CIPD Podcast 20 - The future of global HR

Date: 03/06/08 Duration: 00:20:25

In this podcast a panel of senior HR professionals from around the world talk to Philippa Lamb. The starting point for the discussion is the Boston Consulting Group’s new global survey on the issues likely to affect HR in the coming decade, such as the global competition for talent. The four panellists are Rainer Strack, a partner and Managing Director at BCG, Mr. R. Nanda, Senior Vice President Human Resources at Tata Communications Limited, Andreas Gollan, Senior Vice President Corporate HR at E.ON Group and Susan Meisinger, President and CEO of the Society for Human Resource Management (SHRM).

Transcript

Philippa Lamb: Hello and welcome to the latest CIPD podcast. I’m Philippa Lamb and in this programme I’m joined by an impressive panel of senior HR professionals from around the world. We caught up when the CIPD took Britain’s turn to host The World Federation of People Management Association’s World Congress in London. A new global survey from The Boston Consulting Group examining the global challenges facing HR gave us a starting point for our conversation. The survey questioned nearly 5,000 people in 83 countries and it asked about the issues likely to be affecting HR in the coming decade.
 
My guests for this programme are Rainer Strack from The Boston Consulting Group in Germany, R Nanda who’s Senior Vice President of HR at TATA Communications Limited in India (part of the seemingly all consuming TATA Group), Andreas Gollan, Senior Vice President at Corporate HR at E.ON Group in Germany, and finally Susan Meisinger who’s President and CEO of the Society for Human Resource Management in the United States. 
I started by asking Rainer for a summary of the key issues and challenges for the future, identified in The Boston Consulting Group’s report.
 
Rainer Stack: In a nutshell, to summarise what are the key things that HR faces over the next couple of years, is a simple triangle between strategy, matrix and HR. There are actually two broken links in this triangle – HR, what we see looking at these 4,700 answers. It’s not really strategic in a lot of companies and it’s also not really very analytical, so there is not a real link between HR and the strategy department and there’s not a real link between HR and numbers and matrix and analytics. 

PL: What were the other key challenges that emerged from the study?
 
RS: We looked into, as I said, 17 topics. If you just prioritise these 17 topics by using two dimensions. One the capability of HR based on these 4,700 answers and also on the future importance of this topic. Then, there are eight topics that emerge as most important and where HR says there is still a lot to do and these eight topics are talent management as the key overarching topic (top or the near the top of the agenda in almost every country), leadership development (very closely linked to the talent management), then demographics, managing an aging workforce – one of the key challenges, at least in the Western world – then work-life balance, managing work-life balance. That was a big surprise to us, so that people are not looking only at a pay check at the end of the month, they would like to have much more; a meaningful workplace. There’s a lot of discussion about globalisation, how can HR support globalising a company? Then there was the topic of life-long learning, in particular if you have an aging workforce. So, one example, a German bank has more than 20% of its employers above 50 but only 1% of its training and development investment is in those people. There is still a mismatch between investments in training and development and life-long learning experience. Finally, there’s one topic transforming HR into a strategic partner where a lot of people say HR is not yet there. So, they don’t have a real strategic perspective, they don’t really have a business perspective so there’s a lot to do, particularly in this dimension.
 
PL: Now Nanda, obviously a lot to think about there, but I’m interested in this point that talent management emerged as a key issue, almost across the board – across all industries, across all regions. Did that surprise you given the current economic situation? I wonder whether that perhaps might suggest there would less emphasis on talent management.
 
R Nanda: Well actually I don’t think it surprised us but the scale of shortage that we’re experiencing has been quite phenomenal. We knew that we would experience talent shortage but if you look at the way the economy’s growing and the new players coming into the market, the requirements have gone up considerably. It is across all levels or layers of management and across all industry segments, so that’s what we’re experiencing.
 
PL: What are the strategies that you think need to be in place to cope with that problem?

RN: The two things which we’ve identified that seem to be key is one, you need to have a very engaged employee with you. We realise that engagement does not just mean that the boss goes and smiles at him every morning, that’s just one part of the engagement. More importantly that he needs to see a value and meaning in himself and in his career, which happens not just by the task that he’s doing today, but how does he get prepared for the task that he can do tomorrow? That’s one very key important thing that we identified as an engagement issue. The second aspect that really helps in terms of looking at this, is that a lot of people are, today, looking at taking on global leadership positions and if you have an opportunity, within your organisation, instead of recruiting somebody from outside you are willing to experiment from somebody from within, even though he may not have the entire skills and competencies that you need, but the sort of passion that he puts into the assignment, by giving them that opportunity is phenomenal. We have realised that if we have been subject to whatever are the immigration requirements and employment practices across our various countries in which we operate, as far as possible, we are trying to encourage this at the moment, to ensure that one, we encourage and build a body of globally experienced managers and second, more importantly, it helps us in our ((?)) and strategies. These are two things that we’re trying to introduce.
 
