The New World of Work: Leadership and HR Imperatives for 2015 and beyond

Copyright © 2015 Deloitte Development LLC. All rights reserved.1 Global Human Capital Trends 2015 Copyright © 2015 Deloitte Development LLC. All rights reserved. 2015 Global Human Capital Trends Leading in the new world of work Josh Bersin Principal and Founder Bersin by Deloitte March 2015
Copyright © 2015 Deloitte Development LLC. All rights reserved.2 Global Human Capital Trends 2015 Copyright © 2015 Deloitte Development LLC. All rights reserved.2 Global Human Capital Trends 2015 Barriers between work and life dissolve Talent in high demand Millennials make up 50% of workforce Global transparency in job market
Copyright © 2015 Deloitte Development LLC. All rights reserved.3 Global Human Capital Trends 2015 3,300+ Business and HR leaders 106countries One of the largest-ever longitudinal global talent studies Unless otherwise cited, all data referenced in this presentation is from the Global Human Capital Trends 2015 survey. Global Human Capital Trends 2015
Copyright © 2015 Deloitte Development LLC. All rights reserved.4 Global Human Capital Trends 2015 Global Human Capital Trends 2015 LEADERSHIP Why a perennial issue? LEARNING AND DEVELOPMENT Into the spotlight CULTURE AND ENGAGEMENT The naked organization PERFORMANCE MANAGEMENT The secret ingredient WORKFORCE ON DEMAND Are you ready? SIMPLIFICATION OF WORK The coming revolution REINVENTING HR An extreme makeover HR AND PEOPLE ANALYTICS Stuck in neutral PEOPLE DATA EVERYWHERE Bringing the outside in MACHINES AS TALENT Collaboration, not competition
Copyright © 2015 Deloitte Development LLC. All rights reserved.5 Global Human Capital Trends 2015 Culture and engagement Leadership gaps Learning and development HR Skills and capability 87% 86% 86% 80% % VERY IMPORTANT 50% 51% 40% 39% 35% 34% 29% 26% 20% 14% Importance of Trends to Business Percent Rating Trend Important Workforce capability Performance management HR and people analytics Simplifying work Machines as talent People data everywhere 71% 57% 52% 80% 75% 75%
Copyright © 2015 Deloitte Development LLC. All rights reserved.6 Global Human Capital Trends 2015 CULTURE AND ENGAGEMENT The naked organization talent issue Create meaningful work, deep engagement, and job fit #1global say the problem is “very important”– double the 2014 percentage 50% 60% of HR and business leaders do not have an adequate program to measure and improve engagement. Only 12% have a program in place to define and improve culture. Only 7% rate themselves excellent and driving and improving retention
Copyright © 2015 Deloitte Development LLC. All rights reserved.7 Global Human Capital Trends 2015 7 Careers Have Changed and So Have People “Our candidates today are not looking for a career…” “They’re looking for an Experience.”
Copyright © 2015 Deloitte Development LLC. All rights reserved.8 Global Human Capital Trends 2015 Millennials Also … 80% Want to give performance appraisals to the boss 60% think 7 months of work means they’re “loyal” 2/3 Want to be “creative” at work in their job Their “team mates” are the most important people at work Expect feedback weekly and progression annually
Copyright © 2015 Deloitte Development LLC. All rights reserved.9 Global Human Capital Trends 2015 Companies with “soul” had a return from 1996 through 2006, 8x higher than S&P 400 firms 1026% Companies with “soul” experience: • Much higher engagement and retention • Better customer service • Long-term • profitability Source: Simply Irresistible: Engaging the 21st Century Workforce, Bersin by Deloitte, 2014 Importance of Mission and Purpose
Copyright © 2015 Deloitte Development LLC. All rights reserved.10 Global Human Capital Trends 2015
Copyright © 2015 Deloitte Development LLC. All rights reserved.11 Global Human Capital Trends 2015
Copyright © 2015 Deloitte Development LLC. All rights reserved.12 Global Human Capital Trends 2015 Importance of Culture 95% of candidates believe culture is more important than compensation <5% of candidates value compensation over culture
Copyright © 2015 Deloitte Development LLC. All rights reserved.13 Global Human Capital Trends 2015 Engagement Is A Global Challenge Glassdoor Ratings of Employer (Recommended to friends), 20,000+ respondents Average 3.1 What are these companies doing??
Copyright © 2015 Deloitte Development LLC. All rights reserved.14 Global Human Capital Trends 2015 The Simply Irresistible Organization® What we have learned: An Integrated Approach is Needed Meaningful Work Great Management Fantastic Environment Growth Opportunity Trust in Leadership Autonomy Agile Goal Setting (i.e. OKR) Flexible, humane work environment Facilitated talent mobility Mission and purpose Selection to Fit Coaching & feedback Recognition rich culture Career growth in many paths Investment in people, trust Small Teams Leadership Development Open flexible work spaces Self and formal development Transparency and communication Time for Slack Modernized Performance Mgt. Inclusive, diverse culture High impact learning culture Inspiration
