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Rethinking human capital a priority for high-performing companies

In a world that is changing rapidly, the speed with which organisations adapt has become a critical business capability.

The world's leading organisations are raising their sights, broadening their focus and leaning towards becoming more adaptable to new business circumstances, one of which has to do with human capital.

A number of significant movements are shifting the human-resource (HR) outlook and potentially changing how leaders are tackling human capital. Listening to and working with clients from various industries, conversing with experts and conducting extensive research, Deloitte's human-capital team has identified two key trends that are driving decisions in high-performing organisations.

First, the talent-management pendulum is swinging from recruitment to development.

In most organisations' talent-management programmes, development has taken a back seat to recruitment. That trend is shifting, as businesses struggle to fill critical positions with specific skills needed to do the task. According to Deloitte's findings, high-performing organisations are placing a much stronger emphasis on talent development, as opposed to medium-to-low-growth organisations. And here are the reasons:

Planning workforce development together with a career model that rewards individual performance as much as organisational advancement helps reduce turnover rates. Leading organisations know that when an employee departs, companies lose two to three times that employee's annual salary in terms of lost intellectual capital, client relationships, productivity and experience, plus the cost of recruiting new hires.

This is especially true for leadership and executive roles, where both hiring costs and losses in productivity hurt the bottom line.

Often, the best leaders are home-grown, moving up the career ladder.

Companies around the world are actively looking for ways to develop talents, especially leaders. For example, a global consumer-product company had a major initiative to develop 500 leaders through its intensive leadership-development programmes designed to position them for expanded roles. This demonstrates that the true differentiation of the performance of a company stems from developing the quality of its talent.

To embrace this trend, organisations should establish a well-planned workforce development programme that may be less concerned with finding more of what it already has and more with understanding what new skills need to be nurtured and developed.

This consists of creating a new career model that rewards individual based on performance. Second, HR functions must not only support the business, but enable business strategy.

In the past, HR transformation focused primarily on making existing functions more efficient and effective. Today, the focus is on designing HR and talent systems that can work across locations.

Being excellent at traditional HR services - such as integrated HR systems, timely access to workforce data and effective service delivery - is now the price of entry. With the technological advancement in information technology, leading organisations have been using cloud-based HR solutions that lay the foundation for real-time HR analytics and broad-based benchmarking. This advance in technology represents a seismic shift in the ability of HR to move from historical reporting to developing predictive capabilities, the new frontier of competitive advantage.

To give an example, a global insurance company with more than 60,000 employees in more than 80 countries realised that its HR organisation was not fully contributing to business strategy. More than 180 different HR and payroll systems served this global workforce. The company decided to launch its global HR transformation programme in emerging Asian markets, including new HR technology and new outsourced payrolls.

HR leaders' focus should be tuned into key business priorities and building out core HR operations, including shared service centres and centres of expertise. This should enable the organisation to focus on smaller, strategic components of the business that is vital to its success.

THE BOTTOM LINE

The real challenge for business and HR leaders today is to ask: What are we doing today to get in front of these trends? How do we use it in our favour to drive positive changes in our organisation? In short, as HR leaders, what are we going to do differently and how are we going to do it? These are the questions that need to be answered.

It is time to rethink human capital.

Kessara Sakmaneevongsa is a partner in consulting services at Deloitte Touche Tohmatsu Jaiyos Co Ltd.


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