CANADA

Human Resources Management in Canada

Perspectives and Issues
The outlook for the performance of the Canadian economy in 2005 remains optimistic. Despite fluctuations sparked by the appreciation of the Canadian dollar, 2004 ended with a real GDP growth of 2.9%. In 2005, this growth is likely to be maintained since exporters have had the chance to adjust to the higher loonie and consumer spending and investments should continue to advance at enviable pace.

However, even though economists have predicted that the dollar should stabilize, signs are emerging that the US economy is a few quarters away from a slowdown. Since the Canadian economy depends significantly on exports to the US, the ensuing imbalances could weigh on Canadian economic growth in 2006. Nonetheless, the Canadian economy should stay on track in 2005, which should have a positive impact on employment.
Macroeconomic Data

The Canadian economy maintains its pace

In the first quarter of 2005, real GDP grew 2.3%, following a 2.1% increase in the fourth quarter of 2004. Robust growth in consumer spending and business spending on plant and equipment appear to behind this performance.

A similar trend was noted in employment, where the unemployment rate dipped to 6.8% in the first quarter of 2005, very close to the low in 2000 and 1976. Employment grew 0.6%
during the same quarter. Overall, the Canadian economy has created 280,900 new full-time jobs in the last two years.

In short, 2005 started with good employment growth, even though the labour productivity of Canadian organizations appears to continue to drop. Hourly labour productivity growth fell to 1.1% in the first quarter. Labour costs per unit of output rose a little over 1% in the first quarter, i.e. slightly over 1% higher than a year earlier.

In terms of more long-term forecasts, everything indicates the Canadian economy will maintain its cruising speed in 2005 with a growth rate of around 3%. The turbulence caused by the higher Canadian dollar should stabilize and exporters should adjust. Some economists predict the loonie (the Canadian dollar) will tread water until 2006.

However, in 2006, the Canadian economy could be impacted by the expected slowdown in the US, where the economy is threatened by high household debt, a buoyant housing market and a strong dependence on foreign savings. This could eventually have a negative effect on the Canadian economy since exports to the US constitute a large part of Canadian output and bring the growth rate to 2.5% in 2006.

Canadian Major Economic and Financial
Annual percent change unless otherwise indicated

	Actual	Forecast	Forecast
	2004	2005	2006
Read GDP	2.9	2.8	2.9
Employment (*)	1.8	1.3	1.3
Unemployment Rate (%)	7.2	6.6	7.0
Read Personal Disposable Income	2.4	2.1	3.1
Consumer Price Index	1.8	1.9	1.6
Canadian Dollar (in US cents)	82.9	82.0	83.0

Notes:
(*) Variation from December to December, in per cent
(**) Data are for end-of-period values
Real GDP: Real gross domestic product: Forecast by TD Economics on June 2005

Data on the human resources profession
Some specialists foresee a wide-scale labour shortage from coast to coast in 2010. The unemployment rate is expected to fall below the 7% level over the next five years. In addition, labour productivity is expected to grow at a rate of 2% for the mid- and long-terms, which would be insufficient to offset the impact of the anticipated labour shortages. Human resources professionals should therefore deploy substantial efforts to ensure the recruitment and secure the loyalty of a skilled labour force. They should be aware that, in this environment, recruitment will partly depend on workers’ mobility and their ability to acquire new skills.

A recent analysis of the Labour Force Survey by Statistics Canada revealed a sharp decline in the average annual number of hours of work. Between 2000 and 2003, the average annual number of hours worked by Canadians declined by 70 hours. The differential between employment growth (8.1%) and the number of hours worked is continually decreasing.

Contributing factors include the aging of the workforce and the desire to achieve a better balance between work and personal life. Time off for other than statutory holidays has increased, particularly among workers over age 45. Also noted is an increase in time off for vacation and for personal or family responsibilities, as well as more weeks of parental benefits. These trends reflect the greater value assigned to a better balance between work and family life.

It seems that balancing work with family or personal responsibilities will remain an issue for some time to come.

