GLOBAL organizations today must navigate a “new world of work” one that requires a dramatic change in strategies for leadership, talent, and human resources.

In this new world of work, the barriers between work and life have been all but eliminated. Employees are “always on” hyper-connected to their jobs through pervasive mobile technology.

Networking tools like LinkedIn, Facebook, and Glassdoor enable people to easily monitor the market for new job opportunities. Details about an organization’s culture are available at the tap of a screen, providing insights about companies to employees and potential employees alike. The balance of power in the employer-employee relationship has shifted making today’s employees more like customers or partners than subordinates.

"In this new world of work, the barriers between work and life have been all but eliminated"

Many of today’s employees work in global teams that operate on a 24/7 basis. An increasing number of skilled workers in this new world work on a contingent, parttime, or contract basis, so organizations must now work to integrate them into talent programs. New cognitive technologies are displacing workers and reengineering work, forcing companies to redesign jobs to incorporate new technology solutions.

Demographic changes are also in play. Millennials, who now make up more than half the workforce, are taking center stage. Their expectations are vastly different from those of previous generations. They expect accelerated responsibility and paths to leadership. They seek greater purpose in their work. And they want greater flexibility in how that work is done.

For human resources (HR) organizations, this new world requires bold and innovative thinking. It challenges our existing people practices: how we evaluate and manage people and how we engage and develop teams; how we select leaders and how they operate. HR organizations now face increasing demands to measure and monitor the larger organizational culture, simplify the work environment, and redesign work to help people adapt.For HR and talent teams,2015 will be a critical year. As these forces gather momentum, we see 2015 as a time for creativity, bold leadership, and a fundamental reimagining of the practices HR leaders have used for years.

Our global research

Deloitte’s 2015 Global Human Capital Trends report is one of the largest longitudinal studies of talent, leadership, and HR challenges and readiness around the world. The research described in this report involved surveys and interviews with more than 3,300 business and HR leaders from 106 countries. (See the appendix to this chapter for details on survey demographics.) The survey asked business and HR respondents to assess the importance of specific talent challenges facing their organization and to judge how prepared they were to meet these challenges.¹ Using these responses, we calculated a “capability gap” for each challenge, measuring the difference between an issue’s importance and an organization’s readiness to address it.²

In this year’s report, we explore 10 major trends that emerged from our research, which reflect four major themes for the year: leading, engaging, reinventing, and reimagining (figure 1). We also present the capability gaps associated with each of these trends, and offer practical insights to help you address each of these challenges in your organization.

All the data from this research can be viewed by geography, company size, and industry using an interactive tool, the Human Capital Trends Dashboard. This tool, available at https://www.deloitte.com/hcdashboard, lets you explore the data visually to see how talent priorities vary around the world.

Leading in the new world of work: The 10 trends

Figure 2 shows respondents’ ratings of the importance of 10 talent challenges along-side their rated readiness to address each challenge.³ These data highlight substantial capability gaps in all 10 areas. Comparing these results to the data from last year, we see that the capability gap in many of these areas has increased in magnitude (figure 3), suggesting that the accelerating economy and rapid changes in the workforce have created even more urgency in the need to adapt HR and people practices around the world.

Based on the survey data, interviews, and secondary research, we provide more detail on each of these challenges and recommendations for how leaders can begin to address them in this report’s 10 chapters:

1. Culture and engagement: The naked organization. This year, culture and engagement was rated the most important issue overall,⁴ slightly edging out leadership (the No. 1 issue last year). This challenge highlights the need for business and HR leaders to gain a clear understanding of their organization’s culture and reexamine every HR and talent program as a way to better engage and empower people.
2. Leadership: Why a perennial issue? Building leadership remains paramount, ranking as the No. 2 issue in this year’s survey.⁵ Yet despite the fact that nearly 9 out of 10 respondents surveyed cite the issue as “important” or “very important,” the data also suggest that organizations have made little or no progress since last year: The capability gap for building great leaders has widened in every region of the world.
3. Learning and development: Into the spotlight. This year’s third most important challenge⁶ was the need to transform and accelerate corporate learning, up from No. 8 in 2014. The percentage of companies rating learning and development as very important tripled since last year. But even as the importance of this issue rose, the readiness to address it went down. Only 40 percent of respondents rated their organizations as “ready” or “very ready” in learning and development in 2015, compared to 75 percent in 2014.

   

4. Reinventing HR: An extreme makeover.The fourth biggest issue was the need to reskill HR itself.⁷ This area also shows little progress since last year. Both HR and business leaders, on average, rated HR’s performance as low; furthermore, business leaders rated HR’s performance 20 percent lower than did HR leaders, showing how important it is to accelerate HR’s ability to deliver value as the economy improves. Perhaps because of these dim views of HR’s performance, we found an increasing trend of CEOs bringing in non-HR professionals to fill the role of CHRO.
5. Workforce on demand: Are you ready? Eight out of 10 respondents surveyed cited workforce capability as being either “important” or “very important” in the year ahead, indicating the demand for skills that is driving a trend toward greater use of hourly, contingent, and contract workers. This trend highlights the need to develop better processes, policies, and tools to source, evaluate, and reward talent that exists outside of traditional corporate and organizational balance sheets.
6. Performance management: The secret ingredient. One of the biggest needs in the new world of work is the need to rethink how organizations manage, evaluate, and reward people. New, agile models for performance management have arrived, and we see these new performance management models as a core component of this year’s focus on engagement, development, and leadership.
7. HR and people analytics: Stuck in neutral. HR should now make serious investments in leveraging data to make people decisions. People analytics, a strategy that has been evolving over the last several years, has the potential to change the way HR will work. However, HR organizations appear to be slow in developing the capabilities to take advantage of analytics’ potential.
8. Simplification of work: The coming revolution. Last year’s Global Human Capital Trends report identified the “overwhelmed employee” as an emerging trend. This year, the percentage of respondents who regard this as a “very important” issue rose from 21 percent to 24 percent. This heightened recognition is just the beginning of what we see as a long term movement by companies to simplify work, implement design thinking, overhaul the work environment, and help employees focus and relieve stress. We are entering an era of “doing less better” rather than “doing more with less.”
9. Machines as talent: Collaboration, not competition. Cognitive computing the use of machines to read, analyze, speak, and make decisions is impacting work at all levels. Some believe that many jobs will be eliminated. HR teams must think about how to help redesign jobs as we all work in cooperation with computers in almost every role.
10. People data everywhere: Bringing the outside in. The explosion of external people data (data in social networks, recruiting networks, and talent networks) has created a new world of employee data outside the enterprise. It is now urgent and valuable for companies to learn to view, manage, and take advantage of this data for better recruiting, hiring, retention, and leadership development.

