UK: Human Capital Trends 2011

1. Workforce analytics: Up the ante

Given the importance of talent and people, it's time to move beyond instinct, gut, and tribal wisdom in making workforce decisions. If you're not using workforce data and analytics to drive your talent decisions, you may be behind the curve — and at risk of losing your competitive edge. As HR works with business leaders on the front lines, analytics are becoming critical in making more effective decisions related to workforce planning and recruitment, compensation, development programs, and deploying critical talent.

Workforce analytics involves using statistical models that integrate internal and external data to predict future workforce and talent-related behavior and events. These models help companies focus limited resources on critical talent decisions. For example, models have been demonstrated to predict the likelihood that a particular employee will leave in the next six months — and can provide likely reasons for the prediction.

What's driving this trend?

The need for foresight — moving from reactive to proactive. Leading HR operations are moving from fi ling reports to harnessing the power of workforce analytics to make more effective decisions in hiring, training, assignments, and trend projections.

Falling technology and data costs; new models and tools. Software-as-a-Service (SaaS) technology and cloud computing are driving down the cost of data management and analytics, making sophisticated workforce analyses faster, cheaper, and more broadly available. New solutions are demonstrating to be easily scalable, creating accessible options for companies of almost any size.

Data-savvy leaders. There has been a signifi cant shift in HR leadership, with a new breed of executive coming into HR from Finance and Operations. The new leaders bring data-driven techniques along with them — and they are quickly changing how HR does business. They're challenging their HR organizations to be more fact-based and focused on higher returns on HR investments.

Richer and deeper data. Companies have amassed large quantities of workforce data over the past 10 years from their enterprise resource planning (ERP) and HR management systems. This decade of experience has produced new sources of data, as well as more effective data integration and governance. More companies now have timely access to higher-quality workforce information than ever before.

Generational differences and diversity in the workforce. The growing diversity and complexity of today's workforce are forcing organizations to adopt new solutions, which are being quickly embraced by a new generation of HR leaders. Many younger HR leaders are Internet natives and are often more receptive to using advanced analytics technology and analytics as a natural part of doing business.

Practical implications

When it comes to workforce analytics, the most important step is the fi rst one: getting started. Most companies already have the data they need (good enough is indeed good enough), so there's really no excuse for delays. As one executive said, "If you're paying people with a payroll system, you have enough data required to begin." Visualize a fi ve-phase journey. View your workforce analytics efforts as a multiphase transformation.

Start with real business problems. Begin with an assessment of current challenges. Moving from basic reporting to advanced, predictive analytics takes time and investment. Tying the effort to top business challenges makes it real and promotes greater acceptance and adoption of workforce analytics.

Focus on building capabilities from the outset. Don't underestimate the magnitude of the shift to an analytics mindset. Moving from a reporting culture (fi ling reports) to an analytics culture (creating and using actionable data) requires companies to defi ne analytic goals precisely and provide concrete examples of benefi ts that help users visualize the "art of the possible." Building a sustainable and scalable analytics capability may not happen quickly.

Keep the end in mind. You're moving to an operating environment where you'll use predictive modeling to make more effective workforce decisions. Don't lose sight of that.

Lessons from the front lines

The most effective workforce analytics programs strike a balance between capability building and point solutions. Being "capable" means building long-term value through detailed HR systems, a holistic approach to data, and change management that gets your organization on board. Point solutions focus on specifi c challenges, such as marketplace priorities, recruiting, retention, and workforce health and safety. In the fi nal analysis, the combination should be both sustainable and scalable. Here are eight possible entry points:

• Workforce planning and optimization. What types of talent do you need across your businesses and geographies — and where are demographic shifts creating gaps in your supply-demand forecast?
• Recruiting analytics. As you focus on near-term needs and future generations, what are your most effective strategies for attracting critical talent?
• Retention risk analytics. Which categories of employees and which specifi c employees are fl ight risks? Why?
• Organizational design. What organization structures can help you manage growth in the "new normal?"
• Leadership development. Who will replace your current leaders and when? What is their probability of success?
• Workforce safety analytics. How can you anticipate workplace accidents before they happen to improve compliance, productivity, and lower costs?
• Workforce transitions. How can you make more effective workforce deployment decisions related to mergers, acquisitions, realignments, market opportunities, and competitive threats?
• Health and productivity. How can you more effectively correlate benefi ts and related investments in wellness with productivity?

