Rethinking Human Resources in a Changing World

A new study from KPMG International shows that the “war for talent” is crucial to almost every business in today’s competitive global markets. However, the Human Resources function is often viewed as being non-essential or ineffective.

In the last several years, there has been a preoccupation with cost optimization, cost reduction, sustainable cost management - all things ‘cost’. This has required HR to play its part, largely through making the HR function more efficient, but not necessarily more effective.


With this relentless focus on costs, the problem has been that many HR functions have lost sight of how they can generate value in the wider business. This is a significant issue given that the people agenda in most organizations contains some truly business-critical issues and challenges, such as:


•             the war for recruitment and retention of “top talent”

•             the engagement of a global workforce operating within a much more fluid environment

•             ensuring the people profile matches the value drivers of the business

•             the smart use of technology to support both the business and its employees

•             drawing predictive insights from complex sources of data to ensure the agility of the organization


To probe more deeply into these challenges, as well as the opportunities for the HR function to change the dynamics of its relationship with the business, KPMG International commissioned the Economist Intelligence Unit to conduct a study of executives across the globe.


Rethinking Human Resources in a Changing World has provided us with a fresh view of the path forward for leaders of the HR function. We believe there are some things on the horizon that will really shake up HR and make the people agenda as important to the CEO as the balance sheet and P&L statement.


To explore Rethinking Human Resources in a Changing World, read the key findings from the research and hear the perspectives of KPMG Advisory professionals.


The value of the Human Resources (HR) function elicits sharply contradictory views within organizations. While the “war for talent” is understood to be crucial to almost every business, the HR function is often dismissed as non-essential or ineffective.


Respondents to an Economist Intelligence Unit survey, sponsored by KPMG International, give similarly mixed messages:

•             About eight in ten (81 percent) respondents say that putting in place the most effective talent management strategy will be key to competitive success.

•             Six in ten (59 percent) believe that HR will grow in strategic importance.

•             Just 17 percent maintain that HR does a good job of demonstrating its value to the business.


Meanwhile, the forces of globalization, talent constraints and new technology are driving rapid change to the HR function. A majority (55 percent) of survey respondents believe the metrics that define the success in HR today will fundamentally change over the next 3 years.


Key insights from the research

Rethinking Human Resources in a Changing World examines the challenges facing the HR function and its future direction. These are the main findings.

  • HR is struggling with the challenges of managing a global, flexible workforce. The global workforce has become increasingly integrated across borders while growing more virtual and flexible.


These developments have made the retention of key talent and building workforces in new markets top priorities of HR departments. Only one in four respondents say that their HR department excels at sourcing and retaining key talent globally; supporting a virtual and flexible workforce; and contributing to the globalization of the business.


Finding ways to engage with workers will help address the challenges of a global, flexible and remote workforce. Insights from report interviewees suggest the need for improved employee engagement, fostered by creative solutions with new HR policies and approaches that have global application but local relevance.


 What we believe: Shifting focus to talent management strategies (MP3 508 KB) hear what KPMG HR professional Tim Payne believes about shifting focus to talent management strategies that are aligned with an organization’s value chain.


 Technology has already transformed HR and data analytics will foster even more profound change. Sixty-nine percent of companies surveyed say that their HR function now provides web-based and/or mobile HR platforms (e.g., benefits, payroll), enabling HR to do basic, administrative work more efficiently, provide employees with flexible, tailored training, and create a positive culture for communication.


Data analytics - the most commonly cited area by respondents for IT investment in the next 3 years - will lead to the next technological leap for HR. For example, already 57 percent of respondents say that data analytics is helping to identify future talent gaps.


Interviewees explain that the proper application of analytics will enable a more robust understanding of employee-related needs and opportunities.


What we believe: predictive workforce analytics (MP3 1 MB, 34sec.) hear what KPMG HR consulting professional Paulette Welsing believes about the potential for predictive workforce analytics to become as important to the CEO as the balance sheet and P&L statement.


Technological change and current workforce challenges should be catalysts for HR to transform itself into a strategic player. To reshape itself in this landscape of new challenges, emerging technologies, and heightened financial constraints, HR needs to:

•             Develop greater confidence, leadership and credibility, so that HR heads can earn a place in strategic conversations at the highest levels.

•             Use technology to shift from administrative matters towards more high-value activities.

•             Develop closer partnerships within the company, especially with line managers who will use technology-driven HR services to play a greater role in employee management.

•             Recast its strategy, beginning from a whole-business perspective and aligned with the needs of the entire Regional reports



Next step: data-driven HR


Data analytics is the most commonly cited area for planned HR technology investment in the next 3 years.


Analytics will allow HR to be involved in managing talent, and also collecting clearer information on its talent supply chain, and where demand for particular skills lies. Rather than acting on instinct alone, the HR function will be able to provide a detailed roadmap of how to reshape the organization’s people resources to deliver on the corporate strategy.


We believe: The laser focus provided by data is important with increasingly scarce resources in HR departments. But taking full advantage of such information will take time. First, HR needs to develop its abilities in a data-centric environment, transforming data into intelligent insight and disseminating the information across the organization.


Operating in a transparent world: The promise and peril of social media


The rise of data analytics is accompanied by new sources of information. Social media, for example, is changing HR across a range of areas, from recruitment to performance and career management. The implications can be both positive and negative. For example:

•             Forty-nine percent of survey respondents say that social networking sites have provided access to new sources of talent.

•             About two-thirds (65 percent) are using social networking sites to recruit employees.

•             Yet 51 percent of respondents believe that these sites have made it easier for competitors to poach their best people.

•             A similar number (49 percent) report that social media make it harder to control the company’s message and image.

•             One in four (24 percent) admit that sensitive information has been leaked to the public through such sites.


Our conclusion: Three simultaneous changes in HR


The Human Resources function currently faces pressing, interconnected challenges.


The challenges for HR range from adjusting to the demands of a globalized workforce, through negotiating cost constraints, to taking advantage of new technologies. At the same time, HR’s potential strategic value is under-appreciated. In order to emerge stronger from its current struggles - stronger and better able to add value - executives must recognize and implement three concurrent changes to the HR function:


•             Who HR manages: HR needs to engage with the flexible, often virtual workforce that companies are increasingly implementing, while remaining current with a core of permanent employees. Ironically, this may involve stepping back and providing tools for line managers, or even employees themselves, to take on traditional HR functions.

•             How HR carries out its role: Web and mobile technology have already created substantial improvements in HR’s performance. Data analytics should enhance HR strategy the way the web improved administrative tasks, providing improved data to enable HR to contribute more valuable insights into the business.

•             HR’s role within the organization: The changes HR is undergoing may well lead to the function becoming more of a partner that assists others who focus on individual employees, while focusing on higher-value tasks than in the past. Ultimately, HR should make clearer to the company the value that it can provide, thereby giving it a higher profile and a more strategic role.


We believe there are a few things on the horizon that could really shake up HR and potentially make the people agenda as important to the CEO as the balance sheet and P&L statement.


But we also believe that if HR truly wants to add business value and enhance its reputation, it must push well beyond the basics and shift its focus to understand the most critical roles and levers in an organization’s value chain.