A

Rethinking
Human Resources
in a Changing
World
kpmg.com

KPMG International
B

Preface

KPMG International commissioned the economist Intelligence

Unit to conduct a study to investigate the forces influencing
the Human resources (Hr) function, how technology is
shaping Hr’s response and what Hr might look like a decade
from now. Rethinking Human Resources in a Changing World
is the report from that study.

We would like to thank all the executives who participated

in the survey as well as the following individuals who
contributed their time and insights in subsequent interviews:

Gabriella Giglio
executive Vice President, Human resources, american express

Mark Huselid
Distinguished Professor, School of Management
and labor relations, rutgers University

Hugh Mitchell
Chief Human resources officer, royal Dutch Shell

Kate Terrell
Vice President, Human resources,
Global Products organization, Whirlpool Corporation

Dave Ulrich
Professor, ross School of Business,
University of Michigan

Athene van Mazijk

Hr leader

Mike Westcott
Global Human resources Director, national Grid

© 2012 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. all rights reserved.
 About the study

Between May and June 2012, the economist Intelligence

Unit conducted a global study of 418 executives. More than
one-third (37 percent) of respondents identified themselves
as C-level executives; the remainder are at the management
level up to senior vice-president. More than one-half of
respondents (58 percent) primarily serve an Hr function;
the remainder (42 percent) represents a wide range of other
functions.

the respondents are based in asia-Pacific (32 percent),

europe (30 percent), north america (28 percent) and
latin america (10 percent). a wide range of industries is
represented, including manufacturing and energy & natural
resources (both at 12 percent), It, financial services, and
healthcare & pharmaceuticals (all at 11 percent). More than
one-half of the companies surveyed (53 percent) boast more
than 10,000 employees – 22 percent have over 50,000;
the remaining 47 percent have between 1,000 and 10,000
employees.

© 2012 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. all rights reserved.
D

Foreword
In the last 5 years, there has been a preoccupation
with cost optimization, cost reduction, sustainable cost
management ... all things ‘cost’. this has required Hr to
play its part, largely through making the Hr function more
efficient, but not necessarily more effective.
no one expects this focus on costs to change in the
short to medium term. What you will read in this report
is that there is a clear case for Hr functions to also
generate value in the wider business and that there are
some signs that this drive for value creation from Hr
will become increasingly important. the people agenda
in most organizations contains some truly business-
critical issues and the need for Hr to rise to these
challenges has never been more acute:
• the recruitment and retention of “top talent”,
particularly retention, in an environment where
employee engagement has been and will be
challenging
• matching the supply of talent to the geographies
where the opportunities for growth are greatest
• the development of global career paths
• the need to create more innovative, agile and
globally responsive organizations
• ensuring the people profile matches the value
drivers of the business

© 2012 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. all rights reserved.
 E

• the smart use of technology to support both the differentiated performance improvement to business.
business and its employees this is a route that requires deep insight into the
business value chain and the development of a highly
• drawing predictive insights from multiple sources of
differentiated Hr operating model. this is not, however,
data to ensure timely decision making on all aspects
the path that many in Hr have been following over the
of the people agenda
last 15 years. this study gives us some insight into this
• achieving an optimized workforce that has an as well as some clues as to the way through the maze of
appropriate mixture of employee types and challenges that Hr now faces.
employment policies.
the Hr function must rise to the challenge. It can, and
KPMG International commissioned this study of must, push beyond the basics to enhance its reputation
executives across the globe to probe more deeply into and fully exploit its critical role in securing return of
the challenges the Hr function is facing and to gain investment on the people agenda.
a deeper understanding of the opportunities that lie
We value your insights on these topics and encourage
ahead. We sought to gain new insights into how the Hr
you to join the conversation by following us on twitter.
function can transform itself in order to deliver against
the long awaited promise of becoming a strategic
partner to the business.
Rethinking Human Resources in a Changing World has
provided us with a fresh view of the path ahead for
leaders of the Hr function. We believe that a number of
areas such as workforce analytics, talent management
and technology will reinforce the need for Hr to make
the people agenda as important to business leaders as
the balance sheet and P&l statement.
at KPMG our recent work with clients suggests
that there is a route for Hr to deliver sustained and

Mark Spears
Global Head of People
& Change
KPMG in the UK

© 2012 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. all rights reserved.
F

Rethinking Human Resources in a Changing World

© 2012 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. all rights reserved.
 1

Contents
2

1
executive summary

‘the Big three’

challenges to Hr’s
new growth agenda 4

2 technology with the

power to transform Hr 10

3 the future of Hr:

eradicating the stigma

Conclusion
14

19

© 2012 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. all rights reserved.
2

Fifty-five percent of survey respondents

believe the metrics that define success in
HR today will fundamentally change over
the next 3 years.

Executive summary
the value of the Human resources (Hr) function elicits sharply
contradictory views within organizations. on the one hand, in today’s
competitive global markets, the “war for talent” is understood to be
crucial to almost every business. on the other hand, the Hr function
is often dismissed as non-essential or ineffective. respondents to
the study commissioned by KPMG International, give similarly mixed
messages. about eight in ten (81 percent) respondents say that
putting in place the most effective talent management strategy will be
key to competitive success. Some six in ten (59 percent) believe that
Hr will grow in strategic importance. But just 17 percent maintain that
Hr does a good job of demonstrating its value to the business.

