Finance, information technology (IT), procurement and other business services areas are in the midst of a growing talent crisis, and the failure of human resources and business services leaders to effectively collaborate is in large part to blame, according to research released July 19, 2012, by The Hackett Group Inc., a global business management consulting firm.
According to The Hackett Group's research report Cracks in the Foundation: Closing the Critical Skills Gap Undermining Business Capabilities, business services organizations are seeing dangerous deficits in talent and skills, and are highly dissatisfied with the level of support they receive from HR on talent management issues. The study looked at six key areas of talent management:
- Workforce planning and succession.
- Collaboration/knowledge sharing.
- Managing performance.
- Learning and development.
- Recruiting and staffing.
Companies represented in the study said they were either dissatisfied or very dissatisfied with HR support for business services nearly 70 percent of the time on average. Companies were most unhappy with HR support for collaboration and knowledge sharing (79 percent dissatisfied/very dissatisfied) and retention (70 percent dissatisfied/very dissatisfied).
In large part, this dissatisfaction is being driven by extremely low levels of service that HR is providing and lack of effective communication and collaboration between business services leaders and HR, according to the report. The research also found that business services organizations say they're getting talent management support from HR less than 35 percent of the time on average. In addition, the percentage of companies saying HR is providing a full range of services is 13 percent or less.
In some of the worst areas, such as retention and collaboration/knowledge sharing, 18 percent or fewer of companies in the study said their HR organizations are providing adequate levels of services or expertise. In other areas, including workforce planning, performance management, and learning and development, only 33 to 47 percent of all companies said adequate levels of services are provided.
The study found that even in the top-performing area, recruiting and staffing, over 40 percent of all companies say only limited services and expertise are being provided by HR. And in all areas, the number of companies that say HR provides a full range of services and expertise in these areas ranges from only 13 percent, for recruiting and staffing, to 7 percent for performance management, to 5 percent or less for all other areas.
The study noted that one key explanation for HR's inability to effectively support talent management needs of business services is that HR has had a hard time adapting to its changing mission of enabling business performance. At many companies, HR budget and staff cuts made during the recent recession remain in effect, having a negative impact on talent management programs, training, career development and retention programs. Finally, few HR organizations have a dedicated business partner role responsible for communicating and understanding the talent management needs of business services functions.
"At most companies, business services functions were badly weakened by across-the-board cuts during the recent recession," said Harry Osle, Hackett’s global HR practice leader, in a statement released about the results. "Underinvestment in talent has created deficits in important skills such as business acumen, strategic thinking and analysis, change management, and process improvement capabilities. Yet companies seem to be almost completely ineffective at addressing this talent challenge, in large part because HR and business services leaders are not collaborating. This is a dangerous situation with the potential to cripple companies that don't address it quickly. While these business services functions are often considered cost-centers, they provide key services that enable companies to manage and optimize assets ranging from cash, capital and talent to technology and product/service inputs."
Recommendations for Improvement
The Hackett Group study outlined how both sides can work together to improve the situation and address growing talent management issues being driven by increased business volatility, globalization and insufficient investment in talent.
For example, while recruiting is generally an area where HR provides the strongest support to business services, it is also the least effective talent management category employed by business services. According to the study, business services must do a better job of defining and prioritizing the skills and characteristics that are truly essential for job candidates to have.
HR also can rely less heavily on external labor markets, and develop staff, as well as examine alternative approaches to recruiting, such as hiring less-experienced staff with development potential and permission-based recruiting. Candidate relationship management is also a powerful emerging strategy for handling company interactions with applicants, candidates and current employees.
"Today's changing business environment requires that business services organizations retool and radically change their mix of staff to improve their ability to directly impact on business performance,” said Hackett’s Chief Research Officer Michel Janssen in the same statement. “Talent management is key, and business services can't accomplish this without strong and effective support from HR. Both parties must redouble their efforts to improve their working relationship. Business services managers must take the lead in specifying their needs, and taking accountability for results for talent management. HR must provide comprehensive process and administrative support, methods and tools, training and guidance to function leaders."
The Hackett Group has completed benchmark studies with over 2,800 major corporations and government agencies, including 97 percent of the Dow Jones Industrials, and 86 percent of Fortune 100 companies.