Winmark’s HR 2020 report draws upon the expertise and insights of HR leaders to explore the trends and developments that will impact the future of the HR function, the challenges it will face, and the function’s evolving role in business. The report is a must-read for any practitioners interested in finding out how social and technological trends are transforming the workplace, how society’s expectations of businesses are changing in relation to the retirement agenda and human rights in the supply chain, and how HR as a function can become better aligned with the wider executive.
The report is based on detailed survey responses by 56 HR directors, complemented by six in depth interviews with leading practitioners in this field. Further insight has been derived via input from 13 prominent non executive directors – with multiple portfolio positions – all with a common interest in HR. We have used feedback from the latter group as a comparator at various stages in this study.
The research was conducted by Winmark, in partnership with Eversheds LLP.
Below you will find the Executive Summary of the report. All courtesy goes to Winmark and Eversheds LLP.
You will find the full report here: Navigating the future.
Following years where the financial crisis and subsequent recession meant that the focus of many organisations was on survival in the short term, recent improvements in the economic climate mean that there is now an opportunity for HR as well as the wider oranisation to scan the horizon for upcoming developments and prepare an appropriate response.
One key HR priority for the next five years according to non-executive directors is improving productivity, as productivity growth in the UK is lagging behind that of comparable economies. HR directors believe that the best ways to boost productivity in their organisations would be to increase the skills of managers (54%), to make employees feel valued and treated fairly (45%), and to have informed employees who can contribute to decisions and who are listened to (38%). Also, the HR directors in this study identify several key macro-economic and political developments which pose high or very high risks to their organisation, namely economic downturn (66%), political instability in Europe (40%), and British exit from the EU (33%).
While in most organizations these macro-level risks are included in wider strategy and risk management processes, some HR directors are not yet taking steps to manage these risks, mainly due to the uncertainty about what will happen. However, at board level there is a preference for HR to take a more proactive approach towards long term, macro-economic issues, and increasingly HR directors are working to develop strategies that take these issues into account. Beside the impact of economic and political macro developments, the world of work is also very much affected by social and technological trends. According to HR directors, social trends which will have a high or very high impact on the workplace include the war for talent (69%), skills shortages (59%), and remote working and anywhere/ anytime delivery (55%).
In an environment where the demand for highly skilled workers is growing, alongside the increasing polarisation between low skilled and high skilled work which is making it harder for individuals to become highly skilled, it is essential for organisations to tap into all available talent pools to win the war for talent and fill the associated skills shortages. This is one of the reasons why non-executive directors see improving diversity as a top HR priority for the next five years, and are looking to HR for guidance on how to achieve this. Apprenticeships are on the rise as a means to attract and develop talented new employees to fill specific skills gaps and expand the pool of highly skilled workers. The new apprenticeship levy which will come into effect in April 2017 provides an extra incentive for businesses to develop or extend their apprenticeship programs.
Global mobility is one area of significant strategic importance for many organisations, which are likely to suffer from skills shortages, at least in the UK. Already a lack of foreign language skills is estimated to cost the UK economy 3.5% of GDP per year, and due to the increasingly international nature of business, the number of globally mobile workers is estimated to increase by 50% by 2020. HR is in an excellent position to help fill this skills gap and meet businesses’ long term needs by providing tailored training, recruitment and other global mobility initiatives.
In addition to skills shortages, the growing flexibility in the labour market poses a challenge for retaining and planning for the succession of key staff members. We are seeing a breakdown of the dominant model of binary employer-employee relationships, in favour of a multifaceted labour landscape in which organisations work with a mix of employees, contractors, consultants and service providers. HR is charged with navigating this complex environment, and taking advantage of opportunities to outsource and reduce costs where appropriate, whilst ensuring there is a pipeline of talent to fill crucial positions.
