The future of HR 2019: In the Know or in the No - The gulf between action and inertia - KPMG International
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The future of HR 2019: In the Know or in the No The gulf between action and inertia East Africa Outlook February 2019 kpmg.com/eastafrica
Introduction Building capacity for the transformative HR agenda The Regional Center for Workforce Transformation defines workforce HR’s ability to support enterprise transformation from an organisational transformation as an organisational capability perspective. culture improvement initiative, requiring — Similar findings from the understanding of and participation research show that 50% (of global in continuous quality improvement respondents) and 40% (of East Africa at every level of an organisation. The respondents) believe that their HR reference to “understanding” in this functions are not at all prepared for definition speaks to a data-driven, artificial intelligence and /or machine insight-based approach to continuous learning. improvement. The above findings are symptomatic of When Bill Smith and Bob Galvin helped the main challenge for HR today: there Motorola save $16 billion in costs and is a gap between what is required today win the prestigious Malcolm Baldrige and tomorrow and what HR has the National Quality Award in 1988, the capability and capacity to deliver. One global manufacturing industry was of the key capability gaps as highlighted changed forever. The disciplined earlier is the ability to leverage evidence approach to data collection and analysis - gather it, process it, and loop insights that form a core part of the lean six from it into the design of processes and sigma approach played a critical programs as well as decision-making on role in the resultant transformation employee matters along the employee for Motorola. Lean six sigma and life cycle. other data-driven improvement methodologies have continued to define But why the fuss? What is the and transform business operations to imperative for HR to change anyway? date. The HR profession however, has One word, “VUCA” comes to mind. struggled to effectively tap into the Volatility, Uncertainty, Complexity, transformative power of data. and Ambiguity (VUCA) are an increasing reality for the business According to the KPMG 2019 ‘Future of world. Increasingly, industry leaders HR Survey’, HR executives in East Africa are faced with the rapid pace of ranked performance management, business change, a greater pressure to attraction of employees, learning and perform, increasing globalisation, the reskilling, and staff retention as the emergence of new business models, areas where they think they currently new communication channels, matrix add the most value to the organisation. organisation structures as well as a However, analytics, creating multiple shift in the accepted paradigms of employee value propositions and good leadership. The role of HR is to strategic work force planning were work with management to create the listed among the areas they felt they right ecosystem that will unleash the were adding the least value. productivity of the workforce, and — From the survey, 92% of HR deliver value for the customer as well as executives recognise the need for the employee. Therein lies the challenge workforce transformation but only for the HR. HR functions must deliver 56% — feel “very confident” about value within a VUCA environment. To
do this effectively, HR leaders need are unhappy, HR should seek to define: Authors and clarity on the drivers of business and How many staff are unhappy? For how employee value and a modus operandi long have they been unhappy? From that delivers optimal value for both. This which departments are they? What is will entail cultivating new competencies the cause of the unhappiness? What is contributors for HR professionals. There are at least the cost to business if this unhappiness four additional core competencies remains unaddressed? What will be the HR functions require to enable them cost of addressing this unhappiness? deliver value in the context of a VUCA Is there a cheaper way to address this environment. unhappiness effectively? Knee jerk KPMG East Africa would like to reactions to employee unhappiness may thank the following for their time Business acumen: The Financial not effectively solve the problem. Data and expertise in the preparation of Times describes Business acumen as analytics goes a long way in helping HR this year’s report. “keenness and speed in understanding professional’s quantity benefits, costs and deciding on a business situation.” Gerald Kasimu and defend causes of action. HR leaders HR professionals can no longer get by Partner and Head that tap into data analytics will be able with technical HR knowledge only - Advisory to shape the boardroom agenda, earn their knowledge and skills must cover gkasimu@kpmg.co.ke respect among their peers and offer competencies required to identify and solutions that stand the test of time. leverage opportunities to grow revenue, Brian Desouza Without