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Crossing the void: Connecting HR and the business

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Crossing the void: Connecting HR and the business | 3

Contents1. HR has never been more vital to business success 4

Difference in Perceptions 4

2. The disconnect is everywhere 6 A consistently negative perception 6

3. Is HR aligned with the company’s goals and strategy? 8The C-Suite Disconnect 8

Connecting with the reality of the business 9

Buy-in is hard to achieve 10

4. HR is disconnected from employees 11Employers no longer have the same control 12

5. How can HR get it right? 14Focusing on objectives and outcomes 15

6. A new way of measuring 16

7. The business also needs to change 18Finding common ground 19

HR is not alone 20

Better communication is needed 21

8. Dreaming the same dreams as the CFO 22You’re only as good as your current client 22

Have data in one place 23

The importance of HR is growing 23

4 | Crossing the void: Connecting HR and the business Crossing the void: Connecting HR and the business | 5

HR has never been more vital to business successHR has never been more vital to business success. According to Josh Bersin, Principal and Founder, Bersin by Deloitte1, “2015 will be a tumultuous and transformational year in many areas of corporate talent. The global economic recovery, changing demographics, and rapid changes in the technology landscape have come together to redefine the entire nature of work.”

A similar context is painted by a HfS and PwC report2, which explains that aggressive global expansion and changing workforce characteristics have elevated the importance of recruiting, talent management, and performance management. As companies embrace globalization, technology and competitive pressures, local labor markets are rapidly evolving and changing and skill shortages are pushing human resources into the frontlines of acquiring, developing, and retaining talent.

At such a time it is essential that HR works more closely with the business than ever before. Any misalignment or misunderstanding between the talent strategy and the business strategy could be costly, even fatal.

Yet recent studies by ADP have uncovered a dangerous disconnect between HR and its corporate colleagues.

DIFFERENCE IN PERCEPTIONS

Disparities in perceptions between HR and business colleagues in companies of all sizes have now come to light in three separate ADP Research Institute® global studies: Quantifying Great Human Capital Management (2013), Employee Perspectives on Human Capital Management (2013) and HR 360 (2013). Each study measured

“2015 will be a tumultuous and transformational year in many areas of corporate talent.”

perceptions of status and value of the HR function and showed significant differences of perception between employees, the C-Suite and HR in how well employees are managed and the effectiveness of the HR function itself.

For example, the ADP HR 360 research found that 88% of HR leaders believe they take actions that are clearly aligned with the company strategy, yet only 66% of their C-suite colleagues (and 47% of employees) agree.

Manuela Montagnana, Vice President of Human Resources for Europe, Middle East and Africa (EMEA), ADP, believes that “a huge disconnect between HR and business associates” is shown by this data. “If people don’t trust HR, then people will not speak to them, resignations will come out of the blue, absenteeism will increase, and early signs of employee disengagement won’t be detected. If HR does not communicate clearly its service level agreement - what we are capable of doing with the means that we have - then people will continue to question HR’s role and may have unrealistic expectations on the support that can be provided. If there is a disconnect between HR and the business, represented by managers and employees, then I have a real problem, because the business is my client.”

HR Leaders

Employees

88%C-suite colleagues

66%

47%

ADP HR 360 RESEARCH Opinions about taking actions clearly aligned with the company strategy.

110 Predictions for 2015 Redesigning the Organization for a Rapidly Changing World, Bersin by Deloitte 2 Human Resources Transformation: Is It Driving Business Performance? HfS and PwC’s 2012


The disconnect is everywhereThe ADP Research Institute® found that the disconnect between HR and the business is not isolated to particular regions, but can be found across the globe. The only differences found were simply different degrees of how bad the problem is. Latin American HR functions were found to be most likely to rate themselves more highly than their business colleagues rate them. European and North American HR showed the next biggest disconnect, while Asia-Pacific was relatively better aligned.