HR has the chance to reinterpret its role and to contribute in ways that will be more effective and more valued than before
Another area of strategic focus for HR is managing technological innovation, in terms of both the opportunities and risks that this represents. The most important technological innovations for the future of the workplace, according to HR directors, are mobile technology (79%), online applications (68%), and automation (52%). Here too we see polarisation, between work which can be fruitfully automated and that which will continue to require a human touch. It is up to HR to distinguish between the two and structure work in an effective and efficient way. The majority of HR directors are taking some steps to capitalise on new technologies, however approximately half are still at an exploratory stage. In the eyes of non-executive directors, HR is not always keeping up with available technological capabilities, and this can engender board level frustration with the function.
The HR directors who are taking specific actions tend to focus on recruitment to bring new technological skills into the organisation, as well as invest in agile working policies, or even change the organizational design to simplify and improve the way people work. This is one area where collaboration with the IT team and with line managers is of growing importance for HR to understand and take advantage of technological innovations and contribute strategically to overall business success.
Technology is not the only area where many HR teams could strengthen their strategic input; two other topics which are gathering importance in the run-up to 2020, despite not being on the radar of all HR functions, are changes to the retirement landscape, and the increasing level of scrutiny that is directed at ethical issues in the supply chain.
The retirement agenda is heavily impacted by changes such as auto-enrolment and the ability to withdraw a lump sum. HR directors are mainly concerned about risks such as the potential impact of pension reform on people’s ability to retire (39%), as well as increasingly high standards for pension member transparency (24%), and risks in terms of pension governance (24%). Changes in people’s ability to retire is a main concern because it feeds into areas such as talent management and succession planning, which both non-executive directors and HR directors consider to be among the key HR priorities for the next five years. While 84% of HR directors believe that responsibility for pensions lies either wholly or partially with HR, we were concerned to find that 27% of HR directors don’t know what their organisations have planned in response to the recent changes affecting pensions and retirement. Following scandals relating to infringements of human rights in the supply chains of several leading brands, labour practices and conditions in developing countries are under increasing scrutiny.
To a certain extent, HR directors are aware of this and are concerned about the resulting risk to reputation (37%), risk to continuity of supply (29%), and risk of legal action (27%). However, most HR directors surveyed for this study are not ready for the recent Modern Slavery Act, which obligates businesses to release information which shows that they are taking steps to ensure that none of the businesses in their supply chain use forced or slave labour – only 45% of respondents formally monitor freedom from slavery and forced labour across their supply chains. This may be partially due to the fact that responsibility for human rights in the supply chain tends to be fragmented across the business and frequently is not formally defined. However, HR has an important role in maintaining ethical standards across the business, particularly where its labour force and that of its suppliers are involved.
A finding which is repeated across these different topics is that there is scope for HR to embrace a more proactive stance towards long term developments, becoming the strategic business partner that we hear so much about. There is quite a bit of work to be done to meet organisations’ needs and requirements for the next five years – both non executive directors and HR directors indicate that HR functions in general are somewhat but not well prepared to do this.
There is scope for HR to embrace a more proactive stance towards long term developments
On the bright side, both groups are relatively well aligned when it comes to agreeing about the key HR priorities for the next five years. Also, HR functions are taking a number of steps to operate more effectively, specifically they are adopting new technologies (89%), collaborating with other parts of the business (76%), automating HR processes (68%), shifting towards strategic business partnering (65%), and training the HR team (57%).
Nonetheless, a frequent complaint by non-executive directors is that HR can still be too process-driven and not strategic enough. HR can improve this Board level perception of the function by mastering the language of finance and risk which is commonly used by other senior executives, as well as demonstrating how the ‘softer’, human elements of HR add value to the business. Providing data-driven management information to support advice and decision-making would help HR to improve its communication and alignment with the wider executive, with the ultimate goals of improving mutual understanding and collaboration, to the benefit of the long term success of the organisation.
Despite, and perhaps because of the manifold challenges and rapid pace of change, both non executive directors and HR directors agree that this is a great time to be in HR. By scanning the horizon for important developments, and by proactively formulating courses of action in partnership with the rest of the business, over the next few years HR has the chance to reinterpret its role and to contribute in ways that will be more effective and more valued than before.