reliable data, HR solutions reduce cost, and improve profitability; or Partner and Head proposed may sound good but indeed at least support these activities. Among Risk and Management Consulting be far from effective. the several ways HR could be of value briandesouza@kpmg.co.ke in this regard include reduction in lead Negotiation and problem-solving time for HR processes so that staff can skills: Heads of HR often find Nancy Mosa focus on revenue-generating activities, themselves listed as respondents Partner reduction in unwanted attrition, and in labour cases initiated by unhappy IT Advisory improved employee utilisation. staff or labour unions. Employees and nmosa@kpmg.co.ke unions are increasingly demanding for Strategy formulation: While strategic “more and better”. HR functions must Titilope Olajide Human Resource management looks at become better at negotiating with staff, Associate Director and Head how HR functions can support business unions, and process owners across People and Change strategy, it is no longer enough to only the business. The ability to anticipate titilopeolajide@kpmg.co.ke play the role of enabler to business dissatisfaction, mitigate problems strategy. HR must increasingly play before they emerge, and negotiate Anastasia Kamande a proactive and participative role in compromises with stakeholders is Associate Director corporate strategy design. HR leaders becoming an increasing value add. Data and Analytics must now help businesses interpret Several millions in fines, and lawyer akamande@kpmg.co.ke what the implication of robotics, and fees could be saved if HR functions artificial intelligence are, and help enhanced their negotiation and problem- Jared Nyarumba businesses anticipate and respond solving skills. Costs to business and Associate Director proactively. HR leaders that play a reputation resulting from go-slows and IT Advisory value addition role in the workforce other industrial actions can be immense. jnyarumba@kpmg.co.ke transformation agenda are competent While better negotiation skills alone in strategy formulation and help the may not eliminate industrial challenges, Geoffrey Ogoti business broaden its strategic insights they could be useful in reducing the Manager and actions with regards to talent within frequency of occurence. Data and Analytics the organisation. gogoti@kpmg.co.ke In conclusion, opportunities and Data analytics: Edwards Deming challenges presented to HR functions is famed for the saying, “In God we George Kamau will continue to be demanding and trust. All others must bring data.” Data, Senior Advisor exciting. HR will only be able to deliver trends, empirical research, proof and Management Consulting value and execute the transformation hard evidence is the loudest voice in gkamau@kpmg.co.ke agenda if they continue to evolve and the noisiest bourse. HR teams often tailor their competencies towards defend views, and drive conversations Jacklyne Betty today’s business needs. around emotional rather than factual Advisor data. I am not saying that emotions are Data and Analytics Titilope Olajide jbetty@kpmg.co.ke to be ignored, but that emotions must Associate Director and Head be supported by data and insights that People and Change can hold up to interrogation. E.g if staff KPMG East Africa Sidney Aburi Business Development Advisor saburi@kpmg.co.ke
Table of contents 06 08 In the Know or Key findings in the No
12 Driving business performance through HR predictive The role of HR in a analytics digital transformative world 14 Building a 16 workforce for the future - Artificial Intelligence About the survey How KPMG 18 can help 22
Are you In the Know or in the No.. Most HR executives — Identify 92% transformation recognise the need for workforce as critical for transformation. relevance 6 The future of HR 2019: In the Know or in the No | East Africa outlook
However HR growth and excellence fewer are Common characteristics: delivering predictive change ready insights believing in, and driving, digital 56% of HR Leaders are very agenda reshaping the workforce confident in HR’s ability to transform the workforce and enhancing the itself employee experience Furthermore not too many are Common characteristics: change capable HR not seen as value driver Respondents feel that these are the areas where they are currently HR not using adding the least value: predictive insights - Workforce of the future/workforce planning generally timid of AI - Analytics - Differentiated value proposition no digital plan in place for various workforce (and not planning to) segments HR extinction The future of HR 2019: In the Know or in the No | East Africa outlook 7
Key findings Here are the key findings of the survey we carried out involving HR executives across East Africa. 76% of HR executives agree that HR has undergone or is undergoing a digital transformation. But only 49% of HR leaders said they have a digital workplan in place at the enterprise or HR level. Most HR executives — 92% — recognise the need for workforce transformation. Yet only 56% — feel “very confident” about HR’s actual ability to transform and move them forward via key capabilities like analytics and AI. 8 The future of HR 2019: In the Know or in the No | East Africa outlook