In terms of primary capabilities, the building blocks of a successful workforce analytics program rest on the following general questions:

• People. What kind of organization and specifi c skills are needed to support an analytics capability?
• Process. What's the leading way to improve the impact of decision support tools?
• Technology. What tools and systems are necessary for data-driven decisions?
• Data. How do we get the most value out of internal and external data?
• Governance. How will data guide decisions — and who is accountable for implementing them?

Workforce analytics: Leaders are all in

Workforce analytics is already proving its value. For companies that embrace the power of analytics, there is no going back to basic reporting and shoot-from-the-hip decisions. The challenge is clear: Get a plan. Move fast. Stay focused on two things — building capabilities and solving business problems.

2. HR in the cloud: It's inevitable

Cloud computing and SaaS. Are these the next big disruptive technologies — or are they simply a natural evolution of distributed computing? Either way, they're changing how many parts of the business operate — and they really are a big deal for HR. Especially SaaS.

SaaS has already demonstrated its value in terms of scalability and fl exibility, using both on-demand and subscription-based models. Along with other aspects of cloud computing, SaaS is helping organizations to transform their traditional information technology (IT) structures into more nimble, fl exible, and affordable architectures.

And while SaaS technology is evolutionary, its business implications are more likely considered revolutionary. That's why the real demand for SaaS is being driven by the business, where there are heightened expectations for agility and fl exibility. SaaS can create the possibility of rapid business model innovation, improved service levels, and new ways of controlling costs — powerful stuff for companies responding to the aftereffects of the economic downturn and the pent-up business demand for HR.

But there's even more at stake than the opportunity to do current things faster, better, and cheaper. SaaS solutions, like cloud computing, can also enable organizations to do entirely new things, like helping HR organizations of any size compete and operate on a global scale.

What's driving this trend?

Recent Deloitte research shows that 84 percent of surveyed companies are either transforming or planning to transform how they handle human resources functions. Chief motivators are cost savings (85 percent) and greater effectiveness (75 percent).¹ And while business and HR leaders appreciate the long-term value of HR transformation, the journey toward obtaining such value can seem too long. SaaS is an effi cient way to accelerate HR transformation and capture value faster.

New choices. Companies have new options for deployment models (public, private, and hybrid clouds), as well as for service models (SaaS, platform as a service, and infrastructure as a service). These options offer varying benefi ts in terms of effi ciency, availability, scalability, and speed of deployment.

Demand for return on investment (ROI). Massive investments in HR infrastructure have produced mixed results. Companies have an increasingly limited tolerance for spending money on technology without tangible, documented improvement in effectiveness.

Explosive growth in SaaS and cloud computing options. While software and hardware sales in general have slumped amid poor economic conditions, SaaS products and cloud-computing solutions are growing at two to three times the pace of on-premises solutions.²

This gives organizations looking for fresh approaches to HR transformation several new paths to consider.

Simultaneous maturation of SaaS and HR. While companies have made great efforts to streamline processes and technology, many times those efforts haven't extended to the delivery of HR services. But now HR, business needs, and technology are converging to create a unique moment in the history of HR transformation. Business leaders need improved HR delivery models to enable better decisions and growth. At the same time, SaaS HR technology is providing new and affordable tools. The timing couldn't be better.

Introduction of broad, stable cloud computing providers. The cloud computing marketplace has taken off in the last few years — expanding the options for both IT and HR to support HR service delivery.

Lower costs and scalability. Many SaaS and cloud computing options cost less and are faster to implement than large enterprise systems. There are now SaaS products and services that can compete with or integrate with comprehensive on-site solutions. Many offer elastic scalability so HR organizations can add or remove capacity on demand. This is especially advantageous for organizations with variable workloads or growth spikes triggered by acquisitions.

Practical implications

SaaS can offer a middle ground between in-house tech people dedicated to HR and full-scale outsourcing. It also allows software to be hosted off site while managing HR processes in house. Issues companies are considering when choosing SaaS technology to drive HR transformation include:

Value. Will the new system increase or decrease dependence on IT resources? Can users confi gure the system themselves, or will a vendor have to customize it for them? Will it truly improve service levels?

Deployment. Will the solution be immediately usable, or is there an extended implementation period? Can HR business partners, managers, and employees take the ball and run with it soon after launch? Do future improvements to the system involve massive, time-consuming upgrades, or can the system be updated automatically?

