Challenges Facing HR Over the Next 10 Years

Challenges Facing HR Over the Next 10 Years

Challenges Facing HR Over the Next 10 Years November 1, 2012 Key Findings What will be the three biggest challenges facing HR executives over the next 10 years? Retaining and rewarding the best employees (59%), developing the next generation of corporate leaders (52%), and creating a corporate culture that attracts the best employees to organizations (36%). What will be the biggest investment challenge for organizations over the next 10 years? About two-fifths (43%) of HR professionals indicated that obtaining human capital and optimizing human capital investments will be the biggest investment challenge. Which tactics will be the most effective in attracting, retaining and rewarding the best employees over the next 10 years? The top four responses were providing flexible work arrangements (40%); creating an organizational culture where trust, open communication and fairness are emphasized and demonstrated by leaders (37%); providing employees with opportunities for career advancement (26%); and offering a higher total rewards package than organizations that compete for the same talent (26%). How do HR Professionals expect the future workforce to evolve over the next 10 years? In terms of workforce size, the majority (69%) of HR professionals expect their organization to have a larger workforce in 10 years. Just over one-half (54%) indicate that their use of contract/temporary employees will not change, and 29% expect a growing proportion of contract/temporary employees. Nearly one-half (47%) indicate that over the next 10 years there will be a greater proportion of full-time employees, whereas the other half believe the workforce will stay the same (27%) or have more part-time employees (26%). Challenges Facing HR Over the Next 10 Years SHRM 2012 2

Key Findings (continued) Which HR competencies will be most critical 10 years from now? Over onethird of HR professionals think that the four most critical competencies in 10 years will be business acumen (42%), organizational leadership and navigation (40%), relationship management (37%), and communication (35%). What components (subcompetencies) of business acumen will be most critical in 10 years? HR professionals expect the top three components to be HR and organizational metrics/analytics/business indicators (45%), knowledge of business operations and logistics (41%), and strategic agility (41%). What bodies of knowledge do HR professionals rate as being the most important in 10 years? The four bodies of knowledge that were rated as most important were strategic business management, talent management, change management, and workforce planning and employment. Challenges Facing HR Over the Next 10 Years SHRM 2012 3 Challenges in HR Challenges Facing HR Over the Next 10 Years SHRM 2012 4 Over the next 10 years, what do you think will be the three biggest challenges facing HR executives at your organization? 59% Retaining and rewarding the best empl...

51% 52% Developing the next generation of corporate le... 29% 36% Creating a corporate culture that attracts the best employees to our organiz... 44% 34% Remaining competitive in the talent market... 21% 33% Finding employees with the increasingly specialized skills we... 41% 20% 17% Creating smooth and efficient HR processes that ensure a good employee exper... 2012 (n = 483) 2010 (n = 465) 15%

Finding the right employees in the right markets where we do business around the ... 33% 13% 12% Creating an employee-centric, service-oriented HR organiz... 11% Breaking down cultural barriers that make it difficult to create a truly global co... 24% 6% 1% Note: Percentages do not total 100% due to multiple response options. Respondents who answered dont know were excluded from this analysis. Challenges Facing HR Over the Next 10 Years SHRM 2012 5 Over the next 10 years, what do you think will be the three biggest challenges facing HR executives at your organization? Comparisons by organization sector Publicly owned for-profit and privately owned for-profit organizations are more likely than nonprofit organizations to indicate that finding the right employees in the right markets where we do business around the world is one of the biggest challenges facing HR executives. Comparisons by organization sector

Publicly owned for-profit (24%) Privately owned for-profit (19%) > Nonprofit (8%) Note: Only statistically significant differences are shown. Challenges Facing HR Over the Next 10 Years SHRM 2012 6 Over the next 10 years, what do you think will be the biggest investment challenge facing organizations? 43% Obtaining human capital and optimizing human capital investm... 47% 22% Obtaining financial capital and optimizing financial capital investm... 29% 19% Obtaining technology and optimizing technological capital investm... 11% 2012 (n = 484) 2010 (n = 449) 14%