Meanwhile, the forces of globalization, talent constraints and • Finding ways to engage with workers will help
new technology are driving rapid change to the Hr function. address the challenges of this global, flexible and
Fifty-five percent of survey respondents believe the metrics remote workforce. Insights from interviewees for this
that define success in Hr today will fundamentally change report point toward improved employee engagement
over the next 3 years. Rethinking Human Resources in a as the way to address many of these problems. this will
Changing World examines the nature of the challenges facing involve creative solutions, such as the development of
the Hr function and its future direction. the report’s main Hr policies and approaches that have global application
findings include the following: but can be made relevant to local conditions. It will
also require new ways to engage meaningfully with a
• HR is struggling with the challenges of managing
workforce that is less committed to the organization.
a global, flexible workforce. the global workforce
has become increasingly integrated across borders • Technology has already transformed HR and the
while simultaneously growing more virtual and flexible. application of data analytics will foster even more
these developments have made the retention of key profound change. Sixty-nine percent of companies
talent and building workforces in new markets the top surveyed say it is more common for the Hr function to
priorities of Hr departments over the last 3 years. Survey provide web-based and/or mobile Hr platforms (e.g.
respondents expect little change in the next 3 years. benefits, payroll) than it was 3 years ago; only 3 percent
Yet only about one in four respondents say that Hr at of respondents have cut back on these technology
their company excels at core issues such as sourcing enhancements. these have already enabled Hr to do its
and retaining key talent globally; supporting a virtual basic, administrative work faster and more efficiently.
and flexible workforce; and supporting the greater they have also provided employees with more flexible
globalization of the business. and tailored training opportunities while creating a
positive culture for communication.

Rethinking Human Resources in a Changing World

© 2012 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. all rights reserved.
 3

the advent of data analytics – the most commonly cited – develop closer partnerships within the company,
area by respondents for It investment in the next 3 years especially with line managers who will inevitably use
– will lead to the next technological quantum leap for Hr. technology-driven Hr services to play a greater role in
Interviewees explain that the application of analytics, if employee management
done properly, will enable a more robust understanding of
– recast its strategy so that it begins from a whole-
employee-related needs and opportunities. For example,
business perspective and is aligned with the needs of
already 57 percent of respondents say that data analytics is
the entire company, not just the Hr function.
helping to identify future talent gaps.
• Technology and economy: twin catalysts for HR
transformation. Powerful technologies, emerging in
times of heightened financial constraints, present a rare
opportunity for Hr to enact long-overdue reinvention.
looking ahead, Hr needs to:
– develop greater confidence, leadership and credibility,
Powerful technologies, emerging in
so that Hr heads can deservedly insist on a place in times of heightened financial constraints,
strategic conversations at the highest levels present a rare opportunity for HR to enact
long-overdue reinvention.

Rethinking Human Resources in a Changing World

© 2012 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. all rights reserved.
4

Part 1
‘The Big Three’ challenges to HR’s new growth agenda
amid current worldwide economic difficulties, the How has your company’s workforce evolved
globalization of business continues apace. Companies from geographically over the past 3 years? Indicate whether
developed countries are seeking greener pastures, while each activity is more or less common at your company
those from emerging markets have acquired sufficient scale now than before.
to start taking on the world. at the same time, cost-conscious
businesses are turning to technology to become increasingly 4% 6% 5% 4% 5%
2% 2% 2% 7%
3%
flexible and virtual. as a result of these forces, Hr executives 2% 4%
2%
6% 4% 3%
are focusing on the following core challenges: 2%
5%
19% 32% 34% 35%
(1) balancing the global and the local – managing, hiring 30%
34%
and identifying talent globally while retaining important
local insights
(2) managing a flexible and virtual workforce – but not at
42%
the cost of loyalty and career development
(3) retaining the best talent – maintaining employee
engagement in the face of a less committed, more 36%
39%
flexible workforce. 37% 35%
34%

Balancing the global and the local

Unsurprisingly, globalization is affecting today’s workforce.
according to the survey, 71 percent of respondents believe
that working across borders (e.g. collaboration among
teams in different geographies) has increased over the past 29%
3 years, while at over half of companies polled, international
reporting lines and talent flows have also become more 22%
20%
common. 18% 18% 18%

Working Creating Transferring Sourcing Cross- Adding

across HR policies key talent key talent border new
borders (e.g. to address between outside reporting cross-
teams in the global cross- our home lines border
different nature border market offices
geographies of the operations
collaborating) workforce
Much more common now Somewhat less common now
Somewhat more common now Much less common now
No change Do not know/not applicable

Source: economist Intelligence Unit study: rethinking Human resources in a

Changing World, 2012

Rethinking Human Resources in a Changing World

© 2012 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. all rights reserved.
 5

