The Future of Hr

HEALTH WEALTH CAREER THE FUTURE OF HR

HR 2020: WHAT THE FUTURE HOLDS DRIVEN BY DATA EMPLOYEE VALUE PROPOSITION WHAT SETS YOUR COMPANY APART? TOTAL REWARDS 2020 TOP WATCH OUT ‘FOURS’ ON THE HORIZON DRIVING DIGITAL ENGAGEMENT CONTENTS 1 HR 2020: What the Future Holds HR 2020: WHAT THE FUTURE HOLDS 2 Driven by Data Four major factors are impacting, TECHNOLOGY and will continue to impact, 3 Technology enables organizations and shaping the employees at all levels Employee Value future of work. to work virtually while easily Proposition: What Sets collaborating and sharing ideas not Your Company Apart? GLOBALIZATION only with each other, but also with outsiders. Continued advancements It is clear that the world in globalization and technology 4 will become increasingly increasingly turn work into a connected over the next 10 Total Rewards 2020 24/7 reality which blurs the lines to 20 years as the flow of products, between work- and non-work lives services, talent, and knowledge and increases the pressures and continues apace across developed 5 stress on employees sometimes with and developing countries. To unfortunate consequences for their Top Watch Out “Fours” compete and survive, a growing physical and emotional well-being. on the Horizon number of companies will intensify their efforts to explore new market Implications for HR: In a world of opportunities and develop business increasingly advanced technologies, capabilities to take advantage of where the nature of work changes these markets, while continuing to with great frequency, traditional grow in more established venues. approaches to filling jobs internally will give way to more systematic Implications for HR: Companies will and decentralized approaches to increasingly depend on building matching talent to work and work organizational and employee agility to talent. As work is redefined and rather than relying on periodic talent flows increase, new, primarily change initiatives. They will find it online approaches to employee necessary to develop the capacity development will become necessary to attract, develop, and retain top- to ensure that requisite hard and notch talent in emerging markets. soft skills are kept current.

From the Center for Advanced Human Resource Studies at Cornell University, February 2015.

2 HR 2020: WHAT THE FUTURE HOLDS

CONSUMERIZATION number of one-size-fits-all policies members of a given generation are and practices in their arsenals in the same, employers will see key Greater access to favor of greater overall flexibility differences across generations information, combined and, in particular, the capacity to in terms of working styles and with the spread of social media, be more responsive to employees’ approaches to collaboration, encourages the development of individual needs and wants. Leaders communication, and decision- a consumer mentality in which and managers will find it necessary making, as well as expectations customers and clients feel to improve their understanding regarding feedback, rewards, and empowered to shape their own of employees as individuals by the pace of promotions. experiences while companies are developing deeper relationships forced to adapt by customizing their Implications for HR: Nearly all with them and engaging them in products, services, and solutions. traditional HR practices are coming genuine dialogue around work, goals, These experiences are increasingly under scrutiny as companies find and processes, as well as more being replicated inside organizations it particularly difficult to motivate personal matters. as employees — particularly young people and retain this talent younger employees — come to see long enough to recoup investments “consumerization” and customization GENERATIONAL in their development. In broad terms, many, if not most, gen Ys as guiding principles on which DIFFERENCES to base the employer–employee feel entitled to jobs, projects, and relationship. Most organizations experiences that are tailored in a currently have four generations way that they (as consumers) find Implications for HR: In this new in their workforce: traditionalists/ personally meaningful. As leaders model, employees expect a greater greatest generation, baby boomers, and managers feel the pressure say in shaping the content of their generation X, and generation Y/ to individualize everything and to assignments, goals, and even work millennials — with some companies coach and mentor (and even to be environments when it comes to starting to see a fifth (generation reverse mentored), organizations issues such as where and when Z — those born in 1997 and later). will find that some leaders will and to work. Companies will find it Although there are many similarities can adapt whereas others will not necessary to cut back on the across generations and not all and cannot.

IMAGINE ...