A CONSISTENTLY NEGATIVE PERCEPTION

In the ADP Employee Perspectives on HCM Study (2013) when asked how well companies manage employees, in the US only 49% of employees stated extremely well or very well, compared to 71% of HR respondents. A similar disconnect was found across the globe: in Latin America 54% of employees said they were managed extremely well or very well compared to 78% of HR; Canada, 47% to 77%; Asia-Pacific, 41% to 73%; the biggest disparity of all was found in Europe, where only 38% of employees responded positively compared to 74% of HR.

The disparity between HR’s belief and employees’ belief is greatest in the Asia-Pacific region and in the United States, but it is also significant in Europe. Overall, only about half of employees find getting answers to their HR and benefits questions “very” or “extremely” easy.

Workers across the globe consistently have a far more negative perception of how well companies are managing them than their HR leaders and C-suite senior executives believe. Employees rank the level

of their compensation and benefits less favorably than HR or management does. With the exception of the US, employees also rate their work/life balance significantly lower than the perceptions of HR or senior management. Career opportunities – a key driver of retention and engagement – receive significantly lower ratings from employees than from HR.

International employees’ perceptions of how well an organization is managed also declines as the size of organization gets larger. For example in Latin America, whereas in small firms of 1-49 employees 65% of employees rate company management highly as do 75% of HR, for firms of 1,000 employees or more this small divide stretches out to a chasm, at 44% of employees compared to 82% of HR.

ADP HCM Study : How well companies manage employees

Employees HR

Only about half of employees find getting answers to their HR and benefits questions “very” or “extremely” easy.

ADP HCM Study : Company management of employees and size of the organization

Employees HR

US Latin America

Canada Asia-Pacific

71%

47%

Europe

78%

54%

77%

47%

73%

41%

74%

38%

75%

65%

Small firm (1-49 employees)

Big firm (1000 employees)

82%

44%


Is HR aligned with the company’s goals and strategy?THE C-SUITE DISCONNECT

HR leaders consistently rate their personal impact much more highly than their business colleagues do. Most worrying is the gap between the HR leaders and their C-Suite peers. When asked to rate the HR function out of five stars, HR leaders tended to give four or five stars – senior-level executives however consistently gave a ranking a third lower.

Bridget Penney, VP Human Resources, Global Employee Services International Sales at ADP, comments on these findings: “HR professionals are still struggling with the balance of making a strategic impact and driving the day to day transactional needs of the business. While many organizations are now working to add “strategic value” they are inadequately set-up to manage the day to day. Without the correct infrastructure and systems in place, it’s no wonder we see the disconnect coming from this study.”

While 88% of HR leaders believe they take actions that are clearly aligned with the company’s goals and strategies, only 68% of their C-Suite colleagues agree. HR leaders also greatly overestimate how well they work with the C-Suite and the influence they have at the executive level. While 81% of HR heads say they make other senior leaders at the company more effective at their jobs, only 53% of those senior leaders actually agree:

“Professionals are still struggling with the balance of making a strategic impact and driving the day to day transactional needs of the business.”

CONNECTING WITH THE REALITY OF THE BUSINESS

According to Manuela Montagnana, VP Human resources, EMEA at ADP “many HR organizations are doing very interesting things from a theoretical standpoint but they are living in an ivory tower, approaching talent management, for instance, in a way that is not connected to the reality of the business and the human capital of the company. That creates a huge disconnect.”

ADP HCM Study : Opinions of employees, C-Suite, HR managers and HR leaders


“HR needs to understand the strategy in order to identify and provide the leadership skills that will be needed to execute it.”

In the power and automation industry, this is something that Gary Steel, former Member of the Group Executive Committee, Executive Vice President and Head of Human Resource at ABB, also recognizes: “There is nothing more frustrating than an HR organization that fails to deliver. If you try to do strategy without people, you don’t get very far, when people say they would rather do ‘strategic HR work’, as if that’s somehow on a higher ground than paying people at the end of the month and doing all the benefits stuff. You have to get the basics right.”

