SOURCE: The Boston Consulting Group

The Boston Consulting Group

The Boston Consulting Group

June 11, 2009 09:00 ET

Most European Companies Are Unprepared for the Demographic 'Double Whammy' That Will Strike When the Recession Ends, According to a New Report by BCG and the EAPM

Companies Are Hastily Cutting Their Work Force Without Taking Into Account That People Will Soon Be a Scarce Resource; In the Most Comprehensive European HR Study Ever Conducted, BCG and the EAPM Argue That It Is Not Too Late to Take Action

AMSTERDAM, THE NETHERLANDS--(Marketwire - June 11, 2009) - Only 15 percent of European companies plan their work force more than three years in advance, suggesting that many companies may soon face key shortages in skills as the "double whammy" of falling birth rates and rising numbers of baby boomers entering retirement shrinks the size of the work force, according to a report published today by The Boston Consulting Group (BCG) and the European Association of People Management (EAPM).

The report also found that 47 percent of European companies do not plan their work force requirements more than a year in advance. Companies that have been forced to cut costs and reduce head count during the recession may struggle to find the people they need when growth eventually returns. Companies therefore need to consider the long-term impact of their actions, even -- or especially -- in times of crisis.

"In ten years, the scarcest resource for a company will be people," says Rainer Strack, a coauthor of the report and senior partner in BCG's Düsseldorf office. "Companies should understand how their work force will develop, which job categories drive the business, and how demand will evolve. With the uncertainty prevailing today, the human resources (HR) department should analyze different scenarios to figure out whether and how to find, hire, retrain, outsource, or lay off employees."

The report, "Creating People Advantage: How to Tackle the Major HR Challenges During the Crisis and Beyond," analyzes the results of the most comprehensive HR survey ever conducted in Europe. (For details, see the section "About the Methodology of the Study.") The survey asked executives to rate the future importance of 21 HR topics. Despite the crisis, managing talent remained the most urgent future topic in 2009, as it was in 2007, when the previous survey was conducted. "This topic is vital for companies today and in the future, and they know it. Other topics, such as managing work-life balance and managing corporate social responsibility, are viewed as luxuries these days," explains Rudolf Thurner, president of the EAPM.

Among the 21 topics, improving leadership development and enhancing employee commitment have risen significantly in importance since 2007. In the current economy, leaders have to show that they can lead in stormy weather and maintain employee commitment.

In March, BCG and the EAPM published a White Paper, "Creating People Advantage in Times of Crisis: How to Address HR Challenges in the Recession," that summarizes survey results as they relate to the recession. The results revealed that one-third of European companies were planning to lay off full-time employees. The White Paper encourages companies to follow a 12-point HR plan to cope with the recession and safeguard their long-term prospects.

The full report builds on that theme and lays out an approach, strategic work force planning, that allows companies to prepare for the future. Companies need to calculate how different strategic scenarios will affect the demand for specific job categories, and they need to determine whether there is an adequate supply of employees -- either internally or in the job market. Strategic work force planning, however, requires fundamental changes in HR practices. Jean-Michel Caye, a coauthor of the report and a partner in BCG's Paris office says, "Besides engaging in strategic work force planning, companies should also tightly link their overall corporate strategy with their HR practices and rely on metrics that track and prove the performance of people and HR processes."

Few non-HR executives believe that the HR department acts as a partner with business units. One remedy would be to rotate executives in and out of the HR department. But in half of the HR departments, only 3 out of 10 employees had experience in the business line. "Many companies struggle not only on metrics but also on delivering HR business partnership and meeting the customer's needs," says Pieter Haen, vice president of the EAPM.

The report contains more than 20 case studies and best-practice examples of companies that are looking beyond the crisis to achieve long-term success. Four, in particular, stand out:

Linking people and business strategy. A large utility's people strategy ensures that it is able to comprehensively meet its strategic needs for people. (See page 17.)

Seeing strategic work force planning in action. A telecommunications operator in need of new skills to rebuild its network around the Internet Protocol created a large-scale strategic work force plan. (See page 26.)

Measuring people performance. An Italian telecommunications operator's HR system identifies top performers and has helped lower attrition. (See page 39.)

Improving bank performance through HR practices. A German bank has created an HR cockpit for business executives that identifies strong and weak performance at the branch level, including employees' productivity (value added per person). (See page 41.)

About the Methodology of the Study

BCG and the EAPM conducted the online survey in Europe from November 2008 through January 2009, receiving 3,348 responses from HR and other executives in more than 30 European countries. This survey was supplemented by 109 interviews with senior executives, which were conducted between December 2008 and April 2009.

About The Boston Consulting Group

The Boston Consulting Group (BCG) is a global management consulting firm and the world's leading advisor on business strategy. We partner with clients in all sectors and regions to identify their highest-value opportunities, address their most critical challenges, and transform their businesses. Our customized approach combines deep insight into the dynamics of companies and markets with close collaboration at all levels of the client organization. This ensures that our clients achieve sustainable competitive advantage, build more capable organizations, and secure lasting results. Founded in 1963, BCG is a private company with 66 offices in 38 countries. For more information, please visit www.bcg.com.

About The European Association for People Management

The European Association for People Management (EAPM) and its national member organizations in 28 European countries -- comprising not only members of the EU but also Norway, Switzerland, Russia, and Turkey -- are pursuing the goal of improving the quality of HR management and developing and improving professional standards. With its initiatives, conventions, surveys, and dialogue platforms, the EAPM is promoting professional exchange among HR experts. For more information, please visit www.eapm.org.