HR Monitor 2025 by McKinsey Part 1 – Asrar Qureshi’s Blog Post #1139

HR Monitor 2025 by McKinsey Part 1 – Asrar Qureshi’s Blog Post #1139

Dear Colleagues! This is Asrar Qureshi’s Blog Post #1139 for Pharma Veterans. Pharma Veterans Blogs are published by Asrar Qureshi on its dedicated site https://pharmaveterans.com. Please email to pharmaveterans2017@gmail.com  for publishing your contributions here.

Credit: Artem Podrez

Credit: cottonbro studio

Credit: Edmond Dantès

Preamble

Excerpt from McKinsey report preface.

[Quote] To help HR leaders compare their functions with others’ and benchmark their progress accordingly, we’ve repeated and expanded our HR Monitor report. Last year’s report covered Germany’s HR landscape. This year, to create a robust set of meaningful indicators across the HR topics most relevant to European organizations, we gathered data from 1,925 companies and insights from more than 4,000 employees across Europe and, for comparison purposes, the United States.

This year’s report highlights developments in both what HR delivers—such as strategic workforce planning, talent acquisition, and employee development—and how it operates, including the use of technologies such as gen AI. It also sheds light on employee trends, especially those related to employee experience and the factors that influence attraction and retention. [Unquote]

Five Trends That HR Leaders Must Recognize

1. Workforce planning is not approached strategically enough

2. Talent acquisition is becoming more complex

3. Employee development continues to be highly fragmented 

4. Employee experience is essential

5. Gen AI and shared-services centers should boost efficiency and effectiveness

HR function can evolve as a strategic partner for the organization if they address these five areas in an integrated fashion.

We shall now take up these five trends one by one in some detail.

1. Strategic Workforce Planning – More Critical Than Ever

Rapid technological advances and shifting business models are driving a sharp increase in demand for new skills, leaving many organizations with widening skills gaps. Research indicates that about a third of employees lack the necessary skills for their current roles, with the greatest shortages seen in countries like Italy. The demand for future-critical abilities—such as problem-solving, data analytics, and AI expertise—is accelerating, while automation and AI are rendering certain skills obsolete.

Types of Workforce Planning

• Operational Workforce Planning: Focuses on short-term staffing needs, typically looking one year ahead.

• Strategic Workforce Planning (SWP): Projects staffing needs over three to five years, aligned with business strategy.

• Skills-based SWP: Emphasizes identifying and developing critical skills rather than just filling roles.

Current Trends and Recommendations

Most organizations still rely on operational planning rather than adopting a more forward-looking, skills-based approach. While 73% of organizations conduct systematic operational planning, only a small fraction (for example, 12% in the US) engage in long-term strategic planning. To address ongoing skills shortages and prepare for future needs, organizations are advised to pilot strategic workforce planning, focusing on critical roles and skills, before scaling these efforts more broadly.

Skills taxonomies are widely used—but could be streamlined

Skills taxonomies offer organizations a systematic framework to identify, evaluate, and strategically cultivate the capabilities necessary to align their workforce with both current and future business goals. Although these frameworks are broadly adopted, they have not yet become standard practice across all organizations. Our survey indicates that while 77 percent of HR professionals state their organization has implemented an enterprise-wide skills taxonomy, only 41 percent report having a taxonomy tailored specifically to their business needs, and 36 percent utilize a standardized version.

Adoption rates vary by region: in our sample, 90 percent of UK organizations and 87 percent of US organizations employ either a customized or standardized skills taxonomy. Conversely, adoption remains considerably lower in France and Germany, where 39 percent and 31 percent of organizations, respectively, have an overarching system.

Skills taxonomies play a critical role throughout the talent management lifecycle—from recruitment to learning and development to performance evaluation. However, excessive documentation of skills across job families can introduce complexity and administrative inefficiency. For instance, 37 percent of French organizations track at least 21 individual skills per employee, potentially creating an administrative burden that undermines the practical effectiveness of skills management. Across the entire survey sample, 23 percent of organizations report having at least 21 skills in their taxonomy, 16 percent have between 11 and 20, and 61 percent maintain one to ten.