Instead of HR “You have to ...” HR delivers “I needed this” delivering “Do this now ...” experiences that “This is easier” messages that associates want “You must ... or ...” “This makes my begin with: to use life better”

3 EXTERNAL FACTORS INFLUENCING TOTAL REWARDS MULTIPLE GENERATIONS: MANAGING DIFFERENT SEGMENTS REQUIRES SENSITIVITY TO VARYING GENERATIONAL NEEDS

PERCENTAGE OF WORKFORCE 10% 44% 34% 12% (2014) TRADITIONALISTS BABY BOOMERS GEN X MILLENIALS (Born < 1946) (Born 1946-1963) (Born 1964-1979) (Born 1980-1995)

Company loyalty: Live to work: Work to live: Work my way: “same company “office face time” “work should not “own careers, forever” define life” meaningful work”

“The Conference Board’s 2014 survey of global CEO challenges ranked human capital as the number one challenge,” says Dave Ulrich, the Rensis Likert Professor at the University of Michigan’s Ross School of Business.

“We’ve found that the leadership profile of successful CEOs most closely matches that of effective CHROs,” he adds, referring to a 2014 analysis he undertook in partnership with Korn Ferry that was published last year in the Harvard Business Review. This suggests that future CEOs may not only place greater importance on HR —- in a growing number of companies, they themselves will be former CHROs.

4 DRIVEN BY DATA

By 2020, HR will need to be Companies such as Google use predicts that about half the adept at providing the rest of the “meeting-cancellation rates” as people working in HR today won’t organization with data that does an indicator of engagement and be working in the profession five more than simply explain what’s potential turnover challenges, says years from now. The CHRO role is a already happened — it must tell its Martin. HR will become a kind of demanding one that requires deep leaders who within the organization analytics guide, producing “the right domain in HR but also a willingness to may be thinking of leaving, who’s answers at the right times” to avoid innovate, to push the envelope, and joining and why, and why one team is negative HR outcomes. not all director-level HR people are ready for that. experiencing performance failures “Wearables” will also play an while another is thriving, says Jean important role; devices such as What sorts of skills will be Martin, talent solutions architect at smart identification badges can necessary? The ability to consulting firm CEB. predict performance. Hitachi, whose understand analytics and draw As work has become more horizontal smart badges track employee prescriptive guidance from data and collaborative, says Martin, a movement in the workplace, will be vital. HR must also be seen surfeit of data and technology revealed that engineers who move as a credible source — in other provides a new level of insight for around a lot and eat lunch with large words, CHROs who are confident obtaining more precise answers. groups of co-workers are more in their ability to deliver what the Today, she says, companies can productive than their more solitary business needs should insist on the report on their turnover rates, but counterparts. same level of support and respect granted to other C-suite members, tomorrow, they may be able to There’s some bad news, however: particularly the CFO. foresee that turnover and design Many current HR professionals won’t programs accordingly, thanks to have what it takes to measure up the level of insight offered by Excerpted from Human Resource Executive in this new world. CEB’s research Online, May 2015 predictive analytics.

CONDUCT QUALITATIVE AND QUANTITATIVE ANALYSIS

Insights that come from CROWD-SOURCING juxtaposing “say” and “do” Data about what employees and employers say about performance are so strong, and so often at management as caused by: variance with what comes from either approach alone, that the best way to ensure insight and successful change — for DATA the important issues — is to Data about how performance work with both. management influences employer and employee actions as captured by actions such as pay increase/ promotion linkages to ratings

5 EMPLOYEE VALUE PROPOSITION WHAT SETS YOUR COMPANY APART?

The value of working needs to go beyond the traditional silos of HR programs. The glue that binds colleagues together isn’t simply the sum of the pay and benefits program.

Total rewards is a part of your broader employee value proposition (EVP), which includes long-term career opportunities, workplace culture, and line of sight to the impact of jobs. The EVP has to connect to the meaningfulness — the purpose — of the work of your next generation of talent and leaders.

6 WE NEED TO RE-IMAGINE WHAT WE DO

Love isn’t an abstract emotion. It’s the most acute and specific emotion we feel. It’s about a specific relationship built on HOW DO WE WITH A unique experiences between two people. FALL IN LOVE JOB? WE ENVISION AND ARE INSPIRED BY FUTURE SHARED VALUES POSSIBILITIES WE CAN BE OURSELVES AND What if we re-imagined the programs of PLAY TO OUR STRENGTHS COMPLEMENTARY EMOTIONALLY ENGAGED PASSION STRENGHTS IN OUR PRESENT WORK MY BASIC NEEDS HR into complete, distinct, and personal ARE MET BRIGHT FUTURE set of experiences built on a common WORKING FROM WE FEEL SAFE WE’RE IMMERSED IN HOW DO WE THE HEART AND SECURE NEW EXPERIENCES compelling story — experiences that WE FEEL RESONATING VALUE foster passion for the purpose of work, SUSTAIN LOVE experiences that translate into delighted EXCITEMENT OVER A customers and an unwavering love of OF THE NEW DOCUMENT CAREER? the brand? KEEP THE SPARK ALIVE EXPERIENCES

