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Accounting for the Future

Experts weigh in on 10 leading issues and concerns affecting HR in a specially compiled series of listings.

Tuesday, November 1, 2005
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At a time when the challenges and responsibilities of HR are becoming increasingly taxing and complex, the editors of Human Resource Executive® have chosen to break down some of the more pertinent issues and developments into bite-size portions.

With input from outside experts, we've segmented those developments into lists of 10 things we believe are the most important to ponder in each category we've taken on. With the business world speeding across a sea of change -- through monumental shifts toward globalization, offshoring and outsourcing, shifting workforce demographics and new technologies -- HR executives are being asked to take on new roles, and quickly.

The challenges are huge -- from finding ways to combat the rising cost of health care and the demands of an aging workforce, to fending off the snowball-down-the-mountain of class-action lawsuits, to finding a way to rise to the ever-pressing demand to step up as true business leaders and strategic forces in their organizations.

We trust, in the midst of this complexity, you'll welcome the simplicity and tangibility of our first annual List of 10s. From the more complicated trends and developments in human resources and qualities CEOs look for in their strategic HR partners to a more engaging roster of influential books and overused buzzwords, the lists that follow here, listed in no particular ranking order, should offer a pretty good snapshot of what many at the top of this profession consider top of mind.

Top Trends and Developments in HR

1. HR as a Business Leader

"Strategic leadership" and "CEO's trusted adviser" have almost become HR mantras of late. Coupled with the new goal of helping steer strategy comes the challenge of trying to outsource enough administrative tasks to allow for that. That HR has a strategic role to play is beyond debate, says Edward E. Lawler III, business professor and respected HR scholar. "People really are becoming the most important asset for knowledge companies. That potential puts HR front and center." Making the transition, however, is no simple process and will require HR leaders to know their business and customers -- internal and external -- better than ever before.

2. HR's Role in Corporate Governance

As Human Resource Executive's September 2005 cover story, "The New Recruit," points out, HR executives are increasingly being asked to participate at the board level. In some rare cases, the article says, HR executives are sitting on those boards. More frequently, however, they're serving as advisers on a wide range of HR topics. "If boards want to add an informed, experienced voice to their deliberations on leadership succession and compensation, who better to ask than a human resource executive?" writes Hal Johnson in his book, Restoring Trust: HR's Role in Corporate Governance. He adds that "the right HR executive can bring unique depth and dimension to the boardroom." The operative word here, of course, is "right." Not every HR executive may be up to the task. But as more and more HR leaders successfully demonstrate they have much to add to the discussion, the entire profession should benefit.

3. Rising Health-Care Costs

The cost of health care is the No. 1 concern and challenge to the business world now and for decades to come. According to the National Coalition on Health Care, employer health insurance premiums increased by 11.2 percent in 2004, nearly four times the rate of inflation, with the annual premium for single coverage averaging $3,695. HR, health-care and benefits experts will have to work together so employers and employees can drive better value and lower the cost, be it through consumer-driven, disease-management or other plans and programs. Leslie Weatherly, HR content expert for the Society for Human Resource Management, writes in her latest study, The Rising Cost of Health Care, that "there is broad consensus" among health and HR experts this approach can eventually work.

4. Globalization

Developing a global mind-set will need to become a core HR competency, not just a nice thing to have, in today's "flattened" world. Globalization will continue to present huge challenges to today's HR leaders, including the identification and development of talented people who can perform in such a world. As Vladimir Pucik, a professor of HR and strategy at the International Institute for Management Development in Lausanne, Switzerland, writes in a chapter of a new book entitled The Future of Human Resource Management, managers aren't born global; it's a skill that needs to be developed. "Making a rational business case concerning the future need and use of global managers is one of the critical strategic decisions HR has to tackle," he writes. The ability to value diversity will also become increasingly important in the coming years. According to Pucik, being truly global requires an openness to learn from the experiences of others and understand how others (local employees, customers, even competitors) may think.

