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Accenture: Lack of necessary workforce skills hinders

corporate ability to succeed
22-Jun-2006

Most senior executives report that their workforces lack the skills their companies need to
achieve market leadership, and even their critical functions do not perform as strongly as they
should, according to research by Accenture.

Accenture: Lack of necessary workforce skills hinders corporate ability to succeed

The Accenture High Performance Workforce Study is conducted approximately every 18

months to measure workforce management trends among executives in large corporations in
the United States, Europe and Australia. This year’s research, of more than 250 senior
executives, found that only 14 percent of respondents described the overall skill level of their
organizations’ entire workforce as industry leading. Furthermore, just 20 percent of
respondents said the vast majority of their employees understand their companies’ strategy
and what’s needed to be successful in their industry.

Respondents also reported that even functions they consider critical – sales, customer
service, finance and strategic planning (cited as critical by 62 percent, 43 percent, 23 percent
and 23 percent, respectively) – were not performing as strongly as they should. In fact,
among those who rated these functions among the top three, just one-quarter (25 percent)
assigned the highest rating to the performance of their sales function, and under a third
provided the same rating to their customer service, finance and strategic planning functions
(25 percent, 19 percent and 33 percent, respectively).

“The lack of essential skills is a vital issue for senior managers,” said Peter Cheese, global
managing partner in Accenture’s Human Performance practice. “As the competitive
environment grows more demanding and as markets become increasingly commoditized, the
need to cultivate these skills – particularly in the critical functions – should be at the top of
every corporate to-do list. Those companies that fail to develop their workforces risk losing
their competitive edge.”

According to the research findings, these shortcomings can be attributed, in part, to several
key human resources- and training-related findings. For example, just one in ten respondents
reported being very satisfied with the performance of his or her human resources (HR) and
training functions (11 percent and 10 percent, respectively). The research uncovered a
number of possible reasons for this, including:

* A lack of connection to business drivers – Only 36 percent of respondents said their

companies tailor their HR and training support to each function’s needs and contributions to
the organization.

* Failure to measure the business impact of HR and training efforts – More than 40
percent do not evaluate the impact of their HR and training efforts against profitability, and
half (50 percent) do not evaluate those efforts against revenues and sales.

* Ineffective or non-existent knowledge capture and sharing capabilities – Four in 10 (42

percent) respondents described capturing and sharing knowledge as a challenge or a severe
challenge for their companies. The most commonly cited impediments to better knowledge
capture and sharing were: a lack of a common business culture across different locations
(cited by 38 percent); no knowledge support infrastructure with dedicated people (37 percent);
and the fact that knowledge sharing is typically not rewarded in the organization (32 percent).

* The talent time bomb – Nearly two-thirds (60 percent) of respondents reported that, over
the next five years, they expect to begin feeling the impact of the aging workforce and the
impending retirement of baby boomers. Of those, 28 percent said they are feeling the impact
now. Almost one-half (43 percent) of participants described talent sourcing as a challenge or
a severe challenge, primarily because of a smaller or shrinking talent pool from which to
choose.

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* Lack of functional leaders’ involvement in people issues – Only a small percentage of

respondents said the heads of customer service, finance, sales and strategic planning at their
companies are highly involved in human capital management initiatives (reported by 29
percent, 31 percent, 34 percent and 37 percent, respectively).

“A company’s ability to manage its workforce strategically and develop its capabilities will set
it apart from its competitors,” said Cheese. “Some companies focus well on one or two
aspects of human capital management, such as learning or internal communications, but the
best take a broad view of managing their workforce. These are the companies that vastly
increase their chances of being industry leaders.”

The research did identify a group of companies that Accenture refers to as “human
performance leaders” – companies in which the three functions their executives deem to be
the most important perform at the highest levels. These leaders, as opposed to the “laggards”
– who said that none of their top three functions performs at the highest level – are more likely
to be successful in addressing the organizational issues that contribute to strong financial
performance. For example, respondents stated that their companies perform “very well” in the
following areas:

* Acquiring new customers and increasing market share (reported by 43 percent of “human
performance leaders” vs. 14 percent of “laggards”)

* Encouraging strong customer loyalty and retention (52 percent vs. 17 percent)

* Responding to changing market conditions (52 percent vs. 14 percent)

* Finding and developing talented leaders (39 percent vs. 7 percent)

* Attracting and retaining skilled staff (30 percent vs. 12 percent)

* Generating superior business value from technology investments (35 percent vs. 15
percent)

According to the findings, “human performance leaders” have more effective HR and training
support. Among the practices helping them excel are: formal measures that gauge the impact
of all HR and training support activities on their top functions; tailoring HR and training support
according to the contribution of specific functions; and taking a more strategic approach to
human resources and training, including viewing the HR function leader as a strategic
business partner to the executive suite.

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