Transcript Europe - iMercer.com

DOING BUSINESS IN EUROPE
ADDRESSING TODAY’S AND TOMORROW’S
MOST PRESSING ISSUES
DRAFT FOR REVIEW
MERCER
CONTENTS
• THE GLOBAL MACRO-ECONOMIC SCENE AND EUROPE
• GLOBAL & EUROPEAN LABOUR/TALENT-RELATED TRENDS
• RISKS AND OPPORTUNITIES FOR EMPLOYERS IN EUROPE
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1
THE GLOBAL MACRO-ECONOMIC
SCENE AND EUROPE
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FROM A TWO-SPEED TO A THREE-SPEED RECOVERY OVER 2012-2013
SLOW GROWTH IN EUROPE WITH GLIMMERS OF RECOVERY
Source : IMF staff estimates - April 2013 World Economic Outlook report
The euro area came out of recession in
April-June, having been in a "double-dip"
recession since the 4th quarter of 2011.
Actual GDP % change (Q2)
Actual GDP % change (Q2)
Europe
+0.3
USA
+1.0
France
+0.5
China
+7.5
Germany
+0.7
Brazil
+1.9
Greece
-4.6
India
+4.8
Spain
-0.1
Turkey
+3.2
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Switzerland
+1.1
Russia
+1.9
3
A CLOSER LOOK AT EUROPE
SLOW ECONOMIC GROWTH:
Euro Area GDP Growth Rate averaged 0.35 Percent from 1995 until
2013, reaching an all time high of 1.30 Percent in June of 1997 and a
record low of -2.50 Percent in March of 2009. The economic crisis
affecting some of the Euro Zone peripheral countries has been raising
doubts over the euro’s future and is the major obstacle to growth.
DECLINING POPULATION:
Consistently low birth rates and higher life expectancy are
transforming Europe's population pyramid. The proportion of people of
working age is shrinking while numbers of retirees is expanding.
HIGH GOVERNMENT DEBT TO GDP:
Government Debt To GDP averaged 73.81 Percent from 1999 until
2012, reaching an all time high of 90.60 Percent in December of 2012
and a record low of 66.20 Percent in December of 2007.
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OTHER EUROPE STATS
AGEING POPULATION
HIGH UNEMPLOYMENT
Likely to stabilize above 12% in 2014
Challenges to countries' welfare, pension and healthcare systems. Waste of
valuable skills and expertise because of early retirement age.
High youth unemployment leads to youth migration. This loss of labour force
slows the region’s economic output and increases the dependency ratio.
LABOUR COST DISPARITY
INVESTMENTS
High in core countries (Sweden, Belgium, France, Germany). Countries in the
periphery offer important labour cost advantages to consider (Poland,
Romania, Bulgaria).
The EU is the largest source and destination of FDI in the world measured in
stocks and flows. The EU supports such movement of capital as it is
essential in generating economic growth, jobs and reducing poverty.
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INTERWEAVING POLITICAL, ECONOMIC AND SOCIAL TRENDS RELATED
TO THE LABOUR/TALENT MARKET
SLOW GROWTH +
DEBT / AUSTERITY
WORKFORCE MIGRATION +
DISENGAGED GEN Y-Z
YOUTH UNEMPLOYMENT +
DECLINING MIDDLE CLASS +
SOCIAL TENSION
TALENT MOBILITY +
BRAIN DRAIN +
VOCAL WORK COUNCILS
DECLINING POPULATION AND
AGEING WORKFORCE
LABOUR COST CONTRASTS +
TIGHTENING EU REGULATIONS
COST REDUCTIONS +
RESTRUCTURING
RETIREMENT COSTS +
HEALTHCARE COSTS
PAY EQUITY +
DIVERSITY & INCLUSION
DIVESTITURES +
REINVESTMENTS
+ GLOBAL ACCELERATION OF TECHNOLOGY PROGRESS & ENVIRONMENTAL ISSUES +
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GLOBAL & EUROPEAN LABOUR /
TALENT-RELATED TRENDS
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TOP CHALLENGES FOR CEOs
HUMAN CAPITAL, OPERATIONAL EFFECTIVENESS AND INNOVATION
CEOs, presidents and chairmen seem somewhat less concerned than
in prior years about external business environment factors they can't control.
Instead, they're taking a hard look at their own organisations focusing
on people-driven strategies to counter slow market economic
conditions, and improve performance.
TOP FIVE CHALLENGES:
1.
2.
3.
4.
5.
