Reducing Human Capital Risk in a global war for talent
How recruitment agencies could help in recruiting and retaining talent
©2008
Masterarbeit
59 Seiten
Zusammenfassung
Inhaltsangabe:Abstract:
It was in 1982 as the oil price reached more than a hundred dollar a barrel for the first time. The limit of resources and the vulnerability of economies were then discussed widely in the public as it is today. Stock prices were affected heavily due to the economical risks a high priced commodity exposes to shareholders.
In a few years time, a similar scenario seems to be possible for Human Resources. A companys availability to recruit and to retain key talent could have the same or an even higher impact on investors expectations in the future.
This study examines actual ways Human Capital Risk is handled, shows scenarios of future development and discusses ways to optimize sourcing and retaining personnel in the future.
In a first step, it is shown that the threat of missing ability to attract and retain key talent is increasing strongly within the next couple of years. The availability will reduce, for example due to an over proportional retirement of knowledge workers in the developed countries. On the other hand, the global demand for high qualified staff will increase constantly, since economies like India and China will continue to grow.
Furthermore, ways of analyzing the structure of companys personnel are introduced, which allow a well founded understanding of Human Capital Risk. Even if not applicable today, the meaning of Human Capital within rating systems will increase as the impact on companys performance rises. It is argued that, a company with less ability to recruit will face consequences in a lower rating and therefore higher interest rates in the future.
In order to asses recent recruitment and retaining activities a survey between companies in Germany and The Netherlands has been conducted for this study. The results show a statistical correlation between the use of recruitment agencies and the ability to recruit faster and more successfully. Recruitment processes in Germany seems to be much longer than in The Netherlands. Exit Interviews are not exploited to its full extend and a structured retention management is not yet in place in the majority of the companies.
Recruitment companies are specialists in indentifying key personnel. With their knowledge they could be an independent partner in ensuring a high retention by providing after placement services to both, the placed candidate and the employer. Repeating candidate surveys about his experiences with in his new job towards personal […]
It was in 1982 as the oil price reached more than a hundred dollar a barrel for the first time. The limit of resources and the vulnerability of economies were then discussed widely in the public as it is today. Stock prices were affected heavily due to the economical risks a high priced commodity exposes to shareholders.
In a few years time, a similar scenario seems to be possible for Human Resources. A companys availability to recruit and to retain key talent could have the same or an even higher impact on investors expectations in the future.
This study examines actual ways Human Capital Risk is handled, shows scenarios of future development and discusses ways to optimize sourcing and retaining personnel in the future.
In a first step, it is shown that the threat of missing ability to attract and retain key talent is increasing strongly within the next couple of years. The availability will reduce, for example due to an over proportional retirement of knowledge workers in the developed countries. On the other hand, the global demand for high qualified staff will increase constantly, since economies like India and China will continue to grow.
Furthermore, ways of analyzing the structure of companys personnel are introduced, which allow a well founded understanding of Human Capital Risk. Even if not applicable today, the meaning of Human Capital within rating systems will increase as the impact on companys performance rises. It is argued that, a company with less ability to recruit will face consequences in a lower rating and therefore higher interest rates in the future.
In order to asses recent recruitment and retaining activities a survey between companies in Germany and The Netherlands has been conducted for this study. The results show a statistical correlation between the use of recruitment agencies and the ability to recruit faster and more successfully. Recruitment processes in Germany seems to be much longer than in The Netherlands. Exit Interviews are not exploited to its full extend and a structured retention management is not yet in place in the majority of the companies.
Recruitment companies are specialists in indentifying key personnel. With their knowledge they could be an independent partner in ensuring a high retention by providing after placement services to both, the placed candidate and the employer. Repeating candidate surveys about his experiences with in his new job towards personal […]
Leseprobe
Inhaltsverzeichnis
Jan Veder
Reducing Human Capital Risk in a global war for talent
How recruitment agencies could help in recruiting and retaining talent
ISBN: 978-3-8366-1265-4
Druck Diplomica® Verlag GmbH, Hamburg, 2008
Zugl. Georg-Simon-Ohm-Fachhochschule Nürnberg, Nürnberg, Deutschland, MA-Thesis /
Master, 2008
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Printed in Germany
Page 4 of 59
Table of Contents
A.