5. Offshoring

Remember the 2004 presidential election? All the talk about offshoring? Perhaps the political rhetoric surrounding the offshoring of American jobs has faded, but the fact remains that, as New York Times columnist Thomas Friedman puts it in his recent book, The World is Flat, the world has "flattened." Though most U.S. multinationals prefer not to talk about it, the offshoring of jobs to markets such as China and India has become a business reality. As Daniel Pink points out in his book, A Whole New Mind, "outsourcing is overhyped in the short term. But it's underhyped in the longer term. As the cost of communicating with the other side of the globe falls essentially to zero, and as developing nations continue to mint millions of extremely capable knowledge workers, the working lives of North Americans, Europeans and Japanese people will change dramatically." Though Pink admits the upheaval will be significant, he adds that it's not much different from previous transitions, such as when factory workers had to master a new set of skills and learn how to manipulate pixels instead of steel. True enough. But it still is going to present huge challenges for HR leaders, ranging from identifying and tapping new labor markets to retooling the current workforce.

6. Technology

Technology now touches almost every area of HR. Talent acquisition and management, performance management, learning and payroll -- pick an HR function and there's likely a dozen or more vendors with solutions to support it. Uncertainty surrounding Oracle's recent battle to acquire PeopleSoft and the merger's aftermath may have dampened HRMS investment during the past 12 months, but the effects were temporary. In a recent report, IDC, a Framingham, Mass.-based research firm, predicted compound annual growth rate for HR services will be 9.6 percent through 2009, bringing the estimated total to $133.4 billion. That compares with an estimated $71.9 billion in 2004. No doubt a significant portion of this investment will go to upgrading HR systems. Nevertheless, companies are also likely to invest in specialized solutions that assist in areas such as talent acquisition, workforce planning, employee development and measuring HR effectiveness. That's obviously good news for the supplier community, especially vendors that innovate. But it's also going to require HR professionals to be thoroughly versed in technology and know how to apply it.

7. The Changing Nature of Work

The workforce of tomorrow has arrived. Contingent workers, independent contractors, consultants, job sharing, telecommuting, offshoring and outsourcing -- these have become the norm as more businesses take advantage of the free-agent nation. Statistics from the American Staffing Association show the percentage of U.S. workers in temporary positions doubled in the 1990s. More recently, U.S. staffing firms employed an average 2.6 million temporary and contract workers per day from January through March 2005, up 11 percent from the same period in 2004. The challenge for HR executives will continue to be figuring out how to manage and motivate such diverse ranks and take a more holistic view of workforce planning.

8. HR Outsourcing

There's little question that HR outsourcing has gained significant traction in the past few years. Companies have been outsourcing discrete HR functions such as outplacement, EAPs, payroll and defined-contribution administration for years, but now, with many organizations looking to focus their attention on core businesses and trim costs, HR business-process outsourcing has become a viable option. To date, many companies seem pleased with the results they're seeing. A recent study by Lincolnshire, Ill.-based Hewitt Associates, which expanded its presence in outsourcing with the acquisition of BPO pioneer Exult in 2004, revealed that 89 percent of 129 companies surveyed are satisfied with their outsourcing arrangements, with 85 percent saying they've achieved their hoped-for goals. Yet another by New York-based Towers Perrin, the jury is still out as to whether the HR generalists remaining behind will be able to step up and perform the strategic HR role that's now expected of them. Of the 47 companies surveyed, respondents said a lot more retooling was still needed. HR generalists should have plenty of opportunity, considering some research firms are predicting double-digit growth rates in HR BPO through 2009.

9. The Aging Workforce

According to the U.S. Bureau of Labor Statistics, more than 25 percent of American workers will reach retirement age by 2010, resulting in a potential worker shortage of nearly 10 million. The Employment Policy Foundation estimates that, over the next 30 years, more than 61 million Americans will retire and, by 2013, labor demand will exceed supply. As the shortage intensifies, policies to encourage higher productivity from available workers and increase participation among women, minorities and others will be essential, as will more employer-friendly immigration policies. At the same time, latest figures show Americans are saving less for retirement and pension plans may soon be nonexistent. Converting pensions into hybrid plans has become controversial, with some courts ruling they violate age-discrimination laws. "Unless these issues are resolved, employer efforts to shore up . . . retirement income may be stymied," says EPF President Janemarie Mulvey.

