Use of staff key to success

By SIMON HENDERY

New Zealand firms have earned a mixed scorecard for their people-management practices in a study into the bottom-line impact of the human resource policies of Asia-Pacific companies.

Consulting firm Watson Wyatt probed more than 500 companies in 12 countries for its Human Capital Index (HCI) survey, including 20 listed New Zealand companies, half of which are in the NZSE-40.

Watson Wyatt won't name the New Zealand companies which took part in the survey, citing confidentiality and the fact that it will be reporting results back to them.

But Air New Zealand, The Warehouse and Auckland International Airport are known to have taken part in the study, which concludes that effective HR practices can increase shareholder value by more than 75 per cent.

Watson Wyatt's New Zealand managing director, Paul Loof, says the local companies surveyed rated a B-minus, ranking highly in some areas and badly in others.

"The overall message from the HCI is that firms with the best people-management practices substantially out-perform the market," says Loof.

"By improving human capital management, New Zealand firms can improve their bottom line.

"And from the HCI, we now know which practices contribute most value."

The survey compares "top-performing" and "average" companies across the region.

It finds that having an effective HR capability and focusing the HR function on helping a business succeed can add up to 31.5 per cent to a company's shareholder value.

Watson Wyatt came up with the figure by comparing the extra shareholder value created by top-performing companies compared to average-performing companies.

Using the same approach, the survey finds four other HR-related practices can add further value: having a "collegial, flexible, customer-focused workplace" (21.5 per cent), effective remuneration structures (17.7 per cent), appropriate recruitment and retention policies (5.4 per cent), and communications with staff (2.6 per cent).

Wyatt Watson's New Zealand head of human capital practice, Christian Dahmen, says the findings for the local companies surveyed indicate that they do the HR basics correctly, but fail to link them to overall business strategy.

"The general thing we find is that HR still seems to be very disconnected from what the business wants and plans and aspires to," says Dahmen.

A key lesson for New Zealand businesses: they would benefit from having an HR executive in a role reporting directly to the chief executive.

Dahmen cites Fonterra as an example of a company which has learned this lesson - the dairy giant's group director of human resources, Glen Petersen, reports directly to CEO Craig Norgate. Fonterra was not one of the New Zealand companies which took part in the study.

New Zealand can also learn from Australian businesses, which are much better at designing flexible employment and remuneration packages to attract talented staff.

"While the global evidence is that flexible working arrangements, such as flexible hours and work patterns, are consistent with higher shareholder value, clearly these practices appear not to be used enough in New Zealand," Dahmen says.

"The area of pay and benefits is obviously critical to business performance, and while we do some things well in New Zealand, we definitely need to do more to link pay to business strategy if we want to drive the right employee behaviours.

"We also need to become smarter in assembling the right mix of total rewards to attract and motivate employees."

Watson Wyatt