Defining High-Performance HR

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Consulting

Organization and HR Effectiveness

Defining High-Performance HR

HR Effectiveness Survey Report

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About This Survey

3 The Challenge

3 Our Approach

3 Executive Summary

4 It’s a People Business

4 Study Highlights

5 Organizational Design and Strategy

5 HR Structure and Governance

6 Service Delivery and Technology

8 Organizational Programs and Design

9 HR Capabilities and Development

12 Conclusion

14 The Future of HR

14 Data

15

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About This Survey

The Challenge

For HR leaders, the challenge—increasingly—is how to do more with less. The driving force behind organizations is

people. To that end, the success of organizations largely revolves around the quality of their senior leaders, support

functions, and staff. The ability of leaders to drive the strategic agenda for their organizations, the innovativeness of

talent, and the quality of services, products, and outcomes provided drive the success of these organizations. While

HR is being asked to do more to improve talent, the impact of cost pressures, reduced budgets, and increased

expectations puts downward pressure on HR budgets.

Given today’s pressures, how does HR deliver value and contribute to institutional success? What is it that

distinguishes HR functions from one another?

Our Approach

In October 2011, Aon Hewitt invited HR executives from the United States to participate in the 2011 HR Effectiveness

Study: Defining High-Performance HR. Study participation was open to any organization regardless of size, scope, or

financial status. From those invitations, just over 30 organizations completed the 15-item on-line survey. The purpose

of the study was to gauge the extent to which HR practices are progressive, practical, well executed, and effective.

The study explored a variety of HR functions and practices in the areas of program management, service delivery,

talent and workforce management, and HR function management. The sample size of this study impedes our ability

to generalize these observations to a broader geographic or organizational demographic audience.

The pages that follow highlight some key trends identified by participants in the prevalence and strategic intent

behind HR practices, and the comprehensive aggregate data results from the study.

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Executive Summary

It’s a People Business

Business today is about people. Therefore, the success of organizations largely revolves around the quality of their

senior leaders, support functions, and staff. The ability of leaders to drive the strategic agenda for their organizations,

the innovativeness of talent, and the quality of services, products, and outcomes provided drive the success of these

organizations. The demands placed on HR organizations to source, develop, and retain quality talent are greater than

ever before. Our recent Top Companies for Leaders study shows the top three challenges North American

organizations face over the next 1 to 3 years are business growth, cost pressures, and product/service innovation

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.

Leaders at these top organizations all consider succession planning and leadership development, attracting and

retaining skilled professional talent, developing capabilities, increasing diversity, and improving retention as key

priorities.

HR is central to achieving organizational people goals and objectives. It is the engine that helps drive the talent

agenda and shapes the culture to achieve the organization’s vision and mission. Yet historically, HR has been viewed

as more an administrative or personnel function charged with sourcing and paying people, providing benefits, and

handling employee relations.

Shifting to more of a business partner role to address critical talent challenges is a tall order. It requires human

resources expertise and skills to develop and change the social infrastructure, accomplish goals, and engage leaders

and employees in new strategic directions and processes. It also requires senior management sponsorship and

involvement to transform the way HR delivers services and engages with senior leaders to drive the talent agenda.

To shift focus, HR needs significant commitment and support from the board of directors, CEO, senior management

teams, and other key stakeholders to both support changes in the way HR delivers services and partner with HR to

drive new talent management initiatives.

Seven years after Aon Hewitt published the paper, “Is HR Still Stuck in the Middle?”, one question that continues to

spark discussion among HR leaders concerns defining the value the HR function brings to the organization and the

people it supports. In 2005, we deemed HR at many companies “stuck in the middle”; that is, “saddled with

investments in new technology and processes, but not yet accruing the strategic and financial benefits of a 21st

century HR delivery model.” Our 2011 study told us that, in many cases, organizations haven’t moved much. There

has been significant advancement in adopting technology, standardizing processes, and creating a more efficient HR

function. Yet this current study, Defining High-Performance HR, found that overall, HR functions continue to be

unclear on their purpose and strategic objectives, and organizations remain unclear about how they assess, utilize,

develop, and measure the impact this group has on the organization.

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Study Highlights

Organizational Design and Strategy

More than 90% of participating organizations have operations in North America. Just under half (49%) of the

respondents have operations in several regions throughout the globe. Participants with operations outside North

America primarily operate in EMEA and APAC, but just under half of those respondents do not track revenues in

those locations. Organizations in this study could benefit from enhancing the standard tracking mechanisms related

to headcount, revenues, and HR expense to better understand how enhancing efficiencies could improve their bottom

lines.

Traditional HR function metrics are still widely used across all types of participating organizations regardless of their

geographic scope. However, many respondents reported that these functional HR metrics (e.g., HR cost, staff ratio)

are not the most effective means of measuring their impact on the organization. More participating organizations are

turning toward metrics involving business impact, including HR customer satisfaction, HR program effectiveness as

indicated by impacts to financial performance, and line managers’ effectiveness as people managers. As noted in the

graph below, HR customer satisfaction is rated most consistently as a heavily used and highly effective metric.

