Workforce 2020 Project Themes

Created by Oxford Economics for SAP, July 2014

Program Overview: The Looming Talent Crisis
Preparing for the 2020 workforce is critical to business strategy and performance. To understand the challenges and opportunities around people issues, Oxford Economics and SAP conducted global surveys of 2,700 executives and 2,700 employees in 27 countries during the second quarter of 2014. We asked executives to identify their company’s performance level and employees to report their performance on their last appraisal. We found that, although companies must manage diverse, mobile, multi-generational employees, they lack adequate structure, strategy, culture, and resources to do so. In order to succeed, they must take action on several fronts, including the role and relevance of people strategy; changing employee demographics and evolving definitions of work; leadership cultivation and shortfalls; worker wants and needs; and talent development.

Key Themes: The New Face of Work
Businesses must understand the workforce of the future and its importance to bottom-line success, but on some concerns, HR is out of touch with workers and out of the loop with business leaders.
• The 2020 Workforce will be increasingly flexible.
     • An increase in the number of non-payroll positions for consultants, intermittent employees, and contingent workers is forcing change on companies:
           41% of executives say their firm is increasingly using contingent workers.
           42% say this increasing number of contingent employees is affecting their workforce strategy.
     • HR management will need to become more evidence-based to accommodate the increasingly flexible and diverse workforce of the future.
• The 2020 Workforce will be increasingly diverse.
     o Ongoing globalization and macroeconomic shifts mean the 2020 workforce will be made up of a wider group of ages and nationalities than ever before, and in order to succeed companies will need to have a broader understanding of their people and the markets in which they operate.
     o Executives cite globalization and Millennials entering the workforce as top business concerns—51% say these labor market shifts have great impact on their workforce strategies. Our qualitative research—interviews with executives from around the world—will delve deeper into the reasons for these concerns. Respondents from Asia-Pacific (64%) and Middle East/Africa (57%) are more concerned with Millennials entering the workforce than other respondents, as are companies with higher-than-average profit margins compared with other firms in their industry (56%).
     o HR management will need to become more evidence-based to accommodate the increasingly flexible and diverse workforce of the future.
• HR too often lacks the information or insights to be truly strategic.
     o HR most frequently works with C-suite executives but does not drive strategy at the board level. Only half (52%) of executives say workforce issues drive strategy at the board level, and nearly one-quarter say that workforce issues are an afterthought in business planning.
     o Ready, fire, aim: While companies are executing on operational plans (53%), less than a third have a strategic, enterprise-wide vision for the workforce they want to build.
     o High-performing firms are more likely to say that workforce issues drive strategy at the board level (61%, vs. 47% of less profitable firms), and will increase their focus on workforce issues over the next three years.
• A lack of metrics and tools holds HR back from developing strategies for building the workforce of the future.
     o While over half (53%) of executives say workforce development is a key differentiator for their firm, they do not have the tools and organization to back it up.
     o Just 38% say they have ample data about the workforce to understand their strengths and potential vulnerabilities from a skills perspective, and 39% say they use quantifiable metrics and benchmarking as part of their workforce development strategy.
     o Only 42% say they know how to extract meaningful insights from the data available to them.
     o C-suite executives are more likely than HR executives to say their firm uses quantifiable metrics and benchmarking as part of their workforce development strategy, suggesting further strategic misalignment.
• As a result, companies are not making progress toward meeting their workforce goals.
     o 19% of executives say they have made slight progress toward their goals of building a workforce to meet future business objectives; 47% say they have made moderate progress; and 33% say they have made good or significant progress.

Questions related to The People Imperative
Executive: Q11, Q12, Q13, Q14, Q15a, Q15b, Q16, Q17, Q18, Q19, Q21, Q26,
Employee: Q13, Q21, Q23

The Millenial Misunderstanding
Millennials are different, but not as different as companies think.
• Executives are concerned about Millennials entering the workforce, yet they aren’t making any special plans for managing them.
     • Although 51% of executives say Millennials entering the workforce is having significant impact on their workforce strategy, fewer than one-third (30%) of executives say they are giving special attention to the particular wants and needs of Millennials.
• And perhaps they don’t need to: There are many myths about what Millennials want most from work.
     o Myth 1: Millennials care more than non-Millennials about making a positive difference in the world through work. Reality: Just about one-fifth of Millennials and non-Millennials alike cite this as important to their job satisfaction. But competitive compensation matters most—68% of Millennials and 64% of non-Millennials cite it as an important or very important benefit, and 41% of Millennials and 38% of non-Millennials say higher compensation would increase their loyalty and engagement with the company.
     o Myth 2: Achieving work/life balance is more important to Millennials. Reality: 31% of non-Millennials say this is important to their job satisfaction, vs. 29% of Millennials.
     o Myth 3: Finding personal meaning in their work is more important to Millennials. Reality: Finding personal meaning is actually slightly more important to non-Millennials (18%) than Millennials (14%).
     o Myth 4: Meeting income goals is less important to Millennials as long as they are learning and growing. Reality: Millennials prioritize meeting career goals and income goals, followed distantly by learning and growing. When it comes to job satisfaction, Millennials prioritize meeting career goals (35%), meeting income goals (32%), and meeting goals for advancement (29%). Non-Millennials prioritize corporate values that match their own (30%), achieving work/life balance (31%), and meeting income goals (30%).
     o Myth 5: Millennials are more likely to plan on leaving in the short-term. Reality: Millennials are no more likely than non-Millennials to leave their jobs in the next six months. However, women are more likely overall to leave than men and they express more job dissatisfaction than men.
o Separating myth from reality and creating incentives accordingly is a key to success for the 2020 workforce.
• But Millennials do need to be managed differently, in terms of feedback and development.
     o Nearly one-third of Millennials say they expect more feedback on their performance than they currently receive—and they want it more often than non-Millennials. More than 2/3 of Millennials want informal feedback from their managers at least monthly, whereas less than ½ of non-Millennials expect feedback that often.
     Only 7% of Millennials say they have experienced most of their professional development through networking, likely because they have not developed a network of contacts yet; this means Millennials are relying more on formal training and mentoring to develop their skills.
     o Accommodating Millennials’ desire for more feedback and development opportunities would not just satisfy Millennials—it would help push companies forward. 48% of executives report difficulty finding employees with base-level skills, so they should be focused more on developing these skills within their organization.

