Top 5 HR Challenges for 2010

HRM 31 Dec 2009

2009 has been the year of grim HR buzzwords - retrenchments, hiring freezes, recession and budget cuts are some of the first to come to mind. Jobs in most industries and roles were major casualties of the global financial crisis, thrusting leaders into an unflattering spotlight and straining relationships between HR and staff.

There are plenty of reasons for HR to celebrate the arrival of 2010 in Singapore. For the local workforce, economic growth is imminent as major projects like the inaugural Youth Olympics and two integrated resorts create new employment and training opportunities.

While a new year signals the arrival of opportunities for jobseekers, it does not necessarily translate to a fresh start for employers. Dealing with the aftermath of the financial crisis will not be an easy task. Between managing expectations, strengthening trust with employees, and continuous efforts to control costs, HR will have its hands full with a number of different people-related issues.

At the same time, it’s not all bad news for HR. According to Mercer’s global Leading through Unprecedented Times survey, published in June, companies in this region are more upbeat about their economic prospects. Indeed, HR issues will be more pronounced than ever before, but the mood in boardrooms appears to be lifting as the period of recovery begins.

When asked to enumerate the likely challenges of 2010, most HR consultants say they are concerned with resources for managing talent. Among their chief priorities are talent retention and skills development as a strengthening economy opens more doors to recruits. Branding and attraction will also be an issue for HR, particularly in companies whose reputations have suffered from decisions to cut staff.

The end of the economic downturn may be drawing near but employers still have to look carefully at their balance sheets. Residual uncertainties from a year of pay slashes will continue to have an impact on employee morale in 2010. Companies will be scrambling to adjust salaries and pay bonuses to keep up with employee expectations and maintain loyalties. For this reason, compensation and benefits issues were also prominent on experts’ lists.

If 2009 made one thing apparent, it’s the way HR functions in locally-based companies link to those in offshore sites. With the economic crisis affecting economies on a global scale, this was a year for re-assessing international assignments. Employers had to adjust remuneration packages according to the sudden weakening or strengthening of currencies in host countries. Additionally, overseas assignments might have been seen as major career incentives before budget cuts forced companies to scale back. HR will have to communicate across borders to restore and re-assess expatriate packages in the upcoming year.

Employers and employees agree that 2009 was a year of inequity – whether in terms of salary cuts compared to rising costs of living, or overtime hours versus leisure time. Achieving Work-Life Balance shifted from the check-list to the wish-list in 2009, but it is likely to be solidly back on the agenda in 2010. The fact that experts are moving it to 2010’s HR challenges list is both good and bad news. It is heartening that work-life balance will become a priority, and that HR may be better equipped to give employees that much-needed break. However, like each of the top five challenges facing HR professionals in 2010, it indicates HR will certainly have its work cut out for it.

5  Perceptions of HR

Experts found it difficult to rank something so subjective and multilayered, but most agreed that this is an issue HR must address. HR has been one of the most vilified departments in many organisations this year, and its efforts to limit attrition were largely underestimated. Not only does HR have to improve its image in the eyes of employees, it has to strengthen ties with other business departments.

Research from Talent2 shows HR is still seen as a back-office, transactional and operational function in Singapore and much of Asia. Buy-in from senior management is often hard to come by as well. Yet, high expectations await HR.

In a recent Hudson Report, 12% of survey respondents said a dominating priority would be ensuring HR strategy is the cornerstone of the overall corporate strategy. HR departments must examine their effectiveness and the way they deliver services to ensure it becomes a high-performing function moving into 2010.

Suggestions for improvement vary according to consultants. Some suggest HR outsourcing as an important solution. It enables HR to decrease its administrative burdens and practice a more direct approach to business needs. Others believe leaders should work to give a stronger definition to HR roles in the organisation so they are more aligned with business requirements.

4 Cost control

Cost control will be a corporate-wide priority in 2010, but there will be added pressure on HR to manage budgets through process and policy standardisation. HR must consider cost-efficient solutions in areas such as compensation and benefits and training programmes.

But if forecasts show an upturn is on the way, why will cost control still be a challenge? Talent2 reminds employers that recovery in 2010 will not be so drastic that employers no longer have the challenge of dealing with budget constraints. Organisations will not restore budgets and head counts to anything near pre-crisis levels as they want to maintain continuous efforts to be as distanced from the effects of the economic downturn as possible.

In multinationals particularly, the mantra “do more with less” has trickled from headquarter offices in the US and Europe to Asia, despite this region faring relatively better in the crisis. But economic uncertainty is not an excuse to ignore the backbone of any business: the people.

According to the ECA International 2009 Assignment Benefits Survey, HR is under significant pressure to reduce costs for international assignments. Two-thirds of participants reported that they intend to review various facets of their benefits policy in the upcoming year. However, employers are also struggling to find a balance between cost management and finding the right talent to post overseas. These conflicting requirements will be a major HR consideration in 2010.

Mercer consultants suggest looking for measures to contain costs. Organisations can leverage economies of scale from regional frameworks on executive pay, employee health and benefit programmes, and training and development. Meanwhile Hudson consultants predict that some HR departments will go through restructuring themsleves. They may opt to outsource more non-essential activities, they told HRM.