Metrics Used to Evaluate Organizational Impact

45% 52% 39% 45% 52% 55% 35% 35% 35% 32% 26% 23% 19% 19% 32% 13% 23% 42% 19% 23% 10% 13% 16% 13% 0% 10% 20% 30% 40% 50% 60% HR cost HR staff to employee ratio HR operational measures (e.g., transactions, error rates, service

utilization)

Percent of employees w ith a development plan Percent of employees w ith performance goals HR customer satisfaction HR program effectiveness as demonstrated by verifiable business or

financial outcomes

Line manager effectiveness as people managers Processes in place to lead/facilitate organizational change Percent of open positions filled w ith succession plan candidates Impact on business operations/outcomes as demonstrated by verifiable

business or financial outcomes

Increased customer usage of HR staff for more strategic interventions (rather than going to external providers or building capability outside

HR)

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HR Structure and Governance

The majority of participating organizations manage the execution of their core programs—such as corporate social

responsibility, diversity and inclusion, and broad-based and executive compensation—by using centers of expertise

(COEs) or corporate functions. HR generalists are handing the execution of labor and employee relations and HR

workforce administration. HR specialists are used most often to manage recruiting, and share equal responsibilities

with HR generalists for managing HR metrics and reporting. When participating organizations employ an outsourcing

partner, the partner is most commonly used for benefits administration and executive compensation management.

Most companies use an internal shared service model rather than an outsourced model for their payroll, learning and

development, leadership development, HR workforce administration, and broad-based compensation practices.

Groups Responsible for Execution

73%

59%

50%

56%

55%

50%

56%

52%

68%

54%

10%

19%

13%

26%

14%

17%

8%

18%

12%

4%

13%

11%

21%

6%

20%

5%

19%

11%

13%

7%

10%

13%

17%

20%

9%

15%

10%

7%

10%

6%

3%3%

Executive compensation

Broad-based

compensation

Health and welfare

benefits

Leadership development

HR budget

Organizational

effectiveness

Expatriate management

HR metrics and reporting

Corporate social

responsibility

Diversity/inclusion

Centers of expertise (COE)/corporate functions

Internal shared Services

HR generalists

HR line specialist

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Groups Responsible for Execution

33% 31% 36% 45% 10% 21% 7% 14% 23% 38% 43% 31% 30% 10% 14% 10% 3% Recruiting HR workforce administration (new hire setup, transfers,

promotions, data changes, etc.)

Labor and employee relations Performance management

Centers of expertise (COE)/corporate functions Internal shared Services HR generalists HR line specialist Outsourced provider

More than half (53%) of multinational organizations in the study use a two-tiered approach to structure their HR

function (specific abilities reside at the corporate level, while others reside at the divisional or regional level).

Domestic-based participants typically use a regional HR structure using traditional functional departments that may

be supported by a small corporate HR group. This aligns with the responses that seem to balance management of

execution through a COE and HR generalist model.

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Service Delivery and Technology

Most survey respondents that have automated fundamental practices such as succession planning, compensation

management, performance and learning management, and benefits administration do so as part of their core HRMS

platform. Time and attendance is the most heavily utilized point solution among study participants. Nearly half the

respondents support absence management through their core HRMS, and just about the same number use a point

solution to administer this program. Nearly all the companies who have a succession planning process use their core

HRMS systems to support this practice.

The overwhelming majority of participants are currently using Software as a Service (SaaS) to manage their core

talent and administrative programs.

Mechanisms Used to Support Key Processes

46% 54% 65% 86% 68% 52% 40% 41% 46% 39% 38% 31% 14% 28% 31% 30% 52% 42% 14% 8% 4% 4% 17% 30% 7% 13% 71% 71% 73% 50% 56% 76% 80% 72% 67% Recruiting/talent acquisition Learning management Performance management Succession planning Compensation management Benefits administration Payroll Time and attendance Absence management

Part of core HRMS Point solution

Outsourced Currently using Software as Service

Note: Data reflects a multiple-response question.

Employee self-service (ESS) and manager self-service (MSS) tools are available to the majority of the population at

participating organizations. However, those same employees and managers do not utilize the self-service tools,

systems, and processes to accomplish their tasks—suggesting there is opportunity to improve the impact, training, or

functionality of the tools currently in place.

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Access and Utilization to Self-Service Tools

65%

35%

42%

Employee Self-Service

Manager Self-Service

76%–100% of the employee and manager populations utilize self-service tools, systems, and processes

76%–100% of the employee and manager populations have access to the self-service tools, systems, and

processes

HR professionals who are not part of COE or shared services groups spend nearly half their time collecting and

reporting data (48% and 45%, respectively), and less time conducting trend analysis and predictive modeling.

Because they are still focused on administrative tasks, they are less likely to have the capabilities or capacity for

more in-depth, strategic analyses or to partner strategically with the business to drive performance and business

outcomes.

Organizational Programs and Design

HR Strategy: Nearly half of participating companies report that the design of their HR strategy reflects alignment with

business objectives, including input from business leaders on workforce issues. Further, nearly half believe their

strategy clearly identifies the workforce and organizational outcomes needed to drive the business forward across all

regions. However, just over half (51%) report not using a specific quantitative framework to align human capital

investments with business results.

Workforce Planning: Respondents typically analyze talent needs on a global basis, incorporating their strategic and

operating goals across all operating locations. Respondents were more likely to assess talent gaps, sourcing needs,

onboarding, and engagement across their organizations than in the primary operating region. More than half (54%) of

all respondents do not use workforce modeling tools to support their internal and external workforce planning and

forecasting analysis.