Copyright © 2015 Deloitte Development LLC. All rights reserved.15 Global Human Capital Trends 2015 LEADERSHIP Why a perennial issue? see leadership shortfalls as a top-3 issue Need to focus on developing leaders at all levels Treat as short-term training instead of a strategic initiative 86% Leadership “capabilities” in 2015 are no higher than in 2014, despite the fact that this was the #1 issue in 2014. Leadership spending increased by 14% in 2014 with no real impact on results. Only 6% rate themselves excellent in developing Millennial leaders and 66% rate themselves “weak” Only 8% feel strong in developing global leaders and 57% feel weak
Copyright © 2015 Deloitte Development LLC. All rights reserved.16 Global Human Capital Trends 2015 Leadership creates shareholder value • Analysts place a 35% spread on stock price based on how they view leadership +15.7% Equity premium on organizations perceived to have effective leadership -19.8% Equity discount on organizations perceived to have ineffective leadership $2.4 billion Premium as 15.7% of Company M market capitalization $3.0 billion Discount as 19.8% of Company M arket capitalization consider their leadership development programs very effective, and… 4.3% 2% And yet, companies aren’t getting the investment right… Believe that their succession management is where it needs to be* Source = Talent Edge 2020
Copyright © 2015 Deloitte Development LLC. All rights reserved.17 Global Human Capital Trends 2015 Bersin Leadership Development Maturity Model Inconsistent Management Training Content Available • No Development Process • Benefit to Employees Level 1 Structured Leadership Training Core Competencies • Well-Defined Curriculum • Developing Individuals Level 2 Focused Leadership Development Culture-Setting • Future-Focused • Developing Organization Level 3 Strategic Leadership Development Championed by Executives • Talent Management Integration Level 4 BersinbyDeloitte 25% 38% 28% 10%
Copyright © 2015 Deloitte Development LLC. All rights reserved.18 Global Human Capital Trends 2015 10% 19% 26% 36% First-level Mid-level Senior-level Executives Source: Leadership Development Factbook Survey, Bersin by Deloitte, 2014, n=288 % of Positions with Successors Identified (Large organizations) Succession Management Very Weak: Does It Work?
Copyright © 2015 Deloitte Development LLC. All rights reserved.19 Global Human Capital Trends 2015 • The average tenure at work is <4 years, so “lifetime employment” strategies are out of date • 55 Million people (32%) in the US work part-time, contingent, or as contractors • 30% of Tech workers believe they could get a better job within 60 days if they looked (Dice) • 50% of Millennials will change jobs within two years • If you don’t have a facilitated talent mobility strategy good people will leave New Models for Talent: No Longer for Life
Copyright © 2015 Deloitte Development LLC. All rights reserved.20 Global Human Capital Trends 2015 The Talent Mobility Formula Bringing the Talent System Together DESIRED COMPETENCIES (KNOWLEDGE, BEHAVIOR, SKILLS) OPEN POSITIONS & OPPORTUNITIES INDIVIDUAL NEEDS/DESIRES INDIVIDUAL DEVELOPMENT PLAN (IDP) VISION STRATEGIC INITIATIVES DESIRED BUSINESS OUTCOMES VALUES MISSION ORGANIZATION NEEDS MOBILITY STRENGTHS DEVELOPMENT NEEDS CAREER ASPIRATIONS ANNUAL GOALS Succession Management Career Development Individual Development Plan (IDP) Strategic Competencies Workforce Planning Performance Management Development Planning
Copyright © 2015 Deloitte Development LLC. All rights reserved.21 Global Human Capital Trends 2015 Talent Mobility takes a Complete Commitment Only 11% of companies have a clear strategy for career development • Identify Career Goals • Maintain Profiles • Demonstrate Values • Socialize Interests • Create Internal Network • Share Expertise Employee • Define Job Profiles • Provide Coaching • Assess Potential • Identify Development Opportunities • Provide Candid Feedback • Share Talent Openly Manager • Provides Tools & Resources • Develop Career Models • Facilitate Process • Offer Career Coaching • Career Development Training • Integrate with Talent Mgmt HR • Infrastructure – Process, Technology, People • Create Culture of Mobility • Communicate Expectations • Create Transparent Marketplace Company
Copyright © 2015 Deloitte Development LLC. All rights reserved.22 Global Human Capital Trends 2015 What Millennials Want (and Need) • Companies are desperately looking for ways to build leaders from Millennials • Mentors and mentor programs are among the hottest programs to build new leadership • When asked “how would you like to learn to lead,” more than 60% of Millennials say “I’d like a mentor.” The Mentor Next Door
