Introduction

Senior executives worldwide have reshaped their companies to embrace the global marketplace and improve financial results. But now, to get to the next level of performance, they must deal with the toughest issue: their people.

That is one of the major findings of Watson Wyatt’s breakthrough survey, Competing in a Global Economy. Over 2,000 top executives from 23 countries participated, including 455 executives from the United States. The study focused on the business and people issues critical to competing successfully in a global economy.

Across the globe, senior executives identified the need to align workers with business strategies and to deal with the factors driving human performance as critical to business success. Organizational culture was named as the greatest barrier to promoting desired change. Executives are now saying that culture, values and human behavior—the "soft" issues—are as important as the traditional "hard" issues, and they are struggling to deal with them.

What are the Most Important People Issues?

Senior executives were asked to identify the top three human resources issues facing their companies today and for the next several years. Unilaterally, they identified the following three major issues:

Leadership development
Motivational pay
Training and development of their workforce

This summary addresses executives’ ideas on each of these topics and the profound impact these issues can have on the management, culture and success of organizations.

What Are the Three Most Important People Issues?

U.S. Canada Latin America Europe Asia-
Pacific All

Leadership Development 38% 35% 37% 28% 37% 35%

Motivational Pay 20% 30% 29% 28% 25% 26%

Training/Development 24% 29% 28% 19% 18% 24%

Leading in a Different Business World

The study showed that the number one factor driving change within an organization is leadership. Fifty-four percent of all respondents identified leadership (CEO) as the agent of change within the organization. In turn, leadership was blamed by 71 percent of participants as the reason that a company failed to meet its objectives. These two findings reflect the importance and magnitude of the role that leaders play in determining the success, staying power and growth of their companies—and the extent to which the leaders themselves know that they must change how they lead.

In Watson Wyatt’s 1994 study of business issues across the globe, leadership development was also identified as the number one people issue on senior executives’ radar screen. Yet it is obvious from the results of the 1997 study that leaders feel little progress has been made in leadership development. Why? Executives in the study identified four distinct obstacles as the major barriers hindering leadership development: (1) inadequate succession planning, (2) inadequate leadership training, (3) lack of commitment by senior managers to develop leaders and (4) failure to delegate by senior management. Each of these barriers to leadership development is rooted in part in an organization’s culture—and in the conflict with the leader’s role as defined in the 80s and early 90s versus the leader’s role today.

What Are the Major Barriers to Leadership Development?

U.S. Canada Latin America Europe Asia-
Pacific All

Inadequate Succession Planning 51% 50% 68% 50% 48% 53%

Inadequate Leadership Training 57% 46% 64% 42% 47% 51%

Lack of Commitment to Leadership Development 51% 50% 64% 37% 52% 51%

Failure to Delegate by Senior Management 49% 47% 57% 40% 54% 49%

Pay — It's More than Money

Nearly one-third of executives in the study identified motivational pay as the second most important human resources issue. And 76 percent believe motivational pay is a key to attracting, developing and retaining an effective workforce.

Interestingly, Watson Wyatt’s ongoing study of worker attitudes, WorkUSA (WorkCanada,™ WorkUK,™ etc.), shows that only 30 percent of workers see a link between their performance and their pay. And they don’t see much connection between pay philosophies and business strategies. In a global economy, executives need to view pay programs as part of a much larger whole of motivators, satisfiers and incentives that help people balance work life and personal life.

Investing in Human Capital

Completing in a Global Economy identifies several trends in business worldwide. Across the world, companies are:

shifting from investing in an organizational "fix" to investing in the "human capital" of the organization;
moving away from a structural focus and toward a cultural focus; and
focusing less on work processes and more on developing people and programs that motivate both behavior and performance.

What senior executives are saying is that people are the key to breaking through to the next level of performance. They overwhelmingly recognize people as the key to maximizing shareholder value and increasing profits in today’s global economy. They understand that growth now hinges on creating a culture of shared values, where workers’ behaviors are aligned to their company’s business goals. All of this means investing in the people side of business:

examining human resource programs from a "whole cloth" perspective
aligning these programs with business strategies
developing leaders who can manage the people side of businesses as well as the financial side
creating work environments that are learning cultures with distinct values. It’s a tall order—but senior executives say that’s what it will take to be a world class organization in a world economy.