Hr Global Challenges Essay

Conducted by PricewaterhouseCoopers on behalf of the World Federation of Personnel Management Associations (WFPMA) Survey of Global HR Challenges: Yesterday, today and tomorrow* Contents Foreword . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Global results Africa results ………………….. ………… 7 …………………… ……….. 12 Asia Paci? c results . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Europe results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 North America results . . . . . . . . . . . . . . . . . . . . . . . . . . 21 South America results ………….. ……….. 24 Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Contact information . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 Survey of Global HR Challenges: Yesterday, today and tomorrow 3 Foreword

To mark the 10th anniversary of its biannual World Congress last year, the World Federation of Personnel Management Associations (WFPMA) commissioned a survey, undertaken on its behalf by PricewaterhouseCoopers (PwC), on the current HR challenges faced by HR professionals three years ago, what those issues are today and what they believe they will be three years from now. management associations in their contacts with world organisations such as ILO, UNESCO, the UN, etc. 5 To commission or undertake research which will further broaden understanding of personnel issues.

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The graphic on the next page lists the regional federations as well as which countries are represented in these federations: The WFPMA: The World Federation of Personnel Management Associations is a global network of professionals in Human Resources. Founded in 1976, its mission is to aid the development and improve the effectiveness of professional people managers all over the world. The continental federations making up the membership include more than 70 national personnel associations representing over 400,000 people management professionals.

The networking opportunities afforded by WFPMA include a quarterly newsletter and periodic research projects along with the international World Congress held every two years. The WFPMA has ? ve main objectives: 1 To improve the quality and effectiveness of professional people management, and to demonstrate the importance of the HR role in all employing organisations, both public and private. 2 To stimulate and assist in the establishment and development of regional and national personnel management associations in those parts of the world where a continental or regional association does not exist. To create and maintain contacts with all WFPMA member associations as well as with other organisations which have some activity in the same or similar ? eld. 4 To support or represent personnel 4 Survey of Global HR Challenges: Yesterday, today and tomorrow Member organizations of the WFPMA Full members AFHRMA African Federation of Human Resource Management Associations APFHRM Asia Paci? c Federation of Human Resource Management EAPM European Association of Personnel Management FIDAGH Interamerican Federation of Professional HRM Associations

NAHRMA North American Human Resource Management Association Botswana Democratic Republic of Congo Kenya Malawi Namibia Nigeria South Africa Swaziland Tanzania Uganda Zambia Zimbabwe Australia Bangladesh Hong Kong India Indonesia Japan Malaysia New Zealand Papua New Guinea Philippines Singapore Sri Lanka Taiwan Thailand Austria Belgium Bulgaria Cyprus Czech Republic Denmark Estonia Finland France Germany Greece Hungary Ireland Italy Latvia Malta Netherlands Norway Poland Portugal Slovak Republic Slovenia Spain Sweden Switzerland Turkey United Kingdom

Argentina Brazil Chile Costa Rica Colombia Dominican Republic Ecuador Guatemala Nicaragua Panama Paraguay Peru Uruguay Venezuela Canada Mexico USA Survey of Global HR Challenges: Yesterday, today and tomorrow 5 The survey The survey was designed to collect information on challenges facing Human Resources today. To elicit informative contrasts, respondents were also asked about the challenges faced three years ago and about what the future might hold three years down the road. Sharing this information is intended o help HR professionals who are facing new issues by assisting them in ? nding others that may have dealt with those same issues and have helpful suggestions to share. In addition, the information could help HR professionals sharpen their focus on challenges that are being experienced globally and thereby provide a rationale for changes that can be adopted within their own regions, countries and companies. This summary presents an analysis of responses from some 200 companies in more than 35 countries.

Our thanks go out to all companies and individuals who participated in the survey as well as the country HR organizations who reached out to their members for participation. In particular, we would like to thank the following individuals who were part of this projects steering committee. These individuals took on the responsibility of assisting with designing the questionnaire and coordinating responses for their regional federations: Hans Bohm – WFPMA delegate from EAPM Janaka Kumarasinghe – WFPMA delegate from APFHRM Horacio Quiros – WFPMA delegate from FIDAGH Tiisetso Tsukudu – WFPMA delegate from AFHRMA. Survey of Global HR Challenges: Yesterday, today and tomorrow Global results Survey respondents represent a diverse industry background as illustrated in Table 1 below. Major events Around the world, political, economic and social turmoil take their toll on companies and their HR professionals. For example, the events of 9/11 were referred to repeatedly by survey respondents. As one African representative noted, “The events of 9/11 have increased the risk of travel throughout the world and have also raised diversity issues to the forefront. A European representative noted the slowdown in the world economy that stemmed from 9/11 and the resulting impact on personnel. Wars and invasions disrupt operations. Health issues, from AIDS in Africa to the SARS epidemic in Asia to the cost of bene? ts in North America, are also a frequent concern. Issues overlap. As one European respondent commented, “The increasing threat in terrorism has meant that some governments have switched funding from healthcare to defense. ” Other referenced issues include globalization and currency devaluations, with ripple effects across economies, sectors and companies.

