible aspects of diversity, such as race, gender, age, and physical ability, but also diversity of thinking. This means deriving

• Many organizations promote diversity while struggling to fully leverage the business benefits of a diverse workforce.

• Nearly one-third of respondents to the Human Capital Trends global survey say they are unprepared in this area, while only 20 percent claim to be fully “ready.”

• In a recent study, 61 percent of employees report they are “covering” on some personal dimension (appearance, affiliation, advocacy, association)1 to assimilate in their organization.2

• Leading companies are working to build not just a diverse workforce, but inclusive workplaces, enabling them to transform diversity programs from a compliance obligation to a business strategy.

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value from people’s different perspectives on problems and different ways to address solu- tions. It’s a complex world, it’s a global world, and maximal participation is required from every workplace participant from the bottom to the top. Thinking of diversity in this way

helps organizations to see value and to be con- scious of the risk associated with homogeneity, especially in senior decision makers. And this means that diversity is no longer a “program” to be managed—it is a business imperative.

Graphic: Deloitte University Press | DUPress.com

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The Human Capital Capability Gap Index The Deloitte Human Capital Capability Gap Index is a research-based index that shows HR’s relative capability gap in addressing a given talent or HR-related problem. It is computed by taking an organization’s self-rated “readiness” and subtracting its “urgency,” normalized to a 0–100 scale. For example, if an organization feels that an issue is 100 percent urgent and it also rates itself 100 percent capable and ready to address the issue, the capability gap would be zero. These gaps, which are almost always negative, can be compared against each other.

The capability gap grid By plotting the gaps on a grid (with readiness on the vertical and urgency on the horizontal), we can see how capability gaps vary among different countries and industries.

• Capability gaps at the lower right part of the grid are those of high urgency and low readiness (areas that warrant major increases in investment).

• Capability gaps at the upper right part of the grid are highly urgent, but companies feel more able to perform in these areas (they warrant investment but are lower priority than those at the bottom right).

• Capability gaps on the left side of the grid are areas of lesser importance, and those lower in the grid are areas of less readiness.

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Uncovering talent: A new model of inclusion3

An importance advance in thinking about inclusion is the recent work on “uncover- ing talent” from Kenji Yoshino, at NYU Law School, and Christie Smith, the head of Deloitte University’s Leadership Center for Inclusion. Their research suggests that current inclusion initiatives often implement formal inclusion (that is, “participation”) without recognizing how that inclusion is predicated on assimilation. In response to pressures to assimilate, individuals downplay their differ- ences. This behavior is referred to as “covering” and can include how individuals behave along four dimensions:

• Appearance: Individuals may blend into the mainstream through their self- presentation, including grooming, attire, and mannerisms.

• Affiliation: Individuals may avoid behav- iors widely associated with their identity, culture, or group.

• Advocacy: Individuals may avoid engaging in advocacy on behalf of their group.

• Association: Individuals may avoid associ- ating with individuals in their own group.4

Yoshino and Smith’s research reports that covering behaviors are widespread, costly to individuals and their organizations, and often misaligned with values of inclusion. Organizations should be interested in cover- ing not because they are “playing defense” against lawsuits, but because they are “playing offense” to create a more inclusive culture over and above legal compliance. Most Fortune 500 companies are seeking to create that kind of culture.

Linking diversity of thinking and inclusion

Bringing these two themes together—diver- sity of thinking and inclusion—we suggest that organizations consider the importance of diversity when it comes to meeting specific business objectives:

• Accessing top talent: Companies should recruit top people from a globally diverse workforce. The importance of leadership pipelines, the No. 1 priority in our global trends survey, underscores the importance of broadening leadership pipelines and accelerating the development of diverse leaders. Given the transparency of the employment “brand” today, in order to attract the best people, organizations must create a diverse workplace. When can- didates research a prospective employer online, interact as customers, or interview with the company, they have to feel as if they would “fit” into the work environment.

• Driving performance and innovation: A significant body of research shows that diverse teams are more innovative and per- form at higher levels.5 Companies that build diversity and inclusion into their teams reap the benefits of new ideas, more debate and, ultimately, better business decisions.

• Retaining key employees: One reason people leave organizations is that they feel they no longer “belong.” Or perhaps they feel they will “belong” and thrive in another organization that appreciates their unique value. A company that fails to create a diverse and inclusive workplace risks alien- ating or excluding key employees, who are then more likely to disengage or eventually leave the organization.

• Understanding customers: There’s a thin line between customers and employees, with current and former employees pur- chasing their companies’ products and

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services, acting as advocates, and sensing customer needs. How better to understand and respond to diverse customer needs than by tapping into diverse employees? From where we sit, this is one of the most significant gaps in the diversity story, with the breadth of ideas and experiences from a more diverse front line falling by the wayside as decisions are made by more distant, homogenous teams that sometimes fail to fully include diverse perspectives. In a broad range of industries—including retail, hospitality, food service, oil and gas, insurance, and even banking—a diverse workforce creates opportunities to appeal to a more diverse customer base.6

Diversity is the measure: Inclusion is the mechanism

What this all adds up to is that high- performing organizations recognize that the aim of diversity is not just meeting compliance

targets, but tapping into the diverse perspec- tives and approaches each individual employee brings to the workplace. Moving beyond diversity to focus on inclusion as well requires companies to examine how fully the organi- zation embraces new ideas, accommodates different styles of thinking (such as whether a person is an introvert or an extrovert), creates a more flexible work environment, enables people to connect and collaborate, and encour- ages different types of leaders.

While nearly one-quarter of executives (23 percent) believe their companies have done an “excellent” job creating a culture of inclusive- ness, and defining what it means (24 percent), the overwhelming majority rate their effort as “adequate” or “weak.” Clearly, there is much more to be done to turn the vision of diversity and inclusion into a daily reality (figure 2). Much more than a focus on programs, this effort needs to focus on cultural change: behav- iors, systems and symbols, and an explicit understanding of the extent and causes of “covering” in organizations.

Graphic: Deloitte University Press | DUPress.com

% of total number of responses

Number of respondents

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Creating a culture of inclusiveness and respect for individuals

Clearly defining what diversity and inclusion means to our organization

Focusing on gender and sexual orientation

Providing formal programs to build inclusive environment

Focusing on global cultural diversity

Supporting new family models in workforce

Providing programs for young, old, and multi-generational workforce 9%

9%

17%

10%

13%

24%

23%

34%

35%

36%

44%

46%

38%

46%

58%

56%

47%

46%

41%

37%

31%

Figure 2. Challenges to creating an inclusive workplace

HR executives’ assessment of diversity and inclusion capability levels ExcellentAdequate Weak

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LESSONS FROM THE FRONT LINES

Adopting diversity and inclusion to solve a demographic mismatch

BHP Billiton’s marketing division was highly diverse in terms of gender and ethnicity in non-executive positions, but there was a demographic mismatch between the global talent pool and the company’s senior team.9

Mike Henry, the president of health, safety, environment, and community, marketing, and technology, observed this misalignment. He concluded that the only reasonable explanation was an unconscious bias within the organization and a tendency to do things as they had always been done—particularly the fact that leading talent was primarily sourced from BHP Billiton’s traditional hiring bases in Australia, the United Kingdom, North America, South Africa, and the Netherlands.

Following the closure of BHP Billiton’s marketing office in The Hague—a traditional hub for recruiting and developing marketing executives—Henry decided to take action to prevent narrowing the leadership pipeline even further.

With strong support from the CEO, Henry began seeking out broad-based leadership engagement and took steps to understand BHP’s unconscious biases. He led by example, taking the Harvard Implicit Association Test and sharing the results with his team. He aimed to prove his commitment to diversity and inclusion and show that he could only mitigate his own unconscious biases by being aware of them first.

Next, Henry had BHP Billiton’s marketing organization conduct an inclusive leadership program for its top 150 leaders, which included measuring perceptions on diversity and inclusion. The program involved interactive workshops, storytelling, videos, self-paced activities, homework, coaching, and reading, all designed to help leaders shift their mindsets and behaviors. And it broadened the conversation from one about diversity to one about diversity and inclusion, from demographics to diversity of thinking, and from compliance to business imperative. To help take this from a program to a sustained focus of attention, Henry appointed a full-time diversity and inclusion manager to implement change. During a time of downsizing, this was a potent symbol of the value he placed on diversity and inclusion.

These steps yielded several notable results. Nine months after the first leadership intervention, 88–94 percent of leaders reported that they understood what they needed to do, that they had changed their behaviors, and that they knew they were accountable for change. Critically, 72–76 percent of staff agreed that their leaders were behaving differently—that is, more respectfully and inclusively—and that their teams were now more collaborative. In 2013, the program was expanded to include all leaders and all staff, which was a huge investment of time and energy. Mindsets have shifted, and while employee statistics have been slow to change, the 2013 results of BHP Billiton’s marketing organization’s annual “inclusion index” diagnostic reveal that representation of women and talent from outside the companies’ traditional hiring bases has increased at leadership levels—a trend that has continued year on year since the first diagnostic was run in 2011.

Research by Deloitte Australia shows that high-performing organizations are character- ized by their commitment to diversity and a culture of inclusion. In the areas of cus- tomer service, innovation, safety, and more, the message from employees is the same: Organizations that support diversity and that also make employees feel included are much more likely to meet business goals than those organizations that focus on diversity and inclu- sion in isolation (or focus on neither).7 The question is, how do you get there?

One essential component of building a strategy of inclusion is recognizing the biases in the way each of us receives and processes information and the historical biases in our systems of work.8 Addressing these process- ing biases is critical because leaders—as they themselves feel high levels of inclusion—often do not understand levels of alienation in an organization. Given the critical importance of retention in our survey, inclusion becomes a key strategy for success.

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Where companies can start

MANY organizations have not put enough effort into understanding what makes people feel included. Do employees feel they are known and valued as individuals? Are they well-connected to other people in the orga- nization? Are they given a voice in decision making? Is there an understanding of the types and extent of covering in the organization (appearance, affiliation, advocacy, association)? In addition to examining these fundamen- tal questions, companies looking to build a more inclusive workplace should consider the following steps:10

• Create inclusion labs to help educate leaders about unconscious bias and covering behaviors: Encourage leaders to honor other people’s opinions and promote constructive debate. Understand covering biases and behaviors and approaches to changing them. Leadership drives inclu- sion; the process should start at the top.

• Embed diversity and inclusion in leader- ship pipelines and programs: Include the diversity and inclusion initiative in leader- ship development programs, new manager

programs, and talent acquisition programs. Give particular focus to supporting diver- sity of thinking—for instance, by select- ing people from diverse backgrounds for leadership development.

• Conduct a gap analysis of talent systems and processes: How is the principle of merit-based decision making transparently embedded into systems, from recruit- ment, remuneration, and training to career development opportunities and succes- sion? Review the outputs of these deci- sions in terms of equity, such as via a pay equity audit.

• Develop a diversity and inclusion score- card and measure business impact: Hold leaders and managers accountable and identify outliers in the diversity and inclusion initiative.

• Install governance and resource the effort appropriately: Create a council with representatives from different parts of the business that is properly resourced to be a change agent.

BOTTOM LINE Diversity is not a program or a marketing campaign to recruit staff. Thinking of diversity in this way relegates it to its compliance-driven origins. A diverse workforce is a company’s lifeblood, and diverse perspectives and approaches are the only means of solving complex and challenging business issues. Deriving the value of diversity means uncovering all talent, and that means creating a workplace characterized by inclusion. Our research shows that most organizations are not there yet, but change is in the wind, and market leaders are starting to move from compliance to inclusion as a business strategy.

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Contributors Stacia Garr, Jackie Scales

Authors

Juliet Bourke Deloitte Consulting Pte Ltd [email protected]

Juliet Bourke leads the Australian Diversity and Inclusion practice and co-leads the Australian Leadership practice. She has over 20 years’ experience in human capital and is an internationally recognized author and speaker on the workplace, cultural change, leadership, and diversity. Bourke is a member of the Australian firm’s diversity council and sits on the Australian School of Business’s HR advisory board.

Christie Smith Deloitte Consulting LLP [email protected]

Christie Smith has spent the last 24 years consulting, focusing on aligning business strategy with organizational structure, talent, leadership development, and global workforce planning. She recently drove the formation of Deloitte’s collaboration with the California Institute for Quantitative Biosciences (QB3) to spur bioscience innovation and convert that innovation into a catalyst for jobs, companies, and better health. Smith is one of Diversity Journal’s 2013 “Women to Watch.”

Nicky Wakefield, Human Capital leader, Deloitte Southeast Asia Deloitte Touche Tohmatsu [email protected]

Nicky Wakefield is an experienced leader and advisor working primarily on large- scale, complex transformation programs. She started her career in consulting in 1995 after completing her MBA in organizational strategy and change. Educated as an economist, Wakefield transitioned to human capital after beginning a diploma in psychotherapy and developing a real passion for human performance. She has lived and worked in Australia, the United States, Singapore, Brunei, Zimbabwe, England, and the Netherlands.

Heather Stockton, Human Capital leader, Deloitte Canada Deloitte Canada [email protected]

Heather Stockton is global Human Capital leader for the financial services industry. She is a member of the board in Deloitte Canada and chair of the talent and succession committee. Through her work in developing and executing strategic plans, Stockton has become an advisor to executives who are undertaking business transformation, merger integration, and changing their operating model. She has extensive experience in talent strategy and leadership development for leaders and boards.

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Endnotes

1. Kenji Yoshino and Christie Smith, Uncover- ing talent: A new model of inclusion, Deloitte Development LLC, December 6, 2013, http:// www.deloitte.com/assets/Dcom-UnitedStates/ Local%20Assets/Documents/us_LLC_De- loitte_UncoveringTalent_121713.pdf.

2. Ibid.

3. Ibid.

4. Kenji Yoshino, Covering: The Hidden Assault on Our Civil Rights (United States: Random House, 2007).

5. Scott Page, The Difference: How the Power of Diversity Creates Better Groups, Firms, Schools, and Societies, Princeton, NJ: Princeton University Press, 2007).

6. Alison Paul, Thom McElroy, and Tonie Leath- erberry, “Diversity as an engine of innovation: retail and consumer goods companies find competitive advantage in diversity,” Deloitte Review 8, January 1, 2011, http://dupress.com/ articles/diversity-as-an-engine-of-innovation/.

7. Deloitte Australia and Victorian Equal Oppor- tunity and Human Rights Commission, Waiter, is that inclusion in my soup? A new recipe to

improve business performance, November 2012, http://www.deloitte.com/assets/Dcom-Austra- lia/Local%20Assets/Documents/Services/Con- sulting/Deloitte_Diversity_Inclusion_Report_ V4_Nov_2012.pdf, accessed January 23, 2014.

8. Juliet Bourke, Bernadette Dillon, Stephanie Quappe, and Linda Human, Inclusive leader- ship: Will a hug do?, March 2012, http:// www.deloitte.com/assets/Dcom-Australia/ Local%20Assets/Documents/Services/ Consulting/Human%20Capital/Deloitte_In- clusive_Leadership__March%202012%20 v2.0.pdf, accessed January 23, 2014.

9. Deloitte Australia, “Interview with Mike Henry (Group Executive & Chief Marketing Officer, BHP Billiton): Reflections on investing in leaders to accelerate diversity and inclusion outcomes,” May 2013, https://www.deloitte. com/view/en_AU/au/services/consulting/ human-capital/DiversityandInclusion/ fc1eb8b30902e310VgnVCM3000003456f70aR- CRD.htm, accessed January 23, 2014.

10. Bourke, Dillon, Quappe, and Human, Inclusive leadership: Will a hug do?

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The overwhelmed employee Simplify the work environment

AN explosion of information is over-whelming workers, while smartphones, tablets, and other devices keep employees tethered to their jobs 24/7/365. The Atlantic recently termed this trend “hyper-employ- ment,” noting that even the unemployed can suffer from it.1

Studies show that people check their mobile devices up to 150 times every day.2 Yet despite employees being always on and constantly con- nected, most companies have not figured out how to make information easy to find. In fact, nearly three-quarters (72 percent) of employ- ees have told us they still cannot find the information they need within their company’s information systems.3

This constant and frenetic level of activ- ity also costs money, perhaps $10 million a year for mid-size companies.4 According to one study, 57 percent of interruptions at work resulted from either social media tools or switching among disparate stand- alone applications.5

The true downside of this information overload is harder to measure. With every- one hyper-connected, the reality may be that

employees have few opportunities to get away from their devices and spend time thinking and solving problems. And the problem is getting worse. The sun never sets on a global company, so someone is always working, awaiting a response to an email or phone call. The weekend as a time away from work is also becoming a thing of the past.

More than half of the respondents to our Human Capital Trends survey believe that their organizations are not doing a good job helping workers address information overload and today’s demanding work environment. Nearly six in ten respondents (57 percent) say their organizations are “weak” when it comes to helping leaders manage difficult schedules and helping employees manage information flow (figure 1).

According to our global survey, executives around the world are sounding the alarm, with respondents in most countries recognizing the urgent need to address this challenge. But, with the exception of Spain and Kenya, executives in few countries report their capabilities are equal to the sense of urgency (figure 2).

• Information overload and the always-connected 24/7 work environment are overwhelming workers, undermining productivity and contributing to low employee engagement.

• Sixty-five percent of executives in our survey rated the “overwhelmed employee” an “urgent” or “important” trend, while 44 percent said that they are “not ready” to deal with it.

• HR has an opportunity to lead efforts to manage the pervasive communications practices that overwhelm employees, simplify the work environment, create more flexible work standards, and teach managers and workers how to prioritize efforts.

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Creating more time to think and produce

How serious is the problem? Julian Birkenshaw and Jordan Cohen studies the pro- ductivity of knowledge workers and found that people waste as much as 41 percent of their time on things that offer little personal satisfac- tion and do not help them get work done.6

One reason employees are so busy is they may be afraid to delegate tasks, while more and more employees, particularly men, view “being busy” as a badge of honor. In fact, new research shows that 29 percent of men with children work more than 50 hours per week—a “worka- holic” lifestyle that increases with income and seniority.7

Many have suggested that, as organizational leaders and as individuals, we need to learn new skills to manage time. While Yahoo’s CEO Marissa Mayer made headlines when she asked employees to stop working at home, what she was really saying was that “we want to know what you’re working on so we can make sure you prioritize well.”8

The value of smaller, agile teams Organizations are beginning to acknowl-

edge their share of responsibility for the

problem of the overwhelmed employee and take steps to help solve it.

Historically, managing time and informa- tion was viewed as an employee’s personal concern. If employees were overwhelmed, the thinking went, they were expected to fix it themselves—by taking a course in time management, for instance. Now, some employ- ers are treating overload as a shared problem requiring a company response. In short, the overwhelmed employee is being viewed as a business and productivity challenge, as well as a personal one.

One strategy companies are following to help employees become more productive with their time is creating smaller, more agile teams.

The software industry, which is widely known for experimenting with innovative management practices, has been revolution- ized by the “agile” model.9 Under this system, teams are broken up into small groups that regularly hold short, face-to-face meetings. Each day, these teams have daily “scrums” and “stand up meetings.” These events last no lon- ger than 15 minutes, forcing people to rapidly discuss issues, resolve problems, and get back to work.

This practice is backed up by research from Richard Hackman, a former professor at Harvard University and Yale University, which

% of total number of responses

Number of respondents

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Active employee management of their own development and careers

Helping employees manage information and schedules

Helping leaders manage demanding schedules and expectations 4%

4%

6%

39%

39%

41%

57%

57%

53%

Figure 1. An underwhelming response to today’s overloaded employee

Graphic: Deloitte University Press | DUPress.com

HR executives’ assessment of capability to address the overwhelmed employee ExcellentAdequate Weak

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found that small teams outperform big ones.10 Hackman also demonstrated that teams where members know each other well communicate more quickly, with far fewer words and emails.

