C-level perspectives of the HR function in Western Europe

Transcription

1 C-level perspectives of the HR function in Western Europe Executive summary An Economist Intelligence Unit research programme Sponsored by and

2 About the research C-level perspectives of the HR function in Western Europe is an executive summary written by the Economist Intelligence Unit and sponsored by Oracle and IBM. In April and May 2012 the Economist Intelligence Unit conducted a global survey of 235 C-level executives, of whom 95 were based in Western Europe. Some of the countries represented include Belgium, France, Germany, Italy, Switzerland and the UK. Fifty-seven percent of all 235 respondents identified themselves as CEOs or the equivalent and 43% as CFOs or the equivalent. A wide range of industries were represented; the top five are financial services (15%), healthcare, pharmaceuticals & biotechnology (12%), professional services (12%), manufacturing (10%) and IT & technology (8%). One-half of the companies are large, with over US$500m in annual revenues; the other half are small and medium sized. 1

3 Executive summary Prevailing economic conditions are forcing companies throughout Western Europe to make difficult decisions about their employees. Indeed, research conducted recently by the Economist Intelligence Unit found that a higher proportion of companies reduced their staffing levels over the last three years in this region than anywhere else in the world. Moreover, the overall business climate might deteriorate further, with the Organisation of Economic Co-operation and Development warning that the 17-country euro zone economy could contract by as much as 2% in However, while streamlining may be necessary, executing these cuts carelessly could leave too few quality people in the right positions, thereby jeopardising companies recovery. According to C-level perspectives of the HR function in Western Europe, many CEOs and CFOs in the region believe that the HR function s expertise and experience in people issues can help companies to walk this delicate tightrope. Indeed, 80% of survey respondents want the head of HR to be a key player in the company s strategic planning. The key findings of the survey include the following: Western European survey respondents attest to a close and trustful relationship with their head of HR, and say they value this relationship highly. More than two-thirds (69%) of respondents in Western Europe say that their relationship with their head of HR is close and trustful, and 63% say the relationship is highly valued. Make it personal Respondents relationship with HR head is... (% Western European respondents) 69% close and trustful 63% among my most valued professional relationships 7% distant and mistrustful 11% no value 1. Associated Press. Euro Zone Warned by OECD: Severe Recession Looming, May Source: Economist Intelligence Unit survey, June

4 The big picture Respondents believe the head of HR (% Western European respondents) is too focused on processes and rules Yet a minority of respondents believe their head of HR is a key player in strategic planning. Thirty-eight percent of Western European respondents say their head of HR is a key player in strategic planning at their organisation. Only one in ten believes the head of HR is an extremely key player. Concerns over employee engagement create a pressing need for the head of HR to become a key player. Sixty-three percent of Western European respondents believe that insufficient talent within the organisation as a whole might cost the company financially over the next 12 months and 56% say the same about insufficient leadership talent. Nearly one-half (48%) worry about the effects of low employee satisfaction, which the current economic environment has no doubt doesn t understand the business well enough Source: Economist Intelligence Unit survey, June % is not of the same calibre as other C-level executives behaves like an independent advisor and service provider rather than a fully invested member of the management team 25% 36% 30% exacerbated. Undoubtedly, these concerns convince senior executives that the head of HR, who is thought to be more of an expert in people issues than other executives, can play an important role in devising strategy. Respondents worry about the head of HR s understanding of the overall business. Forty-two percent of Western European respondents think the head of HR is too focused on process and is not a big picture person and 36% say he or she doesn t understand the business well enough. Of course, these are executive perceptions, which can be altered if HR were to showcase its strategic thinking, for example, in meetings. Heads of HR who share similar views to those of the CEO and CFO are likely to be more influential. Although only 38% of all Western European respondents believe their head of HR is a key player, the figure rises to 81% among those who say they strongly agree with the head of HR on the organisation s people strategy. It therefore seems likely that the opportunities for heads of HR to exert influence on the strategic direction of their company increase substantially when they see eye-to-eye with the CEO and CFO. We cannot dismiss the possibility, however, that the reverse holds true that having a central role in devising strategy helps to convince others that their views are correct. Executives at larger companies are more likely to be preoccupied with issues affecting the hierarchy of the organisation. When CEOs and CFOs in larger companies contemplate HR issues, they are more likely to think of concerns relating to the top tier of executives within the company. For example, more than two-thirds (67%) of respondents at companies with more than 1,500 employees worry that insufficient leadership talent will harm their organisation financially within the next 12 months. In their eyes, this is the greatest HR-related threat. Only 49% at smaller companies agree that their organisation could suffer from a lack of leadership talent. For the latter, 3

5 insufficient talent throughout the organisation as a whole is a greater danger. For the very largest companies in our survey (with annual revenues of more than US$10bn), executive concerns frequently come up in conversations between heads of HR and their CEO and CFO. For example, 42% at these largest companies often discuss executive performance and development, compared with 24% in all smaller companies. Thirty-three percent frequently discuss executive succession, but only 6% at smaller companies talk about this issue with similar regularity. For the matter of executive compensation, the respective figures are 17% and 3%. Employee satisfaction surveys are by far the most popular metric of HR value in larger companies. More than two-thirds (69%) of companies with over 1,500 employees use the results of employee satisfaction surveys to measure the value of the HR function, a considerably higher proportion than use any other metric. The next most popular metric was compensation costs compared with industry benchmarks, with 39% in larger companies selecting this option. It appears that the HR function in Western Europe still has work to do to convince senior executives that it can play a key role in the strategic direction of organisations. The survey also suggests that the head of HR might be able to increase this influence through impressing the CEO in one-to-one meetings. Whilst every effort has been taken to verify the accuracy of this information, neither The Economist Intelligence Unit Ltd. nor the sponsor of this report can accept any responsibility or liability for reliance by any person on this report or any of the information, opinions or conclusions set out in it. 4

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