Table 1 Agriculture and Mining Chemicals, Oils & Pharmaceuticals Communications Construction Energy and Water Engineering/Electronics Food, Drink and Tobacco Hotels/Tourism/Cruises/Catering/Leisure Other manufacturing Media (Broadcasting, Publishing, etc. ) Paper and Printing Professional services (Accountancy, Advertising, Consultancy, Legal, PR, etc. ) Public services (Army, Education, Government, Police, etc. ) Retail and Wholesale Transport, Distribution and Storage Voluntary and Community services (Charities, Housing Associations, etc. ) Other Key survey questions included: ¦ % 5% 8% 3% 4% 5% 6% 3% 12% 3% 2% 13% 4% 4% 5% 2% 19% Today’s challenges On a global scale, despite national and regional differences, there was remarkable unanimity. As illustrated in Table 2. 1, the three issues most often chosen by the global group to represent a current top-three challenge were change management (48%), leadership development (35%) and the measurement of HR effectiveness (27%). In a strong show of uniform concerns, as will be evident in reviewing the following regional breakdowns, change management was the most frequently listed issue in 4 of the 5 regions.

The issues that may require change management skills may be different in different regions, but the competency to deal with change management is clearly a common skill needed for today’s HR professional regardless of location. Is there a major social, economic or political event that has had a signi? cant impact on the work you do? Which three issues in the area of human resources represent signi? cant challenges for you today? What were the top three issues you faced three years ago? What do you believe will be the top three issues facing you three years from now? ¦ ¦ Survey of Global HR Challenges: Yesterday, today and tomorrow 7 Table 2. 1 Question 6: Please choose 3 areas that represent signi? cant challenges for you today (Global results) Challenge % of Companies Bene? ts costs: Health & welfare Bene? ts costs: Retirement Change management Compensation Employee rewards HR effectiveness measurement HR technology selection & implementation Industrial relations Leadership development Learning and development Legal/Regulatory compliance M&A integration/restructuring Organizational effectiveness Outsourcing Staf? g: International mobility of employees Staf? ng: Recruitment and availability of skilled local labor Staf? ng: Retention Succession planning Other 13% 9% 48% 24% 12% 27% 9% 7% 35% 19% 7% 11% 25% 8% 4% 24% 16% 20% 7% Change management represents a particular challenge for personnel management staff, as this expertise has generally not been a consistent area of focus for training and development of HR professionals. This may also be the reason why it is cited as the foremost issue as HR continues to attempt to help businesses move forward. An intensi? d focus on training may be needed to develop added competencies to deal with change management. Leadership development also proves to be a big challenge. HR professionals continue to wrestle with understanding the best ways to keep people in the pipeline and develop leaders for future succession planning. Increasingly recognized as becoming strategic business partners within their organizations, HR professionals are expected to provide the essential frameworks, processes, tools, and points of view needed for the selection and development of future leaders.

Across the globe leadership development has been identi? ed as a critical strategic initiative in ensuring that the right employees are retained, that the culture of the organization supports performance from within to gain market position, and that managers are equipped to take on leadership roles of the future so that the organization is viable in the long term. Measuring HR effectiveness is an interesting new top three focus for HR as it highlights the profession’s need to measure results –not only in terms of 8 Survey of Global HR Challenges: Yesterday, today and tomorrow ransaction management but also in terms of driving the business. HR professionals have been questioned in the past regarding their business acumen. Utilizing metrics to determine effectiveness is the beginning of a shift from perceiving HR’s role as purely an administrative function to viewing the HR team as a true strategic partner within the organization. In fact, the next section reports that survey participants believe a critical future issue for HR will be organizational effectiveness – again supporting HR’s critical role as a strategic partner to management.

Other important issues emerging from the survey include organizational effectiveness, compensation, recruitment and availability of local labor, succession planning and availability of local labor and learning and development. Yesterday and tomorrow Looking back three years, as illustrated in Table 2. 2, the three historical issues most often cited by the global group were change management (36%), compensation (31%) and leadership development (24%). Looking ahead, the three key issues expected to pose a challenge three years from now are organizational effectiveness (39%), leadership development (33%) and change management (28%).

Table 2. 2 Responses to the three questions regarding what are the HR challenges you were facing 3 years ago, what they are today and what you believe they will be in 3 years (Global responses) All Regions Challenge 3 Yrs Ago Today In 3 Yrs Bene? ts costs: Health & welfare Bene? ts costs: Retirement Change management Compensation Employee rewards HR effectiveness measurement HR technology selection & implementation Industrial relations Leadership development Learning and development Legal/Regulatory compliance M&A integration/restructuring Organizational effectiveness Other Outsourcing Staf? g: International mobility of employees Staf? ng: Recruitment & availability of skilled local labor Highlighted responses represent challenges most often selected by participants. 10% 3% 36% 31% 13% 13% 13% 12% 24% 23% 8% 16% 23% 5% 15% 7% 22% 15% 8% 13% 9% 48% 24% 12% 27% 9% 7% 35% 19% 7% 11% 25% 7% 8% 4% 24% 16% 20% 13% 5% 28% 15% 12% 17% 5% 8% 33% 19% 5% 6% 39% 4% 8% 13% 24% 23% 21% Staf? ng: Retention Succession planning Survey of Global HR Challenges: Yesterday, today and tomorrow 9 Change management and leadership development were, are and will be important issues for HR professionals.

Compensation has moved down the list of perceived challenges while organizational effectiveness is expected to play a larger role in the years to come. Where HR departments have traditionally focused on measuring their own effectiveness, there is an evolving recognition that they can provide organizational value by measuring the effectiveness of the entire business organization. The shift is signi? cant as it represents movement from simply counting the numbers hired to determining the ROI of collective and individual hires on a long-term basis.