ACTIVELY ENCOURAGE A MAKE MEMORIES FOCUS ON STRENGTHS What if we used design-thinking, mobile, KEEP THE PROMISE OF NUTURE GROWTH SUPPORT NEW THE FUTURE ALIVE social, and big data techniques to help HEADINGS ENABLE AND ENCOURAGE AN EMPLOYEE TO HAVE MULTIPLE employers craft a story and build a set CAREERS AT YOUR COMPANY ENCOURAGE NEW of signature employee experiences — EXPERIENCES a new and distinct employment value CULTIVATE proposition? STRENGTHS

ENGAGEMENT DRIVES A BETTER BOTTOM LINE

Organizations with high • 3x higher EBITA growth as • When managers emphasize engagement levels experience compared to industry average. the negative in their employee positive returns on talent reviews, individual performance outcomes, customer • When employees clearly decreases by . satisfaction, and the understand what is expected of 27% them, individual performance bottom line. increases by 36%. • When managers provide fair, accurate, job relevant feedback • Employees who work 57% harder • In a culture where communication on a regular basis, individual and are 9 time less likely to leave. between managers and employees performance increases by 39%. and between peers is frequent and • Average three-year revenue effective, individual performance Source: The Conference Board growth of 20.1% as compared to increases by 34%. industry average of 8.9%.

• When managers emphasize the • Higher stock price over a periods positive in their employee reviews, of 3 years as compared to a individual performance increases sample of 500 leading companies by 36%. in a variety of industries.

7 EVP AND TOTAL REWARDS INFLUENCES ENGAGEMENT, TALENT, AND BUSINESS EVP

Employee The numbers show ... Engagement Companies in the top quartile for engaged employees, compared with the bottom quartile, had:

• 22% higher profitability. Talent • 10% higher customer ratings. Outcomes Business • 28% less theft. Performance • 48% fewer safety incidents.

Source: Gallup Poll/NY Times article

DRIVERS RESULTS OFFERS MEASURES • Personal/relevance • Quality. • Material rewards. • Discretionary effort. of EVP. • Productivity. • Intangible rewards. • Attraction. • Communication. • Sales growth. • Career value. • Internal moves. • Recognition. • Safety. • Company reputation. • Promotions. • Empowerment. • Profit. • Turnover. • Teamwork. • Absenteeism. • Leadership.

HOW DOES MERCER DO IT? Take a comprehensive look at how employees experience your EVP

ENVISION Career Possibilities B U I L D Your Wealth UNDERSTAND Your Rewards A L I G N Purpose and Values

F I N D MANAGE L E A D Community Your Health Your Team

8 TOTAL REWARDS 2020

There are many external factors influencing the total rewards strategies of the future:

Aging Population Multiple Generations Health Care Retirement Compensation We are living longer, Managing different Current trends Traditional pension Income growth which will create segments requires in the US are plans in the US are divergence in greater pressure sensitivity to varying unsustainable. from a bygone era. the US is causing on retirement and generational needs. social unrest and social programs. minimum-wage pressure.

Unionization Diversity Globalization Technology Activist Investors The new bargaining The workforce of There will be a Work environments Continued pressure agenda in the US the future will be greater need for will take on a new on corporate results calls for a living less homogenous. global workforce flexibility. requires rethinking wage and corporate management. total rewards. wealth sharing.

How organizations will respond is a topic for much discussion. Through extensive research, we at Mercer have compiled our thoughts on what total rewards will look like in the next five years.

9 HOW WILL ORGANIZATIONS RESPOND?

THOUGHTFUL RESPONSES: PERSONALIZED EVP FOR CORE WORKERS

YESTERDAY 2015 2020

STANDARDIZE INDIVIDUALIZE

How to retire Confusion about employment Core employees viewed as crucial relationship for success Paternalistic Transactional employment Individual accountability for relationship benefits, careers, and workplace One-size-fits-all Limited rewards flexibility Personalized rewards reflecting global cultures and multi- generations

PROGRESSIVE EMPLOYEE RELATIONS

YESTERDAY 2015 2020

AUTHORITATIVE PARTICIPATORY

Employees as interchangeable Employees as necessary evil Employees as volunteers Formal dress code Business casual Anything goes Rigid attendance policies Limited attendance flexibility Universal paid time off Pay is secret Apps provide an opportunity for pay Pay arrangements are open similar comparisons to proxy statement disclosures