Copyright © 2015 Deloitte Development LLC. All rights reserved.23 Global Human Capital Trends 2015 LEARNING AND DEVELOPMENT Into the spotlight Need to reinvent the learning experience Skill shortage is holding back strategy execution see L&D as a top-3 issue; up from #8 last year 84% Learning moved from #8 to #3 in priority this year. The capability gap tripled from 2014 to 2015. Only 24% feel capable of using advanced media in learning (76% are weak) 30% now feel they have capability to use MOOCs, yet only 12% feel they have mastered L&D operations
Copyright © 2015 Deloitte Development LLC. All rights reserved.24 Global Human Capital Trends 2015 We are Here E-Learning & Blended Talent Management Experiential Learning Continuous Embedded 2001 2005 2015 Evolution of Corporate L&D From Content-Centric to Continuous and Experience-Centric 2010 E-Learning Get Materials Online Social, Collaborative Corporate University Blended Programs Content Management Taxonomy Learning Paths Role-Based Self-Authored Extreme Blended Gaming, Embedded, On-Demand Rich Catalog University 2020 LearningEverywhere AllTheTime Intelligent Learning Instructional Design Kirkpatrick Career Curricula Content Community 70-20-10 Job Relevant Classroom LMS as E-Learning Platform LMS as Talent Platform LMS as Data (Where is the LMS?) LMS as Experience Platform
Copyright © 2015 Deloitte Development LLC. All rights reserved.25 Global Human Capital Trends 2015 REINVENTING HR An extreme makeover Align HR capabilities with business goals HR is being redefined as an enabler and builder of talent see an urgent need to reskill the HR function 39% HR skills are the fourth highest priority in all areas with almost 40% rating the problem “urgent.” Only 11% have strong programs to develop HR professionals internally. Despite a 4% increase in HR spending, almost all talent capabilities this year have dropped
Copyright © 2015 Deloitte Development LLC. All rights reserved.26 Global Human Capital Trends 2015 HR is Under the Gun by Business Leadership
Copyright © 2015 Deloitte Development LLC. All rights reserved.27 Global Human Capital Trends 2015 Global Capability Gaps Percent Rating Trend Important
Copyright © 2015 Deloitte Development LLC. All rights reserved.28 Global Human Capital Trends 2015 PERFORMANCE MANAGEMENT The secret ingredient Emphasize coaching and feedback Less emphasis on evaluation; more on agile goal setting have changed performance management processes or plan to change it in the next 18 months 89% Today 10% of companies believe their performance management process is an effective use of time (up from 8% last year) 35% believe the process drives no value at all 45% believe it hurts engagement and only 10% believe it helps engagement.
Copyright © 2015 Deloitte Development LLC. All rights reserved.29 Global Human Capital Trends 2015 Burdensome, Fixed Flexible, Agile, Simple Ongoing, Continuous Assumption Based Annual, One-Time Data Driven Centralized, Deferred Local, Real-Time Appraisal Focused Development Focused Remediation Strengths Future Outlook Investments in development planning reduce voluntary and high performer turnover while increasing the average revenue by employee1 1 Bersin: High Impact Performance Management (2011) [n=200+] 2 Gallup Organization Research (1998 – present) The defining characteristic of high performing teams is that each member feels that their role repeatedly calls upon their strengths2 * Additional research can be found in the appendix Time for a Shift in PM Principles
Copyright © 2015 Deloitte Development LLC. All rights reserved.30 Global Human Capital Trends 2015 Clarifying the Purpose of PM Coaching for Development Talent Decisions Performance Improvement Legal Documents Employee Motivation Compensation Performance Feedback PERFORMANCE MANAGEMENT Coaching for Development Talent Decisions Performance Improvement Legal Documents Employee Motivation Compensation Performance Feedback PERFORMANCE MANAGEMENT Kelly Services Source: “Getting Away from the Score: Creating Better Ongoing Performance Feedback,” Bersin & Associates, 2012.
Copyright © 2015 Deloitte Development LLC. All rights reserved.31 Global Human Capital Trends 2015 1. High Performers are Disappointed 2. Mid-level Performers can Lay Back 3. Low Performers can Hide 4. Managers rate Themselves 5. Compensation is a separate, distinct process from evaluation and rating The Myth of the Bell Curve
Copyright © 2015 Deloitte Development LLC. All rights reserved.32 Global Human Capital Trends 2015 WORKFORCE ON DEMAND Are you ready? Need to apply engagement strategies to all workers see an increase in contingent hiring in the next 3 to 5 years Organizations are tapping networks of specialists 51% 41% expect to increase or significantly increase the use of contingent labor in the coming year 51% expect this increase over the next 3-5 years.
Copyright © 2015 Deloitte Development LLC. All rights reserved.33 Global Human Capital Trends 2015 HR AND PEOPLE ANALYTICS Stuck in neutral Need a long-term commitment to analytics No year- over-year improvement in analytics capabilities rate analytics important; only 8% are “strong” 75% Year over year there has been almost no improvement in analytics maturity and capability around the world. 2/3 of companies have little or no capability to correlate HR data to business data Only 28% use HR data to predict workforce performance and only 4% feel expert today