Survey respondents believe that expanding workforces in company, says, “there has been an idea for some time that
new markets – including the identification and hiring of talent you could standardize the Hr function globally. Many markets
across borders – has been the second-biggest concern for today, though, are so distinct that Hr needs to focus on
Hr departments (after talent retention) in recent years and understanding local needs.”
they expect it to remain so. nevertheless, only one-quarter of
Finding a balance between a global and local focus is
respondents say that their Hr departments excel at sourcing
therefore essential. Gabriella Giglio, executive vice president
key talent globally and 24 percent say the same of their ability
for Human resources at american express, says that
to support the company’s globalization strategies.
companies “need to ensure that Hr programs and systems
one of the ways in which Hr executives can better manage meet the local needs of employees. But everything we do is
a globalizing workforce is to devote more attention to global, then locally cultivated. We never create programs that
issues such as coaching, training and staff development, are specific just to one population.”
and by changing remuneration and incentive schemes. But
in so doing, companies need to work out just how globally Managing a flexible and virtual workforce
consistent or locally customized these strategies should be.
Survey respondents are embracing the concept of a wider
Dave Ulrich, a professor at the University of Michigan’s ross
range of flexible work arrangements, which can reduce labor
School of Business, has conducted the largest global study
costs and allow greater access to talent.
on Hr competencies1, surveying over 20,000 executives, half
of whom work in Hr. He says his research indicates that “Hr • Sixty percent of businesses have increased their use of
has truly become a global profession with global standards virtual workspaces while 48 percent reduced their reliance
for Hr competencies.” He adds that efforts to develop purely on physical office premises, shifting to hot-desking.
local Hr solutions should be framed in the context of these
• Fifty-five percent of respondents have hired more
global standards.
contractual or temporary workers in the last 3 years;
our survey results support this finding. Sixty-three percent 41 percent are even using former employees as
of respondents agree that Hr functions are likely to become contractors.
more globalized, centralized and uniform in the next 3 years.
these trends are set to continue, according to our respondents,
this suggests that Hr policy and strategy should be global.
with 72 percent maintaining that their companies should
Yet companies need to remember that local knowledge will
increase the use of both virtual and flexible workers.
remain essential to staff at an individual level. Mike Westcott,
Global Hr Director at national Grid, an electricity and gas

1. the 2012 Human resource Competency Study, conducted by the rBl Group and the ross School of Business at the University of Michigan, 2012

Rethi
hink
nkiing Human Resour
ourcces in a Chang
anging Worl
orld
© 2012 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. all rights reserved.
6

Employee engagement measures from

virtual teams typically are lower than
those for on-site teams that work close
to each other.

How has your company’s workforce evolved in these this is more complex than it might appear. as Hugh Mitchell,
areas over the past 3 years? Indicate whether each Chief Human resources officer at royal Dutch Shell, an oil
activity is more or less common at your company now and gas giant, puts it, “the flexibility that you get from virtual
than before. working does have a consequence in terms of engagement.”
He explains that employee engagement measures from
1% 2% 2%
virtual teams typically are lower than those for on-site teams
2% 4% 2% 3% 4% 4%
3% 4% 7% that work close to each other. Survey respondents are less
3% 4%
3% 7%
21%
7% 5% 4% than satisfied with how well they are doing in meeting such
8%
31% 8% challenges: only 24 percent of respondents believe their
33% 33% 40%
37%
Hr department excels at supporting an increasingly virtual/
40% flexible workforce.
40% “even something as fundamental as performance
management requires rethinking”, says Mr. Westcott. “ the
challenge with virtual working environments is trying to work
37% out where people have really made a difference,” he says. “We
38% need a sharper focus on basic things like objective setting,
37%
33% roles and capabilities and metrics and measurements.” athene
31%
van Mazijk, an Hr leader, adds, “We’ve found that we need
26%
to put a lot of effort into how we get people aligned behind
33% common work agendas in remote locations.”
the solution is often to balance the use of traditional tools,
23% like in-person meetings and mentoring, with technological
17% 17% 16% tools, such as instant messaging and videoconferencing.
15% 15%
“You have to invest money and face-time with people
initially,” says Mr. Westcott. “But once you’ve got the basic
Using Using Flex-time Hiring Reducing Outsourc- Hiring
working relationships in place, it’s easy to use the technology
videocon- virtual arrange- workers reliance on ing core former to build connectivity and deeper relationships.”
ference or work- ments on a physical business employees
telepres- spaces (e.g. contrac- office activities as
ence to telecom- tual or premises to contrac­ the Hr function also needs to determine which workforce
technolo- collaborate muting) tempo- (e.g. shift external tors roles are appropriate to work remotely and which are not. Mr.
gies in lieu rary basis to hot- vendors
of meeting desking) Mitchell is not convinced of the advantages of creating large
face-to-face
communities working on a constantly virtual basis because
Much more common now Somewhat less common now
Somewhat more common now Much less common now we are not getting the benefits [from them] in terms of
No change Do not know/not applicable collaboration, innovation and their personal development.
Source: economist Intelligence Unit study: rethinking Human resources in a
Changing World, 2012
Retaining the best talent
Contingent workers, remote workers, temporary workers and retaining talent remains Hr’s biggest concern, according to
part-time workers – the growing array of employee types – survey respondents. If anything, its importance will increase:
present Hr with a challenge. “no matter what contractual or 34 percent of respondents cite retaining crucial skills as Hr’s
work relationship,” says Mark Huselid, Distinguished Professor leading focus in the last 3 years and 40 percent say it will
of Hr Strategy at rutgers University’s School of Management remain so over the next 3 years.
and labor relations, “all these workers have careers and
interests. they need to feel like they’re part of the team.”
Rethinking Human Resources in a Changing World
© 2012 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. all rights reserved.
 7

Retaining talent remains HR’s biggest

concern.