Work is performed at the Broad-band allows work to be con- Work and play over 24/7: employee employer site ducted outside of the employer site determines place and time Union prominent for major employers Unions on the continued decline Unions support lack of living wages

COMPENSATION FOR THE NEW WORLD ORDER

YESTERDAY 2015 2020

INTERNALLY BASED EXTERNALLY BASED

Limited employee risk Employees desire fixed pay Employees as business partners Base pay linked to internal equity (job Market pay becomes common Market pay within global levels evaluation) practice Pay positioning is at market Most organizations target pay Fixed pay is at P25-P50 with P50+ between P25-P75 coming from variable cash/equity compensation Variable pay is limited to executives Most organizations offer variable pay Significant variable pay opportunity and sales is the norm

10 DO-IT-YOURSELF BENEFITS

YESTERDAY 2015 2020

COMPANY RISK EMPLOYEE RISK

Paternalistic Organization role continues Individual accountability through to decline self-service Organization provided health care, Cost shifting and abandonment Organizations provide group retirement, etc. of employee benefits purchasing power without being the sponsor Defined benefit pension plans Defined contribution 401(k) plans with and without employer match Health care for employee and Constant cost shifting Opportunity to participate in dependents exchanges

ACTIVE TALENT MANAGEMENT

YESTERDAY 2015 2020

PASSIVE TALENT MANAGEMENT AGGRESSIVE TALENT MANAGEMENT

Unlimited supply of talent Labor markets tightening Constant struggle to retain skills and millennials New hire training Buy experienced talent Continuous training and development to support EVP Hierarchical career path Career progression being defined Well-defined lattice career growth Annual performance management Healthy experimentation Frequent performance assessments process with annual ratings Leadership reflects home country Global mobility is encouraged Leadership is multicultural

DIVERSITY AND PAY EQUITY ARE REALITIES

YESTERDAY 2015 2020

GOOD IDEA MANDATORY PRACTICES

Diversity goals in most organizations Organizations struggle to meet goals Employers match the multiple cultures that they serve Employers don’t know how to Experimentation is rampant Analytics drives good decision- develop diverse talent making Pay equity is afterthought Pay inequality is a leadership concern Pay fairness is assured through analytics

11 TOP WATCH OUT ‘FOURS’ ON THE HORIZON DRIVING DIGITAL ENGAGEMENT

1 WEARABLE COMPUTING

2 INTERNET OF THINGS

3 CONSUMERISM OF USER EXPERIENCE

4 AUGMENTED REALITY

12 1 WEARABLE COMPUTING

Where wearable tech is potentially heading: • Provide employees information they need the moment they need it. • Provide temperature readings of an employee’s environment.

Joe Smith XYZ Corp

Employee ID 123456 • Enable employees with digital information — seamlessly.

2 INTERNET OF THINGS

JOB WORKFORCE PLANNING INTERNET OF THINGS DEFINITION

ENTERPRISE THIRD-PARTY MANAGER ASSETS PEOPLE, APPS, SERVICES SOCIAL TRADITIONAL SERVICES MARKET SOURCE HR PROCESSES %

ANALYTICS, CONNECTED BIG DATA APPLICATIONS CLOUD/CROWD SOURCING HR PROCESSES @

13 3 THE AGE OF CONSUMERISM

Consumers are using multi-function devices for work purposes.

Nearly 60% of consumers say it improves their productivity to take conference calls and use collaborations tools from their personal devices.

Source: Accenture

4 AUGMENTED REALITY

Job-seekers point their phone at a building/office and immediately see what positions are available,

XYZ Corp. compensations ranges, and benefit 1700 Main Street (888) 555-1234 packages. www.xyzcorp.com

Industry Pharmaceuticals Expatriates search for places of Fortune Rank 125 interest in their new home country. 2013 Revenue $11.5 Billion

Positions Dir. Marketing Available Details

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SO, WHAT NOW? THINK ABOUT ...

The impact that How machine data The impact of end How mobility, Where technology wearables can have can intersect and user experience imaging, and is heading and how on the workforce, merge with people and the merging of 3D content automation can by simply monitoring data to make better personal life and management make your company employee’s compensation work life, helping can impact better and faster. interactions. decisions impacting employees to make your workforce, decisions. informed benefits especially decisions. expatriates.

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