Workplace culture is considered a top barrier to digital transformation for 58% of respondents. Of these respondents, current culture is task-oriented. 41% said their 81% of HR executives believe that the role of HR is becoming more strategic in their business. The three top issues the management board is looking for HR to address are: - Performance - Productivity - Culture Despite data’s remarkable ability to deliver new insights and enhanced decision-making, barely one in five — 22% — of HR leaders believe analytics will be a primary HR initiative for them over the next one to two years. Fewer still — 14% — cite analytics as a top management concern. The future of HR 2019: In the Know or in the No | East Africa outlook 9
Recent and projected technology investment has been highest for payroll systems and/vendors and human capital management (HCM) softwares 54% of HR executives invested in payroll systems and/vendors over the past 2 years 38% softwares in human capital management Over the next year or two, more are planning investments in areas such as: predictive analytics enhanced process and AI automation 54% 57% 27% Those leading the pack on transformation recognise how AI and machine learning can drive significant value for HR but they are in the minority by far. Only 19% of HR functions have started to introduce AI and just 5% have invested in AI over the past 2 years. 10 The future of HR 2019: In the Know or in the No | East Africa outlook
Of organisations yet to adopt AI within HR, some remain uncertain that they will do so in the next year or two. 40% admit to being “not at all prepared” to respond strategically as AI and machine learning emerge. Among those who have invested in AI to date, the vast majority call the investment worthwhile, with the focus primarily on learning and performance management 43% and business transformatiton 29% . The future of HR 2019: In the Know or in the No | East Africa outlook 11
The role of HR in a digital transformative world A ccording to the KPMG 2019 ‘Future of HR Survey’, 76% of the respondents from East Africa agree that their HR function is undergoing or has recently undergone a digital transformation. But what is a digital transformation? Several definitions have been coined but Enterprises Project may provide the most useful one. They define digital transformation as “the integration of digital technology into all areas of a business, resulting in fundamental changes to how businesses operate and how they deliver value to customers.” 12 The future of HR 2019: In the Know or in the No | East Africa outlook
Transformation guru Greg Verdino says business transformation. If your culture during rapid digital transformation, there - “Digital transformation closes the gap is built on an analogue philosophy, is need to facilitate effective change between what digital customers already it won’t support digital results. A car management for their organisations. expect and what analogue businesses designed for a top speed of 240kph will Integral to change management, is actually deliver.” not attain its optimal speed on a rough an effective communication strategy and curved road. Similarly, a 100kph that carries the critical mass of staff The following examples demonstrate the digital transformation agenda will not run and management along the digital technical distinctions between analogue optimally on a 15kpm culture track. The transformative journey. and digital as applied to technology. success of your digital ambitions will be Transmission of an email uses digital Digital transformation in the HR space moderated by your organisation’s culture. technology for instance. In the context should not be looked at in isolation. A digital culture encourages and rewards of a digital transformation, an example Organisations need to build their digital innovation, supports learning, tolerates could be moving from a brick-and mortar strategy around internal and external failure in the pursuit of transformation storefront business, to a website or operations, remaining anchored on their – while quickly leveraging lessons - and ecommerce platform for business business strategy. Today, failure to build rewards a high performance culture. transactions. “Going paperless” for an all-encompassing digital strategy Culture informs how you recruit, and how instance, often entails some sort of exposes the organisation to various risks you design your staff policies. HR can digital transformation. In summary, you and inefficiencies, including those that play a powerful role in redefining culture are undergoing a digital transformation if could threaten its own survival. by working with leaders to recruit the your business is introducing a technology right staff, and by redesigning policies, that does any of the following: enables procedures, incentives and performance scalability, facilitates remote access, programs to encourage