This is not to say that strategy is unimportant – but that if HR becomes too focused on strategy at the expense of the basics, or vice versa, then that can cause a disconnect with business reality. Piet-Jan Van Gerwen, Director Business Development EMEA, for Raytheon Professional Services believes that: “HR needs to understand the strategy in order to identify and provide the leadership skills that will be needed to execute it. Companies spend more per employee on leadership and training than on any other staff related programs so the better HR understands the business strategy, the higher the return we can deliver on that spend... It takes time to get buy-in, and you have to start at the top.”

BUY-IN IS HARD TO ACHIEVE

That buy-in may be harder to achieve in some parts of the world compared to others. ADP found that C-suite executives in Latin America and Asia-Pacific regions would like even more strategic HR contributions from their HR colleagues. Whereas in the United States and Canada, HR aims for a higher strategic vision than their C-suite colleagues want. HR leaders in large US-based companies also differed from their C-suite executives on which issues or challenges their companies faced. Interestingly, succession planning and training/development are perceived by the C-suite as far more of a challenge than the HR leaders. HR leaders are more apt to identify HR policies varying by country/region and diversity as more challenging.

Four out of five C-suite and senior-level executives defined succession planning, training/development and recruiting/talent acquisition as HR challenges. Nearly one-third of C-suite executives ranked recruiting/talent acquisition as their top challenge in managing worldwide employees while HR leaders see the more tactical issue of complying with varying HR policies by country/region as their top challenge.

HR is disconnected from employeesAccording to Manuela Montagnana, VP Human resources, EMEA at ADP, “Most of the HR leaders I know are spending 80 per cent of their time with managers and very little time with the employees, the basis of the organization. This can create a disconnect between the expectations that people have when you ask them about HR and the support to be provided, and what HR actually does.”

The following table clearly shows these disparities. Perhaps one of the most shocking findings sees far fewer employees agreeing with the very modest statement ‘I/employees have adequate opportunities for professional growth at my company’ – which is surely a reasonable expectation – than do HR.

Agreement with statements — Employees versus HR

Source : ADP Research Institute, Employee Perspectives on HCM Study, 2013. ADP Research Institute, Quantifying Great HCM, 2013.

Employees HR


EMPLOYERS NO LONGER HAVE THE SAME CONTROL

This disconnect is dangerous in the modern marketplace. Josh Bersin, writes in his Predictions for 20153: “Employers, once in a position of power over employees, are no longer in control. Today, thanks to tremendous transparency in the job market (driven by Twitter, LinkedIn, Facebook, Glassdoor, and dozens of other online professional networks), people with in-demand skills are flooded with targeted job opportunities online. One recent survey showed that two-thirds of all software engineers believe they could find a better job within 60 days if they just tried. This means if your company is not a great place to work at, then people find out about it fast. Low engagement today is a significant business risk. In today’s transparent job market, employment brand and employee engagement have become synonymous. If people are unhappy at work, then they are likely telling others—making it harder to hire good people.”

A lack of understanding between HR and employees is clearly making this situation worse. Responses to the ADP studies4 indicate that employees consistently rate compensation and benefits lower than the HR people who provide those benefits. A centralized HR department accessible via telephone is cited by more than half of employees surveyed as a resource it expects to go to for answers. However, less than one-quarter of HR leaders agree.

Unsurprisingly, given employees now don’t know where to go to for HR information and advice, and feel they don’t have adequate opportunities for professional growth or training – they are looking to leave in vast numbers. In the US, two out of five employees surveyed indicate an intention to leave their company within the next 12 months. Among those who feel it is extremely or very easy to have their HR questions answered, less than a fifth say they are likely to look for a new job in the next 12 months. Among those who say it is not easy to have their HR questions answered, the number almost doubles to more than a quarter:

“Professionals are still struggling with the balance of making a strategic impact and driving the day to day transactional needs of the business.”

Likelihood to look for a new job, by satisfaction with Specific HR functions/policies

Likelihood to Look for a New Job in the Next 12 Months

Satisfaction With Specific HR Functions/Policies

U.S. Employees Extremely/Very Likely Not Very/Not at

All Likely

Payroll function 59% 35% 73%

Benefits function 47% 24% 60%

HR function 44% 23% 55%

Social media policies 41% 24% 48%

Mobile policies 41% 25% 48%

Source : ADP Research Institute, Quantifying Great HCM, 2013.

