Contact: Robyn Matsumoto
Deloitte
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Toronto, May 29, 2007 — While "people issues" dominate the business agenda in Canada and across the globe, there is increasing tension between organizations' needs and HR's ability to deliver on key people challenges, according to new global research conducted by Deloitte Touche Tohmatsu and the Economist Intelligence Unit.

Aligned at the Top, a global study of 531 HR and non-HR executives (5% being Canadian), revealed more than 85% of participants believe people are vital to all aspects of organizational performance, rising to 90% when looking three to five years ahead. However, the findings indicate there is a significant gap between companies' people-related needs and the perceived capabilities and responsibilities of HR. Ultimately, companies are still struggling to build an effective partnership between business and HR to tackle key "people challenges."

Although senior business executives view "people issues" as strategically important, they are not sure HR is ready for the challenge. Only 23% believe HR "plays a crucial role in strategy formulation and operational success." Only 3% of participants describe their organization as world-class in people management and HR, while nearly half (46%) say their capabilities are only "adequate" and need to improve. Furthermore, 52% of companies surveyed do not have a chief human resources officer (CHRO), or other C-level executive dedicated to people issues, with 68% expecting to have this position in three to five years.

"Over the past decade, there has been much talk about HR becoming a strategic business partner within the company," commented Margot Thom, a partner with Deloitte in Canada. "But we find HR is still primarily viewed as a cost centre or administrative function. In our experience, HR and 'people issues' are often two entirely separate conversations within the Canadian market. When business executives talk about HR, they focus on things like benefits, performance evaluations, and HR operating efficiency. But when those same executives talk about 'people issues,' they focus on strategic challenges, such as talent management, workforce productivity, and leadership development — and in many cases the HR function isn't even mentioned."

People-related strategic issues are primarily business issues requiring deep business insight. Conversely, HR operations have traditionally been primarily administrative, requiring a comprehensive understanding of HR policies and procedures. The survey findings indicate that while most HR groups appear to have the administrative side well covered, the strategic side remains largely unfulfilled — presenting a common challenge to business and HR executives alike. According to surveyed executives outside of HR, senior management is still reluctant to even consult HR on strategic "people issues." Conversely, HR executives often fail to consult management on key 'people issues'. For example, the findings show that management rarely or never consults their senior HR team on mergers and acquisitions (63%), while only 41% of HR executives consult with senior management on outsourcing.

Encouragingly, the research findings do indicate business and HR executives are confident the role of HR will evolve. The vast majority (82%) expect HR to be perceived as a strategic, value-adding function, not just a cost centre, over the next three to five years.  Furthermore, the findings demonstrate HR organizations recognize the challenge to become more strategic and, as such, are shifting their administrative transactions and other non-strategic activities to shared service centres or an outsourcing vendor. On average, 25% already outsource recruitment, training, and payroll, while another 15% expect to outsource these and other HR activities in the next three to five years.

"Companies' ability to address 'people issues' is integral to long-term success, and in some cases — survival. Ultimately, it's not just about giving HR a seat at the strategy table.  It's about making sure 'people issues' are at the table to begin with — and that the right combination of voices from business and HR are heard," concludes Margot Thom. "The starting point is to ensure HR embraces the necessary business skills to analyze people challenges and to devise solutions. Companies then need to explore how best to marry HR and business to form a "strategic powerhouse" to tackle these issues."

Methodology
Deloitte Touche Tohmatsu and the Economist Intelligence Unit collaborated on this study. Approximately 531 senior business executives and HR leaders representing companies globally participated in the research. Data was collected in the form of 481 written surveys and 50 executive interviews. The analysis of alignment between HR leaders and senior business executives was based on 259 responses from corporate executives, including 104 respondents who self-identified as "responsible for the HR function" (40%) and 155 respondents who self-identified as "a C-suite executive outside the HR function" (60%). Participants represented every major global region and industry, and companies varied in size from more than $10 billion in revenues to less than $125 million.

About the Economist Intelligence Unit
The Economist Intelligence Unit, the business information arm of The Economist Group, publisher of The Economist, is the world's leading provider of country intelligence, with over 500,000 customers in corporations, banks, universities and government institutions. Our mission is to help companies do better business by providing timely, reliable and impartial analysis on market trends and business strategies.

About Deloitte
Deloitte, one of Canada's leading professional services firms, provides audit, tax, consulting, and financial advisory services through more than 6,800 people in 51 offices. Deloitte operates in Québec as Samson Bélair/Deloitte & Touche s.e.n.c.r.l. The firm is dedicated to helping its clients and its people excel. Deloitte is the Canadian member firm of Deloitte Touche Tohmatsu.

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