Glossary ... 5
B.
List of figures ... 6
C.
List of Tables ... 7
1. Executive Summary ... 8
2. The global shortage of talent ... 10
3. Human Capital ... 15
3.1. Research history ... 15
3.2. Human Capital and risk ... 17
3.3. The evaluation of Human Capital ... 20
3.3.1. The value driver model of human capital ... 22
3.3.2. The Real Options Approach ... 26
3.4. Strategic Human Resources Management specific software ... 29
4. Recruitment in Germany, risk and chances a survey ... 30
5. Recruitment Consultancies ... 38
5.1. Huxley Associates ... 38
5.2. Additional services for partnership ... 40
6. Conclusion ... 44
D.
Bibliography ... 46
E.
Appendix survey questions and answers in detail ... 55
Page 5 of 59
A. Glossary
CV
Curriculum vitae
e.g.
For example - abbreviation of Latin 'exempli gratia'
GER
Germany
HR
Human Resources
HRM
Human Resource Management
i.e.
That is - the abbreviation of Latin 'id est'
IT
Information Technology
Ltd
Limited
NL
The Netherlands
plc
Public limited company
PSL
Preferred Supplier List
USA
United States of America
Page 6 of 59
B. List of figures
Figure 1: Projected Change in the working age population
(15-64 years old) from 1970 to 2010 and 2010 to 2050 ... 11
Figure 2: Graduates in China, Chinese students
abroad and students returning to china ... 13
Figure 3: Global Talent Shortage - Percentage of employers having
difficulties finding adequate staff for open jobs ... 14
Figure 4: Human Capital Risk considered the most important
risk between senior risk executives ... 17
Figure 5: Only a few senior risk executive consider Human Capital Risk
managed well within their organization ... 18
Figure 6: ideal component of a bank internal rating system ... 20
Figure 7: The Value Driver Modell of Human Capital ... 22
Figure 8: functionality mySAP Human Resources ... 29
Figure 9: Survey size of companies participated ... 31
Figure 10: 2005 recruitment market shares Germany by search method ... 38
Figure 11: recruitment process Huxley Associates ... 40
Figure 12: The "Develop Deploy Connect" Model ... 41
Figure 13: new services overview ... 42
Page 7 of 59
C. List of Tables
Table 1: value driver for the three types of human capital
and assignment of the 36 factors ... 24
Table 2: A Facet Analysis of Financial, Real and HR Options ... 28
Table 3: survey participants by branch ... 31
Table 4: survey use of recruitment agencies ... 32
Table 5: survey - recruitment challenges in Germany ... 33
Table 6: survey recruitment challenges in The Netherlands ... 33
Table 7: survey - fluctuation rate for new hires
during the probation period ... 34
Table 8: survey awareness of key personnel ... 35
Table 9: survey how are exit interviews used within the organization ... 36
Table 10: survey is future retirement a problem for your company ? ... 36
Page 8 of 59
1. Executive Summary
It was in 1982 as the oil price reached more than a hundred dollar a barrel for
the first time (Bayer, 2008). The limit of resources and the vulnerability of
economies were then discussed widely in the public as it is today. Stock
prices were affected heavily due to the economical risks a high priced
commodity exposes to shareholders.
In a few years time, a similar scenario seems to be possible for Human
Resources. A company's availability to recruit and to retain key talent could
have the same or an even higher impact on investor's expectations in the
future.
This study examines actual ways Human Capital Risk is handled, shows
scenarios of future development and discusses ways to optimize sourcing
and retaining personnel in the future.
In a first step, it is shown that the threat of missing ability to attract and retain
key talent is increasing strongly within the next couple of years. The
availability will reduce, for example due to an over proportional retirement of
knowledge workers in the developed countries. On the other hand, the global
demand for high qualified staff will increase constantly, since economies like
India and China will continue to grow.
Furthermore, ways of analyzing the structure of company's personnel are
introduced, which allow a well founded understanding of Human Capital Risk.