Questions related to A Generational Misunderstanding?
Executive: Q14, Q15b, Q21, Q22, Q23, Q24, Q25, Q27, Q28, Q29, Q30, Q31
Employee: Q11, Q12, Q14, Q15, Q16, Q17, Q18, Q19, Q20, Q21, Q22, Q23, Q25, Q26, Q27, Q28, Q29, Q30


What Matters Most at Work
Companies do not understand what their employees really want from them.
• When it comes to satisfied employees, cash is king.
     o Companies should focus more on compensating their employees; only 39% of executives say their company offers competitive compensation. But when ranking the importance of benefits, competitive compensation and bonuses/merit-based rewards rank highest among employees—other benefits are far less important.
     o Compensation is slightly more important to employees who scored above average on their last performance review (68%, vs. 64% of employees who scored below average). With slight variations by age, employees also care about retirement plans (45%), supplemental training programs to develop new skills (44%), a flexible working location (44%), and vacation time (43%). While a high number of executives say their companies offer bonuses and merit-based rewards (62%) and training programs (55%), fewer offer a flexible working location (34%). Given the increasing prevalence of contingent workers, employers need to focus on making workplaces more flexible and adaptive.
     o Just 39% of survey respondents say they are satisfied with their job overall. When asked what is most important to their job satisfaction, respondents are most likely to cite meeting overall career goals and meeting income goals. However, companies may not be offering the development opportunities or compensation to match.
     o Some companies may be focusing their efforts incorrectly. Headline-grabbing amenities like recreational facilities and laundry services are not highly important to employees—only 39% say these amenities are important, and companies may want to rethink spending money on them to better focus their engagement efforts.
• Executives value loyalty more than job performance.
     o Executives cite lack of employee longevity and loyalty (35%) as a leading barrier to meeting strategic workforce goals, yet they do not know— or are not focused on—how to engender loyalty.
     o Employees believe the ability to learn and be trained quickly is the most important quality to their employer, but executives say the most important quality is a high level of education or institutional training.
     o Loyalty is a two-way street. Employees focused on career development should take steps to show their manager and higher-ups commitment to the company—including self-directed learning and other development initiatives.
• Men rate the importance of quality of life slightly higher than women. It’s important to both, with 47% of women agreeing compared to 51% of men. Women rate using more current technology higher than men do, with 53% of women agreeing compared to 47% of men.

Questions related to The Unknown Employee
Executive: Q14, Q15b, Q21, Q23, Q24, Q25, Q27
Employee: Q11, Q12, Q14, Q17, Q19, Q20, Q21, Q23, Q25, Q26, Q27

The Leadership Cliff
Executives and employees agree that leadership is lacking—and companies are not focused enough on developing future leaders.
• Gaps in leadership capabilities spell trouble for future growth.
     o Executives cite a lack of adequate leadership as the number two impediment to achieving goals of building a workforce to meet future business objectives, and only 35% say talent available in leadership positions is sufficient to drive global growth.
     o Only about half (52%) of executives say their leadership has the skills to effectively manage talent or to inspire and empower employees. C-suite executives have less confidence than HR executives in their leaders’ ability to inspire and empower employees (47%, vs. 53%), while firms with higher-than-average profit margins are likelier to say their leaders know how to do this.
     o Leadership is not equipped to lead a global, diverse workforce. Just one-third (34%) say their leaders are prepared to do so—a number that is even lower in Asia-Pacific (28%).
     o 42% of C-suite executives say their companies’ expansion plans for growth are limited by access to the right leadership.
• Employees agree with executives that leadership is lackluster.
     o Just 44% of employees say that leadership at their company can lead the organization to success. Only about 40% of employees say their company makes it easy for them to collaborate, and even fewer say their company is committed to diversity (37%).
     o When it comes to managers delivering on expectations, only about half (53%) of employees say that their managers perform well on leadership. Other leadership qualities score even lower—nearly two-thirds do not agree that their manager sponsors them for training and development programs. Above-average performers (those respondents who scored higher on their latest performance review) are more likely to say that their manager delivers on leadership and regular performance reviews.
     o Employees are more critical of executive leadership than of their direct managers. When asked what would increase their loyalty and engagement, employees didn’t focus on having a high-quality manager, but men especially sought a stronger company reputation and brand.
• Most companies are not cultivating leadership within their organizations.
     o Although executives cite a lack of employee loyalty and longevity as the biggest barrier to meeting strategic workforce goals, nearly two-thirds (63%) do not plan for succession and continuity in key roles.
     o Just one-fifth (19%) of employees say management values leadership ability in employees, and executives agree—only 21% of executives say leadership ability is one of the most important employee attributes.
     o Companies are not focusing as much on development and training as most employees want—roughly one-third of employees expect more feedback on their performance than they currently receive. Not only will this impede employees’ ability to develop the skills that will move the company forward—it will also decrease their loyalty and commitment, ultimately forcing companies to hire leadership from outside the organization.

