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Exclusive: HR is facing a world turned upside down

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The long-term effects of recession and the financial crisis on remuneration and talent were the main concerns at a recent conference.

The recession may be over but in its wake issues such as the emerging markets, the war for talent, stricter government regulation, risk, sustainability and remuneration, are set to "turn the world upside down" and shake up HR departments.

Speaking at the British American Business Conference last month, John Ainley director of HR and corporate responsibility at Aviva, said: "The financial crisis has been the toughest of my 30-year career. It has led to a huge increase in regulation and a difference in how people run their businesses. Now risk, governance and long-term stability are the top issues for achieving trust from employees as well as customers."

He added: "People have lost faith in financial institutions. It is important we have a brand people trust globally. If we don't feel pride working for Aviva, how can we engender that to our customers?"

Speaking in the same session Financial Times assistant editor Michael Skapinker said: "We are living in a world turned completely upside down and the consequences of the recession will be with us for quite some time."

According to Richard Lambert, director general of the Confederation of British Industry, the chief executives of the UK's 100 largest companies will have earned 81 times the average pay of all full-time workers in 2009, up from 47 times the average wage in 2000.

But he and other experts agreed employers have to consider alternative approaches to remuneration and bonus strategies to attract staff, as the UK is now competing in a global economy. "We need to attract new talent who can innovate in a highly regulated sector," said Ainley. "Reward structures do shape behaviour and outcomes have to be rewarded.

"But (remuneration) can be overstated. It is a component but not the most important - some employers have been turning the dial a bit too far. Employers shouldn't knee-jerk to reward (to engage staff) but consider the whole culture of the organisation."

In April, Aviva announced it would be closing its final-salary pension scheme, allowing staff to move on to a defined-contribution (DC) arrangement, whereby Aviva will contribute between 8% and 14% into pension pots depending on the size of staff contributions. "The huge political involvement in pensions has created a complexity we need to clear up," Ainley explained. "The days of the defined benefit scheme are over. The value of DC has certainty and doesn't create a liability."

But Skapinker added: "Although DB is not a sustainable model, it was a way of retaining staff. There is no such thing as 'a job for life' any more and DC schemes allow staff to be more mobile."

Mobility of staff struck a chord with Ainley also: "We try to develop 70% of our staff internally," he said, "and about 30% come from outside to bring new ideas. Larger organisations are creating their own talent, where they need deep expertise, but employers are chasing talent and the cost is going to rise. In a global organisation, Singapore and Hong Kong are looking more attractive to employees as a place to work."

But, while recognising the unprecedented growth of economies in China, India and Brazil, Skapinker stressed the importance of HR directors in the UK focusing on long-term plans for remuneration and talent: "We need to think about what sort of leaders we need and how we will attract them - not just now but 10-20 years down the line," he said.

FIGURE IT OUT
61% of Asian HR professionals face employee retention challenges
54% of Asian HR professionals have employee engagement issues
55% of UK HR professionals face performance challenges
51% of UK HR professionals have employee engagement issues
Sources: Thomson Online Benefits and HR magazine/Vebnet