Talent management emerges as top European HR challenge

Boston Consulting Group and European Association for Personnel Management conducted a survey with 1,350 executives in 27 EU countries

Dusseldorf (June 1, 2007) - European companies will face five major human resources challenges in the future, with managing talent being the most critical, according to a recent survey of more than 1,350 executives from 27 countries in Europe. This survey was conducted jointly by The Boston Consulting Group (BCG) and the European Association for Personnel Management (EAPM). While the top five topics that emerged in the survey are all long-range and strategic, HR executives seeking to gain the trust of senior executives also need to focus on basic HR duties such as recruiting and hiring. One of the key findings of the survey is that executives outside of HR are much more likely to approve of the performance of their HR department if the department masters basic HR activities.

In some countries, specific circumstances are catapulting topics other than talent management to the top of the HR agenda. Managing demographics, for example, was the top future HR issue in Germany, Austria, and Switzerland, where 250 executives particpated. "Corporate executives in Europe generally agreed that they have a demographic problem and that they have not yet devised strategies to fully combat it," says Rainer Strack, a BCG partner and managing director based in Dusseldorf. BCG and EAPM are releasing the survey results in a report, The Future of HR: Key Challenges Through 2015, a thorough and highly comprehensive look at European HR practices. The report provides in-depth analysis of the most important HR issues in nine focus European countries and a quick overview of HR conditions in other European nations. In addition to taking a quantitative view of the European HR scene, BCG and EAPM rounded out their research by conducting more than 100 interviews with senior executives in 12 countries. "Human resources has never played a more important role in business than it does today," said Hans Böhm, general secretary of EAPM. "We live in an age of intellectual property and knowledge-based industries; we live in an aging society; we live in a global economy offering multiple job opportunities for individuals. HR executives must face these challenges to draw on human capital as a major source of competitive advantage."

The survey examined the future importance of 17 HR topics. Five topics emerged as the most important in future, but they also respresent the capabilities that the companies are weakest in. So far only 30 percent of the respondents said that they have begun to tackle all five of the top challenges for the future. The report highlights concrete action steps that HR professionals should take in these areas.

Managing Talent. Talent shortages loom, both in Europe and in new markets abroad, and companies must take steps now if they hope to address these shortages. To fully exploit global labor pools of highly skilled professionals, companies should source their talent from throughout the world. Companies should also ensure that they target their offerings to meet the needs and goals unique to different ethnic groups and nationalities, women, and older workers.

Managing Demographics. With the workforce in western Europe graying, European companies must mitigate two different risks: the loss of capacity and knowledge as workers retire and the loss of productivity as the workforce ages. A company should introduce a job family structure to de¬average the demographic risk and to identify specific initiatives that address recruiting as well as cross-job qualification, and transfers.

Becoming a Learning Organization. Corporations must prepare their employees to cope with the complexities and accelerated speed of an increasingly global economy. Simply spending more on training programs won't automatically translate into enhanced productivity. Rather, executives must clearly define and measure the return on investment that they expect from learning initiatives. By making program goals and program outcomes tangible, companies can ensure tangible improvements.

Managing Work-Life Balance. As the boundaries between private and work life blur, employees are increasingly selecting-or rejecting-jobs based on how well they can help the individuals achieve work-life balance or advance personal goals and values. In order to attract and retain highly talented individuals, companies will therefore need to offer flexible work arrangements. They will also need to appeal to employees' growing desire to derive a sense of greater purpose from their work.

Managing Change and Cultural Transformation. As companies hire workers from around the globe and enter new markets with increasing speed, managing corporate and cultural change will become a critical capability. Already, our research showed, executives expect their company's HR functions to develop tools and methodologies that aid line managers in communicating to employees the need for change-and empower them to bring about such change.

While managing talent was one of the top two HR issues in 17 of the 19 countries with more than 20 responses, other issues arose as the most critical in individual countries.

France: Among the top five HR topics identified in the survey, managing talent and managing demographics were most important. Eager to modernize their companies and improve productivity, executives were also concerned with enhancing employee commitment, measuring HR and employee performance, and improving performance management and rewards.

Italy: Respondents recognize that their nation is undergoing rapid modernization, rising immigration, and increasing global competition. Consequently, managing change and cultural transformation, managing globalization, and managing diversity are the top issues.

Russia: Only one of the top five HR topics ranked on Russia's national HR agenda: managing talent. Instead, managing corporate social responsibility emerged as a top priority, largely because local governments are pressuring firms to compensate for shortfalls in local budgets and because Russian companies are eager to show the world-and potential targets-that they can be good corporate citizens.

Spain: Executives are worried primarily about managing talent and becoming a learning organization, a reflection of the country's emergence as an economic force and its needs for new skills in formerly state-owned companies. Facing a large influx of immigrants, executives are also concerned about managing diversity.

United Kingdom: Executives told us that their top business focus was managing the human resource implications of growth in an increasingly global context. Consequently, executives included two of the top five HR topics in Europe on their national agenda: managing talent and improving leadership development.

To help enhance their HR capabilities, companies should secure highly visible support from top management for HR projects: Even though only about one-third of HR departments reported having the support of top managers behind their projects, those that garnered it appeared to benefit considerably. These HR functions received performance scores that were 65 percent higher on average than those received by functions lacking such support.

Survey Design and Methodology BCG and the EAPM conducted an anonymous Web-based survey that solicited in-depth feedback from HR and other executives on the final 17 HR topics; receiving 1,355 responses. Respondents represented 27 countries and all relevant industries in Europe. Slightly more than half (51%) of the respondents worked at small and medium-sized companies employing up to 1,000 workers; the remainder worked at companies with a workforce exceeding 1,000 employees. HR professionals accounted for 82 percent of the survey respondents, with other executives accounting for the remainder.

For more information, please contact Heidi Polke: +49 89 2317 4594; Polke.Heidi@bcg.com

About The Boston Consulting Group
Since its founding in 1963, The Boston Consulting Group has focused on helping clients achieve competitive advantage. Our firm believes that best practices or benchmarks are rarely enough to create lasting value and that positive change requires new insight into economics and markets and the organizational capabilities to chart and deliver on winning strategies. We consider every assignment to be a unique set of opportunities and constraints for which no standard solution will be adequate. BCG has 64 offices in 38 countries and serves companies in all industries and markets.

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