Obtaining intellectual capital and optimizing intellectual capital investm... 12% 3% Obtaining physical capital and optimizing physical capital investm... 2% Note: Percentages do not total 100% due to rounding. Challenges Facing HR Over the Next 10 Years SHRM 2012 7 Talent Management Tactics Challenges Facing HR Over the Next 10 Years SHRM 2012 8 Over the next 10 years, which of the following tactics do you believe will be most effective in attracting, retaining and rewarding the best employees in your organization? 40% Providing flexible work arrangements 37% Promoting a culture of trust, open communication and fairness Providing employees with opportunities for career advancement*

26% Offering a higher total rewards package than competitors 26% 23% Demonstrating a commitment to employee development 24% Providing meaningful work with clear purpose in meeting organization's objectives 24% Having latest tools/technology to maximize work efficiency and effectiveness 11% 40% 17% 2012 (n = 486) 2010 (n = 449) 15% 15% Encouraging employees to make decisions and to take risks

14% Providing employees with recognition based on job performance* 13% 13% Developing human capital managers at all levels of the organization 11% 14% Providing employees with better opportunities to use skills and abilities 11% 11% Creating a highly inclusive culture that uses diverse perspectives Being committed to corporate social responsibility and sustainability 47% 29% 17% 21% Creating a stimulating and attractive organizational culture 58%

7% 4% Note: Percentages do not total 100% due to multiple response options. An asterisk (*) indicates option was not included on 2010 survey. Challenges Facing HR Over the Next 10 Years SHRM 2012 9 Over the next 10 years, which of the following tactics do you believe will be most effective in attracting, retaining and rewarding the best employees in your organization? Comparisons by organization sector Nonprofit organizations are more likely than privately owned for-profit organizations to indicate that creating an organizational culture where trust, open communication and fairness are emphasized and demonstrated by leaders is one of the most effective tactics in attracting, retaining and rewarding the best employees. Comparisons by organization sector Nonprofit (51%) > Privately owned for-profit (33%) Note: Only statistically significant differences are shown. Challenges Facing HR Over the Next 10 Years SHRM 2012 10 Future Workforce

Challenges Facing HR Over the Next 10 Years SHRM 2012 11 Over the next 10 years, how do you expect the size of your organizations workforce to evolve? 69% Larger workforce 48% 2012 (n = 442) 16% Smaller workforce 37% 15% No change 15% Note: Respondents who answered dont know were excluded from this analysis. Challenges Facing HR Over the Next 10 Years SHRM 2012 12 Over the next 10 years, how do you expect the

size of your organizations workforce to evolve? Comparisons by organization sector Privately owned for-profit organizations are more likely than nonprofit and government organizations to expect the size of their organizations workforce to grow larger over the next 10 years. Comparisons by organization sector Privately owned for-profit (80%) Nonprofit (62%) > Government (36%) Government organizations are more likely than privately owned for-profit organizations to expect the size of their organizations workforce to get smaller over the next 10 years. Comparisons by organization sector Government (39%) > Privately owned for-profit (11%) Nonprofit organizations are more likely than privately owned for-profit organizations to expect the size of their organizations workforce to have no change over the next 10 years. Comparisons by organization sector Nonprofit (23%) Note: Only statistically significant differences are shown. >

Privately owned for-profit (10%) Challenges Facing HR Over the Next 10 Years SHRM 2012 13 Over the next 10 years, how do you expect your organizations use of contract or temporary employees to evolve? 54% No change 22% 2012 (n = 424) 29% 2010 (n = 448) Growing proportion of contract/temporary employees 65% 17% Growing proportion of full-time employees 13% Note: Respondents who answered dont know were excluded from this analysis. Challenges Facing HR Over the Next 10 Years SHRM 2012

14 Over the next 10 years, how do you expect your organizations use of contract or temporary employees to evolve? Comparisons by organization staff size Organizations with 25,000 or more employees are more likely than organizations with 1 to 2,499 employees to expect a growing proportion of contract or temporary employees over the next 10 years. Comparisons by organization staff size 1 to 99 employees (25%) 25,000 or more employees (57%) > 100 to 499 employees (21%) 500 to 2,499 employees (29%) Note: Only statistically significant differences are shown. Challenges Facing HR Over the Next 10 Years SHRM 2012 15 Over the next 10 years, how do you expect your organizations employment status to evolve? 47% Growing proportion of full-time employees 19% 2012 (n = 434)

