Creating People Advantage 2012

Mastering HR Challenges in a Two-Speed World

By Rainer StrackJean-Michel CayeVikram BhallaPeter TollmanCarsten von der LindenPieter Haen, and Horacio Quirós

Business leaders throughout the world continue to struggle with the complexities of a two-speed world: they face economic crisis in Europe and weak growth in the developed economies while also facing rapid growth in the developing world. Volatility and uncertainty have become the new constant. These realities create difficult people-management challenges that range from keeping up with supply-and-demand fluctuations to ensuring an adequate talent pipeline for the future. Aggravating these challenges are the growing talent shortage and rising leadership deficits, which are fueled in part by profound demographic changes and are expected to worsen significantly in the coming years. This situation creates a buyer’s market for talented individuals.

Many companies recognize that today, more than ever, their people have become their most critical competitive asset. But they need to sharpen their efforts, integrate processes for greater impact, and manage globally while allowing for regional adaptation. That’s a tall order—particularly considering the resource squeeze that has forced many HR organizations to do more with less.

This global report, the third conducted by The Boston Consulting Group and the World Federation of People Management Associations (WFPMA), examines critical trends in people management by exploring 22 key HR topics that our Creating People Advantage research has explored every year since 2007. (The first joint BCG/WFPMA report was completed in 2008. BCG has also partnered with the European Association for People Management in three similar surveys with a European focus.)

  • We explore the topics in terms of both their current and future importance to companies and how they relate to companies’ existing strengths. We also probe the practices and strategies that highly capable companies have implemented to boost their people-management efforts.
  • The online survey polled 4,288 executives from companies throughout numerous industries, 102 countries, and six major regions. We also interviewed 63 executives (both within HR and beyond) from well-known companies all around the world.
  • This report presents our findings and analysis of the 22 HR topics that constituted the core of the survey. Also included are short case studies on individual companies.
  • In addition, we have inserted in the Appendix of this report our Creating People Advantage prepublication highlighting one of the most significant findings from our research this year: the correlation between companies’ capabilities in people management and their economic performance.

This year, the critical topics—those considered of the greatest urgency—remained the same as in our 2010 global survey. Three topics stand out as the most critical.

  • Managing talent ranks at the top of our survey respondents’ critical list. Given the growing scarcity of talent worldwide, this is hardly surprising.
  • Improving leadership development, another still-critical topic, was rated second highest in urgency.
  • Strategic workforce planning maintained its ranking as a crucially important topic for the future, as companies struggle with forecasting long-term scenarios for workforce supply and demand.

Each of the report’s six chapters focuses on the people management topics of highest relevance this year. Drawing on the survey findings and interviews, we offer analysis of the current performance and challenges, along with strategies and tactics to help leaders set priorities and take action.

  • “The Big Picture: Global Trends in 2012” provides a summary of survey results, showing the topics executives consider most important today and in the future—and which ones most need improvement.
  • “The Case for Integrated Sourcing Management” emphasizes the importance of a holistic approach to people sourcing, from people planning and employer branding to formulating a recruiting strategy and retaining employees. By integrating their sourcing activities, companies can ensure consistency across their messages and achieve important synergies.
  • “Building Up Your Critical Assets: Talent and Leadership Development” discusses the importance of six key—and highly interdependent—steps in developing talent and leadership, from developing a talent strategy to creating a talent magnet culture.
  • “Managing People in the World’s Fastest-Growing Economies” delineates the specific skill shortages and capability gaps that plague companies operating in high-growth markets.
  • “Enabling Workforce Flexibility in a Two-Speed World” highlights a rising challenge facing the majority of companies in our survey: simultaneous workforce shortages in some areas and surpluses elsewhere. The chapter describes useful strategies for deploying talent effectively to reconcile these imbalances.
  • “HR Governance: Global or Local?” looks at the three levels of HR governance that companies currently practice across 16 key HR activities. Moreover, we also discuss what could be the most effective approach in each activity.

An additional element rounds out and enhances the content of the report.

The Focus report Realizing the Value of People Management compares the practices of high-performing companies against those of lower-performing ones in key areas and in dozens of activities, including talent management, leadership development, and performance management and rewards. The report finds that companies that demonstrated proficiency in 22 key HR areas experienced revenue growth that was up to 3.5 times higher and profit margins that were 2.1 times higher than those of less capable companies. Such data may provide important insights as leaders decide how best to invest their people-management resources.

Creating People Advantage 2012