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Execution of Core Programs and Practices

16% 16% 16% 16% 6% 51% 54% 32% 29% 29% 35% 35% 23% 16% 45% 42% 45% 42% 42% 13% 13%

We have a clearly defined HR strategy aligned w ith business objectives

We gather input from business leaders regarding business and w orkforce issues to create the HR strategy We clearly identify the w orkforce and organizational outcomes that

HR needs to drive for the business

We assess the performance and engagement of new hires during the first year of employment

We invest in common HR systems (HRMS, performance management, training programs) to manage talent effectively

We utilize a specific quantitative framew ork to align human capital investments w ith business results

We leverage w orkforce modeling tools to support our internal and external w orkforce planning and forecasting analysis (e.g., model scenarios based on different w orkforce demographic and business

trends)

Not at all/We do not have this practice In primary region in which we operate Across all regions/Globally

Leadership Development: From our Top Companies for Leaders research, we know organizations that focus efforts

on building and cultivating a pipeline of strong leaders have better business results. In fact, over the last five years,

the 2011 Top Companies in each region have had, on average, 8.76% higher total shareholder returns. This study

uncovered significant gaps in the leadership and key talent practices implemented across these organizations. Nearly

half (45%) of surveyed participants in the study do not conduct talent reviews on senior executives at least

semi-annually. Fifty-eight percent do not have a strong leadership bench with succession plans extending at least two or

three people down across most leadership roles. Forty-two percent do not use developmental assignments or job

rotation assignments to address specific leader development needs, and nearly half (45%) do not reward leaders

(e.g., with promotions or compensation) for the strength of the talent pipeline in their business units.

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2011 North America Top Companies HRE Study Participants We do not have this practice CEO 96% Senior management 96% Middle management 96% We have a sufficient pipeline at the following levels to be successful in the future

Front line management 84%

We have a strong leadership bench with at least 2 or 3 successors across most leadership roles 58% Senior management 72% Middle management 88% Development assignments offered to leaders at the following levels

Front line management 64%

We use development assignments or job rotation assignments to address specific leader development needs

42%

We reward leaders for the strength of their talent pipeline 88% 45%

Performance: As we outlined earlier, one of the primary functions of HR is to support the organization in developing

tools and programs designed to drive high performance in the organization. It is not surprising that most of the

respondents in the study execute their high-performance practices across their operating regions. Respondents

clearly focus this execution on an ongoing basis, through their communications and organizational alignment of goals,

training efforts for managers, and taking action to address issues of poor performance. To enhance their practices,

organizations should incorporate career paths for major job groups to ensure consistent career management, identify

the future critical capabilities needed to execute against the business strategy, and ensure that every employee has a

development plan.

Employee Environment: Most respondents have the standard elements in place to build an engaging environment for

employees: well-established employment relations plans to articulate the values and behaviors they expect from

employees, processes to gather and analyze data to measure employee engagement and/or opinions, and

competitive benefits packages that are consistent across the organization. Yet there is room to grow. Nearly half the

respondents do not have a clearly defined or communicated diversity strategy or implementation of diversity-based

programs across their entire organization.

Mergers and Acquisitions: More than half the participants in this study do not have practices in place related to

mergers and acquisitions, including the availability of consistent tools and processes (52%), robust due diligence

processes to identify human capital-related liabilities for new acquisitions (58%), well-defined integration plans that

include cultural assessments of the acquired organization (61%), or consistent and systematic organizational

development tools used throughout the organization for restructuring, process redesign, capability assessment, and

workforce assessment (45%).

The recent Aon Hewitt study Culture Integration in Mergers & Acquisitions

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investigated how culture was prioritized

both pre- and post-close, what methods were used to integrate cultures, and how successful organizations were in

achieving their objectives. Participants who were unable to meet their transaction objectives and synergy targets

following an acquisition cited the following reasons for deal failure:

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Contributing Factors to Deal Failure

Top 10 drivers of deal failure—percent of respondents

18% 20% 22% 26% 26% 28% 30% 32% 33% 41% 0% 10% 20% 30% 40% 50% Failure to implement an appropriate organizational structure

Price paid for target was too high Leadership "infighting" and/or buy-in Insufficient execution capability/competency Risks/liabilities not identified during due diligence Poor/misinformed strategy Insufficient attention/priority to workforce/people issues Inconsistent/unclear communication of synergy objectives Cultural integration issues Integration/implementation took longer than expected

Data Management: Survey participants understand the importance of technology when it comes to managing human

capital and organizational data. More than half the respondents in the survey (55%) consolidated their core HR

service delivery in the primary region in which they operate. Forty-eight percent have an HRMS system or data

warehouse to store data within their primary operating region. Yet, when it comes to identifying the business impact

of this data, there is some room for improvement. Fifty-five percent of respondents do not use an event-driven

workflow in their service centers in place of a transaction-driven workflow, 42% do not have a clearly defined set of

human capital reports or dashboards used consistently across their organization, 51% do not have a centralized or

coordinated team focused on providing human capital analytics and insights to business leaders, and 52% do not

have access to their robust data warehouse to be able to report on the human capital data across systems and

businesses.

HR Capabilities and Development

Perhaps consistent with the old saying that the cobbler’s children seem to be the ones who have no shoes,

participating organizations in this study also lagged behind in the development of their own HR talent. Participating

organizations develop their HR talent primarily within the HR silo. Respondents prefer to keep employees within the

HR function, serving as a local resource in a single location with few opportunities to change jobs or advance

throughout the organization. This may lead to issues surrounding retention—and could prevent the development of

the talent pipeline into the COE function, as these resources would not have broad, strategic experiences to help

them contribute at more senior levels of the HR organization. In the 2011 Top Companies for Leaders study, we saw

a consistent practice of rapid movement of talent outside business functions to give high-potential employees

opportunities outside their areas of expertise. These insights are relevant both to leaders and to the high-potential

population at large.