Going beyond measuring turnover, this new approach considers “bad” turnover and “good” turnover along with the overall cost of replacement hires. Compensation was one of the top three issues in 2001 because of factors including mergers and acquisitions (and pay equity among new divisions), the invention of new systems for human capital management (including stock option plans), and global competition (in which attracting and retaining key employees became increasingly important). While these factors remain important in 2004, compensation has fallen to 5th place in the tier of challenging issues.

The survey respondents expect it to be in 9th place three years from now. Some key issues surfacing in the survey’s look ahead include recruiting and availability of skilled local labor, succession planning, learning and development, and the measurement of HR effectiveness. In addition, outsourcing and cost of retirement bene? ts were mentioned in many of the comments as a concern. Time allocation Another portion of the survey was devoted to the way HR professionals spend their time. United States Academic David Ulrich has identi? ed 5 distinct roles for HR.

Respondents were asked, “Of the total hours worked by your HR Department, what percent of the total time would be allocated to each of these roles (e. g. , 20% of the overall departments time is spent as a strategic business partner, etc. )? ” The answers portrayed signi? cant change. As the graphic indicates, almost onequarter (24%) of total hours worked in 2004 were devoted to being a strategic business partner in the organization. Dr. Ulrich de? nes the strategic business partner as a partner with senior and line managers in strategy execution, helping to move planning from the conference room to the marketplace.

A bit less time (23%) was spent in what may be perceived as the more “traditional” HR task of administrative expert. This entails being expert in the way work is organized and executed, delivering administrative ef? ciency to ensure that costs are reduced while quality is maintained. Only 16% of hours worked were spent as an employee champion, vigorously representing their concerns to senior management and at the same time working to increase employees’ commitment to the organization and their ability to deliver results. Just under one-? th of the hours (19%) were devoted to being a change agent, shaping the processes and culture that together improve an organization’s capacity for change. Finally, 18% of hours worked by HR professionals were as what Dr. Ulrich calls a “player,” doing things that make a difference by acting as a coach, architect, designer, facilitator and leader. 10 Survey of Global HR Challenges: Yesterday, today and tomorrow Of the total hours worked by your HR department what percent of the total time would be spent in the following areas? Strategic business partner ¦ Administrative expert ¦ Employee champion ¦ Change agent ¦ Player 16% 18% 19% 24% 23% The following regional reports reveal what HR professionals are doing in one’s own region, while allowing one to compare and contrast with reports from other regions as a source for suggestions and help in tackling one’s own people management challenges. Survey of Global HR Challenges: Yesterday, today and tomorrow 11 Africa results

Responses from the African Federation of Human Resource Management Associations (AFHRMA) members In answer to the survey question about the impact of current events, HR professionals in this region pointed to the AIDS epidemic, the democratization and liberalization process occurring in many countries and the turmoil stemming from the political and economic climates in this region. All of these events impact the ability for organizations in this region to source, engage and retain their workforces. Table 3. 1 Question 6: Please choose 3 areas that represent signi? ant challenges for you today (African results) Challenge % of Companies Bene? ts costs: Health & welfare Bene? ts costs: Retirement Change management Compensation Employee rewards HR effectiveness measurement HR technology selection & implementation Industrial relations Leadership development Learning and development Legal/Regulatory Compliance M&A integration/restructuring Organizational effectiveness Outsourcing Staf? ng: International mobility of employees Staf? ng: Recruitment and availability of skilled local labor Staf? ng: Retention Succession planning Other 1% 13% 63% 6% 0% 31% 13% 6% 31% 31% 0% 0% 19% 0% 13% 0% 13% 25% 6% Today’s challenges Africa is experiencing challenges in many areas such that choosing the top three responses is not possible. As illustrated in Table 3. 1, the issues most often chosen by the African participants to represent current top challenges were change management (63%), leadership development (31%), the measurement of HR effectiveness (31%), health and welfare bene? t costs (31%) and learning and development (31%). 12 Survey of Global HR Challenges: Yesterday, today and tomorrow Table 3. 2

Responses to the three questions regarding what are the HR challenges you were facing 3 years ago, what they are today and what you believe they will be in 3 years (Africa responses) Africa Challenge 3 Yrs Ago Today In 3 Yrs Bene? ts costs: Health & welfare Bene? ts costs: Retirement Change management Compensation Employee rewards HR effectiveness measurement HR technology selection & implementation Industrial relations Leadership development Learning and development Legal/Regulatory compliance M&A integration/restructuring Organizational effectiveness Other Outsourcing Staf? g: International mobility of employees Staf? ng: Recruitment & availability of skilled local labor Highlighted responses represent challenges most often selected by participants. 13% 6% 44% 31% 0% 19% 0% 25% 19% 13% 6% 13% 0% 0% 19% 13% 31% 25% 6% 31% 13% 63% 6% 0% 31% 13% 6% 31% 31% 0% 0% 19% 6% 0% 13% 0% 13% 25% 13% 0% 31% 6% 13% 31% 0% 6% 38% 25% 6% 0% 44% 0% 25% 13% 13% 6% 31% Staf? ng: Retention Succession planning Yesterday and tomorrow Looking back three years, the three historical issues most often cited by the Africa group were change management (44%), compensation (31%) and staf? g: recruiting and availability of skilled local labor (31%). Looking ahead, due to the diversity of issues in Africa today, ? ve issues are expected to pose a challenge three years from now. Those issues are organizational effectiveness (44%), leadership development (38%), change management (31%), measurement of HR effectiveness (31%) and succession planning (31%). Survey of Global HR Challenges: Yesterday, today and tomorrow 13 Commentary Comments from African representatives demonstrate the challenges presented in the area of change management in a region of enormous cultural diversity.