ROI. What are the likely implementation costs for a new system? To what extent can upfront costs be recovered via reduced costs for an ongoing operation? How does the purchase impact cash fl ow? Can subscribing versus buying reduce the amount of capital tied up by the purchase?

Service to end users. Is the system intuitive and easy to use? How quickly can employees competently use the new functionality? How much training is required to achieve profi ciency? How diffi cult is it to update features and functionalities to incorporate end-user feedback?

Lessons from the front lines

Speed can be critical to realize value through HR transformation. That's why SaaS can be such a compelling option for companies that want to show their organizations the value of transformation now — not a year or two in the future. Many companies are exploring SaaS options, but as with all new technologies, there is still a great deal of apprehension.

The major factors holding companies back include:

• Security. SaaS security may be as effective as security associated with in-house data centers, but many companies just don't have the comfort level to go down this path. And even some early adopters are keeping particularly sensitive applications in house.
• Quality of service. The lack of formal service-level agreements for performance and availability means quality of service may be an issue for some organizations.
• Integration. Many companies have questions about their ability to integrate SaaS applications with in-house applications.

Though not discounting these concerns, leading companies that have embraced SaaS are realizing significant benefits:

• Rapid deployment of preconfi gured technology and service delivery solutions.
• Cost savings from accelerated implementation are redirected to other elements of HR transformation.
• True integration is achieved by "connecting" various HR initiatives and technology across the enterprise, including strategy, technology, service delivery, HR organizational design, and portals.
• SaaS helps to transform HR at the most critical point of change — the interaction of end users with HR services, such as recruitment, screening, predictive analytics, performance management, payroll, time, and attendance or workforce management.

Three real-world examples illustrate the benefi ts of tying SaaS to global HR transformation efforts:

• A global medical device manufacturer needed to create an independent HR system as it divested from its parent company. Cloud computing was at the core of its newly developed global HR delivery model. The approach sped up implementation and reduced the demand on internal business and IT resources. The company was able to establish fully independent HR operations within nine months.
• A national not-for-profi t foundation with a fastgrowing employee population sought to improve the effectiveness of HR operations. The organization opted for a cloud-based solution, which dramatically accelerated time to value — without overstretching internal IT resources. Because little front-end investment was required, the foundation hit its budget target with room to spare.
• A global entertainment company needed a learning management system that could deliver content varying from instructor-based training to 30-second video how-to snippets. They chose to deploy a new learning management system in the cloud. This afforded them a quick turnaround time to get the new system up and running — without having to maintain the learning content.

Cloud computing and SaaS have become effective approachs to HR transformation

Enterprises should recognize emerging cloud capabilities and take advantage of new service offerings, such as more nimble, flexible, and affordable architectures. That means evaluating SaaS alternatives to discover offerings that are aligned with operating environments and risk profi les. Navigating the options, assessing the opportunities and risks, and migrating to the appropriate SaaS environment can enable organizations to position themselves for future adoption of additional HR capabilities.

The real power of HR-focused SaaS is in the potential to rethink and redesign HR delivery and IT architecture at a fundamental level. SaaS-enabled HR transformations can help HR to accelerate the value to talent strategies (workforce planning, performance, succession management, etc.), revenue growth (M&A, business transformation, globalization), and operational excellence (workforce intelligence, HR policy, culture, and communications) — making SaaS a technology consideration for any organization looking to take HR to the next level.

3. From ladder to lattice: The shift is on

The corporate ladder, rooted in the industrial era, takes an outdated, one-size-fi ts-all view of managing work and leading people. In the ladder model, careers are expected to shoot straight up, work is a place you go, and communications fl ow top down. Success is defi ned by the level of prestige, rewards, and power tied to each rung. High performance and career-life fi t are viewed as opposing forces.

But today's workplace isn't what it used to be: The pace of change is faster. Organizations are fl atter. Work is more virtual, collaborative, and project-based. Workers are less tethered to traditional offi ces and set hours. The workforce isn't what it used to be either, from gender to generations, to ethnicity to culture, to the changing family structures, today's workforce is more diverse in every sense of the word. Workers' needs, expectations, and defi nitions of success now vary widely, rendering obsolete a one-size-fi ts-all approach to talent management. The corporate ladder is collapsing; the Corporate Lattice is emerging.

