November, 2007

Mercer’s Global HR Transformation StudyIt’s all about the business

최종연 부사장, Ph. D.Mercer Korea

Mercer Korea 2

Today’s discussion

배경 - Background on Mercer’s Global HR Transformation Study

2003 연구 - Transformation v1.0: A look back to the beginning

Biz 중심 - The shift from HR-focused to business-focused transformation

HR의향후방향 - Transformation v2.0: Moving HR forward

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Study background

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2006 Global HR Transformation Study

1400명응답- Approximately 1,400 respondents in 2006– Up from nearly 1,100 respondents in 2003

지역 - Regions covered in 2006:– Asia– Australia– Europe– Latin America– New Zealand– North America (Canada and the US)

산업망라 - Broad cross-section of companies by industry

지역에걸친일관성 - Relatively consistent responses across geographies in 2006

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Study participants by region in 2006

North America(Canada and US)

154

Latin America and Mexico

191

Asia 619

Australia and New Zealand

100

Europe 338

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Defining HR transformationHR Transformation은 HR 기능을리엔지니어링, 리스트럭처링, HR시스템혁신, 아웃소싱, 코소싱등을통해재창조하는과정임. 이를통해 HR의공헌도를강화하기위함

HR transformation is the process of recreating or reinventing the HR function via

– reengineering – restructuring – implementing new systems or

a new HR service delivery model– outsourcing or – co-sourcing

with the intent of enhancing HR’s contribution to the business.

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Key finding: HR is definitely busy transforming글로벌차원에서약 50%의회사들이 HR을 Transforming하거나, 끝냈음

50% globally

24%

19%

23%

16%

24%

50%

66%

47%

46%

8%

8%

11%

15%

9%

18%

7%

19%

23%

20%47%

NA

LA

Europe

Australia/NZ

Asia

Have completed an HRtransformation

Currently transforming

Plan to start a transformationin the next 12 months

No plans to transform

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Key finding: Focus of HR transformation is shifting과거의포커스가운영차원에있었다면전략적이슈에대한부분에서사업파트너로서조직의탤런트관리및 Human Capital전략의실행에집중

Earlytransformation

focus

운영효율성중심Enhancing operational excellenceImproving service deliveryMaking technical process enhancements

Futuretransformation

focus

사업파트너, 인재경영, 인적자본전략실행Serving as business partner to leadershipManaging the organization’s talentImplementing the human capital strategy

Currentfocus

전략적이슈이동Delivering on operational expectationsGetting “house” in order so HR can focus on more strategic aspects

Transformation is not a one-time event!일회성이아니라, 지속적인활동

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Critical questions for the future of HR and HR transformation – 핵심 질문

HR은진보하는지, 적절한방향으로가고있는지? Is HR making progress – and in the right direction?

HR의진보가이루어지지않은영역과, 이유는? Wherehas HR not made progress and why?

어떻게 HRT가지역별로차이가나타나는지? How does HR transformation vary around the world?

HRT의미래성공을위해조직을어떻게포지셔닝해야하는지? How can organizations position themselves for success in the next wave of HR transformation?

무엇이미래성공적인 HR 역할인지? What will the successful HR function of the future look like?

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Transformation v1.0A look back to the beginning

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A look at early HR transformation efforts

5~10년전처음시작 - First wave started 5 to 10 years ago

포괄적조직변화에서시작 - Driven largely by broader organizational changes

HR의중요성상승 - Key goal was to get HR a “seat at the table”

Focus of change was heavily on HR infrastructure– 인트라넷활용 - More than three-quarters of organizations

globally deployed an intranet to support program and process delivery

– 기술과프로세스통합 - Two-thirds had integrated processes with changing technology

– 조직변화완료 - 50% had completed some form of HR organizational change

– 아웃소싱시작 - Outsourcing gained traction, but still seemed more opportunistic than strategic

FindingsfromMercer’s2003 study

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A look at early HR transformation effortsAssessing the effectiveness of the HR function

Top transformation activities already completed by 2006:

HR조직체계의실행 - Implementation of a new HR organizational structure

HR고객니즈와요구사항의평가- Assessment of HR customers’needs/requirements

HR서비스제공전략설계 - Design of a new strategy for delivering HR services

HR기능효과성의측정 - Assessment of HR function’s effectiveness

현행 HRIS 기술의감사 - Audit of current HRIS technology

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Transformation transformsShifting from HR-focused to business-focused transformation

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What’s changing and why?HR priorities are evolving – it’s all about talent now

전략역할증대 - Human capital strategy as a principal function of HR jumps from 40% to 64% within two to three years

운영차원감소- Operational excellence as a principal function drops from 46% to 32%

Principal HR function (Top six as ranked by future priority) Now 2-3 years인적자원전략 - Human capital strategy 40% 64%