To make meetings shorter and more efficient, Jeff Bezos, CEO of Amazon, hit

on a novel approach he calls the “two pizza” rule. Every meeting at Amazon should be small enough to feed everyone with two piz- zas—limiting attendance to around five to seven employees.

The Human Capital Capability Gap Index The Deloitte Human Capital Capability Gap Index is a research-based index that shows HR’s relative capability gap in addressing a given talent or HR-related problem. It is computed by taking an organization’s self-rated “readiness” and subtracting its “urgency,” normalized to a 0–100 scale. For example, if an organization feels that an issue is 100 percent urgent and it also rates itself 100 percent capable and ready to address the issue, the capability gap would be zero. These gaps, which are almost always negative, can be compared against each other.

The capability gap grid By plotting the gaps on a grid (with readiness on the vertical and urgency on the horizontal), we can see how capability gaps vary among different countries and industries.

• Capability gaps at the lower right part of the grid are those of high urgency and low readiness (areas that warrant major increases in investment).

• Capability gaps at the upper right part of the grid are highly urgent, but companies feel more able to perform in these areas (they warrant investment but are lower priority than those at the bottom right).

• Capability gaps on the left side of the grid are areas of lesser importance, and those lower in the grid are areas of less readiness.

Graphic: Deloitte University Press | DUPress.com

30

35

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30 35 40 45 50 55 60 65 70

Spain

Kenya

Argentina

Mexico

Chile

South Africa

Ireland

Brazil

United Kingdom Netherlands

China

United States

Poland

Switzerland India

Canada

Germany

Uruguay

Japan

Luxembourg

Australia Belgium

Portugal

All others

Ireland

Brazil

United Kingdom

South Africa

Canada

United States

Belgium

Chile

Luxembourg

All others

Australia

Portugal

Mexico

Poland

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Switzerland

Argentina

Netherlands

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Spain-5

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-36

Figure 2. Urgency vs. readiness: Who is leading, who is lagging?

Capability gap grid

The overwhelmed employee

Capability Gap Index (readiness – urgency)

So m

ew ha

t re

ad y

(5 0)

10 0

= R

ea dy

g f

0 =

N ot

r ea

dy

100 = Urgent gImportant (66.6)Somewhat important (33.3) f 0 = Not important

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Simplifying HR practices and employee systems

It’s likely that many organizations will look to their HR leaders to help figure out how to address worker overload. Some HR organiza- tions are already stepping up to the challenge.

Best Buy, for example, adjusted its “flexible working” policies to encourage employees to take time off and recharge. Adobe eliminated steps in its performance appraisal process, helping managers and employees save several weeks each year.

Simplifying business and HR systems and making them easier to use can also make employees more productive. People no longer want more features in their enterprise software; they want “one click” or “one swipe” transac- tions. We call this the “consumerization” of corporate systems—which really amounts to valuing the time of a company’s employees as much as it respects the time of its customers.

In our most recent research on HR sys- tems adoption, ease of use and user interface integration were rated as the most important factors in driving user adoption.11

This finding raises many important ques- tions: How many steps does it take at your company to appraise an employee? To fill in an expense report? To register for a corporate course? How easy is it to find information, people, and resources in your company? If the HR and IT departments are not working

together to make things easier, they are taking away valuable employee time.

Outsourcing or insourcing non-core tasks

Companies are also looking at ways to out- source or insource repetitive, non-core tasks to free up employee time and energy.

Pfizer developed a program called PfizerWorks that allows employees to off-load technical and administrative non-core tasks, such as statistical analysis, writing, and pub- lishing. Scientists claim it saves months of time per year, allowing them to dedicate more time to strategic work and their scientific skills.12

Changing work expectations Does everyone need to be online all day

and night? Some executives now deliberately avoid sending emails at night or on weekends, sending a signal to the team that it is OK to disconnect and unwind.

Professional services organizations are increasingly asking teams to travel less and offering the option to work at home, enabling them to save time and energy on commuting and travel.

More and more companies are experiment- ing with “email free” times and the use of collaborative web tools that slow down massive email distribution and focus communications directly to the smaller working team.

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Where companies can start

THE point of these and similar efforts is not merely to save employees’ time, reduce stress, and foster employee engagement, important as those aims are. Rather, it is also to free up unproductive time to permit more- engaged employees to focus deeply on business imperatives. Here are a few starting points:

• Lead through example: Change is often most powerful when it comes from the top. Leaders should have—and should grant themselves—permission to take these steps, setting an example to help their employees deal with being overwhelmed.

• Get input: Assess employees’ current workloads and what issues trouble them most. Rather than ask high-level engage- ment questions, survey them on their most “frustrating” work practices or systems.

• Simplify HR and talent programs: Reduce the number of steps and make it possible to complete an entire process in a few minutes.

• Simplify information and HR systems: Consolidate HR and employee sys- tems in favor of what we call a “learning

architecture”—one integrated place to find information, people, and content.

• Publicize and celebrate flexible work policies: Employees need to understand that it is OK to work at home, take time off during the day, and miss meetings. Clear policies help make it possible for people to disengage from less important tasks when they are busy with other projects or personal needs.

• Make meetings productive: Post guid- ing principles in every meeting location to encourage effective meetings. Help people reduce the size of meetings, number of emails, and frequency of communication. Schedule meetings for 20 or 50 minutes rather than 30 or 60. “Stand up” meetings are a powerful way to keep people from wasting time.

• Delegate decision making: Is it clear who makes decisions in your workgroup? Can people make their own decisions without involving many others or asking others for help? Push decisions down, and people’s lives become easier.

LESSONS FROM THE FRONT LINES

Saving employee time by promoting effective communication

A global health care company initiated a major program to address the issues of information overload, meeting ineffectiveness, and unnecessary travel. The project produced four recommendations:

• Enforceable guidelines on sending emails, holding meetings, and traveling—and educating staff in these areas. Meetings were limited to 30 minutes, while the use of “cc” and “reply all” in emails was curtailed.

• Empowering leaders to replace some travel by making greater use of virtual technology—including Live Meeting, WebEx, Skype, and MS Lync—and improving the overall virtual technology experience in the company.

• Dedicating half a day per week to focus on company’s leadership initiatives, with an emphasis on connecting with customers.

• Promoting accountability in decision making in these areas by working with HR.

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BOTTOM LINE Companies need to recognize that the overwhelmed, hyper-connected employee is a business concern. As employees become more connected and messages and information proliferate, it is increasingly important for employers to develop standards, principles, and technologies that simplify work. The opportunity for business and HR leaders is to find ways to make information easier to find, simplify processes and systems, keep teams small, and make sure leaders provide focus. The result will likely be improved employee satisfaction, teamwork, and productivity.

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Authors

Tom Hodson, managing principal, Leadership Center for Clients Deloitte Consulting LLP [email protected]

Tom Hodson collaborates with clients on leader and team effectiveness, strategic change, and innovation. He also leads Professional and Leader Development for the Consulting practice, where he has implemented innovative programs including the development of web-based and mobile technology platforms to drive behavioral change, personal development, and recognition.

Jeff Schwartz, global Human Capital leader, Marketing, Eminence, and Brand Deloitte Consulting India Pvt Ltd [email protected]

Jeff Schwartz is the practice leader for the Human Capital practice in US India, based in New Delhi, and the global leader for Human Capital Marketing, Eminence, and Brand. A senior advisor to global companies, his recent research focuses on talent in global and emerging markets. He is a frequent speaker and writer on issues at the nexus of talent, human resources, and global business challenges.

Ardie van Berkel, Human Capital leader, Deloitte EMEA Deloitte Consulting BV [email protected]

Ardie van Berkel is the Human Capital leader for the Netherlands and is also a member of Deloitte’s supervisory board in the Netherlands. She is an active market-facing client partner who consults on merger integrations, organizational design, HR strategies, and change management to support major transformation programs, primarily in the public sector.

Contributor Lisa Barry

Ian Winstrom Otten, HR Transformation practice leader, Deloitte Japan Deloitte Tohmatsu Consulting Co. Ltd [email protected]

Ian Winstrom Otten focuses on helping global clients improve the quality of HR service delivery by driving projects that define the right underlying HR model to establish a cost-effective mix of service centers, processes, and technology. He also helps clients deploy these solutions globally, with constant attention on change adoption throughout. He has been working in the human capital area since 1996 and has led large global projects to implement SAP, PeopleSoft, and Workday.

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Endnotes

1. Ian Bogost, “Hyperemployment, or the ex- hausting work of the technology user,” Atlantic, November 8, 2013, http://www.theatlantic.com/ technology/archive/2013/11/hyperemploy- ment-or-the-exhausting-work-of-the-technol- ogy-user/281149/, accessed January 23, 2014.

2. Victoria Woollaston, “How often do you check your phone? The average person does it 110 times a DAY (and up to every 6 seconds in the evening),” Mail Online, October 8, 2013, http://www.dailymail. co.uk/sciencetech/article-2449632/How- check-phone-The-average-person-does- 110-times-DAY-6-seconds-evening.html.

3. David Mallon, Janet Clarey, and Mark Vickers, The high-impact learning organization series, Bersin & Associates, September 2012, www. bersin.com/library or www.bersin.com/hilo.

4. Assuming an average salary of $30 per hour, for businesses with 1,000 employees, the cost of an hour per day of interrup- tions exceeds $10 million per year.

5. I can’t get my work done! How collaboration & social tools drain productivity, Harmon.ie, 2011, http://www.uclarity.se/ wp-content/uploads/Distraction_Survey_Re- sults_US.pdf, accessed January 23, 2014.

6. Julian Birkinshaw and Jordan Cohen, “Make time for the work that matters,” Harvard Business Review, September 2013, http://hbr. org/2013/09/make-time-for-the-work-that- matters/ar/1, accessed January 23, 2014.

7. Joan C. Williams, “Why men work so many hours,” Harvard Business Review Blog Network, May 29, 2013, http://blogs.hbr. org/2013/05/why-men-work-so-many- hours/, accessed January 23, 2014.

8. Julianne Pepitone, “Marissa Mayer: Yahoos can no longer work from home,” CNNMoney, February 25, 2013, http://money.cnn. com/2013/02/25/technology/yahoo-work- from-home/, accessed January 23, 2014.

9. “Manifesto for agile software de- velopment,” http://agilemanifesto. org/, accessed January 23, 2014.

10. J. Richard Hackman, “Six common mispercep- tions about teamwork,” Harvard Business Review Blog Network, June 7, 2011, http:// blogs.hbr.org/2011/06/six-common-misper- ceptions-abou/, accessed January 23, 2014.

11. Josh Bersin, “The Move from Systems of Record to Systems of Engagement,” Forbes, August, 16, 2012, http://www.forbes.com/ sites/joshbersin/2012/08/16/the-move- from-systems-of-record-to-systems-of- engagement/ accessed January 23, 2014.

12. Jean McGregor, “Outsourcing tasks instead of jobs,” Bloomberg Businessweek, March 11, 2009, http://www.businessweek.com/ stories/2009-03-11/outsourcing-tasks- instead-of-jobs, accessed January 23, 2014.

13. Deloitte internal analysis based on client interviews.

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Transform and reinvent

The reskilled HR team Transform HR professionals into skilled business consultants

CEOS now see human capital strategies as one of their top priorities for growth.1 In order to meet their business goals, senior

executives today are holding HR departments accountable for developing creative new ways to acquire talent, build employee skills, develop leaders, engage employees at all levels, and retain critical workers.

This challenge comes at a time when shifting demographics, rapid technologi- cal advances, increasing globalization, and the rise of new work arrangements are forc- ing companies to reengineer many of their people strategies. Many businesses have also told us that they are seeing a “disruption” of the CHRO role in their organizations and are refocusing HR as a “business contribution” function—a role that demands deeper skills in data and analytics as well as MBA-level business capabilities.

The critical question is whether HR teams have the skills they need to rise to the chal- lenge. According to our global survey, more than one-third of respondents report that

their HR and talent programs are just “get- ting by” or even “underperforming.” Twice as many respondents say that their HR and talent programs are “underperforming” (10 percent) as consider them “excellent” (5 percent) (figure 1).

When asking about organizations’ readi- ness to respond to the 12 global trends, our global survey revealed significant differences between business executives and HR leaders. For the five most urgent and important trends we identified, business executives at large companies (10,000+ employees) believe that their companies are less ready to address these issues than HR leaders report (figure 2):

• Leadership (the most urgent trend according to our survey): 40 percent of business leaders reported that their com- pany is “not ready,” compared to 28 percent of HR leaders

• Reskilling HR: 48 percent of business respondents reported that HR is “not ready,” compared to 36 percent of HR respondents

• Less than 8 percent of HR leaders have confidence that their teams have the skills needed to meet the challenge of today’s global environment and consistently deliver innovative programs that drive business impact.

• Business leaders agree: 42 percent of business leaders believe their HR teams are underperforming or just getting by, compared to the 27 percent who rate HR as excellent or good when assessing HR and talent programs.

• To become an effective business partner, HR teams need to develop deeper business acumen, build analytical skills to underwrite their leadership, learn to operate as performance advisors, and develop an understanding of the needs of the 21st-century workforce.

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• Global HR and talent management: 45 percent of business executives reported that the company is “not ready,” compared to 29 percent of HR executives

• Retention and engagement: 38 percent of business executives reported that their

company is “not ready,” compared to 27 percent of HR executives

• Talent and HR analytics: 57 percent of business respondents reported that their company is “not ready,” compared to 41 percent of HR respondents

Graphic: Deloitte University Press | DUPress.com

Excellent

Good

Adequate

Getting by

Underperforming 9.7%

24.1%

31.4%

30.1%

4.8%

Figure 1. Rating HR performance

“How would you assess your HR and talent program capabilities?”

Graphic: Deloitte University Press | DUPress.com

Leadership Non-HR

Reskilling the HR function

Non-HR

Global HR and talent management

Non-HR

Retention and engagement

Non-HR

Talent and HR analytics Non-HR 7%

12%

11%

20%

19%

18%

10%

13%

12%

16%

35%

47%

50%

53%

36%

54%

42%

51%

48%

56%

57%

41%

38%

27%

45%

29%

48%

36%

40%

28%510

185

513

179

480

180

504

185

508

181

HR

HR

HR

HR

HR

Not ready Somewhat ready Ready

Figure 2. Business leaders and HR executives’ take on their readiness level for the five most “urgent” and “important” trends (companies with 10,000+ employees)

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Differences in perceived readiness exist, not just between HR and non-HR respondents, but among global regions as well. Executives in Japan, Germany, the United Kingdom, and China all recognize the importance of reskill- ing HR, but doubt their companies’ ability to respond (figure 3).

Ramping up HR skills What is behind this perceived lack of HR

skills? The problem is relatively easy to under- stand at one level, yet elusive at another.

More than 70 percent of all HR profession- als enter the field without a specific degree or certification in business or human resources.2

Graphic: Deloitte University Press | DUPress.com

Figure 3. Urgency vs. readiness: Who is leading, who is lagging?

10

20

30

40

50

60

70

20 30 40 50 60 70 80 90

Spain

Kenya

Argentina

Mexico Chile

South Africa Ireland

Brazil

United Kingdom

Netherlands China

Unitd States

Poland

Switzerland India

Canada

Germany

Japan

Luxembourg

Australia

Belgium

Portugal

All others

Uruguay

-13

-16

-16

-19

-21

-22

-22

-23

-24

-24

-24

-25

-26

-27

-28

-29

-29

-31

-31

-33

-35

-35

-39

-42 Japan

Germany

United Kingdom

China

Brazil

Mexico

South Africa

Portugal

All others

Ireland

Canada

Netherlands

Australia

India

Chile

Argentina

United States

Belgium

Luxembourg

Poland

Kenya

Spain

Switzerland

Uruguay

Capability gap grid

Reskilling the HR function

Capability Gap Index (readiness – urgency)

So m

ew ha

t re

ad y

(5 0)

10 0

= R

ea dy

g f

0 =

N ot

r ea

dy

100 = Urgent gImportant (66.6)Somewhat important (33.3) f 0 = Not important

•

•

•

The Human Capital Capability Gap Index The Deloitte Human Capital Capability Gap Index is a research-based index that shows HR’s relative capability gap in addressing a given talent or HR-related problem. It is computed by taking an organization’s self-rated “readiness” and subtracting its “urgency,” normalized to a 0–100 scale. For example, if an organization feels that an issue is 100 percent urgent and it also rates itself 100 percent capable and ready to address the issue, the capability gap would be zero. These gaps, which are almost always negative, can be compared against each other.

The capability gap grid By plotting the gaps on a grid (with readiness on the vertical and urgency on the horizontal), we can see how capability gaps vary among different countries and industries.

• Capability gaps at the lower right part of the grid are those of high urgency and low readiness (areas that warrant major increases in investment).

• Capability gaps at the upper right part of the grid are highly urgent, but companies feel more able to perform in these areas (they warrant investment but are lower priority than those at the bottom right).

• Capability gaps on the left side of the grid are areas of lesser importance, and those lower in the grid are areas of less readiness.

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Given that many organizations do not invest in developing either the HR or the business skills of their HR teams, it is no surprise that they are falling behind.3 This lack of skills severely limits HR’s ability to impact business strategy and advance business goals. For example, a 2013 study found that only 14 percent of com- panies reported that their HR teams have the capabilities to utilize talent analytics—a critical function as HR becomes more data-intensive.4

This year’s global survey supports this find- ing. Forty-three percent of respondents stated that their companies are “weak” when it comes to providing HR with appropriate training and experiences; 47 percent rate their companies “weak” on preparing HR to deliver programs aligned with business needs; and 50 percent rate their companies “weak” when it comes to providing innovative solutions and programs (figure 4).

Companies need to challenge themselves to develop programs and professional expecta- tions to transform HR employees into skilled business consultants. What skills does HR need to more effectively meet the demands of today’s businesses? The specific list will vary across companies, but all share the need to develop skills in three primary areas:

1. HR and talent skills

2. Business, industry, and global skills

3. Management, leadership, and program implementation skills

HR and talent skills

• Technical HR skills. Specialists should have deep skills in training, recruiting, sourcing, organizational design, employee relations, labor relations, compensation strategies, benefits, and many other areas. These technical skills should be refreshed every year as new vendors, technologies, and strategies emerge.

• Labor market and workforce knowledge. HR teams should have a deep understand- ing of the labor markets and workforces where their companies operate. What cul- tural, demographic, and local labor market trends affect a company’s ability to hire, retain, and engage people? How do high- performing leaders in Japan, for example, compare with high-performing leaders in China or Brazil? What will attract engineers in San Jose vs. Munich vs. Bangalore?

Graphic: Deloitte University Press | DUPress.com

% of total number of responses

Number of respondents

609

610

610

Providing HR staff with appropriate training and experiences

Preparing HR staff to deliver programs aligned with

business needs

Holding HR accountable to provide innovative solutions and programs 7%

6%

8%

43%

46%

49%

50%

47%

43%

Figure 4: HR teams report they are poorly prepared to integrate HR and business strategy

HR executives’ assessment of HR capability levels ExcellentAdequate Weak

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LESSONS FROM THE FRONT LINES

Prioritizing skill development to raise retention and performance

A fast-growing global health care company realized five years ago that it lacked leadership capabilities, talent mobility, and managerial practices, resulting in high turnover and low levels of service.5 The CEO recruited a new CHRO to upgrade the skills of the HR team from top to bottom. Specific reforms included:

• Asking the HR team to evaluate its own performance and assessing why some areas were rated poorly

• Developing a senior peer-to-peer certification for senior HR business partners

• Establishing technical centers of excellence in talent acquisition, performance management, talent mobility, compensation and rewards, retention and engagement, and analytics

• Recruiting MBAs into the HR department

• Creating an internal research and tools group within HR focused on research and methodology development

• Pushing the team to develop small consulting groups that brought HR practices together to work on business- unit-specific programs

Today, this company is a leader in innovative HR practices and has become an employer of choice in its markets. Five years of investment in HR skills and capability have paid off in higher employee retention, better engagement, and stronger performance.