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Examples from 2011 Top Companies for Leaders Study

“If I’m a high potential, I don’t want to be stuck in one function, one business forever. I want opportunities. So we

have to understand, to move them around and let them understand the pains of different functions, different

businesses. As long as an organization can facilitate movement, employees are attracted. If you give a person all

this, why would they leave and join multiple other companies?” – Telecommunications Company

“The Regional Council leverages our talent philosophy through facilitation of cross-BU movements. The various

unit heads of businesses come together for this exercise to discuss and close on possible cross-BU linkages and

probable talent movements.” – Telecommunications Company

“Over time, we’ve seen the assessment components of our performance management process overshadow the

development pieces. Our business leaders, in partnership with Human Resources, are making improvements to

our performance management process that will drive a more balanced assessment and development culture,

provide greater opportunities for career growth, remove barriers to greatness, and bolster the role that managers

play in talent development. The improvements focus on a more consistent reward process for formalized ’stretch

roles’ and a consistent definition of ‘great people management.’” – Financial Institution

There is no overwhelming consensus concerning the confidence in the strength of their pipeline of HR talent within

the participating organizations. Nearly two-thirds overall of participating organizations feel confident about their

senior-level HR talent, but this result differs if broken out by company location. Nearly three-quarters (74%) of

domestic respondents are confident in their senior-level HR pipelines, compared to only 47% of multinational

participants. At the mid-level and below, just over half are confident about their pipelines—but again, domestic

respondents show more confidence (63%) than multinationals (27%). At the entry level, both multinational and

domestic respondents feel confident about the pipeline of talent. Giving HR professionals greater development

opportunities and movement into different HR areas would provide them with the broader experience they need to fill

pipeline gaps.

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Conclusion

The Future of HR

As HR professionals look to shift the HR function from a transactional to a transformation role, it’s essential to

develop a roadmap outlining a methodical plan. By focusing on those areas within HR service delivery management,

talent management, and HR function management that align with the organization’s strategic objectives—while at the

same time, building internal capability—HR can charter a course that yields demonstrable value.

As the landscape of respondents continues to become more global, we expect to see the use of SaaS-based data

management extend into the regional operations of a global or multinational company, and the rise of a new mind-set

for the HR function as a group whose goal is to have a capable, willing, and able workforce ready to run the business.

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Data

Industry Classification

N= Percent

Automobiles and Components 1 3%

Banks 1 3%

Capital Goods 2 6%

Commercial and Professional Services 6 19% Consumer Durables and Apparel 1 3%

Consumer Services 1 3%

Diversified Financials 0 0%

Energy 2 6%

Food and Staples Retailing 0 0% Food, Beverage, and Tobacco 0 0% Health Care Equipment and Services 2 6% Hotels, Restaurants, and Leisure 1 3% Household and Personal Products 0 0%

Insurance 3 10%

Materials 3 10%

Media 0 0%

Pharmaceuticals, Biotechnology, and Life Sciences 0 0%

Real Estate 1 3%

Retailing 0 0%

Semiconductors and Semiconductor Equipment 1 3%

Software and Services 1 3%

Technology Hardware and Equipment 3 10% Telecommunication Services 0 0%

Transportation 2 6%

Utilities 0 0%

Total 31 100%

Business Operation Profile

N= Percent

Global (operations in all regions around the globe) 7 23% Multiregional (operate in several regions) 8 26% Regional (operate in one region) 6 19% Domestic (operate only in one market/country 10 32%

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Employee Size (in FTE) by Region

We do not have operations in

this region Number of full-time equivalent (FTE)

We do not track this

Location N= Percent Min Max Mean Median N= Percent

North America 2 6% 182 26000 3554 1360 1 3% Europe, Middle East & Africa 18 58% 14 4000 600 109 2 6% Asia-Pacific 20 65% 21 4400 874 290 1 3% Latin America 27 87% 200 14000 7400 8000 1 3%

Revenues (in USD) by Region

Revenues (in USD)

Location Min Max Mean Median N= Percent

North America 75 3,000,000,000,000 137,061,992,342 383,375,900 7 23% Europe, Middle East & Africa 15 889,000,000,000 148,451,531,669 244,595,000 7 23% Asia-Pacific 10 1,132,740,000 493,185,003 420,000,000 7 23% Latin America 15,000,000,000 15,000,000,000 15,000,000,000 15,000,000,000 3 10%

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Annual HR Expenses (in USD) by Region

“HR expenses” is defined as HR labor (base, incentives, and benefits) and non-labor (technology, vendor, consulting,

travel, etc.) expenses related to delivering HR services, including payroll and learning and development, not including

program costs (e.g., workforce benefits, tuition costs).

We do not have operations in

this region HR Expense (in USD)

Location N= Percent Min Max Mean Median N= Percent

North America 2 15% $40 $91,000,000 $9,269,265 $1,550,000 11 85% Europe, Middle East & Africa 19 68% $663 $80,000,000 $27,666,888 $3,000,000 9 32% Asia-Pacific 21 72% $1,582 $2,000,000 $1,000,791 $1,000,791 8 28% Latin America 24 77% $0 $0 $0 $0 7 23%

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Total HR Staff (in FTEs for your most recent fiscal year) by Region

North America EMEA

Total HR Staff (in FTE) Min Max Mean Median Min Max Mean Median

Centers of expertise (specialists such as comp analysts, recruiters, etc.)

