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engaging the global workforcebridging the gap between finance and talent management

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The link between workforce retention and company performance has become more quantifiable, and a new wave of HR executives is moving to the vanguard of corporate governance—the Chief Talent Officer (CTO).

In the 21st Century, the question is no longer whether global changes in workforce dynamics impact company performance, but how to be in front of these changes. One such change is the onset of baby-boomer retirement combined with decades of economic expansion and a tight labor market to create a critical shortage of seasoned managers.

To lessen the impact of these changes, many companies have increased investment in succession planning, employee retention and employee engagement. Such initiatives help to bridge the gap between finance and talent management as the two departments collaborate to create business cases for new processes, programs and technologies to track their financial outcomes as it relates to their biggest investment in human capital.

This report assesses the attitudes of business leaders towards the relationships between the CTO and the CFO, and their mutual role in engaging the global workforce to adapt to the new global workforce trends.

Key findings* Human Resources must take a more strategic role in the business.

* Employee recognition improves employee engagement, which increases retention and productivity, thereby positively affecting company performance.

* Creating a universal recognition platform for global companies is difficult.

* CFOs are not aware of how much they are currently spending on recognition programs.

* The CTO and the CFO must work together to chart the course for the future.

introduction

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Human Resources must take a more strategic role in the business.

Human Resources has come a long way from its days as the Personnel Department. The idea of HR’s role as merely a transactional or recordkeeping function is as outdated as the typewriter.

Today, employees are the largest investment for an organization and, like any other investment, their value needs to be understood, their performance measured and their skills amplified. As one survey respondent explained, “HR holds the keys to the engine—the employees. Nothing is more important than what happens on the front line. HR hires, trains and retains these folks, and it is vital that HR plays a role in the strategic planning.” With this in mind, it comes as no surprise that 87 percent of respondents said HR should play a more strategic role than in the past.

As technology enables organizations to harness more data about employees, HR is not only expected to take a strategic position in the organization, but also to quantify its work with appropriate metrics to substantiate ROI. Survey respondents overwhelmingly agreed with this—91 percent said it is more important than ever for HR to be accountable for what it spends. Almost as many respondents—88 percent—said HR must embrace a more metric-based standard for measurement.

But how is HR doing in taking a strategic view? The survey results indicate actions are not necessarily following intent. Although 87 percent of respondents believe HR should play a more strategic role than in the past, only 63 percent of respondents believe HR has the right amount of input in the strategic direction of the organization. Furthermore, fully one-third of respondents still believe HR has too little say in overall business strategy.

key finding no. 1

Human Resources Must Take a More Strategic Role in the Business

HR has the right amount of input in the company’s strategic direction

HR has too little say in strategy

HR should play a more strategic role than in the past

HR must be accountable for what it spends

HR must embrace a more metric-based standard for measurement

0% 20% 40% 60% 80% 100%

63%

33%

87%

91%

88%

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Employee recognition improves employee engagement, which increases retention and productivity, thereby positively affecting company performance.

Human Resources is frequently asked to provide a measurable benefit to the organization for employee engagement. In fact, the term employee engagement is so often discussed that it almost borders on cliché.

As the Society for Human Resource Management (SHRM) Foundation Report “Employee Engagement and Commitment” defined it, employee engagement is a worker’s satisfaction with their work and pride in their employer and “the extent to which people enjoy and believe in their work and the perception that the employer values what they bring to the table.”1

In 2007, the International School of Human Capital Management Faculty of Employee Engagement defined employee engagement as an output-based concept that describes how aligned and committed employees are to the company, such that they are at their most productive.2

Generally, definitions of employee engagement describe an employee attitude that results in a behavior that positively benefits the company. Although some may still wonder how something so intangible can be measured, the proliferation of performance management software and the increasing capability to measure employee attitudes through surveys are making the naysayers fewer in number.

Most Important HR Metrics

Employee satisfaction surveys

Training ROI

Turnover rate

Human capital ROI

Employee productivity

Employee engagement

0% 20% 40% 60% 80% 100%

71%

63%

57%

56%

56%

56%

key finding no. 2

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The financial benefits of engaged employees have been conclusively established in many surveys.3 But the data reports the same idea—engaged employees are more likely to be high performing employees and less likely to leave their current organization.4

With this in mind, it is not surprising employee engagement, productivity and retention issues are clearly on the minds of survey respondents. When asked which HR metrics they consider most important in guiding corporate strategy, the top replies were focused on engagement, retention and productivity issues.

The most important HR metrics for respondents were employee engagement at 71.4 percent, employee productivity at 62.9 percent, and human capital ROI at 57.1 percent. Interestingly, employee satisfaction surveys, training ROI and turnover rate all returned at 55.7 percent.

Respondents also understand recognition plays a vital role in attracting and retaining employees. A clear majority—78.8 percent—said recognition was an important attraction and retention tool.