• Managing a service operation. HR teams must understand how to manage to service levels, design service-centric systems and solutions, measure quality of service, and implement self-service technology.

• Technology and analytics. It is impos- sible to run or manage HR without a deep understanding of multiple technologies— from payroll systems to social sharing tools. Cloud, mobile, and social technologies are critical areas where HR professionals should develop leading skills. As big data becomes a pervasive resource and tool, HR professionals should also develop skills and comfort with data, statistics, and analytics. This area may be one of the largest gaps for HR teams as they reskill for the future.

Business, industry, and global skills

• Business and industry acumen. HR professionals should develop a deep

understanding of business and industry trends: how the company makes money, what drives long-term competitive advan- tage, what skills are needed to maintain and drive improved profits, what new products are underway, how customers perceive value, and how to drive innovation. The challenge for HR professionals is to help the business create value through their under- standing of talent, such as by identifying new sources of talent in new markets.

• Global insights. Most businesses, large and small, operate globally when it comes to customers, supply chains, and talent mar- kets. HR professionals must be innovative in accessing talent in global geographies, determining what is required to be effective in local talent markets, and understanding how to integrate HR programs across coun- tries and regions to provide “one source of truth” for HR and talent data and insights.

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Management, leadership, and program implementation skills

• Management and leadership. HR profes- sionals must understand how people lead, how to coach leaders, and how to lead their own teams. They should have the confi- dence and the leadership experience to interact with senior business professionals in a meaningful way.

• Project and change management skills. It is easier to design a “picture-perfect”

program than to get managers and employ- ees to adopt it. Focusing on the realities of change and achieving practical results should be in the crosshairs of every HR manager.

• Continuous development and knowl- edge sharing. Just as IT, finance, sales, and customer service invest heavily in training and certifications, HR should develop an “HR for HR” team that certifies, develops, and continuously improves the skills of the entire HR function.

Where companies can start

THE CHRO should play the role of “chief change officer,” championing the HR team’s expansion from providing HR services to business consulting.

Fifty-nine percent of respondents in a recent global report rated “increased change management” their top concern for improving their business transformation efforts.6 Business leaders are waiting for HR leaders and profes- sionals to reskill and up their game.

Critical starting points include:

• Invest in HR professional development: Our benchmarks show that high-impact HR teams spend between $1,200 and $2,500 annually per HR professional on training, development, research, and tools, compared to an average of $500 across all organizations.7

• Elevate and deepen the business partner role: Our research shows that the future of HR consists of highly trained expert

business partners coupled with networks of deep specialists, supported by service centers for transactional work.

• Focus on emerging business-critical skills: Business leaders rated analytics, workforce planning, and leadership as the most important HR skills, reinforcing that reskilling HR is not about “doubling down” on traditional HR skills but about expand- ing into delivering insights on analytics, business, and globalization.

• Establish a professional development team: An “HR for HR” team can apply the same level of skills assessment, development planning, and career development to HR as HR does to the rest of the organization.

• Conduct self-assessments: Define roles clearly and then honestly benchmark roles, structure, and skill levels. How proficient is

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BOTTOM LINE The global economy is poised for a growth cycle. A limiting factor will be the increasing scarcity of talent, which will only intensify the need for HR to ably lead the organization forward. HR teams that rise to the challenge will see their internal effectiveness, external market value, and overall stature climb.

Reskilling HR was rated the third most urgent and important trend in our 2014 global survey, with 77 percent of respondents ranking it as “urgent” or “important.” Businesses report that their HR teams are “not ready” or up to the job in critical areas including leadership, retention, global, and analytics. To achieve better business results, companies will need to reskill and invest in their HR and talent capabilities. Focusing on emerging HR skills, such as analytics and deep business and global skills, is a place to start.

the HR team compared to other companies? Where it is strong and where is it weak? Be honest with this assessment.

• Diversify HR to meet business goals: Consider HR to be an internal consulting organization and bring the strongest HR leaders together to take action where busi- ness needs demand it. At the same time, HR can be strengthened with an infusion of professionals with strong business back- grounds—as long as they master the critical HR skills necessary for their tasks.

• Break down silos within HR: Connect specialists with each other and with HR

centers of excellence, encourage deep skill building and knowledge sharing, and create communities of practice. Encourage centers of excellence to work together on major ini- tiatives like turnover, workforce planning, engagement, and leadership development.

• Change the measurement of HR busi- ness partners: Rather than measuring HR business partners by “client satisfaction,” use talent metrics (quality of hire, leader- ship progression, retention) so that HR feels responsible for outcomes, not just adminis- trative services.

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Contributors Robin Lissak, Jennifer Steinmann

Authors

Udo Bohdal-Spiegelhoff, Human Capital leader, Deloitte Germany Deloitte Germany [email protected]

Udo Bohdal-Spiegelhoff is recognized in the market as a thought leader in change management, strategy execution, leadership and organizational development, large-scale facilitation, and HR advisory capabilities. He has led many complex global transformations such as large-scale reorganizations, HR and people strategy implementations, and post-merger integrations for clients in a variety of industries.

Jason Geller, Human Capital leader, Deloitte US Deloitte Consulting LLP [email protected]

Jason Geller is the National Managing Director for Deloitte Consulting LLP’s Human Capital practice in the United States and a member of the Deloitte India board. He is responsible for overall strategy, financial performance and operations, talent recruitment and development, and delivery of services. Geller has served as a US Deloitte Consulting board member, the global and US leader for HR Transformation, and the US Human Capital chief strategy officer. He advises organizations on their HR and talent transformations.

Cathy Benko, vice chairman and managing principal Deloitte Consulting LLP [email protected]

Cathy Benko is internationally renowned for being among the first to design and implement a systemic response to the changing workforce. She holds dual roles as Deloitte Consulting LLP’s talent game-changer and the leader of Deloitte’s corporate citizenship agenda, driving the firm’s collective societal impact. Benko is a US patent-holder and the bestselling co-author of several books, including The Corporate Lattice (Harvard 2010) and Mass Career Customization (Harvard 2007).

Hugo Walkinshaw, executive director Deloitte Consulting Pte Ltd [email protected]

Hugo Walkinshaw leads the Human Capital practice and the manufacturing industry sector in Southeast Asia, and is the Asia Pacific HR Transformation practice leader. He is primarily focused on delivering large-scale HR Transformation programs, working with both captive and outsourced service delivery models. With over 20 years of experience, Walkinshaw has provided assistance to clients in Japan, China, Hong Kong, Taiwan, the Philippines, Indonesia, Malaysia, Thailand, and Singapore, as well as in the United States and Europe.

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Endnotes

1. Cathy Benko, Trish Gorman, and Alexa Rose Steinberg, “Disrupting the CHRO: Following in the CFO’s footsteps,” Deloitte Review 14, January 17, 2014, http:// dupress.com/articles/dr14-disrupting- the-chro/, accessed January 23, 2014.

2. Karen O’Leonard, HR factbook 2011®: Benchmarks and trends in HR spending, staffing, and resource allocations, Bersin & Associates, June 2011. This information is based on current research by Bersin by Deloitte on the topic of high-impact HR, the report for which is due to be published in 2014.

3. Josh Bersin, The career factbook for HR and learning professionals, Bersin & Associates, June 2009, www.bersin.com/library.

4. Josh Bersin, Karen O’Leonard, and Wendy Wang-Audia, High-impact talent analytics: Building a world-class HR measurement and analytics function, Bersin by Deloitte, October 2013, www.bersin.com/library.

5. This information is based on current research by Bersin by Deloitte on the topic of high- impact HR, the series of reports for which are due to be published throughout 2014.

6. 2013 Global Shared Services survey results, Deloitte, February 2013, http://www.deloitte. com/view/en_US/us/Services/additional- services/Service-Delivery-Transformation/ 656989ae16dfc310VgnVCM3000003456f7 0aRCRD.htm, accessed February 2, 2014.

7. Bersin, The career factbook for HR and learning professionals.

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Talent analytics in practice Go from talking to delivering on big data

AT a time when big data is becoming a mainstream strategy in many business functions, HR is playing catch-up. Right now, 86 percent of companies report no analytics capability in the HR function, compared to 81 percent of companies that utilize analytics in finance, 77 percent in operations, 58 percent in sales, and 56 percent in marketing.1

The good news is that 57 percent of HR teams increased their investment in measure- ment and analytics in 2013.2 Companies that are ahead of the game in this area are doubling their improvements in recruiting, tripling their leadership development capabilities, and enjoying 30 percent higher stock prices than their peers.3

Today’s focus on HR analytics is not new. Companies have been trying to understand workforce data since the early 1900s. The evolving discipline of talent analytics, how- ever, combines workforce data with business data to help companies make better business decisions about people. Critical questions— such as whom to hire, how to manage people, and what drives performance, retention, and

customers—can now be understood statisti- cally and answered with data, not just opinion or experience.

Despite understanding the importance of HR analytics, respondents to our survey are largely unprepared to meet this challenge. Companies in major industrialized nations, such as Japan, Germany, and the United Kingdom report that they are especially behind the curve (figure 1).

The key leap from talk to action Despite the powerful improvements analyt-

ics can deliver, most companies have yet to convert these capabilities into action. While 14 percent of companies now have some form of analytics capabilities, more than 60 percent are still stuck with a disorganized set of HR systems and no clear way to make meaningful data-driven decisions.4

This may be one reason why at least nine in ten respondents in our survey rate their companies as “weak” or just “adequate” when judging their current talent and HR analyt- ics capabilities. Organizations rate themselves

• HR is evolving into a data-driven function, with the focus shifting from simply reporting data to enabling the business to make informed talent decisions, predict employee performance, and conduct advanced workforce planning.

• While 78 percent of large companies (with 10,000 or more employees) rated HR and talent analytics as “urgent” or “important,” enough to place analytics among the top three most urgent trends, 45 percent of the same companies rated themselves “not ready” when assessing their readiness in HR analytics—among the lowest readiness rankings for any of the 12 global trends. Only 7 percent of large companies rated their organizations as having “strong” HR data analytics capabilities today.

• Companies that successfully leverage analytics and big data will be positioned to outperform their peers in executing their talent strategies.

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poorly when using HR data to predict work- force performance and improvement, with more than two-thirds (67 percent) calling this capability “weak” (figure 2).

Aware of their weaknesses, nearly half (48 percent) of global respondents are actively developing or planning to move ahead with talent and HR analytics capabilities (figure 3).

In 2014, the focus on big data in business will challenge HR leaders to build a talent ana- lytics team, bring together multi-disciplinary skills, and develop a long-range plan to “datafy” HR.5

A transition of this magnitude cannot happen overnight, but more than 60 percent

Graphic: Deloitte University Press | DUPress.com

Spain

Kenya

Argentina

Mexico

Chile

South Africa

Ireland

Brazil

United Kingdom Netherlands

China United States

Poland

Switzerland

India

Canada

Germany

Japan

Luxembourg

Australia

Belgium

Portugal All others

Uruguay

10

20

30

40

50

60

70

20 30 40 50 60 70 80

Figure 1. Urgency vs. readiness: Who is leading, who is lagging?

Japan

Germany

United Kingdom

Brazil

Canada

Netherlands

United States

Argentina

Mexico

South Africa

India

China

Spain

Australia

Switzerland

All others

Belgium

Kenya

Chile

Luxembourg

Uruguay

Ireland

Portugal

Poland-13

-13

-15

-17

-21

-22

-25

-25

-27

-27

-27

-27

-29

-29

-31

-31

-32

-33

-34

-36

-39

-42

-44

-44

Capability gap grid

Talent and HR analytics

Capability Gap Index (readiness – urgency)

So m

ew ha

t re

ad y

(5 0)

10 0

= R

ea dy

g f

0 =

N ot

r ea

dy

Somewhat important (33.3) 100 = Urgent gf 0 = Not important Important (66.6)

•

•

•

The Human Capital Capability Gap Index The Deloitte Human Capital Capability Gap Index is a research-based index that shows HR’s relative capability gap in addressing a given talent or HR-related problem. It is computed by taking an organization’s self-rated “readiness” and subtracting its “urgency,” normalized to a 0–100 scale. For example, if an organization feels that an issue is 100 percent urgent and it also rates itself 100 percent capable and ready to address the issue, the capability gap would be zero. These gaps, which are almost always negative, can be compared against each other.

The capability gap grid By plotting the gaps on a grid (with readiness on the vertical and urgency on the horizontal), we can see how capability gaps vary among different countries and industries.

• Capability gaps at the lower right part of the grid are those of high urgency and low readiness (areas that warrant major increases in investment).

• Capability gaps at the upper right part of the grid are highly urgent, but companies feel more able to perform in these areas (they warrant investment but are lower priority than those at the bottom right).

• Capability gaps on the left side of the grid are areas of lesser importance, and those lower in the grid are areas of less readiness.

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of companies are putting plans in place now.6 Examples of high-value solutions include:

• Understanding the characteristics of high- performing salespeople to better select and attract leading candidates

• Identifying work-related factors that cor- relate to fraud and accidents, enabling

managers to dramatically reduce loss by focusing on well-known patterns

• Setting up an internal platform for veteran employees to find new positions within a firm by matching skills with jobs

• Creating analytics models that understand and predict turnover so managers can more

Graphic: Deloitte University Press | DUPress.com

% of total number of responses

Number of respondents

509

512

514

512

Utilizing HR and talent operational reporting and scorecards

Conducting multi-year workforce planning

Correlating HR data to business performance

Using HR data to predict workforce performance and improvement 7%

8%

7%

8%

26%

30%

31%

40%

67%

62%

62%

52%

Figure 2. A big challenge with big data

HR executives’ assessment of talent and HR analytics capability levels ExcellentAdequate Weak

Graphic: Deloitte University Press | DUPress.com

Strong

Under active development

Limited

Planning how to proceed

Not considering at this time

Not applicable 3%

6%

15%

35%

33%

8% 134

560

595

262

105

47

Figure 3: Nearly half of the companies surveyed are moving forward

Talent and HR analytics: State of HR analytics capabilities

Number of respondents

Talent analytics in practice

119

rapidly change work conditions or behavior to keep top people from leaving

• Understanding the impact of pay increases in detail to make more scien- tific decisions about where to invest to maximize performance

Successful talent analytics programs require focused investment, dedicated cross-functional teams, and strong partnerships between HR, IT, and business operations. HR should take a leadership role by embracing this positive

disruption—an opportunity to bring together different parts of the business to solve prob- lems and drive business results.

A key insight provided by talent analytics is the ability to link business goals directly to talent strategies. Rather than focusing on HR spending and measuring HR metrics alone, talent analytics today has the power to ana- lyze the contribution people make to business outcomes across the board—from sales and customer service to accident reduction and quality improvement.

LESSONS FROM THE FRONT LINES

Using analytics to understand turnover and raise retention

A global pharmaceutical company facing an extremely competitive talent market in China understood it had to reduce workforce turnover to meet its growth targets. It embarked on a predictive analytics effort to improve retention, particularly among its sales force.

Using data from the previous three years, the company developed and implemented a model to provide predictive insights on critical sales roles for the company and pivot points that influenced retention. The model enabled prediction down to the level of the individual employee, identifying which variables were strong predictors of retention and turnover, and informing the development of focused retention strategies. For example, despite an intensely competitive talent market, compensation was not the primary driver of turnover.

Using this highly data-driven model to improve the targeting and effectiveness of its retention strategy, the company has been able to use the analysis to take targeted action to improve retention. The company was able to focus its investments on the retention initiatives that offer the highest value and impact.

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Where companies can start

FOR many companies, the transition from data reporting to data analytics is a leap into the unknown. HR teams question if they have the skills and understanding to put this function together. Industrial and organiza- tional psychologists, statisticians, and data analysts may all be needed to help HR build this new capability.

Potential starting points include:

• Look for skilled analysts to lead the team: Having a skilled analyst on your team isn’t the same as having a skilled analyst lead the team. That said, depending on the maturity of the organization, a skilled salesperson may be better equipped at leading the team, given the amount of convincing the organi- zations (both HR and business) will likely require on the topic.

• Add a couple of outlier profiles to the analytics team, such as econometricians, demographers, computer/applied scien- tists, and business intelligence specialists. They usually bring in a different view to the challenges at hand while being hands-on with numerical analyses, fact-finding, and generating insights from data.

• Create a community of practice where intrinsically interested professionals can share experiences and best practices. They will become your best ambassadors, and establishing a community of prac- tice ties in to the overall action of raising visibility for fact-based decision making through analytics.

• Equip analysts with HR technology, perfor- mance consulting, visualization, and project management skills. Build a close relation- ship between HR and IT; HR organizations working in predictive analytics often have an IT specialist on the HR staff.

• Identify specific business challenges to be addressed: Use data to meet visible busi- ness challenges by working with business units to agree on deliverables, reports, and expectations. Don’t just try to analyze data; start by focusing on business problems.

• Build capabilities by experimenting: Choose a business problem, bring people from different functions together, consider which types of data might help solve that problem, and find the techniques that might help the team analyze the data and devise solutions.

• Make analytics user-friendly for the entire organization through the use of tools such as dashboards in order to provide maxi- mum value to business units.

• Do not let the perfect be the enemy of the good: Recognize that without quality data, analytics projects will likely fail; at the same time, insisting on 100 percent data qual- ity means a project will likely never begin. Data quality remains a challenge for all functions in analytics; it is valuable to lever- age the data that does exist to start improv- ing people-related decisions today.

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BOTTOM LINE Over a decade ago, author Michael Lewis’s book Moneyball7 told the story of how people decisions in professional sports could be dramatically improved by using numbers and analysis, rather than on the basis of subjective opinion alone—a conclusion that has been widely accepted in business. In the 2014 Global Human Capital Trends survey, companies indicated that they understood the importance of building their HR and talent analytics capabilities, but also revealed significant gaps in their current readiness and capabilities. It can take three to five years to build a strong talent analytics function and the same length of time, or longer, to develop a mindset and culture in which people make decisions based on data and not just instinct. It is important to start laying the groundwork. In 2014, companies should take action to build HR and talent analytics capabilities, to seek out and conduct pilot projects focused on critical business and talent problems, and to invest in developing the analytics capabilities to drive the HR function going forward. Recognizing HR’s reputation as a profession and function that shies away from numbers and data, it is critical to move from talk to action.

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Authors

John Houston, global Workforce Analytics leader Deloitte Consulting LLP [email protected]

John Houston is the global leader of Workforce Analytics, which provides services that combine deep knowledge in human capital strategy and program implementations with advanced business intelligence capabilities to help organizations gain visibility into data to support their efforts to make informed and timely business decisions.

Boy Kester, Organization Strategy and Analytics leader, Deloitte Netherlands Deloitte Consulting BV [email protected]

Boy Kester leads the Dutch Organization Strategy and Analytics practice and is part of the global Workforce Analytics leadership team. He supports his clients by configuring and developing winning organizations that understand where to play and how to win, and has consulted on market entry strategies. He specializes in the identification, quantification, and development of critical organizational capabilities, as well as in performance management. Kester works primarily for high-tech, manufacturing, and life sciences conglomerates.

Contributors Rishi Agarwal, Carl Bennet, Russ Clarke, Ben Fish, Bart Moen, Karen O’Leonard, Van Zorbas

Josh Bersin, principal and founder, Bersin by Deloitte Bersin by Deloitte, Deloitte Consulting LLP [email protected]

Josh Bersin founded Bersin & Associates in 2001 to provide research and advisory services focused on corporate learning. He is a frequent speaker at industry events and is a popular blogger. He has spent 25 years in product development, product management, marketing, and sales of e-learning and other enterprise technologies. His education includes a BS in engineering from Cornell, an MS in engineering from Stanford, and an MBA from the Haas School of Business at the University of California, Berkeley.