Note: Figures represent the importance index score for each challenge calculated on a 0–100 scale, as described in endnote 1. Rankings are based on actual scores when decimals are taken into consideration. Differences may not be statistically significant.

Six key findings

As we analyzed the data and talked extensively with companies around the world about these issues, we uncovered six key findings that paint a high level picture of how organizations are approaching talent and work.

“Softer” areas such as culture and engagement, leadership, and development have become urgent priorities.

As the economy grows and skills become more specialized, the competition for talent has increased. This has driven culture and engagement, leadership, and development to the top of the human capital agenda. These challenges consistently ranked as the top three most important issues across regions (figure 4) and industries (figure 5).

Especially notable in these results is the prominence of culture and engagement. While leadership has been the top issue in past years, this is the first time culture and engagement has been viewed as the most important challenge overall. In fact, the proportion of respondents citing culture and engagement as a “very important” issue almost doubled this year, from 26 percent to 50 percent. Almost two-thirds of our HR respondents are looking at ways to update or revamp their entire strategy to measure, manage, and improve employee engagement.

Note: Figures represent the importance index score for each challenge calculated on a 0–100 scale, as described in endnote 1. Rankings are based on actual scores when decimals are taken into consideration. Differences may not be statistically significant.

Every program in HR must address issues of culture and engagement: how we lead, how we manage, how we develop, and how we inspire people. Without strong engagement and a positive, meaningful work environment, people will disengage and look elsewhere for work.

Leadership and learning have dramatically increased in importance, but the capability gap is widening.

As the economy recovers, companies see an accelerating demand for leadership at all levels, especially among Millennials.⁸ This may be one reason that the proportion of respondents rating leadership as “very important” rose by 32 percent over last year, and the capability gap is increasing. Yet, as noted above, improvements are not coming fast enough. Only 6 percent of companies feel fully ready to address their leadership issues, only 10 percent feel comfortable with their succession program, and only 7 percent have strong programs to build Millennial leaders.

Learning and development showed a similar pattern. On average, respondents’ ratings of the importance of this issue quadrupled this year over last year’s ratings.⁹ Moreover, while this issue had the smallest capability gap last year at -9, this year, the gap widened significantly to -28. This result suggests that, while technical and professional skills are a top priority, corporate training departments have fallen behind. Companies are struggling to redesign the training environment, incorporate new learning technologies, and utilize the incredible array of digital learning tools now available.

HR organizations and HR skills are not keeping up with business needs.

As previously noted, compared with last year, the capability gap for virtually every talent issue increased in magnitude (figure 3). Meanwhile, business leaders and HR respondents themselves continue to give HR borderline failure/barely passing grades. At a time when talent is indisputably a CEO level issue, this should be setting off alarms in every HR organization.

HR organizations rated their teams the equivalent of a Cminus (an average of 1.65 on a five-point scale), showing almost no improvement over last year’s ratings. When we asked business leaders to rate HR, the score was even lower. Business leaders rated HR a Dplus (an average of 1.32 on a five-point scale), indicating their increased expectations.¹⁰

Given these poor grades, it is not surprising that only 5 percent of the HR leaders surveyed this year believe their organization’s talent and HR programs are “excellent” and only 34 percent rate them as “good” (figure 6). The rest about 61 percent, or nearly two out of three believe their HR solutions are barely adequate or falling behind. And HR’s self assessment of its skills has hardly budged over the last two years. The upshot: As business is growing and changing exponentially, HR is improving at a much slower pace.

The silver lining is that while the average HR scorecard has barely improved in the past year, organizations whose HR functions have made strides are reaping significant benefits across the spectrum of talent issues. Organizations whose HR teams rate themselves as “excellent” (5 percent) also far outperform their peers in every talent capability by between 40 and 60 percent, according to research.¹¹

HR technology systems are a growing market, but their promise may be largely unfulfilled.

HR’s selfassessed lag is taking place amid a steady increase in HR investment. HR spending grew by 4 percent in 2014 over 2013, with much of this growth dedicated to technology.¹² Further, according to this year’s research, nearly 6 in 10 companies are planning to increase HR spending in the next 12–18 months (figure 7).

Why is this money not resulting in improved outcomes? The widening capability gaps in areas such as learning and development, engagement and culture, and leadership, coupled with Deloitte’s client experience with HR technology, suggests that the heavy increased spending on technology has not been accompanied by similar investments in process and people. HR technology investments are critical—and the market for these solutions has grown by 50 percent into a $10 billion industry in the last five years.¹³ But when it comes to critical issues like learning, engagement, and the work environment, HR organizations have not transformed fast enough. Implementing new tools without redesigning processes and retraining HR does not solve talent problems. The lesson is not to stop spending on technology, but to make sure complementary investments are made in programs that redesign processes, develop new learning content and programs, and train both leaders and the HR team.