Human Capital
Operational Excellence
Innovation
Customer Relationships
Global political/economic risk
Source: The Conference Board CEO Challenge 2013 Report
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ENTERING THE NEW ERA OF
TALENTISM
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April 5, 2017
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A MERCER TALENT BAROMETER
HUMAN CAPITAL SPEND RISING, BUT IS IT PAYING OFF?
EUROPE
EUROPE
Source:
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56%
Extremely/
very effective
Somewhat/
not effective
INCREASED
SPEND
32%
68%
Mercer’s 2013 Talent Barometer Report
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THREE KEY ACCELERATORS OF TALENT EFFECTIVENESS:
EDUCATION, HEALTH & WELLNESS, AND CAREER EXPERIENCE
EDUCATION
41% of European organisations believe that educational institues are generating the Talent to
support their business needs in 3 – 5 years.
However, partnership with Educational institutes is low: High School 8% ; Tertiary Schools 37%
HEALTH &
WELNESS
32% of European organisations have a formal plan for employee health and wellness, with only 15%
measuring the return on investment. 18% actively participate in health-related programmes. 21% do not
provide any support from employee health.
However, only 54% of European organisations have a healthy workplace (including safe environment,
smoke-free, healthy food & fitness options).
CAREER
EXPERIENCE
88% of European organisations have a regular talent review process, and 76% fill critical roles from
within the organisation.
However less than half (48%) have a succession plan in place.
Source: Mercer’s 2013 Talent Barometer Report
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EDUCATION
TALENT INVESTMENTS: EARLIER IS BETTER
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Source: Mercer’s 2013 Talent Barometer Report
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HEALTH & WELLNESS
Source:
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HEALTH BENEFITS COST IN EMEA ROSE BY ALMOST 4% IN 2012
2012-13 Mercer Marsh Benefits EMEA Healthcare survey findings:
• The average cost per employee for health-related benefits rose by 3.6% in 2012.
• Government reforms will put added pressure on employers to provide private health insurance.
• Employee wellness tops list of cost-management strategies.
• Companies are lacking data analysis which is critical to cost management.
The biggest drivers of cost in 2012:
- increasing utilisation of health services
- growing complexity / expense of medical procedures
- the impact of large claims such as for cancer treatment
The UK sees 8.2% increase in health benefit cost, attributing it
primarily to increases in large claims.
Source:
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CAREER EXPERIENCE
BUILD VS.BUY TALENT MIX
Source: Mercer’s 2013 Talent Barometer Report
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EMPLOYERS LACKING ADVANCED WORKFORCE METRICS & ANALYTICS
NEED FOR BIG/LONG DATA
Thoughtful analysis of LONG DATA allows organisations to identify, segment and analyse data
as part of an ongoing process to drive meaningful results.
97% of organisation in EMEA use analytics to develop ongoing reports (87% of them use
analytics often), 82% use analytics to internally benchmark (42% of them use analytics
often), but only 26% use analytics for predictive modeling (and 8% use them often).
Source: Mercer’s 2012 Metrics and Analytics: Patterns of use and value in EMEA Report
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….EMPOWERED BY TECHNOLOGY
THE DEMAND IS FOR INTEGRATED CONSULTING EXPERTISE, MARKET
INFORMATION, AND STREAMLINED TECHNOLOGY
‘’Suit’’ solutions on the rise
‘‘Integration and consolidation are in increased demand will improve the interoperability of
systems, databases, and tools’’.
Susan Galer, Forbes
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STRATEGIC WORKFORCE PLANNING IS BECOMING A MUST
AS AN ESSENTIAL PART OF POSITIONING TALENT AS A STRATEGIC FINANCIAL
INVESTMENT AND MAINTAINING A COMPETITVE BUSINESS ADVANTAGE
Organisations in EMEA spend 32.6% of their revenue on human capital.
Yet only 16% have a moderate understanding of their return on investment.
Source: Mercer’s 2012 Metrics and Analytics: Patterns of use and value in EMEA Report
Source: Mercer’s 2013 Talent Barometer Report
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TALENT SKILLS/SUPPLY GAP DESPITE HIGH UNEMPLOYMENT
TALENT MOBILITY INOVATION TO ADRESS FOUNDATIONAL ISSUES
A broader definition of Talent Mobility: The physical movement of workers within or across organisations,
industries or countries, and globally, or the professional movement of workers across occupations or skill
sets. Mobility may be temporary or permanent and may also involve moving people from unemployed to
employed, moving jobs to people or allowing for virtual mobility.