0 200 22 7 0 50 8 1 Operations (e.g., service center administration,

HR operations)

0 50 9 4 0 75 13 1 Field HR (e.g., HR business partners, generalists,

employee relations)

0 160 23 7 0 125 26 3

Other 0 8 2 2 0 0 0 0

Ratio ( (Mean HR Staff: FTE)

1:161 1:75

Operations (e.g., service center administration, HR operations)

1:394 1:46

Field HR (e.g., HR business partners, generalists, employee relations)

1:154 1:23

Other 1:1777 0:600

Asia-Pacific Latin America

Total HR Staff (in FTE) Min Max Mean Median Min Max Mean Median

0 8 3 1 0 35 9 0 Operations (e.g., service center administration,

HR operations)

0 5 2 2 0 65 16 0 Field HR (e.g., HR business partners, generalists,

employee relations)

0 23 8 7 0 145 38 3

Other 2 2 2 2 0 0 0 0

Ratio (/Mean HR Staff: FTE)

1:291 n/a

Operations (e.g., service center administration, HR operations)

1:437 n/a

Field HR (e.g., HR business partners, generalists, employee relations)

1:109 n/a

Other 1:437 n/a

Note: Latin America means only represents three participants (not valid).

North America EMEA Asia-Pacific Latin America

Total HR Staff (in FTE) N= Percent N= Percent N= Percent N= Percent

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Which of the following does your organization use regularly (at least 80% of the time) to measure the

effectiveness of the HR function, and which are the most effective?

Used regularly

(check all that apply)

Most effective

(check up to three)

N= Percent N= Percent HR cost 14 45% 6 19% HR customer satisfaction 17 55% 13 42% HR staff/employee ratio 16 52% 6 19% HR program effectiveness as demonstrated by verifiable business or

financial outcomes

11 35% 6 19% Line manager effectiveness as people managers 11 35% 7 23% HR operational measures (transactions, error rates, service utilization,

etc.)

12 39% 10 32% Impact on business operations/outcomes as demonstrated by verifiable

business or financial outcomes

8 26% 5 16% Increased customer usage of HR staff for more strategic interventions

(rather than going to external providers or building capability outside HR)

7 23% 4 13% Processes in place to lead/facilitate organizational change 11 35% 3 10% Workforce productivity 9 29% 5 16% Shift to HR staff time spent on higher-value-added activities 5 16% 1 3% Percent of employees with a development plan 14 45% 4 13% Percent of employees with performance goals 16 52% 7 23% Percent of open positions filled with succession plan candidates 10 32% 4 13% No specific measures 5 16% 4 13%

(20)

At what geographic level are each of the following practices consistently executed?

Consistently executed (check one only)

Unable to rate _Globally _Regionally _Locally

N= Percent N= Percent N= Percent N= Percent

Executive compensation 1 3% 13 43% 9 30% 8 27% Broad-based compensation 4 13% 6 22% 15 56% 6 22% Health and welfare benefits 1 3% 4 13% 15 50% 11 37% Retirement (pension) benefits 1 3% 4 13% 16 53% 10 33% Payroll 2 6% 1 3% 15 52% 13 45% Recruiting 1 3% 3 10% 17 57% 10 33% Learning and development 2 6% 3 10% 15 52% 11 38% Leadership development 4 13% 6 22% 14 52% 7 26% HR workforce administration (e.g., new hire setup,

transfers, promotions, data changes)

2 6% 4 14% 13 45% 12 41% HR budget 2 6% 5 17% 13 45% 11 38% Succession planning/ talent review 2 6% 8 28% 13 45% 8 28% Performance management 2 6% 6 21% 13 45% 10 34% Organizational effectiveness 7 23% 5 21% 14 58% 5 21% Labor and employee relations 3 10% 3 11% 13 46% 12 43% Expatriate management 13 42% 8 44% 6 33% 4 22% HR metrics and reporting 6 19% 6 24% 11 44% 8 32% Corporate social responsibility 9 29% 7 32% 8 36% 7 32% Diversity/inclusion 5 16% 6 23% 14 54% 6 23% Other 2 6% 0 0% 0 0% 1 100%

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Who is primarily responsible for managing their execution?

Managed by the (check one only) Centers of expertise (COE)/corporate functions Internal shared services HR generalists HR line specialists Outsourced provider

N= Percent N= Percent N= Percent N= Percent N= Percent

Executive compensation 22 73% 3 10% 1 3% 1 3% 3 10% Broad-based compensation 16 59% 5 19% 1 4% 3 11% 2 7% Health and welfare benefits 15 50% 4 13% 4 13% 4 13% 3 10% Retirement (pension)

benefits

14 47% 5 17% 2 7% 3 10% 6 20% Payroll 14 48% 9 31% 2 7% 1 3% 3 10% Recruiting 10 33% 3 10% 7 23% 9 30% 1 3% Learning and development 14 48% 9 31% 3 10% 3 10% 0 0% Leadership development 15 56% 7 26% 3 11% 2 7% 0 0% HR workforce administration

(e.g., new hire setup, transfers, promotions, data changes)

9 31% 6 21% 11 38% 3 10% 0 0%

HR budget 16 55% 4 14% 6 21% 3 10% 0 0% Succession planning/ talent

review

13 45% 7 24% 6 21% 3 10% 0 0% Performance management 13 45% 4 14% 9 31% 3 10% 0 0% Organizational effectiveness 12 50% 4 17% 5 21% 3 13% 0 0% Labor and employee

relations

10 36% 2 7% 12 43% 4 14% 0 0% Expatriate management 10 56% 3 17% 1 6% 3 17% 1 6% HR metrics and reporting 13 52% 2 8% 5 20% 5 20% 0 0% Corporate social

responsibility

15 68% 4 18% 1 5% 2 9% 0 0% Diversity/inclusion 14 54% 3 12% 5 19% 4 15% 0 0% Other 1 50% 0 0% 0 0% 1 50% 0 0%

(22)

How does your organization currently structure HR?

(Choose the description below that best fits your structure.)