As one representative notes, the key is “working with line managers across cultures to challenge prevailing ‘authoritarian’ thinking, to [move toward] a climate which promotes personal responsibility and freedom. ” Another points out that “managing diversity in the local context is [an] enormous [challenge] in a fastchanging technological and economically liberalised environment. ” Bureaucracy can also be a problem, presenting “the need to consider doing things differently in order to eliminate bottlenecks and red tape. ” Looking forward, empowerment of local managers is seen as a priority issue.

HR effectiveness presents a challenge when, in one representative’s words, “line managers think performance management, job evaluation, monitoring and evaluation [are] a waste of time. This attitude bogs down the efforts by the HR team. ” Or, as another puts it, “staff still have a negative view of HR, look at it as bad news bearers. ” Leadership development is a key issue in a region with “high labor turnover” and a “young and inexperienced work force. ” This may be a particular challenge in a region faced with the enormous impact of the AIDS virus and regional wars.

Due to the combination of a large proportion of the work force ailing and the introduction of new industries and businesses which require local talent who are currently not trained to meet those needs, there is a vacuum for HR professionals to ? ll. AIDS is a social issue everywhere but it is hitting particularly hard on the African continent. In fact, the cost of health and welfare bene? ts ranked very high among current concerns in Africa, tying with HR effectiveness measurement and learning and development as key issues, just below change management. 4 Survey of Global HR Challenges: Yesterday, today and tomorrow Asia Paci? c results In answer to the survey question about the impact of current events, HR professionals in this region pointed to the events of 9/11, the SARS epidemic, and the turmoil stemming from the downturn in the economy. All of these events affected travel within the region and, as a result, adversely affected cash ? ow and company operations. Responses from Asia Paci? c Federation of Human Resource Management (APFHRM) members Table 4. 1 Question 6: Please choose 3 areas that represent signi? ant challenges for you today (Asia results) Challenge % of Companies Bene? ts costs: Health & welfare Bene? ts costs: Retirement Change management Compensation Employee rewards HR effectiveness measurement HR technology selection & implementation Industrial relations Leadership development Learning and development Legal/Regulatory compliance M&A integration/restructuring Organizational effectiveness Outsourcing Staf? ng: International mobility of employees Staf? ng: Recruitment and availability of skilled local labor Staf? ng: Retention Succession planning Other % 8% 52% 16% 20% 20% 12% 12% 36% 20% 16% 12% 8% 12% 4% 16% 16% 32% 12% Today’s challenges As illustrated in Table 4. 1, the issues chosen by Asia participants to represent current top three challenges were change management (52%), leadership development (36%) and succession planning (32%). Survey of Global HR Challenges: Yesterday, today and tomorrow 15 Table 4. 2 Responses to the three questions regarding what are the HR challenges you were facing 3 years ago, what they are today and what you believe they will be in 3 years (Asia responses) Asia Challenge 3 Yrs Ago Today In 3 Yrs

Bene? ts costs: Health & welfare Bene? ts costs: Retirement Change management Compensation Employee rewards HR effectiveness measurement HR technology selection & implementation Industrial Relations Leadership development Learning and development Legal/Regulatory compliance M&A integration/restructuring Organizational effectiveness Other Outsourcing Staf? ng: International mobility of employees Staf? ng: Recruitment & availability of skilled local labor Highlighted responses represent challenges most often selected by participants. % 4% 36% 24% 16% 8% 4% 32% 24% 28% 4% 8% 28% 8% 20% 8% 16% 16% 8% 4% 8% 52% 16% 20% 20% 12% 12% 36% 20% 16% 12% 8% 12% 12% 4% 16% 16% 32% 4% 4% 36% 8% 12% 16% 0% 12% 24% 12% 4% 12% 40% 8% 12% 20% 20% 20% 36% Staf? ng: Retention Succession planning Yesterday and tomorrow Looking back three years, the Asia group sited four issues that challenged HR: change management (36%), industrial relations (32%), learning and development (28%) and succession planning (28%). Looking ahead, the issues expected to pose a challenge three years from now are organizational ffectiveness (40%), change management (36%), and succession planning (36%). This list is very similar to what was reported by Africa. 16 Survey of Global HR Challenges: Yesterday, today and tomorrow Commentary Although it “takes a considerable time to accept changes” and “many longservice employees enjoy the status quo and are reluctant to make any changes,” a signi? cant issue exists today in “moving the business from a product focus to a customer interface focus and more of a business planning mentality. Three years ago, business integration and consolidation was a major challenge, both in the area of change management and in compensation, as staff tried to ensure compensation equity between employees of the acquired and the acquiring company. Leadership development is clearly a “critical issue for on-going viability of [the] corporation. ” As part of this endeavour, HR professionals need to focus on “developing supervisors into ‘people managers,’ not just technical specialists,” a comment that was repeated as an issue for the years to come. Another representative notes that “there are many tools for leadership development.

Finding the most appropriate tools is a challenge. ” This challenge can best be met by “gaining support from executives to develop leaders of the future” and “engaging senior management in leadership development philosophy and practice. ” Succession planning “will remain an issue as we look at gaps in the market, gaps in the organization and how to shadow employees in key positions. The aging workforce within the company is a key driver. ” In fact, the aging workforce was noted by many who chose succession planning as an issue due to the “issues in retaining knowledge held by retiring workers, and ensuring suf? ient time to train successors. ” Staf? ng, including international mobility of employees, continues to be a critical element as is noted in other regions. HR effectiveness appears to be less of an issue in the Asia-Paci? c region, although one respondent comments that “to date, it has not been possible to measure HR effectiveness in the workplace. ” As illustrated in Table 4. 2 although HR effectiveness is not a top three challenge, its importance has more than doubled in three years, suggesting that more attention is warranted in the future.

