Today’s businesses face a nexus of talent challenges. As the chart from this report shows, business is moving fast, markets are global, and many organizations have become highly interconnected, flat, and filled with young professionals. Internally, many of today’s jobs require deep levels of specialization and a new generation hands-on leadership—leadership which knows how to select talent, inspire people and drive team performance. And added to all these challenges, there is a new war for skills, escalating the need to compete for top talent.

These new realities have forced a rethink of old-school HR practices, many of which date back to the early days of industrialization. Back then, when the term “Human Resources” was coined, many companies considered people to be a replaceable asset, similar to capital or raw materials. Many of the practices we still have in place today (traditional succession and performance management, for example) are based on this idea— building a “system” which operates independently of the people.

Today the world has changed. More than 70% of most business value comes from intangible assets and we now know that people, unlike many other parts of a company, are an appreciating asset. Often, the more we invest in them, the greater value we receive.

So many of today’s high-impact HR leaders focus on programs that facilitate collaboration, create passion and highly engaged workers, develop a new generation of leaders, and implement global mobility and career options for everyone— not just those at the top of the pyramid. And more and more HR practices now leverage social technologies, using the collective wisdom of the organization to support training and coaching and enabling everyone to contribute their experience.

Here are just a few of the HR areas we think are ripe for bold action:

• Replacing that “ancient” HR technology platform. A survey we did late last year shows the average age of a core HR system is 7 years—ancient in technology terms. And very few companies have just one HR system. Some have dozens, at different levels of maturity and housing different data elements. This means that HR has to be a “systems integrator” and “follower of technology,” something most HR organizations find difficult and complex.
• Implementing Systems of Engagement, not just Systems of Record. Modern HR and talent technology lets us facilitate coaching, performance and goal management, expertise sharing, and collaboration like never before. These systems help managers select people, develop them, and identify top candidates for promotion. But are they easy to use? Today, more than ever, we need to implement modern cloud-based technology which is as easy to use as consumer systems, taking HR out of the job of administering HR processes.
• Rethinking many processes, such as the once-a-year performance appraisal. The idea that employees are evaluated and coached only once per year is out of date. Today’s workforce often demands regular and continuous coaching, feedback, and evaluation. Our research on goal-setting shows that many organizations that revisit and calibrate goals quarterly gain significantly higher returns (some 30 to 40% higher) than those who set goals annually.
• Implementing 21st Century Leadership development. Year after year companies tell us that one of their greatest talent challenges is finding and developing good leaders. Well today the definition of “good” has changed. Our 21st Century Leadership research shows that many modern high-impact leaders are more collaborative, inspirational, and have a global awareness that is very hard to find. Hands-on leadership has become vital—the days of leading from behind a desk are over. Companies want leaders who have been very deep practitioners in their area, have a lot of hands-on experience, and have earned the respect of their peers. And they create a culture of continuous learning, so everyone in the organization can improve and evolve in their own personal role.
• Driving a new level of employee engagement: one with a focus on passion and purpose. While an annual engagement survey can be helpful to gauge the lay of the land and uncover pockets of low engagement, it often doesn’t go far enough. The real secret to engaging employees comes from communicating a purpose, and building a brand that means something to possible candidates. Today’s CHRO should partner with the Chief Marketing Officer, to make sure that the real employee experience mirrors the company’s outside marketing message. People are often far less motivated by money than most people believe: It is mission, good work, and a vibrant work environment that often makes companies. It is HR’s job to build this environment and makes sure it is reinforced day after day.

Predictions for 2013 dives into these and many other trends and issues that are shaping HR’s future and—as we say in the study’s conclusion—moving HR from simply working “on the business” to working as a vital partner “in the business.” Please take a look and tell us what you think.