A recent survey by the Economist Intelligence Unit on behalf of the Chartered Institute of Management Accountants and the American Institute of Certified Public Accountants has revealed that HR and the C-Suite aren’t exactly seeing eye to eye on talent management issues.
CIMA and AICPA suggest that this could lead to a decrease in growth for companies where talent management influences innovation, succession planning, and leadership.
The study, Talent Pipeline Draining Growth: Connecting human capital to the growth agenda, polled over senior executives (CEOs, CFOs and HR directors). The differences between C-suite and HR views on talent management are striking.
According to the study, only 41% of companies feel their human capital strategy is “truly embedded in their organization’s strategy.” That disconnect leads to a lot of concern on behalf of executives on issues like succession planning, promotion, and more. The study explains:
“A significant number of respondents cite missing financial targets and failing to innovate due to ineffective human capital management, which suggests that many firms worldwide are not fulfilling their growth potential because they are failing to effectively manage and harness the skills and experience of their workforce. This is mainly due to the lack of information to support decision making, strategy development and investment evaluation.”
Significant numbers of business leaders agreed that human capital challenges were inhibiting their company’s ability to achieve its goals. For example, 43 percent of respondents said inadequacies in human capital left their companies “unable to achieve key financial targets,” and 40 percent said human capital inadequacies led to a “reduction in the company’s ability to innovate. Over a third (39 percent) said they were “unable to achieve forecast growth” because of human capital challenges, and 37 percent said they were “unable to start a major project or strategic initiative” due to human capital challenges.
The challenges are there – but finding a solution to them may be even more challenging. Because, the study showed, a major divergence between the viewpoints of the C-suite and HR.
The study showed that HR and the C-suite have different perceptions of human capital. For example, the study said, “It is also worrying that two in five firms claim to have missed performance targets or delayed initiatives because of human capital issues, yet over the next 18 months 77% of CEOs plan to cut spending on training and development. (18% of HR directors agree).”
Program funding isn’t the only area where the C-suite and HR have different views. Succession planning is another area where they don’t see eye to eye. Three quarters (75 percent) of HR directors said they have a formal succession planning process. But only 57 percent of CEOs and 12 percent of CFOs said the same.
Over a third of HR directors (36 percent) said they won’t have to recruit externally for senior roles, “less than 10% of CEOs and CFOs agree.” The study notes, “The CEO’s and CFO’s significant lack of confidence in their organisation’s ability to nurture home-grown talent, indicates that existing structures and investment in human capital may not be fit for purpose.”
Finally, the C-suite and HR have different views on accountability. According to the study, more than three-fifths of CEOs and CFOs believe that the head of finance has the mandate to measure the effectiveness of the firm’s talent management strategy. On the other hand, the vast majority of HR directors feel they have responsibility for tracking the effectiveness of talent management. Less than a third of CEOs and CFOs agreed.
CIMA and AICPA believe that companies should close the gap between expectations around talent management, putting ultimate responsibility for talent management effectiveness in the hands of the CFO. The study advises, “Restructure for closer collaboration at the executive and operational levels, encouraging in particular partnering between the finance function and HR. Finance has a helicopter view of the organisation and can therefore ‘connect the dots’ across different units and functions.”
Wherever the accountability for talent management is situated in a company – with the CFO or HR, it is important that leadership is clear on the issue. Leaving responsibility for human capital effectiveness up in the air may be one reason so many companies are seeing inadequacy here.