As companies emerge from the recession, workforce issues such as managing talent, leadership development, employee engagement and strategic workforce planning will be critical in determining their success - or otherwise - over the coming years.
But according to a new report by The Boston Consulting Group (BSG) and the World Federation of People Management Associations, many companies feel unprepared to meet these critical HR needs or to address the other workforce challenges that they will face in the post-recession environment.
Based on a global online survey of more than 5,500 HR and business-unit executives from 109 countries, the report reveals big differences in the approach of high-performing companies towards workforce issues compared to low performers.
"High-performing companies don't just put more resources into HR — they reboot the function," said Boston Consulting Group's J. Puckett.
"Leaders go deeper on human resources issues than their competitors. They focus on flexibility, not on cutbacks, and are more willing and able to use human resources as a strategic partner."
In particular, the report found, high-performing companies put much more effort into measuring workforce performance, transforming HR into a strategic partner of senior management and branding themselves as good employers. These three priorities ranked dramatically lower at low-performing companies.
High performers also pay far more attention to leadership development, recruiting around half of their top executives internally. In contrast, low-performing companies source only 13 per cent of their senior leaders internally.
These internal talent pools will only grow in importance over the coming decades, the report argues, as leadership skills shortages at senior levels start to peak between 2020 and 2030. As a separate study by BCG and the World Economic Forum showed, by 2030, the U.S. will face critical talent shortages in IT and business services, construction, health care, hospitality, financial services, trade, transport, communications and public administration.
Another difference emerging from the report is that low-performing companies are continuing to make across-the-board cuts in their workforce while their high-performing competitors instead embrace flexibility.
Yet streamlined processes and flattened hierarchies, are more effective in period of prolonged economic difficulty than making layoffs, eliminating overtime or reducing training. And the German short-time work model, which leverages reduced pay for reduced work, was rated 10 per cent more effective than the average measure.
None of these measure, however, can be successful without the buy-in and commitment of a company's middle managers. The report found that middle managers are the key to employee engagement, communicating company values, and the smooth running of the business on a day-to-day basis. But they need to be empowered by being given more responsibility, trained for their expanded roles and more involved in strategic decisions. "Managing talent, leadership development, strategic workforce planning and employee engagement are the most critical topics around the world," said BCG's Grant Freeland.
"The good news is that they are on the table. But there is much more that organizations need to do to meet HR needs that, if unaddressed, could reach crisis proportions."