10. Legal Nightmares

The complexity of employment-related laws, as well as federal and state regulations and guidelines interpreting those laws, will keep HR professionals and their legal counsel working hard to stay out of court. The average number of employment discrimination charges filed annually with the U.S. Equal Employment Opportunity Commission in the 10 years ending fiscal 2004 was 81,000, with legal experts predicting the number will stay the same or increase in the near future. Especially plaguing, they say, will be the rise in class-action, harassment, retaliation, employee-leave and wage-and-hour litigation. "Employers have to be sensitive to their workforce," says Richard Shaw, a partner in the Pittsburgh office of Jones Day. "It's that valuing of employees that allows them to avoid lawsuits."

What CEOs Want: The 10 Most Sought-After Talents of HR Leaders

Former Chairman of the Joint Chiefs of Staff and former Secretary of State Colin Powell once said, "There are no secrets to success. It is the result of preparation, hard work, learning from failure."

In today's tumultuous business environment, HR executives need to pay heed to those words -- while, hopefully, keeping the "failure" part of the equation to a very minor role best experienced early in their careers.

Today, CEOs are under fierce pressure to perform and they need the assistance of their entire organizations -- most especially, their HR leaders. According to interviews with executive-search consultants and human resource consultants, these are the top 10 qualities CEOs are looking for in their HR executives:

1. Trusted Adviser

One of the most important elements of the HR executive's job description is having the ear of his or her CEO -- and deserving to have that special relationship.

"CEOs want an HR executive to have an opinion that is not going to go with a group and . . . is going to be the right arm and a trusted adviser because of the fact that they are coming in with new and independent thinking," says Gregory S. Hessel, a partner and global director of the HR practice for Korn/Ferry International in Dallas.

To deserve that special relationship, HR executives must "say what you mean [and] mean what you say," says David Abrams, senior vice president at Aon Consulting Inc.'s Minneapolis office.

Sought-after HR leaders have "the courage to tell the CEO what he/she needs to hear, not what you think he/she wants to hear," he says.

2. Great Communicator

Words matter. And the results can be seen in the engagement levels of employees, peers and stakeholders. Effective HR leaders communicate and create "understanding of mission, vision, strategy and culture and [provide] focus, alignment and line of sight," says Abrams.

They also avoid "HR speak," says Scott Cohen, national practice leader for talent management in the Boston office of Watson Wyatt Worldwide. Preferred HR executives are able to take concepts and strategies and "translate them into plain and simple business language that people can relate to and understand," he says

3. Leader

Insight and knowledge are necessary to lead others -- and CEOs want an HR executive who is a leader; one who understands people, understands the corporate structure and where the business is going, and understands corporate culture and how to drive it, says Francis J. Luisi, founding partner in the Rumson, N.J., office of the boutique firm of Charleston Partners, which exclusively recruits HR executives and professionals. "They are looking at the head of HR as a key business leader who just happens to do HR," he says.

Adds Abrams: "Making informed, compassionate, tough decisions and understanding and communicating their ramifications, good and bad, is highly valued by the CEO and board."

4. Cultural Leader

"HR doesn't own culture; the organization's people own the culture," says Abrams. HR leaders, however, must understand the culture -- and understand how to guide it in conjunction with senior leadership.

"HR partners with operational leaders in an attempt to guide a desired culture -- 'the way we do things here' -- that allows the organization to live its mission -- 'why we exist' -- achieve its vision -- 'what we're trying to achieve or be' -- and execute its differentiated strategy -- 'how we will get there.' Culture is critical to mission, vision and strategy achievement," he says.

5. Outsourcing Innovator

"Outsourcing is a key efficiency and expense-reduction tool that, if misapplied or poorly executed, can have the opposite results," says Abrams. CEOs want their HR professionals to have "keen knowledge of not only the systems and processes of the organization -- [both] HR and the operational unit as a whole -- that may be amenable to outsourcing, but a deep understanding of organization culture that will allow for effective planning and execution of any outsourcing effort," he says

6. Financial Know-How

Don't know numbers, don't get the job. HR executives in today's corporate world need to know much more than how to craft incentive plans, says executive search consultant Eileen Finn of Eileen Finn & Associates in New York, who specializes in HR professionals.