Talent and people analytics are a high priority and a tremendous opportunity, but progress is slow.

Analytics is on the agenda of almost every HR team we surveyed, with three in four respondents rating it as “important” or “very important.” But despite this interest, our research shows only a small improvement in analytics capabilities. Thirty five percent of this year’s respondents reported that HR analytics was “under active development” at their organizations just slightly more than the proportion of respondents who said the same last year (33 percent) (figure 8). And this year, only 8.44 percent of the respondents surveyed believe their organizations have a strong HR analytics team in place, a very slightly higher percentage than last year’s figure. These findings suggest that new vendor tools have hit the market, but teams are still not fully enabled, trained, or organized to succeed.

Note: Percentages may not total 100 percent due to rounding.

Excludes respondents who answered "not applicable." Percentages are displayed to two decimal places to show the differences between the 2014 and 2015 results.

The role of outside data is now integral to an HR analytics solution. Data from social networks and external job sites is vital to understanding retention, engagement, and employee career needs. In fact, some executives have found that external people data is more accurate and useful than data inside the company. How can companies make sense of this sea of data, much of which is out of their control? More importantly, how can organizations transform this data into a strategic advantage on the talent front?

We see people analytics as an accelerating trend part of a new set of critical skills for HR, business, and leadership. Companies that take the time and make the investment to build people analytics capabilities will likely outperform their competitors significantly in the coming years.

Simplification is an emerging theme; HR is part of the problem.

Last year, many executives were surprised to see the “overwhelmed employee” emerge as a significant problem around the world. This year, we decided to dig deeper by assessing how companies are dealing with this issue. What emerged was what we perceive as a potential revolution in the way companies organize and operate, all built around the imperative to radically simplify work environments, practices, and processes.

In this year’s survey, 71 percent of companies rated work simplification as an “important” or “very important” issue, and 74 percent believe their work environment is “very complex” or “complex” (figure 9). More than half have programs to simplify work to drive productivity gains and relieve unnecessary and counterproductive pressures on employees (figure 10). Some HR organizations themselves are working to simplify some of their procedures: Companies are starting to phase out traditional performance management processes, notorious for their burdensome nature, in favor of more streamlined approaches.

We believe that this is just the beginning of a major movement to apply innovative approaches and techniques like “design thinking” to simplify and rationalize the workplace of the 21st century.

A new playbook for new times

Growth, volatility, change, and disruptive technology drive companies to shift their underlying business model. It is time for HR to address this disruption, transforming itself from a transaction-execution function into a valued consultant that brings innovative solutions to business leaders at all levels.

Unless HR embraces this transformation, it will struggle to solve problems at the pace the business demands. Today’s challenges require a new playbook one that makes HR more agile, forward thinking, and bolder in its solutions.

Our goal in this research is to give business and HR leaders fresh insights and perspectives to shape thinking about priorities for 2015. In a growing, changing economy, business challenges abound. Yet few can be addressed successfully without new approaches to solving the people challenges that accompany them challenges that have only grown in importance and complexity.

Our advice is simple: Jump into the fray with enthusiasm. Seize ownership of these challenges and show leadership in addressing them. Make 2015 a year of bold leadership in helping your organization thrive in this new world of work.

Appendix: Survey demographics

Endnotes

1. We asked respondents to rate each issue’s “importance” and their organization’s “readiness” to address it on a four-point scale: “not important/ ready,” “somewhat important/ready,” “important/ready,” and “very important/ready.” These ratings were then indexed on a 0–100 scale in which 0 represents the lowest possible degree of importance/readiness (“not important/ready”), and 100 represents the highest possible degree of importance/readiness (“very important/ ready”). An overall index score was calculated for each trend using the respondents’ ratings of “importance” and “readiness.” The index scores were also used to calculate the “capability gap” described in the following endnote.
2. The Deloitte Human Capital Capability Gap is a research-based score that shows HR’s relative capability gap by looking at the difference between the “readiness” and “importance” index scores for each trend. It is computed by taking the “readiness” index score and subtracting the “importance” index score based on the 0–100 scale described in the previous endnote. For example, a trend with a readiness index score of 50 and an importance index score of 80 would produce a capability gap of -30. Negative values suggest a shortfall in capability, while positive values suggest a capability surplus.
3. Using the normalized scores described in endnote 1.
4. According to its importance index score calculated as described in endnote 1.
5. According to its importance index score calculated as described in endnote 1.
6. According to its importance index score calculated as described in endnote 1.
7. According to its importance index score calculated as described in endnote 1.
8. According to the 2015 Deloitte Millennial Survey, Millennials’ expectations are different from those of older leaders. Millennials place a much higher priority on corporate purpose (77 percent believe “purpose” is their No. 1 reason for selecting an employer) and on employee wellness than older leaders. At the same time, they feel left out of the leadership pipeline: Only one-third believe their organization makes “full use” of their skills. Forty-three percent believe they will need to exit their current employer to find the opportunities they need. Deloitte, “Mind the gaps: The Deloitte Millennial survey 2015,” 2015, www2.deloitte.com/global/en/pages/about-deloitte/articles/millennialsurvey.html
9. According to its importance index score across all respondents in each of the Global Human Capital Trends 2014 and 2015 surveys.
10. The GPA is the weighted average score of responses for excellent (4), good (3), adequate (2), getting by (1), and under performing (0). The percentage values for organizations rating themselves as under performing and getting by is calculated with a negative value that helps us determine the overall GPA. The letter grade is assigned as follows: A = 4, B = 3, C = 2, D = 1, E = 0.
11. David Mallon, Karen Shellenback, Josh Bersin, and Brenda Kowske, PhD, High-impact HR: Building organizational performance from the ground up, Bersin by Deloitte, July 2014,http://www.bersin.com/library.
12. Karen O’ Leonard and Jennifer Krider, HR Factbook 2015: Benchmarks and trends for US HR organizations, Bersin by Deloitte, January 14, 2015, http://www.bersin.com/Practice/Detail.aspx?id=18200.
13. Katherine Jones, PhD, The market for talent management systems 2014: Talent optimization for the global workforce, Bersin by Deloitte, June 2014,http://www.bersin.com/library.

