Human Capital Management

Human Capital Management

June 18, 2013

What's Driving Human Capital? Four Major Trends Emerge

The world of human capital is an increasingly puzzling affair. With large parts of Europe seeing revenue per employee drop off, while Asia sees continued growth, it's enough to make many businesses—especially those that work on a global basis—wonder just what's going on in the field. PwC Saratoga recently released a report showing some of the major trends going on in the field of human capital management, and how there are some stark differences among parts of the world.

PwC Saratoga's report points to four critical trends that have emerged in the world of human capital, examining issues like gaps in productivity among various countries, the difficulties faced by potential employees just getting started, the difficulty inherent in keeping the survivors of economic hardship engaged, and a look at some of the new best practices when it comes to analyzing the field of human capital.

The first major development was that developed countries lost ground in productivity, on average, while developing regions like the Asia-Pacific field and Latin America have been gaining. The United States also saw some productivity gain, somewhat bucking the trend, though the professional services sector has seen some of the largest gains. With organizations cutting back on raw talent hiring, average remuneration has increased to match, but revenues have fallen at the same time, leading to a lower average rate of return overall.

That same quality of cutting back on raw talent hiring is posing significant problems for younger workers, who are now finding it difficult to find work anywhere as companies value experience over youth, hoping that experienced hands will help enterprises brave rougher seas. But without raw talent development, the experienced hands of tomorrow will be in short supply, leaving organizations with potential problems down the road. While this approach is proving to be a sound short-term response, the long-term implications are worrisome.

This approach, in turn, coupled with the economic downturn overall, has left employers with a major problem: employee engagement. Those that actually survive the cost-cutting measures and large-scale firings are left without much faith in the company's larger overall vision, likely owing to the fact that said employees may not be part of same at any given time. Worse, younger employees are finding moving up the ladder tough as older employees discover a lack of ability to retire, and when rewards for high performance are largely limited to continued employment and nothing more, burnout is more easily settled in. But even in Asia, where younger talent is getting a better chance, job-hopping is a normal part of life, and that lack of permanence is keeping younger employees from becoming fully concerned with the company's vision.

But despite these many challenges, there are still critical key steps involved in proper human capital management, and these best practices revolve around analytics. Heavy investment in human capital analytics has lead to some impressive new systems in terms of data collection and analysis, and companies are eager to put that technology to work. With 75 percent of companies using an established management program in relation to human capital, and another five percent using a full workforce analytics system, it's clear that analytics are being practiced, on some level, at most corporations.

The field of human capital is posing a variety of challenges for its practitioners, but these challenges must be faced down to make a successful business. A business is only as successful as the people doing the work, and if those people don't work, the whole business doesn't work.

Edited by Alisen Downey

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