Companies with foreign owners still a step ahead in terms of human resources

Companies with foreign owners still a step ahead in terms of human resources claims PricewaterhouseCoopers study

31 July 2006 - PricewaterhouseCoopers published the study entitled HR Controlling 2006, in which 84 leading companies in the Czech Republic took part. This comparative study, which provided this year’s HR controlling key indicator values, fully utilises the global methodology developed by the Saratoga Institute, the global leader in measuring human capital.

Martina Wolfová, Manager in the Human Resources Services department, has this to say about the situation in the Czech Republic:

“In comparison with Europe, the Czech Republic still has a long way to go with regard to HR controlling. It is especially purely Czech companies that fail to make use of the possibilities offered by human capital. In a host of such companies, the HR department is still considered to be only a cost item. Studies show, however, that it truly pays to invest in people.“

Foreign companies are able to achieve better business results even at the price of higher costs

• Companies that invest in human capital and, at the same time, try to increase the efficiency and effectiveness of all their processes and activities achieve higher profit despite higher personnel costs.
  
  
• Although companies with foreign capital do incur higher overall costs per employee in comparison with purely Czech companies (almost CZK 3.5 million versus CZK 2.3 million), including bonuses (almost CZK 0.5 million versus CZK 320,000), they are able to generate higher profit before tax and great economic value added per employee.
  
  
• Companies in the Czech Republic invest only a quarter of that normally invested in Europe in the education and development of employees. Companies with foreign capital invest more than purely Czech companies do.

Europe focuses on utilising internal resources

• The results of the study shows that European companies make better use of their internal resources, both when filling vacant positions from internal sources and in education and development. The Czech Republic, however, is still not responding to this trend. While employees in Europe spend 8.1 hours a year on internal training, in the Czech Republic it is only 2.8 hours.

High employee fluctuation decreases company productivity and increases costs

• Fluctuation rates in the Czech Republic are significantly higher than in Europe (15.8% versus 9.1%). Companies should focus on building a company culture that creates an environment that attracts and keeps the required workers. The most stable employees can be found in the chemical industry, where the fluctuation rate is only 6.9 %. This result apparently relates to a greater proportion of employees older than 35, for whom the fluctuation rate is usually lower. Conversely, the automobile industry suffers the highest fluctuation rates (34.2%), most likely due to the abundance of manual workers.
  
  
• Companies still have reserves in recruitment and selection of employees and in the system of evaluating performance.  This fact is reflected in the increased rate of involuntary fluctuation, i.e., the number of employees who are asked by the employer to leave the company.  In the Czech Republic, this fluctuation rate is 5.3%; in Europe, it is 3.3 %.

Other findings

• In the Czech Republic, the absence rate is 4.7% (2.2% in Europe), which represents 10.9 days per year.
  
  
• Of the overall costs of the HR department, outsourcing amounts to 10% (12% in Europe).  Companies, however, most often use outsourcing to recruit and select employees.
  
  
• The recruitment of one employee from external sources costs the company almost CZK 16,000. This amount is, of course, significantly influenced by whether or not the company is looking for a specialist, manager, or manual worker.

END

Notes to the editor:

1. The study entitled HR Controlling 2006: Measuring the Performance of Human Capital, to which 84 participants contributed data, contains these chapters: Structure of Labour Force, Productivity and Value Added, Remuneration and Employee Benefits, Absence and Fluctuation, Employee Recruitment and Selection, Education and Development, and HR Departments.
   
   
2. HR controlling is a topic that is beginning to interest more and more companies, namely their HR specialists, which fact is also confirmed by the 33% growth in the number of participants in the HR Controlling 2006 study from last year. However, interest still prevails mainly among companies with foreign capital (79 % versus 21 % of Czech companies).
   
   
3. This year’s study draws entirely from the international method developed by the Saratoga Institute, which has been the global leader in human capital measuring for over 25 years and a part of PricewaterhouseCoopers since 2003. The mentioned methodology began to be used this year also for Slovakia, Romania and Russia, to name a few.
   
   
4. The HR Controlling study is prepared by the Human Resources Services department of PricewaterhouseCoopers. The services of this department include implementation and optimisation of HR processes, advisory on remuneration and employee benefits, sector surveys, and employee opinion surveys. It also provides support in assignments of employees abroad and employment of foreign workers in the Czech Republic.
   
   
5. Information about the other launched press releases, publications, surveys and expert articles you will find at http://www.pwc.com/cz/eng/about/press-rm/index.html.
   
   
6. PricewaterhouseCoopers (www.pwc.com) provides industry-focused assurance, tax and advisory services to build public trust and enhance value for its clients and their stakeholders. More than 130,000 people in 148 countries work collaboratively using Connected Thinking to develop fresh perspectives and practical advice.
   
   “PricewaterhouseCoopers” refers to the network of member firms of PricewaterhouseCoopers International Limited, each of which is a separate and independent legal entity.