Copyright © 2015 Deloitte Development LLC. All rights reserved.34 Global Human Capital Trends 2015 What is People Analytics Bring HR & Business Data Together Recruiting and Workforce Planning Comp and Benefits Performance Succession Engagement Learning & Leadership HRMS Employee Data Engagement & Assessment + Sales Revenue Productivity Customer Retention Product Mix Accidents Errors Fraud Quality Downtime Losses Groundbreaking New Insights & Tools for Managers to Make Better Decisions =Data management, analytics, IT, and business consulting expertise +
Copyright © 2015 Deloitte Development LLC. All rights reserved.35 Global Human Capital Trends 2015 What Our Research Discovered • Bersin by Deloitte Talent Analytics Maturity Model BersinbyDeloitte Operational Reporting Reactive Reporting of Operational & Compliance Measures • Focus on Data Accuracy, Consistency & Timeliness Level 1 Advanced Reporting Proactive Reporting for Decision-Making • Analysis of Trends & Benchmarks • Customizable, Self-Service Dashboards Level 2 Advanced Analytics Statistical Analysis to Solve Business Problems • Identification of Issues & Actionable Solutions • Centralized Staffing & Integrated Data Level 3 Predictive Analytics Development of Predictive Models • Scenario Planning • Integration with Business & Workforce Planning • Data Governance Model Level 4 56% 30% 10% 4%
Copyright © 2015 Deloitte Development LLC. All rights reserved.36 Global Human Capital Trends 2015 Value is High Today, 14% of HR ORGANIZATIONS believe they “regularly use data to make talent and HR strategy decisions”… …and these organizations, are… 2X as likely to believe they are excellent at selecting the right candidates 2X as likely to believe they are delivering a strong leadership pipeline Generating 30% higher stock returns than the S&P 500 over the last three years 3X as likely to believe they are efficiently operating HR
Copyright © 2015 Deloitte Development LLC. All rights reserved.37 Global Human Capital Trends 2015 SIMPLIFICATION OF WORK The coming revolution Redesign work to focus on what matters Technology and globalization creating overwhelmed employees see need to simplify work; 25% say need is very important 75% Believe it or not, 63% of companies have some program in place to “simplify work” but only 12% feel it is driving significant value today. 74% say their work environment is “highly complex” or complex, and only 4% say it is “simple”
Copyright © 2015 Deloitte Development LLC. All rights reserved.38 Global Human Capital Trends 2015 Are We Part of the Problem? Often yes. De-Cluttering HR
Copyright © 2015 Deloitte Development LLC. All rights reserved.39 Global Human Capital Trends 2015 “Softer” areas such as culture and engagement, leadership, and development have become urgent priorities Leadership and learning have dramatically increased in importance, but the capability gap is widening HR organizations and HR skills are not keeping up with business needs Talent and people analytics are a high priority and a tremendous opportunity, but progress is slow Simplification is an emerging theme; HR is part of the problem 6 KEY FINDINGS HR technology systems are a growing market, but their promise may be largely unfulfilled
Copyright © 2015 Deloitte Development LLC. All rights reserved.40 Global Human Capital Trends 2015 BE BOLD Copyright © 2015 Deloitte Development LLC. All rights reserved.40 Global Human Capital Trends 2015
Copyright © 2015 Deloitte Development LLC. All rights reserved.41 Global Human Capital Trends 2015 Copyright © 2015 Deloitte Development LLC. All rights reserved.41 Global Human Capital Trends 2015 www.deloitte.com/hctrends2015 Global Human Capital Trends 2015 Leading in the new world of work
Copyright © 2015 Deloitte Development LLC. All rights reserved.42 Global Human Capital Trends 2015 This publication contains general information only and Deloitte is not, by means of this publication, rendering accounting, business, financial, investment, legal, tax, or other professional advice or services. This publication is not a substitute for such professional advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified professional advisor. Deloitte shall not be responsible for any loss sustained by any person who relies on this publication. As used in this document, "Deloitte" means Deloitte Consulting LLP, a subsidiary of Deloitte LLP. Please see www.deloitte.com/us/about for a detailed description of the legal structure of Deloitte LLP and its subsidiaries. Certain services may not be available to attest clients under the rules and regulations of public accounting. Copyright © 2015 Deloitte Development LLC. All rights reserved. Member of Deloitte Touche Tohmatsu Limited