Today's CEOs, she says, want HR leaders in the C-suite who understand balance sheets and the micro- and macro-economic impact of internal and industry issues and actions.

"Making money," says Abrams, "drives most, if not all, CEO decisions and is still the yardstick by which most organizations and their stakeholders measure success."

7. Talent Manager

Managing talent -- acquisition, development, retention and succession planning -- is the "hottest" ability requested of HR executives, Hessel says. Each company may define talent management somewhat differently, but each CEO knows it's crucial to his or her company's success.

A company's talent strategy is "what creates sustainable competitive advantage," says Abrams.

8. Technological Wiz

Human resource executives need to "know what technology drives not only HR productivity and efficiency but what technology drives your organization and industry growth and efficiency," Abrams says.

Sought-after HR leaders understand how to leverage technology to increase organizational growth and productivity while reducing expenses, he says.

9. Results-Driven Operator

Bachman-Turner Overdrive's hit "Taking Care of Business" says it all. So do a few well-known clichés: Keep the boat afloat, the train on the track, an eye on the wheel. Whatever sounds sweetest, the underlying principle remains: "At the end of the day, you can talk about the most cutting-edge strategy, but you need to be able to execute on those strategies," Luisi says.

"Organizations are all about results, not activities -- by which HR often still measures its own success," says Abrams.

CEOs are looking for HR leaders who "communicate deliverables to senior leadership" and deliver on their promises, Cohen says

10. M&A Analyst

Understand the HR-related business issues and potential solutions that need to be brought to the table during due diligence and M&A planning and execution, says Abrams.

"Mergers and acquisitions drive many industry sectors' growth goals," he says. "Additionally, people and culture issues have driven many M&A failures."

If HR professionals are undaunted by this list, then add one more to the mix: enjoyment. The Washington Redskins' legendary coach, Joe Gibbs, once said, "People who enjoy what they are doing invariably do it well." That assuredly holds true for human resource executives.

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Top 10 HR Buzzwords That Should Disappear

Administrivia -- It's been trivialized by overuse.

Alignment -- Leave it to the auto mechanics.

Change agent -- In plain English, it's "leader."

Core competencies -- Skills necessary for eating an apple?

Empowerment -- Employees have long since figured out what it really means.

Seat at the table -- Aim higher: Go for the throne.

Mission-critical -- No one would have dared say this to Peter Graves, star of television's Mission Impossible. 

Scalable -- What isn't these days?

Human capital -- Wasn't "human resources" good enough?

Synergy -- Together, let's give this one a rest.

10 Must-Read Books for HR Leaders

Execution: The Discipline of Getting Things Done, Larry Bossidy and Ram Charan.

A Whole New Mind: Moving from the Information Age to the Conceptual Age, Daniel Pink.

Treat People Right!: How Organizations and Employees Can Create a Win/Win Relationship to Achieve High Performance at All Levels, Edward E. Lawler III.

Built to Last, Jerry Porras and Jim Collins.

Human Resources in the 21st Century, Marc Effron.

HR from the Heart: Inspiring Stories and Strategies for Building the People Side of Great Business, Libby Sartain with Martha I. Finney.

The War for Talent, Ed Michaels.

Human Resource Champions, David Ulrich.

The ROI of Human Capital: Measuring the Economic Value of Employee Performance, Jac Fitz-Enz.

The Workforce Scorecard: Managing Human Capital to Execute Strategy, Mark A. Huselid, Brian E. Becker and Richard W. Beatty.

Top 10 Oddest Job Interview Responses

"A guy said he was the sole source of support for his puppy."

"The candidate noted that there were no redheads in the company, and said we should hire one."

"An applicant explained that his brother-in-law was successful in the industry, so he would be, too."

"Someone said she was a good reader at church, and that's why she ought to be hired."

"The candidate said she'd always wanted to work in our building."

"The candidate said that unless we hired him, our corporate identity would disappear."

"The applicant said he'd been rejected by all the good companies."

"The job seeker said we should hire him because he just won big in Las Vegas and was on a roll."

"He said we should hire him so he could ride his bike to work."

"One person said we should hire her because she was a cheerleader in high school."

Source: Accountemps, Menlo Park, Calif.