PL: Sue, obviously you’re based in the US, what are the big upcoming HR issues there?
 
Susan Meisinger: I think the ongoing challenge of talent. Even though the economy is softening and the unemployment rate is rising, we’re still at a low on employment rate by historic terms. So, employers are still experiencing skill shortages. While there may be some increase in some industries – auto workers in the United States for example – in healthcare it’s difficult to find people. I think the other overarching consideration for the profession in the US is the upcoming elections. Regardless of who the new President is, the expectation is that it will be a more regulated environment, that there will be some initiatives to legislate in the field of HR and redirecting a lot of attention that had been on strategic issues now back into compliance issues, and that’s, for me, a concern to the profession.
 
PL: What’s that going to mean in practical terms for the practitioners over there?
 
SM: One of the roles of HR is HR delivery and in the US it’s a highly litigious environment and so risk management plays perhaps a higher role for HR professionals. The challenges with new legislation and new risks created by that, that HR not divert all of its attention. You have to pay attention to it but you risk being defined by it. That you’re the compliance cop, you’re the person who’s always ensuring that you don’t go to jail or you’re not sued by an employee because, you know, in the United States the employees are quite likely to sue. That’s a concern because, as this research has shown, the need and the importance and the opportunity created for HR to really be engaged in this strategy, development of the organisation and linking HR to execution, organisational strategy, it’s a wonderful opportunity and there’s going to be a competing demand for attention in the HR delivery, in the HR compliance issue. I think that’s something to watch in the United States next year. 

PL: Rainer mentioned this issue of work-life balance being high up the list of priorities of people, almost surprisingly high on the list in some areas. Is that a big one in the States?
 
SM: It was interesting because as I looked at the results of the research, for the United States, work-life balance didn’t fall into the red zone, which is the top areas, the key zone. It was very close but it was not there. I think that is also linked to the regulatory environment. In the United States our leave policies are unpaid leave and so the focus and attention for an employer in managing that leave is somewhat different than for example in another development country where it’s a paid leave. That’s one area that I would be expecting legislative efforts in the United States, to become more Europeanised in some of our leave policies, but that’s probably why, in the response to this survey from HR professionals it didn’t rise to that red zone. Having said that, in conversations with HR practitioners, it’s always a subject of conversation and it’s just the subject of how do you manage a 24/7 environment where everybody’s connected all the time, and globally? It’s not just connected on weekends, it’s connected in the middle of the night.
 
PL: Andreas, obviously you’re based in Germany, what’s the European perspective on this? Are we facing the same sort of issues that Sue was just describing or do we have other challenges?
 
Andreas Gollan: I think in general we have more or less the same perspective and the same problems in Europe, and especially in Germany where I am based; one or two things are different. One is the situation of the unemployment rate. In the States it is increasing, in Germany it’s decreasing, that’s one difference. Maybe with one perspective, which is a little bit different, to handle and cope with the trade unions and the workers council. Especially in an environment which is more and more difficult for the people, it’s more pressure on the people, I think all over the world and also in Germany and to handle this topic with the works council is sometimes not so easy. On the one side to say okay we have to reduce the salaries, that’s one situation in Germany and to increase the working hours, and then on the other side there’s more pressure to discuss this with these people is maybe not special for Germany but it is a special situation.
 
SM: One of the things that we’re seeing in the United States during this campaign is a push by organised labour supporting the Democratic campaign because they are looking forward to labour legislation that will greatly ease their ability to organise a company. Right now, in the United States, in the private sector, only seven or eight percent of the workforce is unionised and there’s a very strong interest in having legislation enacted to sort of encourage and make it much easier by not requiring individuals to have a secret ballot election for a union, that if the unions just show cards saying people are interested, the union would be recognised. That would be a dramatic change for many HR professionals in the United States, if it becomes law, because so many HR professionals have never worked with unions. It just hasn’t been part of the history in the last 15/20 years for most industries, so that could be a real challenge. 

PL: Nanda, what’s the situation in India?
 