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Endnotes

1. Josh Bersin, Karen O’Leonard, and Wendy Wang-Audia, High-impact talent analytics: Building a world-class HR measurement and analytics function, Bersin by Deloitte, October 2013, www.bersin.com/library.

2. Ibid.

3. Ibid.

4. Ibid.

5. Josh Bersin, “The datafication of human resources,” Forbes, July 19, 2013, http://www. forbes.com/sites/joshbersin/2013/07/19/ the-datafication-of-human-resources/, accessed January 23, 2014.

6. Josh Bersin, Karen O’Leonard, and Wendy Wang-Audia, High-impact talent analytics.

7. Michael Lewis, Moneyball: The Art of Winning an Unfair Game, (New York: W.W. Norton & Company, 2004).

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Race to the cloud Integrate talent, HR, and business technologies

THE HR technology marketplace is one of the fastest-growing areas of business. The market for integrated talent management sys- tems will reach nearly $5 billion in 2014, and the market for human resources management systems (HRMS) is now over $12 billion.1

Why the dynamic growth? Today, perhaps for the first time in nearly

20 years, cloud computing has brought ven- dors together around a common set of tech- nologies, making solutions more integrated, easier to use, and easier to deploy than ever. Organizations can select and implement a wide range of HRMS and talent management tools in record time, eliminating the need to build an enormous IT team to install, configure, and customize software.

Interestingly, however, given the size of the HR technology market, less than half of our global survey respondents said that they were in the process of updating their HR and talent systems, and over 56 percent of respondents reported they have no definitive plans or no plans in this area (figure 1).

Companies that update their HR and talent systems are using technology to change the organization, rather than making technology

the change in itself. Research suggests there are four key factors that determine success—or failure—for companies moving to cloud-based HR technology platforms: integration, ease of use, industrial strength, and implementation and support.2

Shifting from legacy silos to a single integrated system

The average large company has seven HR systems of record.3 These systems typically do not communicate well, if at all—a problem that has been frustrating HR and business leaders for years.

A 2012 global survey found that two-thirds of companies are willing to sacrifice technical features for a single-vendor or highly inte- grated solution.4 Today, implementing inte- grated HR systems is increasingly within reach.

Most of the major ERP providers (Oracle, SAP, Workday, ADP, Infor, and NetSuite) are building highly integrated end-to-end HR, payroll, and talent management platforms. In 2014, these technology companies will likely focus heavily on incorporating analyt- ics platforms, mobile interfaces, and better recruiting systems.

• Companies are rapidly moving away from legacy systems to implement a new breed of highly integrated, cloud-based talent and HR systems.

• Two-thirds of our global survey respondents say that HR technologies are “urgent” or “important,” yet 56 percent report that their companies are either not considering updating their systems or have no definitive plans to do so.

• Companies that adopt cloud-based talent solutions ahead of their peers may gain an advantage in driving employee satisfaction, engagement, capability development, and performance—and generating data for the emerging wave of talent analytics.

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Companies across the world recognize the importance of implementing these kinds of systems, but almost all are unprepared to do so. With the exception of companies in just a few countries—for example, Switzerland—most are far behind in the race to replace legacy HR technologies with integrated cloud-based solutions (figure 2).

Mobility drives ease of use and impact

The ultimate suc- cess of HR software is directly dependent on its adoption by users. Embracing mobile access is an essential feature of any easy-to-use technology plat- form. Organizations tell us that upwards of 40 percent of job applications now come via mobile devices.5 Employees want mobile access for time and expense reporting, employee directory, knowledge sharing, and other HR applications.

Unfortunately, many employers are cur- rently unable to provide such tools. A solid

majority (60 percent) of global survey respon- dents acknowledge that their organizations have not implemented HR technology that is “up to date, easy to use, and mobile-accessible” (figure 3).

HR applications benefit by having a mobile strategy, both to promote ease of use and increase business impact. Today’s HR software is not only a system of record; it is a “system of engage- ment.”6 Employees and managers use these systems for everyday

support, including collaboration, learning, goal setting, and expertise sharing. When companies roll these systems out, they are creating a new way of working for most of the organization.

Providing industrial-strength implementation and support

HR technology is complex and offers thou- sands of features and applications.

Graphic: Deloitte University Press | DUPress.com

Yes, complete

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Figure 1: Limited investment in HR and talent systems

“What are your plans to replace current HR technology with new integrated cloud-based systems?”

Today’s HR software is not only a system of record; it is a “system

of engagement.”

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While the cloud has made system installa- tion easier, companies still need a support team behind them. Vendors, for example, can now upgrade systems automatically every three to six months, rather than waiting for corporate IT departments to plan updates. Companies need a process to manage this change, along with processes for data quality and error

handling. Moreover, it is increasingly impor- tant to avoid costly customization.

Data-driven decision making HR systems now have “embedded analyt-

ics”—dashboards that instantly show rankings, ratings, and graphical views of people-related data in two-dimensional form. Therefore, an

The Human Capital Capability Gap Index The Deloitte Human Capital Capability Gap Index is a research-based index that shows HR’s relative capability gap in addressing a given talent or HR-related problem. It is computed by taking an organization’s self-rated “readiness” and subtracting its “urgency,” normalized to a 0–100 scale. For example, if an organization feels that an issue is 100 percent urgent and it also rates itself 100 percent capable and ready to address the issue, the capability gap would be zero. These gaps, which are almost always negative, can be compared against each other.

The capability gap grid By plotting the gaps on a grid (with readiness on the vertical and urgency on the horizontal), we can see how capability gaps vary among different countries and industries.

• Capability gaps at the lower right part of the grid are those of high urgency and low readiness (areas that warrant major increases in investment).

• Capability gaps at the upper right part of the grid are highly urgent, but companies feel more able to perform in these areas (they warrant investment but are lower priority than those at the bottom right).

• Capability gaps on the left side of the grid are areas of lesser importance, and those lower in the grid are areas of less readiness.

Graphic: Deloitte University Press | DUPress.com

Figure 2. Readiness vs. urgency: Who is leading, who is lagging?

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% of total number of responses

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Graphic: Deloitte University Press | DUPress.com

HR executives’ assessment of HR technology capability ExcellentAdequate Weak

Implementing HR technology that is up to date, easy to use, and

mobile-accessible 9%31%60%

Figure 3. HR technology deployment not keeping up

important step in any new systems project is to define data standards and establish a data dictionary.7 When these standards are estab- lished early, the results can be groundbreaking, providing companies with data to inform and drive decision making.

In addition to considering data issues during system implementation, companies should also train HR business partners and

line managers to use the new data made avail- able to them. Companies should build simpler dashboards and graphical tools that make data easy to use and actionable. Line managers, for example, do not need to be trained analysts or statisticians, but they need to understand how to access data that can help them make better business decisions.

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LESSONS FROM THE FRONT LINES

Using the cloud to simplify data management

Seeking to replace redundant manual processes and manage its global workforce more efficiently, cosmetics and beauty products leader Elizabeth Arden decided to move its HR technology to the cloud. In 2011, the company selected long-time partner Oracle to deploy the Oracle Fusion HCM cloud-based solution.

The rollout was planned in phases. Since the company’s non-US businesses were expected to grow faster than US operations and had significantly fewer capabilities to manage their workforce, Elizabeth Arden planned a phased deployment. Phase 1 of the program focused on its largest and most complex non-US markets—the United Kingdom and Switzerland. Phase 2 continued the program’s global rollout to the remaining European and Asian countries. Phase 3 will focus on the United States.

The scope of the project was quite broad. It included implementing a global set of “good practice” HR processes and creating a single global source for employee data. Workforce reporting and analytics tools were also built into the system.

The solution streamlines core human capital and talent management functions such as performance, compensation, and employee objectives and goals. HR can now easily extract information and upload it to existing payroll systems, while an automated annual compensation process allows for more consistent and equitable compensation practices, at both the global and the local level. Employees can now enter and access their personal information easily, and managers enjoy faster, more consistent data management processes.8

Users describe the new system, MyHRDoor, as “employee-friendly” and “ready to use” while also providing more robust reporting and analytics capabilities for management. The end result is less paperwork, much simpler business processes, and more reporting at the user’s fingertips. As a result of this move to the cloud, Elizabeth Arden has significantly improved its workforce reporting and analytics capabilities, enabling the company to dramatically raise its ability to manage a variety of HR responsibilities critical for today’s global businesses—from increasing global mobility to more effective performance management and succession planning.

Equally important, the solution can constantly evolve to meet the company’s changing needs. New Oracle upgrades can be uploaded easily every few months, delivering greater functionality with every new release. The process of applying upgrades to cloud solutions is significantly less time-consuming than for traditional ERP technology, and is a critical differentiator for cloud solutions.

For Elizabeth Arden, the ease of use, greater functionality, and sharply heightened analytics capability mean that its cloud-based solution reaches beyond technology and process improvement to serve as a catalyst for broader organizational and cultural change.

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Where companies can start

IF cloud-based talent solutions are so power-ful, what is holding some companies back from adopting them? Mainly, it’s coming to the realization that cloud solutions are now mature enough to make a real difference—and mustering the activation energy to get started. Potential starting points include:

• Be prepared to sprint, but start with a plan: Take advantage of the shorter time frames needed to implement cloud- based HR and talent technologies. Develop a game plan in which process improvement and data and analytics are priorities that guide the selection and implementation process.

• Align with critical and emerging busi- ness goals and metrics: Ensure that HR has a strong understanding of the organi- zation’s emerging and core business issues and key metrics and performance indica- tors to determine what HR-related data will be most useful in aligning and driving business performance.

• Assign a joint HR/business/IT leader- ship team: Create a team to promote active cooperation and interaction among HR specialists, as well as between business and HR, to ensure effective integration strate- gies, security, mobile access standards, and vendor selection.

• Refresh the HR service delivery model: Use the opportunity provided by the imple- mentation of new technology to rethink how HR serves users, how it will support self-service technology, and how local busi- ness partners will leverage the system.

• Promote broad adoption: Bring together all stakeholders early to encourage wide- spread adoption of the system once it is rolled out. Make the system easy to use for both HR managers and employees.

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BOTTOM LINE The race to the cloud presents an opportunity for HR transformation. A new cloud-based platform allows companies to consolidate legacy systems and dramatically improve decision making. These systems also help redefine the role of HR, set up a more scalable service delivery model, and improve the effectiveness of HR business partners. Today’s integrated HR platforms are not just systems of record, but “systems of engagement.” When adopted widely, these platforms enable dramatic improvements in productivity, capability development, collaboration, and data-driven decision making.

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Authors

Andrew Hill Deloitte Touche Tohmatsu [email protected]

Andrew Hill has been with Deloitte for 15 years and currently leads the HR Transformation team in Australia. Hill consults to many of Australia’s leading organizations on projects that include HR strategy, HR service delivery strategy, business case preparation, shared services, service centers, HR technology, HR intranet design, HR outsourcing, and retained HR organization design. Hill is currently leading several initiatives planning cloud-based HR services and productivity improvement.

John Malikowski, global Workday leader Deloitte Consulting LLP [email protected]

John Malikowski has more than 20 years of experience in HR consulting. He focuses on global HR strategy and transformation, defining and developing global HR service delivery and processes, HR transformation, and global HRMS Implementations. He has a proven track record of success with large-scale HR and IT consulting across the manufacturing, retail, transportation, insurance, life sciences, financial services, entertainment, and public sector industries.

Erica Volini, national service line leader, HR Transformation Deloitte Consulting LLP [email protected]

As the US HR Transformation practice leader, Erica Volini works with organizations to determine how best to deliver HR services that enable global growth and drive enhanced profitability. Volini has led global HR Transformation projects involving Workday, SAP, SuccessFactors, PeopleSoft, and Oracle. She also serves on Deloitte’s board advisory council and is the leader for the Service Delivery Transformation practice, which focuses on transformation across HR, finance, IT, and procurement.

Contributors Jeff Altman, Michael Stephan

Brett Walsh, global Human Capital leader Deloitte Touche Tohmatsu Limited [email protected]

Brett Walsh consults at a senior level on HR strategies, merger integration, organization design, and major transformation programs, including the provision of back-office shared services and outsourcing, with particular expertise in HR and change management. He has an MBA from Warwick University and is a fellow of the Institute of Business Consultants. His international consulting experience includes working with clients in the United States, the Netherlands, Germany, Italy, Switzerland, and France.

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Endnotes

1. Katherine Jones, Wendy Wang-Audia, and David Mallon, Talent management systems 2013: Market analysis, trends, and solution provider profiles, Bersin & As- sociates, November 2012, www.bersin. com/library or www.bersin.com/tms.

2. This information is based on our cur- rent research on the topic of HCM implementation, the report for which is due to be published in April 2014.

3. Jones, Wang-Audia, and Mallon, Tal- ent management systems 2013.

4. Ibid.

5. Katherine Jones, Buyer’s guide to talent acquisition management and onboard- ing solutions 2013, Bersin by Deloitte, July 2013, www.bersin.com/library.

6. Josh Bersin, “The move from systems of record to systems of engagement,” Forbes, August 16, 2012, http://www.forbes.com/ sites/joshbersin/2012/08/16/the-move- from-systems-of-record-to-systems-of- engagement/, accessed on January 27, 2014.

7. A “data dictionary” (or “metadata repository”) is the information about the data (such as its meaning, relationships to other data, origin, usage, and format) contained in a data model or database. A data dictionary can be consulted to understand where a data item fits in the structure, what values it may contain, and what the data item means in real-world terms.

8. Deloitte, Implementing Oracle Fusion at Elizabeth Arden, April 2013, http://www. deloitte.com/view/en_GB/uk/services/consult ing/6f90e2b9e699b310VgnVCM2000003356f 70aRCRD.htm, accessed on January 27, 2014.

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The global and local HR function Balance scale and agility

GLOBAL businesses should have a global HR function. At the same time, in order to compete successfully in diverse markets, companies should recruit, train, and manage people locally—reflecting local culture, local labor markets, and the needs of diverse local business units.

Creating global standards, platforms, and service centers addresses only part of the challenge. Leading companies are developing HR operating models that are flexible enough to allow for local implementation and agile enough to adapt to local markets and business needs. The ultimate goal: to combine scale and agility to optimize talent management in every market where the company does business.

The global side of the equation For many organizations, one of the key

drivers of a globally integrated HR strategy is the need for talent mobility within the company. Leading companies often move talent from region to region to address key talent gaps.

Consider a business unit in California with a strong need for engineering skills. The company may have a team in Moscow with precisely the right skills that has just finished a similar project. Unless the company’s talent practices are globally integrated, this match between business need and existing skills may never take place.

Companies operating on a global basis often offer high-potential employees global developmental assignments as one of their “tours of duty.” They also face the need to move specialists to global assignments rap- idly. Globally integrated HR is critical to this process, but many companies do not have the systems in place to accomplish these increas- ingly common HR responsibilities.

In fact, when HR readiness was compared among more than 20 talent practices, the implementation of global mobility and career programs was among the lowest rated—more than 40 percent lower than the average for all other HR practices. More than two out of three executives (70 percent) rate their

• Business and talent strategies should be global in scale and local in implementation. Effective programs recruit, train, and develop people locally.

• Global HR and talent management is the second most urgent and important trend for large companies around the world (those with 10,000 or more employees), according to our global survey.

• Companies face the challenge of developing an integrated global HR and talent operating model that allows for customizable local implementation, enabling them to capitalize on rapid business growth in emerging economies, tap into local skills, and optimize local talent strategies.

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company’s ability to deliver on this need as “weak” (figure 1).

Adapting global HR to local talent marketplaces

While businesses today operate in a per- vasively global environment when it comes to customers, talent, and supply chains, each local labor market has vastly different dynam- ics. To balance strong global HR strategies and platforms, companies should build flexibility and agility into HR so it can be customized for local markets.

The talent markets in Asia, for example, are far different from those in Western Europe and North America. Critical skills are in short sup- ply; top candidates change jobs every nine to twelve months; salaries are increasing nearly 10 percent annually. To adapt to these conditions, talent strategies should focus on recruiting, rapid talent mobility, onboarding, and acceler- ated leadership development.

Of course, these variances are not limited to Asia. Localized challenges drive demand for local talent solutions in every region where a company does business. Labor regulations, compensation expectations, workplace cul- ture, and many other factors vary significantly among regions. While global consistency and

standards drive efficiency and scale, local flex- ibility powers growth and employee engage- ment. To achieve both, companies should move toward a new HR operating model.

When asked how well their companies are adapting HR and talent programs to local needs, executives were roughly split between “weak” and “adequate,” while less than 10 per- cent rated themselves as “excellent” (figure 1).

Moving from globally rationalized to globally optimized

For the past decade, many companies have been implementing a shared services model for HR to reduce global costs and improve service delivery. In most large companies, this “ratio- nalized” model delivers tremendous benefits. It saves money, increases service to managers and employees, and provides global scale.

But for companies trying to recruit and optimize their teams in disparate markets, this shared services model is neither robust enough nor flexible enough to address the widely dif- fering challenges that come from operating in dozens of individual markets.

How can companies aggressively recruit and build leaders in fast-growing Asian markets? How should organizations reskill

% of total number of responses

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Configuring HR and talent programs to meet local country needs

Managing consistent talent processes and systems

around the world

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Figure 1. Building a new global HR operating model

Graphic: Deloitte University Press | DUPress.com

HR executives’ assessment of global HR capability levels ExcellentAdequate Weak

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and retain employees in Western Europe or the United States? What is the most effective strategy for developing talent in India? These and many other issues demand a balance of global standards that can be customized to fit local needs.

Addressing issues like these requires a shift from global rationalization to global

optimization. Yet our survey found that many companies are struggling to adapt, particularly organizations in Brazil, Japan, and the United Kingdom (figure 2).

To make progress in this area, companies should focus on implementing an integrated HR operating model that centralizes critical

Graphic: Deloitte University Press | DUPress.com

Figure 2. Readiness vs. urgency: Who is leading, who is lagging?

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The Human Capital Capability Gap Index The Deloitte Human Capital Capability Gap Index is a research-based index that shows HR’s relative capability gap in addressing a given talent or HR-related problem. It is computed by taking an organization’s self-rated “readiness” and subtracting its “urgency,” normalized to a 0–100 scale. For example, if an organization feels that an issue is 100 percent urgent and it also rates itself 100 percent capable and ready to address the issue, the capability gap would be zero. These gaps, which are almost always negative, can be compared against each other.

The capability gap grid By plotting the gaps on a grid (with readiness on the vertical and urgency on the horizontal), we can see how capability gaps vary among different countries and industries.

• Capability gaps at the lower right part of the grid are those of high urgency and low readiness (areas that warrant major increases in investment).

• Capability gaps at the upper right part of the grid are highly urgent, but companies feel more able to perform in these areas (they warrant investment but are lower priority than those at the bottom right).

• Capability gaps on the left side of the grid are areas of lesser importance, and those lower in the grid are areas of less readiness.

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LESSONS FROM THE FRONT LINES

Driving business change through HR integration

In 2010, a large financial services company began a business transformation that included significant investments to modernize the firm’s service infrastructure. This included the modernization of human resources policies, programs, and infrastructure to support new compensation and talent management programs, the development of global centers of excellence, regional shared services, and the implementation of global HR platforms—all aligned to support a globally integrated operating model with the flexibility to adapt to local needs.

This task was made more complex by the organization’s history of acquisitions and decentralized operations. As a result, HR had operations in over 90 counties and more than 200 HR and payroll systems. This decentralized operating structure made it difficult to meet the growing need for global HR data and processes for managing talent, performance, and compensation. The result was duplication of effort, high costs, HR service quality problems, and inadequate data for both HR and business-unit managers.

