CHROs Navigate Complex Challenges in Balancing Cost Optimization and Leadership Development – The Findings of the Latest Survey

CHROs are currently navigating a delicate balance: they must optimize current costs while also investing in future skills, all while fostering collaboration with other leaders. Their focus within their own departments is on technological upskilling and nurturing leaders capable of driving company growth. According to PwC’s June 2024 Pulse Survey, human capital leaders are renewing their commitment to enhancing the employee experience, yet they are overlooking significant opportunities, particularly in leveraging feedback and AI tools in daily operations.

CHROs are promoting leadership, both by embodying leadership themselves and by creating a leadership-oriented culture. Almost half of CHROs prioritize making their role a strategic partner to the CEO, a goal that appears to be effective as 60% of CEOs consider CHROs to be key business partners in shaping company strategy.

Developing effective leaders across the organization is a primary goal for CHROs. They are introducing new formal training programs to build leadership capabilities within teams. To fund growth, they are also optimizing costs and revamping performance management and career development processes.

Strategies for CHROs:

• • Adopt a Business Strategy Approach: Move beyond transactional roles and align HR with broader business strategies. Understand the priorities of the C-suite and the total cost of the workforce to identify opportunities for optimization and alignment.
  • Invest in Future Leaders: Develop leadership skills in potential future leaders through formal programs, partnerships with external organizations, rotations, and “stretch” opportunities that challenge employees beyond their current roles.
  • The survey indicates that 79% of CHROs are hiring fewer new employees compared to August 2023, reflecting a broader industry trend of decreased hiring post-pandemic. Instead, HR leaders are focusing on optimizing workforce costs through means other than headcount. Eighty percent are addressing cost balancing more vigorously than the previous year.

Investment in skills-based talent architecture is on the rise, with 86% of HR leaders increasing their focus, slightly up from 2023. CHROs are more likely than other executives to use tax credits for funding investments over the next 12 to 18 months. Almost 90% have plans for upskilling their workforce to effectively implement AI and generative AI (GenAI), which can enhance productivity by reducing manual tasks.

Optimizing Costs and Enhancing Skills:

• • Generate Savings for Reinvestment: Look for savings through automation, rebates, and tax credits to fund strategic initiatives.
  • Utilize Technology for Skill Matching: Develop a robust job architecture that aligns roles with required skills, and consider using GenAI to streamline data analysis and role assignments for faster decision-making.

Performance management is being re-evaluated to ensure it incentivizes the right behaviors. Effective feedback within a defined framework is crucial, but a misaligned framework can lead to poor outcomes. Nearly half of companies are altering their performance metrics, and over half are using new technologies to collect performance data.

However, many companies miss the opportunity to utilize this data fully, as feedback tends to flow only one way. While 57% of companies prioritize manager training for real-time feedback, only 36% have platforms for upward feedback, representing a significant lost opportunity in measuring ROI.

Improving Performance Management:

• • Evaluate and Refine Processes: Critically assess current performance management processes to ensure they drive business results, provide timely feedback, and recognize outstanding work.
  • Foster Two-Way Feedback: Implement effective processes for two-way feedback and understand the time investment required. Encourage real-time feedback and align policies with employee preferences to create a supportive culture.

By focusing on these strategies, CHROs can navigate the complex landscape of cost optimization, leadership development, and employee engagement, positioning their organizations for sustained growth and success.

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