CCHRA UPDATE

In 2005, the CCHRA forged ahead with the implementation of following three major components of its strategic plan:
Establish CCHRA as the voice for HR on national issues
Forge new ties with the federal government to provide input on HR issues
Continue to promote the CHRP designation

Establishing CCHRA as the voice for HR on national issues was initiated through a one-day forum that brought together a select group of senior executives from the public and
private sectors, as well as heads of the HR generalist and specialty associations across Canada. Response was very enthusiastic and the forum achieved its goal of identifying major strategic business challenges and how these challenges will impact the future management of human resources and Canadian business in general.

A Federal Government Affairs Committee with representatives from across the country has been very successful in developing ties with the federal government and several initiatives involving advocacy and information sharing are well under way.

A national marketing committee composed of marketing specialists in member associations was recently organized. Its goal will be to leverage the expertise of the participants and increase the awareness of the CHRP designation following the approval in principle by the Board of a national CHRP marketing plan.


CHRP Designation Update

Work continues on improving systems and programs that support the national standards of assessment. The major foci of the improvement initiatives are outlined below.

National Code of Ethics – Discipline Model:
The enforcement component of the code of ethics, the Discipline Model, has been studied extensively by member associations and ratification of the final document is expected in the fall.

Body of Knowledge – Certification Exams:
There are special challenges posed in preparing bilingual multiple-choice examinations. Several steps have been taken to ensure the appropriate wording of questions in both languages: our Independent Board of Examiners is composed of both Francophone and Anglophone members; some questions are prepared in French first and then translated, others vice versa; there are two levels of translation and review to ensure questions are both technically and colloquially correct.

Numbers of exam writers continue to grow. In the first series of 2005 exams, the number of exam writers was already more than 80% of the final numbers achieved in 2004. (1,150 vs. 1,400). Member associations have sponsored in-person exam preparatory workshops, while CCHRA has partnered with an online learning company to host e-learning preparatory courses. The course for the first exam was very well received and a prep course for the second exam will be launched shortly.

Updating the Body of Knowledge:
The exams are based on RPCs—Required Professional Capabilities. The year 2005 will see an extensive multi-stage review process involving volunteer commitment from across the country. In the first stage, carefully selected groups of HR professionals will be asked to assess assigned RPCs and determine whether they should stay the same, be modified, or be removed, and then provide the rationale for each recommendation. Results will be collated and reviewed by our Independent Board of Examiners who will make final recommendations to the Board. HR professionals will then be surveyed to determine which RPCs are expected of HR professionals at an entry level and which at a more experienced level of work. Entry-level RPCs will then become the basis of the first exam and the more advanced, the basis of the second exam. Exams based on the modified RPCs are expected to be in place by 2007.

Recertification:
A national committee meets every other month via conference call to share recertification procedures and clarify the types of activities that are deemed appropriate for recertification. The national committee develops the guidelines, which the local provincial committees implement. An automated program has been developed for all member associations to use that will allow them to randomly select the 3% of recertification logs that must be audited in detail, where actual invoices demonstrating proof of attendance at professional development activities will be requested. The balance are reviewed on an honor system.


MEXICO

Mexican Economic, Political and Labor Indicators

Macroeconomic Trends
The Mexican economy will grow steadily assuming recovery continues in the United States, which consumes 90% of Mexico exports, with GDP growth of 3.6% expected in 2005. However Mexico is losing ground to China as a major supplier to the world’s biggest economy and competitiveness for the next 2 years will not improve enough to recover the competitiveness lost recently..

Employement will remain steady at the same level of 2004.

The Mexican peso gained ground versus the US dollar between the last week of June and the first week of July, allowing the financial market to move ahead. Average exchange rate forecast $10.50 Peso/Dollar by year end. The inflation rate will slowly decrease and reach expected 3.5% for 2005, lower than that of 2004. The decrease is mainly due to monetary and fiscal policies.

Political Trends
The P.R.I. (The party in the political arena for over 70 years, ousted by actual President Fox) regained ground, winning important State and Municipal elections. The party seems to be leading the preference of the electoral decision for the presidency.