RN: The benefiting sector used to be the most stronghold of all the union activities historically and over the last few years we actually find whilst the benefiting sector has been growing, the level of unionism has been coming down because the competitive changes have been introduced. In fact no employer relations manager in any manufacturing sector really now spends so much time on industrial relation issues that what probably his predecessor did ten years back, that’s a change. Very significantly what we have witnessed is that the services sector is picking up and the employment in the services sector is growing quite considerably every year and this becomes a very strong bank which every political party and every trade union is trying ((?)). What is also interesting to watch is that most of the people entering the services sector, there are two types. There is one which is the knowledge worker and they are the programmers and developers and people who actually contribute from a knowledge perspective. Then you have the people who are basically providing support and you have the hospitality industry or the retail industry or the travel and tourism industry. I would say there is a disinclination of people who are in the knowledge sector and the service industry to actually be associated as being unionised. They would prefer to be labelled as being part of management rather than being unionised, so while unions are trying they are also facing resistance. The people don’t want to be branded as being unionised so that’s one thing that also seems to be developing.
 
PL: Rainer, you’ve got the global perspective on this, was the organisation of labour an issue right round the world or was it very regional specific?
 
RS: I would say it was regional specific. I will give you one example. If you look at Germany (and the results only for Germany) and capability of HR across these 17 topics, it was higher rated than the ((rich?)) European country and this is also a little bit due to the importance and the power of unions and also the hierarchy of a HR VP in an organisation. In Germany, for example, HR VP is usually a member of the management board, so HR is not only on the table when HR issues are discussed, HR is at the table and therefore the power and also the professional attitude, the budget etc are a little bit higher. This is also at least partly due to the importance of unions in the German society.
 
PL: Talking around the importance of different issues in different areas of the world, it does very much bring to the forefront of my mind how very difficult it’s going to be for HR practitioners within organisations operating across boundaries, to deal with these challenges going forward. Andreas, how is this to be done because there are obviously very different approaches needed in different parts of the world?
 
AG: Looking at E.ON we are on the way. Also in our strategy we have a plan to bring more people abroad and to acquire companies is one thing but then to integrate companies is a different thing and for this we need really experienced managers with also different culture views and experience in different cultures. What we are doing is to bring young people abroad because it’s really much easier to bring young people across the border because of the families, the kids and so on, and so normally we would try to do it immediately, at the beginning. One example is we have a graduate programme in place at E.ON and normally we fill every 50 young people in this programme and now we expand this programme to 100 or 150 graduates and the idea is that it’s a two year programme and then they have two or three steps in different countries and then they learn immediately the language, the culture and then they are really internationals for us. 

SM: To that point I think, Infosys from India had a programme that they put in place, we gave an award to them, because they brought in interns from the United States into India to work and sent interns to the United States and they were very focused on having that cross border at an internal level, which was for us an incredible investment that they were willing to do, but to get the experience for that individual and the individual exposed to and familiar with the Indian company.
 
PL: Is this something that TATA’s looked at?
 
RN: Yes TATA’s been doing this across four specific countries. We have been recruiting from Singapore, the Philippines, China and the US and I think the average intake is about 70 or so interns every year. These people come to India and spend between three months to six months working with one of the companies, then they go back to their respective regions and be part of the organisations or any other TATA companies working there.
 
PL: And is that working well?
 
RN: It’s working well. In the oldest country, Singapore, we are in the fourth year of running this programme and in China and the US we’re in the second year and the Philippines just this year.
 
PL: Rainer do you think we’re going to see more of this? I think the question in mind is see more of this for companies who would never have thought of doing such a thing in the past because they’re going to have to look abroad to get the talent they need.
 
RS: Yeah, as I said, we looked into 194 action steps and one of the action steps which has the highest increase over the next ten years is global recruiting and to really know at what universities in India, China etc I should recruit, what my marketing campaign is etc because talent is a scarce resource and it’s becoming even more scarce over the next couple of years because of the baby boomers who will retire in ten years. Coming up with a global recruiting strategy for global companies is absolutely a must and I would say a lot of the global companies don’t have such a thing yet in place. What they have are certain development programmes. There’s one company which we found had a 2+2+2 programme. And two means to make a career in this company they have to be in two sub units, in two different functions and also in two countries to, let’s say, get ahead. To make some simple rules sometimes works but then you also have to fulfil those rules and don’t make exceptions to the rule.
 
