Human Capital Identified As A Priority In CEO Challenge 2014

From the CEO Challenge 2014 from The Conference Board, CEO’s report that Human Capital (raising employee engagement) is pivotal for companies wanting to reshape how their organizations work and succeed.

Human Capital is cited as either the first or second priority in every global region surveyed and contributes to other top-ranked challenges including:

  • Customer Relationships (sharpening understanding of customer/client needs),
  • Innovation,
  • Operational Excellence, and
  • Corporate Brand and Reputation (enhancing quality of products and processes, ensure ethical accountability throughout the organization).

The Conference Board advises, “(…) without a talented, engaged and properly motivated workforce, achieving progress against these challenges is impossible.”

Human Capital is the number one challenge in both Asia, India and Europe and number two in the United States, China and Latin America. Customer Relationships is number one in the U.S. and Operational Excellence is number one in Latin America.  Innovation is number one in China.

The Human Capital strategy (raising employee engagement) which ranked globally eighth in 2012, and third in 2013, is now ranked second.

One of the participants, George Barrett, Chairman and CEO of Cardinal Health said, “There is a lot of room for experimentation and innovation, which makes human capital more important. That’s why this is all (innovation, customer relationships, human capital, operational excellence) connected. If I don’t have the people that are uniquely, distinctly better than my competitors providing those unique insights, than I can’t compete effectively.”

CEO’s throughout the U.S. consider the development of an engaged and motivated workforce as a critical element to lead organizational growth.  “Raising employee engagement in general” is ranked as a top strategy for Human Capital, and “Raising employee engagement to drive productivity” is the number two strategy to drive operational excellence. “Creating a culture of innovation by promoting and rewarding entrepreneurship and risk taking” and “Finding, engaging and incentivizing key talent for innovation” are two of the top strategies for meeting the innovation challenge.

A major human-capital related issue identified by The Conference Board is “diversity in our leadership ranks.”  The CEO Challenger 2014 report states, “CEO’s across the globe are clearly concerned about diversity – no region has it lower than number four on the hot-button issue list.  (…) CEO’s have come to the realization that diversity among a company’s leadership team is simply good business. Diversity of views and experiences allow for greater awareness of customer and consumer needs and tastes, especially as a company enters new markets, looks to attract new market segments, or creates new products and services. Diversity is especially important given the rise in purchasing power among women around the world and with the emerging middle-class consumers in markets like China and India, where buying decisions for certain goods will, more often than not, be made by women. Diversity (or lack thereof) affects the corporate brand and makes a difference to both potential consumers and “free market” top talent when considering similar products or similar employees.”

Diversity and leadership are treated differently in different regions and countries.  Praveer Sinha, Chief Executive Officer of Tata Power Delhi Distribution Limited observes, “There is definitely a difference between leadership in the West and India (and Asia). Basically, there is more involvement with employees – not only professional but personal involvement also. So leadership today is much more personally engaged and involved with employees and their families, which is not so prevalent, I think, in Europe or in the U.S.”

The report continues, “When asked about the attributes and behaviors that future leaders must exhibit to be successful, CEO’s rank “Integrity” number one, followed by “Leading Change” and “Managing Complexity”.   Asian CEO’s underscoring their selection of “Innovation” as the second top challenge, rank “Entrepreneurial mind-set” as the most important attribute.

“Increasing efforts to retain critical talent” moved from ninth place last year to a tie for fifth this year.  At the same time, in addition to retention, CEO’s in the U.S. are more willing than their peers elsewhere to recruit outside their own entities to fill talent and skill gaps.

Lee Weng Chong, President-Asia Pacific, Telleborg Sealing Solutions told The Conference Board, “So, when we’re talking about talent or lack of talent, for many organizations and for ours, too – it creates a barrier to growth. In other words, growth is very dependent on the talent that we have. So, if we have good talent available, then we seem to achieve a lot more.”

Per the report, the top ten strategies to meet the challenges in Human Capital are”

  1. Provide employee training and development.
  2. Raise employee engagement.
  3. Improve performance management processes and accountability.
  4. Increase efforts to retain critical talent.
  5. Improve leadership development programs.
  6. Focus on internally developed talent to fill key roles.
  7. Enhance effectiveness of the senior management team.
  8. Improve effectiveness of front-line supervisors and managers.
  9. Improve corporate brand and employee value propositions to attract talent.
  10. Improve succession planning for current and future need.

Ramakrishnan Mukundan, Managing Director and Chief Executive Officer at Tata Chemicals Limited said, “If we don’t have a highly engaged workforce and we don’t give people latitude or don’t give them enough scope to grow and learn, they just find another place to grow and learn.”

Franz-Josef Schurmann, Country Head of Infosys-Germany said, “I also believe  – and I’ve worked in Anglo-American, German and emerging markets – that the art is not to create the perfect manager with all the versatility and skills, but rather to equip leaders with the skills to identify complementary teams. The art is to put leadership teams together which can outperform the competition through collaboration, not creating two or three individuals who are the best leaders with all the right traits.”

The Conference Board reports, “After being mostly an afterthought of sorts compared to other CEO challenges in recent years, “Corporate Brand and Reputation” climbs into the top five globally in 2014 while rising in importance in every region, particularly in the United States, where it went from number eight in 2013 and 2012 to a tie in fifth spot this year.”

The report continues, “Surprisingly, while human capital practitioners are focused globally on building and leveraging a strong employer brand and employee value proposition to attract and retain talent, especially in highly competitive labor markets in emerging economies such as Asia-Pacific and China, CEO’s in the United States and Latin America do not see it as an essential tool to meet the Human Capital challenge. ‘Improve corporate brand and employee value propositions to attract talent’ is the twelfth-ranked strategy in the United States and thirteenth in Latin American in the human capital space. It is tied for fourth in Europe and seventh in Asia.”

“The Tata brand name gives tremendous comfort to people who look at joining the company and retiring from there,” says Praveer Sinha, Chief Executive Officer or Tata Power Delhi Distribution Limited.  “I have colleagues who are second-generation, third-generation, and some fourth-generation employees working in the company. So we’ve been able to build this brand equity with the employees. Poaching doesn’t take place because empowerment and opportunity are being provided.”

Overall, companies must create an engaged and motivated staff along with clear organizational alignment to initiate and maintain success in today’s marketplace. It’s a challenge clearly identified by the CEO Challenge 2014.

The report is based on responses from 1,020 CEO’s, presidents and chairmen to The Conference Board Challenge survey, distributed between September and October, 2013. Respondents were asked to rank order their top five challenges from a list of ten.

For the survey, “Human Capital” was defined by The Conference Board as the full spectrum of the employee/employer experience, which includes understanding global labor markets and workforce readiness, determining the skills and competencies companies need to compete and win; creating a compelling employment brand; managing compensation, benefits, and wellness programs; attracting, developing, rewarding, engaging, and retaining diverse talent; managing succession; and articulating the impact of these efforts in business terms.

For a full copy of the CEO 2014 Challenge report, contact either Meg Robinson at The Conference Board  (meg.robinson.mm@conference-board.org) or myself at Mike.Temkin@shaker.com .

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