the right culture. receives or synthesises data from Since culture is driven by leadership, HR multiple systems, reduces time spent, can help leaders design and execute requires less human processing and reduces errors. effective digital culture transformation Organisations need to build initiatives. their digital strategy around Digital transformation for HR is Talent management. Effective talent internal and external two-pronged. On one hand, HR is experiencing digital transformation management entails a 360 degree operations, remaining approach to staff management - from pre anchored on their business through the use of online recruitment recruitment to post exit. HR functions and candidate shortlisting, as well as the strategy. have undertaken significant digital integration of employee measures of transformations with regards to talent productivity with payroll, amongst other Jared Nyarumba management. Social media to source things. On the other hand, HR must Associate Director talent, candidate shortlisting softwares, help businesses address the ongoing IT Advisory electronic performance management talent implications resulting from digital KPMG East Africa systems, and employee self-service transformation across other functions of modules are increasingly being used. the business. From an organisation-wide perspective, 57% of East Africa respondents to digital transformation agenda requires the KPMG 2019 ‘Future of HR Survey’ the organisation to engage competent highlighted an increased budget for staff, and facilitate sustained learning HR technology/digital solutions over and development, to secure a workforce the past two years in their enterprises. that is agile and responsive. Digital East African respondents pointed to an transformation has opened new increased budget for HR technology/ frontiers for how work gets done, such digital solutions over the next two years as “work from home” and other flexi in their organisation. options. All these have implications for talent management within a digital There are at least three imperatives environment. HR must design strategies for HR in this highly tech-driven work that enable the business to unlock and context. Culture transformation, effective maximise employee productivity within talent management, and effective the context of digital transformation. change management. Change Management. Digital Culture has real implications for the transformation can be very disruptive, digital transformation agenda. 58% and unsettling for industries, of the East Africa survey respondents organisations and staff. Weak or lack of (against 40% of global respondents) change management programs could identified culture as the top barrier in be costly. For HR teams to add value moving from the initial phases of digital The future of HR 2019: In the Know or in the No | East Africa outlook 13
Driving business performance through HR predictive analytics I n the 21st century, the exponential increase in data promises to create opportunities for growth. Its supply is unlimited and its applications are endless. Data & Analytics (D&A) enables the delivery of insights as a source of competitive advantage across the business and at each point of need. 14 The future of HR 2019: In the Know or in the No | East Africa outlook
There are broadly three levels of D&A. percentage. This could be a reflection of These are descriptive, diagnostic and an overall data management gap. predictive. In descriptive, the HR function A majority of the respondents in the would have a coherent workforce Future of HR survey agree that the HR dataset and easily accessible reporting function can prove the value it brings dashboards. A diagnostic level would to the enterprise through analytics. involve a little more analysis. Ideally there Fortunately, data happens to be an would be such cases where HR would accessible asset that is available in large identify underlying drivers of performance volumes, and is continuously generated through analysis. Finally, predictive within enterprises. Depending on the analytics involves HR influencing governing law and regulatory compliance, and partnering with the business to HR predictive analytics can be the driving predict outcomes and drive business force through which this data is churned performance. into actionable insights to achieve set The Future of HR survey informed that objectives. This in turn ensures that 62% of enterprises within the East Africa predictive analytics can be relied upon. region utilise analytics for predictive purposes. This is in a bid to improve HR’s value to the business and to increase an organisations’ overall competitiveness in the race for the best talent. Some of the areas where predictive analytics has been applied in HR include talent selection, predicting employee attrition, employee engagement, identifying training needs, In the 21st century, the workforce planning depending on exponential increase resources, time and budget. in data promises to 30% of enterprises based in East Africa create opportunities believe that there