HR Important — But Who Measures?

Survey shows executives are high on HR initiatives, but they don't know why. Plus: SK, Southcorp CFOs dumped after delivering bad news.
Lisa YoonApril 2, 2003

CFOs listed human-resources issues as one of their top concerns in a study released Tuesday by Accenture.

But while finance chiefs say they’re willing to pony up the money for workforce development, the survey found that many fail to measure the effects of such programs on the bottom line.

The study, based on interviews with 200 CFOs and other C-level executives in the U.S., Europe, and Australia, found that 74 percent of respondents believe people-related issues are more important to their company’s success than they were a year ago.

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In addition, four of the top five strategic priorities at respondents’ companies were workforce-related: “attracting and retaining skilled staff”; “changing organizational culture and employee attitudes”; “changing leadership and management behaviors”; and “improving workforce performance.”

Surprisingly, those choices beat out such weighty issues as “cost reduction” and “competitive pressures.”

A separate global study by Accenture of nearly 500 business leaders also found that human resource issues are the top concern for companies. That study found that “changing organizational culture and employee attitudes” is the number one business issue on the executive agenda. Also ranking near the top of the list were “reducing workforce-related costs” and “improving workforce performance.”

That study, which will be released shortly, offers additional evidence of how workforce issues are a key corporate priority.

Indeed, three-quarters of respondents said their companies increased or maintained their HR and training budgets (73 percent and 78 percent, respectively) over the past year.

Interestingly, only 17 percent reported that they are very satisfied with the progress they’ve made with training programs. Only one in four said they believe that most of their employees have the skills to outperform workers at rival companies.

Part of that dissatisfaction might stem from a disconnect between implementing training programs and measuring the programs’ performance. In fact, 40 percent of respondents said their companies do not regularly measure how these initiatives affect factors such as retention, employee satisfaction, innovation, productivity, and quality.

More than half of the respondents (57 percent) said their companies never or rarely measure their training investments against employee retention. The same percentage said their companies never or rarely measure the impact of HR investments on employee satisfaction.

Additionally, more than one-third said their companies never or rarely measure investments in human resources or training against customer satisfaction.

“Investments in human resources, training and development enhance employee satisfaction and improve workforce performance,” said Peter Cheese, managing partner of Accenture’s human performance practice, “but measuring the impact of those investments is key to ensuring companies’ ongoing success.”

One significant weak spot, according to the survey: employees’ understanding of corporate strategy and their role in executing it. Only 12 percent of respondents said they believe that 75 percent or more of their employees understand their company’s overall business strategy. Just 17 percent believe enough employees understand the connection between their jobs and execution of corporate strategy.

CFOs on the Move

As corporate America digests the latest corporate scandal — the problems at HealthSouth — CFOs on the other side of the globe are making waves of their own.

At SK Group, Korea’s third largest conglomerate, finance chief Moon Duk Kyu resigned after a string of accounting errors were revealed at the company’s trading arm. SK Global reported that it lost 296.7 billion won ($236 million) last year. Earlier it reported a profit of 194.2 billion won ($154.8 million). Sound familiar?

The company also indicated that its accumulated debts of $5.3 billion were $169 million more than its assets.

SK Group was under investigation for a $1.2 billion accounting errors for 2001. According to The New York Times, 10 SK Group executives were indicted as a result of that investigation, including executives of SK Corp., Korea’s largest oil refiner, which sells its products through SK Global. SK Corp. chairman Chey Tae Won and another top aide, in jail while awaiting trial, owns nearly 40 percent of SK Global’s shares.

The Korea Stock Exchange suspended trading in SK Global.

Meanwhile, in Australia, Peter Cleaves reportedly resigned as CFO of Southcorp, the winemaker behind such brands as Rosemount and Lindeman’s. Cleaves, who had been finance chief of Rosemount before its 2001 merger with Southcorp, departs just three weeks after his former boss, CEO Keith Lambert, resigned. Lambert’s departure was hastened after he announced Southcorp’s interim profits were down some 97 percent.

According to The Age, Southcorp’s board decided to dump Cleaves soon after it forced Lambert to resign. Apparently, Cleaves only learned of the decision last week.

The Australian paper reports that Southcorp’s board was especially upset over Cleaves and Lambert’s failure to warn them of the profit bombshell.

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