OREANDA-NEWS. October 29, 2014. PwC’s Key Trends in Human Capital 2014 reveals that many organisations are following an habitual pattern as economic conditions improve – they rush to recruit as soon as growth returns.

The temptation is strong; organisations feel the need to compensate for workforce cutbacks made during the recession, but also to counter the effect of a rising resignation rate (confirmed by PwC’s Saratoga trend data see note 1) as disaffected employees who had remained during difficult times begin to look for new opportunities. The result is a growing global talent war.

PwC argues in the report that organisations have much to gain by breaking this habit. By concentrating initially on growth from existing human capital resources, before then growing the workforce at a slower rate, organisations can achieve a significant improvement in Human Capital Return On Investment – the profit returned per unit of currency spent on employees.

PwC analysis shows that a failure to apply these ‘smart growth’ principles is costing organisations in every sector – over USD50,000 marginal profit per employee in the banking sector, for example, and USD 104,550 per employee in the utilities sector.

Anthony Bruce, Global HR and Workforce Analytics Leader at PwC, says:
“It’s the human capital decisions that businesses make as economies emerge from recession that separates the best from the rest. This won’t have been the first recession that most businesses have experienced and many will do what they always do when the recovery arrives – they recruit to grow. Our data shows that this is already happening and the competition for talent is intense.

“We need to break this habit. There’s another way. The organisations that will outperform everyone else over the coming years will be those that successfully make the transition from ‘doing the same with less’, as they did during the recessionary years, to ‘doing more with the same’.”

‘Smart growth’ means taking a more strategic approach to resourcing - using predictive analytics to understand the skills the business will need in the future – while maximising productivity and performance among existing staff today.

PwC Saratoga data for Europe shows how high-performing organisations that apply smart growth principles are able to outstrip others. The best quartile of organisations recruit more efficiently (taking 23 days to fill a post, compared with an average of 35 days), match people more carefully into their roles and encourage greater productivity by paying closer attention to employee engagement and training (investing 1.5% of compensation in learning & development compared to a European median of 0.9%).

The right workers are found more quickly, their on-the-job competence is higher, they’re more engaged and productive (the absence rate in high-performing organisations is 2.2%, compared with a European median of 3.7%), and they stay for longer (12 years, versus a median of 7 years).

Anthony Bruce says:
“Organisations across the world are facing enormous talent challenges, some of which will seem familiar and some of which are entirely new. Competition for the best talent is more intense than ever, and the pressure to maximise the return on the investment you make in your people has never been higher. Good talent decisions are based on knowledge, understanding and analysis.

“This is a challenge for HR but the recent advances in analytics mean that this is also a clear opportunity for HR to prove its strategic worth. The best organisations are using analytics to predict talent supply and inform their hiring and talent management decisions. This helps them to deliver improved and sustainable business value.”