SM: Do you think this is going to be a challenge because of the focus and the need to get the ex-patriot experience where there’s also pressure on work-life balance, that on the one hand people are expecting and wanting more control over their own life and yet dealing with a corporate expectation and requirement that they relocate and move elsewhere, and basically change their life?
 
RS: Yeah but I would say in retrospect it looks terrific. In my younger days I was at BCG’s Boston Office for one and a half years and my wife still tells me that was the best time ever in our whole lives so far, so it was a terrific experience – personal wise and also professional wise – these almost two years At the beginning you are nervous. A different environment, different culture and how could you succeed also in a different culture? In retrospect it was a fantastic experience and a lot of people, for example in our company, are looking for this global experience because we do consulting with global companies and therefore you have to have also global experience.
 
AG: On the other side, it’s really great to bring the people abroad but on the other side, to reintegrate them after a period of time, this is now our big challenge for the future. After two or three years then they ask the question what is the next step? Back to Germany and then normally also the question is, what about the next career step? This is the new problem we have to face.
 
PL: Sue, is what we’ve just been talking about, huge global companies recruiting overseas and the whole ex-pat experience, we’re familiar with that. What about companies and organisations lower down the tree who are just not on the scale to do that sort of thing, how are they to tackle the issue of getting the people they need?
 
SM: Well I think what you’ll see is greater ease and ability to use the internet. The global search engines that are out there, the accessibility to talent on a global scale is much different now because of technology and I think you’ll see the growth of boutique recruiting firms where these firms are specialised in helping domestic (whatever domestic it would be) firms locate and access talents in other markets. I think there’ll be a growth in that where somebody can go locally to a firm, they can help them reach globally. But I do think it’s a challenge and I think that’s one of the reasons you’ll see, on a very macro level, the companies becoming bigger and bigger. Companies will be gobbling up more companies because the size gives them the leverage for the global recruiting, and I think on a macro you’re going to see more and more of that.
 
PL: It’s probably fair to say that US companies are perhaps more imaginative than their European counterparts already about targeting particular groups that they’re interested in recruiting. I know that Home Depot have gone down that road with looking for older people, how did they go about that?
 
SM: Well Home Depot, their strategy was corporate growth of stores. If they’re going to grow the stores then HR has to link that strategy to finding people to staff the stores and so they started targeting what are the different applicant pools that they can reach into and they formed a partnership with The ARP, which is The Association of Retired Persons in the United States, a very large organisation with retirees. They created a website where retired persons could express an interest in working for the store and the interest was so heavy that it crashed the website. They also built an alliance with the military so that they would be standing at the door when a soldier left the military and re-entered the workforce, Home Depot was standing there saying, “Have you considered working in a retail environment in a career with Home Depot?” It’s a very focused approach, the strategy was growth of stores, had to staff the stores, how do we link to that strategy? We have to find the bodies. It has been very successful for them.
 
PL: See Rainer I think that’s very fascinating. Frankly, it’s not rocket science, it’s just common sense isn’t it but we haven’t seen as much of that sort of entrepreneurialism I don’t think in Europe, would it be fair to say as perhaps they’re exhibiting over in the US?
 
RS: I would counter argue here because I would say, in particular of the demographic challenge, the shortage of labour is even perhaps more severe in some countries in Europe. Germany has the oldest workforce all about Europe and what I see here is a challenge not only in the traditional executive recruiting market, it’s much more in the skilled, blue collar labour market.
 
PL: Indeed, which we tend to forget about.

RS: Completely and if you look, for example, in job family by job family approach in a company, so if you really look where you have a surplus and a shortfall, you have a shortfall also in a lot of blue collar job families and there it’s about how to get the next electrician and also competing against global companies. This would be a big big challenge, in particular in special job families in certain industrial companies.
 
SM: To support what you’re saying, I have a story. I was giving a speech, talking to our members in Michigan in the United States and that’s where the auto industry is centred, and in talking to them what I heard from some was we’ve got a problem because we have all these unemployed auto workers, they’ve got a skill but it’s a skill we can’t use any longer and we have a deep, desperate shortage of healthcare workers. Two weeks later I was in India talking with HR professionals and they were pointing out the massive level of unskilled workers that they have available, the unemployment rate and yet they had a shortage of engineers. I think it’s a global issue where the fit of the skilled workforce or the workforce development efforts of the country may not match the business needs going forward. Government is not keeping up with and responsive to the kinds of programmes that are in the real world. Certainly the nature of government is to be too late to the game and that’s part of the challenge that we’re spending some time on in the United States, is this notion of workforce development. How do you ensure you’ve got the workforce of the future? In the United States the education system is very localised, it’s not strong central control and so local school boards are making decisions about the workforce of the future that they’re not necessarily equipped to make and I think we are going to see a long term impact from that in the United States.
 
