Even Critical Functions not Performing at Optimal Levels
NEW YORK; June 21, 2006 – Most senior executives report that their workforces lack the skills their companies need to achieve market leadership, and even their critical functions do not perform as strongly as they should, according to research released today by Accenture.
The research, the Accenture High Performance Workforce Study, is conducted approximately every 18 months to measure workforce management trends among executives in large corporations in the United States, Europe and Australia. This year’s research, of more than 250 senior executives, found that only 14 percent of respondents described the overall skill level of their organizations’ entire workforce as industry leading. Furthermore, just 20 percent of respondents said the vast majority of their employees understand their companies’ strategy and what’s needed to be successful in their industry.
Respondents also reported that even functions they consider critical – sales, customer service, finance and strategic planning (cited as critical by 62 percent, 43 percent, 23 percent and 23 percent, respectively) – were not performing as strongly as they should. In fact, among those who rated these functions among the top three, just one-quarter (25 percent) assigned the highest rating to the performance of their sales function, and under a third provided the same rating to their customer service, finance and strategic planning functions (25 percent, 19 percent and 33 percent, respectively).
“The lack of essential skills is a vital issue for senior managers,” said Peter Cheese, global managing partner in Accenture’s Human Performance practice. “As the competitive environment grows more demanding and as markets become increasingly commoditized, the need to cultivate these skills – particularly in the critical functions – should be at the top of every corporate to-do list. Those companies that fail to develop their workforces risk losing their competitive edge.”
According to the research findings, these shortcomings can be attributed, in part, to several key human resources- and training-related findings. For example, just one in ten respondents reported being very satisfied with the performance of his or her human resources (HR) and training functions (11 percent and 10 percent, respectively). The research uncovered a number of possible reasons for this, including:
- A lack of connection to business drivers – Only 36 percent of respondents said their companies tailor their HR and training support to each function’s needs and contributions to the organization.
- Failure to measure the business impact of HR and training efforts – More than 40 percent do not evaluate the impact of their HR and training efforts against profitability, and half (50 percent) do not evaluate those efforts against revenues and sales.
- Ineffective or non-existent knowledge capture and sharing capabilities – Four in 10 (42 percent) respondents described capturing and sharing knowledge as a challenge or a severe challenge for their companies. The most commonly cited impediments to better knowledge capture and sharing were: a lack of a common business culture across different locations (cited by 38 percent); no knowledge support infrastructure with dedicated people (37 percent); and the fact that knowledge sharing is typically not rewarded in the organization (32 percent).
- The talent time bomb – Nearly two-thirds (60 percent) of respondents reported that, over the next five years, they expect to begin feeling the impact of the aging workforce and the impending retirement of baby boomers. Of those, 28 percent said they are feeling the impact now. Almost one-half (43 percent) of participants described talent sourcing as a challenge or a severe challenge, primarily because of a smaller or shrinking talent pool from which to choose.
- Lack of functional leaders’ involvement in people issues – Only a small percentage of respondents said the heads of customer service, finance, sales and strategic planning at their companies are highly involved in human capital management initiatives (reported by 29 percent, 31 percent, 34 percent and 37 percent, respectively).
“A company’s ability to manage its workforce strategically and develop its capabilities will set it apart from its competitors,” said Cheese. “Some companies focus well on one or two aspects of human capital management, such as learning or internal communications, but the best take a broad view of managing their workforce. These are the companies that vastly increase their chances of being industry leaders.”
The research did identify a group of companies that Accenture refers to as “human performance leaders” – companies in which the three functions their executives deem to be the most important perform at the highest levels. These leaders, as opposed to the “laggards” – who said that none of their top three functions performs at the highest level – are more likely to be successful in addressing the organizational issues that contribute to strong financial performance. For example, respondents stated that their companies perform “very well” in the following areas:
- Acquiring new customers and increasing market share (reported by 43 percent of “human performance leaders” vs. 14 percent of “laggards”)
- Encouraging strong customer loyalty and retention (52 percent vs. 17 percent)
- Responding to changing market conditions (52 percent vs. 14 percent)
- Finding and developing talented leaders (39 percent vs. 7 percent)
- Attracting and retaining skilled staff (30 percent vs. 12 percent)
- Generating superior business value from technology investments (35 percent vs. 15 percent)
According to the findings, “human performance leaders” have more effective HR and training support. Among the practices helping them excel are: formal measures that gauge the impact of all HR and training support activities on their top functions; tailoring HR and training support according to the contribution of specific functions; and taking a more strategic approach to human resources and training, including viewing the HR function leader as a strategic business partner to the executive suite.
The Accenture High Performance Workforce Study, conducted approximately every 18 months, is a research project that explores trends, issues and developments in human capital management at organizations around the world. This year’s study was conducted by GfK NOP Limited on behalf of Accenture between February and April 2006, and it includes completed telephone surveys with 251 senior executives – chief executive officers, chief operating officers, chief financial officers and chief information officers, human resource leaders, chief learning officers – in the United States, United Kingdom, France, Germany, Spain and Australia. Respondents’ companies represent seven broad industry segments (retail, travel & transportation, financial services, electronics & high tech, communications, energy and utilities).
Accenture is a global management consulting, technology services and outsourcing company. Committed to delivering innovation, Accenture collaborates with its clients to help them become high-performance businesses and governments. With deep industry and business process expertise, broad global resources and a proven track record, Accenture can mobilize the right people, skills and technologies to help clients improve their performance. With more than 129,000 people in 48 countries, the company generated net revenues of US$15.55 billion for the fiscal year ended Aug. 31, 2005. Its home page is www.accenture.com.