310 Predictions for 2015 Redesigning the Organization for a Rapidly Changing World, Bersin by Deloitte 4ADP Research Institute® global studies: Quantifying Great Human Capital Management (2013), Employee Perspectives on Human Capital Management (2013) and HR 360 (2013).


How can HR get it right?So what should HR be doing instead to better align with the wants and needs of the business? What KPIs should it be setting, and what practical changes can be made to HR strategy?

The rewards of managing employees and their data more effectively, and easier access to information and ease of reporting, are becoming ever clearer. HR can now mine the related data for information instead of just trying to keep up with the transactions, or set strategy based on educated guesses.

FOCUSING ON OBJECTIVES AND OUTCOMES

In order to focus on objectives and outcomes, HfS and PwC6 argue that HR executives need to, “spend more one-on-one time with their business managers to understand their real talent issues and spend a lot of time listening before pressing home transformation initiatives. Transformation can only be effective once HR and the business function leader all bought into the objectives and outcomes - maximizing business time spent on workforce productivity, identifying how business performance is impacted by workforce metrics, understanding the root cause behind first-year and high-performer attrition, and coordinating succession planning and management development activities.”

Biggest chalenges

According to the Society for Human Resource Management (SHRM)5, the biggest challenges facing HR executives over the next 10 years will be:

1. Retaining best employees and rewarding them

2. Developing the next generation of corporate leaders

3. Creating a corporate culture that attracts the best employees

4. Remaining talent marketplace competitiveness

Tactics to achive these

In turn, the top tactics to achieve these over the next ten years were identified as:

1. Providing flexible work arrangements

2. Maintaining a culture of trust, open communication and fairness

3. Providing employees with opportunities for career advancement

4. Demonstrating a commitment to employee development

5Workforce Forecast (2013), SHRM 6 Human Resources Transformation: Is It Driving Business Performance? HfS and PwC’s 2012


A new way of measuring HR needs to ensure it is setting the right KPIs. “There are 100’s maybe 1000’s of KPIs in the practice of HR. And while KPIs measuring core HR processes are relevant, quite frankly, they are not very strategic. That is expected. Next level KPIs need to be aligned to the relevant strategic business drivers. At the end of the day, we need to seamlessly deliver on core HR processes while demonstrating a clear business impact with strategic HR initiatives.”

To this list, Manuela Montagnana, VP for HR, EMEA at ADP, adds “a KPI measuring achievement versus expectation. Why do we want to hire more people, is it because we need to face the growth of the organization? Is it because we are replacing people that are leaving? In talent acquisition you have obvious classical indicators like time to fill a position or cost per hire. But when it’s about more soft indicators, it’s important that there is a link with the strategy, i.e. what are you trying to achieve? What’s the purpose of setting up a shared service center in Eastern Europe for example? Is it just to benefit from a labor cost arbitrage? Are you working on productivity? Will you be able to measure the efficiency, the quality?

She advises: “Start with understanding what the business is trying to achieve and how you can align the human capital to those business objectives. Then look at the classical pillars of HR – like talent acquisition and talent management – always making sure that the whole life-cycle of an associate or an employee in a company is covered.”

“Next level KPIs need to be aligned to the relevant strategic business drivers.”

New KPIs

An outline7 of what new KPIs might look like include:

• HR systems designed to monitor or manage organizations that are increasing their part-time, contingent, or contractor workforces.

• Creating a new impetus on employee wellness and happiness as a Retention and Engagement HR strategy.

• Employee engagement programs using new tools for employee feedback, sentiment measurement, and communications.

• Targeted talent solutions which drive talent and business outcomes. This means developing a set of clear strategies to use as guideposts to help to redesign, implement, or buy solutions in each area.

• Improved speed and quality of hire through improved employment brand and strategic sourcing.

• Building a leading L&D function to drive performance and improve employee engagement through a blended centralized program and infrastructure with local learning teams in the business.

• Training managers in recruitment and assessment.