27% 2010 (n = 447) No change 30% 26% Growing proportion of part-time employees 50% Note: Respondents who answered dont know were excluded from this analysis. Percentages may not total 100% due to rounding. Challenges Facing HR Over the Next 10 Years SHRM 2012 16 Over the next 10 years, how do you expect your organizations employment status to evolve? Comparisons by organization staff size Organizations with 25,000 or more employees are more likely than organizations with 1 to 99 employees to expect a growing proportion of regular part-time employees over the next 10 years. Comparisons by organization staff size 25,000 or more employees (44%) > 1 to 99 employees (16%) Comparisons by organization sector

Privately owned for-profit organizations are more likely than nonprofit and government organizations to expect a growing proportion of regular full-time employees over the next 10 years. Comparisons by organization sector Privately owned for-profit (58%) Nonprofit (38%) > Government(21%) Government organizations are more likely than privately owned for-profit organizations to expect a growing proportion of regular part-time employees over the next 10 years. Comparisons by organization sector Government (50%) Note: Only statistically significant differences are shown. > Privately owned for-profit (21%) Challenges Facing HR Over the Next 10 Years SHRM 2012 17 HR Competencies Challenges Facing HR Over the Next 10 Years SHRM 2012 18 Ten years from now, which of the following competencies do

you see being most critical for the HR professional? Business Ac... 42% Organizational Leadership and Naviga... 40% Relationship Manage... 37% Communica... 35% Critical Evalua... 30% HR Technical Expertise and Prac... 26% Consulta... 25% Ethical Prac...

21% Global and Cultural Effective... 17% Note: n = 472. Percentages do not total 100% due to multiple response options. Challenges Facing HR Over the Next 10 Years SHRM 2012 19 Ten years from now, which of the following competencies do you see being most critical for the HR professional? Comparisons by organization staff size Organizations with 2,500 or more employees are more likely than organizations with 1 to 99 employees to see business acumen as being most critical for the HR professional 10 years from now. Comparisons by organization staff size 2,500 to 24,999 employees (56%) 25,000 or more employees (59%) > 1 to 99 employees (24%) Organizations with 100 to 499 employees are more likely than organizations with 2,500 to 24,999 employees to see HR technical expertise and practice as being most critical for the HR professional 10 years from now. Comparisons by organization staff size 100 to 499 employees (35%)

> 2,500 to 24,999 employees (14%) Organizations with 2,500 to 24,999 employees are more likely than organizations with 100 to 499 employees to see global and cultural effectiveness as being most critical for the HR professional 10 years from now. Comparisons by organization staff size 2,500 to 24,999 employees (27%) > 100 to 499 employees (10%) Note: Only statistically significant differences are shown. Challenges Facing HR Over the Next 10 Years SHRM 2012 20 Ten years from now, which of the following competencies do you see being most critical for the HR professional? Comparisons by organization sector Publicly owned for-profit organizations are more likely than nonprofit organizations to see business acumen as being most critical for the HR professional 10 years from now. Comparisons by organization sector Publicly owned for-profit (57%) Note: Only statistically significant differences are shown. >

Nonprofit (34%) Challenges Facing HR Over the Next 10 Years SHRM 2012 21 Ten years from now, when considering Business Acumen for HR professionals, which of the following components (i.e., subcompetencies) will be most critical? HR and Organizational Metrics/Analytics/Business Indic... 45% Knowledge of Business Operations/Logi... 41% Strategic Ag... 41% Business Know... 28% Knowledge of Government and Regulatory Guide... 25% Knowledge of Finance and Accou...

18% Economic Awar... 17% Knowledge of Labor Ma... 17% Knowledge of Techn... 16% Systems Thi... 14% Effective Administr... 11% Knowledge of Sales and Mark... 6% 1% Note: n = 469. Percentages do not total 100% due to multiple response options. Challenges Facing HR Over the Next 10 Years SHRM 2012

22 Ten years from now, when considering Business Acumen for HR professionals, which of the following components (i.e., subcompetencies) will be most critical? Comparisons by organization staff size Organizations with 2,500 to 24,999 employees are more likely than organizations with 1 to 99 employees to consider HR and organizational metrics/analytics/business indicators as being most critical for the HR professional 10 years from now. Comparisons by organization staff size 2,500 to 24,999 employees (57%) > 1 to 99 employees (34%) Note: Only statistically significant differences are shown. Challenges Facing HR Over the Next 10 Years SHRM 2012 23 Rate the importance of these bodies of knowledge for HR professionals 10 years from now. Body of Knowledge Average Rating (0 to 10) Strategic Business Management 8.8