Leadership:Why a perennial issue?

• Organizations around the world are struggling to strengthen their leadership pipelines, yet over the past year businesses fell further behind, particularly in their ability to develop Millennial leaders.
• Eighty-six percent of all surveyed HR and business leaders cite leadership as one of their most important challenges.
• A focus on leadership at all levels, coupled with consistent year-over-year spending in this area, is key to building sustainable performance and engaging employees in the new world of work.

WHY is leadership a perennial issue? For the third year in a row, leadership soared to become one of the most pressing talent challenges faced by global organizations. Nearly 9 out of 10 global HR and business leaders (86 percent) cited leadership as a top issue. Fully 50 percent of respondents in our survey rated their leadership shortfalls as “very important.” Yet only 6 percent of organizations believe their leadership pipeline is “very ready” pointing to a staggering capability gap. (See figure 1 for capability gaps across regions and selected countries). Respondents’ overall capability gap in leadership, which has grown in magnitude since last year (figure 2),¹ is striking, considering that leadership program spending has increased compared to last year.²

If nearly every company recognizes leadership as a critical talent problem, why are so few companies making any progress in addressing it?

The short answer is that many companies treat leadership sporadically, confining development to a select few employees, failing to make long term investments in leadership, and neglecting to build a robust leadership pipeline at all levels. For all the talk about leadership as a CEO-level priority, too many companies do not consistently invest in this area. Issues that hold back effective leadership development include:

• Leadership for the few, not the many: At the top of the corporate pyramid, fewer than 50 percent of C-suite executives feel they are receiving any development at all.³ Meanwhile, lower down in the organization, just 6 percent of survey respondents report they have “excellent” programs in place to develop Millennials. This is despite the fact that 53 percent of Millennials aspire to become the leader or senior executive of their own organization.⁴
• Lack of consistent investment: Many organizations view leadership as a short-term training program or series of episodic events that are funded one year but not the next. Companies that “get it” (GE, for example) invest in developing leaders during good times and bad rather than treating it as a luxury they can only afford in strong years. In fact, research shows that high-performing companies spend 1.5 to 2 times more on leadership than other companies, and reap results that are triple or quadruple the levels of their competitors.⁵
• A weak leadership pipeline: Unless developing leadership is treated as an ongoing, strategic initiative by HR and the business, leadership pipelines will be weak and potentially impact the ability of the business to deliver on its strategy. Recent research shows that only 32 percent of organizations have a steady supply of leaders at the top levels, while only 18 percent regularly hold their leaders accountable to identify and develop successors.⁶ Only 10 percent of respondents to this year’s survey believe they have an “excellent” succession program, and 51 percent state that their programs are weak or have none at all.

The Deloitte Human Capital Capability Gap is a research-based score that shows HR’s relative capability gap by looking at the difference between respondents’ average “readiness” and “importance” ratings for each trend, indexed on a 0–100 scale. It is computed by taking the “readiness” index score and subtracting the “importance” index score. For example, a trend with a readiness index score of 50 and an importance index score of 80 would produce a capability gap of -30. Negative values suggest a shortfall in capability, while positive values suggest a capability surplus.

The percentage change figure and up arrow denote an increase in the magnitude of the capability gap.

Faced with these challenges, organizations often believe they can simply “buy” a solution to develop leaders. Off-the-shelf leadership development solutions are fragmented and of inconsistent quality. With so many models and approaches from large firms to business schools to boutiques it is hard for many companies to architect the tailored yet integrated experiences they need.

Despite these challenges, new data-driven tools offer innovative approaches to help accelerate leadership by better assessing leadership qualities, understanding career patterns of successful leaders, and learning what development works best. For example, companies can now look at talent movement data and use people analytics to see which job experiences and backgrounds produce the best leaders. They can then target training that best prepares leaders to learn from this experience, and use assessment tools to measure capability uplift and readiness for the next level.

As the global economy gathers momentum, companies need to seize this opportunity to transform their leadership development programs from a perennial question mark to a source of strategic strength.

Lessons from the front lines

In late 2012, T-Mobile was on the edge. In addition to having experienced the turmoil of an unconsummated merger with AT&T in 2011, the company had difficulty differentiating itself in a hyper-competitive sector and competing at scale against much larger competitors. While profitable, it was losing customers at an alarming rate. It also had a great, collaborative culture, but was not able to capitalize on its key strengths to disrupt the status quo.

"With so many models and approaches—from large firms to business schools to boutiques— it is hard for many companies to architect the tailored yet integrated experiences they need."

John Legere, T-Mobile’s new CEO, had decided to shake up the industry. Starting in early 2013, Legere and the senior leadership team rapidly introduced their “Un-carrier” strategy in a series of bold moves that created first-mover advantage and took the industry by surprise. This series of quickly unfolding events, which continued throughout 2014, put in motion a transformation not only in the industry, but also within the company. By definition, things needed to change on the inside if they were to change outside.