• Developing a strong pool of candidates through relationship management and employer branding — i.e. marketing the company, attracting interested candidates well before a job is posted, developing strong university relations programs and tapping into professional groups (known as “network recruiting”).

7Predictions for 2015 Redesigning the Organization for a Rapidly Changing World, Bersin by Deloitte


The business also needs to change There are, of course, two sides to this story of disconnect between HR and business leaders. There is also a clear level of business leaders and the wider workforce misunderstanding the nature of modern HR. The business also needs to change its ways. For years, business leaders have experienced only the most tactical of human resources capabilities and have learned to use them solely in this way. Need to hire someone after they leave? Call your human resources representative. With the exception of compliance related training, business executives and line managers have grown accustomed to expect little from their human resources representative except to offer helpful advice at critical moments. Business strategies are increasingly forcing employees to collaborate across customer segments, regions, and processes, which requires changes to organization design, performance management, and culture. Organizations have been forced to adopt global business process ownership models, learn to rely on outsourcing vendors, and develop or enhance shared service strategies. Along with new organizational designs, business leaders need to update performance management processes to reflect new goals.

Recalling his experience of uniting two organizations at Nokia Siemens Networks, Eric Sorin, Vice-President HR, Customer Operations Europe & Latin America at Nokia, argues that any HR transformation requires “leaders who have strong analytic skills, who identify issues quickly, learn fast, and are agile. When it came to the willingness of our 6,000 line managers to adopt and communicate the new leadership values, we saw some differences in maturity of leadership between regions but in fact there were more differences between functions.”

FINDING COMMON GROUND

What does business need to do to better understand the HR function and its strategic capabilities? The ADP research found many areas of common ground. See table below:

“For years, business leaders have experienced only the most tactical of human resources capabilities and have learned to use them solely in this way.”

16

HR and C-suite executives’ agreement (completely/Somewhat)


However the response to the global recession was typically to ask HR to find efficiencies both within the workforce and within their own departments. Workforces reduced and so did HR departments – thus the challenges identified by both HR and C-Suite executives became harder, not easier. With reduced resources, HR departments are now being asked to do much more strategic work; at the same time, employees are wondering why the HR team are no longer visible, or not instantly available on the other end of the phone.

HR IS NOT ALONE

Disconnect between business leaders and key support functions is also not exclusive to HR. ‘The Big Picture Global Survey: Dual Perspectives on ItaaS’ (CIO 2013) report found many of the same problems facing IT departments: “IT executives are more likely than those in business to indicate that IT does a good job of understanding what the business wants, improving time to market, communicating a clear vision, gaining the trust of business stakeholders, informing the business of new services, articulating business value, enabling innovation and collaboration, and supporting mobility. Business executives are more likely to see significant room for improvement in: making IT services easier to package and deliver. Demonstrating an accurate understanding of the services the business needs/wants. Communicating a clear vision for future services.” Poor communication between IT and lines of business, the study found, “is reported by 47% of business respondents.”

Efficiencies and streamlined processes have created a work environment where people have less time to communicate their needs, yet greater demands and expectations that those needs are met. Manuela Montagnana, VP HR, EMEA at ADP, explains this has been exacerbated by, “naive expectations of what HR should do. When our research finds that the HR perception around whether employees are well managed differs from that of employees, the question is what does each party mean by being well managed? Because from an employee perspective, keeping wage costs low and reducing the training budget is not necessarily what they would consider well managed. And these might be the expectations from the top management to HR.”

BETTER COMMUNICATION IS NEEDED

At Nokia Siemens Networks, the response of Sorin and his team was to launch a Consistency in Leadership Program to: “create a clear and distinctive management culture that would enable the organization to act consistently and with individual and collaborative accountability for achieving business goals. Along the way, we wanted to improve employee commitment through a sense of confidence that management was pulling together for the success of the company and not divided or fighting to protect their own turf or avoid accountability. We incorporated these criteria into the annual engagement survey and used them in reviews of line managers with over six direct reports.”

