U.S. Human Capital Effectiveness Report 2010/2011


Some highlights from the annual survey, as presented by PwC Saratoga HR consulting group.  To access the Executive Summary, click here.  Note:  Many of the 300 responding companies are global, but the results are for U.S. operations only.  

Retention rates are high.   In a severe downturn, keeping talent is easy.  There are few new jobs for employees to consider.  Voluntary separations have decreased 30% since 2006 and more than 20% in the past year.  First year of service turnover rate is dropping from 31.7% in 2007, 28% in 2008 and 23.6% in 2009.

But productivity is dropping.  The recession is taking a toll on those remaining after waves of job cuts — with many doing the work of 2 or more people.   People only have so much bandwidth and they are stretched to the max, as revenue per FTE has dropped from $413,690 in 2008 to $387,993 in 2009 — the first year-over-year decrease since 2005.   This has a material impact on employee satisfaction. 

With recovery, prepare for musical chairs.  As the economy improves, historical trends suggest that turnover numbers will increase. 

Prioritize retention targets.  Should companies try to keep everyone, post-recession?  It’s not practical, according to survey participants.  What if the A Players bolt and the B Players stay?  Instead, market leaders are identifying pivotal roles that are mission-critical to corporate performance/profitability and focusing employee engagement on a selective basis. 

Emphasis on top-line growth.  The major downsizing initiatives have already taken place.  Companies are moving from cost-cutting to selling.  Market leaders are looking to HR to drive sales/revenue. This is not managing the head count. It’s a strategic assessment of talent to increase output and corporate performance.

Cost per hire rising.  Hiring new employees, while becoming faster, is certainly not less expensive.  Maintaining a consistent trend over the past three years, employers continue to spend more per hire.  Last year’s 26 % increase brings the average per-hire cost to $3,375.  Note that this is in an extreme downturn, so the dynamic will become more acute in a more active hiring environment. It will cost you more to replace departing talent, thus the emphasis on employee engagement/retention. 

Retirement issues still looming.  Businesses need to plan carefully to confront a potential ”brain drain” as the economy recovers ad more key workers retire.  According to the report, more than one in ten employees are currently eligible for retirement.  In five years, nearly one third of executives and one in five managers will be eligible for retirement. 

Succession planning moving to forefront.  Succession planning depth as measured by the percentage of key roles that have a succession pool of at least one or more unique candidates is at 56%, a decrease from 2008 results of 61% and represents a 12% decrease since 2007.  Additionally, the extent to which companies are filling leadership positions with internal talent declined by 4%  between 2008 and 2009 to 56%. 

While we all await an element of uplift in the economy, be forewarned that underlying talent issues are looming for organizations at every revenue level and stage of growth.  The bar has been raised.  The goal is to gain a sustainable competitive advantage through human capital.  Time to be proactive and deploy a plan!

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Copyright © 2012 Nancy Keene