Which of these activities has your company’s HR function focused on most in the past 3 years – and which will
it focus on most over the coming 3 years? Select up to two for each timeframe.

34%
Retaining crucial skills and experience within the business
40%

Expanding our workforce in new markets (e.g. identifying key talent 29%
globally, hiring across borders) 26%

Adopting new technologies (e.g. data analytics, social networking, 23%

web-based HR systems) or expanding the use of existing
technologies 23%

Implementing a new approach to HR to suit a changing business 19%

(e.g. shifting transactions to a self-service environment) 20%

Workforce planning (e.g. preparing for demographic shifts, 18% Past 3 years
changes in core skill set of business) 20%
Next 3 years

18%
Enabling the business to increase workforce productivity
15%

17%
Succession planning for key executives
20%

15%
Managing an increasingly virtual or flexible workforce
20%

5%
Other, please specify
3%

2%
Do not know
2%

0 10 20 30 40 50

Source: economist Intelligence Unit study: rethinking Human resources in a Changing World, 2012

With alarmingly high jobless rates in many countries, it consultancy, found that as many as 84 percent of
seems paradoxical that talent retention would be challenging. employees plan to look for a new job at some point in 2012
But the reasons are clear. Workforces are increasingly – up from 60 percent in a corresponding survey in 2010.
uncommitted. For example, a 2011 online survey of north among economist Intelligence Unit survey respondents,
american employees by right Management, a workforce only 26 percent say that their company excels at retaining
the key talent it requires.

Rethinking Human Resources in a Changing World

© 2012 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. all rights reserved.
8

the key to improving these figures is employee engagement – the key question is, will the greater virtualization of work
increasing the commitment of the workforce to the undermine employee loyalty to the organization and clash
organization. a recent study by the Corporate executive Board2 with the need to retain top talent? the risk exists, but the
found that employees who are most committed to their result is not certain, says Professor Ulrich: “People are
organizations expend 57 percent more effort and are 87 percent motivated by different factors. Some enjoy the social setting
less likely to resign than those who are disengaged. Ms. van of work and find face-to-face interactions a critical part of the
Mazijk says that although the economic climate has helped work experience. But more employees want to do work that
with employee retention, the problem is still growing: “When is meaningful. If remote work is meaningful, people will stay.”
it comes to retaining employees, employee engagement is
crucial. It’s probably two-thirds of the equation.”

2. Source: Corporate executive Board, “the role of employee engagement in the return to Growth”, Bloomberg Businessweek, august 2010

Rethinking Human Resources in a Changing World

© 2012 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. all rights reserved.
 9

I believe... talent management should be the

top priority for HR, but many business leaders
don’t feel that HR is delivering for them. I believe
that is because talent management is so often
Tim Payne
KPMG anchored in the present rather than focusing
Hrtransformation on the unique roles, capabilities and skills the
Center of excellence organization needs to succeed in the future.

the “war for talent” has not let up, form-filling exercises where Paradoxically, I think Hr must
despite global economic conditions. In business managers comply and Hr give away accountability for talent
addition, it is a more sophisticated and departments are disappointed with management in order to increase
complex war – the increasing global the outcomes. engagement and retention. Business
nature of the workforce, virtualization, unit and executive teams must own
Hr can re-define talent management
and disaffection of the workforce – are their talent and be held accountable
by thinking ‘outside-in’, or put another
all making it harder to secure the talent for keeping the best employees. But
way, beginning with the talent they
a business needs to succeed. Hr can and should help prepare them
need rather than their current talent.
for that responsibility.
Senior executives seem to agree
this is important because many
– with eight out of ten in the study Finally, I believe that Hr teams must
organizations are sitting on
seeing talent strategy as their primary expect to be treated as any other core
workforces that are not aligned to
source of competitive advantage. business function – they should help
their futures. those in growth markets
It is easy to assert then that talent leaders to manage risk – in this case,
are still lacking the right talent. those
management should be the top to manage talent risks such as critical
in depressed markets are staffed with
priority for Hr departments. But what skill gaps, key person dependency and
skills that are no longer needed. Both
does it really mean in practice, and succession risk – and they should be
need to transform their workforces.
why are leaders not satisfied with able to demonstrate the return on the
their Hr teams? So talent management should focus investment made in managing talent.
on understanding the unique critical
I believe there is often a gap between Can Hr help their businesses get
roles, skills and capabilities that a
the ambition and rhetoric of talent battle-ready for the war on talent?
business will need to win in the future
management and the practice on absolutely. there has never been a
and then acquiring, developing and
the ground. Many talent processes greater need or a better time to start.
retaining them.
have unfortunately become annual

Rethinking Human Resources in a Changing World

© 2012 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. all rights reserved.
10

The advantages of the HR self-service

function are undeniable.

