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Europe - HR managers lack future-proof strategies

30 September 2011

Talent management and leadership development remain the largest HR challenges in Europe. Both topics are rated as highly critical for success by executives, who also report that these issues are insufficiently managed in their current companies. About 60% of companies, the executive survey found, have no systematic or strategic approach in place to win, develop, and retain suitable talents for future challenges.

These are the results of the study Creating People Advantage 2011, Time to Act: HR Certainties in Uncertain Times. For the third time, the Boston Consulting Group (BCG), in collaboration with the European Association for People Management (EAPM), has surveyed more than 2,000 executives from business and administration in 35 European countries, exploring trends in HR.

The lack of strategic talent management presents a major opportunity for HR managers looking to shed their unpopular image as internal service providers. By taking on a more strategic role, these professionals can contribute in important ways to advance a company's competitiveness. But the demands are steep: only fact-based and analytical personnel management will enable a close interlinking of business and personnel strategy.

In contrast to the uncertainties that companies face in the financial sector, the trends confronting HR managers are clear-cut and set the agenda for the coming years. The most critical trends are the impact of the nascent shortage of talent; the targeted promotion of workforce diversity aligned with business requirements; the integration of online social networks into the core activities of personnel management; and the promotion of international standards and processes within the HR function.

Building talent internally takes time

Successfully counteracting the shortage of talent and executives by developing employees in-house and retaining them requires a strategic, systematic approach. This is evidenced by the performance of the companies analysed by the study: 53% of the top-performing organisations (measured by revenue and growth over the past three years) have already established an integrated strategy to recruit, develop, and retain suitable talents. By contrast, only 27% of the less successful companies have done so.

Dr. Rainer Strack, Senior Partner and global topic co-leader for People Advantage and HR at BCG, and an author of the report, commented "talent development takes time. Companies need to take a long-term perspective and plan the size and composition of their talent pool in accordance with their corporate strategy."

Most talent programs focus primarily on experienced executives. Only 35% of the companies analysed by the study have programmes to systematically develop younger talent.

Pieter Haen, President of EAPM and an author of the report, said "internal development and promotion options do more to retain talent in the company over the long term than monthly salaries or bonuses do."

In addition, improvements are needed to better secure the buy-in and involvement of top management on this critical issue. In most of the analysed companies the CEO spends a maximum of nine days a year on talent management.

Jean-Michel Caye, Senior Partner and global topic co-leader for People Advantage and HR at BCG and an author of the report, said "the level of top-management attention and support, including that of the CEO, has a strong influence on the value placed on talent management within a company."

Social media are changing the rules in personnel management

The rapid growth of online social networks will have a lasting impact on personnel management. Around three-quarters of the managers surveyed cite the chance to present their companies as attractive employers (employer branding) as the greatest opportunity offered by social networks. Half of those surveyed cite the recruiting of new employees as most important, and one-third most value the transfer of knowledge that the networks enable. Among the respondents, Web-based professional career networks are expected to be considerably more important in the future than standard social networks.

By contrast, the greatest risks identified by the surveyed managers are the disclosure of a company's internal information, the limited corporate influence on published entries about companies, and the rising risk that the new technologies will make it easier for competitors to poach employees.

Stephanie Bird, an author of the report and the director of HR capability for the Chartered Institute of Personnel and Development (CIPD), said "social media are here to stay. HR departments must embrace the Web 2.0 advances as an opportunity and not see them as a threat."

Furthermore, social media in personnel management must at all times be credible and aligned with the general business strategy. Any discrepancies that exist between corporate policy and the reality at a company will be detected and will be quickly addressed and criticised by the online community.

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