PwC: Responsible recruitment – Michael Rendell

Each year, PwC carries out a survey in which it asks approximately 1,400 CEOs across the world what they consider to be the greatest challenges surrounding human capital. The overwhelming response continues to be that most workforces still lack the sufficient talent to grow in the way they would like.

"It's a consistent theme," explains Michael Rendell, global head of PwC's HR services practice. "Even going back five years, when businesses were growing very quickly, and also throughout the recession, CEOs were constantly saying, 'We've got the people, but we don't have the skills'. That has been the response in developed and developing markets alike."

Getting the best out of staff isn't exactly a novel idea for employers; however, there is an ongoing re-evaluation about how to achieve it. According to Rendell, optimisation starts at home with the corporation itself, which needs to display sufficient social responsibility credentials in order to attract the right talent.

"There has been much debate about the morality of some of today's businesses, particularly larger groups," he says. "Employees are keen to understand more about the organisations they are joining, which mainly relates to corporate social responsibility. New generations of school-leavers and graduates are a lot more switched on to this as well."

Arguably, the crux to fostering employee performance remains incentivisation, in which there has been a paradigm shift in recent years. More CEOs are moving from an overriding emphasis on pay-for-performance schemes - predominantly found in the financial services sector - and instead drawing on other sociological factors.

"There has been a lot of rowing back from pay-for-performance because it's been found not to incentivise the right kind of performance," explains Rendell. "What actually drives people is a lot more complex. Not everybody works solely for pay. It's a very pressing issue that CEOs are still struggling to deal with."

Different strokes

The first step that CEOs and HR departments need to take is to adopt a more responsive approach, appreciative of the fact that the modern workforce is increasingly diverse.

"There is a whole range of different things that people expect to receive from their employer," says Rendell. "This could be to do with benefits, shares in the business or pensions. The latter is especially important given that people today are working for longer. Companies need to understand that an incentive package for a 70-year-old is going to be different to what it is for an 18-year-old."

With new waves of globalisation and the removal of international trade barriers, the corporate landscape is also becoming broader and more complex. According to Rendell, this has had an undeniable effect on the metrics that guide investments in human capital.

"Organisations are really trying to simplify their processes and policies," he says. "For example, a company could be involved in several joint ventures, which means that people have to be more international-thinking and understand how to work in partnership with their suppliers and customers. This could mean bringing teams together from different places around the world, which can be a very complicated thing to do. That's not to mention the increasing rafts of regulations coming into play.

"It also means that these days you can't be an HR consultant unless you understand labour law and employee motivation; how to source talent, develop it and incentivise it. You need an understanding of tax law as well. You can't be a specialist in just one area."

Legal concerns

Employment regulation is in an ever-changing state of flux. Consequently, today's HR departments are required to be particularly vigilant in adhering to new legislations - respective to their locale - concerning the management of the workforce.

"In western Europe we have a very strong employee-biased legislative environment," explains Rendell. "This puts a lot of pressure on employers to look after and pay proper attention to their employees. In addition, redundancy programmes are often difficult and expensive, so this is something companies would ideally like to avoid.

"Conversely, in North America, there is a much more relaxed labour environment, where it is arguably much easier to hire and fire. Subsequently, employees are a lot less engaged in the conduct of the business because there is less legislative protection for them. Then in emerging markets, labour laws and regulations are still patchy. This is the set of complexities faced by CEOs."

Sustainable systems

Amid the backdrop of global market volatility, the subject of rewarding talent - namely senior executive schemes - has also become particularly contentious. With JP Morgan and Citigroup recently announcing that they are looking to restructure their reward programmes, could there be an overhaul of C-suite bonus culture in the offing?

"It is essential that there is a strong linkage between the incentivisation of senior executives and the returns that shareholders generate," says Rendell. "In the early 2000s, this risk-reward ratio went out of kilter, particularly within the financial services industry, but also in other sectors. In order to reassert that linkage, CEOs need to make sure that incentive programmes are about generating sustainable performance and not just short-term revenue."

As a result, echoing the rising influence of HR boards, remuneration committee heads have risen to the fore. Tasked with enabling the recruitment, motivation and retention of senior executives while complying with regulatory requirements, the role in Rendell's eyes has become "probably the hottest non-executive appointment around, whether it's in the UK or anywhere in the world".

"Over the last couple of years, we have seen remuneration committees become much more effective," he says. "To be chair of the committee is an incredibly challenging and difficult role. You now have to actively balance the various interests of the different employees and stakeholders."

Collective affair

There's no doubt about it; HR is undergoing a makeover. Rather than being the sole preserve of HR directors, more provident companies are beginning to adopt a holistic approach, stressing the importance of continuous dialogue between CEOs, CFOs and COOs. As a result, the likes of PwC have tailored their HR consultancy divisions accordingly.

"HR is now very much a boardroom issue," says Rendell. "Ultimately, it is about helping the overall business become more effective. Whether this concerns the implementation of a new IT system or building a car plant in China - all of those things involve people at some stage. CEOs need to understand this, and it is something we are helping them to achieve."