June 21, 2023 – With macro-economic uncertainty, geopolitical threats, new ways of working, and the advent of game-changing technologies, businesses need to transform to survive, and they have to transform sustainably if they are to thrive. Leathwaite’s annual HR survey found that more than half the HR leaders surveyed (53 percent) highlighted the enablement of business transformation as an area where their HR functions would deliver the most value and operational efficiency. However, 67 percent of respondents felt their function would deliver most value in the arena of employee engagement and retention. This is further corroborated by 69 percent of respondents sharing that engagement scores at their organizations had either remained flat or improved over the past 12 months.
It is no coincidence that there are significant interdependencies between change and transformation and engagement and retention: maintaining or improving levels of engagement during periods of high change is perceived by respondents as a core functional strength, said the report. Some of the ways in which respondents plan to deliver this engagement and retention value was signposted in responses to the question itself, with a focus on DEI, well-being, and workforce development also among the top responses (48 percent, 39 percent, and 36 percent respectively).
Organizations that applied the lens of customer experience to issues of employee and user experience during the COVID years reported stronger profitability and reduced attrition, according to the Leathwaite report. “This is no doubt a strategy that HR functions will continue to employ as a means to add the predicted value in the areas of engagement and retention,” the search firm said. “It is also clear that, post-pandemic, with competitive talent markets and complex multigenerational workforce dynamics, HR leaders are looking beyond traditional compensation and benefits to motivate and retain employees.” In addition to the growing trend of personalized benefits packages (the design and delivery of which is optimized by HR technology and HR analytics) Leathwaite’s survey showed that roughly a quarter of HR leaders have introduced or are considering introducing sabbaticals (25 percent) and company-funded professional development (24 percent) to retain talent. One-off bonuses are also considered a viable retention mechanism by 40 percent of respondents.
Over the past few years, the board’s priorities have changed. The Leathwaite report said that today, diversity, culture, and EVP are all critical agenda points meaning that HR, perhaps more than ever, is being recognized as fundamental to organizational performance. Seventy-two percent of survey respondents said they believe the deliverables of the HR function to be clearly understood by their board. This is a 30 percent increase from the firm’s 2022 survey results.
“Whether driven by regulatory concerns, good governance, or an appreciation for its impact on business outcomes, organizations are paying heed to the people and culture agenda in record numbers,” the Leathwaite report said. “Does this prioritization of HR topics on the board agenda mean that HR functions are now being adequately recognized by business leaders for the value they deliver to the organization? Even though our data suggests that understanding of HR deliverables has improved significantly, perceived appreciation has not. Only 61 percent of respondents feel the HR function is appropriately valued, a decrease from 2022 levels. It is not uncommon for understanding to lead to appreciation, so it will be interesting to track these results over the next year or two.”
HR Strategy: Challenges and Opportunities
The responses to this question pointed overwhelmingly in one direction – driving organizational performance through technology, data and analytics. With 37 percent of HR leaders ranking HR chief data and analytics officer as the second most likely role to join the HR leadership top table, the Leathwaite report said it is no surprise that data and analytics rank so highly among the functional improvements required to drive organizational success.
“We would argue that improvement related needs ranking three to six (process improvement, strategic insight and output, new ways of working, design optimization) – are all underpinned, enabled or optimized by one or both of the two improvements deemed the most fundamental to success: data, analytics, technology, and digitization,” Leathwaite said. The firm’s research in other corporate functions, reinforced by external market commentary, shows that this focus is not limited to the HR function – it is an enterprise-wide focus for a huge number of organizations.
At 67 percent and 53 percent respectively, employee engagement and retention and business transformation were highlighted as areas in which the HR function will drive most value in the next 12 months. “Given both of these strategic focuses can have a significant positive impact from technological advances and improvements in data analytics, it begs the question how transformative an impact data and digital developments in the HR function may have on delivering value in domains where HR leaders are less sure of delivering tangible value,” the report said.
The exciting advantages promised by digitization do, however, cast a shadow, according to the Leathwaite report. “Hard-coded biases and issues of decision-making accountability have been associated with AI and machine-learning in organizations,” the firm said. “Digitization, in general, risks deepening the inequities of the digital divide and missing out on talent coming from a low base in digital literacy. As a result, ensuring the upskilling of the function in these areas should be a priority as well as building close cross-functional partnerships with internal technology and analytics teams and external partnerships is critical.”
How CHROs can Prevent Top Talent from Leaving
Russell Reynolds Associates recently interviewed 12 CHROs and talent leaders across sectors to better understand what strong HR and talent organizations are doing to differentiate themselves to attract and retain the best talent. The firm received diverse perspectives, but one thing was clear: The workforce has changed permanently. Consequently, the skills needed to manage it have also shifted. Let’s take a closer look!
Forty-eight percent of respondents ranked DEI as an area in which HR would add the most value in the next year. Leathwaite said it is important that this priority be strategically aligned with the improvements in technology, digital, data and analytics to ensure the HR strategy is holistically coherent.
“As a broader point on digitization, it’s important to avoid putting fad or form before function (ie, investing in automation or new systems without a clear business case that forms part of a cogent digital strategy),” the Leathwaite report said. “If, however, technological advances are driven by desired outcomes rather than process, and employee experience and high-performance shine as North Stars, the opportunities are significant.”
New Ways of Working
In an environment of unstable financial markets, a backdrop of global geopolitical tensions (and coming out of three long years of COVID-19), the Leathwaite report said that it is perhaps to be expected that employees in 2023 have been looking for reassurance, stability, and greater transparency. As such, and in part due to huge increases in remote and hybrid working (89 percent adopted hybrid working in some form and 39 percent employed fully remote staff) nearly half of all respondents have implemented changes to their internal communications strategies.
The report also noted that the importance of this evolution in communications has led to more than a quarter (28 percent) of respondents naming a head of employee communications and experience as a likely addition to the HR leadership in the not-too-distant future.
To read the full report, click here!
Contributed by Scott A. Scanlon, Editor-in-Chief; Dale M. Zupsansky, Managing Editor; and Stephen Sawicki, Managing Editor – Hunt Scanlon Media