When asked why, one survey respondent explained: “Our company understands the benefit of having a performance-based recognition program and how it helps drive employee engagement. Ultimately, it leads to satisfied customers, and, if you have satisfied customers, they are more likely to purchase again.”

When asked to put it all together, respondents were near unanimous in their belief that employee recognition improves engagement and productivity, which affects the bottom line.

* 98.5 percent agreed employee engagement increased employee retention and productivity

* 97 percent agreed employee retention and productivity have a positive impact on company performance

* 93.9 percent agreed employee recognition improved employee engagement

1http://shrm.org/foundation/1006employeeengagementonlinereport.pdf 2http://www.valuentis.com/Publications/Journal/JoAHCM_VOL1NO1_2007_EmployeeEngagementarticle.pdf 3http://www.workforce.com/tools/whitepapers/TheNewROI_of_HR.pdf 4http://shrm.org/foundation/1006employeeengagementonlinereport.pdf

Attitudes about Recognition, Engagement, Productivity and Retention

Employee engagement increased employee retention and productivity

Employee retention and productivity have a positive impact on company performance

Employee recognition improved employee engagement

Recognition is an important attraction & retention tool

0% 20% 40% 60% 80% 100%

99%

97%

94%

79%

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Business leaders believe creating a universal recognition platform for global companies is difficult.

Motivating and engaging employees is challenging enough when they share a common office, language and culture. As global business operations cross international borders, those challenges increase dramatically.

The majority, or 80 percent, of respondents believe addressing the needs of global employees is difficult. Almost as many—76.6 percent—also find it difficult to recruit and retain the right talent at the right location.

As difficult as recruiting and retention may be, survey respondents are also aware these things matter. More than 55 percent of survey respondents cited recruiting and retention of the right talent at the right location as the one issue with the greatest effect on their organization.

As stated before, survey respondents understand employee recognition is a key component in engagement and retention, 58 percent of respondents said creating a universal recognition platform for a global organization was difficult.

Evidently, this challenge has also prevented many organizations from implementing a truly global recognition solution. Even though 88 percent of respondents said their organization has an employee recognition program in place, only 66 percent said they have a universal recognition platform.

key finding no. 3

Developing a Global Recognition System Is Dicult

My organization has an employee recognition platform

My organization has a universal recognition platform

Addressing the needs of global employees is difficult

Recruiting and retaining the right talent at the right location is difficult

Recruiting and retaining the right talent at the right location has the greatest effect on the organization

Creating a universal recognition platform for a global organization is difficult

0% 20% 40% 60% 100%80%

88%

66%

80%

77%

55%

58%

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CFOs are not aware of how much they are currently spending on recognition programs.

Even though nearly everyone agrees HR and Finance need to be on the same page, only 58 percent of respondents say this is the case in their organization. When asked if their CFO was aware of how much their organization spends on recognition programs, the response was the same with 58 percent agreeing with the statement.

In fact, many respondents did not believe their organization was taking the necessary steps to measure and quantify engagement and other HR functions. Only 52 percent said their organization had a metric or plan for measuring the effect of employee engagement on company performance.

One respondent articulated why HR must do a better job to justify its investments and suggested a best practice: “HR plays a key role in establishing the business case and instigating the research for new processes or systems. This will lead to a larger scale feasibility study where Finance resources are used to consider ROI and other key financial requirements. The final proposal will be reviewed by a global steering group for presentation to the CFO.”

Even though best practice suggests Finance is the business unit that should require ROI, few survey respondents indicated Finance was taking a leading role. Only 36 percent of those surveyed said Finance made the final decision to create business and ROI cases to justify an investment in new processes, programs or technologies for the HR department, as opposed to 46 percent who reported HR made the final decision. Also, only 22 percent said their CFO was involved in reviewing and approving all HR metrics in their company.

key finding no. 4

CFO is involved in reviewing and approving all HR metrics

0% 20% 40% 60% 80% 100%

22%

HR, Finance Not on the Same Page

Metric/plan in place to measure effect of employee engagement on company performance

CFO aware of recognition program spend

HR & Finance are on the same page

Finance makes final decision to create business and ROI cases for HR process/technology investments

HR makes final decision to create business & ROI cases for process/technology investments

58%

58%

52%

36%

46%

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The CTO and the CFO must work together to chart the course for the future.

Because Human Resources is expected to measure the performance of the human capital investment, it comes as no surprise that the work of the Chief Talent Officer would draw the attention of the Chief Financial Officer.

Survey respondents overwhelmingly understand this, and 95 percent believe the CTO and the CFO should work together to chart a course for the future. As one respondent explained, “Alignment by these two key support executives is critical for charting the right course and staying on course. Human capital is also the largest cost in the organization and the largest competitive advantage and tool to win in the marketplace.”