N= Percent

Divisional HR: Traditional functional departments replicated in major divisions or business units (may be

supported by a small corporate HR group)

4 13%

Regional HR: Traditional functional departments replicated in major regional hubs (may be supported by a

small corporate HR group)

5 16%

Global HR: Centers of expertise that manage program strategy and design for a number of functions. Also

includes global HR operations group that manages centralized regional HR service centers and/or outsourced providers. Program execution handled by regional/divisional business partners

6 19%

Two-tiered: Specific abilities reside at corporate level (e.g., leadership development) while others reside at

the divisional or regional level (e.g., compensation)

11 35%

Other 5 16%

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Which of the following areas are supported by systems? For each system used, indicate whether you are

currently using or considering using Software as a Service to manage the following programs.

(Software as a Service: The vendor hosts and operates the technology platform at its facility. The application is

offered in a multi-tenant architecture with all the vendor’s customers accessing a single code base.)

How are programs supported? We do not

have this

practice Part of core HRMS

Point

solution Outsourced

N= Percent N= Percent N= Percent N= Percent

Recruiting/talent acquisition 3 10% 13 46% 11 39% 4 14% Learning management 7 23% 13 54% 9 38% 2 8% Performance management 5 16% 17 65% 8 31% 1 4% Succession planning 9 29% 19 86% 3 14% 0 0% Compensation management 6 19% 17 68% 7 28% 1 4% Benefits administration 2 6% 15 52% 9 31% 5 17% Payroll 1 3% 12 40% 9 30% 9 30% Time and attendance 2 6% 12 41% 15 52% 2 7% Absence management 7 23% 11 46% 10 42% 3 13%

(24)

Which of the following areas are supported by systems? For each system used, indicate whether you are

currently using or considering using Software as a Service to manage the following programs.

(Software as a Service: The vendor hosts and operates the technology platform at its facility. The application is

offered in a multi-tenant architecture with all the vendor’s customers accessing a single code base.)

Intent to use Software as a Service

Currently using Adding in 2011/ 2012 Adding in next 3–5 years Not considering at this time

N= Percent N= Percent N= Percent N= Percent

Recruiting/talent acquisition 20 71% 2 7% 1 4% 5 18% Learning management 17 71% 4 17% 1 4% 2 8% Performance management 19 73% 4 15% 0 0% 3 12% Succession planning 11 50% 3 14% 1 5% 7 32% Compensation management 14 56% 3 12% 3 12% 5 20% Benefits administration 22 76% 2 7% 1 3% 4 14% Payroll 24 80% 2 7% 0 0% 4 13% Time and attendance 21 72% 3 10% 0 0% 5 17% Absence management 16 67% 2 8% 1 4% 5 21%

(25)

To what extent is HR self-service accessed/utilized in your organization?

(Overall, indicate what percentage of your employee and manager populations have access to the self-service tools,

systems, and processes that have been made available for use in your organization.)

76%-100% 51%-75% 26%-50% 1%-25% Not at all Unable to rate

N= Percent N= Percent N= Percent N= Percent N= Percent N= Percent

Employee self-service 20 65% 1 3% 1 3% 4 13% 3 10% 2 6% Manager self-service 20 65% 0 0% 2 6% 3 10% 4 13% 2 6%

(Overall, indicate what percentage of your employee and manager populations utilize self-service tools, systems, and

processes.)

76%-100% 51%-75% 26%-50% 1%-25% Not at all Unable to rate

N= Percent N= Percent N= Percent N= Percent N= Percent N= Percent

Employee self-service 11 35% 4 13% 4 13% 5 16% 3 10% 4 13% Manager self-service 13 42% 3 10% 4 13% 4 13% 4 13% 3 10%

(26)

How much time do HR people outside the centers of expertise or shared services spend on the following

data activities?

A significant amount of time A moderate amount of time A limited amount of

time Not at all

N= Percent N= Percent N= Percent N= Percent Collecting: Gathering and standardizing current

workforce data

10 32% 5 16% 10 32% 6 19%

Reporting: Slicing and dicing current workforce data 5 16% 9 29% 9 29% 8 26%

Trend Analysis: Using historical data to conduct analysis

and build projections

4 13% 10 32% 10 32% 7 23%

Predictive Modeling: Using advanced analytics to predict

future behavior

(27)

To what extent does your organization consistently execute on the following practices?

Not at all In primary region in which we operate Across multiple regions Across all regions/ globally We do not have this practice

HR Strategy

We have a clearly defined HR strategy aligned with business objectives

0 0% 10 32% 2 6% 14 45% 5 16% We gather input from business leaders

regarding business and workforce issues to create the HR strategy

2 6% 9 29% 4 13% 13 42% 3 10%

We clearly identify the workforce and organizational outcomes that HR needs to drive for the business

2 6% 9 29% 3 10% 14 45% 3 10%

We communicate and execute our HR strategy

2 6% 10 32% 3 10% 12 39% 4 13% We conduct workforce planning broadly

across all divisions, operating companies, or business units

2 6% 13 42% 4 13% 9 29% 3 10%

We utilize a specific quantitative framework to align human capital investments with business results

6 19% 7 23% 4 13% 4 13% 10 32%

Talent Supply

We identify the critical roles and capabilities that create the most value for our business and ensure that the required talent is available to fill those roles

2 6% 12 39% 2 6% 11 35% 4 13%

Our strategic business planning involves a review of our existing and future talent needs

2 6% 11 35% 5 16% 11 35% 2 6%

We leverage workforce modeling tools to support our internal and external workforce planning and forecasting analysis (e.g., model scenarios based on different workforce demographic and business trends)

