Duncan Brown says that HR must snap out of its tunnel vision on efficiency savings to support more sustainable growth
'Stocks Roar Back!' trumpets my City AM front-page on the morning of the 8th of May, perhaps rather ominously appearing alongside a description of the Institute of Directors latest madcap ideas for employment law removal and no fault dismissals. Let that free market roll!
But wait a minute? Is the economy really back to 'normal' growth?
Take HSBC, generally held to be our best performing major bank, which received no government bailout money. Latest results out yesterday showed profits up 95% on the year to $8.4 billion and return on equity up from 6.4 per cent to 14.9 per cent. Pretty good?
Well yes, but the growth is largely explained by a drop in bad loans and particularly, excellent cost cutting. The latest efficiency drive saw it lose another 1,000 staff, with further cuts expected to be announced next week, taking total headcount down well ahead of plan by more than one fifth to under 250,000. Sales revenues across its investment banking and corporate units were essentially flat however, at a weaker-than-expected $18 billion.
Which exactly reflects the pattern in Aon Hewitt's just released 8th Annual HR Barometer of HR leader priorities and experiences across 12 European countries, covering employers with more than 2 million staff. Improved delivery by HR is reported in areas such as labour cost cutting and narrowly focused, short-term responses to new requirements on corporate governance and executive pay.
But much less progress was reported in the areas which HR directors rate as having the greatest potential to impact on long-term corporate performance, such as talent management, leadership development and rebuilding employee engagement. Cost cutting and challenging productivity targets were overwhelmingly the most important drivers of HR actions over the past year.
So perhaps it’s not surprising although 64 per cent of surveyed companies measure employee engagement, only 34 per cent had any plans to address and improve it, with 57 per cent for example identifying shortfalls in their employee communications and half in managing culture change. Educating line managers, improving learning and development, and the total rewards offer, were all highlighted as being required by over half of the respondents.
Our study concludes that like their employers, HR functions are in danger of being caught in a vicious circle after another year of short-term cost-cutting-focused activity in a no-growth economy, waiting forlornly for recovery. As Sunday Times Economics Editor David Smith put it recently: "We may be entering a period in which both employment and wages are weak: this is not quite the worst of all worlds, but it is heading that way."
Possibly the only way for HR leaders and employers to break out of the depressed and depressing downward spiral, our research concludes, is to "pro-actively invest in their people, their skills and their processes", and to "push the long-term agenda hard with their fellow business leaders".
So what's your HR agenda looking like for the rest of 2013?