Part 2
Technology with the power to transform HR

A mobile, online, self-service HR function Sixty-nine percent of survey respondents say that in the last
Hr has gone mobile in an effort to provide employees 3 years, their companies have increased the use of mobile
and their managers with a range of self-service functions. or web-based platforms. nearly half (49 percent) are making
greater use of the cloud to power these.
Compared to 3 years ago, how is technology being used
by your company’s HR function? Indicate whether each Web-based and mobile apps have enabled many employees
activity is more or less common at your company now to handle their own Hr services, including benefits, payroll
than before. and performance evaluations. the shift to mobile and web-
1%
1% based platforms has not always been easy, though. “the
3% 2%
4%
5% 5% 1% 8% 9%
story of Hr erPs is a fairly bloody one in most organizations,”
1%
2% 4% 1% 1% says Professor Huselid. “they cost a fortune and you see
25% 25% 2%
25% 35% 2% 2%
many big companies that can have difficulties just giving the
35%
39% payroll out.”
Yet the advantages of the Hr self-service function
are undeniable. Mr. Westcott cites the following Hr
improvements experienced at national Grid.
45% 44%
40% • Doing the basics better and more efficiently – Moving
38%
toward a more self-service model has improved basic
36% Hr service efficiency while freeing up Hr to focus on
29% delivering more strategic services that add value to the
core priorities of the business.
• Better training – national Grid has moved away
from classroom training toward a more interactive,
demonstrative approach. “this has been a very positive
24% 24% 25% development and had a very powerful impact,” notes
19% 20% Mr. Westcott. “It enables employees to learn in more
18%
bite-sized chunks and in a much more visual manner.”
• Creating a positive culture and brand for current
employees and potential hires – “new technologies
Providing Using Using Using data Using Delivering are playing an important role in how we connect people
web-based technology to social analytics social business
and/or capture network­ for network­ applications via in the organization and how we create a culture that
mobile HR performance ing sites business ing sites the “software
platforms reviews and (e.g. intelligence to reach as a service” is a medium for people,” says Mr. Westcott. “We are
(e.g. create LinkedIn) and to alumni (SaaS) model exploring how we use the technology to create a
benefits, reports on to recruit identify risk or other
payroll) workforce talent cloud-based company brand that is attractive to people joining it.”
skills technologies
Much more common now Somewhat less common now
Somewhat more common now Much less common now
No change Do not know/not applicable
Source: economist Intelligence Unit study: rethinking Human resources in a
Changing World, 2012
Rethinking Human Resources in a Changing World
© 2012 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. all rights reserved.
 11

Data analytics gives HR departments the

long-overdue chance to become more
empirical, to provide hard evidence for
their opinions, thereby gaining
much-needed credibility at the highest
levels of the business.

The next step: data-driven HR Data analytics gives Hr departments the long-overdue chance
Data analytics is the most commonly cited area (selected to become more empirical, to provide hard evidence for their
by 31 percent of respondents) for planned Hr technology opinions, thereby gaining much-needed credibility at the
investment in the next 3 years. analytics will allow Hr to not highest levels of the business. Kate terrell, vice president,
only be involved in managing talent, but to also collect clearer Human resources, Global Products organization, at Whirlpool
information on its supply chain of talent and where the most Corporation, a household appliance manufacturer, explains:
demand for particular skills lies. rather than acting on instinct “When you arm a business partner of the future with analytics,
alone, the Hr function will be able to provide a far more granular and they can share the facts with their teams to help drive
roadmap of how the organization’s people resources need to be better decision-making, it allows you to be much more
reshaped to deliver on the corporate strategy. strategic, much more insightful, and potentially, much more
laser-focused on where you should be spending your time.”

I believe…well thought- out predictive

workforce analytics could become as
important to the CEO as the balance
Paulette Welsing
KPMG
sheet and P&L statement. Technology and
Hrtransformation workforce analytics could really shake up
Center of excellence HR as we currently know it.

While it is encouraging that the consider measures around workforce to strip away even the benefits of the
topic of workforce analytics may sentiment and how complex the line technology around them and hone in on
be in vogue, I question how many of sight is from an individual’s role right what people actually deliver.
organizations have been able to move through to overall corporate strategy.
I don’t think the idea of ‘return
any further than the most basic set of
this level of workforce analytics moves on human capital’ or ‘profit per
measurements.
away from Hr performance to the use employee’ has yet taken a firm hold
at this level, workforce analytics does of qualitative and quantitative measures in most Hr teams’ thinking, but I
little more than provide a record of the to hold a mirror up to the organization. believe it represents the future for
Hr department’s activities (number workforce analytics.
I think there is a third level of workforce
of recruits or training days in any given
analytics, but this is real holy grail stuff. It should be what helps secure Hr
time period for example). It is a purely
this is the stage at which we will be a place at the strategic top table and
historic exercise that is fuelled by the
able to demonstrate the return on the should be the next big thing as far as
vast array of data that emerges from
human capital employed. the Ceo is concerned – not just the Hr
any typical erP program.
Director. that’s because, well-designed,
It’s the ultimate killer metric;
I think that true insight into the predictive workforce analytics could
benchmarking people in terms of the
business begins to emerge at the become as important to the Ceo as the
revenue and profitability associated
second level, when Hr is able to balance sheet and P&l statement.
with their efforts. It would allow us

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12

You have got to see social media as an

opportunity: the idea that you can keep
it somewhere outside the door is not
going to be an effective strategy.