One element of this internal transformation was to rethink the way the company’s people were managed. “The combined HR leadership team knew we needed to look hard at all our people practices, so we started with a fresh sheet of paper and a focus on next practices, not best practices,” said Ben Bratt, VP HR and head of talent and organization capability. “We knew that our managers had to embody Un-carrier in everything they did, but we had little to offer them on their journey to a new set of leadership capabilities. And we didn’t want to recreate the past. We wanted to build toward the future.”

T-Mobile decided early on to recreate a significant focus on first- and second-line leadership, and to radically rethink mothballed high-potential efforts. “Sometimes, you have to pause to go fast,” said Melissa Davis, director of leadership and organization development. “We focused on a six-week ‘dash’ to get crystal clear on the new capabilities needed, and we rapidly developed a new framework and strategy that drove toward core elements like customers, goal setting, coaching, development, and engagement. These capabilities are now the underpinning of all leadership development.”

• To help shape the new, empowering culture in a way reflective of the Un-carrier spirit, T-Mobile embarked on a series of leadership investments, including:
• A high-potential program aimed at getting directors ready for VP roles
• A “dead simple” 360-feedback tool that aligned with the new leadership framework, with real-time support for selected directors to take action on the feedback
• A new, high-octane two-day “manager mastery” program for frontline managers

“We are taking a new approach to developing our 4,500 first- and second line leaders,” said Bratt. “These leaders and their teams touch more than 1.5 million customers each year, so we need them to inspire their teams to produce great results and deliver world-class customer service at each ‘moment of truth.’ By focusing on leadership at all levels, we know we can continuously transform the teams that work with our customers, delivering the industry’s leading service, support, and quality care with the Un-carrier spirit.”

This “clean sheet of paper” approach to leadership development and the emerging momentum in the talent development space has dovetailed with similar redesign efforts across all HR groups. From paring down and overhauling approaches to performance management, to creating radical transparency in the hiring process, to giving employees an “always on” voice that managers can immediately mine for valuable insights, T-Mobile is equipping managers to lead the Un-carrier revolution.

Where companies can start

• Start with commitment to leadership development from the top: Without CEO ownership, leadership development will likely never be a long term commitment. Engage top executives to maintain a continuous investment in leadership development.
• Answer the question: Leadership for what? Begin a conversation about your top business priorities. Then, build a capability framework for selection, assessment, development, and succession that defines the leadership you need for today and tomorrow. Keep the model simple it should be your “language for leadership” across the enterprise.
• Develop inclusive leaders at all levels: While many executives worry about top leadership, midlevel and first-level leaders actually operate the company and are the future strategic leaders of the organization. They also interact with customers every day. Capable and engaging managers and supervisors can drive performance, foster engagement, and increase retention. This requires focusing on growing segments of leaders such as Millennials, global leaders, and women—and tailoring development to their unique needs and preferences.
• Make talent development and succession a priority: Reward leaders for developing successors and sharing talent. Without a process to seed and feed the pipeline with the best, most diverse talent, your leadership investments will not deliver value.
• Develop or leverage a capability model: Build a framework for assessment, Leading in the new world of work development, and coaching. New models are now available, but companies can benefit by keeping the model simple and focusing on implementing leadership models and programs.
• Extend boundaries to create new leadership development opportunities: Work with business partners, universities, nongovernmental organizations, and other third-party organizations to create a range of new leadership experiences, including pro bono and community service projects.

BOTTOM LINE

In today’s competitive business environment and rapidly evolving world of work, organizations must continuously develop a robust portfolio of leaders who are ready to engage employees, push forward growth strategies, drive innovation, and work directly with customers. Companies that fail to invest continuously in the leaders of tomorrow may find themselves falling behind their competitors.

Endnotes

1. We asked respondents to rate each issue’s “importance” and their organization’s “readiness” to address it on a four-point scale: “not important/ ready,” “somewhat important/ready,” “important/ready,” and “very important/ready.” These ratings were then indexed on a 0–100 scale in which 0 represents the lowest possible degree of importance/readiness (“not important/ready”), and 100 represents the highest possible degree of importance/readiness (“very important/ ready”). An overall index score was calculated for each trend using the respondents’ ratings of “importance” and “readiness.” The scores were also used to calculate the “capability gap,” which is computed by taking a trend’s “readiness” index score and subtracting its “importance” index score. For example, a trend with a readiness index score of 50 and an importance index score of 80 would produce a capability gap of -30.
2. Karen O’Leonard and Jennifer Krider, Leadership development factbook 2014: Benchmarks and trends in U.S. leadership development, Bersin by Deloitte, May 2014, http://www.bersin.com/library.
3. “Deloitte business confidence report 2014: The gap between confidence and action,” Deloitte Development LLC, 2014, http://www2.deloitte.com/us/en/pages/operations/articles/cxo- confidencesurvey.html.
4. “Mind the gaps: The Deloitte Millennial survey 2015,” Deloitte, 2015, http://www2.deloitte.com/global/en/pages/about- deloitte/articles/millennialsurvey.html.
5. O’Leonard and Krider, Leadership development factbook 2014.
6. Ibid.

Learning and development: Into the spotlight

• Companies see an urgent need to build skills and capabilities and are now focused on transforming their learning organizations and strategies.
• Learning and development issues exploded from the No. 8 to the No. 3 most important talent challenge in this year’s study, with 85 percent of survey participants rating learning as a “very important” or “important” problem. Despite this demand, capabilities in learning dropped significantly; the gap between importance and readiness was more than three times worse in 2015 than in 2014.
• Companies that transform their learning and development organizations are not only able to accelerate skills development, but also can dramatically improve employee engagement and retention—one of the biggest challenges cited by this year’s respondents.¹

THIS year, corporate learning and development (L&D) burst onto the scene as one of the most pressing business and talent issues facing our respondents.² Business and HR leaders report that corporate learning capabilities are waning (39 percent say the problem is “very important,” more than three times last year’s percentage), and companies are now competing heavily for new technical and professional skills. This research tells us that 2015 will be a critical year for targeted investment in learning.

