Strategic HR - the view from Milan
21 Dec 2017
One of the distinctive characteristics of the Italian economy is its reliance on small, family-owned enterprises. There are more than 3.6 million micro-firms in Italy, with fewer than 10 employees in each. They contribute more to both employment and to value added than in any other EU member state and they remain the backbone of Italian enterprise. You could, therefore, be forgiven for thinking that large companies in Italy are left in the shadows by comparison. Yet Italy has some of Europe’s premier brands and, for many years, has employed thousands in large automotive, high-tech manufacturing and consumer goods businesses in the industrial North of the country. And like all larger organisations, the challenges of HR management need to be addressed and it is HR professionals who are expected to lead the way.
So, what is on the minds of HR Directors (HRDs) of large Italian enterprises and how are they grappling with the strategic puzzles being posed by low economic growth, higher than average unemployment and stagnant wage growth? Well, I got to hear about these issues in person during a recent trip to Milan where I was presenting at a couple of learning events on talent management, retention and data analytics for Italian HRDs from several larger businesses.
The day I spent in conversation with these groups gave me an insight into both their daily and more enduring challenges and how they were going about tackling them. Overall, I think there were three themes which illustrate the current people management situation in Italian businesses – and all of them will have resonance with their counterparts in the UK.
First is the conundrum of managing careers in a low growth economy. The UK labour market has been quite resilient both during and after the financial crisis, but in Italy the recovery has been more sluggish. In these circumstances keeping talented and ambitious people engaged and motivated can be difficult and offering career progression in a growing business is often easier than in one which is contracting. There was considerable interest in how to manage horizontal but developmental job moves in larger organisations, which want to demonstrate they are investing in their talent but are not able to deliver progression and pay increases. HRDs in foreign-owned businesses had the advantage of being able to offer international job moves for some, but the main challenge was to support line managers to have career conversations with their direct reports which focused not just on their next job move but the subsequent job moves – those which would help ensure an adequate supply of internal candidates for senior specialist or generalist roles over the next five to ten years.
Talent retention, even when the labour market is not buoyant, is another preoccupation for many of the HRDs I met. There was a recognition that retention strategies which were heavily weighted towards rewards were unlikely to be seen as affordable and were probably not addressing the core problem. Active career management was generally agreed to be part of the solution for some and others included placing the ‘high-risk’ (ie likely to be ‘regretted leavers’) on important corporate projects. Tweaking job content to increase responsibility and exposure to senior managers were also on the agenda.
Finally, there was a recognition that intelligent use of HR data (through analytics), offered the HR profession the opportunity to demonstrate its strategic influence by ‘joining the dots’ on a number of business performance issues. The idea that HR could help operational managers make the journey from intuition to insight was appealing to many of the HRDs in the group and some were investing in HR specialists with data mining skills and curiosity about business metrics. This was regarded as one of the areas of untapped potential in the large organisations represented at the meeting.
For most of the HRDs there was cautious optimism that the Italian economy, especially in the more prosperous North, might allow larger businesses to be more expansive and ambitious, both in the opportunities they could offer employees and the HR practices and tools they could adopt. As we know from the UK experience, however, the path to recovery can be slow and opportunities to re-invest in ‘human capital’ need to be justified with energy and imagination.