Australian companies lag behind international best practice organisations in managing their human capital, Les Pickett writes
Australian companies lag behind international best practice organisations in managing their human capital, Les Pickett writes
Evidence has recently indicated that an increasing number of Australian organisations are paying greater attention to more effectively utilising skills and talents and motivating their employees. However, there is still considerable scope for improvement.
Senior executives have a great opportunity to improve key business outcomes, resulting in better bottom line results simply by paying greater attention to the way people are managed in their respective organisations.
Increasingly, the most senior levels of management are addressing people issues and taking them into account when it comes to corporate governance. Matters requiring consideration by executive team members include attracting and retaining capable high calibre people at all levels, having professional and technical capabilities available when required, changing community expectations regarding career aspirations and work/life balance and the ongoing saga of expense minimisation and productivity improvement in a highly competitive global economy.
Because of the critical nature of these issues, members of the board of directors are expected to understand them and to help contribute to their solution.
Sadly, there are a number of boards (as there are HR departments) found wanting in their approach to leading and managing their own organisation’s main source of sustainable competitive advantage.
Aligning human capital as well as enterprise objectives and strategies is one of the greatest challenges confronting the HR and people management function. This requires an effective professional working relationship between HR, senior operating line management and the corporate board of directors.
During November last year, 175 organisations around the world participated in an international human capital management benchmarking initiative carried out by McBassi & Company. Twelve Australian organisations submitted data. Although the sample is small, the outcomes provides a basis for a review of current practices by highlighting areas in which improvements can be made.
Participating organisations provided information using a self-assessment tool on five key human capital indicators: managerial effectiveness/leadership practices; workforce optimisation; knowledge accessibility/optimisation; learning effectiveness/capacity; and employee engagement/talent retention.
The survey indicates how Australian organisations compare with the overall average of all participating organisations and against best practice organisations (those who scored in the top 20 per cent of all respondents) for each category.
Commenting on the overall results, Laurie Bassi, CEO of McBassi, said that US-based organisations have substantially higher scores on all five human capital management categories than do organisations in other countries. Among US based for-profit firms, privately held firms have higher scores on all five human capital management indices than do comparably sized publicly traded firms. This reflects the stock market’s chronic pressure on publicly-traded companies to limit human capital ‘costs’ that are the drivers of future profitability.
In general, scores on an organisation’s ‘systems’ in the five key human capital management categories received the lowest scores within a given category. This indicates that most organisations still have a long way to go to get systems in place that help them systematically optimise their return on people.
Organisations’ commitment to employee development and their value and support for learning were the two specific factors (other than systems factors) that received the lowest scores. This reveals the gap between the mantra that ‘people are our most important asset’ and the reality in many organisations.
Organisations that had a high degree of confidence in the accuracy of their reported data on training and development expenditures also reported higher levels of investment. This points to the importance of carefully measuring and managing these investments – organisations are probably spending more on training and development than they think.
Australian organisations outperformed the average in the two specific areas of training and development but still lagged behind the best practice group.
The specific factor (besides systems factors) on which there was the broadest range of responses was related to employees’ time – whether workloads are appropriate and allow employees to balance home and work. Australian participants rated equally with the average group but both fell well behind the best practice organisations in the sub-category of time. Time is a subset of employee engagement and addresses the balance of time to allow the employees to do their jobs right, make thoughtful decisions and achieve an appropriate balance between work and home.
How Australia ranks in HC management
On a scale of one (the lowest) to five (the highest), Australian organisations scored 3.1 in overall human capital management: The global average was 3.3, while best practice organisations scored 4.1. Specific categories included:
Leadership practices (includes managers’ and leaders’ communications and inclusiveness, performance feedback, supervisory skills, demonstration of key organisational values, and ability to instill confidence): 3.1. Average: 3.3. Best practice organisations: 4.3.
Workforce optimisation (an organisation’s success in optimising the performance of its employees by establishing essential processes for getting work done, providing good working conditions, establishing accountability and making good hiring choices): 3.4. Average: 3.5. Best practice organisations: 4.4
Knowledge accessibility (the extent of an organisation’s ‘collaborativeness’ and its capacity for making knowledge and ideas widely available to employees): 2.9. Average: 3.4. Best practice organisations: 4.6
Learning capacity (an organisation’s overall ability to learn and innovate – and ultimately, to achieve a continual level of improvement): 3.1. Average: 3.2. Best practice organisations: 4.2
Employee engagement (an organisation’s capacity to engage, retain and optimise the value of its employees. It hinges on how well jobs are designed, how employees’ time is used and the commitment shown to employees): 3.0. Average: 3.2. Best practice organisations: 4.2
Les Pickett is chief executive of Pacific Rim Consulting Group, which has a strategic alliance partnership with McBassi & Company. Email: [email protected]