In this year’s Global Human Capital Trends survey, more than 8 out of 10 (85 percent) respondents cited learning as “important” or “very important,” up 21 percent from last year. Yet, in a troubling development, more companies than ever report they are unprepared to meet this challenge. The capability gap between the importance of the issue and the ability to respond grew in magnitude by an enormous 211 percent over the last 12 months (from -9 to -28).³ (See figure 1 for capability gaps across regions and selected countries, and figure 2 for year-over-year changes in the gap.)

Why the huge increase in need and growing gap in capability?

To start with, senior business leaders increasingly see shortages of skills as a major impediment to executing their business strategies. Only 28 percent of the respondents to this year’s survey believe that they are “ready” or “very ready” in the area of workforce capability. As the economy improves and the market for highskill talent tightens even further, companies are realizing they cannot simply recruit all the talent they need, but must develop it internally.

Faced with gaps in talent and skills, CEOs are turning to CHROs and CLOs to ask for more and better learning platforms and products. Just when the need is most urgent, HR organizations face a massive digital transformation in the learning and training industry, plus new expectations by employees for on demand learning opportunities.

The Deloitte Human Capital Capability Gap is a research based score that shows HR’s relative capability gap by looking at the difference between respondents’ average “readiness” and “importance” ratings for each trend, indexed on a 0–100 scale. It is computed by taking the “readiness” index score and subtracting the “importance” index score. For example, a trend with a readiness index score of 50 and an importance index score of 80 would produce a capability gap of -30. Negative values suggest a shortfall in capability, while positive values suggest a capability surplus.

The percentage change figure and up arrow denote an increase in the magnitude of the capability gap.

The last three years have witnessed an explosion of new learning offerings, including MOOCs (more than 400 universities now offer free or lowcost courses), digital learning tools, video offerings, and new cloud based training systems. These new learning platforms are easy to use, provide access to internal and external content, and use analytics to recommend content in a manner similar to Netflix and Amazon.

Innovative and engaging learning solutions today are on demand, fast to absorb, and available on mobile devices.⁴ Yet, while employees now demand a personalized, digital With a background in employee development, change, and leadership, the CLO of today wears many hats: chief capability officer, chief leadership officer, chief talent officer, and even chief culture officer. learning experience that feels like YouTube, many companies are stuck with decades old learning management systems that amount to little more than a registration system or course catalog. Research shows that less than 25 percent of companies feel comfortable with today’s digital learning environment.⁵ This year’s trends survey results support this: Only 6 percent of respondents rate themselves excellent at providing mobile learning, only 6 percent rate themselves excellent at incorporating MOOCs into their learning and development programs, and only 5 percent rate themselves excellent at using advanced media such as video, audio, and simulations—essential capabilities in a world dominated by digital learning platforms.

This may be starting to change, however. Many companies are starting to invest more heavily in learning and development to build the skills they need.

Last year, the learning and development market grew by 14 percent, while spending on leadership development grew at an even faster rate.⁶ The learning technology market grew by 27 percent and is now a $4 billion industry.⁷ Last year, more than $400 million was invested in fast growing learning providers such as EdX, Khan Academy, Coursera, and Udemy, which have emerged as large marketplaces for online training, serving millions of users after only a few years of operation.⁸

But new technology is only one part of a learning transformation. Companies such as Philips are rationalizing their distributed learning teams, cutting down on duplicative content, and consolidating technologies to build an integrated, consistent learning environment.⁹ MasterCard ties learning directly to Leading in the new world of work business strategies and has assigned product managers to help make sure learning is directly relevant to individual employees.¹⁰

And technology is no substitute for the expertise of a company’s own people. Companies are also increasingly unleashing the power of their own experts. Google’s Googler-to-Googler program is one good example of how companies promote a learning culture. Karen May, Google’s head of people operations, says that giving employees teaching roles makes learning a natural part of the way employees work together, rather than something HR is making them do.¹¹

Deckers Outdoor, a leading shoe manufacturer (the maker of Ugg footwear and other well known brands), has redefined its learning strategy as a critical part of employee engagement, communications, and culture. Not only has Deckers revitalized its digital learning experience, but the company also considers all learning programs to be programs to engage people and drive the corporate culture. Each program includes an element of “why” and communicates purpose and meaning, not just content. This approach fits in with Deckers’ culture of not merely “teaching people,” but “inspiring people to learn.”¹²

Deckers’ head of L&D is also responsible for employee engagement, culture, and employee communications. Her team tells stories about learning successes and career growth; they give people artifacts to take to their desks to remind them to learn; and they focus on change management and communication as an integral part of the learning environment. The result is not only strong business results but also one of the lowest turnover rates in the industry.

Beyond filling skill and capability gaps, some companies are realizing other goals through learning and development transformation. TELUS, one of Canada’s fastest growing telecommunications companies, recently revitalized its learning platforms with improved technology, the assignment of “product managers for learning” within L&D, and the adoption of new contextual learning tools. Following these steps, employee retention improved by 30 percent.¹³

As companies begin the transformation process, chief learning officers are taking on critical business roles. With a background in employee development, change, and leadership, the CLO of today wears many hats: chief capability officer, chief leadership officer, chief talent officer, and even chief culture officer.¹⁴

Lessons from the front lines

Nestlé recently completed a review of how learning could play a more strategic role in a world dominated by the need for innovation, agility, and social, mobile, and digital technology.

