Staff morale is high on the majority of CEOs' recovery agendas

The research, based on in-depth interviews with approximately 70 CEOs of UK organisations, found some areas of weakness have been highlighted by the recession and the majority (85%) of CEOs expect to overhaul the way their organisations manage people during change as a consequence of the economic crisis.

Attending to staff morale was highlighted by four in five (81%) CEOs, as an area also in need of reform and increased investment. Some 59% said they would make changes to flexible working, while 55% will revise global mobility arrangements - looking at factors such as staff travel or international secondments.  

But questions are being raised that could have an impact on whether the HR function will be trusted as an appropriate adviser during and beyond recovery.

The unanticipated scale of the cost-cutting, headcount and redeployment changes required by organisations during the downturn meant some of the processes in place could not support rapidly changing needs and brought some human capital failures to the surface.  

Michael Rendell, partner and leader, human resource service at PwC, said: "There is some debate about whether HR did its job during the downturn and whether the function is broken - particularly in terms of the reward models it champions and its ability to cultivate an agile, flexible workforce.  If not satisfactorily answered, some speculate that these questions could jeopardise HR's opportunity to prove itself and see it reduced to an administrative function.

"There are some big issues that will, in part, influence how successfully these new challenges are met - for example, how supportive the Government is in helping to create a skilled future workforce and how politicised debates around education and remuneration become.  

"Preparing for the upturn is a clear platform of opportunity for HR and, in the near future, this will mean refocusing on managing through change and engagement programmes as talent gaps need to be closed and roles redefined.  Given the strong focus CEOs appear to be placing on people management strategy and processes, we expect to see significant changes to HR models over this decade."

He added: "Some of the biggest challenges facing organisations include the availability of finance, changing risk requirements and market adaptability, together with responding to new customer demands and change management capability - galvanising employees and executives with the right skills and experience will be critical to operating and competing effectively in the emerging environment.

"We are all well-versed in the assertion that the deep cost-cutting and headcount reduction many companies felt forced to undertake during the recession could impact speed of recovery and competitiveness so it's encouraging that CEOs are now prioritising the people agenda.

"Despite the stagnant labour market, there are always opportunities for the best people and some organisations have used the downturn to poach from competitors that failed to ring-fence top performers. As the population ages, organisations' and countries' prosperity will depend on an increasingly limited number of talented people producing wealth so CEOs are right to be concerned about having the right people in the business."

Approximately three-quarters (72%) of respondents see having a talented, well-skilled and well-educated workforce as critical to the future competitiveness of the UK but almost a third (32%) think the Government has been effective in helping to create a skilled workforce.

Previously released findings showed that CEOs recognise the importance of having the right people in the right place - with over a third 42% hoping to increase headcount over the next 12 months.  That said, 62% stated they had reduced headcount over the past year. Perhaps in recognition of the new skills required of the emerging business environment, approximately two-thirds (65%) plan to increase investment in training and development.