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HR Trends in US Corporations

HR Trends in US Corporations. Shapers Top Priorities CHRO Role. Shapers. Technological/Finance/Social Context CEO Issues Demographics Regulatory Stakeholders. 5 Technological/Finance & Social Cycles. Shapers. Technological/Finance/Social Context CEO Issues Demographics

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HR Trends in US Corporations

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  1. HR Trends in US Corporations • Shapers • Top Priorities • CHRO Role

  2. Shapers • Technological/Finance/Social Context • CEO Issues • Demographics • Regulatory • Stakeholders

  3. 5 Technological/Finance & Social Cycles

  4. Shapers • Technological/Finance/Social Context • CEO Issues • Demographics • Regulatory • Stakeholders

  5. Pressing CEO Needs • Organization agility to change • Innovative employees and mindset • Short term results • Globalization – reality and backlash • Talent Pool • M&A • Global energy; health; and security issues

  6. Shapers • Technological/Finance/Social Context • CEO Issues • Demographics • Regulatory • Stakeholders

  7. Productivity Growth above Historical Levels – Can it Last?Average Annual Productivity Growth – 1950’s to Present Percent Source: Employment Policy Foundation

  8. Labor Shortage is Looming Compound Growth in Workforce Source: EPF Analysis of BLS Data

  9. Skill Shortage ChallengeNew Jobs will require more education Millions Source: Employment Policy Foundation

  10. Challenges • Managing Four Generations at Work • Identifying and Retaining Critical Knowledge • Retaining Talent – all generations, all levels

  11. Shapers • Technological/Finance/Social Context • CEO Issues • Demographics • Regulatory • Stakeholders

  12. Shapers • Technological/Finance/Social Context • CEO Issues • Demographics • Regulatory • Stakeholders

  13. “HOW TO MAKE THE COMPANY WORK?” BOD Governance / Strategy C SUITE Integrated System ALIGNMENT & LEADERSHIP Capabilities / Alliances IDEATION Management Systems & Operations Controls PEOPLE PROCESS TECHNOLOGY

  14. Top CHRO Concerns Top 5 issues from HRPA 2006 Survey: • Attracting, developing and retaining talent • Health care costs, strategies, and benefit designs • Leadership development • Compensation strategies for motivating and rewarding executive talent • Managing organizational change

  15. Top Priorities • Organization Rx • Talent Development • Governance • Executive Compensation • Healthcare and Retirement

  16. The Four Building Blocks of Organizational DNA Decision Rights Information Motivators Structure

  17. TRANSFORMATION GOVERNANCE MODELAN INTEGRATED SYSTEM Level 1: Strategic Alignment - Investment Decisions - Productivity Initiatives - Delegation/Key metrics C Suite (BOD) Ownership / Strategy driver Level 2: Human Resources Alignment - Workforce Development - Talent Management - Workforce Planning - Reward System Led by Senior Line Leaders Integrated System / Overview Level 3: Execution - Measurements to assure short-term decisions are aligned to goals On-going Dialogue

  18. HR Strategy Governance

  19. Top Priorities • Organization Rx • Talent Development • Governance • Executive Compensation • Healthcare and Retirement

  20. Priority: Talent & Diversity Management Executive Leader Ownership • Critical Issues to Consider: • Demographics of leadership • Changing required leadership capabilities • Robustness and quantity of the pipeline regarding talent and diversity Leadership Development Process IDENTIFY INSIGHT DEVELOPMENT ACCOUNTABILITY Organization And Talent Review Educational Experiences Orchestrated Staffing Individual Organization • Assessment • Organization • Individual • Leadership Benchmark • “Next Generation” • Core • Experiences • Large TeamLeadership • Customer FacingRoles • Strategy / BusinessDecision / Analysis • Start Up /Turnaround /Mission Critical • Global Performance Management Diversity Metrics Coaching High Potential Programs Mentoring Development Plans Move Metrics

  21. Workforce Transformation Initiative What is the evolving nature of the work? Business Strategy Fundamentals Major Job/Work Segments Load Demands Time Dimension Brand of Work Financial Model Workforce Transformation Labor Shortage Business Driven How should we organize to get work done? Information & Knowledge Flow Work Processes Management/ Organization Structure Operating Structures Decision Making Process Mgmt Structure What type of talent do we need? Human Capital Requirements Training Staffing Behaviors Attitudes Capabilities Human Resource Driven How do we reward and treat people to optimize their value delivery? Human CapitalSystems Careers/ Diversity Engagement and Culture Pay Benefits Total Rewards Healthcare