RS: I think in the long run the shortage of experienced people is, for Europe, a bigger problem because we have a shortage in literal resources in Europe so our resources as a human resources is a specialist knowledge of the people. My feeling is it’s much more easy to train the blue collar workers than to find, especially today, engineers. We are looking for thousands of engineers in Germany and we have no idea where we can find them. We are now looking to South America, the Middle East, wherever, so back to India.
 
AG: In Germany we had a shortage of 40,000 engineers last year and in India I think there were 400,000 graduates in engineering last year, so there’s a huge market mostly from the local companies here.
 
SM: But some of those engineering graduates, are they workforce ready?
 
RN: No, they are academically ready but not trained to take up work. I mean they need to go through a three months to six months finishing school to actually make them work ready.
 
SM: And the employer provides that.
 
RN: Yes. 

SM: It’s an expense that the employer has to incur.
 
AG: Really in the long run it could also be the reason for mergers, to merge with a company and ((?)) people, you never know.
 
PL: See this is interesting because it highlights the need for global cooperation doesn’t it because it’s a question of moving scarce resources and expertise around to fit the pegs into the holes isn’t it?
 
SM: Well you don’t necessarily need to move the people any more either, it’s moving the work, so that the workers may be some place else. What has historically been done in Germany is no longer done in Germany and that’s a major cultural shift.
 
PL: There’s so much to talk about in this, I’m afraid I must bring it to a close, but what I’d like to do is I’d just like to run round the table and ask all of you what you think, in practical terms, HR practitioners should be doing right now to prepare them for the challenges we’ve been talking about over the next ten/15 years. Sue, can I start with you?
 
SM: I think HR professionals need to understand the business. They need to understand who they work for, what the strategy of the business is, what the strategy is for the long term. If their business does not have a strategy they need to be the leader in directing it and encouraging the development of a strategy. But I think the biggest gap that I see in the profession, and I think this research confirms, is that HR professionals need to not be a business partner, they need to be part of the business.
 
RN: Yes, I tend to agree. HR people's involvement in the strategy is very key but I think equally important is also for them to look at creating certain actionable models, which they can actually start working. In HR you may have a plan, you also need to have a contingency and usually the whole pressure comes when you don’t have a contingency then you have to start fire fighting and that’s really where the effort should be put in.
 
AG: I would agree to first to build up an HR strategy and then to align this HR strategy with a group strategy, I think this is most important. In particular, also to manage the demographic changes and the employability of the people.
 
PL: Rainer, you’ve spent a lot of time looking at this, what do you think is the really key step?
 
RS: To make this perhaps a little bit more concrete in terms of really linking these two things, HR to a strategy and also to analytics. We saw today an example of Dymler and Dymler did this by really coming up with a little bit more sophisticated models in terms of doing strategic workforce planning, looking at how does the workforce develop over the next couple of years, taking into account attrition, taking into account retirement age and on the other side coming up with a demand model. So, really linking HR in a quantitative way to strategy. So how many key people do we need by job family taking into account growth strategies, productivity increases etc? Then you know precisely by job family where you have a surplus and where you have a shortfall and then out of this you can directly come up with your recruiting strategy, with your trainee strategy, training strategy in a much more quantitative way and this gives HR a complete different kind of reputation in an engineering kind type of environment because it’s based on figures and it’s linked in a quantitative way to strategy.
 
PL: That I think is the point at which we’ll have to leave it but thank you all very much indeed for sharing your expertise with us today, we much appreciate it. Thank you.
 
A fascinating quick tour of global HR issues there. While there appear to be a large number of common issues, there are also clearly some differences in emphasis in the challenges facing you, depending where in the world you’re operating. Thanks for listening.
 
To find out more about the people taking part in our discussion and the topics raised, go to the notes that accompany the programme at cipd.co.uk/podcasts. 

If there are issues raised in the podcast that you’d like to discuss, remember CIPD members can carry on the discussion online at CIPD.co.uk/community, and we would love to hear your thoughts. 

Listen in next month when we’ll be taking a look at leadership – what is it and what can we in HR be doing to nurture or deliver it? I’ll be talking to organisations as diverse as Nokia and The Metropolitan Police to find out some of the answers.
 
For now though, goodbye and thanks for listening. 

 

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