June 10, 2016 – After struggling to drive employee engagement & retention, improve leadership pipelines, and build a meaningful culture, executives now see a need to redesign the organization itself. According to the just released Deloitte Consulting ‘Global Human Capital Trends’ report, 92 percent of survey participants rated this as a critical priority.
To lead the shift toward a new organization, the study found that CEOs and HR leaders are focused on understanding and creating a shared culture (86 percent), designing a work environment that engages people (85 percent), and constructing a new model of leadership (89 percent) and career development. In competition for skilled people, organizations are vying for top talent in a highly transparent job market and becoming laser-focused on their external employment brand. Executives are embracing digital technologies to reinvent the workplace, focusing on diversity and inclusion as a business strategy, and realizing that, without a strong learning culture, they will not succeed.
A New Role for HR
According to the Deloitte report, the HR function is taking on a new role as the steward and designer of these new people processes. The mission of the HR leader is evolving from that of ‘chief talent executive’ to ‘chief employee experience officer.’ HR is being asked to simplify its processes, help employees manage the flood of information at work, and build a culture of collaboration, empowerment, and innovation. This means that HR is redesigning almost everything it does—from recruiting to performance management to onboarding to rewards systems. To do this, Deloitte’s research suggests that HR must upgrade its skills to include the areas of design thinking, people analytics, and behavioral economics.
Four New Disruptive Drivers of Change
What are the forces driving this demand to reorganize and redesign institutions around the world? The ‘Global Human Capital Trends’ report reveals a series of drivers coming together to create disruptive change in the talent landscape:
First, demographic upheavals have made the workforce both younger and older, as well as more diverse. Millennials now make up more than half the workforce, and they bring high expectations for a rewarding, purposeful work experience, constant learning and development opportunities, and dynamic career progression. At the same time, Baby Boomers working into their 70s and 80s are being challenged to adapt to new roles as mentors, coaches, and often subordinates to junior colleagues.
Second, digital technology is now everywhere, disrupting business models and radically changing the workplace and the way work is done. Technologies such as mobile devices, 3D printing, sensors, cognitive computing, and the Internet of Things are changing the way companies design, manufacture, and deliver almost every product and service, while digital disruption and social networking have changed the way organizations hire, manage, and support people.
Third, the rate of change has accelerated. The axiom that computing power doubles every two years has not only propelled technology innovation forward but also significantly increased the pace of change in business as a whole, requiring organizations to be more agile.
Fourth, a new social contract is developing between companies and workers, driving major changes in the employer / employee relationship. The days when a majority of workers could expect to spend a career moving up the ladder at one company are over. Young people anticipate working for many employers and demand an enriching experience at every stage. This leads to expectations for rapid career growth, a compelling and flexible workplace, and a sense of mission and purpose at work. Today, contingent, contract, and part time workers make up almost one third of the workforce, yet many companies lack the HR practices, culture, or leadership support to manage this new workforce.
Top 10 Human Capital Trends
Here is a look at the top 10 human capital trends for 2016 identified by Deloitte Consulting:
- Organizational design: The rise of teams. More than nine out of 10 executives surveyed (92 percent) rate organizational design as a top priority, and nearly half (45 percent) report their companies are either in the middle of a restructuring (39 percent) or planning one (six percent). A new organizational model is on the rise: a ‘network of teams’ in which companies build and empower teams to work on specific business projects and challenges.
- Leadership awakened: Generations, teams, science. Eighty nine percent of executives rated the need to strengthen, reengineer, and improve organizational leadership as an important priority. The traditional pyramid shaped leadership development model is simply not producing leaders fast enough to keep up with the demands of business and the pace of change. Fifty six percent report their companies are not ready to meet their leadership needs. Only seven percent state that their companies have accelerated leadership programs for Millennials, although 44 percent report making progress—a jump from 33 percent last year. While investment in leadership development has grown by 10 percent since 2015, progress has been uneven. In fact, 21 percent have no leadership programs at all.
- Shape culture: Drive strategy. Eighty six percent of respondents cited culture as an important or very important issue. The percentage of executives who believe their companies are driving the ‘right culture’ rose from 10 percent to 12 percent—a small sign of progress. Yet fewer than one in three executives (28 percent) report that they understand their organization’s culture.
- Engagement: Always on. Eighty five percent ranked engagement as a top priority. Culture and engagement are also linked: When a company’s culture is aligned with its values, it attracts those who feel comfortable in that culture, which in turn helps companies to motivate people, leading to a high level of engagement. The percentage of executives who believe their organizations are ‘very ready’ to deal with engagement issues increased from 10 percent in 2015 to 12 percent in 2016, while those who feel they are ‘fully ready’ rose from 31 percent to 34 percent. These are hopeful signs, but even with this increase, only 46 percent of companies report that they are prepared to tackle the engagement challenge.
- Learning: Employees take charge. Eighty four percent of executives rated learning as important or very important. This focus on learning seems appropriate, as learning opportunities are among the largest drivers of employee engagement and strong workplace culture—they are part of the entire employee value proposition. Compared to last year, companies appear to be making strides in adopting new technologies and embracing new learning models. The percentage of companies that feel comfortable incorporating massive open online courses (MOOCs) into their learning platforms rose to 43 percent from 30 percent last year, while the percentage who said the same about advanced video climbed from five percent to 15 percent.
- Design thinking: Crafting the employee experience. Seventy nine percent of executives rank design thinking as a high priority when it comes to meeting talent challenges. While only 12 percent of respondents overall believe that design thinking is prevalent in their current talent programs, 50 percent of those executives who rate their talent programs as excellent state that they apply design thinking well, and self-identified high performing companies are three to four times more likely than their competitors to be applying design thinking to their people practices.
- HR: Growing momentum toward a new mandate. Sixty eight percent of respondents reported their companies have solid development programs for HR professionals, and 60 percent believe they are holding HR accountable for talent and business results—both a higher proportion than a year ago. Best of all, HR organizations’ scorecard shows a marked and steady improvement. Four out of 10 executives report their companies are ready to address the skills gaps in HR, an increase of 30 percent over 2015.
- People analytics: Gaining speed. Seventy seven percent of executives now rate people analytics as a key priority, up slightly from last year. In response, companies are building people analytics teams, rapidly replacing legacy systems, and combining separate analytics groups within HR into one strategic function. In 2016, 51 percent of companies are now correlating business impact to HR programs, up from 38 percent in 2015. Forty-four percent are now using workforce data to predict business performance, up from 29 percent last year.
- Digital HR: Revolution, not evolution. Seventy four percent of executives identified digital HR as a top priority, and it will likely be a major focus in 2016. The trend is moving rapidly: 42 percent of companies are adapting their existing HR systems for mobile, device-delivered, just-in-time learning; 59 percent are developing mobile apps that integrate back office systems for ease of use by employees; and 51 percent are leveraging external social networks in their own internal apps for recruitment and employee profile management.
- The gig economy: Distraction or disruption? More than seven out of 10 executives and HR leaders (71 percent) ranked the trend as important or very important. Operating effectively in the gig economy poses a number of questions: How can companies best use and schedule external staff to improve the productivity of their own workers and increase profitability? How can companies leverage contingent workers to access some of the most talented and highly skilled people in the workforce? Many companies are struggling with the challenge. Only 19 percent of executives surveyed believe their companies fully understand the labor laws that govern contingent workers, and only 11 percent have complete management processes for the contingent part of the workforce.
The 10 trends ranked in order of importance
Contributed by Scott A. Scanlon, Editor-in-Chief, Hunt Scanlon Media