The continuing rapid growth of China-based businesses may be imperiled by poorly developed human resources functions, according to survey results released today by Aon Hewitt, a global HR consulting firm with unique expertise in the China market.
More than 100 companies participated in the survey, representing a wide range of industries, company sizes (the majority of companies had more than 1,000 employees) and a mix of domestic and multinational companies. With companies across Asia and around the world identifying the recruitment and retention of talent as a major bottleneck to their corporate growth, developing and maintaining effective HR functions is looming as a critical business element.
Companies participating in the survey were found to be particularly lacking in the key area of integrating their HR strategies with the company’s overall business goals and strategies. Only about half (52%) the responding companies reported having in place a clearly defined HR strategy that is aligned with its business objectives.
“The best HR practices developed over the past decade have emphasized the importance of aligning HR strategies with the company’s overall business strategies,” said Klaus Liu, Aon Hewitt Greater China CEO. “The most effective companies have realized that their human resources are their most important assets, and that these must be managed effectively to maximize their value to the company. Our survey indicates that the relatively low maturity of HR functions in many Chinese companies may slow the double digit growth we have seen over the past decade and more."
Overall, respondents identified the same challenges as their counterparts in more developed countries:?- Attracting and retaining skilled and professional talent (60%)?- Developing leadership bench strength (46%)?- Developing critical future skills and capabilities (37%)?- Developing and maintaining employee engagement (36%)
Responding to these challenges will be key to the ability of China-based firms to continue competing effectively in a global business environment. Aon
Hewitt’s research has shown that companies with highly effective HR functions significantly outperform their competitors in terms of revenue growth, profitability, and efficiency measures (e.g., significantly higher spans of control and higher HR ratios).
Other areas of concern identified by the survey were benchmarking and measurement of HR’s performance. Only about one third of responding companies reported using benchmarking to compare their performance in key areas against other companies. And only 14% of companies reported using a formal metric framework (such as a balanced scorecard) to measure the effectiveness and efficiency of their HR functions.
“How can HR functions become strategic partners if they are not able to demonstrate to the business the value that the function is delivering? We anticipate a stronger focus on building credible HR measurement and reporting systems in the future,” said Dr. Piotr Bednarczuk, corporate transactions and transformations practice leader of Aon Hewitt Greater China.
About the HR Effectiveness in Greater China Survey
Aon Hewitt conducted this survey in July 2010, in both Chinese and English. It is designed to inspire reflection on current practices by HR professionals across China and to provide benchmarking data that will enable companies to identify their own areas of need. The 114 responding companies were asked to use a 6-point scale to rate their own effectiveness across four main areas covered by the survey: HR strategy and governance, HR organization and delivery, HR processes, and HR capabilities, as well as to identify the leading workforce challenges they face. Companies were determined to be “HR Excellence” companies if they had an average rating of at least 4.5 across all four areas of the survey.