In the following months, the parties will have their internal process to elect candidates for the Presidency for the 2006-2012 period. Some of them are looking for alliances with small parties to start a never before seen difficult race.

Social Trends
Because of the race for the Presidency, the Secretary for Work Issues was moved to cover the Ministry of the Interior Secretary who is now one of the internal candidates from the
PAN party. Thus the process of the Reform of the Labor Law has slowed. Some other Minister changes will take place among President Fox principal councils.

Unemployment
According to non official numbers unemployment continues to grow, contradicting President Fox statement.

Human Resources Issues
Contract negotiations for the first six months have been in a range of 4.53% with a maximum of 7% and a minimum of 2.5%.

Economic Issues and Human Resources in Mexico
Due to the “no easy to get” incomes in Mexican economy, Human Resources areas have been taught to:
a) Reduce or postpone salary and benefit raises
b) Cancel or reduce their budgets for Recruitment and training processes,
c) Reduce Consultants services
d) Maintain or reduce head count (part time jobs, four days work week)
e) Reduce Long Term Training Programs (Masters Degrees),
f) Minimize cultural and fitness activities
g) Renegotiate Subscriptions (Associations, Clubs, Specialize Magazines).

Despite this, even with reduced budgets companies are
a) Bringing into their Work Groups people with more experience and scholarly degrees at reduce costs
b) Using outsource services to streamline their work
c) Get union sensibility to understand the companies situation (technical stops, reduce of strikes, more interest in ideas to reduce costs).

If the same tendency continues, Human Resources executives will need to offer in order to maintain their valuable human capital:
a) Horizontal growth (knowledge) instead of vertical.
b) Share attractive incentives through results.
c) Create another type of not economic

incentives to maintain valuable elements. d) Generate alliances with other businesses for jointly obtain better conditions for training programs e) Be much more creative in the search of alternatives on “doing more with less” f) Understand that being efficient means that Human Resources must make money.

AMEDIRH UPDATE

Membership
Slightly increase of membership on the first six months of the year in spite of the economical situation of Human Resources departments. For the second period of the year, AMEDIRH launches an aggressive plan to increase membership, tailored to cover the specific needs of new members.

Training Programs
Using a different marketing strategy, the 2005 Human Resources Forum and Exposition will be held on September 21& 22 at Centro Banamex in Mexico City. New important sponsors are already confirm (DDI, METLIFE, AVANTEL, SHORE, MANPOWER, AMERICAN EXPRESS, IBM, NEXTEL, OFFICE MAX).
The Best Practices in Human Resources Recognition, will be held for second time with the active participation of 20 well known companies from all kinds and sizes.

The most prestigious group in the National Human Resources Community (Grupo RH+), keeps its professional and social activities, becoming from 72 to 89 members settled in different states of the Mexican Republic.

Certification Program
Because of the slow advance in developing the HR Certification Program, the AMEDIRH Council decided to seek professional advise to finish the first stage of the plan before October 2005.

COMARI UPDATE

o COMARI continues offering e-learning Seminars to its members to stimulate the updating efforts and promote learning about the Human Resources body of knowledge in Mexico.

o COMARI: Together with University of Monterrey and ERIAC (HR Association of Monterrey) will organize The 2nd Organizational Development International Congress (Monterrey N.L. September 2005).

o COMARI will continue to support regional initiatives around critical topics together with his associated Regions around Mexico.

Main topics:

Unemployment, Mexico Economic Recovery
Productiveness and competitiveness Best Practices and Coaching.
COMARI, as a result of the professional collaboration agreements signed with the more prestigious universities of Mexico, elaborated and developed the first Human Resources Competencies Certification Program for HR practitioner in Mexico. It was launched during the first quarter of 2005. In cooperation with UR University it has developed up-to-date 2 out of the 6 modules included in the program.


UNITED STATES OF AMERICA

U.S. Macroeconomic data relating to HR
The Bureau of Labor Statistics of the U.S. Department of Labor reported that unemployment continues to trend down as of June 2005. The current unemployment rate is 5.0% compared to 5.4% last reported to NAHRMA in December 2004. Payroll employment continued to grow notably in the professional and business service industry, as well as in the healthcare industry.

