Developing effective leadership is the number one priority for most UK organisations this year, moving up from fourth position in 2013 (74% on the Importance Index*). Reskilling the human resource (HR) function (70%) and retention and engagement (70%) are next, with global HR and talent management (68%) and talent analytics (68%) following.

This is according to Deloitte’s UK Human Capital Trends 2014 report, which examines the critical trends shaping the human capital agenda. It also revealed that the increased focus on leadership development could be due to changing leadership needs and the challenge of addressing multiple generations of leaders.

“Developing leaders is one of HR’s most important function,” said David Parry, head of Deloitte UK’s human capital practice. “Sadly, however, while leadership is listed as the top priority for UK organisations (74% on the Importance Index) the readiness to address this issue remains low (only 43% on the Readiness Index). There is a ticking time bomb aspect to this trend, as there is strong evidence to suggest that Millennials are not being sufficiently engaged and developed as future leaders and pathways to leadership for all employees aren’t clearly defined.”

The study also indicated that UK organisations, when compared to the global findings, face larger capability gaps when it comes to the top five talent and leadership priority issues, and their readiness to respond to them. The UK specifically lags behind in the global comparison when it comes to addressing the issues of reskilling the HR function and implementing talent analytics.

“The challenge facing many UK organisations is that they are not prepared to deal with the major trends that are reshaping today’s workforce,” said Parry. “The skills gap we observe is the result of both a lack of investment in developing HR over a number of – fairly lean – years, and what is often a lack of understanding within HR departments of exactly what capabilities are really needed in this changing environment.”

Go from talking to delivering on big data

Even with the importance of HR analytics widely recognised, 86% of companies surveyed by Deloitte globally last year were still saying that there was no analytics capability in their HR function. As comparison with the global results confirms, the report suggests that companies in the UK appear behind the curve when it comes to addressing HR analytics (27% of UK companies are ‘ready’, compared to 32% globally).

Trends in HR investment

Perception of the delivery and success of change management programmes in the UK is lukewarm. Only 3% of UK organisations rated their efforts as “excellent”, with a further 31% saying it was “good”, but the overwhelming response was “adequate” (38%). Over a quarter (27%) said they were either “getting by” or “underperforming”.

However, even in spite of the lukewarm assessment, investment plans for the most part seem set to “remain the same” over the next 12 to 18 months (38%), with marginally less investment growth in the UK than the global and EMEA average.

Parry commented:

“This subdued level of investment will not enable the five key HR trends to be fully and effectively addressed.”

“This year there is a heightened sense of urgency around developing leaders and retaining employees and, without the right investment, UK organisations are going to struggle to remain competitive.”