Notas del editor

Welcome remarks
Today’s global organizations must navigate a “new world of work” that has turned traditional assumptions about talent management upside down.

In this new world, the barriers between work and life have been all but eliminated.
Talent is in high demand, and many organizations cannot keep up.
Millennials will soon make up 50 percent of the workforce—and they have different values than previous generations do.
From a macroeconomic perspective, the world has entered a period of stronger economic growth.
With 2015 expected to be the year of the employee, it is increasingly imperative for organizations to reimagine and reinvent the way they approach talent management—or risk falling behind.

This year’s report spotlights the 10 trends that shape the new world of work.
This is one of the largest-ever longitudinal global studies of talent, leadership, and HR challenges and readiness, with more than 3,300 business and HR leaders from 106 countries responding.

We believe that 2015 is a critical year for HR leaders. These trends will serve as a guide for the new way of thinking and actions required to meet new challenges.
In this year’s report, we explore 10 major trends that emerged from our research, which reflect four major themes for the year: leading, engaging, reinventing, and reimagining.
10 human capital trends for 2015
Percentage of respondents who say the topic is “important” or “urgent”

1.      Culture and engagement – Create meaningful work (87%)
2.       Leadership – Develop global leaders at all levels (86)
3.       L&D – Reinvent the learning experience (86)
4.       On-demand workforce – Engage all workers (80)
5.       Reskilling HR – Align HR with business goals (80)
6.       Performance management – Shift from evaluators to coaches (75)
7.       People analytics – Need long-term commitment (75)
8.       Simplifying work – Focus on what matters (71)
9.       Machines as talent – Look for opportunities (57)
10. People data – Leverage inside and outside data (52)
The findings
In an era of heightened corporate transparency, greater workforce mobility, and serious skills shortages, the issues of culture, engagement, and retention have emerged as the top critical issues for business leaders—not simply an HR problem.
Culture and engagement is the No. 1 issue companies face around the world; 87 percent of organizations cite culture and engagement as one of their top challenges, and 50 percent call the problem “very important”—double the number in last year’s survey.
Given this new transparency, an organization’s culture can become a key competitive advantage—or its Achilles’ heel. Culture is now a business issue, not just an HR issue. And there’s no place for organizations to hide.

Why is this?
Today’s organizations live in a transparent era. Every corporate decision is immediately exposed and debated publicly. Once-private issues are now posted online for every employee—and every potential employee—to read.
Culture drives many things within an organization, most prominently employee engagement and retention. That is bad news for a lot of companies.
According to the Gallup polling firm, only 13 percent of the global workforce is “highly engaged.” Research from Bersin by Deloitte found that upward of half the workforce would not recommend their employers to their peers.

What’s needed?
Organizations that create a culture defined by meaningful work, deep employee engagement, job and organizational fit, and strong leadership are outperforming their peers and will beat their competition in attracting top talent.
Our research shows that, in 2014, it will be hard to keep good people. “Responsible companies” had much higher levels of engagement and retention, customer service, and long-term profitability. People want to work for organizations that fulfill a larger mission.

People want to work for organizations that are inspiring to work for – and offer a greater sense of purpose (this is even more true for Millennials – which will be 75% of our workforce in 10 years.)

People also desire flexibility or control/autonomy over workload, time and schedules, as well as opportunities to grow and contribute. All of this (plus more – inclusion, workspace design, etc.) is part of a holistic work environment.