However, even with these challenges in Asia, two of the world’s most populated nations, India and China, are receiving enormous economic bene? t from companies in other regions that are continuing to outsource their information technology, customer service and manufacturing needs. Such global economic realities, along with the political developments that in? uence them, require decisive, ethical and visionary local leadership to quickly and effectively navigate and manage change. HR professionals in Asia Paci? , as elsewhere, need to be sensitive to external conditions as well as to their own organizational needs in order to de? ne and meet the leadership development goals of their organizations. Survey of Global HR Challenges: Yesterday, today and tomorrow 17 Europe results In Europe, the major event of the last few years – in addition to 9/11 and the increasing threat/ impact of terrorism – is the growth of the European Union. In Eastern Europe, one respondent noted that “our young and good workers are going to work for neighbors [as] people feel more free to change their jobs. Responses from the European Association of Personnel Management (EAPM) members Table 5. 1 Question 6: Please choose 3 areas that represent signi? cant challenges for you today (Europe results) Challenge % of Companies Bene? ts costs: Health & welfare Bene? ts costs: Retirement Change management Compensation Employee rewards HR effectiveness measurement HR technology selection & implementation Industrial Relations Leadership development Learning and development Legal/Regulatory compliance M&A integration/restructuring Organizational effectiveness Outsourcing Staf? g: International mobility of employees Staf? ng: Recruitment and availability of skilled local labor Staf? ng: Retention Succession planning Other 5% 7% 48% 30% 11% 23% 11% 7% 20% 18% 2% 7% 36% 4% 5% 34% 20% 16% 5% Today’s challenges As illustrated in the Table 5. 1, the issues chosen by the European participants to represent current top three challenges were change management (48%), organizational effectiveness (36%) and staf? ng: recruitment and availability of local labor (34%). 18 Survey of Global HR Challenges: Yesterday, today and tomorrow Table 5. 2

Responses to the three questions regarding what are the HR challenges you were facing 3 years ago, what they are today and what you believe they will be in 3 years (Europe responses) Europe Challenge 3 Yrs Ago Today In 3 Yrs Bene? ts costs: Health & welfare Bene? ts costs: Retirement Change management Compensation Employee rewards HR effectiveness measurement HR technology selection & implementation Industrial relations Leadership development Learning and development Legal/Regulatory compliance M&A integration/restructuring Organizational effectiveness Other Outsourcing Staf? g: International mobility of employees Staf? ng: Recruitment & availability of skilled local labor Highlighted responses represent challenges most often selected by participants. 5% 2% 34% 38% 21% 7% 11% 9% 23% 30% 7% 16% 30% 4% 13% 14% 25% 13% 5% 5% 7% 48% 30% 11% 23% 11% 7% 20% 18% 2% 7% 36% 5% 4% 5% 34% 20% 16% 13% 4% 29% 14% 14% 16% 7% 13% 25% 21% 5% 9% 39% 5% 7% 27% 25% 21% 11% Staf? ng: Retention Succession planning Yesterday and tomorrow Looking back three years, as with Asia, there were four historical issues most often cited by the European group.

Those issues were compensation (38%), change management (34%), learning and development (30%) and organizational effectiveness (30%). Looking ahead, the issues expected to pose a challenge three years from now are organizational effectiveness 39%), change management (29%), and staf? ng: international mobility of employees (27%). Survey of Global HR Challenges: Yesterday, today and tomorrow 19 Commentary Rapid technological change is a current challenge facing HR professionals in the area of change management. Other issues include globalization and the aging of the work force.

Three years ago, joining the European Union was a key issue for the profession. The need to downsize the work force in response to the downturn in the ? nancial markets also presented a challenge with the con? icting challenge of recruitment and availability of skilled local labor. Across the board, three years from now, continuing technological change is seen as an issue closely tied to the need for training in change management. Although a challenge not unique to Europe, global expansion was noted in many comments under a wide range of challenges.

For example, change management due to cross border activity was prevalent with one participant commenting that “the continual drive to shape the organization appropriate to its markets means a signi? cant shift in mindset and skill set as the company strives to balance growth in Asia with a balanced portfolio in Europe and America”. Organizational effectiveness is also critical in this expansion mode to new markets as “continued growth will require review of processes and procedures to ensure success in international / new markets. International mobility of employees was noted as a top three issue of the future “ensuring international growth of business”. This mobility is needed and as one participant commented – “as there is lack of quali? ed personnel in the regions, we will move quali? ed employees to new destinations. ” Leadership development is an ongoing issue, with a two-pronged focus: motivating middle management while encouraging top management to abandon a style perceived as authoritarian. In Eastern Europe three years ago, the biggest challenge may have been moving from a planned economy to a free market economy, necessitating new management philosophy nd leadership. Looking forward, as one respondent notes, there is “always a need to focus on [leadership development] to remain competitive. ” Compensation and HR effectiveness measurement also scored high as current issues of concern to European HR professionals. Measuring HR effectiveness was not among the foremost issues three years ago but respondents were three times as likely to choose this as an issue today. Three years from now, measuring HR effectiveness falls behind organizational effectiveness as OE generally includes some component of measurement. 0 Survey of Global HR Challenges: Yesterday, today and tomorrow North America results Major events in North America include the attack of 9/11, increasing terrorism and the resulting downturn in the economy. In addition, the Free Trade Agreement and global trade agreements are challenges, as are the pace of technological change and a very competitive marketplace. Responses from the North American Human Resource Management Association (NAHRMA) members Table 6. 1 Question 6: Please choose 3 areas that represent signi? cant challenges for you today (North America results) Challenge % of Companies

