President of the WFPMA Pieter Haen spoke at the IPM convention
Business leaders globally continue to struggle with the complexities of a two-speed world: they face an economic crisis in Europe and weak growth in the developed countries, 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 pipeline for the future.
Aggravating these challenges are the growing talent shortage and rising leadership deficits, which are fuelled — in part — by profound demographic changes and are expected to deteriorate significantly in the coming years. This situation creates a buyer’s market for talented individuals.
Employees have become a company’s most critical competitive asset.
However, employers need to sharpen their efforts, integrate processes for greater impact, and manage globally while allowing for regional adaptation. This is a tall order — particularly considering the resource squeeze that has forced many HR organisations to do more with less.
The most pressing challenges — those ranked most important in the future and in which companies also showed the lowest capabilities — are:
1. Managing talent;
2. Improving leadership development;
3. Strategic workforce planning.
Managing talent continues to top the list of critical topics
It remains apparent that companies still perceive their current capabilities to be insufficient to cover expected future demands.
This is hardly surprising, given the growing shortage of talent worldwide.
Improving leadership development is the second most urgent
Top executives increasingly need to place greater emphasis on developing future leaders rather than leave the task to HR (and traditional formal training programmes) or simply leave it to chance.
Moreover, companies need to make leadership planning an integral part of their people-planning efforts rather than simply focus on chief executive and senior executive succession.
Strategic workforce planning is a crucially important topic for the future
This is because companies struggle with forecasting long-term scenarios for workforce supply and demand.
In Africa, the situation is different. Improving performance management and rewards, on-boarding of new hires, as well as retention and managing talent are the top priorities.
African companies are experiencing the most critical shortages in management, leadership and technical skills.
They cannot rely on their countries’ education systems or the general workforce to produce the talent they need.
The most important remedies are implementing companywide development programmes and offering clearly defined career paths to boost retention.
The workforce transformation reflects not only global economic and demand shifts but also dramatically different business realities: the shortage of managerial talent in emerging markets alongside an oversupply of employees in established markets.
African economies are on the move
The continent has been the second-fastest growth region in the world in the past decade.
The acceleration in Africa’s growth reflects fundamental improvements in the macro-economic landscape, political stability and the business environment.
Economic growth reaches most people through employment income, so Africa’s challenge is to ensure that economic growth translates into the stable wage-paying jobs that are the key to the continued expansion of the consuming class.
The continent has begun to create the wage-paying jobs that are necessary to meet the needs of an expanding labour pool — 37-million of them over the past decade.
However, accelerating the pace will be critical.
A 2012 McKinsey Quarterly report, Africa at Work, made the following key findings:
• Africa will add 122-million people to its labour force between 2010 and 2020.
• By 2035, the continent’s labour force will be larger than that of any nation, including China or India. Over the same period, the number of children and retired people that each worker supports will fall from the highest level in the world today to a level equal to the United States or Europe.
• The continent’s official unemployment rate is only 9%. Today, however, just 28% of Africa’s labour force has stable wage-paying jobs. With few social safety nets, most adults must work just to survive; therefore, the larger problem is that the majority of adults are engaged in subsistence agriculture and informal self-employment, and have few prospects of raising their living standards — a situation best described by the term “vulnerable employment”.
• Africa has the potential to create between 54-million and 72-million more stable wage-paying jobs by 2020, with much of the job growth coming from manufacturing, agriculture, retail and hospitality. This would raise the share of workers with wage-paying jobs to between 32 and 36% by 2020. In Africa’s most diversified economies — such as South Africa, Egypt and Morocco — the number of wage-paying jobs could grow faster than the number of new entrants to the labour force over the next decade.
• The continent’s workforce is more educated and is employed in a more diverse array of sectors than is commonly perceived.
• Just 10 years ago, only 32% of Africans had secondary or tertiary education but by 2020, that number will rise to 48%.
• Worker skills are not seen by business leaders as the most prominent obstacle to job creation in Africa today. The challenge for stakeholders will be to create opportunities for individuals to gain work experience and to build more practical vocational and tertiary programmes that develop the skills needed by business.
Economic growth is a prerequisite for job creation
In this 21st century strategy, one can see that there is an immense opportunity to rethink how we, as HR, do things and can help to realise economic growth.
Many organisations have focused on cutting costs over the past years but that is not a sustainable, long-term strategy.
HR has experienced a cutback as well. The challenge is now about innovating and growing. How do we ensure our organisation has the capability and the skills to innovate and grow?
Are we creating the right environment for success — which we may call the business culture, leadership, attitudes and so on — to enable people to give their best? Research has shown that the impact of these last elements contributes roughly one-third to the success of companies that excel.
HR professionals believe that their HR expertise is the most important skill to bring to the strategic partnership.
Business executives have a different view: they see traditional HR expertise as being less important for HR professionals today than their skills in other areas, such as business planning, analytics and conflict resolution.
Furthermore, as people are increasingly seen as a source of competitive advantage, HR professionals need consulting skills and business acumen along with capabilities in change management.
They need to help shape people strategies that conform to the company’s business objectives and strategy.
In addition, business executives want HR professionals to be more proactive, more proficient, and support them in becoming better people managers, for example, providing help with recruiting, promotion decisions and low performers.
Companies can only outperform with HR’s input so it is a time of great opportunity and, in my opinion, the most interesting time ever to be in HR.
At a time when our companies and organisations need global perspectives on the most daunting issues, as well as a place to share and to learn from each other, it is essential to know what role HR can — and must — play in the near future.
Pieter Haen is president of the World Federation of People Management Associations (WFPMA) and spoke at the 2014 IPM annual convention, held from November 9 to 12 in Sun City, North West province