68% of women without children would rather have more free time than make more money — even more than those with children (62%). More magazine – 2013, “Women in Workplace Study,” http://www.more.com/flexible-job-survey
One of every five employees cares for elderly parents, a number that could increase to almost half of the workforce over the next several years. http://whenworkworks.org/research/downloads/FlexAtAGlance.pdf
40% of professional men work more than 50 hours per week. Of these, 80% would like to work fewer hours. We have the “overwhelmed employee” problem to address.Center for American Progress. August, 2013http://www.americanprogress.org/wp-content/uploads/issues/2012/08/pdf/flexibility_factsheet.pdf

Transition: So let’s talk about this a bit more on the next slide
4/12/2015
The findings
For the third year in a row, “leadership” appeared as one of the top three most pressing business challenges. Nearly 9 out of 10 global companies cited leadership as a top issue—with 50 percent of executives citing leadership shortfalls as “urgent,” up from 38 percent last year.
Organizations around the world are struggling to strengthen their leadership pipelines, yet over the past year businesses fell further behind, particularly in their ability to develop Millennial leaders.
Why is this?
Too many organizations treat leadership as a short-term training program rather than as a strategic initiative that requires long-term, consistent investment.
Most companies treat leadership sporadically, confining development opportunities to a select few employees, failing to make long-term investments in leadership, and neglecting to build robust leadership pipelines at all levels. For all the talk about leadership as a CEO-level priority, companies do not consistently invest in this area.
What’s needed?
A focus on leadership at all levels, coupled with consistent year-over-year spending in this area, is essential for organizations to remain competitive and effectively engage employees in the new world of work.
(c) Bersin and Associates
Large companies, especially, are guilty of not ‘priming the pump,’ with successors identified for just 10% of their first-level leaders and 19% of their mid-level leaders. (See Figure X.) The pipeline for senior-level and executive positions also looks weak, with successors identified for just 24% and 36% of these positions, respectively. Research shows that it costs more to import senior-level leaders into an organization than to grow them internally4, which will need to be accounted for in HR budgets.
The findings
Learning and development issues rocketed from the No. 8 to the No. 3 talent challenge in this year’s study, with 84 percent of survey participants rating learning as a critical or urgent problem. Despite this demand, capabilities in learning dropped significantly, and the gap between urgency and readiness is three times worse in 2015 than it was in 2014.
Companies see an urgent need to build skills and capabilities and are now focused on transforming or fixing their learning and development organizations.

Why is this?
Senior business leaders increasingly see shortages of skills as a major impediment to executing their business strategies. Only 28 percent of the respondents to this year's survey believe that they are "ready" or "very ready" in the area of workforce capability. As the economy improves and the market for highly skilled talent tightens even further, companies realize they cannot simply recruit all the talent they need but instead must develop it internally.

What’s needed?
Faced with gaps in talent and skills, HR needs to reinvent the learning process.
In the past three years, there has been an explosion of new learning offerings, including MOOCs, digital learning tools, video offerings, and training systems.
More than one-third of all learning now takes place on mobile devices, facilitated by video and learning apps.
This is the kind of personalized, digital learning experience that employees increasingly want.
Companies that transform their learning and development organizations are not only able to accelerate skills development and more successfully build their leadership pipelines, but also to directly impact employee engagement and retention, one of the biggest challenges cited this year.
The findings
HR needs to deliver greater business impact and drive HR and business innovation. Accomplishing this will require an extreme makeover.
While CEOs and top business leaders rate talent as a key priority, only 20 percent of HR professionals give themselves high marks when it comes to addressing their companies’ talent needs. HR’s self-assessment showed virtually no improvement over the previous year.
39% see an urgent need to reskill the HR function.

Why is this?
HR is being forced to redefine its role from “service provider” to enabler and builder of talent. HR’s traditional employee service mission is now handled through shared service centers, modern human capital management technologies, and easy-to-access online and mobile applications. This frees HR to advise and consult executives on people-related strategies.

What’s needed?
HR needs to dramatically raise its game by aligning its skills and capabilities with the organization’s overall business goals.
In this new world, HR is shifting from a group of generalists to a team of highly skilled business consultants. HR can drive operational value by eliminating much of the daily HR transactional work.
Companies are moving beyond talk to action: revisiting the operating model, building HR universities, and modernizing relationships with business partners.
The findings
Performance management processes affect each of the top business challenges: leadership, engagement, and capability. Most companies tell us that an “up or out” performance management process alone simply does not help solve these problems and, in many cases, makes them worse.
Innovative new performance management models are now becoming an imperative as businesses modernize and improve their talent solutions.
Change is happening: 89 percent of respondents recently changed their performance management process or plan to change it within 18 months.