인재경영 - Talent management 49% 55%

리더십개발 - Leadership development 49% 52%

조직개발 - Organization development 35% 40%

변화관리 - Change management 42% 38%조직효율성 - Operational excellence within the HR function 46% 32%

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What’s changing and why?Attention is turning to new transformation initiatives

Activities CompletedPlanning to complete in the next 12 months

Not under consideration for the next 12 months

Implementation of a new HR organizational structure 45% 41% 13%

Assessment of HR customers’ needs/requirements 44% 42% 14%

Design of a new strategy for delivering HR services 38% 51% 11%

Assessment of HR function’s effectiveness 38% 44% 18%

Audit of current HRIS technology 35% 39% 26%

Redesign of HR work processes 30% 60% 10%

Decentralization of selected programs to the business, e.g., performance management

27% 37% 36%

Evaluation/implementation of new HRIS technology 24% 50% 26%

Outsource any part of the HR function 24% 28% 48%

Strategy for attraction/retention of the HR staff 23% 47% 30%

Changes in reward strategy for HR staff 19% 35% 46%

Talent development strategy for improving skills within HR 18% 66% 16%

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What’s changing and why?Top human capital challenges are consistent globally

Top human capital challenges Global AsiaAustralia

& NZ EuropeLatin

AmericaNorth

America

핵심인재확보 1

2

3

1 2 2 1

문화및행동변화 3 1 1 3

리더십역량구축 3 1 3 2 2

핵심인재유지 2 3

• Increasing workforce productivity• Headcount constraints (“making do with less”)• Resourcing/managing HR issues in new geographies• Reducing overall human capital costs • Coping with an aging workforce• Workforce planning• Succession planning• Increasing line managers’ people-management

capabilities

• Increasing ROI in remuneration• Measuring how human capital contributes to

business performance• Managing human capital during and after an

acquisition/merger • Lack of consensus on organization’s

strategy/direction• Implementing people changes due to

operational performance changes

Other human capital challenges not ranked in the top three:

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What’s changing and why?Interest in outsourcing/co-sourcing is up, but varies globally –아웃소싱/코소싱필요성은증대

0% 10% 20% 30% 40% 50% 60% 70% 80%

Recruitment administration

Remuneration administration

Training administration

Performance mgmt. administration

Payroll

OHS&E

Pension administration

Benefits administration

HRIS

Asia

Europe

LA

NA

Percent co-sourced/outsourced*Australia/New Zealand data not included

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What’s not changing?Drivers of HR transformation remain the same –조직변화에대한대응중요

0% 10% 20% 30% 40% 50%

Company-wide cost reduction mandate

Responding to changes in the organization

It was part of a broader organization-widetransformation process

Change in domestic market environment or regulation

CEO/business leader mandate for change in the HRand/or other staff functions

Leadership changes in the HR function

HR was not adding value in its existing role Australia/New Zealand

Asia

Europe

LA

NA

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What’s not changing?Time spent on various HR activities –전략기능투입증대에대한요구는있으나실제적인변화는안됨

전략파트너

HR프로그램 시스템설계

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What’s not changing?HR staff skills sets misaligned with future needs – HR 스킬은변화가별로없음

Strongest skills currently Weak Sufficient Strong

Interpersonal skills 9% 43% 48%

Team skills 12% 44% 45%

Recordkeeping/data maintenance 10% 48% 43%

Functional HR experience team skills 15% 45% 40%

Customer service 15% 47% 39%

Interviewing and assessment 19% 44% 37%

Client relationship management 26% 49% 26%

Knowledge of compliance / corporate governance 25% 50% 25%

Counseling 33% 43% 24%

Leadership 28% 48% 23%

Consultation/negotiation skills 30% 48% 23%

Technology understanding 31% 52% 17%

Vendor management 34% 52% 14%

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What’s not changing?HR staff skills sets misaligned with future needs –미래조직의요구사항/사업및조직변화에대한대응부족

Weakest skills currently Weak Sufficient Strong

Financial skills(재무) 51% 40% 9%

Business strategy skills(전략) 50% 37% 13%

Organizational assessment/organizational design(조직) 48% 38% 14%

Cross-functional expertise(다기능) 47% 41% 11%

Cost analysis and measurement(비용분석측정) 47% 39% 14%

Cultural change/ transformation skills(문화변화) 44% 39% 17%

Change management (변화관리) 44% 39% 17%

Project management(프로젝트관리) 40% 45% 15%

HRIS data analysis and reporting 37% 44% 18%

Process management/ process improvement 36% 45% 19%

Business understanding 35% 45% 20%

Coaching/facilitation 34% 43% 23%

Conflict management 34% 44% 22%

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What’s driving these changes? – 변화 추동인