Bene? ts costs: Health & welfare 30% 17% 40% 9% 15% 23% 9% 0% 53% 15% 2% 15% 28% 11% 4% 26% 11% 32% 6% Today’s challenges As illustrated in Table 6. 1, the issues chosen by the North American participants to represent current top three challenges were leadership development (53%), change management (40%), and succession planning (32%). These three challenges were also noted by the Asia group, although the relative ranking differed. Bene? ts costs: Retirement Change management Compensation Employee rewards HR effectiveness measurement HR technology selection & implementation

Industrial Relations Leadership development Learning and development Legal/Regulatory compliance M&A integration/restructuring Organizational effectiveness Outsourcing Staf? ng: International mobility of employees Staf? ng: Recruitment and availability of skilled local labor Staf? ng: Retention Succession planning Other Survey of Global HR Challenges: Yesterday, today and tomorrow 21 Table 6. 2 Responses to the three questions regarding what are the HR challenges you are facing 3 years ago, what they are today and what you believe they will be in 3 years (North America responses) North America Challenge 3 Yrs Ago Today In 3 Yrs

Bene? ts costs: Health & welfare Bene? ts costs: Retirement Change management Compensation Employee rewards HR effectiveness measurement HR technology selection & implementation Industrial relations Leadership development Learning and development Legal/Regulatory compliance M&A integration/restructuring Organizational effectiveness Other Outsourcing Staf? ng: International mobility of employees Staf? ng: Recruitment & availability of skilled local labor Highlighted responses represent challenges most often selected by participants. 15% 2% 45% 19% 11% 17% 19% 4% 32% 15% 6% 21% 26% 4% 11% 2% 17% 21% 13% 0% 17% 40% 9% 15% 23% 9% 0% 53% 15% 2% 15% 28% 6% 11% 4% 26% 11% 32% 26% 11% 21% 11% 15% 13% 9% 0% 43% 21% 4% 4% 32% 6% 9% 4% 36% 19% 23% Staf? ng: Retention Succession planning Yesterday and tomorrow Looking back three years, the three historical issues most often cited by the North America group were change management (45%), leadership development (32%) and organizational effectiveness (26%). Looking ahead, the issues expected to pose a challenge three years from now are leadership development (43%), staf? ng: recruitment and availability of skilled local labor (36%) and organizational effectiveness (32%). 2 Survey of Global HR Challenges: Yesterday, today and tomorrow Commentary North America is the single region where change management is not perceived as the foremost challenge. Instead, leadership development takes ? rst place. Leadership development is seen, in one respondent’s words, as critical “to move the company forward after ? nancial restructuring. ” Early retirement and an aging work force make leadership training and development essential for any forwardlooking organization. Developing leadership competencies is viewed as critical in an era of “rapid, sustained growth in many developing areas of the world. Furthermore, there is a greater focus on executive performance, corporate governance, and performance of the board of directors as corporations navigate the post-Enron, post-Sarbanes-Oxley environment. Nonetheless, as elsewhere, change management is a major challenge for the profession. Among the speci? c issues: consolidation and merging of markets within an industry, collective bargaining, early retirement incentives and, in one survey respondent’s words, “convincing some clients [that] critical organizational changes are needed. Three years ago, change management issues revolved largely around downsizing, acquisitions, mergers and related structural matters. “Restructuring” and “re-engineering” were the words of the day. Three years from now, respondents anticipate “continued need to change [the] organization to meet expansion challenges. ” As a top three challenge today, succession planning goes hand-in-hand with leadership development and change management. As one respondent commented, “Succession planning is a high priority because of wave of retirements,” with one participant reporting 30% of their employees retiring within the next 5 years.

As noted by another, “In these volatile times, succession planning, combined with leadership development, are key components to building the foundation for current and future organizational performance. ” Three years ago, the concerns were similar, although one respondent commented on the importance of “convincing leaders that there is a distinction between leadership and management and [that] they should be spending most of their time on the former rather than the latter. ” Looking forward, respondents agree that serious training is needed to develop the leaders that will be able to sustain continued growth and restore con? ence in organizational leadership. Recruitment and availability of local skilled labor, which has been steadily increasing in the list of challenges, moves up to second place three years to come. The many comments around this challenge pointed to the aging workforce as the primary concern. Other issues of current concern to North American HR professionals are bene? t costs, organizational effectiveness and measurement of HR effectiveness. Survey of Global HR Challenges: Yesterday, today and tomorrow 23 South America results

Companies in many parts of South America have confronted both political and economic turmoil and instability in the last few years. As one survey respondent noted, “Recent political and economic-? nancial crisis… has put a lot of strain on the Personnel Management function, as it was necessary to adjust headcount, payroll and bene? t costs, with an obvious impact [on] development. ” Another said, “Economic default, social and political crisis caused high in? ation, high unemployment, high intervention of government in labor cost, forcing companies to revise their structures, reduce staff and bene? s. ” Currency devaluations, diminishing rates of foreign investment, and high rates of unemployment are all mentioned, along with the Free Trade Agreements, PCAOB standards and section 404 of Sarbanes-Oxley. And here, too, the events of 9/11 played a role, with a “major impact on tourism and, as a consequence, in our job as we had to reorganize our structure. ” Responses from the Interamerican Federation of Human Resource Management (FIDAGH) Table 7. 1 Question 6: Please choose 3 areas that represent signi? cant challenges for you today (South America results) Challenge % of Companies

