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Institute for Workplace Studies----------------- Professor Samuel B. Bacharach

School of Industrial & Labor Relations-------- Director, Institute for Workplace Studies

Cornell University

16 East 34th Street, 4th floor---------------------- Stuart Basefsky

New York, NY 10016 -------------------------------Director, IWS News Bureau

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AON/Hewitt

The European Club for Human Resources

Press Release 6 March 2012

2012 European HR Barometer shows that people still come first despite tough economic climate and pressure on cost reduction

Respondents to the Seventh European HR Barometer maintain bold human capital plans for 2012

(NYSE:AON)
http://aon.mediaroom.com/index.php?s=43&item=2566

LONDON, 06 March 2012 – The 7th HR Barometer study, designed and carried out for the European Club for human resources (EChr) by Aon Hewitt, the global human resources business of Aon Corporation (NYSE:AON), has revealed that Europe's HR leaders are still maintaining ambitious people development plans despite a deterioration of the economic climate and pressures on cost reduction. 

Leonardo Sforza, chair of the EChr Scientific Committee and author of the study, said:

"The slow and painful road to economic recovery is not discouraging successful multinationals from continuing to invest in their human capital and from demonstrating the belief that their people remain the most powerful engine for sustainable growth and innovation.

"The relatively high proportion of European HR leaders who plan in 2012 to create new job opportunities and learning and development programmes for their existing workforces is a positive sign.  We must hope these plans will not be undermined by a further deterioration of the economic climate"

Leonardo Sforza added:

"The combination of greater market competitiveness and volatility has reinforced the need for corporate agility and excellence in execution. With people management policies and employee engagement now fully recognised as critical factors to achieve corporate fitness, the pressure on the HR function to upgrade its business acumen and deliver more effectively against business expectation will further increase." 

The 7^th European HR Barometer's results in a nutshell

§                     Ambitious people plans in place despite economic uncertainty and pressure on cost reduction

§                     Tough economic environment increasingly seen as an opportunity rather than a threat by HR leaders

§                     HR function continues to struggle to deliver on policy execution and anticipation of future needs

§                     CEO remains the top partner for HR - but trust is declining

§                     HR leaders ready to be involved in tackling unemployment of young people

§                     HR leaders call for a recasting and simplification of European Union labour laws

Key results of this year's study include:

Growth prospects
The majority of HR professionals across Europe expect the impact of the downturn on business results to continue, but only one-third of respondents believe HR programmes will be affected. Revenues and investment are expected to grow for at least two out of three respondents to the study, but more moderately than last year. The proportion of companies with growth targets above 10 percent has also shrunk, down to
28 percent compared to 35 percent in 2011, but it is still much higher than in 2010 and 2009. Meanwhile, 67 per cent of companies expect to see more of their revenue coming from markets outside Europe, in particular from China, Brazil, and the Middle East

Despite a gloomier macro-economic climate, the proportion of companies that expect to add new jobs in 2012 has increased to 47 percent and overtakes the number of companies foreseeing a reduction of their workforce (31 percent).

Most influential policy drivers for human resource policies
This year, "cost sensitivity" regains the place of most influential factor when designing HR policies. The difficulty of having a suitably qualified labour force or in finding the right talent in the right place, followed by challenging productivity and profit targets, make up the top tier of the list. More astonishing is the very limited consideration given to emerging social and political factors such as:

- perceived increased inequalities in society by public opinion at large
- increase in retirement age
- the call for higher ethical standards in business
- the expanding role of social networks

These factors are likely to have a much greater impact on management policies than indicated by HR leaders in the survey.

Short and medium-term HR policy priorities
In the short-term, the greatest emphasis for new measures planned in 2012 will be on learning and development programmes (the priority for 69 percent of respondents), followed by actions aiming to reward employee performance more effectively. Less frequent but still indicated in the top 12 ranking, were actions encouraging the financial participation of employees in business results (21 percent), actions in favour of complementary health care (19 percent) and pension arrangements (13 percent).

For the longer term (up to 2014) the range of priorities on the HR agenda is much broader and diversified than was the case in previous editions of the study. Nevertheless, the ranking of the top three priorities is confirmed again this year, pointing to: leadership development (mentioned by 46 percent), employee engagement (37percent) and talent retention (37 percent). The most notable variation compared to last year relates to the second tier of priorities, headed by succession planning, measurement and rewarding of employee performance, and IT system integration for HR .

HR performance
When judging its own performance against business expectations, HR delivery has matched corporate targets in only 10 out of 25 employee-related activities, with no material improvement compared to last year. In 15 HR-specific activities the majority of respondents admit to performing below expectations. The most frequently mentioned areas of excellence, where companies are out-performing business expectations, include corporate governance, industrial relations, health and safety at work and corporate social responsibility. At the opposite, the weakest fields, where HR is looking for improvement, are in relation to work-life balance programmes, mapping and management of competencies and HR metric tools. In these areas none of the respondent organisations delivered beyond targets. The largest proportion of companies indicating a poor performance was in relation to the management of inter-generational diversity.

HR-CEO co-operation
The CEO maintains the top position in the study for the best level of cooperation established by HR leaders. In terms of most trusted people, the top position goes to HR peers within the organisation followed by their own employees, while CEOs are ranked only in the third position, losing 20 percentage points compared to last year study.

The weakest level (or total absence) of cooperation in place, is with NGOs and with the function responsible for investor relations, and with universities and business schools and professional associations. The quality of the level of cooperation with top business executives is reflected in the rating of perception of HR activities by the CEO: 84 percent of respondents think that their CEO has a high or very high perception of what HR does. This high level of appreciation is less widespread, and declining further compared to previous years. When asked about the perception that employees have of HR, only 33 % of respondents indicated a high or very high rate.

HR and youth unemployment
Almost all HR leaders surveyed - except a mere 2 percent – consider that their company has a role to play in tackling the unemployment of young people and they recognise that this should not be only the responsibility of public authorities. The top three measures indicated by at least half of respondents are related to:

- fostering partnership with education and training institutions towards more relevant curricula;
- new opportunities for training and corporate internship;
- making information on open positions more accessible and transparent.

78 percent of HR leaders also indicated their openness to creating additional traineeship opportunities within the company, notably in cases where public support focuses on wage subsidies for trainees.

HR and the European Union
For the second consecutive year, HR executives who expressed a generally positive perception of the impact of the EU are no longer the absolute majority, while the relative minority of those with a negative opinion increases. The wish list of HR leaders for top policy priorities include: the recasting of European labour laws into a consolidated and simplified code, a growth plan fostering education, innovation and research; and action to improve cross-border work force mobility.

Notes to editors

About the European HR Barometer
The survey covers European trends related to:

- Recent business achievements and new prospects on results, investments and employment;

- Business drivers of the HR function and top priorities for the years ahead;

- Impact of HR activities on business performance and ways to improve it;

- Future changes foreseen by HR; and

- HR leaders' views on relevant European Union (EU) activities.

Survey participants were HR directors and HR board members from 13 different nationalities of leading companies with substantial operations in Europe. 52 organisations, 62% of which are listed companies, completed the survey. They employ more than 2.4 million people in total and generated revenues in excess of 517 billion euros.

About the European Club for human resources (EChr)
The Club was launched in 2001 by senior executives of global corporations with a European headquarter and which are market leaders in their sector of economic activity. The mission of the Club is to stimulate debates and exchange of practices on Human Resources issues. Through its studies, working groups and seminars, the Club contributes to promote a European approach to the management of HR and support the strategic role of HR executives in the management of change.

For more information, please visit: www.europeanclub-hr.eu

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