Even if not applicable today, the meaning of Human Capital within rating
systems will increase as the impact on company's performance rises. It is
argued that, a company with less ability to recruit will face consequences in a
lower rating and therefore higher interest rates in the future.
Page 9 of 59
In order to asses recent recruitment and retaining activities a survey between
companies in Germany and The Netherlands has been conducted for this
study. The results show a statistical correlation between the use of
recruitment agencies and the ability to recruit faster and more successfully.
Recruitment processes in Germany seems to be much longer than in The
Netherlands. Exit Interviews are not exploited to its full extend and a
structured retention management is not yet in place in the majority of the
companies.
Recruitment companies are specialists in indentifying key personnel. With
their knowledge they could be an independent partner in ensuring a high
retention by providing after placement services to both, the placed candidate
and the employer. Repeating candidate surveys about his experiences with
in his new job towards personal network, learning opportunities and
challenges could give the employer a well founded independent feedback
over time. This enables transparent recruitment processes and benchmark
studies across companies and branches to identify best practices. As a result
symbiotic partnerships between recruitment companies and their clients
could emerge.
Page 10 of 59
2. The global shortage of talent
Globalization, i.e. "a worldwide movement towards economic, financial, trade,
and communications integration" (BusinessDictionary.com, 2006) determined
the political and economical development of most countries since the end of
the cold war seventeen years ago.
By this increasing internationalization the job landscape changed as well.
International division of labor, e.g. outsourcing, specialization of service and
production due to increased global competition are only some characteristics
of this change. As a result, developing countries like India and China, but
also European countries such as Czech Republic and Poland experienced
massive foreign direct investment in order to outsource services a get
access to the important domestic markets.
Moreover lead the increased complexity of business of a globalized
economy, combined with the outsourcing and automation of processes by
Information Technology to a far higher percentage of knowledge intense jobs
within the last years. This development was mainly seen in the developed
countries. Intangible assets like special workforce skills and patents became
much more important. Research has shown that the number of jobs that
require a high level of judgment have grown three times faster than
employment in general (The Economist, 2006b).
While the increased need of knowledge workers stands for a raising demand
for talent, a world-wide demographic change causes a decrease in supply.
The baby-boomer generation is about to retire and the amount of skilled
workforce will decline. As shown in Figure 1 the amount of 15-64 year old
people is expected to reduce significantly in countries like Russia, Spain,
Germany, Italy, South Korea and Japan within the next forty years (see also
Figure 1).
Page 11 of 59
Figure 1: Projected Change in the working age population
(15-64 years old) from 1970 to 2010 and 2010 to 2050
(United Nations Populations Division, 2006)
Governments around the world have recognized these upcoming changes
and implemented various measures. With the treaties of Maastricht in 1992
and Amsterdam in 1997, the European Union enabled and enforced the
exchange of labor resources between its countries, although there are still
some restrictions recently, especially for the new member states like Poland
and Czech Republic. Besides that, national governments in the EU such as
France and Germany lowered visa regulation for foreign experts. It could be
expected that considering 43.000 open jobs in the Information Technology
sector in Germany for instance, these endeavors are going to be intensified.
Page 12 of 59
The world's biggest economy, the Unites States of America, has a strong
immigration record with a constant level of college graduates (Camarota,
2007). The talent shortage is not as dramatic as in the European countries.
However, the upcoming retirement of a high amount of employees out of the
baby-boomer generation means a significant loss of knowledge.
China and India, as the countries with the world's two largest populations,
increased their amount of university degrees intensively within the last
decade (see also Figure 2). But besides the raw numbers, due to cultural
limitations and differences in quality of education, only 12 percent of
university graduates or an equal of 3.9 million are considered suitable and
available for multinational companies within developing countries
1
(Farrel,
Laboissière, & Rosenfeld, 2005). These numbers do not only limit public
concerns of uncapped outsourcing of domestic jobs to low wage countries, it
also clarifies that high skilled resources from abroad are limited since only a
fraction of those available and suitable are willing to relocate abroad.