will be moderate investment in HR technology and/or digital for growth. Its supply solutions in predictive analytics in their is unlimited and its enterprises. Where investment has been done, respondents generally feel that the applications are endless. investment has been worthwhile. The Data & Analytics (D&A) investment in predictive analytics entails enables the delivery of having advanced data management which ensures that the organisation has insights as a source of quality data, a sound data strategy and competitive advantage clear ownership of the data within the organisation. across the business and at each point of need. In an environment where data is available from multiple sources, 32% Anastasia Kamande of respondents based in East Africa Associate Director agree that their enterprises are effective Data and Analytics in bringing together data from various KPMG East Africa sources to make decisions about their workforce, compared to 23% global The future of HR 2019: In the Know or in the No | East Africa outlook 15
Building a workforce for the future - Artificial Intelligence A rtificial Intelligence and machine learning can provide a means to achieving both desired, and unprecedented transformation in business. It can help automate repetitive and non-value adding tasks allowing professionals to deliver on the key focus areas of an organisation. In a recently conducted Global Future of HR Survey, it was found that 76% of HR executives agree that HR has undergone, or is currently undergoing a digital transformation. At the heart of a digital transformation is Artificial Intelligence (AI). 16 The future of HR 2019: In the Know or in the No | East Africa outlook
AI is the field that develops intelligent been introduced as part of formal self-learning algorithms and machines learning in academic institutions; East that use data from a variety of sources African countries may opt to do the and formats. This has been applied same. HR professionals can incorporate widely in self-driving cars, search AI training as part of the continuous engines like Google, smart cameras, professional development for staff There are more product recommendations, just to name within their organisations. opportunities for HR a few. Is the HR function ready for AI? 60% to custom build AI In the East Africa region, 67% of the of the respondents believe that their solutions to enable respondents agree that AI can drive HR functions are either unsure, or significant value for HR in enterprises. unprepared for AI (and /or machine growth in talent In contrast, 81% of the respondents learning) in their enterprises. A part management and in surveyed noted that HR functions of the labour force believes that building a workforce for have not started introducing AI in their rapid advances in technology are enterprises. The AI transformation increasingly threatening job security. the future. needed to drive growth, identify For HR, the challenge is to identify the opportunities and manage risks can right people with the skills that match Anastasia Kamande be spearheaded by the HR function the requirements of a fast changing Associate Director in its role of talent acquisition and technology world. Further, while Data and Analytics development. This raises the question: capital investments required to drive AI KPMG East Africa “How can HR use AI to accelerate, initiatives across the enterprise is a key automate and augment its decisions success factor, 49% of the respondents that drive growth and profitability?” in East Africa noted that there is none or minimal investment in HR AI. To answer this question, we start with the understanding that AI is not In light of the above, respondents of something we buy, it is something we the survey indicated that there is little build. Building a robust AI framework expectation to adopt AI in HR functions in any organisation requires the right over the next two years. data, the right algorithms (formulae Some of the areas where HR and logic), the right tools and the right organisations have built AI solutions “human” in the loop. The right human include software (bots) that interact in the loop is key and foundational in with job applicants through answering this respect since it drives the strength frequently asked questions, scheduling of the AI framework. The right human interviews and on-boarding. Brand speaks directly to HR and challenges profiling and tracking is another area the HR function to get the best in where AI has been applied with terms of personnel who have a keen success. Through sentiment analysis, understanding of industry insights, perceptions can be profiled which subject matter expertise and technical would inform specific HR initiatives of skills. With the right capabilities and employee engagement. passion to deliver, the workforce, built by HR can drive an organisation into There are more opportunities for HR desired efficiency through the use of AI. to custom build AI solutions to enable growth in talent management and in According to the survey, of the 19% building a workforce