However, there is a disconnect. In spite of the near-unanimous agreement that the CTO and the CFO need to work as a team, only 58 percent of survey respondents said this was currently the case in their organization.

In an environment where nearly everyone agrees that HR and Finance need to collaborate, yet only slightly more than half say this is happening, room for improvement clearly exists.

key finding no. 5

HR and Finance Should Work Together. But Do They?

The CTO and CFO actually do work together to drive employee recognition

CTO and CFO should work together to chart a course for the future

0% 20% 40% 60% 80% 100%

95%

58%

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Business leaders understand HR has the power to transform an organization by taking a strategic view and using technology to implement a measurable employee engagement solution that generates real results. They also understand employee recognition can improve employee engagement and—by extension—their bottom line, shareholder value, customer retention and the ability to retain and recruit new employees.

Even though business leaders recognize the value and competitive advantage engaged employees offer, they also realize implementing a universal recognition platform for global companies presents a serious challenge. How do you develop a recognition system to motivate employees that crosses borders, languages and cultures?

As the leading provider of on-demand strategic reward and recognition solutions for global companies, Globoforce suggests these best practices developed in partnership with the world’s largest and most diverse companies:

establish a Clear, global strategy for reCognitionStrategic recognition delivers a clear financial and cultural return. Fragmented, disparate programs and systems undermine those benefits. Global companies need global strategies that treat all employees consistently in a transparent, auditable and measurable way across the program.

seCure exeCutive sponsorship with defined goalsLike all other global strategic initiatives, recognition must also be managed using a process such as Six Sigma’s DMAIC guidelines or other operational excellence program. Organizations must hold managers accountable for success by setting measurable goals for frequency of recognition, program adoption, budget, speed and employee satisfaction scores.

align reCognition with Corporate values for global understanding

Businesses can derive additional strategic benefits from a recognition program that rewards behaviors consistent with company values. Not only is this virtually the only way to bring values alive every day for all employees in a large company, it gives the organization a measurable way to see if employees understand the values and if the values are gaining traction across a global organization.

Summary

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offer everyone an opportunity to partiCipateOpen the recognition program to all employees, not just the elite few. This overcomes the skeptical concerns of employees, such as those made by one survey respondent: “Employee recognition programs have been tried in the past and have become popularity contests. Many who work very hard and keep their mouths shut don’t ever get recognized, and those in the limelight get recognized over and over again.

By offering everyone an opportunity to participate in the recognition program through peer-to-peer options in addition to the more traditional manager-to-subordinate model, companies can begin to fine-tune their culture and social architecture to align with the company’s values and mission.

Motivate and aCKnowledge all eMployees with the power of individual ChoiCe

True choice caters to the demographics of a worldwide, multi-generational workforce with millions of options that are culturally appropriate, meaningful and memorable to the individual recipient. Meaningful reward options reinforce the power of the recognition moment with a lasting item that reminds the recipient the company values him or her.

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The survey was sent via email to HR and Finance professionals during the first quarter of 2008. Over 266 responses were received. Each respondent answered the questionnaire via an online survey tool and was assured of his or her confidentiality.

Their responses were used to drive the results and conclusions of this report and will be used only in this aggregate analysis.

The Key Findings herein are based at the 95 percent confidence level with a +/- 10% margin of error.

The demographic composition of the respondent pool provides a representative sample of global 2000 organizations. All of the respondents are from organizations with more than 10,000 employees engaged in global operations.

The majority of respondents were between the ages of 30-49; 43.8 percent were male and 56.3 percent were female.

Respondents represented a variety of roles within their organization.

The industries represented by respondents were also varied.

Over 80 percent of respondents had responsibilities within the broad category of human resources while 20 percent had responsibilities outside of HR.

methodology & demographicS

80%

Job Responsibilities

Outside HR

HR

20%

Manager

C-Level VP

Director

Respondents Roles

57%

6%

18%

19%

High Tech

Mfg/Aerospace & Defense

Finance/Insurance

BioTech/Pharma/Healthcare

Bus. and Prof. Services

Transportation

Utilities/Oil & Gas

Retail/Wholesale Trade

Consumer Packaged Goods

Education

Hotels/Restaurants/Leisure

Other

Industry Participation

22.4%16.4%

10.6%

3.6%3.5%2.4%

17.2%

6.1%

5.9%5.9%

Founded in 1999, Globoforce is the world’s leading provider of SaaS-based employee recognition solu-tions. Through its social, mobile, and global technology, Globoforce helps HR and business leaders elevate employee engagement, increase employee retention, manage company culture and discover the power of real-time performance management. Today, employees across the world are living their company values and achieving peak performance through the Globoforce platform. A private corpora-tion, Globoforce is co-headquartered in Southborough, Massachusetts, and Dublin, Ireland. To learn more, please visit www.globoforce.com or the company’s blog at www.globoforce.com/globoblog.

© 2012 Globoforce Limited. All rights reserved.

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