To lead the transformation of HR, the organization hired leaders and staff from the outside with experience doing similar projects for other large global companies. The program was ambitious. During the initial phase, an intense, thorough review of all HR systems confirmed the presence of a wide variety of unintegrated technological solutions and an unusually high-touch, local HR service delivery model—even by the standards of its industry. Based on this review, the company developed a design for a standard global HR operating platform supported by regional shared service centers.

A senior team of project managers focused on both global and local priorities—including designing new HR processes at both levels, building regional HR shared services centers, implementing global HR systems, and redesigning the operating model with a global emphasis. Larger countries participate fully in the new “targeted operating model,” which includes shared services. Smaller countries use an “express” version supported by a more locally delivered Workday solution.

With this global model in place, the initial phase of implementation focused on compliance, access to global HR data, platform rationalization, and associated cost reduction.

The company decided to launch its new model in Asia because its US operations already had shared services in place and a relatively standard, though old, operating platform. A new shared services center in Asia was followed by deployments in other regions, including a region comprising the Middle East, Africa, and Eastern Europe, and then a further rollout in Latin America.

In tandem with its global emphasis, the model also accounted for the critical importance of the local layer. The initial design phase included workshops on regional and, in several cases, country-specific requirements. Proposals for regional or local adaptations were referred back to the global HR organization for a thorough vetting process.

Simultaneously, a second aspect of the project’s global-local dynamic emerged as a key driver of success. In response to the perception that the effort was a US-driven global program, the project team shifted considerable responsibility and authority to regional HR transformation teams, while at the same time setting ground rules to retain the integrity of the new operating model. Making this change improved decision-making speed while also improving the perception and reality that regional and local HR teams were involved in the transformation.

The results have been impressive. To date, the transformation has consolidated over 70 legacy systems, reduced HR administrative work by 30 percent, improved compliance, and allowed HR services to more fully support the global alignment of the company’s businesses.

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core areas and empowers local HR teams to customize programs for local needs.

A high-impact global HR operating model

Our global survey shows that 81 percent of large organizations (10,000 employees or more) report that implementing an HR global operating model is “urgent” or “impor- tant” today. This urgent need aligns with our research into ways to create a high-impact HR operating model that combines global

integration with local optimization. Key fea- tures of this model include:

• Implementing a global technology plat- form that provides common HR standards, frameworks, and tools

• Empowering local teams to innovate and to customize corporate programs

• Defining HR success not simply in terms of cost-cutting, but by HR’s ability to drive business performance and growth

Where companies can start

A GLOBALLY integrated, locally custom-ized talent and HR strategy demands a combination of centralized, global standards and services coupled with distributed, highly trained experts. Our research suggests a clear set of starting points:

• Leverage global technology: Implement a common global technology platform to support the global HR organization and offer easy-to-use self-service capabilities to managers and employees.

• Rationalize core global services: Establish a core set of services for HR administra- tion and talent communities of expertise. Encourage communities of expertise to learn from local business partners to deter- mine leading practices in the field.

• Encourage country initiatives within global processes: Once global processes, roles, and expectations are created, expand the team to include communities of expertise and let local HR leaders create,

customize, and deliver local programs. They can leverage the corporate infrastructure and standards to optimize talent strate- gies and HR programs in each business and geography, driving impact at the country level.

• Create deep specialists: Reduce the need for HR generalists and move them into the role of HR specialists, focused on recruit- ing, organizational development, employee relations, and compensation. These spe- cialists can be located in or assigned to the business, but they should operate as a “network of expertise,” sharing skills with each other.

• Build HR “skill masters”: Invest in train- ing, certifying, and developing the HR team to ensure that each member knows how to use all tools and data and feels connected to the larger community of leading practices and new ideas in the marketplace. Deep expertise belongs in HR no less than in other functions.

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BOTTOM LINE Global integration and local optimization are twin goals attainable through global technology platforms and proper role and process definition. Global consistency and standards ensure efficiency and scale; local flexibility drives agility, growth, and employee engagement. Both are necessary to develop an HR organization that is globally “fit for purpose.”

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Contributors Lisa Barry, Walt Sokoll, Ardie van Berkel, Jungle Wong

Authors

Henri Vahdat, Human Capital leader, Deloitte Brazil Deloitte Consultores [email protected]

Henri Vahdat leads Deloitte’s Human Capital consulting practice in Brazil. With more than 19 years of experience in the management consulting industry, he advises public and private organizations on innovative ideas for managing their talent and successfully conducting complex business transformation programs. He is also an executive director of IBGC (the Brazilian Institute for Corporate Governance), where he is responsible for strategy, HR, and IT affairs.

Hugo Walkinshaw, executive director Deloitte Consulting Pte Ltd [email protected]

Hugo Walkinshaw leads the Human Capital practice and the manufacturing industry sector in Southeast Asia, and is the Asia Pacific HR Transformation practice leader. He is primarily focused on delivering large-scale HR Transformation programs, working with both captive and outsourced service delivery models. With over 20 years of experience, Walkinshaw has provided assistance to clients in Japan, China, Hong Kong, Taiwan, the Philippines, Indonesia, Malaysia, Thailand, and Singapore, as well as in the United States and Europe.

Michael Stephan, global HR Transformation leader Deloitte Consulting LLP [email protected]

Michael Stephan develops and integrates HR service delivery models across the operations and technology spectrum, with a targeted focus on optimizing the delivery of HR services around the world. His global consulting experience includes HR strategy, HR operating model design and implementation, HR business process outsourcing, global technology deployment, and enterprise transition management.

Brett Walsh, global Human Capital leader Deloitte Touche Tohmatsu Limited [email protected]

Brett Walsh consults at a senior level on HR strategies, merger integration, organiza- tion design, and major transformation programs, including the provision of back- office shared services and outsourcing, with particular expertise in HR and change management. He has an MBA from Warwick University and is a fellow of the Institute of Business Consultants. His international consulting experience includes working with clients in the United States, the Netherlands, Germany, Italy, Switzerland, and France.

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Endnotes

1. This information is based on current research by Bersin by Deloitte on the topic of high- impact HR, the series of reports for which are due to be published throughout 2014.

2. Lisa Barry, Jungle Wong, and Jeff Schwartz, Fu- elling the Asian growth engine: Talent strategies, challenges, and trends, Deloitte and the Human Capital Leadership Institute, December 2012, http://www2.deloitte.com/global/en/pages/ human-capital/articles/fuelling-asian-growth- engine.html, accessed on January 27, 2014.

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Editors Jeff Schwartz Global Human Capital leader, Marketing, Eminence, and Brand Deloitte Consulting India Pvt Ltd [email protected]

Jeff Schwartz is the practice leader for the Human Capital practice in US India, based in New Delhi, and the global leader for Human Capital Marketing, Eminence, and Brand. A senior advisor to global companies, his recent research focuses on talent in global and emerging markets. He is a frequent speaker and writer on issues at the nexus of talent, human resources, and global business challenges.

Bill Pelster Leader, Integrated Talent Management Deloitte Consulting LLP [email protected]

Bill Pelster is a Deloitte Consulting LLP principal with over 20 years of industry and consulting experience. In his current role, he is responsible for leading the Integrated Talent Management practice, which focuses on issues and trends in the workplace. In his previous role as Deloitte’s chief learning officer, Pelster was responsible for the total development experience of Deloitte professionals, including learning, leadership, high potentials, and career/life fit. Additionally, he was one of the key architects of Deloitte University.

Josh Bersin Principal and founder, Bersin by Deloitte Bersin by Deloitte, Deloitte Consulting LLP [email protected]

Josh Bersin founded Bersin & Associates in 2001 to provide research and advisory services focused on corporate learning. He is a frequent speaker at industry events and is a popular blogger. He has spent 25 years in product development, product management, marketing, and sales of e-learning and other enterprise technologies. His education includes a BS in engineering from Cornell, an MS in engineering from Stanford, and an MBA from the Haas School of Business at the University of California, Berkeley.

Editors

145

Acknowledgements

Global Human Capital Trends 2014 partner advisory panel Lisa Barry, Cathy Benko, David Foley, John Hagel, Daniel Helfrich, Tom Hodson, Simon Holland, Michael Stephan, Heather Stockton, Ardie van Berkel, Brett Walsh, Jungle Wong

Research team Research lead: Manu Birendra Singh Rawat

Survey deployment lead: Shrawini Vijay

Survey analysis lead: Hemdeep Singh

Researchers: Jaydev Adhikari, Megha Agrawal, Razina Bakhshi, Richa Bigghe, Anima Dabas, Jay Dipta, Lahar Garg, Kaustav Ghosh, Ankita Jain, Mankiran Kaur, Ekta Khandelwal, Saurabh Kumar, Annu Pandey, Zarmina Parvez, Vaishnavi Rangarajan, Karuna Sadh, Tapas Tiwari

Special thanks

• Julie May for driving the efforts of the editorial team, over 50 authors and contributors, and dozens of country sponsors who championed the survey outreach. Your vision for the report, boundless energy, and relentless attention to detail helped us attain a new level of global thought leadership.

• Jen Stempel, Gregory Vert, and Elizabeth Lisowski for leading the PMO from concept to publication, and especially for spearheading the development of the new Human Capital Trends Dashboard. Your drive to push the boundaries has helped us create a fabulous new tool with which to explore this rich dataset.

• Junko Kaji, Matthew Lennert, Jon Warshawsky, Emily Koteff-Moreano, and the incredible Deloitte University Press team for their editorial rigor, sharpness, and design skills. You pushed us to refine our thinking, sweat the details, and produce an even greater report.

• Becky Eckerman for leading our marketing program from day one and coordinating countless teams to help us develop an integrated global multimedia campaign.

Finally, our thanks to Brett Walsh, the global leader of our Human Capital practice, and Jason Geller, the United States practice leader, for their sponsorship, leadership, support, and counsel during every step in this journey, which began almost a year ago.

Global Human Capital Trends 2014: Engaging the 21st-century workforce

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Global Human Capital leaders

Brett Walsh Global Human Capital leader Deloitte Touche Tohmatsu Limited [email protected]

Lisa Barry Global Talent, Performance, and Rewards leader Deloitte Touche Tohmatsu [email protected]

David Foley Global Actuarial & Advanced Analytics leader Deloitte Consulting LLP [email protected]

Simon Holland Global Strategic Change & Organization Transformation leader Deloitte MCS Limited [email protected]

Nichola Holt Global Employment Services leader Deloitte Tax LLP [email protected]

Jeff Schwartz Global Human Capital leader, Marketing, Eminence, and Brand Deloitte Consulting India Pvt Ltd [email protected]

Michael Stephan Global HR Transformation leader Deloitte Consulting LLP [email protected]

Global Human Capital leaders

147

Americas & Chile Jaime Valenzuela Deloitte Audit y Consult. [email protected]

United States Jason Geller Deloitte Consulting LLP [email protected]

Canada Heather Stockton Deloitte Canada [email protected]

Mexico Jorge Castilla Deloitte Consulting Mexico [email protected]

Uruguay, LATCO Veronica Melian Deloitte SC [email protected]

Argentina Claudio Fiorillo Deloitte & Co. S.A. [email protected]

Brazil Henri Vahdat Deloitte Consultores [email protected]

Colombia Jesus Salcedo Deloitte Ases. y Consulto [email protected]

Costa Rica Federico Chavarría Deloitte & Touche S.A. [email protected]

Ecuador Roberto Estrada Andeanecuador Consultores [email protected]

Panama Domingo Latorraca Deloitte Consultores [email protected]

Peru Johnnie Jose Tirado Deloitte & Touche SRL [email protected]

Venezuela Maira Freites Lara Marambio & Asociados [email protected]

Human Capital country leaders Americas

Global Human Capital Trends 2014: Engaging the 21st-century workforce

148

Asia Pacific & China Jungle Wong Deloitte Consulting (Shanghai) Co. Ltd, Beijing Branch [email protected]

Australia David Brown Deloitte Touche Tohmatsu [email protected]

India P. Thiruvengadam Deloitte India [email protected]

Japan Kenji Hamada Deloitte Tohmatsu Consulting Co., Ltd [email protected]

Korea Kihoon (Alex) Jo Deloitte Consulting [email protected]

Won Seok Hur Deloitte Consulting [email protected]

New Zealand Hamish Wilson Deloitte [email protected]

Southeast Asia Hugo Walkinshaw Deloitte Consulting Pte Ltd [email protected]

Asia Pacific

EMEA & the Netherlands Ardie Van Berkel Deloitte Consulting BV [email protected]

United Kingdom Feargus Mitchell DTRAB Ltd [email protected]

David Parry Deloitte MCS Limited [email protected]

Austria Christian Havranek Deloitte Austria [email protected]

Belgium Yves Van Durme Deloitte Consulting [email protected]

Central Europe Evzen Kordenko Deloitte Advisory s.r.o. [email protected]

CIS Christopher Armitage CJSC Deloitte & Touche CIS [email protected]

Cyprus George Pantelides Deloitte Ltd [email protected]

Europe, Middle East, and Africa

Human Capital country leaders

149

Denmark Kim Domdal Deloitte Denmark [email protected]

Finland Anne Grönberg Deloitte Oy [email protected]

France David Yana Deloitte Conseil [email protected]

Philippe Burger Deloitte Conseil [email protected]

Germany Udo Bohdal-Spiegelhoff Deloitte Germany [email protected]

Ireland Cormac Hughes Deloitte & Touche [email protected]

Italy Lorenzo Manganini Deloitte Consulting SRL [email protected]

Kenya Kimani Njoroge Deloitte Consulting Ltd [email protected]

Luxembourg Filip Gilbert Deloitte Tax & Consulting [email protected]

Middle East Ghassan Turqieh Deloitte & Touche (M.E.) [email protected]

Norway Bjorn Helge Gunderson Deloitte AS [email protected]

Poland Magdalenda Jonczak Deloitte Business Consulting S.A. [email protected]

Portugal Joao Vaz Deloitte Consultores, S.A. [email protected]

South Africa Werner Nieuwoudt Deloitte Consulting Pty [email protected]

Spain Enrique de la Villa Deloitte Advisory, S.L. [email protected]

Switzerland Sarah Kane Deloitte Consulting Switzerland [email protected]

Turkey Ayse Epikman Deloitte Turkey [email protected]

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About Deloitte University Press Deloitte University Press publishes original articles, reports and periodicals that provide insights for businesses, the public sector and NGOs. Our goal is to draw upon research and experience from throughout our professional services organization, and that of coauthors in academia and business, to advance the conversation on a broad spectrum of topics of interest to executives and government leaders.

Deloitte University Press is an imprint of Deloitte Development LLC.

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Global Human Capital Trends 2014: Engaging the 21st-century workforce

Rose Leadem— November 8, 2018

8 Most Common Leadership Styles —8 Most Common Leadership Styles — Which One Are You?Which One Are You?

To be a successful leader, you have to understand what type of leadership works best for both you

and the people you manage. Because if there’s not a fluid match, you can forget about moving a

team — and business — forward.

So, what’s in a leadership style? Typically, a “leadership style” refers to a leader’s characteristics

when managing (and motivating) a team by directing, guiding and inspiring others. The most

powerful leaders have the greatest ability to inspire change and influence other people. Of course,

everyone is different and that’s especially true when it comes to leadership, for both the leaders

and the followers.

To figure out what type of leader you are, here are eight of the most common leadership styles.

1. Authoritarian

Authoritarian leaders (also known as autocratic leaders) provide clear and precise direction on

what needs to be done and how it should be done. As in its name, authoritarian leaders focus on

control and power as their key to successful management, making the division between leader and

follower well-defined. Authoritarian leaders tend to be decisive, domineering and confident.

If you have an authoritarian leadership style, it’s important to remain conscious of your actions and

others perceive you, as to not cross the line of becoming too overpowering or aggressive.

2. Participative

Participative, or democratic, leadership is a management style where people not only lead others

but involve themselves in the group’s activities. Participative leaders will often encourage team

members to become more involved in certain tasks or projects, but they will also lead by example.

Typically this type of leadership can help to develop a more engaged and collaborative work

environment. Participative leaders will take into account input from others but when it comes to

decision-making time, believe that it is their thoughts that have the final say. Common traits of a

participative leader include commitment, enthusiasm, empathy and drive.

3. Situational

If you identify yourself as easily adaptable to changing environments and people, your style might

fall under situational leadership. Situational leaders possess the ability to adapt to various

scenarios and different types of personalities.

In order to move a company forward and achieve goals, situational leaders understand that they

have to adjust their management to fit the types of followers that they are trying to influence. Self-

awareness, sociability and adaptability are among the top qualities of situational leaders.

4. Transformational

Transformational leadership focuses on moving a company forward and ultimately “transforming” it.

These types of leaders typically focus on ways to motivate employees, oftentimes pushing them

outside of their comfort zones.

Transformational leaders are growth-minded and want what’s best for the future of their company

— oftentimes putting company objectives before employees. Transformational leaders can be

adventurous, outgoing and fearless.

5. Transactional

Transactional leadership focuses on order and structure. Typically, these types of leaders will

reward employees when they’ve done something correct, and discipline them when the case is the

opposite.

They will oftentimes use rewards such as bonuses or extra vacation days to motivate and

incentivize employees. They focus on input (the work people put in) and output (the result of their

work). Common traits of transactional leaders are organization, discipline and motivation.

6. Bureaucratic

Similar to authoritarian leaders, bureaucratic leaders depend on themselves to make decisions.

However, unlike authoritarian leaders, bureaucratic leaders will listen to the input of their

employees when it comes to decision-making.

The catch is — if a bureaucratic leader thinks that employees’ input goes against company goals or

policies, he or she is quick to reject them. While these types of leaders might not come off as

controlling like authoritarian leaders often do, they can end up holding employees back by

discouraging innovation and an open work environment.

7. Servant

The primary goal of servant leadership is to serve those you’re leading. A servant leader

approaches decision-making as a collective effort, and both encourages and values the input of

others. Essentially, these types of leaders believe in a power-sharing business model; they are the

opposite of authoritarian leaders.

While servant leadership can increase employee morale and team cohesiveness, it’s important for

servant leaders to be wary of certain issues like a lack of authority or putting employee preferences

above business objectives.

8. Laissez-Faire

Also known as delegative leadership, laissez-faire leadership is characterized by a hands-off

approach. These types of leaders are the opposite of micromanagers — in fact, sometimes too

much.

Laissez-faire leaders expect and trust their employees to complete the tasks and projects

delegated to them. And while this can often be empowering to employees, sometimes it can limit

employee development and overlook important growth opportunities for the company.

R e l e v a n t T h e n, R e l e v a n t N o w

®SITUATIONAL LEADERSHIP

Copyright © 2017, Leadership Studies, Inc. All Rights Reserved. 2

SITUATIONAL LEADERSHIP®: RELEVANT THEN, RELEVANT NOW At its core, leadership is influence. Regardless of position, a leader is anyone who is able to influence others. Effective leadership is necessary to create and sustain a high-performing organization. Poor leadership can create a host of issues that undermine a company’s performance, including mismanagement of resources, high turnover rates and diminished returns on investment.

With so much at stake in today’s competitive business environment, organizations cannot ignore the importance of developing their leaders and the impact it can have on the business. Companies must equip their leaders with the tools and resources they need to skillfully navigate the demands of an increasingly diverse workforce and evolving global marketplace. And that starts with effective leadership development.

The Situational Leadership® Model transcends cultural and generational differences and equips leaders around the globe with the skills necessary to drive behavior change and increase productivity. For more than 45 years, the Situational Leadership® Model has enabled leaders at all levels of the organization to more effectively influence others.