for the future. of East African HR functions that are Imagine if your organisation introduced currently using AI, 43% are applying a solution that popped an alert that AI to learning and re-skilling; this is advised you to take a break based compared to 35% globally. on your continuous laptop usage or To prepare a workforce for the future, it that detected uncommon stress and is imperative for HR functions to provide recommended you take a break based opportunities for staff to learn and on the error rate it was detecting in your develop their skills in line with initiatives work. Imagine that. for AI. 51% of the respondents in the East Africa region believe that preparing a workforce skilled in AI presents the biggest challenge for the HR function over the next 5 years. Globally, AI has The future of HR 2019: In the Know or in the No | East Africa outlook 17
About the survey D uring July and August of 2018, 1,201 senior HR executives from 64 countries participated in the Future of HR Survey, with representation from 31 industries across Asia Pacific, Europe, North America, Middle East/Africa and Latin America. Approximately half of the sample are companies with a headcount of 5,000 or more employees and 42 percent of participants are from organisations with revenue of 1 billion. In East Africa, HR executives from 37 companies provided insights about the future of the HR function against a backdrop of digital disruption. Demographics Industry Global breakdown Hosp. & Ent. 4% 4% Infrastructure 3% Media & telecom Government/ 4% 1% public sector Other Education & non-profit 4% 16% Financial services Transportation 5% Respondent Industry % of Total Respondents, 15% Consumer goods n=1,201 Healthcare 7% 12% Manufacturing Energy 6% 9% IT & high tech Professional services 8% 18 The future of HR 2019: In the Know or in the No | East Africa outlook
Company Footprint Revenue Enterprise Human Resource (in USD)* Headcount** Headcount** % of respondents % of total respondents, % of total respondents, (excluding education/non-profit n=1,201 n=1,201 industries), n=1,129 42% $1 billion or more 43% 5,000 or more 31% 100 or more 26% $500M — $999M 35% 500 to 4,999 21% 40 to 99 31% Less than $500 million 20% Less than 500 40% Less than 40 *Not collected for education/non-profit industries **Don’t know/unsure not shown The future of HR 2019: In the Know or in the No | East Africa outlook 19
Demographics Industry Demographics Industry East Africa breakdown 8% Infrastructure Government/ 8% 8% Media & telecom public sector 3% Other Education & non-profit 3% Healthcare 3% Respondent Energy 8% Industry % of Total Respondents, 5% Consumer goods 46% Financial 5% Agriculture 3% services Professional services 20 The future of HR 2019: In the Know or in the No | East Africa outlook
Company Footprint Revenue Enterprise Human Resource (in USD)* Headcount** Headcount** % of respondents % of total respondents % of total respondents (excluding education/non-profit industries) 9% $1 billion or more 5% 5,000 or more 8% 40 to 99 17% $500M — $999M 51% 500 to 4,999 92% Less than 40 74% Less than $500 million 41% Less than 500 *Not collected for education/non-profit industries *3% responded ‘Don’t know’ **Don’t know/unsure not shown The future of HR 2019: In the Know or in the No | East Africa outlook 21
How KPMG can help Every market leader understands that talent unlocks competitive advantage. But workforces and workplaces are changing — along with employer-employee relationships. You may need to invest in disruptive technology, acquire new critical skills, introduce artificial intelligence, or reshape your employee experience and workplace culture. It’s all about driving your business forward in new ways. At KPMG East Africa, our HR consultants understand these challenges and opportunities and are working shoulder-to-shoulder with businesses like yours every day. We’re delivering the experience, research and industry expertise organisations need to define the Future of HR — now. It’s a digital world but people still make it turn. They will remain your most-important investment, your greatest asset and the secret sauce in your brand. For more information, we encourage you to contact any of the contributors listed in the publication or your local KPMG member firm. 22 The future of HR 2019: In the Know or in the No | East Africa outlook
The future of HR 2019: In the Know or in the No | East Africa outlook 23
Contacts Gerald Kasimu Brian Desouza Titilope Olajide Partner and Head Partner and Head Associate Director and Head Advisory Risk and Management Consulting People and Change KPMG East Africa KPMG East Africa KPMG East Africa E: gkasimu@kpmg.co.ke E: briandesouza@kpmg.co.ke E: titilopeolajide@kpmg.co.ke kpmg.com/socialmedia The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. © 2019. KPMG East Africa operates as a regional network of firms who are member firms of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. The KPMG name and logo are registered trademarks or trademarks of KPMG International.
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