In mathematics, a lattice is a multidimensional structure that extends infi nitely in any direction. A garden trellis is an everyday lattice example — a structure that provides for growth in many different directions. In the corporate world, lattice describes the multitude of ways careers are built and talent is developed.

What's driving this trend?

Flatter hierarchies. Industrial-age talent development models were built on linear, vertical career progression up a hierarchy. Yet, companies' structures today are on average 25 percent fl atter, with fewer rungs available for upward advancement.¹

Rise of nontraditional family roles. Dad going off to work while mom stays home to raise the kids describes less than 20 percent of American families today. In other words, more than 80 percent of families no longer fi t the environment for which the corporate ladder was developed.²

Virtual, wired workplaces. Fixed work times and places are giving way to more fl exible and adaptive arrangements. Today, more than 40 percent of U.S. employers allow staff to work remotely some of the time.³ Expanded options for when, where, and how work is done are creating new possibilities for people to learn, develop, and contribute — options that did not exist when corporate ladder talent models evolved.

Changing needs of men. Three out of four married men now live in dual-career households, up from one in two in 1977.⁴ Men in dualcareer, dual-caregiver households now cite more work-life confl ict than women do.⁵

Critical number of women in the workforce. Women are half the U.S. workforce and the lion's share of entry-level educated workers, earning nearly 60 percent of undergraduate and master's degrees.6 No longer merely a second income for the family, nearly 40 percent of working women are the primary breadwinners for their families.⁷ Yet, women's careers, more often than men, do not align with the traditional model of a steady climb up the corporate ladder.

Converging generational expectations. Ninety-two percent of millennials cite career-life fit as their top priority. Although, on the other end of the spectrum, older workers are increasingly looking for the same thing. Sixty-fi ve percent of workers aged 45 to 70 say they are looking for ways to better manage work and personal life.⁸

Practical implications

The shift from ladder to lattice refl ects fundamental changes in the mindset and motivations of today's workforce. Companies can harness the potential of these changes by creating options for their talent that align individual needs with the organization's requirements. The Corporate Lattice structures these choices in three areas we call "lattice ways."

Lattice ways careers are built. The Corporate Lattice model depicts employees' career growth as multidirectional, zig-zagging up, down, and diagonally across the organization. There is no universal view of career success, but rather a multiplicity of options to grow and build a career — redefi ning what "career progression" means.

Lattice ways work gets done. The lattice represents the transformation from work being a place you go to a dynamic, increasingly virtual workplace. Technology has enabled new possibilities for where, when, and how work gets done. Globalization, virtualization, modular job and process designs, and team-based project work have each accelerated the trend.

Lattice ways participation is fostered. Broader participation provides more choices for people to get involved, share ideas, innovate, and spread knowledge throughout the company, free of organizational levels and divisional silos.

Lessons from the front lines

As the lattice model usurps the industrial-age ladder model, key principles are emerging:

Map out lattice career pathways. Organizations are creating lattice career pathways that provide options and road maps to move laterally or diagonally, as well as up, and that give employees more opportunities to learn and grow.

Implement mass career customization (MCC). The MCC tool provides a framework and a simple process to personalize careers, designed to help make career development collaborative, dynamic, and in tune with each individual's changing life circumstances — whether that be dialing up, dialing down, or staying consistent with a role's profi le. MCC provides a way to equitably scale workplace fl exibility, hardwiring customization into a company's talent brand.

Include virtual workplace practices. Providing greater options for when and where work gets done, in alignment with job requirements and corporate needs, benefi ts both employees and the bottom line by reducing real estate-related costs while ensuring greater business continuity in the event of natural or other disasters.

Measure results, not face time. The changing world of work is rendering measures of "face time" as a measure of performance — however subtle or not — irrelevant. Organizations must up their game in both goal setting and assessing the results of employees that managers don't see day to day.

The lattice: Ways that work for today — and tomorrow

Not long ago, it was assumed that most everyone wanted the same thing: to climb the ladder rung by rung, acquiring greater responsibility and rewards along the way. But today's much more diverse workforce (diverse among every dimension) has redefi ned the very measures of career success and the talent management processes that support it. Organizations must now include how life fi ts into work and work into life — no longer a uniform calculus — into its employer brand. While today's typical organization is caught between well-engrained ladder norms and the demands of today's ever-changing marketplace, leading companies are already modeling lattice thinking. Lead or follow, we all need to adapt to the changing world of work.

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