HISTORY & BACKGROUND

Developed by Dr. Paul Hersey in the late 1960s, Situational Leadership® is frequently referred to as “organized common sense.” Dr. Hersey’s original Situational Leadership® Model

is based on the relationship between leaders and followers and serves as a framework to analyze each situation based on:

• The amount of guidance and direction (task behavior) a leader gives

• The amount of socioemotional support (relationship behavior) a leader provides

• The Performance Readiness® Level that followers exhibit in performing a specific task, function or objective

Situational leaders learn to demonstrate four core, common and critical leadership competencies:

DIAGNOSE: Understand the nuances of the specific situation they are trying to influence

ADAPT: Adjust their behavior in response to the contingences of the situation

COMMUNICATE: Interact with others in a manner they can understand and accept

ADVANCE: Manage the movement toward higher performance

Situational Leadership®, which stresses flexibility and simplicity in execution, prepares leaders to address the most pressing challenges pervasive in today’s work environment.

ORIGINAL SITUATIONAL LEADERSHIP® RESEARCH By definition, a model is a repeatable process. To add value, that model has to be leveraged on a consistent basis. And to be used consistently, it has to be practical and simple – without being simplistic.

Situational Leadership® helps leaders learn how to think, before it teaches

them what to do.

Dr. Sam Shriver

Copyright © 2017, Leadership Studies, Inc. All Rights Reserved. 3

The concepts, procedures, actions and outcomes derived from the Situational Leadership® Model are based on tested methodologies that are hands-on, real-world and easy to apply. Dr. Hersey synthesized 50 years of research on the behavior of leaders and followers to develop the Situational Leadership® Model. The model provides a framework for leaders to match their behaviors with the performance needs of the individual or group that they are attempting to influence. It is about adapting the directive and supportive behaviors that leaders use to match the Performance Readiness® of others to perform specific tasks or functions.

It seems odd to think about in this day and age, but the first 50 years of research on organizational behavior in general and leadership development in particular were

disconnected, isolated and dispersed. Frederick Winslow Taylor’s findings with Scientific Management (1911) were in direct contrast with the conclusions reached by Elton Mayo in the 1930s at the Hawthorne Electric Plant (Human Relations Theory). Concurrent research at Ohio State (Ralph Stogdill, 1948) and Michigan (Coch-French, 1948) produced four-box configurations that identified a leader’s approach as a function of providing some combination of structure and/or support. Douglas McGregor’s (1957) research suggested the assumptions a leader made about followers was the driving force behind leader behavior (Theory X, Theory Y), while Abraham Maslow (1954), Chris Argyris (1964) and Frederick Herzberg (1966) focused their attention on the factors that contributed to human motivation and development.

These various (and often juxtaposing) conclusions contributed to the foundational research that Dr. Hersey used to develop the Situational Leadership® Model, first published in 1969. After seeing this model create positive results for real-world leaders, Dr. Hersey concluded that there’s no such thing as a bad leadership style, they all work! Leadership is about learning when to use each style to effectively influence others.

HOW IT WORKS In essence, leaders using the Situational Leadership® Model (see Figure 1) start with the task and the person responsible to perform it, then ask:

• How much task-specific knowledge, experience or skill does this person bring to the table?

FIGURE 1

De le

ga tin

g Telling

Selling

Pa rt

ic ip

at ing

S up

po rt

iv e

B eh

av io

r R

el at

io ns

hi p

B eh

av io

r

Task Behavior Directive Behavior

HIGH LOWMODERATE

LOW HIGH

LO W

H IG

H

Situational Leadership® In�uence Behaviors

Performance Readiness®

S3

R4 R3 R2 R1

S4

S2

S1

Situational Leadership® changed the way I managed people.

Retired Senior Vice President, Biotechnology Industry

Situational Leadership® and Performance Readiness® are registered trademarks of Leadership Studies, Inc. Copyright © 1972 - 2017. All Rights Reserved.

Copyright © 2017, Leadership Studies, Inc. All Rights Reserved. 4

• Is this individual confident, committed and motivated to perform this task?

Answers to these simple questions produce four combinations of ability and willingness (Performance Readiness®) that the leader can use as a starting point:

The leader then determines leadership style as a function of:

TASK OR DIRECTIVE BEHAVIOR: The extent to which a leader engages in defining roles, structuring activity and providing the what, where, when, how and, if more than one person is involved, who is to do what for a particular task.

RELATIONSHIP OR SUPPORTIVE BEHAVIOR: The extent to which a leader engages in two-way communication, facilitates interaction and actively listens.

Various combinations of task and relationship behavior define four leadership styles the leader can employ

depending upon the assessment of Performance Readiness® for the task in question:

Leadership effectiveness depends on a leader’s ability to assess the Performance Readiness® of an individual and use the appropriate leadership style for the situation. For example, a new hire with little knowledge and experience to perform a task would require more direction than an employee who has several years of experience. If a leader entrusts a new employee to perform the task with little guidance, then the employee will likely exhibit poor performance and ultimately feel frustrated and lost. But if a leader provides proper detail and instruction, then the employee will feel empowered with the knowledge to effectively perform the task. However, a leader cannot

Telling or guiding: The leader leverages his or her base of experience to make decisions, provide

direction and create movement.

S1

Selling or explaining: The leader clarifies decisions and

recognizes the enthusiasm of the follower in an effort to ensure understanding.

S2

Participating or involving: The leader and follower brainstorms alternatives in an effort to mutually

establish alignment.

S3

Delegating or entrusting: The leader trusts the follower to

leverage his or her base of experience to complete the task.

S4 “I am motivated, competent

and confident.”

R4

“I have a good understanding of what to do, but I need support.”

R3

“I am inexperienced, but highly motivated, so I need both encouragement and direction.”

R2

“I need clear structure and direction.”

R1

Copyright © 2017, Leadership Studies, Inc. All Rights Reserved. 5

simply provide direction without also providing some level of support. How much is some? It truly depends on the situation, which is precisely what the Situational Leadership® Model helps leaders to determine.

BENEFITS OF SITUATIONAL LEADERSHIP® At its core, Situational Leadership® provides leaders with an understanding of the relationship between an effective style of leadership and the level of Performance Readiness® that followers exhibit for a specific task.

With application across organizational leaders, first- line managers, individual contributors and even teams, Situational Leadership® utilizes task specificity to serve as a mechanism through which leaders maximize their influence-related impact.

BENEFITS OF SITUATIONAL LEADERSHIP®:

• Is a multidirectional model that can be leveraged for influencing up, down and across the organization

• Creates a common language of performance

• Accelerates the pace and quality of employee development

• Is a repeatable process that your leaders can leverage to effectively influence the behavior of others

• Utilizes task specificity to serve as a mechanism through which leaders maximize their influence-related impact

• Addresses situations where people are developing or regressing

INFLUENCE ACROSS GENERATIONS While there has been speculation that millennials have significantly different motivations in the workplace compared to older workers, research by The Center for Leadership Studies and Training Industry, Inc. reveals that the fundamental tenets of Situational Leadership®

are equally important to leading younger workers. This research has shown that both leaders and followers see influence as a primary driver of goal-directed behavior, from a freshly-hired millennial to a nearly-retired baby boomer.

Situational Leadership® considers the entire lifecycle of a typical employee – from a new hire who needs direction and support to learn new skills to a seasoned employee performing tasks he or she has mastered long ago. Regardless of an employee’s age or skill level, the Situational Leadership® Model provides leaders with a framework to appropriately engage and influence follower behavior.

INFLUENCE ACROSS CULTURAL DIVIDES Situational Leadership® has been proven to upskill leaders around the world, according to research conducted by Advantis Research and Consulting. Whether a leader is based in North America, South America, Europe, or Asia, the benefits of Situational Leadership® remain consistent. Whether we’re talking about a manager in Brazil, Taiwan, or Belgium, the leadership competencies gained by practicing

As the baby boomer generation is exiting the workforce through

retirement, Situational Leadership® has given our new and emerging

leaders filling those roles an effective and efficient tool and thinking strategy

that has decreased learning curves and improved our training processes.

Manager of Technical Training, Manufacturing Industry

Copyright © 2017, Leadership Studies, Inc. All Rights Reserved. 6

the Situational Leadership® Model have been proven to drive business results such as market share, revenues, employee engagement and retention.

The reason behind this versatility is because Situational Leadership® utilizes a common leadership language that can be applied across any boundary. Implementing the model requires a leader to establish objectives, assess Performance Readiness® and determine the appropriate leadership style within the context of a given situation and work environment. Even when attempting to influence the behavior of international employees, where interactions may be impacted by differences in culture or language, a leader can apply Situational Leadership® to navigate any given situation or interaction.

INFLUENCE ACROSS THE BUSINESS When analyzing influence across functional business units, leadership skills are most frequently used in positions

that involve a high degree of person-to-person interaction both inside and outside the organization. While influence training can benefit all functional areas across the organization, influence skills are especially important to HR, sales, customer service and marketing departments. With so much at stake in today’s competitive business environment, organizations need to ensure employees have effective leadership skills when interacting with customers, clients and vendors.

Across multiple studies, research by The Center for Leadership Studies and Training Industry, Inc. has found that influence is important to leading employees across a range of industries, job roles and working arrangements, as well as across the full spectrum of knowledge workers. Whether a follower is employed in a highly complex job and working remotely, or in a relatively basic job and part of a tightly knit team, Situational Leadership® is universal— and universally effective.

DRIVING BEHAVIOR CHANGE A leader does not merely impact the behavior of an employee through one or two interactions. Rather, having positive influence is a continuous process, requiring thoughtful application of influence-related strategy on a consistent basis over time. Situational Leadership® recognizes that an effective leader, at any level, must be able to vary behavior not only as it applies to the successful completion of the task at hand, but also to encourage employees to seize upon new challenges and development opportunities.

Research by leadership expert Jim Collins suggests that great leaders understand the importance of motivating the right people the right way to seize opportunities and build organizational momentum. By identifying the most appropriate way to influence each individual, a leader can elevate the performance of the entire company, one employee at a time.

But what about when the company is going through change? According to The Center for Leadership Studies and Training Industry, Inc.

As our organizations are becoming flatter and flatter, we see the

importance of influence standing out more and more. The informal

network is key to getting things done in many organizations and ours is no different. There are many instances

where influence is what can drive the business faster and more efficiently

than hierarchy.

Director of Leadership Development, Biotechnology Industry

Copyright © 2017, Leadership Studies, Inc. All Rights Reserved. 7

research, the following sources of organizational power are the most critical:

REFERENT POWER: The leader displays behavior over time that earns employee trust and respect

EXPERT POWER: The leader has accumulated relevant subject matter related knowledge and experience

LEGITIMATE POWER: The leader has the ability to reward, sanction and make appropriate decisions relative to their position or title

Ultimately, leadership is the primary mechanism that drives change and organizational power is the fuel that enables leadership.

INCREASING ENGAGEMENT Although influencing behavior is the essential outcome of Situational Leadership®, it is certainly not the only one. The Center for Leadership Studies and Training Industry, Inc. recently revalidated research has shown that when the task or directive behavior of a leader is matched with the needs of a follower, the follower is likely to experience higher levels of satisfaction with their job, higher levels of meaningfulness of the work he or she does, and improved work-family balance. While supportive behavior is also important to follower engagement, it was most critical to ensure a follower is receiving an appropriate amount of formal and informal recognition.

Furthermore, research by Marcus Buckingham and Curt Coffman suggests that good managers create and sustain employee satisfaction. Their research reveals that the best managers treat every employee as an individual and choose to focus on employee strengths instead of weaknesses – which is exactly what our research has shown with respect to how followers respond to the influence attempts of an effective leader.

Situational Leadership® approaches performance as situation-specific, requiring leaders to assess performance based on a specific task and work climate. Leaders should frequently reassess the performance of individuals to continue meeting their needs, in terms of both direction and support. As employees progress, leadership practices should evolve and reflect that progression – as what was once the appropriate amount of task guidance can become a source of dissatisfaction as employees mature and become increasingly familiar with their role, responsibilities and tasks. Failing to alter leadership styles can negatively impact employee engagement and performance.

FACTORING IN MOTIVATION Employees are unique. What motivates one may demotivate another. Situational Leadership® acknowledges these differences and reflects that the task-specific willingness of each employee will be different. Pulling from decades of scientific research on human motivation, Daniel Pink suggests that the secret to high performance and job

Given the high risk in decision making in our industry, the Situational

Leadership®Model provided our emerging leaders with a much more

heightened sense of awareness of their role in these decisions. The model has

served as a template for talent selection, talent management, and day-to-day

communications between managers and employees. There is less ‘winging it’ thanks

in part to this structure.

Director of Talent Acquisition and Talent Development, Pharmaceutical Industry

Copyright © 2017, Leadership Studies, Inc. All Rights Reserved. 8

satisfaction is largely intrinsic – stemming from our need to be self-directed, to learn and master new skills, and to do something meaningful.

Situational Leadership® takes the motivational level of employees into consideration when selecting a leadership style. For example, a motivated and willing employee will require less coaching than an unmotivated individual. Since motivation largely comes from within the individual, leaders must understand what motivates their employees – or risk diminishing engagement and productivity.

THE POWER OF TRUST Earning the trust of others is an investment that leaders need to make every day. It cannot be gained through a training course, promotion or raise. Leaders must continuously be mindful of their words and behavior because all that hard-earned trust can be burned in one single action (or inaction).

Trust and credibility are the core principles of effective leadership. Employees must have confidence in their leaders’ ability to deliver results. Distrust, on the other hand, can create a breeding ground for discontent, poor performance and employee turnover – all of which can negatively impact an organization’s bottom line. Building and sustaining a strong foundation of referent power helps leaders build trust with those they attempt to influence. Without trust, leaders will not be able to effectively manage change.

Furthermore, management theorist Simon Sinek suggests a great leader is someone who makes their employees feel safe and secure. Humans have an evolutionary need to feel safe. When we feel safe, the natural reaction is to trust and cooperate. By being supportive of employees no matter where they fall on the continuum of Performance Readiness®, leaders are building a culture of trust that breeds employees who are willing to go above and beyond.

INFLUENCE TODAY Today’s workplace is in a constant state of change. As organizations shift from a structured top-down hierarchy to a more collaborative and team-centric dynamic, there is a

growing demand for leaders at all levels. In this complex and evolving workplace culture, we are all leaders. And we all hold the power to motivate and inspire others to take action. Now more than ever, we need leaders with the skills to successfully collaborate across the business.

In fact, leadership expert John Maxwell suggests, “99% of all leadership occurs not from the top but from the middle of an organization… all of us can lead effectively, even if we’re not the VP or CEO.” To put this in context, leadership is the cumulative impact of an individual’s attempts to influence up, down and across the organization, ultimately impacting business results by driving authentic behavior change in every direction.

Situational Leadership® can provide leaders and managers with the tools necessary to influence others and to help them appropriately cultivate and exercise their power to influence and affect change. As organizations strive to be more nimble and respond to changes at the speed of business, leaders are essential. While power often gets a bad rap in business, it can be a positive driver of influence.

Whether it’s up, down or across the organization, effective influence skills can enable leaders to positively influence the behavior of others, make strategic decisions, manage conflict, and affect change. Leadership training on influence can be a powerful way to equip leaders with the tools to better understand why their own attempts to direct behavior succeed or fail. Armed with this knowledge, leaders can more effectively collaborate across the business and move the needle on organizational performance.

Copyright © 2017, Leadership Studies, Inc. All Rights Reserved. 9

REFERENCES Buckingham, M., & Coffman, C. (1999). First, break all the rules: What the world's greatest managers do differently. New York, NY: Simon & Schuster.

Collins, J. C. (2001). Good to Great: Why some companies make the leap… And others don’t. New York, NY: HarperBusiness.

French, J. R. P., Jr., & Raven, B. H. (1959). The bases of social power. In D. Cartwright (Ed.), Studies in Social Power (pp. 150–167). Ann Arbor, MI: Institute for Social Research.

Hersey, P., Blanchard, K. & Johnson, D.E. (2001). Management of organizational behavior (8th ed.). Englewood Cliffs, NJ: Prentice-Hall.

Hersey, P., Blanchard, K.H., & Natemeyer, W.E. (1979). Situational leadership, perception and the impact of power. Group and Organizational Studies, 4(4), 418-428.

Maxwell, J. C. (2005). The 360-degree leader: Developing your influence from anywhere in the organization. Nashville, TN: Nelson Business.

Pink, D. H. (2009). Drive: The surprising truth about what motivates us. New York, NY: Riverhead Books.

Sinek, S. (2014, March). Simon Sinek: Why good leaders make you feel safe. [Video file]. Available at https:// www.ted.com/talks/simon_sinek_why_good_leaders_ make_you_feel_safe/up-next

The Center for Leadership Studies & Training Industry, Inc. (2016). Infographic. Building situational leaders. Available at https://www.trainingindustry.com/articles/ leadership/building-situational-leaders/

The Center for Leadership Studies &Training Industry, Inc. (2015). Influence in leadership development: bases of power in modern organizations. Available at https:// www.trainingindustry.com/research/leadership/influence- in-leadership-development-bases-of-power-in-modern- organizations/

The Center for Leadership Studies & Training Industry, Inc. (2016). Influenced by others: bases of power across employee generations. Available at https://www. trainingindustry.com/research/leadership/influenced-by- others-bases-of-power-across-generations/

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The Impact of Leadership Styles on Employee Organisational Commitment in

Higher Learning Institutions

Munyeka Wiza 1

Ngirande Hlanganipai 2

Department of Business Management, University of Limpopo (Turfloop Campus), Private Bag 1106. Sovenga, 0727. South Africa

E-mail addresses: [email protected],[email protected]

Doi:10.5901/mjss.2014.v5n4p135 Abstract

The current study seeks to determine the impact of leadership styles on employees’ organisational commitment constructs among University academic staff at a selected South African institution. A quantitative methodology, using self-administered surveys comprised of the Organisational Commitment Questionnaire (OCQ) and the Multi Factor Leadership Questionnaire (MLQ) was used to collect data from 160 respondents. The data was analysed using Statistical Package for the Social Sciences (SPSS), version 20.0. Spearman correlation analysis was used to test for relationships between the independent variable (leadership style) and the dependant variable (organizational commitment. The findings of the study revealed that transformational leadership style has a significant and positive relationship with affective and continuance employee commitment while transactional leadership style has significant and positive relationship with only normative commitment. Based on the findings of this study, it is worth noting that leadership styles plays an important role to an employees` organizational commitment and it is very important for organizational policy makers to take this into consideration in order to meet organizational goals. This study contributes to the bank of findings relating to the development of leadership and organisational commitment, not only in South Africa, but within the institutions of higher learning in particular.

Keywords: Impact, Academics, Transformational leadership, Transactional leadership, Organisational commitment.

1. Introduction Leadership is a topic with a broad appeal as most of the people are consciously or unconsciously involved in the process of being influenced or influencing others in the role of leadership. People are always interested in knowing the components that contribute to making an ordinary person a great leader (Bateman & Snell, 2002). There are various forms of leadership styles. However for the sake of this study, only two forms of leadership styles (i.e. transformational and transactional leadership) were used. Transactional leadership is defined as the interaction between leaders and followers (Marturano & Gosling, 2007).

Bass (1985) described transactional leadership in terms of two characteristics: the use of contingent rewards and management by exception. They described contingent reward as the reward that the leader will bestow on the subordinate once the latter has achieved goals that were agreed to. Contingent reward is, therefore, the exchange of rewards for meeting agreed-on objectives. By making and fulfilling promises of recognition, pay increases and advancement for employees who perform well, the transactional leader is able to get things done. Bass (1985) therefore argues that by providing contingent rewards, a transactional leader might inspire a reasonable degree of involvement, loyalty and, commitment from subordinates. Transformational leadership according to Nyengane (2007) is when a leader ensures that followers are consciously aware of the importance of sharing organisational goals and values. They also find ways to ensure that followers know how to achieve these goals.

The field of education is facing a lot more challenges in making its employees committed to the organization (Jones, 2000). According to Gunter (2001) the responsibility of education leadership is to facilitate the learning activities and provide an environment that is enabling and supportive for knowledge and related activities. Butcher, Moon and Bird (2000) recognized the importance of leadership for professional development in education.

