Releasing the results of its 2006 Global HR Transformation Study, the firm said half of nearly 1,400 respondent organisations were in the midst of transforming their HR functions. In Asia, the number of companies claiming to have completed their HR transformation has increased fourfold since its last study in 2003.

HR transformation involves recreating or reinventing the HR function with the specific intent of enhancing its contribution to a business.

Mercer's study last year included responses from nearly 1,400 organisations in all industries across Asia, Australia, Europe, Latin America, New Zealand and North America.

"From our 2006 Study, HR leaders across Asia have a very good understanding of the key issues they are facing and what areas they need to improve to really succeed. They have done well to improve operational efficiency, but the ability to provide strategic and consulting support for the business is not developing quickly enough," said senior Mercer consultant Adam Kassab.

The study shows a clear shift in HR priorities in Asia, with a decreased emphasis on operational excellence within the HR function.

Kassab said this could be positively construed as a shift in focus to more strategic planning and consulting activities, representing an organisation's human-capital strategy. Forty per cent of survey respondents regarded human-capital strategy as a current principal function of HR, whereas 64 per cent expected it to become a key function within two to three years.

Leadership development and talent management are other areas expected to become more important.

"HR transformation is clearly a continuous process," said a Mercer expert on HR effectiveness, Karen Piercy. "The first wave of transformation, which started five to 10 years ago, focused on improving technology and service delivery, with the expectation that HR would adopt a more strategic role within organisations. Today, HR

functions are being challenged to deliver on this expectation; to make human-capital strategies a real part of improving competitiveness and profitability."

The top challenges cited by HR leaders around the world are: acquiring key talent (43 per cent); driving cultural and behavioural change (40 per cent); and building leadership capabilities (40 per cent). In Asia, in addition to these issues, another major challenge is retaining key talent.

About two-thirds of the survey respondents said they had been in their current role for four years or less. Slightly more than one-third had been in the role for less than two years. Despite the brief time in their current role, almost two-thirds of survey respondents said they had spent 10 years or more working in the HR field.

The survey found that organisations around the world were also changing their perception of the HR function. Sixty-seven per cent of respondents said HR leaders are viewed as strategic partners, participating in strategy discussions and decisions. The same percentage of HR leaders reports to the chief executive, compared to 54 per cent in the 2003 study.

Moreover, 59 per cent have significant contact with the board of directors on issues beyond remuneration, such as talent management, succession planning, and human-capital implications of mergers, acquisitions and other transactions.

In Asia only 32 per cent of respondents believe they are seen as strategic partners and have decision-making power. However, the number of HR leaders who are now reporting directly to the chief executive has doubled since 2003.

"In order for the HR function to move forward with its transformation, organisations must implement a talent strategy that arms HR with a range of skills, especially those related to finance and business, so that they can be more effective business partners," Piercy said.