6 19% 5 16% 5 16% 4 13% 11 35%

We have business leaders and managers who actively source and attract new candidates to the organization

3 10% 11 35% 3 10% 10 32% 4 13%

We attract, develop, and retain people of color, women, and other minorities

0 0% 14 45% 3 10% 13 42% 1 3% We use our competency model to assess

candidates for positions

5 16% 10 32% 1 3% 12 39% 3 10% We have a formal process for

onboarding employees who are new to their role

(28)

We assess the performance and engagement of new hires during the first year of employment

3 10% 11 35% 2 6% 13 42% 2 6%

We invest in common HR systems (HRMS, performance management, training programs) to manage talent effectively

0 0% 11 35% 5 16% 13 42% 2 6%

Leadership and Key Talent Capability

We use assessment tools to identify capability strengths and gaps for critical talent

6 19% 7 23% 3 10% 10 32% 5 16%

We clearly define leadership

competencies and capabilities and use them as the basis for performance reviews and developmental activities

3 10% 10 32% 0 0% 16 52% 2 6%

We conduct talent reviews on senior executives on at least a semi-annual basis

4 13% 7 23% 2 6% 8 26% 10 32%

We build customized training programs for critical talent

3 10% 12 39% 2 6% 7 23% 7 23% We ensure that leadership development

programs are grounded in issues affecting our organization (e.g., innovation, execution, globalization)

0 0% 12 39% 2 6% 12 39% 5 16%

We use formal succession management to fill executive positions throughout the organization

3 10% 6 19% 0 0% 14 45% 8 26%

We have a strong leadership bench with succession plans extending at least 2 to 3 people down across most leadership roles

7 23% 8 26% 0 0% 5 16% 11 35%

We ensure that the leadership succession planning process takes into account diversity of gender and people of color

3 10% 11 35% 0 0% 8 26% 9 29%

We use developmental assignments or job rotation assignments to address specific leader development needs (including developing global capabilities)

1 3% 7 23% 3 10% 8 26% 12 39%

We ensure that equity rewards are performance-based and performance criteria are clearly defined

1 3% 11 35% 2 6% 14 45% 3 10%

We reward leaders (e.g., promotions, compensation) for the strength of the

(29)

High Performance

We view performance management and career development as an ongoing management responsibility rather than a once-a-year process

2 6% 11 35% 1 3% 15 48% 2 6%

We ensure that all employees

understand organizational priorities and align their individual performance goals with them

2 6% 11 35% 3 10% 13 42% 2 6%

We ensure that managers have the skills and capabilities needed to provide effective performance feedback and coaching, set aligned goals, and develop their teams

4 13% 12 39% 1 3% 13 42% 1 3%

We use a consistent and systematic performance management process to assess all employees across the entire organization

3 10% 10 32% 2 6% 14 45% 2 6%

We promptly address and take action on poor performance

1 3% 12 39% 3 10% 15 48% 0 0% We hold managers accountable for

effectively differentiating pay based on performance

1 3% 11 35% 4 13% 11 35% 4 13%

We provide career paths for major job groups and ensure that a consistent career management process is used across the organization

3 10% 11 35% 5 16% 4 13% 8 26%

We clearly identify the future critical capabilities needed to execute the business strategy and use this to inform the training strategy

7 23% 8 26% 3 10% 8 26% 5 16%

We provide opportunities for learning and development through special work projects and problem-solving opportunities

2 6% 12 39% 4 13% 6 19% 7 23%

Every employee has an individual development plan

5 16% 8 26% 1 3% 8 26% 9 29% We ensure that rewards and recognition

are linked to attainment of organizational and individual performance goals

2 6% 11 35% 3 10% 13 42% 2 6%

We build compensation plans based on up-to-date competitive market data

3 10% 10 32% 4 13% 13 42% 1 3% We utilize equity programs to

differentiate pay

(30)

Employment Relationships

We have an employer brand that provides a clearly differentiated competitive advantage—helps to attract and retain the best talent

3 10% 9 29% 3 10% 12 39% 4 13%

We align workforce programs and practices to support the employer brand (i.e., company lives its brand)

2 6% 9 29% 5 16% 9 29% 6 19%

We have employees who are very engaged and passionate about our employment brand, internally as well as externally

3 10% 8 26% 5 16% 12 39% 3 10%

We have a clearly articulated set of values that are consistently exhibited in the behaviors of employees

1 3% 9 29% 2 6% 16 52% 3 10%

We gather and analyze data to measure employee engagement and/or opinions

3 10% 10 32% 1 3% 15 48% 2 6% We hold managers accountable for the

engagement results of their team(s)

5 16% 7 23% 4 13% 9 29% 6 19% We have a clearly defined and

communicated diversity strategy and programs employed across the entire organization

5 16% 8 26% 3 10% 6 19% 9 29%

We ensure that we provide competitive pension and/or 401(k) programs to help employees accumulate money for retirement

0 0% 12 39% 4 13% 14 45% 1 3%

We provide competitive health and welfare benefits to employees (in applicable countries) including medical, dental, and vision insurance, life insurance, etc.

0 0% 11 35% 3 10% 16 52% 1 3%

Organizational Effectiveness

We have consistent and systematic M&A tools and processes in place that are used throughout the organization

3 10% 6 19% 2 6% 7 23% 13 42%

We use a robust due diligence process to identify human capital-related liabilities for new acquisitions

3 10% 4 13% 2 6% 7 23% 15 48%

We establish and execute well-defined integration plans that include cultural assessments of the organization being acquired

(31)

We have dedicated organizational development resources or strategic HRBPs with required skills and capabilities that typically plan and lead organizational development initiatives

3 10% 12 39% 2 6% 5 16% 9 29%

We have consistent and systematic organizational development tools and processes that are used throughout the organization (for restructuring, process redesign, capability assessment, workforce assessment, etc.)