The company’s CLO, Fausto Palumbo, presented a bold view that learning could be a strategic lever within the organization to change the way employees think and act. This led to a review of enterprise-wide leadership programs and the initiation of a pilot program with the mission of reimagining the learning experience for senior executives.

• Instead of a lecturebased program, Nestlé developed a multifaceted experiential learning model that included a wide variety of activities:
• A multiday, high-stress simulation around key leadership topics
• Reactions to real-time/simulated data from product-specific social and mobile feeds
• Product development by widely distributed design and development teams using digital technologies
• Prototype development of new products using digital printing

To ensure that learning was not an isolated event but rather integrated into daily work, the company set up a series of video and digital presentations before the live learning module was launched; it also built follow up events.

Through this learning program, the next generation of senior leaders were rapidly introduced to a social and mobile world where agility and innovation are the disruptive norms. The pilot provided the foundation for how the company will use learning to drive its agenda in a digital world where social and mobile need to be part of every executive’s toolkit. With the success of the pilot, the learning team is now moving quickly to reinvent other critical leadership programs.

Where companies can start

• Reimagine the learning experience: This year is the time to reimagine and redesign your learning experience. Look at your learning management systems and content strategy, and expand your thinking to create an environment that attracts and encourages people to learn.
• Assess your current learning offerings: Analyze where your current L&D money is going. Research shows that most companies underestimate their spending by a factor of two to three, and many have uncoordinated and duplicative programs and tools throughout the company.¹⁵ A project to find and rationalize learning spending often identifies areas to reengineer with little incremental investment.
• Centralize spending and strategy while carefully distributing learning capabilities: Great learning teams have a strong leader and spend money strategically, with centralized operations focused on technology, content, tools, and methods. They focus on technical, professional, and leadership programs across the company. They distribute programs locally, leveraging Leading in the new world of work centralized infrastructure and common learning elements.
• Assign a learning technology and design thinking team: Companies need to redefine learning as an agile and routine experience. This often requires the assignment of a development team to build a new “learning architecture” as well as assigning people to be “product managers,” not just instructional designers.
• Reimagine measurement: The old measurement models no longer provide enough information. Look at measuring all types of activity, and capture data about learning like you do from outside customers. Monitor metrics such as activity and usage, feedback, and net promoter scores, as well as satisfaction and instructor ratings.
• Elevate the job of chief learning officer: In times like these the CLO plays a critical role. Elevate this position to attract experienced learning, technology, and HR leaders. The CLO must create a vision for the future, put in place a business and operating plan that scales, centralize strategy and architecture, and engage top leadership in building a learning culture.

BOTTOM LINE

Learning today has become a business critical priority for increasing skills, improving the leadership pipeline, and enhancing employee engagement. As the corporate learning market undergoes a digital transformation, this is the year to assess your current learning environment and implement a new vision to build a corporate learning experience that touches every employee in a significant way.

Endnotes

1. After studying more than 30 different research studies on retention and engagement, researchers found that focus on company specific training is one of the strongest contributors to employee engagement and retention. Research also shows that “high impact” learning organizations deliver 30 percent higher customer service and show similar high performance in innovation. See Angela L. Heavey, Jacob A. Holwerda, and John P. Hausknecht, “Causes and consequences of collective turnover: A metaanalytic review,” Journal of Applied Psychology 98, No. 3 (2013), pp. 412-453; David Mallon, High impact learning culture: The 40 best practices for creating an empowered enterprise, Bersin & Associates, June 2010, http://www.bersin.com/library or http://www.bersin.com/hilc.
2. In this research, respondents were asked to rate their talent challenges by importance on a four-point scale (“very important,” “important,” “somewhat important,” and “not important”). The ranked list of challenges listed by importance is given in the introduction to this report.
3. We asked respondents to rate each issue’s “importance” and their organization’s “readiness” to address it on a four-point scale: “not important/ ready,” “somewhat important/ready,” “important/ready,” and “very important/ready.” These ratings were then indexed on a 0–100 scale in which 0 represents the lowest possible degree of importance/readiness (“not important/ready”), and 100 represents the highest possible degree of importance/readiness (“very important/ ready”). An overall index score was calculated for each trend using the respondents’ ratings of “importance” and “readiness.” The scores were also used to calculate the “capability gap,” which is computed by taking a trend’s “readiness” index score and subtracting its “importance” index score. For example, a trend with a readiness index score of 50 and an importance index score of 80 would produce a capability gap of -30.
4. Todd Tauber and Dani Johnson, The next evolution of learning content, Bersin by Deloitte, December 2014,http://www.bersin.com/library.
5. Todd Tauber and Dani Johnson, The next evolution of learning content, Bersin by Deloitte, fall 2014,http://www.bersin.com/library.
6. Karen O’Leonard and Jennifer Krider, The leadership development factbook 2014: Benchmarks and trends in U.S. leadership development, Bersin by Deloitte, May 2014, http://www.bersin.com/library; Karen O’Leonard, The corporate learning factbook 2014: Benchmarks, trends, and analysis of the U.S. training market, Bersin by Deloitte, January 2014, http://www.bersin.com/library.
7. David Mallon, Todd Tauber, and Wendy Wang-Audia, Learning management systems 2014: Provider comparisons and profiles, Bersin by Deloitte, August 2014, http://www.bersin.com/library.
8. Ellis Booker, “Education tech investments surpassed $1 billion in 2012,” January 25, 2013, http://www.informationweek.com/software/education-tech- investments-surpassed-$1-billion-in-2012/d/d-id/1108366?.
9. Personal communication with Philips executives.
10. Katie Kuehner-Hebert, “Teaching collaboration at MasterCard: Priceless,” Chief Learning Officer, October 16, 2014, http://www.clomedia.com/articles/5898-teaching-collaboration-at-mastercard- priceless
11. Sarah Kessler, “Here’s a Google perk any company can imitate: Employee-to-employee learning,” Fast Company, March 26, 2013,http://www.fastcompany.com/3007369/heres-google-perk-any-company- can-imitate-employee-employee-learning
12. Todd Tauber, Three marketing lessons for learning & development, Bersin by Deloitte, June 24, 2014,http://www.bersin.com/library
13. Elana Varon, “How TELUS engages employees through pervasive learning,” http://www.sap.com/bin/sapcom/en_us/downloadasset.2014-06-jun-24-09.how-telus-engages-employees-through-pervasive-learning-pdf.bypassReg.html.
14. Karen O’Leonard, Today’s world-class chief learning officer, Bersin by Deloitte, May 31, 2012, http://www.bersin.com/library.
15. O’Leonard and Krider, The corporate learning factbook 2014.