Why is this?
A well-functioning performance management process should facilitate good management by good managers who are trained as coaches and mentors rather than evaluators and graders.
Organizations used to think of performance management as a backward-looking assessment program owned by HR. No longer. Performance management is being reinvented for a new, forward-looking purpose: to serve as an efficient, focused business process that improves employee engagement and drives business results.
This redesign focuses less on evaluation and more on agile goal setting, regular feedback, coaching, and development. It shifts the focus away from forced distribution and much more toward helping managers coach people to succeed. By changing this one HR “ingredient,” it is possible to affect many others.

What’s needed?
Companies leading this transformation are redefining the way they set goals and evaluate performance, focusing heavily on coaching and feedback and looking for new technologies to make performance management easier.
Done well, performance management can be one of the most inspiring and developmental events in an employee’s career and drive performance improvements and organization-wide positive results.
Kelly Services offers outsourcing and consulting services, including recruitment, HR management and vendor management to companies worldwide. The organization, which had $5.5 billion in revenue in 2012, has about 1,100 permanent employees at its headquarters in Troy, Michigan, and about 6,800 more in branch offices worldwide. The company provides temporary employment to about 560,000 people each year.
In 2008, the HR leadership team at Kelly decided it was time to take a fresh approach to performance management. There was a general sense that the old way was not working, but it was unclear exactly what lay at the root of the problem.

Kelly assembled a team to set a new course – purposely without a vision for what that course would look like. Open-mindedness and candor were important elements of what participants recall as a deeply introspective process. A key element of the process was a focus on Kelly’s fundamental beliefs and assumptions about its people. Specifically, Kelly looked at how policies and procedures can either communicate or undermine the core beliefs and expectations that leaders have regarding employees. For example, too much emphasis on monitoring behavior through tools like time clocks and activity logs can suggest distrust or an expectation that employees work only for their paychecks, not out of integrity or a desire to do a good job. Kelly took a step back to identify what managers and leaders believed about employees, then let those beliefs guide subsequent decisions.

Leaders at Kelly ultimately decided that past approaches to performance management had been paternalistic, rather than collegial. In examining their core beliefs about employees, leaders concluded that such a tone did not accurately reflect their expectations of employees. The leaders believed most employees cared about their jobs and wanted to do them well.

It followed that the aim of performance management should be to help employees follow through on their natural motivation. But conversation after conversation revealed that many regarded the performance management score as a hindrance.

Kelly could have renewed efforts to standardize the scoring process, but that began to seem like a case of the tail wagging the dog. What leaders and employees primarily wanted wasn’t more consistent scoring; it was more fruitful performance-management conversations.

In the end, the decision came down to what the scores represented for Kelly and its workforce. Rightly or wrongly, the scores had become emblematic of a management-driven, red-tape-laden approach to performance management. So, Kelly decided to abolish them. In one sense, abandoning scores was a tactical move. But in perhaps an even more important sense, the change was strategic and symbolic – an opportunity to redirect thinking across the enterprise.

Since Kelly has abolished performance scores, they have seen higher levels of engagement from employees and received reports that performance conversations are much more honest and effective.
The findings
Companies are taking a more sophisticated approach to managing all aspects of their workforces, including the hourly, contingent, and contract workforces.
More than one-third (34 percent) of all workers in the United States are contract workers, and nearly half (49 percent) of companies say their needs for contingent workers will keep growing over the next three to five years.

Why is this?
The “on-demand” workforce offers companies the ability to tap into extensive networks of innovators, technical experts, and seasoned professionals.
Today’s workforce is no longer a set of employees who come into the office or factory each morning or shift and go home each night. More and more of the workforce consists of contingent employees who are working variable, often part-time, engagements or schedules, are compensated hourly, are operating remotely, or are actually working for an external consulting firm.

What’s needed?
Companies are now beginning to realize that contract labor is often highly talented and should be managed strategically.
To engage and retain these workers, companies should think broadly about how their HR programs, strategies, and analytics tools could be applied not only to full-time employees but also to contingent and part-time workers.
The findings
Data and analytics are key to solving many of the top challenges we identify in these trends: engagement, leadership, learning, and recruitment.
Still too few organizations are actively implementing people analytics capabilities to address complex business and talent needs.
Three in four companies (75 percent) believe using people analytics is important, but just 8 percent believe their organizations are “strong” in this area—almost no change over 2014.

