LONDON - A study designed and carried out for the European Club for human resources (EChr) by Hewitt Associates, a global human resources consulting and outsourcing company, reveals that the economic downturn is accelerating organisational change within HR departments. This will involve the acquisition of different skills and competencies, the need to attract new talent, establishing a leaner HR organisation, and identifying more effective tools to measure HR's value to the business.

Leonardo Sforza, head of EU affairs and research at Hewitt Associates and author of the study, said:

"This year's HR Barometer is inevitably influenced by the general deterioration of the economic climate, with seven out of 10 respondents expecting a work force reduction in 2009.

"However, the results show that leading HR professionals are facing the downturn not just by scaling down employment, but also by thinking ahead to the ways they can help their organisation and its workforce to implement structural changes and to prepare them for economic recovery."

Leonardo Sforza added:

"The on-going crisis will have a transformational rather than a cyclical impact on business and HR can be a crucial contributor in this process. To make this happen, HR needs to balance short term market and operational needs with longer term strategic people issues such as talent and leadership development – and fix them promptly."

This year's HR Barometer covered 53 organisations, employing a total of 3.5 million people and explored the emerging business practices and priorities of the HR function across countries and sectors in Europe. Key findings of this year's edition include:

Economic downturn hits HR

• 77% of respondents said that the impact of the financial crisis and the slowdown of the economy will be significant on business results and on HR programmes (47%).
• All respondents have undertaken or decided already on a wide range of measures to cope with the downturn. The majority of them are focusing on actions that scale down production capacity and cost by reducing overall headcount (72%); by looking for new productivity gains (70%); and by closing down interim work contracts.
• A third of respondents have a more comprehensive response that combines HR budget cutting with opportunistic hiring of top talent, targeted leadership development and new business acquisitions. Compensation and benefit programmes, including long-term incentives are also under review in one out of four of the participating companies.

Reshaped HR drivers and needs

• Improving execution emerges as the main pre-condition for strengthening the impact of HR on the business (mentioned by 42% of respondents), followed by the need for a greater and timelier involvement of HR in strategic business decisions (40%), as well as the opportunity to attract new talent within the HR function itself (36%).
• In terms of performance, in 11 out of 28 different HR specific activities, a majority of respondents recognised the need to improve their services to match business expectation. The negative HR delivery gap is most notable in relation to HR metrics, with 76% of respondents assessing as "poor" or below target their action in this area.
• A majority of respondents expect significant changes in HR capabilities and competencies within the next three years. This will relate to: processes and operations to gain HR efficiency (58% think it will change the most); functional HR expertise in change management (55%) and leadership and talent development (47%); Functional expertise related to compensation and benefits is expected to change the least, with 75% thinking it will remain mainly the same.
• Since last year's Barometer, pressure on cost reduction has become the most influential factor of the HR agenda, jumping from seventh to first position. Challenging productivity targets, organisational change and also talent shortages remain highly influential on HR policies.
• The key priorities on the HR agenda have become: leadership development (mentioned by 38%), talent retention (34%) and employee engagement (30%). The need to reduce labour costs, jumps from twelfth position in last year's priorities (only 7% of respondents mentioned it as a priority in 2008) to fourth position this year, indicated by 28% of HR professionals. 

Solid business partnership, engagement and trust

• HR leaders gave a high ranking to the quality and level of cooperation they had established with their own CEO. In the top partnership ranking, this was followed by the CFO, Legal Counsel and the line of business managers. By contrast, the level of co-operation in place with the investor relations department is considered very poor by one third of respondents, and for another third there is no relationship at all. As in previous editions of the Barometer, respondents gave their CEO the highest confidence rating, just in front of their peers and their company's employees.
• While the majority of HR Directors continue to express a high level of satisfaction with their job, this measure has declined significantly year on year (down from 80% to 60%), almost certainly due to the increased cost pressure and changing demands they are facing.  This declining satisfaction has driven an increase in the percentage of respondents seeking a move to a different function (up from 7 to 17%).

HR and European Works Council review

Given the recent changes introduced by European Union decision makers, companies were asked to assess their own experience and expectations of one of the initiatives that aims to change the nature and scope of employee/management communication – the European Works Council (EWC) Directive. The majority of respondents (55%) acknowledged having an EWC already in place, while another 11% plan to set one up.

More than half of those who have already experienced an EWC consider its effect positive, while 41% thought it useless. Only 3% consider the effect of their EWC as being negative. 22% are considering changes on the functioning of their EWC with a view to improving effectiveness, while another 22% plan to change their information and consultation system to anticipate legislative developments.

For a full set of the key findings of the study please contact Marleen Van De Velde at m2vandev@hewitt.com

Notes to editors

Survey participants were HR directors and HR board members from 13 different nationalities of leading companies headquartered in Europe. 53 organisations, 70% of which are listed companies, completed the survey. They employ in total more than 3.5 million people, the majority of which are in Europe.

About Hewitt Associates

Hewitt Associates (NYSE: HEW) provides leading organisations around the world with expert human resources consulting and outsourcing solutions to help them anticipate and solve their most complex benefits, talent, and related financial challenges. Hewitt consults with companies to design and implement a wide range of human resources, retirement, investment management, health management, compensation, and talent management strategies. As a leading outsourcing provider, Hewitt administers health care, retirement, payroll, and other HR programmes to millions of employees, their families, and pensioners. With a history of exceptional client service since 1940, Hewitt has offices in 33 countries and employs approximately 23,000 associates who are helping make the world a better place to work. For more information, please visit www.hewitt.com.

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/

Other Contacts

Leonardo Sforza, Hewitt Associates, +32 (0)2 743 86 11 or Leonardo.sforza@hewitt.com
Anna Mitchell at CapitalMS&L on +44 (0)20 7307 5346 or anna.mitchell@capitalmsl.com