Talent Management 8.6 Change Management 8.5 Workforce Planning and Employment 8.5 Compensation and Benefits 8.3 Human Resource Development 8.2 Employee and Labor Relations 8.1 HR Technology 8.0 Risk Management

7.7 Global and International Human Resources 6.9 Note: n = 446. Respondents rated each body of knowledge on a scale from 0 (not important) to 10 (very important). Challenges Facing HR Over the Next 10 Years SHRM 2012 24 Organization Demographics Challenges Facing HR Over the Next 10 Years SHRM 2012 25 Demographics: Organization Industry Percentag e Professional, scientific and technical Services 20% Health care and social assistance 17%

Manufacturing 16% Educational services 13% Finance and insurance 12% Accommodation and food services 7% Transportation and warehousing 6% Arts, entertainment and recreation 5% Government agencies 5% Administrative and support and waste management and remediation services 4%

Religious, grant-making, civic, professional and similar organizations 4% Note: n = 461. Percentages do not total 100% due to multiple response options. Challenges Facing HR Over the Next 10 Years SHRM 2012 26 Demographics: Organization Industry (continued) Percentag e Retail trade 4% Construction 3% Information 3% Real estate and rental and leasing 3%

Repair and maintenance 3% Wholesale trade 3% Agriculture, forestry, fishing and hunting 2% Mining 1% Personal and laundry services 1% Utilities 1% Other 9% Note: n = 461. Percentages do not total 100% due to multiple response options. Challenges Facing HR Over the Next 10 Years SHRM 2012

27 Demographics: Organization Sector Privately owned for-pr... 47% Nonpr... 25% Publicly owned for-pr... 18% Govern... O 7% 3% n = 462 Challenges Facing HR Over the Next 10 Years SHRM 2012 28 Demographics: Organization Staff Size

1 to 99 emplo... 21% 100 to 499 emplo... 30% 500 to 2,499 emplo... 19% 2,500 to 24,999 emplo... 25,000 or more emplo... 20% 10% n = 454 Challenges Facing HR Over the Next 10 Years SHRM 2012 29 Other Demographics Does your organization have U.S.-based operations (business units) only, or does it operate multinationally? U.S.-based operations only

Multinational operations 71% 29% Single-unit organization: An organization in which the location and the organization are one and the same. 28% Multi-unit organization: An organization that has more than one location. 72% n = 473 n = 470 What is the HR department/function for which you responded for throughout this survey? Corporate (companywide) 71% Business unit/division 17%

Facility/location 12% n = 348 Is your organization a single-unit organization or a multiunit organization? For multi-unit organizations, are HR policies and practices determined by the multi-unit headquarters, by each work location or by both? Multi-unit headquarters determines HR policies and practices 51% Each work location determines HR policies and practices 3% A combination of both the work location and the multi-unit headquarters determines HR policies and practices 46% n = 347 Challenges Facing HR Over the Next 10 Years SHRM 2012

30 Challenges Facing HR Over the Next 10 Years Survey Methodology 2012 response rate = 17% 2010 response rate = 17% Sample composed of 487 (2012) and 449 (2010) randomly selected HR professionals from SHRMs membership Margin of error +/-5% 2012 survey fielded September 14 to September 28, 2012 2010 survey fielded August 10 to August 23, 2010 Challenges Facing HR Over the Next 10 Years SHRM 2012 31 Challenges Facing HR Over the Next 10 Years About SHRM Research For more survey/poll findings, visit www.shrm.org/surveys For more information about SHRMs Customized Research Services, visit www.shrm.org/customizedresearch

Follow us on Twitter @SHRM_Research Project leader: Tanya Mulvey, survey research analyst, SHRM Research Project contributors: Mark Schmit, Ph.D., SPHR, vice president, SHRM Research Evren Esen, manager, Survey Research Center, SHRM Research Alexander Alonso, Ph.D., SPHR, director, HR Thought Leadership Copy editor: Katya Scanlan, SHRM Knowledge Center Challenges Facing HR Over the Next 10 Years SHRM 2012 32

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