2008 Predictions - A Year of Shifting Priorities
As 2007 comes to a close, it’s always interesting to peer into the crystal ball for a glimpse of what 2008 might hold. In my opinion, 2008 will be “The Year of Shifting Priorities”, with fundamental changes occurring that will set the tone for the next two to three years. Here they are: Prediction 1 - The Beginning of the Employee Power Shift
With Baby Boomers starting to contemplate either partial or full retirement, Gen Y’ers questioning personal opportunity for growth and fulfillment, the “sandwich generation” caring for both elderly parents and children, and the leadership gap continuing to grow, I see 2008 as the year of a pendulum swing back in favor of the employee. Employers are already feeling the talent crunch, with demographic analysis predicting a shortage across a large number of both blue and white collar jobs. Employee loyalty is a thing of the past, with increasing competition for talent making job hopping not only easy, but the mainstay of positions in high demand. Just look at the bonuses the military is promising as an example of this shift in action, a trend that will continue to grow well beyond ‘08.
Prediction 2 - A Major HRO Provider Will Divest
This market is wrought with financial difficulties and I believe investors are losing patience with promises of predictability and profitability in outlying years. Although many have anticipated the demise of certain HR Outsourcing vendors for some time, I believe that at least one vendor - either Hewitt or Convergys - is likely to divest their HRO assets in 2008. Hewitt’s HRO business is dragging both top and bottom line revenues when compared with their traditional lines of business. The decision to report revenues separately provides the transparency necessary for investors and analysts to demand action beyond contract normalization and selective net-new pursuits. At Convergys, financial pressures led their HRO business to lay off all marketing and analyst personnel, in addition to forcing product management into operational deal teams. The leads one to conclude that an effort to make their existing clientele perform properly will supersede any investment in innovation and market communications. The real question is who would buy these assets, with the offshore providers as likely targets.
Prediction 3 - HR Will (Still) Not Have a Seat at the Table
Like Toby on NBC’s The Office, HR continues to have a bad name in the eyes of business units, managers and employees. Often viewed as either enforcers, legal risk mitigators or transactors, the human resources department is not the first place business leaders turn to for advice and guidance in meeting strategic goals and objectives. They are generally perceived to lack basic business acumen (root cause analysis, business case skills, comparative analytics, etc.) despite years of trying to shift internal and external perception. I believe this is a make-or-break year for HR. If consistent, demonstrable examples of strategic value add do not break the glass ceiling in 2008, we will see the continued absorption of HR responsibilities into legal, finance, IT and outsourced service providers, effectively resurrecting the “personnel department” of old.
Prediction 4 - HR Vendor Scrutiny Will Increase
With so much pressure on HR executives to perform, a cascading effect of increased expectations will fall on those vendors who provide a litany of third-party products and services. There are over 1,650 providers of HR solutions in the United States alone. Codependency on service providers will only increase with cost pressures, and HR and procurement departments will no longer be able to manage hundreds of disparate vendors. Sustainability, performance, return on investment and lower total cost of ownership will drive buying decisions in 2008 and beyond. So vendors, be prepared to open yourself more fully to the inscrutable eye of increased analysis. HR cannot afford your failure and desperately needs your success.
I’m not trying to sound a premature alarm, but ever shifting priorities will force employees, employers, analysts, investors and suppliers to constantly reassess their respective value-add, opportunities for success and potential for growth. Let’s keep the conversation going in 2008, and happy new year!
January 3rd, 2008 at 1:56 pm
I couldn’t agree more with predictions 2-4.
Prediction #2 is dead on because HRO providers are realizing that HR cannot be easily consolidated across multiple clients for the vendor to receive economies of scale, which makes the savings opportunities miniscule. Aggressively priced deals (which they must be for clients to justify outsourcing) will put the vendors upside-down given the guaranteed software upgrades, conversions, and service offerings the vendor will need to provide as part of the cost of services.
Prediction #3 horrifically reflects the reality of modern HR teams, which have 5% of their budgets allocated to strategic staff/initiatives, and the other 95% allocated to providing paychecks, self-service portals, and holiday event planning. The rare company with a strategic Chief People Officer makes the workforce BETTER. Look at GE as an example of a solid HR team that develops leaders and the workforce.
Prediction #4 is absolutely true. When I ran a part of a large Fortune 100 company’s strategic sourcing team focused on services, I witnessed first hand the poor service, high costs, and undermanaged vendor relationships. Absolutely every deal can be renegotiated without switching costs to receive a 2-8% price break. Almost all the vendors have performance issues that are the result of HR professionals managing what amounts to an operation. Take Leave of Absence vendors, which manage LOA events for company’s employees. Most companies are very unhappy with these arrangements because they are expensive, do not provide the level of reporting necessary to understand the cost and root cause of LOAs, and because the service provided by the vendors is substandard. More pressure can be put on HR vendors, and HR professionals should actively consider changing vendors to find better performance.
Regarding prediction #1, I agree completely. However, I would suggest that you consider that employers show absolutely no loyalty to employees. With previous generations, that was a slap in a face and a rude awaking to the reality of cold-hearted business in tightly competitive markets. With the X and Y generations, it stimulates their “what’s in it for me” mentality and encourages them to change companies. Honestly, companies need to find the right way to change, but maintain employee loyalty if they want the right human capital assets to compete. X and Y generations see the big time paychecks made by senior executives and the jealousy and unrighteousness of the pay differential drives them to seek new companies. In short, I’d take your prediction #1 and say that companies run by baby boomers will not be able to manage their workforces, which will erode the competitiveness of US firms.
January 16th, 2008 at 11:34 am
[…] « 2008 Predictions - A Year of Shifting Priorities […]
July 21st, 2008 at 4:57 pm
[…] table” discussion focused on HR’s need to be more strategic in their organization. I predicted that 2008 would end with HR still not gaining that elusive chair, but for the sake of argument, […]