that laser focus is important with increasingly scarce (e.g. radian6) that can track and manage their presence
resources in Hr departments. Mr. Westcott says, on social networks. these new data can be blended with
“Hr professionals need to have measures and data traditional sources to reveal a new level of predictive insight.
because without them you are managing with gut instinct.
Social media is changing Hr across a range of areas, from
You need to have facts and you need to be able to interpret
recruitment to performance and career management. the
the trends and benchmarks so that you can ensure better
implications can be both positive and negative. Forty-nine
decision-making.” all this is particularly important when
percent of survey respondents, for example, say that social
Hr engages with other leaders within the business. Shell’s
networking sites have provided access to new sources
Mr. Mitchell points to the ability of such analysis to help the
of talent. about two-thirds (65 percent) are using social
company as a whole. “You now have access to data that
networking sites to recruit employees. Yet 51 percent of
you never had historically,” he explains. “If you’re having a
respondents believe that these sites have made it easier for
strategic debate about overall health, capacity and depth of
competitors to poach their best people. a similar number
skills in the company, you have so much data that you can do
(49 percent) report that social media makes it harder to
modeling with it. Good Hr people are starting to do that in a
control the company’s message and image and one in four
much more structured way. that’s when you can really add
(24 percent) admit that sensitive information has been leaked
value to the business.”
to the public through such sites.
Fifty-seven percent of survey respondents say that data
analytics are helping to identify future talent gaps. For Do you agree or disagree with these statements
example, BMW, a giant automobile manufacturer, has used about the use of technology at your company?
data analytics to identify where the biggest skills gaps will
the perils of social networking sites may arise from the
emerge in its workforce over the coming decade as a wave of
newness of the medium. Companies are still figuring out what
retirees exit the company.
to do with social media and its implications. Social media makes
taking full advantage of such information will take time. First, business more transparent than ever before, with missteps
Hr needs to develop its abilities in a data-centric environment. more easily highlighted. “We’re apprehensive about social
although companies are submerged in data, transforming media because we don’t really understand it,” says
data into intelligent insight and disseminating the information Ms. van Mazijk. “Social media can be as damaging as it can be
across the organization is more of a challenge. as Mr. productive, and we’re constantly being surprised by the power
Mitchell warns, “there is a real skill issue for Hr about getting of it. Invariably, there are some unintended consequences.”
comfortable with using data in an effective way.” and this is no
national Grid’s Mr. Westcott believes the benefits of social
slight against Hr professionals – after all, statistical analysis
media far outweigh the risks. However, he maintains that
has not been in the job description for very long.
flexibility is essential. “In essence you are asking people to
experiment and try different things, so you need to be open
Operating in a transparent world: the promise as well,” he says. “We have pursued that approach, adjusting
and peril of social media all the time, killing the things that don’t work, finding new
the rise of data analytics is accompanied by new sources of things that do.” Ultimately, says Shell’s Mr. Mitchell, social
information. traditional data sources – such as engagement media needs to be managed because it is not going away.
scores, productivity data or labor market trends – have now “You have got to see it as an opportunity: the idea that you
been joined by less-structured sources like crowdsourcing and can keep it somewhere outside the door is not going to be an
social media channels. this is difficult information to capture effective strategy,” he says.
efficiently, but enlightened companies are harnessing software

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 13

Executive Q&A: Shell’s CHRO on technology and HR

Hugh Mitchell is the Chief Human resources officer (CHro) at energy giant royal Dutch
Shell. Here he offers his views on how technology has affected Hr in the energy business.

To what extent does technology support How effective has technology been in reducing
flexible working conditions at Shell? your cost base?
technology allows us to move work to people From about 2007 to 2011, we took some
rather than having to move people to work. It also 40 percent from the cost base of Hr,
allows more flexibility and enables knowledge predominantly on the back of technology, like
transfer and new levels of collaboration. However, big It systems, global process off-shoring to the
it is not a substitute for having people directly Philippines, Poland and Malaysia, and a lot on
connect and engage with our customers and the transactions side of Hr. there has been a big
key stakeholders. We have expatriates from efficiency play.
something like 70 different countries operating in
80 different host locations, reflecting the value of How important is social media at Shell?
having a globally experienced, professional and
leadership cadre. However, technology allows us Social media is a powerful tool. We use it in
to run, manage and deploy this capability through recruitment and more broadly in our engagement
one set of policies, one algorithm. technology with customers and society at large. We use it
enables the introduction of a much more common more and more to link up all the employees into
approach to policies globally on everything that developments inside and outside of the company.
supports the free movement of people around our It also allows us to connect directly with the public
system. If there is a downside, it is that I think the rather than working through intermediaries such as
visible face of Hr to employees is more remote the media or nGos. In a sense, we can even see
now than it has been. our own employees as another large stakeholder
community with whom you would wish to engage
in the same way.

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14

There clearly remains a vast gulf

between the perceived importance and
the perceived effectiveness of HR today.

Part 3
The future of HR: Eradicating the stigma
It is practically a business truism that the Hr function is not • only 15 percent of our survey respondents see Hr as able
well respected at many organizations. Whether deserved or to provide insightful and predictive workforce analytics.
not, this stigma is clearly evident in our survey results.
• only 17 percent view it as able to demonstrate
measurably its value to the business.

In which of these areas do you think your company’s HR function excels? Select all that apply.

Managing costs 39%

Collaborating with senior management on our people strategy 35%

Implementing coaching and career development programs 29%

Retaining key talent globally 26%

Achieving operational excellence 26%
Sourcing key talent globally 25%
Supporting an increasingly virtual/flexible workforce
24%
Supporting the greater globalization of our business
24%
Preparing for a changing workforce (e.g. retiring workers)
22%
Ensuring that succession planning is in place
22%
Making use of social media (e.g. for recruiting key talent)
20%
Measurably proving the value of HR to the business
17%
Providing insightful and predictive workforce analytics that
provide understanding of the people agenda in businesses 15%

None of the above 5%

Don’t know/Not applicable 2%

0 10 20 30 40
Source: economist Intelligence Unit study: rethinking Human resources in a Changing World, 2012

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 15

HR executives have to be courageous

leaders, able to force an argument on
what is good business.