글로벌화 - Globalization of business

인적자원전략의중요성대두 - Human capital strategy is more top-of-mind– 60% of respondents have long-term strategy linked to

organizational goals– 80% of those respondents have that strategy documented and

socialized with management

인재는사업성공에중요요소 - Talent is even more critical to business success: attraction, retention, motivation

인구통계적변화 - Demographic shifts– Aging workforce, especially in certain industries– Skill shortages in many countries and regions– Generational issues: At least four generations in the work force

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So what? Conclusions and contradictions

HR 스텝의스킬보완 - No comprehensive plans to address HR staffs’ skill deficits– High resistance to replacing HR staff who lack necessary skill

sets for the future

전략의실행미비 - “Talking” strategy, but “walking”transactions

HR지표미비 - HR wants to deliver value, but it is neglecting to use metrics to document and demonstrate value

HR 구조, 스텝, 프로세스, 기술지원미비 - Articulated human capital strategy not being delivered on due to shortcomings with HR structure, staff, processes and technology

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Transformation 2.0Moving HR forward

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What should HR focus on now? – HR의 미래촛점

전략적역할증대 - Upgrading HR skills broadly to support the function’s strategic mandate

인적자원전략의실행 - Operationalizing the human capital strategy throughout the organization

HR의역할배분 - Considering the splitting of HR into two critical roles

HR성과지표 - Developing and using better metrics to evaluate HR’s performance and its impact on the business

글로벌관점 - Gaining a truly global perspective

효과적인 HR지배구조 - Establishing effective HRgovernance

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Upgrading HR skillsHR leaders already on the strategic path

HR리더는 10년이상 HR경험보유 - New crop of HR leaders: Two-thirds in current position 4 or fewer years (but three-fourths in HR for more than 8 years)

67% report directly to the CEO; 59% have significant board contact beyond compensation

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Upgrading HR skillsHR leaders bring a wealth of experience –다양한경험획득필요

51% 38% 12%

56% 27% 17%

57% 26% 17%

41% 41% 17%

55% 28% 17%

51% 28% 22%

47% 30% 23%

39% 35% 27%

37% 29% 34%

21% 41% 38%HR consulting

General management

Customer service

Operations management

Legal

Finance

Public relations / communication

Manufacturing

Information systems

Sales / marketing

No experience

< 5 years

> 5 years

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Upgrading HR skillsAssessment of HR staffs remains disjointed

Staff weaknessesFinancial skillsBusiness strategyOrg. assessment/designCross-functional expertiseCost analysis/measurement

Staff strengthsInterpersonal skillsTeam skillsRecordkeepingFunctional HR expertiseCustomer service

AdvancedConsulting/negotiation (65%)Leadership (64%)Cultural change (60%)Business understanding (59%)Org. assessment/design (51%)Business strategy (49%)

Future “must have” skillsAt least basic

Financial (66%)Vendor management (61%)Technology understanding (60%)Cost analysis/measurement (59%)Cross-functional expertise (55%)Project management (55%)

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Upgrading HR skillsSome wishful thinking – Skill Gap은교육으로보완

47% plan an attraction and retention program for HR staff in coming year (only 23% have one already)

Most plan to address HR skill deficits with training

Similar disconnect between goal and action in 2003

Method Global Aust/NZ Europe LA NA

Replace current staff with new hires 6% 3% 6% 9% 12%

Invest in skill development for existing staff 66% 71% 70% 67% 56%

Rotate HR staff to line roles 11% 10% 10% 7% 8%

Rotate line staff to HR roles 10% 12% 12% 8% 5%

Use outsourcing/external suppliersto supplement internal capability 17% 1% 18% 21% 16%

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Operationalize the human capital strategy프로그램, 프로세스, Tool, 기술 등과의 연계 필요

Having a human capital strategy is nice, but it’s no better than a glossy mission statement if not implementedeffectively through the organization

Much work left to be done to connect critical parties –senior managers, line managers & supervisors, employees – to roles and responsibilities

Need right programs, processes, tools, training, communication, change management

Technology will play a vital role – need seamless management of recruiting, performance management, career, development, etc.

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Linking human capital and HR function strategies to business strategy

Human capitalstrategy

How will we secure, manage and motivate a workforce that can execute business strategy?

HR functionstrategy

HR operating model

Sourcing(외부소싱)What activities will we do ourselves/ have others do?

InfrastructureWhat capabilities are needed to fulfill HR’s strategy?

Process

People Organization

Technology

Governance(Control체계)How will we lead the function and manage related investments?

Performance monitoring (HR scorecard)

How will we deliver expected value and contribution to the organization?

Businessstrategy/market

dynamics

What are the changing business priorities?

What new business designs will be operating?

