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

Key Findings (continued)

Which HR competencies will be most critical 10 years from now? Over one-third 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

Challenges in HR

Challenges Facing HR Over the Next 10 Years SHRM 2012

Over the next 10 years, what do you think will be the three biggest challenges facing HR executives at your organization?
59% 51% 52% 29% 36% 44% 34% 21% 33% 41% 20% 17% 15% 33% 13% 12% 11% 24% 6% 1%

Retaining and rewarding the best employees Developing the next generation of corporate leaders Creating a corporate culture that attracts the best employees to our organization Remaining competitive in the talent marketplace Finding employees with the increasingly specialized skills we need Creating smooth and efficient HR processes that ensure a good employee experience

2012 (n = 483) 2010 (n = 465)

Finding the right employees in the right markets where we do business around the world
Creating an employee-centric, service-oriented HR organization Breaking down cultural barriers that make it difficult to create a truly global company

Other

Note: Percentages do not total 100% due to multiple response options. Respondents who answered dont know were excluded fro m this analysis. Challenges Facing HR Over the Next 10 Years SHRM 2012

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

Over the next 10 years, what do you think will be the biggest investment challenge facing organizations?

Obtaining human capital and optimizing human capital investments

43% 47%

Obtaining financial capital and optimizing financial capital investments

22% 29%

Obtaining technology and optimizing technological capital investments

19% 11%

2012 (n = 484) 2010 (n = 449)

Obtaining intellectual capital and optimizing intellectual capital investments

14% 12%

Obtaining physical capital and optimizing physical capital investments

3% 2%

Note: Percentages do not total 100% due to rounding. Challenges Facing HR Over the Next 10 Years SHRM 2012

Talent Management Tactics

Challenges Facing HR Over the Next 10 Years SHRM 2012

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?
Providing flexible work arrangements Promoting a culture of trust, open communication and fairness Providing employees with opportunities for career advancement* Offering a higher total rewards package than competitors Demonstrating a commitment to employee development Providing meaningful work with clear purpose in meeting organization's objectives Creating a stimulating and attractive organizational culture Having latest tools/technology to maximize work efficiency and effectiveness Encouraging employees to make decisions and to take risks Providing employees with recognition based on job performance* Developing human capital managers at all levels of the organization Providing employees with better opportunities to use skills and abilities Creating a highly inclusive culture that uses diverse perspectives Being committed to corporate social responsibility and sustainability 7% 4% 11% 17% 17% 26% 26% 23% 24% 24% 21% 29% 40% 40% 37% 47%

58%

2012 (n = 486) 2010 (n = 449)

15% 15% 14% 13% 13% 11% 14% 11% 11%

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

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%

16%

2012 (n = 442) 2010 (n = 470)

37%

Smaller workforce

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%

29%

2012 (n = 424) 2010 (n = 448)

65%

Growing proportion of contract/temporary employees

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?

Growing proportion of full-time employees

19%

47%

27%

2012 (n = 434) 2010 (n = 447)

30%

No change

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 Acumen Organizational Leadership and Navigation Relationship Management Communication Critical Evaluation HR Technical Expertise and Practice Consultation Ethical Practice 21% 26% 25% 30%

42% 40% 37% 35%

Global and Cultural Effectiveness

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%)
Note: Only statistically significant differences are shown. Challenges Facing HR Over the Next 10 Years SHRM 2012

>

100 to 499 employees (10%)

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%) > Nonprofit (34%)

Note: Only statistically significant differences are shown.

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 Indicators Knowledge of Business Operations/Logistics Strategic Agility Business Knowledge Knowledge of Government and Regulatory Guidelines Knowledge of Finance and Accounting Economic Awareness Knowledge of Labor Markets Knowledge of Technology Systems Thinking Effective Administration Knowledge of Sales and Marketing Other 1% 6% 18% 17% 17% 16% 14% 11% 28% 25% 41% 41%

45%

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
Strategic Business Management Talent Management Change Management Workforce Planning and Employment Compensation and Benefits Human Resource Development

Average Rating (0 to 10)

8.8 8.6 8.5 8.5 8.3 8.2

Employee and Labor Relations

HR Technology Risk Management Global and International Human Resources

8.1
8.0 7.7 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

Percentage Professional, scientific and technical Services Health care and social assistance Manufacturing Educational services Finance and insurance Accommodation and food services Transportation and warehousing Arts, entertainment and recreation Government agencies Administrative and support and waste management and remediation services Religious, grant-making, civic, professional and similar organizations 20% 17% 16% 13% 12% 7% 6% 5% 5% 4% 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)

Percentage Retail trade Construction Information Real estate and rental and leasing Repair and maintenance Wholesale trade Agriculture, forestry, fishing and hunting Mining Personal and laundry services Utilities Other 4% 3% 3% 3% 3% 3% 2% 1% 1% 1% 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-profit

47%

Nonprofit

25%

Publicly owned for-profit

18%

Government

7%

Other

3%

n = 462 Challenges Facing HR Over the Next 10 Years SHRM 2012

28

Demographics: Organization Staff Size

1 to 99 employees

21%

100 to 499 employees

30%

500 to 2,499 employees

19%

2,500 to 24,999 employees

20%

25,000 or more employees

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
n = 470

Is your organization a single-unit organization or a multi-unit organization?

Single-unit organization: An organization in which the location and the organization are one and the same. Multi-unit organization: An organization that has more than one location.
n = 473

28% 72%

71% 29%

What is the HR department/function for which you responded for throughout this survey?
Corporate (companywide)
Business unit/division Facility/location
n = 348

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 Each work location determines HR policies and practices A combination of both the work location and the multi-unit headquarters determines HR policies and practices
n = 347

71%
17% 12%

51% 3%

46%

Challenges Facing HR Over the Next 10 Years SHRM 2012

30

HR 2022 Poll

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

HR 2022 Poll

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