Bene? ts costs: Health & welfare Bene? ts costs: Retirement Change management Compensation Employee rewards HR effectiveness measurement HR technology selection & implementation Industrial relations Leadership development Learning and development Legal/Regulatory compliance M&A integration/restructuring Organizational effectiveness Outsourcing Staf? ng: International mobility of employees Staf? ng: Recruitment and availability of skilled local labor Staf? ng: Retention Succession planning Other 7% 3% 48% 38% 10% 34% 5% 10% 34% 21% 14% 14% 21% 10% 2% 22% 17% 9% 9% Today’s challenges

As with Africa, the summary results in more than three top issues sited. As illustrated in table 7. 1, the issues chosen by the South America participants to represent current top challenges were change management (48%), compensation (38%), measurement of HR effectiveness (34%) and leadership development (34%). 24 Survey of Global HR Challenges: Yesterday, today and tomorrow Table 7. 2 Responses to the three questions regarding what are the HR challenges you are facing 3 years ago, what they are today and what you believe they will be in 3 years (South America responses) South America Challenge 3 Yrs Ago Today In 3 Yrs

Bene? ts costs: Health & welfare Bene? ts costs: Retirement Change management Compensation Employee rewards HR effectiveness measurement HR technology selection & implementation Industrial relations Leadership development Learning and development Legal/Regulatory compliance M&A integration/restructuring Organizational effectiveness Other Outsourcing Staf? ng: International mobility of employees Staf? ng: Recruitment & availability of skilled local labor Highlighted responses represent challenges most often selected by participants. 12% 5% 29% 38% 9% 16% 17% 9% 19% 22% 12% 16% 17% 7% 19% 2% 22% 10% 9% % 3% 48% 38% 10% 34% 5% 10% 34% 21% 14% 14% 21% 9% 10% 2% 22% 17% 9% 9% 5% 28% 26% 9% 17% 5% 9% 36% 17% 7% 3% 41% 2% 3% 5% 19% 33% 21% Staf? ng: Retention Succession planning Yesterday and tomorrow Looking back three years, the South America group reported four historical issues most often cited. They were compensation (38%), change management (29%), learning and development (22%) and staf? ng: recruitment and availability of skilled local labor (22%). Looking ahead, the issues expected to pose a challenge three years from now are organizational effectiveness (41%), leadership development (36%), and staf? g: retention (33%). Survey of Global HR Challenges: Yesterday, today and tomorrow 25 Commentary Diversity, a competitive environment, and intercultural pressures make change management a vital issue in South America today. As one respondent noted, change management is needed to “adjust rapidly to the changes imposed by market globalization. ” As a result of the economic situation in South America and local labor laws, compensation is also a top three issue. Many countries due to devaluation and in? ation are still trying to work out an equitable system with the current economics.

In addition, with the tax cost of cash compensation to both the company and the employee, companies are trying to determine more effective ways to provide incentive to their employees. Finding “new ways to measure and improve our contribution to the business” is at the core of HR effectiveness measurement, as there is “dif? culty in effectively showing the attainments [of HR professionals and their] real contribution to the business. ” The challenge as noted by one respondent was to “build consistent indicators in a quickly changing environment. In addition, leadership development is especially critical in working with a young labor force. As one respondent sums it up, “Our leadership in our market depends on our managers developing leadership. ” Three years ago, in addition to the items mentioned above, staf? ng was a major issue, particularly the recruitment and availability of skilled local labor including international and retaining those people. Outsourcing was a cause for concern, along with leadership development, organizational effectiveness, HR technology and HR effectiveness measurement.

For the years to come, leadership and some area of staf? ng continue to be a top three challenge. In addition to those mentioned earlier, there was also a focus on change management, compensation, succession planning, recruitment, HR effectiveness measurement, and learning and development. Succession planning is a particular issue of growing concern. In summary, as one respondent put it, “Organizations have to adapt to change more rapidly than before, with the changes directed from HR. ” 26 Survey of Global HR Challenges: Yesterday, today and tomorrow

Conclusion Tables 8, 9 and 10 below provide a visual that illustrates areas where there is clear commonality across regions in terms of HR challenges. This commonality reinforces the need for HR practitioners across the globe to continue sharing their experiences and lessons learned. Table 8 Question 6: Please choose 3 areas that represent signi? cant challenges for you today (Global and Regional results) % of Companies-Top choices highlighted Challenge All Africa Asia North South Europe America America Bene? ts costs: Health & welfare Bene? s costs: Retirement Change management Compensation Employee rewards HR effectiveness measurement HR technology selection & implementation Industrial relations Leadership development Learning and development Legal/Regulatory compliance M&A integration/restructuring Organizational effectiveness Other Outsourcing Staf? ng: International mobility of employees Staf? ng: Recruitment & availability of skilled local labor Staf? ng: Retention Succession planning 13% 9% 48% 24% 12% 27% 9% 7% 35% 19% 7% 11% 25% 7% 8% 4% 24% 16% 20% 1% 13% 63% 6% 0% 31% 13% 6% 31% 31% 0% 0% 19% 6% 0% 13% 0% 13% 25% 4% 8% 52% 16% 20% 20% 12% 12% 36% 20% 16% 12% 8% 12% 12% 4% 16% 16% 32% 5% 7% 48% 30% 11% 23% 11% 7% 20% 18% 2% 7% 36% 5% 4% 5% 34% 20% 16% 30% 17% 40% 9% 15% 23% 9% 0% 53% 15% 2% 15% 28% 6% 11% 4% 26% 11% 32% 7% 3% 48% 38% 10% 34% 5% 10% 34% 21% 14% 14% 21% 9% 10% 2% 22% 17% 9% Survey of Global HR Challenges: Yesterday, today and tomorrow 27 Table 9 Question 7: What were the top three issues three years ago? (Global and Regional results) % of Companies-Top choices highlighted