  22. Key Performance Process Projects Enhanced skills driving workforce performance Performance Management Workforce Transformation Areas Performance Development Workforce Management Customer Contact Centers Sales Workforces Field Services IT Workforces Hiring & Selection Function-Centric Workforce

  23. MSOC: Driving Technical & Behavioral Capability • Work Measurement • Management of the operation • Daily Schedule Control • Action Plans • Resource Loads • Master Schedules Metrics & Tools “Hard” • Improving • Customer Experience • Speed to Market • Employee Capability/ Innovation • Cost Structure Total Performance Behaviors “Soft” • Understand current capability • Focused development plans • build customer experience skills

  24. Top Priorities • Organization Rx • Talent Development • Governance • Executive Compensation • Healthcare and Retirement

  25. Top Priorities • Organization Rx • Talent Development • Governance • Executive Compensation • Healthcare and Retirement

  26. Key Findings CEO pay rises with corporate performance • After a sharp increase in 2004, CEO compensation increased moderately in 2005, consistent with corporate performance 2005 Median CEO Pay 2005 Median Performance • Increase in annual incentives tracks corporate profitability: • Revenue: + 10.5% • Net Income: + 13.0% • LTI was flat, reflecting moderating equity use, but TDC was in line with stock price appreciation: • 1 year TSR: + 6.8% Source: Mercer HR Consulting

  27. Key Findings – Long Term incentives remain a significant portion of CEO Pay

  28. Total Annual CompensationProfit goals and measures of individual performance tend to be the most prevalent measures in annual incentive plans Source: Mercer HR Consulting Note: Many companies use more than one measure

  29. Future of EquityOptions are being mixed with a broader array of long-term vehicles rather than disappearing entirely Note: LTI Mix includes only those companies making grants. Excludes 10% of companies which made no award to the CEO in 2005. Data is not directly comparable to prior page, which is based on the full sample. Source: Mercer HR Consulting

  30. Top Priorities • Organization Rx • Talent Development • Governance • Executive Compensation • Healthcare and Retirement

  31. Forecast for Health Care Spending GloomyActual and Projected Health Spending as a Percent of GDP-1983-2013 Percent Source: Centers for Medicare & Medicaid Services, Office of the Actuary

  32. But Benefit Growth Continues to Crowd Out WagesGrowth Rates are adjusted for inflation Percent Change ’94 ’95 ’96 ’97 ’98 ’99 ’00 ’01 ’02 ’03 ‘04

  33. Distribution of Private Sector WorkersWho are participating in an Employment-based Retirement Plan, by Plan Type, 1979-2004 Percent Source: DOL Form 5500

  34. CHRO Role & Issues

  35. CEO View Percentage of CEOs rating performance in business function as “Excellent” or “Good” Finance Customer Service Operations & Production Sales / Marketing Risk Management Knowledge Management / Research IT Procurement / Sourcing R & D Logistics Human Resources Percent

  36. CEO View Percentage of CEOs rating business functions as top three importance to realizing company strategy over the next three years. Sales / Marketing • Knowledge Management / Research Customer Service Operations & Production IT Risk Management R & D Procurement / Sourcing Finance Human Resources Logistics Percent

  37. Current Effectiveness Rating – Roles of the HR Function Strategy-Setting Roles Mean = 32% Workforce Alignment to Strategy Role Mean = 33% Strategy-Support Roles Mean = 59% Percent

  38. Effectiveness of HR Skills People Skills Mean = 42% HR Expertise Mean = 52% Implementation Skill Mean = 35% Business Skill Mean = 29% Percentage Answering “Effective” or “Very Effective”

  39. Critical Skills of HR Staff Key roles of the Human Resources Function Key roles of the Human Resources Function Where must HR Functions Build Capabilities for the Future? • To contribute to business performance, HR functions must increase effectiveness in the function’s strategy-setting roles. • Deliver a human capital strategy. • Drive business strategy • To contribute to business performance, HR functions must increase effectiveness in the function’s strategy-setting roles. • Deliver a human capital strategy. • Drive business strategy Critical Skills of HR Staff What Skills are most important to Increasing HR Function Performance? • Build staff effectiveness • Business analytics • Performance and development expertise • Accountability and commitment to diverse perspectives.

  40. Human Resources Department Evolution Human Capital Strategy HR Process & Performance Management HR Data Systems HR Policies, Compliance, Labor Admin Personnel Administration

  41. Today’s HR Role • Strategist • Aggregator • Builder of Capabilities • Project Manager • Front Line Employee Advocate • Leader of change

  42. New HR Staff Support Paradigm TO FROM Development People Vice President - HR Chief Resources Officer Work Processes/ Technology Environment Financial Funding Payroll Costs Design Strategy

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