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Transforming the HR function

The Future of HR 2019: Power & Utilities

Despite the rapid changes seen throughout the energy sector, Power & Utilities (P&U) executives in human resources (HR) are confident about the strategic value of HR. KPMG’s Future of HR study shows that seventy-five percent of P&U HR executives believe that HR is seen as a core value driver by senior leadership, and although there are challenges to be overcome, they are eager to guide their organizations through changes that include workforce skills, digital transformation and technology investments.

Will awareness result in action?

Workforce transformation is a significant concern: ninety-one percent of P&U executives in HR agree that the workforce will need to be transformed. This includes recognition that change is needed for both the skills possessed by the workforce (79 percent) and how the HR function operates (83 percent). However, only 31 percent of P&U HR executives are very confident that the workforce can be transformed. This is lower than the results for the Energy sector overall (38 percent) and for global HR executives (37 percent).

There is a similar disconnect between awareness and planning regarding digital transformation. Although 75 percent of HR executives in P&U companies agree that HR has undergone or is undergoing a digital transformation, only 41 percent have a digital workplan in place. The top barriers to scaling up the digital transformation are capability and culture. Other barriers include capacity, maturity of relevant technologies and IT organization. One area that may need careful consideration is where the responsibility for digital labor governance lies: 44 percent of P&U HR executives feel that it is led by IT, while only 38 percent believe that it is led by HR. Although leading practices suggest digital labor governance should be led by an integrated, cross-functional unit such as Global Business Services or Shared Services, this response was indicated by only 9 percent of respondents.

Focus on people management

Regarding technology investments over the past two years, 56 percent of P&U HR executives have made investments that improve managers’ ability to perform people management, and 50 percent have made investments that support feedback and performance measurement. This group clearly values people management and performance management more highly than their peers: the top areas for HR in the Energy sector overall were enabling feedback and performance management (50 percent) and enabling managers’ ability to undertake people management (47 percent), while for HR globally, the top areas for technology investments were process efficiencies and effectiveness (41 percent) and process automation and workflow (40 percent).

The strong focus on people management may also account for attitudes about the value of artificial intelligence (AI) and machine learning (ML). While 63 percent of HR executives at P&U companies believe that AI and ML can drive significant value, only 41 percent of HR functions have begun to introduce AI. Given that AI is best utilized for predictive results when a quantitative answer is possible, and that performance and potential are hard to quantify at the best of times, the lack of uptake of AI may not be surprising.

How will AI impact the workforce?

P&U HR executives maintain their focus on people management when considering how AI will impact the workforce. 31 percent believe that HR’s primary role in preparing the workforce for AI is change management, and 28 percent believe that it is training the workforce with new skills required. In response to these changes, leaders will need to rethink how they organize work.

“There will be a period of transition for employees. Investing in the enterprise’s ability to reskill is going to be vital if productivity gains are going to be achieved.”

- Robert Bolton, Global People and Change Centre of Excellence, KPMG in the UK

Questions remain about the P&U industry’s readiness to take on the AI transformation. Although 42 percent of P&U HR executives expect that the HR function will adopt AI and ML in the next year, only 16 percent of respondents indicate that their HR function is prepared for this. AI is already disrupting many industries, and change is on the horizon for P&U. HR executives in this industry will need to take their existing focus on people management and use it to forge a strong understanding of what the workforce of the future will look like. In this way, P&U will weather the changes and come out stronger as a result.

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