Committed employees are less likely to develop patterns of tardiness or to be chronically absent from work (Davenport, 2010). Gbadamosi (2003) contends that the more favourable an individual’s attitudes toward the organisation, the greater the individual’s acceptance of the goals of the organisation, as well as their willingness to exert

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more effort on behalf of the organisation. Employees that are committed are also less likely to leave the organisation to explore other. Therefore, carrying

out a study of this nature will be important in trying to find out it is the case. Previous researches regarding leadership and organisational commitment has also been conducted among

participants from various cultural backgrounds and understandably researchers came up with inconclusive results on the relationship between the leadership styles and employee organizational commitment (Takao, 1998; Wang, 2004). In addition, though the literature suggests a relationship between leadership style and organisational commitment, empirical studies are limited and lack specificity concerning types of leadership styles and organisational commitment (Rai & Sinha, 2000; Yousef, 2000). Different styles of leadership such as transformational and transactional leadership styles and their impact on employee organisational commitment have not been fully discussed especially in higher learning institutions in the South African context. Therefore this study seeks to investigate the impact of leadership style on employee organisational commitment among higher learning academic staff at a selected South African institution. 2. Objectives of the Study The objectives of this study were:

• To investigate the impact of leadership styles (transformational and transactional leadership) and employee organisational commitment.

• To give recommendations to the management on leadership strategies that can be used to improve employee organisational commitment in the organization based on the research findings.

3. Research Hypothesis

- H1. There is a positive relationship between transformational leadership and employees’ organisational commitment (i.e. affective, continuance and normative commitment) among academic staff.

- H2. There is a positive relationship between transactional leadership and employees’ affective, continuance and normative commitment among academic staff.

4. Literature Review 4.1 Theoretical framework The study utilized Grint (2000)s’ trait, contingency and situational approaches which are constrained by some form of essentialism and determinism whereby leadership is seen to be determined by personality (trait), the environment (situational) or by matching the appropriate traits to different environments (contingency) as depicted in figure 1 below. Figure 1: Essentialist and non-essentialist leadership

According (Grint, 2000) the trait approach concentrates on the qualities of the individual as essential and universal aspects of leadership regardless of diverse contexts. Leadership is seen as almost equivalent to personality and cannot therefore be taught or improved. By contrast, the situational approach perceives the context as essential but the qualities of the individual leader is less relevant. The approach ague that there are no universal styles of leadership for it will change depending on the circumstances, context or situation. Once the situation is defined, leaders can be taught the appropriate skills necessary to lead in particular contexts that it is presumed are readily captured through their essential

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features. Particular leaders could grow into the job assuming a competent analysis that discloses the essence of the

situation. The exact opposite of this is the contingency approach where you have to match the right leader for each circumstance or contingency rather than secure his or her adaptation to the environment.

In addition to approaches’ essentialism and determinism, it is our view that these leadership theories tend to reflect and reproduce the autonomous subject of enlightenment thinking since leadership is invariably seen to be the property of individuals and also not that of social groups or institutions. This is less so for the constructionist approach, where the argument is that leadership is about neither an essential individual nor an essential context but an outcome of interpretation (Grint, 2000). Within such a framework, leadership would simply be the embodied manifestation of collective and communal interpretations of appropriate behaviour in particular contexts. Grint (2000) further states that the constitutive approach eschews any sense of essential characteristics or contexts in favour of understanding interpretation to be at the centre of practical leadership. 4.2 The concept of Leadership Leadership is one of the world’s oldest and most topical issues. The importance of good leadership in producing what is required of an organization is accepted unquestionably, from corporate enterprises to educational institutions. Its key role within the changing education systems of different countries has acknowledged over the past decade or so. Leadership is believed to exist in at every level throughout an organization and usually includes management tasks. Leadership has been given different definitions by different authors. Kotter (1988) views it as the process of influencing people to strive willingly to achieve goals. The goals, or movement in a particular direction, should be in the long term interest of the group being led. Kouzes and Posner (1997) in Chipunza (2006: 11) define it as the “art of mobilizing others to want to struggle for shared inspirations”. Chipunza (2006) pointed out that both these definitions observe that there is an important interpersonal process that takes place between leaders and individuals and groups of individuals towards the purposeful pursuance of objectives. The above conceptualizations of leadership indicate the importance of developing leadership that promotes co-operation, trust and commitment between the followers and the leaders in organizations. 4.3 Understanding the concept of Organizational commitment. Organizational commitment is defined in multiple ways. Organizational commitment refers to the employee’s emotional attachment to, identification with, and involvement in the organization and it is generally considered as a three dimensional construct comprising affective commitment, continuance commitment and normative commitment (Boehman, 2006). Muchinsky (2003) adds that the concept of organizational commitment refers to the extent to which an employee feels a sense of allegiance to his or her employer organization. Werner (2007: 14) indicates that “an employee who is engaged to the organization is emotionally, cognitively and personally committed to the organization and its goals by exceeding the basic requirements and expectations of the job”.

According to Meyer and Allen (1991) there are three-components of organisational commitment which are: 1. Affective commitment which involves the employee's emotional attachment to, identification with, and involvement in the organization. 2. Continuance commitment which involves commitment based on the costs that the employee associates with leaving the organization and, 3. Normative commitment which involves the employee's feelings of obligation to stay with the organization. Given this, one can argue that organisational commitment is an attitude about an employee's loyalty to his organization and is an ongoing process through which organisational participants express their concern for the organization as well as its continued success and wellbeing. 4.4 Leadership styles and Organizational commitment relationships According to Nyengane (2007), employee commitment reflects the quality of the leadership in the organisation. Therefore it is logical to assume that leadership behaviour would have a significant relationship with the development of organisational commitment. Previous researches suggest a positive direct relationship between leadership behaviour and organisational commitment.

Transformational leadership is generally associated with desired organisational outcomes such as the willingness of followers to expend extra effort (Bass, 1985). A willingness to expend extra effort indicates some degree of commitment. Contingent reward behaviours that represent transactional leadership have been found to be reasonably

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associated with performance and work attitudes of followers although at a lower level than transformational leadership behaviours (Nyengane, 2007).

A relationship between commitment and leadership style has been reported in the organisational and management literature. Nyengane (2007) reported a positive relationship between leader support and commitment. In three separate studies, Popper, Mayseless and Castelnovo (2000) in Nyengane (2007) found evidence to support the hypothesis that a positive correlation existed between transformational leadership and attachment. Kent and Chelladurai (2001) found that individualised consideration has positive correlation with both affective commitment and normative commitment.

Hayward, Goss and Tolmay (2004) also found that transformational leadership has moderate positive correlation with affective commitment. Lower correlation coefficients between transformational leadership and normative, as well as continuance, commitment were found. No correlation was found between transactional leadership and affective, normative and continuance commitment.

According to Walumbwa and Lawler (2003), there is considerable research available suggesting that the transformational leadership style is positively associated with organisational commitment in a variety of organisational settings and cultures. Nyengane (2007) indicated that transformational leaders are able to influence employees’ organisational commitment by promoting higher levels of intrinsic value associated with creating a higher level of personal commitment on the part of the leader and followers to a common vision, mission, and organisational goals.

Transformational leaders influence followers’ organisational commitment by encouraging them to think critically by using novel approaches, involving followers in decision-making processes and inspiring loyalty while recognizing and appreciating the different needs of each follower to develop his or her personal potential (Nyengane, 2007). By encouraging followers to seek new ways to approach problems and challenges and identifying with followers’ needs, transformational leaders are able to motivate their followers to get more involved in their work, resulting in higher levels of organisational commitment (Walumbwa & Lawler, 2003).

This view was supported by prior research that showed that organisational commitment was higher for employees whose leaders encouraged participation in decision-making (Nyengane 2007), emphasised consideration (Walumbwa & Lawler, 2003) and were supportive and concerned for their followers’ development (Allen & Meyer, 1990). 5. Research Methodology The quantitative research design was used in this study to investigate the impact of leadership styles on employee organisational commitment. 5.1 Population and sample of the study The population consisted of academic staff members at a selected South African higher learning institution. Bless, Higson-Smith and Sithole (2013) defined population as the complete set of events, people or things to which the research findings are to be applied. In this study, the research population constituted of full time heads of departments, senior and junior lecturers including student’s assistants.

To successfully conduct the research, stratified random sampling procedure was used. Stratified random sampling, according to Babbie (2013), is a modification of random sampling in which you divide the whole population into two or more strata based on one or more attributes. In this study, the participants were divided according to position levels (i.e. Heads of departments, senior lecturers, junior lecturers and student assistants. To ensure that samples adequately represent the relevant strata, 200 respondents were randomly selected from within each stratum. 5.2 Instrumentation Two self-administered research questionnaires were used in this study. A 15 item Organisational Commitment Questionnaire with a 5 point likert scale ranging from strongly agree (SA) to strongly disagree (SD) was administered on the respondents to measure organisational commitment.

The shortened version of the Multifactor Leadership Questionnaire (MLQ) developed by Bass (1985) was used to measure both the transactional and transformational leadership style. The measuring instrument has 18 items and the participants were asked to rate their responses on a 5 point likert scale ranging from not at all (1) to frequently, if not always (5).

Scandura and Pilai (2001) confirmed the validity of the MLQ 5X. Using four different samples, Tejeda, Scandura,

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and Pilai (2001) found internal consistency coefficients (Cronbach Alphas) of between .85 and .90 for attributed charisma; between .86 and .91 for idealised influence; between 89 and .94 for inspirational leadership; between .86 and .91 for intellectual stimulation; between .86 and .93 for individual consideration; between .84 and .88 for contingent reward; between .69 and .79 for management by exception (active); between .82 and .90 for management by exception (passive) and .72 - .88 for the non-management positions. 5.2.1 Questionnaire administration Cover letters, affixed to the questionnaire, explaining the nature of the study, as well as assuring respondents of the confidentiality of any information were provided. Respondents were also provided with detailed instructions as to how the questionnaires were to be completed and returned. The rationale behind providing clear instructions and assuring confidentiality of information was based on the fact that this significantly reduces the likelihood of obtaining biased responses. Self-administered questionnaires were collected by the researchers over a period of two weeks. This method was considered the most efficient means of data collection since the sample was widely dispersed across the different faculties. A total of 200 questionnaires were administered, with 160 fully completed questionnaires being returned, thereby constituting an 80% return rate. This is higher than the 30% anticipated in most research as put forward by Sekaran (2003). 6. Data Analysis For the purposes of testing the research hypotheses, the returned questionnaires were inspected to determine their level of acceptability. They were coded. The data was transferred to an Excel sheet. A statistical computer package, Statistics Package for Social Sciences (SPSS) version 20.0 was used to process the results. Spearman product-moment correlation coefficient was used to measure the relationships between the variables, i.e. between leadership styles and employee organisational commitment. 7. Research Findings 7.1 Sample Descriptive Summary Demographic data about the respondents shows that 90 (56%) were females and 70(44%) were males. The majority 97(61%) of the participants were in the 36-50 years. The majority of the respondents 89(56%) were junior lecturers, followed by senior lecturers 56(35%) and only 15(9%) were in the other category respectively. Table 1: Demographic variables

Variable Frequency Percentages Gender

Male 90 56 Female 70 44

Age

20-35 years 46 29 36-50 years 97 61

51-years and above 17 10 Position

Junior lecturer 89 56 Senior lecturer 56 35

Other 15 9

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7.2 Inferential Statistics (Hypothesis testing). Table 2: Relationship between leadership styles and organizational commitment dimensions

Affectivecommitment Continuance Commitment

Normative Commitment

Transformational leadership style

Pearson Correlation .301* .682** .562 Sig. (2-tailed) .003 .002 .145

N 160 160 160 Transactional leadership style

Pearson Correlation .642 .-634 1.582* Sig. (2-tailed) .328 .426 0.04

N 160 160 160 *. Correlation is significant at the p< 0.05 level (2-tailed). **. Correlation is significant at the p<0.01 level (2-tailed).

In testing hypothesis 1 which stated that there is a positive relationship between transformational leadership and employees’ organisational affective, continuance and normative commitment among academic staff, table 1 above presents the results of the relationships. Significant positive relationship was obtained between the transformational leadership style and affective commitment (r=.301, p=.003). Results also confirms a positive and significant relationship between transformational leadership style and continuance commitment(r=.682, p=.002). However there was no significant relationship between transformational leadership style and normative commitment (r=.562, p=.145). The results are supported by Hayward, Goss and Tolmay (2004) who also found that transformational leadership has positive correlation with affective and continuance commitment.

The second hypotheses examined whether there is a positive relationship between transactional leadership and employees’ affective, continuance and normative commitment. The Pearson product moment correlation in table 1 revealed a weak but statistically significant relationship between transactional leadership and normative commitment(r=1.582, p=.04). This implies that the as transactional leadership improves; the more employees are willing to remain/stay in the organization. The positive correlation between transactional leadership style and normative commitment suggests that leadership behaviors involving rewards, highlighting problems, and positive reinforcement related to how employees feel about ought to stay with the organization (Naidu & Van Der Walt, 2005). This relationship also indicates that the leaders’ and followers’ associations affects employees’ moral identification with an organization and relates to their feelings of responsibility (Allen & Meyer, 1990). On the other hand, the absence of relationship for transactional leadership style with affective commitment and continuance commitment suggests that leadership behaviors involving exchange of rewards for meeting agreed-on objectives, highlighting problems, or waiting for problems to become serious before taking action, may not be related to how employees feel about want to stay and need to stay with the organization. These natures are more related with negative performance (Allen & Meyer, 1990).

The results concur with the findings of Bu i nien and Škudien (2008) which identified a significant and positive correlation between transactional leadership style and normative commitment though it does not confirm the relationship with that of affective and normative commitment by the same authors. Taken together, the research findings were also supported by previous studies of Bycio, Hackett and Allen (1995) [cited in Ponnu and Tennakoon, (2009); Lo, Ramayah and Min (2009) and Lo, Ramayah, Minc and Songand (2010) which indicated that transactional leadership has positive relationship with employees’ organisational commitment.

The results seem understandable given that transactional leadership is based on an exchange of information between leaders and followers for various kinds of rewards. When this transactional relationship is acceptable to the follower, there may be a feeling of emotional attachment towards the organization. This could also possibly explain the non - significant correlation between transactional leadership and continuance commitment. Secondly, effective leaders typically display both transformational and transactional characteristics, as evidenced by the positive correlations between these two styles of leadership. This supports previous findings in the literature and suggests that effective executives use a combination of distinct leadership styles, each in the right measure and at the right time (Naidu & Van Der Walt, 2005). 8. Discussion The research objective of this study was to examine the impact of leadership styles on employee organisational

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commitment. Leadership literature suggested a positive relationship between transformational leadership and organisational commitment; however previous researchers (Judge & Bono, 2000) have called for more research to support such a link. This study responds to this call and thus fills an important void in the leadership literature.

The findings are also consistent with previous studies (e.g., Garg & Ramjee, 2013; Walumbwa and Lawler, 2003), that found a positive association between transformational leadership and organisational commitment. It is possible that close followers are more likely to see some of the inconsistencies in their leader’s behavior, which may affect how committed they feel to the organization, as well as how empowered.

The findings as shown in table 1 suggest that there is a significant positive relationship between the transformational leadership style and both affective commitment and continuance commitment. On the other hand, there was a lack of statistically significant correlations between the transformational leadership and normative commitment; the findings suggest that this same leadership style may not be related to how employees feel about their obligation to stay with organization. In general, it may be concluded that respondents who are affectively committed to the organisation are more willing to maintain their relationship with the organisation than those who are normatively committed. Affectively committed employees will thus portray feelings of identification with the organisation, and attachment to and involvement in the organisation. This is in contrast with the dimension of normative commitment, which focuses on commitment by virtue a feeling of obligation to remain with the organisation.

The findings that transformational leadership style has no relationship with normative commitment may be also appropriate as Allen and Meyer 1990; Brooks et al. 2006 pointed out that employees who stay in the organization feel obligated to stay in the organization may not exhibit the same enthusiasm and involvement as employees who stay with an organization because they want to stay and need to stay. This is also in line with the argument of Mannheim and Halamish (2008) that reveals that as transformational leadership is enacted, members of organizations no longer seek merely self - interest but that which is beneficial to the organization as a whole. As such, transformational leadership style may not be related to normative commitment as to affective and continuance commitment. This study, therefore, supports the suggestions by Brown and Dodd (2003) [cited in Bu i nien and Škudien , 2008] that transformational leadership and affective commitment are correlated but not that of having with normative commitment and not having correlation with continuance commitment. Bu i nien and Škudien (2008) also confirms that transformational leadership has a positive relationship with affective and continuance commitment but different for that of normative commitment. Contrary to this, Garg and Ramjee (2013) revealed that transformational leadership style has a positive relationship with normative commitment and a negative correlation with continuance commitment. 9. Conclusion and Recommendations The aim of this research was primarily to determine the impact of leadership styles on employee organizational commitment and the result findings showed a positive relationship between leadership styles and some employee organisational commitment constructs. Given this one may conclude that effective leaders can positively influence trust and meaning within followers and in turn so motivate them to be willing to remain in the organization and feel part of it.

The problems of academics in careers with high levels of job dissatisfaction and work stress should be addressed more proactively and effectively, especially where young academics are concerned. The reason for this is that they are associated with, among others, decreased organisational commitment, decreased mental and physical health, problematic collegial relationships, and a decrease in the quality of work life. Pienaar (2005) feels strongly that, should such problems not be addressed, high quality academics will in all probability increasingly be lost for higher education and its institutions. If this institution does not take heed of the above and so continues to lose academics, its national and international image and its competitive advantage, as well as the ability to generate new knowledge in a specific field may be adversely affected.

Transformational leadership style positively relates to affective commitment and at the same time to continuance commitment, implying that the management must be mindful of the leadership styles on employee commitment. It can be concluded that employees who are under a good leader are more likely to identify themselves as part of the organization.

The existing leadership and employee organizational commitment research also suggests that the leadership style of leaders can lead to higher measures of organisational commitment in their direct reports. This study has demonstrated positive relationships between leadership styles and organisational commitment. Overall findings from this study suggest that transformational and transactional leadership behaviours do play important roles in determining levels of affective commitment, continuance commitment and normative commitment.

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Werner, A. (2007). Organisational Behaviour: a Contemporary South African Perspective. Pretoria: Van Schaick. Yousef, D.A. (2000). "Organisational commitment: a mediator of the relationships of leadership behavior with job satisfaction and

performance in a non-western country". Journal of Managerial Psychology, 15 (1): 6–24.

Developing Your Natural Talent To Lead

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Leadership Style, Emotional Intelligence, and Organizational Effectiveness

by Herb Stevenson

Leadership effectiveness is dependent on the specific circumstances and the blend of leader styles used over time. Mis-use, over-use, or under-use of a particular style can lead not only to ineffectiveness, but to a backlash via the organizational climate. As defined by David McClelland and others, climate refers to six leadership factors that influence an organization s environment via the style most often used by the C-level executive(s):

its flexibility—that is, how free employees feel to innovate unencumbered by red tape; their sense of responsibility to the organization; the level of standards that people set; the sense of accuracy about performance feedback and aptness of rewards; the clarity people have about mission and values; and finally the level of commitment to a common purpose.

As a result of these factors, six leadership styles were created.[1]

Coercive/Commanding: Demands immediate compliance and obedience, as evidenced by such phrases as "Do what I tell you." Authoritative/Visionary: Mobilizes people toward a vision as suggested by such phrases as "Come with me." Affiliative: Creates harmony and builds emotional bonds as suggested by "People come first." Democratic: Forges consensus through participation, "What do you think?" Coaching: Develops people and strengths for the future, "Try this." Pacesetting: Sets high standards for performance, "Do as I do, now!"