4 13% 9 29% 6 19% 2 6% 10 32%

We partner with business leaders as part of annual business planning to identify and develop human capital plans for executing business strategy

3 10% 11 35% 4 13% 8 26% 5 16%

Hr Operational Efficiency and Effectiveness

We consolidate core HR service delivery (benefits administration, payroll, workforce administration, leave administration, etc.)

2 6% 17 55% 3 10% 8 26% 1 3%

We have an HRMS system or data warehouse that houses workforce data globally or within regions

1 3% 15 48% 5 16% 9 29% 1 3%

We have integrated HR systems (e.g., core HRMS system integrated with performance management, recruiting system, performance management system, learning administration system)

7 23% 9 29% 5 16% 5 16% 5 16%

We utilize an integrated HR portal that employees can use to access information about HR-related policies, practices, career development, and information about other aspects of the employment relationship

1 3% 16 52% 4 13% 9 29% 1 3%

We assess and continuously monitor HR processes to both improve value to the customer and to reduce costs

2 6% 13 42% 1 3% 10 32% 5 16%

We utilize HR service centers to provide a single point of contact to answer and resolve employee questions and to support employee transactions

3 10% 11 35% 6 19% 6 19% 5 16%

We utilize event-driven workflow in our service centers rather than transaction-driven workflow

4 13% 7 23% 4 13% 3 10% 13 42%

We have a clearly defined set of human capital reports and dashboards that are consistently used throughout the organization

(32)

We have a centralized or coordinated team that is focused on providing human capital analytics and insights to business leaders

6 19% 9 29% 1 3% 5 16% 10 32%

We have access to a robust data warehouse to conduct analysis on human capital data across systems and businesses

7 23% 10 32% 0 0% 5 16% 9 29%

We ensure that HR programs, practices, and policies are compliant with laws and regulations

(33)

What best describes the development philosophy for your HR talent?

N= Percent N= Percent

Change jobs often 7 23% vs. Change jobs rarely 24 77% Growth within specialty (e.g.,

compensation)

21 68% vs. Rotation between specialties (e.g., compensation, benefits, learning and development)

10 32%

Growth within functional HR (e.g., centers of expertise)

26 84% vs. Rotation between functional and field HR (e.g., HRBPs)

5 16% Advance quickly 9 29% vs. Advance slowly 22 71% HR talent is treated as a

local/business unit asset

21 68% vs. HR talent is treated as a global talent pool 10 32% Growth in a single location 22 71% vs. Growth through geographic mobility 9 29%

(34)

To what extent do you agree with the following statement?

The organization currently has a sufficient talent pipeline at the following HR levels to be successful in the

future at the following levels:

Strongly disagree

Slightly disagree

Neither agree

nor disagree Slightly agree Strongly agree

N= Percent N= Percent N= Percent N= Percent N= Percent

Senior-level HR (HR leader and his/her direct reports)

4 13% 2 6% 6 19% 12 39% 7 23% Mid-level HR (manager of HR

professionals and/or HR programs, HR business partners)

5 16% 5 16% 7 23% 7 23% 7 23%

Entry-level HR (individual contributors, generalists, service center employees)

(35)

To what extent does your HR organization consistently do the following?

N= Percent N= Percent N= Percent N= Percent N= Percent

Use HR competencies/capabilities as part of the performance management evaluation process

2 6% 11 35% 1 3% 13 42% 4 13%

Use HR competencies/capabilities as part of the recruitment process

3 10% 13 42% 1 3% 9 29% 5 16% Use assessment tools to identify capability

strengths and gaps in HR

8 26% 6 19% 1 3% 8 26% 8 26% Offer formalized training programs to build

HR capabilities

7 23% 8 26% 2 6% 7 23% 7 23% Utilize cross-functional project teams and/or

rotational assignments to build HR capabilities

4 13% 10 32% 3 10% 7 23% 7 23%

Align HR capabilities to broader competency frameworks within the company (e.g., enterprise-wide, leadership)

(36)

Contact Information

At Aon Hewitt, we are prepared to answer your questions about this study and offer any assistance to guide you in

your HR effectiveness approach and activities. For more information, please contact:

Jennifer Wich

Aon Hewitt – HR Effectiveness Service Line

9500 Lakeside Blvd.

Woodlands, TX 77380

Direct: 281-363-0456

Mobile: 281-299-2706

[email protected]

Michael MacLeod

Aon Hewitt – HR Effectiveness Service Line

3350 Riverwood Parkway

Atlanta, GA 30339

Mobile: 770-846-1412

(37)

About Aon Hewitt

Aon Hewitt is the global leader in human resource solutions. The company partners with organizations to solve their

most complex benefits, talent and related financial challenges, and improve business performance. Aon Hewitt

designs, implements, communicates and administers a wide range of human capital, retirement, investment

management, health care, compensation and talent management strategies. With more than 29,000 professionals in

90 countries, Aon Hewitt makes the world a better place to work for clients and their employees. For more information

on Aon Hewitt, please visit www.aonhewitt.com.

This document is intended for general information purposes only and should not be construed as advice or opinions on any specific facts or circumstances. The comments in this summary are based upon Aon Hewitt's preliminary analysis of publicly available information. The content of this document is made available on an “as is” basis, without warranty of any kind. Aon Hewitt disclaims any legal liability to any person or organization for loss or damage caused by or resulting from any reliance placed on that content. Aon Hewitt reserves all rights to the content of this document.

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