The Future of HR - by Peter Cappelli

Two recent studies offer some thoughts on the future of HR. While HR leaders in developing areas are dealing with growing economies and an influx of talent -- leading to new ideas -- many CHROs in "mature" economies, such as the United States, are still focused on tactical, instead of strategic, issues. Is this a tipping point for HR?

As the U.S. economy begins to right itself from the financial crisis and associated recession, our thoughts turn to spring and the possibility of new growth -- and new opportunities for business. How about for human resources?

It's the season for guessing what's ahead, and here are two reports that offer their guesses.

The first of these is a study, Working Beyond Borders: Insights from the Global Chief Human Resource Study, conducted by IBM that is based on interviews with 707 chief human resource officers from around the world.

It's worth remembering that many of the world's economies have been chugging along nicely even while the United States and much of Europe were in the doldrums, so the experience of these other countries such as India, Brazil and China might be quite different from that in America.

Having said that, it is surprising to see that the overwhelming priority at the moment for HR leaders around the world in the study is to become more efficient, or in other words, cut costs. This is not a happy finding for those of us who were hoping for some renewed vigor in the HR function.
A potentially big realignment of resources is associated with globalization. Companies in "mature" economies (read: United States, western Europe and Japan, in particular) are focusing their expected head-count growth in developing countries.

Interestingly, almost as many HR heads in the developing countries said that they expect to be expanding their head count in North America. The possibility of expansion, even if modest, back into the United States is something we haven't been anticipating.

In terms of HR-specific challenges, there was much less concern with the ability to hire than with the ability to retain employees across the world. Apparently we are more puzzled about retention than hiring.

CHROs in developing countries thought the hiring challenge was mainly about money, while those in mature markets thought it was more about aligning company values with individual values.

With respect to retention, developing-country representatives said opportunity for advancement was the key to success, more so than those from mature markets who focused on challenging assignments.

I can't help wondering if the responses from the mature-market representatives reflected something like rationalization: We can't offer money -- given cost pressures -- or career advancement -- given the lack of growth -- so let's hope something we can offer will do the trick.

The biggest gaps the HR leaders saw in the capabilities of their own area were in development -- developing workforce capabilities, generally, and leaders, specifically -- and knowledge sharing.

The second study (SHRM Foundation Leadership Roundtable: What's Next for HR?) was conducted by the SHRM Foundation and was based on a focus group of HR heads and thinkers and observers of business. (Full disclosure: I participated in this study.)

The task here was more explicitly to look forward, beyond the current issues, to anticipate future challenges for HR.

There was a recognition that the recession had changed some things, and not in a good way. HR at least in the United States is even more starved for resources, more dependent on outsourcing and more risk-averse.

On the whole, the view was that not much has changed in human resources over the past decade or so. And there was a concern that HR was actually falling behind in terms of the business acumen needed to operate at senior levels and through the acceptance of a support role as opposed to one that drives business.

This group saw three important issues facing the HR side of business in the future. It is possible to see them as both challenges and opportunities. One echoes the IBM study, and that is globalization and the challenge of managing workforces in many different countries.

The other two are quite different, though.

The first has to do with managing risk. The financial crisis has made most businesses pay more attention to the financial risks they are exposed to and, by association, the business risks. As with most aspects of business, managing these risks comes down to managing people differently.

What are the HR implications of taking risk management more seriously?

The other issue is the avalanche of metrics, and business-related data more generally, that has the potential to overwhelm organizations if not managed carefully -- but also has the opportunity to change them for the better if they can use that information appropriately.

Nowhere does that data have more opportunity for good than in HR, where so many costly and strategic bets are still made on the basis of hunches. Can we harness these data in ways that improve our decision making, finding the value and reducing costs?

Here's my take, looking at these two studies together.

  1. I wonder whether the HR issues in developing countries, where economies are booming and labor markets are tight, will have much of anything in common in the future with the HR issues in mature markets, where the opposite is true. HR in these developing economies is a hot area where the best talent is going and new ideas are being generated.
  2. Second, especially in mature markets, I worry that we are fighting the last war in HR.
Hiring, retention and development -- the focus of HR executives here -- are age-old concerns. They are also quite tactical, as opposed to strategic issues.

Is anyone thinking about what it means for HR to take on new challenges such as risk management seriously? Are we making any progress in improving our use of metrics to make decisions in different, better ways?

Finally, I'm wondering whether we have reached something like a tipping point for HR in mature countries where the innovation, ideas and energy shifts clearly from HR departments to HR vendors.

Perhaps HR departments are now so starved for resources and so focused on the operational goal of cost containment that thinking about the future has to be ceded to some other group.

Peter Cappelli is the George W. Taylor Professor of Management and director of the Center for Human Resources at The Wharton School. His latest book, with Bill Novelli, is Managing the Older Worker: How to Prepare for the New Organizational Order.


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