3 Employee Engagement

If there is a lesson to be learned from past recessions, it’s the erosion of employee commitment in organisations. Cost-cutting measures and other effects from the economic downturn have impacted levels of trust and loyalty in employees. Many are feeling stressed and nervous. The upturn will see some of an organisation’s best and brightest workers leaving to join competitors if their employers don’t take immediate steps to motivate and retain them.

Hudson says 14 % of respondents to one of its recent surveys expect employee engagement and re-engagement to be linked closely with staff retention next year. The HR challenges lie in reconnecting with the mood of the workforce, rebuilding trust and collaboration, and driving continuous and transparent communication.

A great emphasis should be placed on measuring employee engagement levels within organisations. Employee surveys, for example, will be very useful in highlighting where HR is succeeding and which areas can be improved. HR should know its key talent segments and find out what they value. Mercer consultants say employers might be surprised at new trends that are emerging, particularly in areas of work-life balance.

If resignations become more frequent, HR must structure its exit interview process to find out why people are leaving, and what it can to do retain current and future employees. Feedback should not just address HR’s initiatives - leaders should also be assessed on their roles in motivating employees.

Besides feedback, HR can be proactive with its retention efforts. Change management programmes must adequately address employee needs. Paying special attention to career development opportunities will send a message to employees that their growth in the organisation is encouraged and valued. Leaders must be deployed and equipped at all levels to inspire employees to work towards a common goal in order to minimise distractions and increase productivity.

2 Compensation and benefits

The economic downturn has changed the way HR approaches compensation and benefits. According to Hudson, 2010 will be a year of realigning total rewards programmes to meet corporate objectives. Research from Talent2 suggests adjusting salary and rewards packages will be half the battle for HR professionals in the upcoming year. Finding creative and cost-effective ways of combining tangible and non-tangible rewards will also be a major challenge.

Employers will benefit from paying particular attention to using compensation as a retention and motivational tool, or leveraging non-financial rewards to keep employees better engaged. Hudson says HR departments will be exploring more effective ways of communicating benefit plans that offer individual flexibility and build appreciation, trust and commitment.

Not only will HR have to be more innovative in this key area in 2010; they will also have to take a more individualised approach to rewards and recognition schemes. Incentive programmes should target all employees rather than just sales personnel who have traditionally been the focus of such initiatives. Out-of-the-box thinking will be crucial in 2010 as companies strive to choose rewards which are relevant and motivational.

Organisations which make it a priority to build customised compensation and benefits programmes are in good company. According to Mercer’s 2009 Employee Benefits Choice survey, near-100 percent of Singapore companies believe providing employees with a choice in the benefits that they receive is crucial for responding to diverse workforce needs and values. Employers also acknowledged the importance of implementing employee choice programmes in order to remain competitive in the marketplace.

1 Talent retention and development

This issue makes it to the top of the HR challenges list for a number of reasons. While the global financial crisis helped to retain staff in 2009, employees will be less cautious and more inclined to change jobs during the recovery. Likewise, competitors will once again able to afford to hire and poach. In particular, employees who were more closely scrutinising remuneration and benefits, job security and career advancement prospects in other companies will gladly make the move as hiring freezes are lifted. Proactive HR strategies must be implemented now to retain employees.

According to the Hudson report, 22% of respondents expect that talent development will take precedence as HR’s first priority moving into 2010. Improvement of talent development strategies and delivery will be key to leveraging the available talent as effectively as possible, especially for success-critical positions.

Mercer adds that developing high-potential talents for the future should also be high on HR’s agenda. Being one of the top executive talent challenges faced by companies in Asia, leadership development initiatives must be stepped up in order to avoid talent shortages at the most crucial levels.

Employers should ensure future leaders are given access to future development and learning opportunities to accelerate their skills development. They must also gain a better understanding of the skills, competencies and behaviours that will be required of leaders in their organisational culture, and assess the gap between these needs and existing talents.

HR’s priorities

There’s no doubt it’s going to be another tough year for HR. Hudson has looked into the priorities for its clients going forward – here are the key HR issues on their minds.

+ Talent development: 22% of respondents place it as their top priority

+ Improving staff retention: 18%

+ Organisational development: 15%

+ Workforce engagement: 14%

+ Compensation and benefits: 12%

Actions to take now

Watson Wyatt says next year is going to be just as challenging as the last; but HR can ease the burden by putting some strategies into play immediately.

» Refine and communicate your employee value proposition

» Strengthen communication at all levels of the organisation

» Be clear with employees about what is expected of them and how they are doing

» Get performance-based reviews right

» Focus on retaining high-performers

» Tune-up the HR function to deliver

» Take advantage of “engageable moments”


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Commented by: Rajalakshmi at 06 Jan 2010 05:53 PM Report this comment
Extremely resourceful article. I am an MBA student specializing in HR. I am doing a project of formulating a compensation strategy for an organization and will be glad if you could share some views on the same to
Commented by: Raza at 11 Nov 2010 03:42 AM Report this comment
This article includes important aspects related to Hr but I believe that the biggest problem is the traditional HR Directors are very much reluctant to allow juniors to take and implement innovative ways of retaining the knowledge workers. i dont knw why,perhaps having fear that new may take better decisions or may make better strategies.. whtevr the reason iz, they r reluctant and v r nt able 2 present our trueself...:(
Commented by: Surabhi agarwal at 15 Aug 2011 12:53 AM Report this comment
very helpful article for the MBA students speially.........

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