All this really comes down to is better communication channels – both improved software solutions and good old-fashioned face-to-face chats. The disconnect can be avoided if HR and the C-suite spend more time together and if HR is invited to the table. HR is only invited if the business has understood that there is a real value having HR there. That’s a challenge when you don’t have that knowledge, understanding, and experience from business leaders who don’t see that added value. So then it’s about building trust. It’s making sure that you demonstrate your added value. Then it should come naturally.

“Disconnect between business leaders and key support functions is also not exclusive to HR.”


Dreaming the same dreams as the CFOA strong connection between HR and the business is necessary for any organization that claims that its people are its greatest asset. The C-Suite leaders can see clearly the work done on retention, recruitment and talent management to drive growth in the business. While HR is better able to anticipate challenges and seize opportunities.

“If you have people in HR who are really curious about the business, they will find ways to influence and build better credibility with business leaders”, says Gary Steel, former Member of the Group Executive Committee, Executive Vice President and Head of Human Resource at ABB. “You have to show a passion for the business – that you are dreaming the same dreams as the CFO. I’m not saying it’s easy. You have to fight for every order and for every piece of margin, but that’s what business is all about. It’s a full contact sport.”

YOU’RE ONLY AS GOOD AS YOUR CURRENT CLIENT

Bridget Penney, VP for HR at ADP, likes to explain this by saying, “you’re only as good as your current client. If your client has expectations for you to set up lunch and learns, to do very basic, non-impactful touchy-feely HR, you are off to a very bad start. Unfortunately, there are still business leaders out there that think that way. Yet, if you are viewed as a confidante, a trusted advisor and someone who can understand the business while bringing insight, you are off to an impactful partnership.”

Josh Bersin of Deloitte agrees, saying, “In 2015, rather than focus on simply innovating in each individual part of HR, companies should focus on prioritizing these imperatives and design integrated, targeted solutions that achieve specific business outcomes. Stay current on talent acquisition technology. New tools that tap into social sourcing networks, mobile recruitment tools, referral networking tools, and analytics tools have flooded the recruitment marketplace. In 2015, it is becoming imperative for HR teams to invest in talent analytics, bringing together the reporting and analytics teams in recruiting, compensation, engagement, learning, and leadership, and putting together a plan to evaluate your workforce with a holistic data perspective.”

“There’s going to be a growing attention to not only attracting the right people but also retaining them, because once you have them, there is no guarantee that those people will stay with you”

HAVE DATA IN ONE PLACE

When you put a program together to collect people data in one place, that’s when “you can quickly focus on more urgent business issues, such as how do we get a higher quality of hire, how do we improve our batting average for high-performing salespeople, what are the characteristics

of our best customer service representatives, which training program is delivering the highest ROI in leadership, and why are certain groups of employees leaving at an alarming rate”.

Ultimately, if these factors are not deemed crucial to the business strategy, then the organization is on a downward path. There are very few industries where misjudging the human capital component – typically an organization’s single most important and expensive asset — would not impact results. It is therefore imperative that HR leaders collaborate with their C-Suite colleagues on these issues, are able to provide the data that explains the urgency of the situation, and demand the platform to do so.

THE IMPORTANCE OF HR IS GROWING

Attracting people with certain skill sets is becoming more and more difficult. It’s going to become more and more of a

challenge to have the right talent in the right place, at the right time. Therefore there’s going to be a growing attention to not only attracting the right people but also retaining them, because once you have them, there is no guarantee that those people will stay with you if you do not match their expectations neither. As this continues to grow, companies increasingly need the tools to support and help the management of their workforce. The importance of HR is not diminishing, it is growing. Therefore the importance of connecting the HR strategy with the business strategy has never been greater.

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© 2015 ADP, LLC.

Employers around the world rely on ADP® (NASDAQ: ADP) for cloud-based solutions and services to help manage their most important asset - their people. From human resources and payroll to talent management to benefits administration, ADP brings unmatched depth and expertise in helping clients build a better workforce. A pioneer in Human Capital Management (HCM) and business process outsourcing, ADP serves more than 610,000 clients in 100 countries.

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