Can you guess which trend ranked number one on Deloitte University Press’ Global Human Capital Trends report last year?
It was culture and engagement—or what the report aptly describes as the “naked organization.” It’s all about transparency in the “Glassdoor era,” where every week companies make headlines for their cultures, whether good or bad.
The survey asked more than 3,300 business and HR leaders from 106 countries to assess the importance of specific organizational challenges and how prepared they were to meet those challenges.
Check out the chart below:
You can see in the chart that the second largest capability gap is in culture and engagement. While business leaders acknowledge that it’s an important trend, they still do not feel prepared to address it. 22% of survey respondents report that their organization has either a poor program to measure and improve engagement or no program at all. And only 12% believe their organizations are excellent at effectively driving the desired culture.
Why culture is king
Deloitte outlines four trends that give context to this culture and engagement dilemma.
- Power has shifted from the employer to the employee. According to the Bureau of Labor Statistics, job openings rose to 5.6 million in December. At the same time, there were 3.1 million quits (now higher than the first month of the recession, December 2007). Employees have more options for jobs today and they have more information about your company’s inner workings than ever before, thanks to social media.
- Leaders lack an understanding of and models for culture. In his book Organizational Culture and Leadership, Edgar H, Schein writes, “The connection between culture and leadership is clearest in organizational cultures and microcultures…These dynamic processes of culture creation and management are the essence of leadership and make you realize that leadership and culture are two sides of the same coin.”
- The new world of work changes the way we engage people. Now that employees are always connected and working on new, cross-functional teams, the report explains that “flexibility, empowerment, development, and mobility all now play a big role in defining a company’s culture.”
- Employees’ motivations have changed. This is largely being driven by millennials. In the 2015 Deloitte Millennial Survey, 6 in 10 millennials said “sense of purpose” is part of the reason they chose to work for their current employers.
In addition to the impact on motivation, retention, and productivity, the C-suite is now keenly aware of the financial benefits of focusing on engagement and culture. Research from Great Place to Work Institute shows that best companies have significantly less turnover, perform nearly 2x better than the general market, and provide nearly 3x the return.
A unique opportunity for HR
Given the challenges that leaders face with driving engagement and culture, HR is left with a unique opportunity to elevate its role and deliver long-standing value.
In a Talent Management article last month titled “What Should CEOs Expect From HR?” John Boudreau shares a telling story from a CHRO in their first leadership meeting, chaired by the CEO. He writes:
The CEO introduced each member of the leadership team, including top finance, operations, marketing and information officers. For each one, the CEO articulated how that function would contribute to the organization’s success. The CEO then turned to the new CHRO and began to describe their expected contributions and paused, realizing that he had no specific idea about what those contributions were.
Instead, he said, “Why don’t I ask our new CHRO to say a few words about how HR will contribute to our strategic success?”
Unfortunately, many CHROs are still in the position where they need to explain, and perhaps defend, their contributions to the bottom line. “HR’s relationship to corporate boards of directors is traditional—the function most frequently advises on executive compensation and succession. Such a traditional mindset risks missing important future contributions and roles for HR,” writes Boudreau. So what is the answer to the CEO’s question?
Time to evolve
Boudreau elaborates on findings from CHREATE, the Global Consortium to Reimagine HR, Employment Alternatives, Talent, and the Enterprise. CHREATE interviewed 22 CEOs, C-suite officers and board members in large U.S. and global companies.
Here are 3 quotes from those interviews:
“HR strategy is one of five strategic pillars of business strategy along with financial, acquisition, geographic and product innovation.”
“CHRO needs to understand the world of work, trends, new approaches beyond the organization and stimulate change internally. Bring strategic insights. Translate what is happening in the world of work to business leaders.”
“A better performance management system — FAST feedback, greater variability on rewards, quicker exit.”
While it’s clear that human resources is viewed as an essential piece of business strategy, CEOs are looking for HR to evolve. Here is what the future of HR could look like, according to those C-suite interviewed:
- A chief operating officer of organizational culture
- Mastery of the principles that drive a new workforce that delivers business strategy, considers emerging employment and work styles, drives purpose and engagement, reflects changing organizational boundaries and is much more diverse
- Use of the cloud to bring Amazon- and Google-like insight and responsiveness to the domain of work
According to CEOs, the sweet spot is where HR is leading organizational culture, driving purpose, and making data-driven decisions.
3 tips to elevate HR
The Global Human Capital Trends report I referenced shares 3 tips for addressing the engagement and culture challenge. Using these tips as guideposts, HR has the opportunity to deliver long-term value in the eyes of the C-suite.
- Measure in real time. “Put in place real-time programs to evaluate and assess organizational culture.” Consider a social recognition program that gives everyone from managers to executives customized reports that benchmark engagement and culture.
- Make work meaningful. “Focus on leadership, coaching, and performance management to help employees make their work meaningful.” Recognition tied back to company values can add meaning to employees’ day-to-day work and show how each person contributes to a company’s success.
- Listen to the millennials. “Their desires, needs, and values will shape he organization’s culture over the next 10 years.” For example, a recent HBR piece shared research that 42% of Millennials want feedback every week. That’s twice as much as other generations.
These are just some of the ways we can begin to elevate the role of HR. If you’re interested in this engagement and culture discussion, consider joining us for WorkHuman in May. The agenda includes sessions on topics like building the workforce of the future, crowdsourced performance coaching, and employee brand. You’ll also have the opportunity to network with senior HR and business leaders from some the world’s top companies. Hope to see you there!
How to Elevate HR (And Keep the C-Suite Happy)
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