2. Talent Acquisition Is Becoming More Complex

Strategic Workforce Planning (SWP) Trends

Organizations are facing ongoing skills shortages and increasing complexity in talent acquisition. As mentined above. Although majority of organizations systematically engage in operational workforce planning, only a small minority are undertaking long-term, strategic planning. This gap contributes to persistent challenges in meeting future skills needs.

Recommendations for Effective SWP

Experts recommend that organizations pilot strategic, skills-based workforce planning, starting with critical roles and skills before expanding more broadly. To succeed, companies should simplify their skills taxonomies, focusing on just 20–30 essential skills across 10–15 job families. Leveraging technology, particularly artificial intelligence (AI), is crucial. AI-driven taxonomies and scenario planning are advised for keeping skills data current and streamlined, enabling organizations to better predict and meet future talent requirements.

Talent Acquisition Challenges

In Europe, 11% of open roles went unfilled last year, highlighting the challenge of sourcing suitable talent. Many HR professionals prioritize external recruitment, with 63% of filled positions coming from outside sources such as direct recruitment, headhunters, and service providers. In Germany, external hiring jumped from 48% to 67% in a year. This reliance on external talent means internal mobility—the movement of current employees into new roles—remains underutilized.

Innovative Approaches to Hiring

To address these issues, some organizations have introduced "talent win rooms." These cross-functional groups bring together stakeholders to make fast, data-driven hiring decisions, track key metrics like time-to-hire and offer acceptance rates, and remove bottlenecks in the hiring process. Gen AI is an essential enabler, automating job postings, resume screening, and interview scheduling. According to research, Gen AI could reduce the costs of creating job descriptions by up to 70%.

Maximizing Internal Mobility

Companies are encouraged to expand internal talent platforms so that open roles are more visible and accessible to current employees. Promoting internal movement can lower onboarding attrition, increase offer acceptance rates, fill positions faster, and reduce costs.

Offer Acceptance and Retention Rates

Despite signs of a cooling job market, only 56% of job offers in 2024 are accepted, with rates varying by region. Furthermore, 18% of new hires leave during probation, and most of these departures are employer-initiated, suggesting that culture fit and performance expectations are playing a bigger role than mere talent scarcity. The average six-month retention rate for new hires in Europe is 46%, with Italy notably low at 40% and France performing better.

Main Drivers of Job Changes

One contributing issue to low hiring success appears to be a widening gap between HR strategies and what candidates are actually seeking. According to HR Monitor findings, the top five reasons employees across Europe decide to change jobs are as follows:

• Compensation and benefits: Thirty-eight percent of surveyed European employees said better pay and benefits were the main reason they switched jobs, with this factor weighing heaviest in Germany (42%) and Spain (41%). In the United Kingdom, only 25% cited this as their primary motivation.

• Training and development opportunities: Opportunities to learn and grow professionally are valued by 28% on average, rising to 33% in Spain and 30% in both Italy and Poland. This reason is less important in the UK (22%) and France (24%).

• Flexibility: Twenty-seven percent of employees consider flexibility—such as adaptable working hours or options to work remotely or in hybrid arrangements—a key reason for changing jobs. Flexibility carries the most weight in Poland (31%) and is less crucial in France (24%).

• Relationship with managers: Twenty-six percent of respondents identified their relationships with management as a leading driver for job change. This was most significant in France (32%) and Germany (30%), while being less of a factor in the UK (22%), Italy, and Poland (both 24%).

• Work–life balance: A quarter of employees (25%) cited work–life balance as a primary factor, especially those in Germany and Italy (26% each). In Spain and France, this was cited by 23% of employees.

Part 1 Concluded.

Disclaimers: Pictures in these blogs are taken from free resources at Pexels, Pixabay, Unsplash, and Google. Credit is given where available. If a copyright claim is lodged, we shall remove the picture with appropriate regrets.

For most blogs, I research from several sources which are open to public. Their links are mentioned under references. There is no intent to infringe upon anyone’s copyrights. If, any claim is lodged, it will be acknowledged and recognized duly.

Reference:

https://www.mckinsey.com/capabilities/people-and-organizational-performance/our-insights/hr-monitor-2025?stcr=DE895C6334BB4DA0828C65372296DAAE&cid=other-eml-alt-mip-mck&hlkid=dbefdb47a62348eeb3ba4d14d5c003ae&hctky=15999472&hdpid=db2b46b1-bdfc-4a5e-818b-6fe85a2cedb5#/