Strikingly though, 81 percent of respondents see talent Think, understand and communicate in the
management as a key competitive advantage over the language of business.
coming 3 years. there clearly remains a vast gulf between Hr needs to eliminate the jargon of its specialization (the
the perceived importance and the perceived effectiveness of same challenge It continues to face) and begin to link its
Hr today. work more explicitly to business value. the right business
at the very least, Hr has a perception problem. In many language helps to open the door, but it is also important
cases it may have actually failed to deliver real value. as to provide a robust business case for projects. It entails
the shifting challenges of globalization and virtualization thinking more carefully about the specific business
combine with the new technological tools available to enable outcomes of the actions that Hr recommends. What is the
a reshaping of the Hr function, executives should take a impact on customer service, or the reduction in costs, or
number of steps to improve the function’s contribution and the increase in staff loyalty, or other metrics that are more
its image. specifically relevant to the line managers and departments
being supported? Importantly, it is also about taking a fuller
Make the value of HR more prominent and perspective of the whole business, including both internal
understood. factors as well as external business conditions, and creating
Hr strategies to fit. In turn, this requires a far deeper grasp of
Perceptions about Hr in the wider company may arise from the organization’s core business model and strategy and the
the very nature of its role. as the Hr function works behind implications this holds for the rest of the business – to date,
the scenes, many in the organization may not be aware of the something that far too few Hr practitioners have mastered.
good things that it is doing. “this is an inevitable part of being to put this in context, a business that fundamentally focuses
a staff support role where Hr is the architect and the line on providing low-cost goods will require a fundamentally
managers are owners of the work,” says Professor Ulrich. different Hr strategy than one that is focused on delivering
Hr executives need to make sure the company knows and leading-edge innovation.
understands the value they can deliver, in part by insisting
on being included in strategic conversations. “However you Move from administration to higher-value-added
are organized, Hr has to make sure it sits where power sits activities.
in an organization. otherwise you are in a reactive mode a technology-enabled Hr function will allow professionals
and are not making the right proactive contribution,” says to avoid being immersed in the minutiae of record-keeping,
Mr. Mitchell. this is not a one-way street: it also involves transactions and life-cycle processes. But it will also likely
understanding the needs of the whole business better in reduce the number of Hr staff that companies require. these
order to make that contribution. “learning to listen deeply is slimmed-down departments will then be able to focus on
one of the skills that Hr functions need to develop, not only providing more strategic, higher-order services.
in terms of the context of their role but in terms of continually
improving the organization,” says Ms. van Mazijk. Some of Hr’s traditional administrative work will almost
inevitably find another functional home, a shift that 45 percent
Being heard requires leadership, as well as the ability to of respondents expect to occur in the next 3 years. there is
provide valuable input. Professor Huselid notes that Hr no compelling reason for Hr to manage the transactional
executives “have to be courageous leaders, able to force administration of payroll, benefits, pensions or mobility (transfer
an argument on what is good business.” although such administration), particularly where managed on a contractual
leadership certainly would help the profile of Hr, its real outsourcing basis. of course, Hr would remain the architect
benefit comes from what it can offer the business. of these systems. But once the desired model is established,
there is no reason why Hr needs to pedal the wheels.

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16

american express’ Ms. Giglio says there is “no doubt” that do that with their business partners, the more credibility they
Hr will shift to a much more strategic role in the business. gain, the more value they bring to the organization.”
“We have been doing that more and more and we see the
trend happening in all other organizations,” she says. “We Transfer appropriate responsibilities to line
are not personnel. We have hired people from the business managers.
like me to go into Hr. We will have an opinion not just about
Constrained budgets and improved technology are also leading
how to implement something in Hr, but really about what it
to a shift in direct responsibility for employees away from Hr
should look like, the strategic direction.”
and back to line managers as the latter become empowered
to get there, Ms. terrell of Whirlpool believes Hr needs to to handle their own Hr transactions. Cloud-based solutions,
exercise confident self-promotion and prove to the business such as Workday, are making this more user friendly than ever
the value it is capable of delivering. “a lot of it is about Hr before. Professor Huselid sees self-service as the biggest
demonstrating what they can do, stepping up and advising push in talent management at the moment and notes that “it
and coaching, bringing solutions that will enable the business will force Hr into more of a partnership role.”
to achieve its objectives,” she says. “the more Hr is able to

An academic perspective on the changing HR function

Professor Mark Huselid of the School of Management and labor relations at rutgers
University is a leading academic in the field of Hr.

Where do companies need their top talent? What are the implications for HR?
Companies always say, ‘We need top talent Most organizations invest horizontally, not vertically:
everywhere,’ but in truth, you can’t afford best-in­ all the vice presidents get this much pay and so
the-world talent everywhere. there are strategic on. In the new world of strategic jobs, hierarchy
roles critical to the business, and you better have matters, but you really need to invest strategically
top talent in those. all companies have a strategy. in the jobs that matter. that’s a big challenge
enacting it requires a set of strategic capabilities because when you invest in talent you’re looking
and you need to have top talent in the roles that for investment opportunities, you’re looking for
support these capabilities. variability. and this also affects training. Hr used to
say, ‘let’s figure out the one best way and roll it out
to everybody.’ now we’re saying that training has
become much more à la carte.