Culture and engagement: The naked organization

• In an era of heightened corporate transparency, greater workforce mobility, and severe skills shortages, culture, engagement, and retention have emerged as top issues for business leaders. These issues are not simply an HR problem.
• Culture and engagement is the most important issue companies face around the world. 87 percent of organizations cite culture and engagement as one of their top challenges, and 50 percent call the problem “very important.”
• Organizations that create a culture defined by meaningful work, deep employee engagement, job and organizational fit, and strong leadership are outperforming their peers and will likely beat their competition in attracting top talent.

TODAY’S organizations live in the Glassdoor era. Every corporate decision is immediately publicly exposed and debated. Once-private issues are now posted online for every employee and every potential employee to read. An organization’s culture  which can be loosely defined as “the way things work around here” is increasingly visible for all the world to see.

Given the harsh spotlight of this new transparency, an organization’s culture can become a key competitive advantage or its Achilles’ heel. Culture and engagement are now business issues, not just topics for HR to debate. And there’s no place for organizations to hide.

This year, employee engagement and culture issues exploded onto the scene, rising to become the No. 1 challenge around the world in our study.¹ An overwhelming 87 percent of respondents believe the issue is “important,” with 50 percent citing the problem as “very important” double the proportion in last year’s survey. Two-thirds (66 percent) of HR respondents reported that they are updating their engagement and retention strategies (figure 1). Along with decreasing readiness, our data also showed substantial capability gaps in engagement and culture across countries and regions (figure 2).

Note: Only HR respondents were asked this question

The Deloitte Human Capital Capability Gap is a research-based score that shows HR’s relative capability gap by looking at the difference between respondents’ average “readiness” and “importance” ratings for each trend, indexed on a 0–100 scale. It is computed by taking the “readiness” index score and subtracting the “importance” index score. For example, a trend with a readiness index score of 50 and an importance index score of 80 would produce a capability gap of -30. Negative values suggest a shortfall in capability, while positive values suggest a capability surplus.

Research shows that in most companies, engagement is low. According to the Gallup polling firm, only 13 percent of the global workforce is “highly engaged.”² Upwards of half the workforce would not recommend their employer to their peers.³

Despite this challenge, a substantial proportion of the respondents in this year’s survey (22 percent) report that their organizations have either a poor program to measure and improve engagement, or no program at all. Only 7 percent rate themselves excellent at measuring, driving, and improving engagement and retention (figure 3). And only 12 percent believe their organizations are excellent at effectively driving the desired culture.

This is a new and systemic problem for organizations worldwide. Why has it become so acute?

• Employees are now like customers; companies have to consider them volunteers, not just workers: As the job market has heated up and new technologies have exploded, power has shifted from the employer to the employee. Websites like Glassdoor, LinkedIn, Facebook, and others not only increase transparency about a company’s workplace; they make it fareasier for employees to learn about new job opportunities and gain intelligence about company cultures.

• Leaders lack an understanding of and models for culture: Culture is driven from the top down. Yet most executives cannot even define their organization’s culture, much less figure out how to disseminate it through the company.
• The new world of work changes the way we engage people: The world of work is very different from and more complex than it was only a few years ago. Employees today work more hours and are nearly continuously connected to their jobs by pervasive mobile technologies. They work on demanding cross-functional teams that often bring new people together at a rapid rate. Flexibility, empowerment, development, and mobility all now play a big role in defining a company’s culture.
• Employees’ motivations have changed:Today’s workers have a new focus on purpose, mission, and work life integration.⁴ Research shows that a variety of complex factors contribute to strong employee engagement, including job design, management, work environment, development, and leadership.⁵ Today, more than twice as many employees are motivated by work passion than career ambition (12 percent vs. 5 percent), indicating a need for leadership to focus on making the work environment compelling and enjoyable for everyone.⁶

Culture and engagement is no longer an arcane topic owned by HR. It is now an imperative for every leader and every executive in the organization. Many studies now show that highly engaged companies can hire more easily, deliver stronger customer service, have the lowest voluntary turnover rates, and be more profitable over the long run.⁷

Google, a highly rated “best place to work” in many studies, focuses heavily on culture.⁸ The company regularly measures dozens of factors to understand what makes people productive and happy. This research has shaped Google’s workplace culture in myriad ways from the company’s open workplace design to the provision of free gourmet food and onsite laundry services for employees.

Although culture and engagement play such a critical role in business performance, most organizations do a poor job of measuring their achievements or shortcomings. Historically, companies have relied on annual engagement surveys, often costing hundreds of thousands of dollars and taking months to deploy. And very few companies have a process or tools to measure culture and learn where it