Questions related to The Leadership Cliff
Executive: Q15b, Q17, Q19, Q20, Q22, Q25
Employee: Q17, Q25, Q26, Q27, Q28

Bridging the Skills Gap: The Learning Mandate
Better training and education opportunities would benefit employees and businesses alike.
• For employees, obsolescence is a bigger concern than layoffs.
     o Employees—Millennials and non-Millennials alike—say their top concern is their position changing or becoming obsolete (40%). As only 19% say economic uncertainty is a concern, their concern over their job is likely skills-related.
     o Millennials are dissatisfied with their managers’ ability to sponsor them for development and offering a career path. Only 1/3 of Millennials are satisfied with how much their managers support them for formal learning and development opportunities and in providing a well-defined career path. Although Baby Boomers and Gen X are equally dissatisfied, development is a slightly higher priority for Millennials.
• Technology skills development will continue to lag.
     o The need for skills like analytics, cloud, and programming/development will grow sizably over the next three years, but less than half of employees expect to be proficient with most of these key technologies in three years. Skills in vital areas such as cloud and mobile are laggards compared to other technologies like programming/development and job-specific software.
     o Although 51% of executives say analytics skills are well-represented at their organization, they also say that analytics skills are the most difficult to acquire.
     o In order to develop the technology skills they need within their organization, companies will have to focus more on supplying the right technology and training to their employees. Currently, less than half of employees say their company provides ample training on the technology they need, and less than one-third say their company makes the latest technology available to them.
• Firms have difficulty finding adequately skilled employees, but do not invest enough in identifying and developing talent within their organizations.
     o Nearly half (48%) of executives say that difficulty recruiting employees with base-level skills has an impact on their workforce strategy. However, companies with higher-than-average profit margins are less likely to have difficulty recruiting employees with base-level skills (44%, vs. 54% of companies with lower-than-average profit margins).
     o Fewer than one-quarter (23%) of executives say their company widely offers education as a benefit to keep employees loyal and engaged.
     o An increase in the number of non-payroll positions for consultants, intermittent employees, and contingent workers may force companies to rethink their development strategies. 41% of executives say they are increasingly using contingent workers, but they may be underestimating the changes needed to accommodate them—only 45% of executives say the changing nature of employment will require increased investment in training.
     o Companies with higher-than-average profit margins are more likely to offer supplemental training programs (57%) than companies with below-average profit margins (51%).
• Firms struggle to develop a learning culture within their organization.
     o Roughly half (52%) of executives say their company is capable of retaining, updating, and sharing institutional knowledge, and 47% say their company has a culture of continuous learning. Only half say they have a mentoring program, and even fewer—41%—say they offer incentives for pursuing higher education. Less than 40% of executives say they offer formal programs such as job rotation and shadowing.
     o Leaders at most companies do not sufficiently encourage learning. Only 41% of employees say their company offers them opportunities to expand their skill sets, and just over one-fifth of employees say self-directed learning is important to their employers.
• Companies need to provide employees with a path and help them develop the key skills that will take the company forward.
     o Executives cite a high level of education or institutional training as the most important employee attribute—however, only 23% of executives say they offer education as a benefit, and incentives for pursuing educational opportunities are also uncommon. With more incentives to pursue education and participate in supplemental training programs, employees would expand their skill sets and likely inspire peers to do the same.
     o Leaders are not sufficiently planning for succession and continuity in key roles. Only 31% of executives say that when a person with key skills leaves they fill the role from within the organization; with proper investment in training and development, companies may be more likely to replace those skills from within the organization, and would inspire employees to stay with the company at the same time.

Questions related to The Development Mandate
Executive: Q12, Q14, Q15b, Q16, Q19, Q20, Q22, Q25, Q28, Q29, Q30, Q31
Employee: Q11, Q12, Q13, Q15, Q16, Q17, Q18, Q21, Q22, Q24, Q26, Q28, Q29, Q30, Q31


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