10 Favorite Quotes from the Pages of HRE

"Customer service is, you know, customer service, it's like, you know, customer service."

       -- Marcia Vian, director of HR for Hilton Hotel Corp.'s Doubletree Hotel in Bellevue, Wash., quoting an entry-level applicant to illustrate how hard it is for most of them to articulate an intelligent response. August 2005.

"One-half to two-thirds of the things I saw in the emergency department were preventable. . . . At some point, I realized I was putting out the fire after the building had burned down."

       -- Tim Crimmins, vice president for health, safety and environment at General Mills, who says he was motivated to take his current job as a result of what he witnessed as a former emergency room physician. May 2, 2005.

"If there are 10 executives in the top group that governs the company, you'll always find at least one who turns out to be a psychopath. He's the one who will try to discredit the assessment process, who will savagely attack you in a meeting and who will have all these very intelligent reasons why assessment is no good."

       -- Robert Hogan, psychologist at the Tulsa Institute of Behavior Sciences, from a feature on corporate psychopaths in the executive suite. December 1996.

"I think most performing CEOs are underpaid. As this is becoming more and more evident, it is starting to be corrected."

       -- Patrick S. Pittard, Heidrick and Struggles, on a story that examines the controversy over rising CEO pay. May 20, 1997.

"The last thing we need is an unyielding, dumb box."

       -- Robert Propst, credited as "father of the cubicle," in a story on workplace design in which he acknowledges the cubicle is a less than ideal workspace. December 1997.

"What I find particularly disturbing is that in its quest to become a strategic partner, HR has abandoned its role as employee advocate in many organizations."

       -- Joel Neuman, associate professor of management and organizational behavior, State University of New York at New Paltz, in an article on workplace bullying. August 1999.

"Skilled employees with experience generally won't leave us for a dollar or two more an hour. They'll leave us if they feel they're not being respected."

       -- Richard Lord, director of benefits and HR at Community Medical Centers in Fresno, Calif., May 1, 2001.

"I think we have what you could call a teachable moment [in retirement planning] . . . . The last three years have been a bucket of cold water on everyone. Employees want help. Before, it was, 'Get out of my way, you're impeding me.' Now, it's, 'Please help me.' "

       -- David Wray, president of the Chicago-based Profit Sharing /401k Council of America, in a story about employers' retirement and financial advice increasing since the 2000 dot-com bubble burst. June 2, 2003.

"I kid [my HR executive] and say, 'You have to be able to take the CEO and everybody else on the executive team to the woodshed every now and then . . . . You're really not a service bureau to the company as much as you are a strategy partner.' "

       -- Godfrey Sullivan, CEO of Hyperion, a Sunnyvale, Calif.-based software firm, in a feature on CEOs who value HR. March 16, 2005.

"Businesses can empower their people by thinking through what they need and what's holding them back . . . . Think about your companies. Are you listening to your people? Is your mission clear and larger than the individuals carrying it out?"

       -- The late Christopher Reeve, actor and director, in an article about the Society for Human Resource Management conference in New Orleans. June 27, 2004.

Favorite Workplace-Related Flicks

9 to 5 -- Lily Tomlin, Jane Fonda and Dolly Parton lock up their boss and open a day-care center in the office. Now that's employee empowerment.

Wall Street -- A pre-Enron look at an ethics-free workplace.

Working Girl -- Melanie Griffith manages her own career development and puts arrogant boss Sigourney Weaver in her place.

In Good Company -- Dennis Quaid gets a new boss who's practically his daughter's age. An entertaining primer for those dealing with generational clashes in the workplace.

Glengarry Glen Ross -- "First place is a Cadillac. Second place, you get steak knives. Third place, you're fired." How's that for employee incentives?

Office Space -- The perfect movie for anyone who's ever worked in an office.

Philadelphia -- Brought up the issue of HIV/AIDS in the workplace even before Abbot vs. Bragdon.

Disclosure -- Put the issue of reverse sexual harassment into sharp focus.

In the Company of Men -- Aaron Eckhart's villain is a reminder to keep an eye out for workplace bullies.

Norma Rae -- Sally Field's Oscar-winning role burnished organized labor's image but didn't help its declining membership.

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