Source: 2012 WEF/ Mercer Talent Mobility Good Practice Report
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LABOUR / COMPENSATION COST DISPARITIES
CONSERVATIVE SALARY INCREASES; LOW INFLATION THOUGH
Salary increase budgets for 2013
Western Europe
Eastern Europe
Highest salary freezes in peripheral markets and Eastern European countries like
Romania, Serbia and Croatia, where pay is already low.
Pay Equity legal requirements in France and upcoming regulation in Switzerland.
Because of layoffs and salary freezes in the past years, and 2013 conservative salary increases,
workforce engagement remains a challenge for many employers in Europe.
Source: Q2 2013 Mercer Salary Movement Snapshot Survey
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IMPLICATIONS OF PRESCRIPTIVE EU APPROACH TO EXECUTIVE PAY
BINDING “SAY ON PAY” VOTES AND BANKERS’ BONUS CAPS
Progress made in FS in linking pay, performance and risk may be eroded in 2014 and
beyond, given the increase in base salaries for executives*.
Reducing the amount of variable pay, like bonuses, weakens the link between pay and
performance.
Rewards in banks and other FS organisations should be tied to multi-year performance
to help manage risk.
*Source: May 2013Mercer Executive Remuneration Pulse Survey
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PAY FOR PERFORMANCE
ONLY 3% of ORGANISATIONS REPORT THEIR OVERALL PERFORMANCE
MANAGEMENT SYSTEM PROVIDES EXCEPTIONAL VALUE
Does your organisation link
performance and pay decisions?
What are your organisation’s primary objectives in
using pay for performance? (Rank top 3 in order)
What practices do you consider as a part
of your pay for performance programme?
(Select all that apply).
Does your company pay for
potential?
Source: 2013 Mercer Global Performance Management Survey
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THE QUEST FOR HIGH-GROWTH MARKETS CONTINUES
WHILE INVESTMENTS IN ASIA REMAIN HIGH, INTEREST IN AFRICA NOW
CONFIRMED
GDP & Population by country
Source: Economic Growth and Cycles in Asia and Africa
in the 20th Century, www.usc.es/economet/cycles/cycles51.pdf
Although foreign investment and off-shoring in
Asia remains high, reshoring (bringing
operations home) is a new trend.
Many US organisations have been bringing
home operations from China, while European
employers are re-investing in Eastern Europe,
given the competitive labour/talent.
Source: 2013 Mercer Global Performance Management Survey
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ENABLING M&A, MOBILITY, CAREER PATHING, PAY EQUITY
THROUGH JOB ARCHITECTURE AND GLOBAL LEVELLING
Global leveling – the process of systematically establishing the relative value of different jobs within a company
– provides a framework to effectively implement talent and compensation management across borders.
Objectives for implementing a global grade structure
Challenges with implementing a global grade structure
While the absence of a strong business case and lack of support from corporate leadership were frequently
identified as major challenges in the past, the value of having a global grading structure has clearly become
more evident to business leaders today.
Source: Mercer’s 2011 Global Levelling Survey
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RISKS & OPPORTUNITIES FOR
EMPLOYERS IN EUROPE
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RISKS FOR EMPLOYERS
GETTING CAUGHT IN A VICIOUS CIRCLE
•
Continued “short-termism” prolonging stagnation and further depression in Europe
•
Decreasing productivity in absence of growth - cost reduction has a limit!
•
Over-investing in high-growth economies - Europe’s decline will impact global economic
balance and growth
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Immediate and long-term critical talent supply issues
•
Too regulated business environment weakening competitiveness and performance
•
Unsustainable retirement and healthcare costs for both employers and employees
•
Increased work council constraints and social tension
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OPPORTUNITIES FOR EMPLOYERS
ACT NOW FOR FUTURE SUCCESS
•
Embrace “Long-Termism” with profound Social & Environmental Responsibility
•
Make strategic investments with long-term impact in geographies like Africa and Europe itself;
“re-shore” to Eastern Europe for labour/transportation cost and environmental advantages
•
Align Strategic Workforce Planning to +5-year business plan
•
Evaluate Return on HC Investment through Metrics and Analytics
•
Innovate to address Global Talent Management issues in the “Talentism” era
•
Re-think Talent Mobility in broader terms, and “Collaborate for Talent”
•
Re-align “Pay for Performance” and revise Rewards Strategy & plans to boost Engagement
•
Improve Labour & Employee Relations management to re-establish Trust
•
Enhance Operational Efficiencies for higher Productivity
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