In today's complex environment, it has become clear that using only one or two overused leadership styles tends to minimize and often hamper effectiveness. For example, an extreme of over-use is Chainsaw Al Dunlap from Sunbeam. Generally, he decimated companies with his coercive and commanding approach to cost cutting for short term profit improvement and long term insolvency. As a means to personally profit, he was successful. As a means to increase short term profit and raise immediate stock prices, he was successful. As a leader who truly maximized the total value of an organization, he was a miserable failure.[2]

A Coaching Example Recently, I worked with a CEO who had been hired to raise the bar for the organization. It had been a mediocre performer for a number of years both in terms of product quality and financial performance. At best, its stock had been boring.

Very quickly, the CEO raised quality standards, and the numbers followed. The organization s profits were rising, losses were stemmed sufficiently to be below peers throughout the recent recession. The board was rewarding the CEO with accolades, bonuses and pure wealth building perks. The board openly indicated that it would pay whatever it took to keep the CEO happy and in place.

Within the organization, the climate was a different story. The CEO combined two preferred leadership styles: Pacesetting and coercive/commanding. As a pacesetter, he had set high standards of performance for himself and expected the same of everyone else. At the extreme of this leadership style, he was often obsessive about doing things faster and better. When this did not meet his expectations, he would move into his command-and- destroy style by "going off the handle" with key executives, frequently personalizing his comments during bouts of rage. Metaphorically, the direct reports often referred to the after-effect as being like a war zone of total devastation and demoralization.

This combination is deftly successful for only short periods of time, typically only in a crisis. To accomplish the type of turnaround needed by this organization, his style was effective. However, now that he has been in place for more than three years, and the quality standards and performance have improved, the internal climate of the organization has turned strongly negative. Where the board has praised the CEO for his outstanding performance, it is now faced with the departure of key executives who have made it clear that the CEO is a problem. Some were forced out because they did not perform in a way that pleased him; others, simply left. The situation has been likened to a well trained horse, where you can only whip it so long before it simply stops performing regardless of how much you beat it.

At issue is that none of the six leadership styles is effective all of the time, and in today's complex environment, we can see that truly successful leaders use all six styles based on circumstances, situations, and the rapidly changing landscape. Jim Collins' research on Level 5 Leaders in Good to Great companies supports this contention as does his more recent work on How the Mighty Fall. Truly great leaders incorporate and seamlessly use all of these leadership styles throughout, meeting different situations, circumstances, and rapidly changing landscapes.

In terms of the coaching example, the CEO needed to develop beyond his limited leadership styles. Now that the crisis is over, he needs to engage through affiliation (teamwork) and by coaching others for succession planning. He needs to set a new vision

for the organization so that everyone can get on the same page (democratic). Unfortunately, this is not happening. Board members are hearing complaints from key customers and water-cooler talk is infiltrating the organization negatively. Having fulfilled my obligation, I left the organization believing that it is a matter of time before he leaves for another crisis or is forced out for not having adequate leaderships styles to meet the everchanging environment.

Below is a synopsis of the six leadership styles that should be seamlessly used to ensure effective leadership in any environment.

Leadership Style

Modus Operandi

Style in a Phrase

Underlying EI Competency When Appropriate

Impact on Climate

Coercive/ Commanding

Demands immediate compliance, obedience

"Do what I tell you."

Achievement, drive, initiative, emotional self-control.

In a crisis to kick- start a turnaround, or with problem employees.

Strongly negative

Authoritative/ Visionary

Mobilizes people toward a vision

"Come with me."

Self-confidence, empathy, change catalyst, visionary leadership

When change requires a new vision or when a clear direction is needed

Most strongly positive

Affiliative

Creates harmony and builds emotional bonds

"People come first."

Empathy, building bonds, conflict management

To heal rifts in a team or to motivate during stressful times

Highly positive

Democratic

Forges consensus through participation

"What do you think?"

Teamwork, collaboration, communication

To build buy-in or consensus or to get valuable input from employees

Highly positive

Coaching

Develops people and strengths for the future

"Try this.">

Developing others, empathy, emotional self-awareness

To help an employee improve performance or develop long term strengths

Highly positive

Pacesetting Sets high standards for performance

"Do as I do, now!"

Conscientiousness, achievement, drive, initiative.

To get quick results from a highly motivated and competent team.

Highly negative

Adapted from Daniel Goleman (2000) Leadership that Gets Results, Harvard Business Review, 82-83 and Cary Cherniss and Daniel Goleman (2001) The Emotionally Intelligent Workplace, 42.

[1] Adapted from Daniel Goleman (2000) Leadership that Gets Results, Harvard Business Review, 82-83 and Cary Cherniss and Daniel Goleman (2001) The Emotionally Intelligent Workplace, 42.

[2] See Barbara Kellerman, (2004) Bad Leadership, Cambridge: HBS Press.

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Daniel Stid, Kirk Kramer

14 mins | Join the Discussion

The Effective Organization: Five Questions to Translate Leadership into Strong Management

Summary

Effective organizations create results, and to be fully effective, nonprofits must exhibit strengths in five core

organizational areas—leadership, decision making and structure, people, work processes and systems, and culture.

"Too many people are involved in every decision."

"Staff complain about unclear and changing priorities."

"No bench strength exists in the leadership ranks to take on new tasks."

"Staff are duplicating work and reinventing existing processes."

Organizational inefficiencies like these are all too familiar to nonprofit leaders. And they come with a high cost: lower potential for making progress toward the important societal challenges and opportunities nonprofits seek to address.

Simply put, effective organizations deliver results. This connection has been well-documented in the for-profit sector, with highly effective organizations demonstrating superior market performance to their less effective peers. We have observed the same connection between effectiveness and performance time and time again in our work with over 200 nonprofit organizations. Given the link, it is critically important for nonprofit leaders to assess their organizations' effectiveness and become more purposeful about improving it.

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How can nonprofit organizations become more effective? In our experience, and in line with organizational research from Bain & Company, Inc., to be fully effective an organization must demonstrate strength in each of the following areas: leadership, decision making and structure, people, work processes and systems, and culture. As Exhibit 1 suggests, these elements are interconnected; strength in one area offset by weakness in another does not appear to result in sustainable improvement. All five elements must be strong to create a highly effective organization.

Our diagnostic surveys of 42 nonprofits suggest that there is significant room for nonprofits to improve their organizational effectiveness across all five categories.[2] While many nonprofits owe their initial success to visionary leadership, only systematic development of each of these five areas will lead to the managerial strength required to sustain growth and outcomes. Organizations need to establish and communicate clear priorities, make roles and responsibilities explicit, create clear connections across organizational silos, and develop the talented people they attract, or they will fall short of their full potential for impact.

In this article, we present our survey results in more detail and offer concrete managerial advice for strengthening the five core organizational elements in pursuit of becoming a more effective organization.

The Link between Organizational Effectiveness and Results

The lack of a common measurement of performance in the nonprofit sector makes it difficult to prove the link between

organizational effectiveness and results quantitatively. In the for-profit world, however, barometers such as profitability

and shareholder value make this assessment possible. Consider the research of Bain & Company, the for-profit strategy

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consulting firm.

In 2003, Bain surveyed more than 500 companies about their organizational effectiveness and also measured the

market performance of those companies. Eighty percent of the respondents from the "strongest financial performers"

rated their companies "highly effective," while only 14 percent of the total pool of respondents did so. [3] Bain also

developed an in-depth diagnostic survey to assess the companies' performance in five areas: leadership, decision

making and structure, people, work processes and systems, and culture. The bulk of respondents from the smaller,

high-performing group gave their companies much better marks across the board than did their more average-

performing peers.

The lessons emerging from Bain's research are clear: effective organizations deliver results, and strength across all five

elements is required. Our experience working with nonprofit organizations has borne this out repeatedly.

Room for Improvement

The link between organizational effectiveness and results puts a premium on understanding how nonprofits function organizationally. To inform this perspective, we adapted Bain's organizational diagnostic survey, asking similar questions designed to assess nonprofit organizations' strength in each of the five categories that distinguish high- performing companies. As of this writing, we have administered our diagnostic to more than 40 nonprofits with annual budgets ranging in size from less than $5 million to about $200 million.

Our analysis indicates that while nonprofits have some tremendous organizational assets, weaknesses in other areas hold them back from achieving their full potential for impact. (See Exhibit 2, which shows how survey respondents' scores on various dimensions compare to the overall average across all dimensions.) In short, significant room exists for improvement. Responses to the diagnostic survey painted the following picture:

Leadership: Nonprofit leaders tend to establish strong visions and build strong teams. These same leaders,

however, seem to be less effective at translating a compelling vision into a set of explicit goals and corresponding

priorities. They're even less effective at communicating priorities throughout their organizations.

Decision making and structure: The ability of people to coordinate and work well together across

organizational boundaries is an area where nonprofits tend to run into difficulties. Decision-making roles and

processes also appear to be a significant weakness.

People: Nonprofits appear to attract good talent and do well placing the right people in the right jobs. However,

these employees do not feel that their work is well aligned to the priorities of the organization. What's more,

organizations on average have some difficulty evaluating, developing, and rewarding staff consistent with the

organizations' priorities. This finding is not surprising, given leadership scores on setting and communicating

priorities. Further, nonprofits in general do not appear to prepare adequately for leadership transitions and

succession; this area emerged as the biggest weakness overall.

Work processes and systems: Nonprofit employees, on both the program and administrative sides, appear to

be skilled and motivated. Working conditions, however, hamper their effectiveness. In particular, work processes

are not well defined and resources are scarce. While this last point did not emerge strongly in the survey data, in

our work with nonprofit organizations working conditions crop up repeatedly as a major impediment.

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Culture: Culture is a clear strength. Interestingly, however, ability to execute change is a weakness. This finding

may also correlate to the relatively low leadership score in setting priorities. Nonprofit leaders cannot effectively

change the direction of their organizations if they do not know what their priorities are and what they want the

change to accomplish.

These findings are consistent with our experience working with and observing many nonprofits: namely, for the most part, they are strongly led but under-managed. Many nonprofits have inspirational and visionary leaders who attract hard-working people with great passion for the cause at hand. However, these same leaders often find it difficult to implement and codify the kinds of mechanisms that would help these highly motivated people be as productive as possible. Good managers know how to bring discipline, structure, and process to bear, and this is where nonprofits seem to be most lacking.

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Becoming More Effective

The key to becoming more effective, then, is to invest in management capabilities—in short, to move to a place where the nonprofit is not only strongly led, but also strongly managed. As noted, our research suggests that nonprofits need to take a holistic approach towards improving effectiveness, shoring up management capabilities across the board. A good place to start is with the areas our research has shown to be most prone to weakness. The following five sets of questions can help an organization's leadership team assess those areas and set a purposeful course towards improvement. Given that many of the issues illuminated by our survey data link to unclear or poorly communicated strategic priorities, we recommend beginning with that challenge.

1. Are we clear on the strategic priorities that will enable our organization to achieve our desired

impact over the next several years? Have we communicated our strategy clearly enough that everyone

within the organization understands where we are going, why, and how we will get there?

Clear priorities are the "north star" against which an organization can align its people, structure, and processes, and

build its culture. When an organization's leader has established clear priorities, he or she has essentially defined what

"success" will look like. Against that goal, it becomes easier to determine which programs or initiatives are essential,

and which are not, and to allocate resources accordingly.

Take, for example, an organization that serves students who are at-risk for dropping out of high school. Where does that

organization draw the line in terms of serving these young people? What if an opportunity arises to help recent

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dropouts get back into school? Or to help younger students move out of the "at-risk" category before they enter high

school? Or to strengthen the home lives of these students? Unless the leadership team has established and

communicated what matters most it can be difficult to chart a course in the face of such options.

One way to determine if your organization has clear priorities is to ask each member of the senior management team to

make a list of its top five priorities for the next one to three years. Once you've compared the lists, you'll be able to see

whether the team members are on the same page. If they are, you'll next want to determine whether the priorities are

well communicated throughout the organization. To begin to find out, ask a representative sample of managers at the

next level down to engage in the same exercise. These simple exercises will help you determine if your challenge is

clarifying priorities or if you need to work to on communicating the priorities to enable alignment to them.

2. Given the organization's priorities, what decisions are truly critical? Is it clear who is responsible (and

who has the authority) to make those decisions?

With clearly communicated priorities come more consistent decisions, given that decision makers throughout the

organization are guiding their choices with the same compass. That said, ample room often remains for refinement of

the decision-making process itself. A well-defined decision-making process leads to more efficient, responsive, and

transparent decisions, with less role confusion and therefore less conflict.

Establishing and implementing a strong decision-making process is a complex endeavor—one that is hard to do well. So

it may be valuable to use a management tool specifically designed to help an organization's leaders unravel the decision-

making process, clarify roles and responsibilities, and set clear expectations for decision making going forward. The

process of using such a tool can help leaders get past preconceived notions of structure and more fully engage in a

holistic approach to their organization.

The national leadership team at Omaha, Nebraska-based Boys Town, for example, used a tool called RAPID® to clarify

decision making between the national headquarters and site-based program leaders. [4] Historically, decision making

had been highly centralized, with a small group of people at the national headquarters making many decisions about

local operations—from hiring, to merit-pay increases, to purchasing furniture. As Boys Town continued to expand its

services, though, that approach no longer worked well.

With input from managers throughout the organization, an internal project team worked with national office

management to draft a matrix that classified the types of decisions Boys Town site-based leaders faced, and set

boundaries of authority and responsibility for decision making going forward. This process helped the organization

push decision making down to the right level and clarify when and how the national office should be involved.

3. Who in our organization must work closely together to achieve these priorities, and does our

structure enable them to do so?

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Identifying the work that's critical to achieving the organization's priorities, who does that work, and how it delivers the

desired outcomes helps reveal which people need to work together and, ultimately, whether the current structure

facilitates their work.

Organizational design experts in the for-profit and nonprofit sectors alike talk about the "grouping and linking" of work.

They find that most leadership teams pay a lot of attention to how work is grouped: around geographies, for example, or

product lines or functional areas such as finance or human resources. Most, however, pay less attention to how people

need to work together across these groups, and thus fail to put in place the kinds of structural mechanisms that can

make such coordination easier. Without these mechanisms, people end up working in their own silos. The fallout ranges

from wasted time (as people try to find information that isn't readily available to them), to poor quality work (when the

right input isn't incorporated), to poor execution (because stakeholders critical to implementation fail to buy in).

To help people work together more effectively across departments or groups, start by identifying critical areas where

such work takes place. Then narrow that list to the areas that link back to the organization's top priorities. Armed with

this information, creating explicit linking mechanisms becomes a more manageable endeavor. Some organizations use

cross-functional working teams. Others tap staff members to serve as liaisons between departments—for example,

asking a finance manager to work with a specific program.

4. Do we have the right people and capabilities to achieve our priorities, and do our people feel that

their goals and measures align with these priorities?

One way to assess and improve the effectiveness of your people is to determine how they are aligned against the

organization's priorities. For each priority, identify who is working on it and compare it to items that are of lower

priority. Ask yourself, do I have enough people against things that matter? Are my best people allocated against the

things that matter the most? Have I taken lower priority work away from these people so that I am sure they will

succeed? Doing this can be especially critical in times of change, be it regrouping after layoffs or embarking on a growth

trajectory. These are the times when management team members tend to take on new responsibilities, sometimes

overextending themselves and under-resourcing critically important areas.

It's also important to maintain the connection to the organization's high-level priorities when setting individual

performance goals and assessing staff performance. Too often, performance reviews are "check-the-box" activities. It's

easier for participants to take reviews seriously—and feel that the process is valuable—when individual goals are clearly

linked to the organization's overall goals. Performance reviews also should lead to action, influencing skill development

plans, future job assignments, promotions, and rewards. Consider an example from another nonprofit that offers

mentoring services. Leaders had told staff members that the organization's priorities included increasing the number of

mentoring matches each staff member set up, maintaining the quality of the matches, and balancing matches across

easy- and hard-to-serve communities. During performance reviews, however, staff were assessed and rewarded only on

the number of matches—the easily quantifiable metric. As one middle manager put it, "Staff members are routinely put

in a position where they have to make a choice between actually doing their jobs well and appearing to do their jobs

well." When this feedback was shared with senior leaders, they redesigned the process to include data and qualitative

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feedback on these other dimensions. They also began to reward employees who had performed well against all of the

organization's priorities. This change has contributed to improved employee morale, and it is expected to drive more

balanced performance across the organization's priorities.

5. Have we defined the work processes and tools to enable our people to be effective as they address

our top priorities?

Time spent clarifying and honing work processes, and making them explicit and accessible to employees can reduce

rework and reinvention. The effort can also contribute to consistency and improving levels of quality. This is gold to any

nonprofit, but it's particularly valuable when an organization is struggling to increase impact on a tight budget or

embarking on an expansion plan.

Consider the experience of KIPP, a charter management organization currently operating schools in 19 states and the

District of Columbia. In 2000, when KIPP had only two schools (both high performing), the organization received a

large grant to replicate its efforts across the country. KIPP's small leadership team recognized that in order to grow

successfully, they would need to articulate the work processes—both programmatic and administrative—that had made

the model so effective in the first place. These processes included, for example, how to build a strong local board, budget

for a new school, and hire the right teachers. To codify these processes, the organization's leaders documented the steps

they had taken to set up their first two schools. By doing this, they ensured that the principals in each new KIPP school

did not have to spend time reinventing the fundamentals of the model and could, therefore, spend more time focusing

on educating the students.

In addition to getting the processes right, deploying tools and technology can also increase organizational effectiveness.

With limited funds available, many nonprofits are hesitant to make these kinds of investments, but they can have a

huge payoff. Consider one large youth-serving organization whose leaders discovered that completing essential

documentation after each case interaction was a major source of stress for staff members. The process was labor

intensive and time sensitive. As a first step towards addressing the problem, the organization tested voice-recognition

software that allowed staff to dictate their notes, which were then automatically transcribed. Not only did the software

cut documentation time in half, but staff members also began to find the task much less onerous. In fact, the

organization's leaders believe that adopting this technology has been a major contributor to improved staff retention,

increasing quality while reducing hiring and training costs.

Progress towards becoming a more effective organization means progress towards increasing

your impact. Whatever your organization's strengths and weaknesses, a purposeful and

holistic effort to improve effectiveness will be worthwhile—not only for your employees and

volunteers but, above all, for those your organization seeks to serve.

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Improving Indirect Cost Recovery

PAY WHAT IT TAKES

leadership | management

Understanding Nonprofit Business Models

PAY WHAT IT TAKES

leadership | management

The Nonprofit Leadership Development Deficit

LEADERSHIP DEVELOPMENT

Libbie Landles-Cobb, Kirk

Kramer, Katie Smith Milway

10/22/2015

leadership | management

Sources Used for This Article

(Kirk Kramer is a partner at the Bridgespan Group and leads the firm's work on organizational effectiveness. Bridgespan partner Daniel Stid has written on the topic of leadership and management in nonprofit organizations.)

[1] Bain & Company, Inc. research originally documented these five areas as being the keys to organizational

effectiveness. Bain's latest thinking on this topic is captured in the upcoming book by Paul Rogers, Marcia Blenko, and

Michael Mankins, due to be published in September 2010 by Harvard Business Press.

[2] Bridgespan's organizational diagnostic survey is an adaptation of the survey Bain developed to assess the

organizational effectiveness of for-profit companies.

[3] Bain classified companies by their effectiveness level based on self-reported answers to the question: "All things

considered, we have a highly effective organization." "Highly effective" companies were those with a score of 3.25 or

greater on a 1-4 scale. Bain categorized the companies by their financial success based on total shareholder return

relative to a peer index.

[4] RAPID® is a registered trademark of Bain & Company, Inc. The article titled “RAPID Decision-making: What it is,

why we like it, and how to get the most out of it,” provides more detail about this tool.

This work is licensed under a Creative Commons Attribution 4.0 International License.

Permissions beyond the scope of this license are available in our Terms and Conditions.

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