Why is this?
Leading companies are using analytics to gain a competitive advantage by understanding all elements of the workforce, including to:
Understand and predict retention
Boost employee engagement
Expand talent sources and improve quality of hires
Profile high performers in sales and customer service
Yet, our survey confirms that most organizations have been slow to get started, showing very little progress in implementing analytics. In fact, this year’s study shows that there has been little year-over-year improvement in analytics capabilities.

What’s needed?
People analytics, a capability built over years, is one of the biggest differentiating factors for high-performing HR organizations today. Without early, substantial investments, it is difficult to get traction. Companies must therefore make a serious commitment to this discipline, search for robust solutions from their core system vendors, and hire people into HR who have an interest and background in analytics and statistics.
We just completed two years of research in this area and found that yes, a small number of HR organizations (14% in fact) are well ahead of the curve and have effectively “datafied” their operation.
These unique companies are seeing tremendous improvements in business performance: they are two times better at recruiting, twice as capable of building the right leadership pipeline, their HR organizations are typically 3X more efficient, and their stock prices rose 30% higher than the average of the S&P 500 over the last three years.
The question one has to ask is who are these companies and how did they get here?
The findings
Organizations are simplifying work in response to employees feeling overwhelmed by increasing organizational complexity, growing information overload, and a highly stressful 24/7 work environment.
More than 7 out of 10 organizations rated the need to simplify work highly, with more than 25 percent citing it as an urgent problem. Ten percent of companies have a simplification program; 22 percent are working on one.

Why is this?
Technology, globalization, and compliance needs continuously add complexity to work. Left unaddressed, this leads to an organizational environment that damages employee engagement, lowers quality, and reduces innovation and customer service.
Some steps are already being taken. Some companies are waking up to the need to “simplify the work environment,” reduce workloads, eliminate steps, and engineer simpler applications that don’t require lots of training or time to use.

What’s needed?
In 2015, successful companies will continue to take steps to simplify work, reduce administrative burdens, and streamline complex processes.
Business and HR leaders should put “simplification” on the agenda for 2015 and focus on individual, organizational, and work-specific programs that reduce complexity and help people focus on what really matters. Taking these steps will ultimately help drive engagement and productivity.
“Softer” areas such as culture and engagement, leadership, and development have become urgent priorities
Increasing competition for talent has driven these to the top of the HC agenda
Consistently top 3 important issues across regions and industries

Leadership and learning have dramatically increased in importance, but the capability gap is widening
With economic recovery, accelerating demand for leadership at all levels, especially Millennials
Only 6% very ready to deal with leadership issues, only 10% have strong succession programs, and only 7% have programs to build Millennial leaders
Learning importance has quadrupled; The capability gap tripled from last year when it was the smallest

HR organizations and HR skills are not keeping up with business needs
Capability gaps have increased for virtually every issue
Business and HR leaders continue to give HR a failing grade
Only 5% rate HR as “excellent”

HR technology systems are a growing market, but their promise may be largely unfulfilled
HR spending increased 4% in 2014 over 2014, much of this dedicated to technology
6 in 10 companies are planning to increase HR spending in next 12-18 months
HR technology solutions market has grown by 50% to a $10 billion industry in last yearn, but HR organizations have not transformed fast enough
Tools without redesigning process and programs does not solve talent programs

Talent and people analytics are a high priority and a tremendous opportunity, but progress is slow
¾ rate talent as important or very important
Only showing small improvements in analytics capabilities: 35% reported HR analytics under development, and only 8% are excellent at HR
Outside data is now integral to the HR solution

Simplification is an emerging theme; HR is part of the problem
Last year the overwhelmed employee emerged as a significant problem
74% rate their work environment on as complex or very complex and half have programs to simplify work
HR is simplifying – for example streamlining performance management
We see beginning of major movement to apply innovative approaches and techniques like design thinking
The full Human Capital Trends 2015 report goes much deeper. You’ll find stories of how leading companies are leveraging these trends for competitive advantage. And if this all seems overwhelming, we’ve incorporated practical advice for companies and HR leaders on where to start.

Our advice is straightforward: Jump into the fray with enthusiasm. Seize ownership of these trends and exert leadership in addressing them. Make 2015 a year of boldness in your human capital strategies. Innovate. Reinvent. Reimagine.

The New World of Work: Leadership and HR Imperatives for 2015 and beyond

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The New World of Work: Leadership and HR Imperatives for 2015 and beyond

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