Businesses can alleviate the skills’ challenge by focusing on workforce planning, talent management and the employee experience, according to the key findings of PwC’s 2019 HR Directors survey.
The survey was carried out in late 2018 with 81 Irish HR leaders from Ireland’s top companies across all industry sectors providing their insights and opinions on the key issues in the human resource management space.
The report also identifies that talent constraints are stifling innovation and remain a key challenge. It also identifies significant changes to reward and performance management are needed, together with the HR function requiring better value from data analytics. It shows that culture and diversity are a key area of focus for HR directors.
Pictured at the launch of the HR Directors' Survey are (left to right): Louise Shannon, Senior Manager, People and Organisation; Sandra Coughlan, Group Talent Manager at DCC; and Gerard McDonough, Director, People and Organisation.
Three-quarters (75%) of Irish HR leaders are currently experiencing talent constraints, up from 45% in 2017; 68% are expecting these constraints to continue. It is no wonder, therefore, that 85% of Irish HR leaders stated that ‘attracting and retaining key talent’ is the top HR challenge for 2019. These findings are in line with views from Irish CEOs who said the skills challenge is at a 13-year high. Key skills gaps, according to the survey, are in areas of technology, engineering, finance and regulatory roles. The talent constraints are leading to significant impacts on the organisation with the majority reporting reduced innovation and falls in quality standards as the biggest impacts.
At the same time, over half (56%) of HR leaders are planning to expand their workforce in the year ahead, up from 45% in 2017. But just four out of ten (40%) are using strategic workforce planning to identify the specific skills and competencies required in their future workforce. A clear message from the survey is that organisation’s (and HR functions) need to build, develop and enhance their capability and output with regard to workforce planning and HR analytics.
Louise Shannon, Senior Manager, People and Organisation said: “the survey highlights that Irish businesses need to do more on strategic workforce planning. It is important as it gives organisations the ability to evaluate their current workforce and assess future requirements by looking at the projected gap between workforce demand and supply. Leveraging technology to deploy a systematic approach that matches the business strategy with the workforce needs is critical to ensure you can flex your resource model to have the right people, in the right place at the right time.”
Organisations with talent management programme’s in place foster a talent-orientated culture by recruiting skilled people and developing these skills with the expertise and knowledge to take on leadership roles in the future. Less than half (47%) operate a clearly defined talent management programme to identify key talent, but at least this has improved from 31% in 2017. A further 24% know who their key talent is but worryingly they don't have a formal talent management process in place. It is good news that of those who have talent management programme’s, 89% measure their effectiveness, up from 61% in 2017.
The survey reveals that all HR leaders surveyed are planning a pay increase in the year ahead, with the majority (89%) forecasting this pay increase to be 2.5% on average. Individual performance (67%), external benchmarking (59%) and company performance (54%) are the top drivers for salary increases.
Creating the right reward strategy is essential to attract and retain key people. Yet over a third (35%) are not happy that their reward strategy appropriately remunerates their best people, granted this has improved from 46% last year. At the same time, a large majority (86%) are planning to make changes to their reward structures, the most popular being revising the performance management system and introducing a recognition scheme or annual bonus.
Over half (56%) revealed that they do not tailor their reward offerings to meet different generational needs of their workforce, which is an improvement on 2017, where it was 96%. A further 25% indicated that this is something they are considering.
Gerard McDonough, Director, PwC People and Organisation, said: “Today’s employees want jobs that are intrinsically rewarding and that fit their values. And though the meaning of work is different for each person, companies that act now to address these demands will gain a lasting competitive advantage”.
Irish HR leaders are increasingly concerned about the effectiveness of their performance management programmes. While 90% of HR leaders reported that they operate performance management programmes, over six out of ten (63%) admitted that these programmes are only ‘somewhat’ or ‘not effective’ at all. Line manager capability (72%) is the biggest blocker to improved effectiveness.
The survey suggests that significant change to performance management programmes is on the way. For example, three-quarters (76%) confirmed that they either have reviewed or are currently reviewing their programme. The key changes include carrying out more frequent performance discussions (64%) and making it more individualised with real time feedback (51%). A quarter are moving to a future focused model and one fifth are removing the annual rating system.
Creating a compelling work experience for employees through active engagement is an ever-increasing priority for businesses. The vast majority (85%) measure employee engagement, up from 79% in 2017. The key benefits, according to the HR leaders, include creating a shared value and culture (66%) and improving job satisfaction (57%).
Gerard McDonough, Director, PwC People and Organisation: “The survey results show an increased focus in the area of culture. However, for the influence of culture to translate into real business results, culture, strategy and operations must be aligned. By defining your organisation’s culture aspirations, and identifying and prioritising the critical behaviours to evolve your culture, you can drive performance and advance key business needs.”
83% of Irish CEOs recently confirmed that the data they receive about their employees’ views and needs is critical for business decision making, but only 23% stated that the information they receive is adequate. 74% of Irish HR Leaders stated that they do not currently have a data analytics capability within their HR function and only 35% use workforce data and analytics to inform decision-making. However, the majority (56%) plan to increase their spend on HR technology in the next 18 months with data analytics being the top priority.
Louise Shannon, Senior Manager, People and Organisation added: “The power of data-led insight is transforming the way organisations make better decisions. Better data is pivotal to today’s strategic workforce planning, talent management, employee engagement and retention, performance management and mobility decisions. By using people analytics, organisations can cut through the noise and get a clear picture of what is working and what isn’t.”
Over half (52%) of respondents reported to have developed a diversity and inclusion strategy with a similar proportion (51%) having calculated their gender pay gap. In Ireland, the most recent OECD/Eurostat information shows that we have a 14% gender pay gap in favour of men. Almost half (49%) are of the view that there are significant gains to be made from achieving gender pay parity and one out of two (48%) have discussed the topic at Board level.
Gerard McDonough, Director, PwC People and Organisation, said: “The introduction of mandatory gender pay gap reporting is a positive step for diversity and a welcome development for gender equality. For true lasting change, organisations really need to look behind their gender pay data and understand the cause of the gap and then come up with actions on how they are going to make progress.”
Brexit and the prevailing uncertainty in relation to the free movement of people is a major issue for HR leaders. Less than six out of ten (58%) admitted that they understand the likely impact of Brexit on their workforce strategy with four out of ten (40%) reporting that they are concerned about the impact of Brexit on their employee mobility.
Over half (55%) of Irish HR leaders admitted they are either ‘somewhat’ or ‘not confident’ in relation to the effectiveness of their cybersecurity activities regarding their HR data and processes.
At PwC, our purpose is to build trust in society and solve important problems. We’re a network of firms in 158 countries with over 250,000 people who are committed to delivering quality in assurance, advisory and tax services. Find out more and tell us what matters to you by visiting us at www.pwc.com.
PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity. Please see www.pwc.com/structure for further details.
© 2019 PwC. All rights reserved
Director, PwC Ireland (Republic of)
Tel: +353 1 792 6170
Senior Manager, PwC Ireland (Republic of)
Tel: +353 1 792 5079
Corporate Communications, PwC Ireland (Republic of)
Tel: +353 1 792 6547