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Consider the bifurcation of HRSeparate strategic and transactional responsibilities(2가지 Role이중요해짐)

Both roles essential to a high-performing HR function

More than 40% of respondents already have HR controller position

Strategic responsibility

responsible for business alignment and human capital

strategy

Transactional/operational responsibility

responsible for managing HR budget, costs, vendors, metrics

and service delivery

Chief HR officerChief HR officer HR controllerHR controller

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Consider the bifurcation of HR‘Strategic transacting’ is an important concept

Ensure that all transactions are done well and in alignment with overall human capital strategy

Example: if hiring and on-boarding are not handled well as transactions, they can become strategic problems quickly – higher turnover, talent drain, etc.

Strategic transaction

lens

Operationalized HR strategy

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Develop and use hard metrics

Top measures of HR effectiveness Global Asia

Australia & NZ Europe

Latin America

North America

HR customer satisfaction 1

2

HR program effectiveness 3 2 3 3

Processes in place to lead/ facilitate org. change 3

1 1 1 1 2

HR cost 2 2 1

HR staff/employee ratio 3 3

Impact on business operations/outcomes 2

Is this how other functions, such as finance, measure their success?

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Develop and use hard metrics

HR should capture and analyze data to show:

How turnover patterns and age demographics will affect growth plans

How well internal staff fit the skills profile needed

Whether the company’s development and succession plans are filling the pipeline with qualified future candidates

Whether the company is retaining its top performers

Where inside the company it can find the necessary skills and competencies for certain jobs

Whether certain HR policies, programs or practices are having the desired effect – or unintended consequences

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Enhance your global perspective

Transformation v1.0 focused on domestic service delivery

For organizations that wish to compete globally, Transformation v2.0 must focus on understanding

– Scale/economics– Language– Cultural and regulatory requirements– How to structure centers of expertise– How to scale services to fit large and small markets– How to serve both mature and emerging markets

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Establish effective HR governance

작동불능이유 - Transformation efforts don’t always work

HR지배구조 - Efforts often lack HR governance – CHRO or advisory committee oversight no longer enough

주요이해관계자개입 - Engage key stakeholders –business leaders, finance and IT leaders, line managers

적절한연계 - Properly aligned HR governance– Optimizes performance of human capital assets– Fulfills fiduciary responsibilities– Mitigates enterprise HR risk– Aligns function’s priorities with those of the business– Enables HR executive decision making

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Establish effective HR governanceFive core elements

1. 구조및책임 - Structure and accountability for guiding group (council) – usually via a charter

2. 효과적인회의체운영 - Effective councils

3. 철학및운영원칙 - Philosophy and operating principles – setting out function’s risk tolerance, delegating authority, autonomy of business units or geographies

4. 핵심관리 체계 - Core management – strategy development, business planning, program oversight, resource allocation, HR staff development

5. 성과모니터링 - Performance monitoring – framework and metrics to evaluate function’s effectiveness and contribution

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HR Transformation v2.0What will success look like?

인적자본전략은실행력확보필요 - Human capital strategy operationalized throughout business and functions

HR 스텝은보다전략적이슈이해필요 - HR staffunderstand business issues and needs and apply knowledge across all parts of their mission

관리는전략, 재무, 서비스목표와연계 - Administrationand recordkeeping done in line with strategic, financial and service goals

HR조직의목표명확화 - HR organization has clear goalsAND clear metrics for evaluating performance

사업성공을위한인재에초점 - HR professionals focus on identifying and managing talent to build the business

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HR Measurement Model – Core Measures도시바

Organizational Effectiveness

Human Capital ROI 1.86 HC Value Added $110,429 Revenue Factor $236,507 Expense Factor $196,054 Income Factor $26,327 % employees satisfied with work environment % of new hires/promoted employees with

satisfactory performance after 6 months

Effectiveness of HC Practices

Turnover 19.7% Voluntary Turnover 14.3% Involuntary Turnover 5.6% Average performance rating of new hires Internal transfers/external hires for key jobs External Offer Acceptance Rate 88.4% % of employees satisfied with benefits program % of employees satisfied with compensation

program

HR Customer Satisfaction

% of HR customers who are satisfied with HRservice levels

% of line managers satisfied with the alignmentof HR strategy and business strategy

% of internal customers that rate staffingfunction highly

% of employees who feel that employeerelations issues are handled in a timely andresponsible manner

% of employees who are satisfied with the waychanges in HR programs are communicated

HR Department Effectiveness

Cost per hire – External/Internal $3,820/$4,324Time to fill – External/Internalnal36 days/51 days

Training Investment Factor $579 Training Cost Factor $698 Employees Trained % 161.6% Total Labor Cost Revenue % 30.3% Total Labor Cost Expense % 35.8% HR FTE Ratio 1:100 HR Investment Factor $787 HR Expense Percent .9% Time to investigate and resolve grievances

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Mercer’s Global HR Transformation Study

Questions?

Visit mercerHR.com/globalhrtransformation to download our new global Point of View paper and regional reports on HR transformation.