On the other hand, there are strong activities of the developing countries to
retain and regain their well educated workers. Scholarship for returnees, the
"hundreds talents program" and a recruiting office in the Silicon Valley are
only a few activities of China's Government to re-recruit its talent (The
Economist, 2006a). As a result, the number of Chinese students who studied
abroad returning to China increased from 14.48% in 2001 to 31,34% in 2006
(National Bureau of Statistics of China, 2006).
India also makes it as easy as possible for Indians living abroad to return
home by special "visa of Indian origin". A survey of Indian executives living in
the United States of America numbered "68% looking for opportunities to
return" while "12% had already decided to do so" (The Economist, 2006a).
1
The 2005 Mc Kinsey Study examined the talent landscape of Argentina, Brazil, Bulgaria,
Chile, China, Colombia, Croatia, Czech Republic, Estonia, Hungary, India, Indonesia, Latvia,
Lithuania, Malaysia, Mexico, Philippines, Poland, Romania, Russia, Slovakia, Slovenia,
South Africa, Thailand, Turkey, Ukraine, Venezuela, Vietnam (Farrel, Laboissière, &
Rosenfeld, 2005)
Page 13 of 59
"The South African Network of Skills Abroad (SANSA)" has a database that
matches domestic skill shortages with expatriates' profiles providing these
skills in order to allow South African companies to attract these lost talents to
relocate (Devan & Tewari, 2001).
Figure 2: Graduates in China, Chinese students abroad and
students returning to china
(National Bureau of Statistics of China, 2006)
Page 14 of 59
Figure 3: Global Talent Shortage - Percentage of employers
having difficulties finding adequate staff for open jobs
(Manpower Inc., 2007)
There is a global shortage of talent and a competition between economies
and companies all expected to increase within the upcoming years. Recent
studies have shown, that in average 41% of employers worldwide are
expecting problems recruiting adequate staff for their open positions 2007
2
(Manpower Inc., 2007) see also Figure 3.
2
The 2007 Talent Shortage Survey by Manpower Inc. was released in March 2007. About
37.000 employers across 27 countries were interviewed in late January.
Page 15 of 59
3. Human Capital
3.1. Research history
The level of research in evaluating company's personnel increased
substantially within the last decade. The activities could be overall divided
into three categories.
In a first phase which emerged between 1960 and 1970 the evaluation of
company's personnel targeted a definition of it as human assets. According
to the money spent for employees a sustainable "accounting for human
assets" was the goal and got publicly noticed when the Barry Corporation
made it part of their annual report in 1970 (Wucknitz U. D., 2002, p. 10).
Rensis Likert was one of the first scientists to investigate the value of human
assets by a survey of executives where he aimed to determine replacement
costs to market prices. In 1967 he defined the cost of an employee as three
times the paid wages (ibidem)
3
.
In an increasing knowledge intense economy the market value of a company
differs widely from its substantial value. The idea, that a significant part of the
so called goodwill is brainpower, knowledge and creativity of its employees
lead to the approach of measuring intellectual capital, the second phase in
research. A performance management system, the "Skandia Navigator for
Intellectual Capital" (Wucknitz U. D., 2002, p. 12), based on 91 human
resource measurements, got very famous not only for its publishing in the
company's annual report since 1995, but for being used as an indicator for
management decisions.
Part of the intellectual capital approach is a concept of determining internal
best practices and understand top-level performance by mapping internal
employees network. A recent Mc Kinsey Study showed the significant
3
Likert conducted a survey of executives, where he aimed to determine replacement costs
to market prices (Wucknitz U. D., 2002, p. 2)
Details
- Seiten
- Erscheinungsform
- Originalausgabe
- Jahr
- 2008
- ISBN (eBook)
- 9783836612654
- DOI
- 10.3239/9783836612654
- Dateigröße
- 829 KB
- Sprache
- Englisch
- Institution / Hochschule
- Georg-Simon-Ohm-Hochschule Nürnberg – Betriebswirtschaft, Business Administration
- Erscheinungsdatum
- 2008 (April)
- Note
- 1,8
- Schlagworte
- human capital risk recruitment companies globalization