Challenge All Africa Asia North South Europe America America Bene? ts costs: Health & welfare Bene? ts costs: Retirement Change management Compensation Employee rewards HR effectiveness measurement HR technology selection & implementation Industrial Relations Leadership development Learning and development Legal/Regulatory compliance M&A integration/restructuring Organizational effectiveness Other: Outsourcing Staf? ng: International mobility of employees Staf? ng: Recruitment & availability of skilled local labor Staf? g: Retention Succession planning 10% 3% 36% 31% 13% 13% 13% 12% 24% 23% 8% 16% 23% 5% 15% 7% 22% 15% 8% 13% 6% 44% 31% 0% 19% 0% 25% 19% 13% 6% 13% 0% 0% 19% 13% 31% 25% 6% 8% 4% 36% 24% 16% 8% 4% 32% 24% 28% 4% 8% 28% 8% 20% 8% 16% 16% 8% 5% 2% 34% 38% 21% 7% 11% 9% 23% 30% 7% 16% 30% 4% 13% 14% 25% 13% 5% 15% 2% 45% 19% 11% 17% 19% 4% 32% 15% 6% 21% 26% 4% 11% 2% 17% 21% 13% 12% 5% 29% 38% 9% 16% 17% 9% 19% 22% 12% 16% 17% 7% 19% 2% 22% 10% 9% 28 Survey of Global HR Challenges: Yesterday, today and tomorrow Table 10

Question 8: What do you believe will be the top three issues three years from now? (Global and Regional results) % of Companies-Top choices highlighted Challenge All Africa Asia North South Europe America America Bene? ts costs: Health & welfare Bene? ts costs: Retirement Change management Compensation Employee rewards HR effectiveness measurement HR technology selection & implementation Industrial relations Leadership development Learning and development Legal/Regulatory compliance M&A integration/restructuring Organizational effectiveness Other: Outsourcing Staf? g: International mobility of employees Staf? ng: Recruitment & availability of skilled local labor Staf? ng: Retention Succession planning 13% 5% 28% 15% 12% 17% 5% 8% 33% 19% 5% 6% 39% 4% 8% 13% 24% 23% 21% 13% 0% 31% 6% 13% 31% 0% 6% 38% 25% 6% 0% 44% 0% 25% 13% 13% 6% 31% 4% 4% 36% 8% 12% 16% 0% 12% 24% 12% 4% 12% 40% 8% 12% 20% 20% 20% 36% 13% 4% 29% 14% 14% 16% 7% 13% 25% 21% 5% 9% 39% 5% 7% 27% 25% 21% 11% 26% 11% 21% 11% 15% 13% 9% 0% 43% 21% 4% 4% 32% 6% 9% 4% 36% 19% 23% 9% 5% 28% 26% 9% 17% 5% 9% 36% 17% 7% 3% 41% 2% 3% 5% 19% 33% 21%

Conclusion commentary Clearly, managing human capital is an ongoing challenge, especially as social, political and economic events take their toll. Strategies must continually be rede? ned to deliver improved return on investment in human capital. As HR professionals work within their own organizations, they must also cope with good and bad economies, new technology, and the social issues – global, regional and national – affecting their organizations. We live in a global economy and, although details differ, the issues are remarkably similar.

Whether it’s AIDS in Africa, SARS in Asia, shifting employee populations within the European Union or the rising cost of health care in North America, the underlying concerns are the same. HR professionals face the same economic, political, social and environmental challenges as other business professionals. Because the role of HR professionals continues to increase in value, more functional skills and greater leadership expectations are placed upon individuals in the profession.

This survey can help HR professionals identify broad, core issues, examine for themselves where more personal and professional development and training may be needed and focus on ? nding solutions to the broad Human Resource challenges that face their organizations throughout the world. Survey of Global HR Challenges: Yesterday, today and tomorrow 29 Contact information For further information or any questions regarding this survey, please contact: Carolyn Gould Principal, Human Resource Services PricewaterhouseCoopers LLP 300 Madison Avenue New York, NY 10017 646. 471. 5591 carolyn. [email protected] pwc. com Contact Information for Continental Federations of the WFPMA can be found at wfpma. com 30 Survey of Global HR Challenges: Yesterday, today and tomorrow www. pwc. com NY-PD-06-0184/600075 © 2005 PricewaterhouseCoopers LLP. All rights reserved. “PricewaterhouseCoopers” refers to PricewaterhouseCoopers LLP (a Delaware limited liability partnership) or, as the context requires, other member ? rms of PricewaterhouseCoopers International Limited, each of which is a separate and independent legal entity. *connectedthinking is a trademark of PricewaterhouseCoopers LLP (US).

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