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 17

Perhaps counter-intuitively, this can be a positive previously were held and executed by Hr need to be held
development. “If we are building great leadership as a and executed by managers.” as a result, she adds, Hr has
cornerstone of a great, engaged culture,” says Ms. van to find a different value proposition. “the function can no
Mazijk. “the employee’s direct manager has to be central longer be surrogate managers or leaders,” she says. “It will
to the relationship with an employee. In order to have an shift from being the deciders of a particular outcome to the
impactful relationship, there has to be accountability for advisors of the direction of strategy.”
many transactions. So a number of the transactions that

Rethinking Human Resources in a Changing World 17

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18

I believe … that HR functions have tried for

the past 15 years to transform themselves
into strategic players and earn a place at the
leadership table. But they’ve done so with limited
success because they have focused on rolling out
generic HR models and universal best practice,
Robert Bolton rather than customized solutions that support the
KPMG Hr value drivers of the business. Now they’re caught
transformation
Center of excellence in what I call the ‘doom loop’.

I should be encouraged by this but can’t the net result is a diversion of services organization reporting to a
help feeling I’ve heard it all before – for attention away from where the real Chief administrative officer? a much
pretty much each of the past 15 years. value lies – in pursuing solutions smaller team of “people agenda
that’s how long I reckon that Hr has tailored to the unique circumstances architects” could then report into
been stuck in what I term its current and requirements of any given someone such
“doom loop”. Fifteen years of pursuing business. What makes the situation as a Chief Change officer.
generic best practice and benchmarks worse are the inevitable delays that
Some businesses could go even
in the hope of pinning down a position typically follow when such fixes
further and have leadership taking
of influence at the top table. Fifteen are delivered in a business of any
direct charge of their people programs
years in which this goal has been meaningful size.
with support at the strategic level
pursued at the expense of actually
at the conclusion of all that, strategic from external specialists and
driving specific value in organizations.
involvement and influence is actually consultants.
Fifteen years in which the status of Hr
diminished and so the cycle repeats.
has not been advanced. Whatever the future may hold, I
that’s the doom loop; that’s the vicious believe that Hr leaders need to
Quite simply, the problem is that
cycle from which Hr finds itself unable consciously break clear of this doom
there is a perceived lack of credibility
to break free. little wonder, then, that loop. another 15 years of pursuing
within Hr and an inability to deliver
Hr professionals admit to the stigma generic best practice will simply
value. In an effort to rectify this
attached to their profession. not add value to the business or the
problem, symptomatic fixes are
reputation of the profession.
pursued, often via the latest generic Instead, what if in the future much of
best practice models. Hr was consolidated into a shared

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 19

Conclusion
Many of the challenges identified in this report are long identifying ways of adding value to the rest of the business,
standing. But they are no less urgent for that. Indeed, there and proactively meeting the needs of Hr’s customers.
is no escaping the prospect of a shrinking and weakened Hr
For many Hr functions, data analytics is an ingredient
function in the coming years. Quite simply, Hr has to break
that has long been missing, for example, it is a way of
out of the trap it has been stuck in for far too long.
providing hard evidence about employee-related needs and
Unfortunately, there are no simple solutions, no generic opportunities and the impact of Hr. the insights that can be
approaches or best practices that will suddenly enable the gleaned from rigorously collecting and analyzing data, and
Hr function to become more effective and respected. Hr creating insightful forecasts on the back of it, is a key tool in
needs to focus on delivering unique talent solutions tailored enabling Hr to shape the organization’s people resources to
to each company’s circumstances and requirements. deliver on its underlying corporate strategy.
to do this, Hr must develop a deep understanding of the But this is not just about employing the latest technologies or
business – in the same way, and using the same “language”, tools. It is about the Hr function using an empirical approach
as other managers. the measures it proposes must be tied to deliver a unique and differentiated people management
to business outcomes: the impact on customer service, the strategy that is closely aligned with the company’s goals –
reduction in costs, the support of a specific new growth area, and in the process of doing so, restoring Hr’s much-needed
the increase in staff loyalty and so on. credibility at the highest levels of the business.
While communication has a role to play, particularly when it this study suggests that Hr perceives its biggest current
comes to managing expectations – after all, Hr needs time challenge to be seizing the opportunity to transform itself into
to do its work – the required antidote is a relentless focus on a strategic player.

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notes

© 2012 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. all rights reserved.
© 2012 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. all rights reserved.
Contact us
Paulette Welsing Robert Bolton Tim Payne
Global Lead Global Lead Partner
HR Transformation Center HR Transformation Center HR Transformation Center
of Excellence (Americas) of Excellence (Europe) of Excellence (London)
T: 1 212 872 7635 T: 44 20 731 18347 T: 44 78 015 22228
E: pwelsing@kpmg.com E: robert.bolton@kpmg.co.uk E: tim.payne@kpmg.co.uk

kpmg.com/hrtransformation

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Publication name: rethinking Human resources in a Changing World

Publication number: 121083

Publication date: october 2012