The March 2005 employer costs for employee compensation averaged $25.87 per hour worked, a slight increase from what was reported in September 2004. Wages and salaries, which averaged $18.22, accounted for 70.4% of these costs, while benefits, which averaged $7.65, accounted for the remaining 29.6%. The Employer Costs for Employee Compensation information, which is trending upward, is based on the National Compensation Survey, measures employer costs for wages, salaries, and employee benefits for non-farm private and State and local government workers.

Costs for legally required benefits, including Social Security, Medicare, unemployment insurance, and workers' compensation, averaged $2.10 per hour (8.1% of total compensation), representing the largest non-wage employer cost. Employer costs for life, health, and disability insurance benefits averaged $2.06 (8%); paid leave benefits (vacations, holidays, sick leave, and other leave) averaged $1.72 (6.6%); and retirement and savings benefits averaged $1.11 (4.3%) per hour worked.

Current U.S. Human Resource Trends

SHRM recently released a trends report compiled by the SHRM Special Expertise Panels. There are twelve such panels made up of volunteer subject matter experts; each panel is focused on a key area affecting human resource management. The panel areas include:

1. Employee Health Safety and Security
2. Employee Relations
3. Ethics
4. Global
5. Human Capital Measurements/HR Metrics
6. HR Consulting and Outsourcing
7. Labor Relations
8. Organizational Development
9. Technology and HR Management
10. Total Rewards/Compensation & Benefits
11. Workforce Staffing and Deployment
12. Workplace Diversity.

The Global Panel outlined the following top ten trends affecting HR from a global perspective:

1. Continued expansion of global business and increased interdependence of countries and cultures
2. Offshoring
3. Outsourcing
4. Economic growth of Asia: China and India
5. Corporate social responsibility and corporate governance
6. Terrorism, safety and security
7. Technology advancements
8. Changing corporate culture
9. Demographic shifts, shortage of skilled workers
10. Increase in divestiture; selling off non-core assets as backlash from the 1990s acquisition frenzy.


Analysis of each of the ten global trends was provided in the full report, along with trend analysis submitted by the other panel groups. The full report can be found online here: http://www.shrm.org/trends/sep_published/.

Excerpts from the top two global trends follow:
Continued expansion of global business and increased interdependence of countries and cultures Rapid advances in technology, efforts to lower costs, the quest for talent and other individual trends will contribute to continuing globalization. Particular expansion of business opportunities in Asia, Eastern Europe and Latin America will occur as organizations seek to lower costs and gain operating efficiencies. New global partnerships, affiliations, consolidations and acquisitions of similar or complimentary industries will continue to cause growing economic interdependence among countries. Smaller companies now realize that their growth potential and profits lie outside of their home country and are making the decision to extend operations internationally, spurring growth in small to mid-sized companies doing business internationally. More mergers and acquisitions may occur in foreign locations as smaller companies take on partners in new countries, and governmental agencies in both locations may become better equipped to support these companies. This global interdependence could be disrupted as a result of natural disaster, health epidemics, some new form of terrorism or hostilities between countries or regions of the world. Any of these scenarios could impose protective legislation or bureaucracy that inhibits trade and the free flow of labor.

HR will need to develop a sophisticated knowledge of global business operations and fluency with strategic issues related to international expansion. This includes understanding the international political and economic environment, implications of job creation and transfer, immigration, and familiarity with local regulatory environments. There will be a greater need for HR professionals to apply this understanding while working in partnership with organization leaders, local HR firms, officials and politicians. There will be a larger application of intercultural competencies and language skills as the headquarters staff manages these relationships, and HR has an opportunity to help foster an environment where diversity contributes value across the organization.

Offshoring

To increase top-line growth through increased efficiencies (for example, locating closer to the customer), companies of all sizes continue to send manufacturing, service and technology jobs overseas. Loss of white-collar jobs will continue to occur in industrialized countries. As companies grow more competent in managing their offshore business units, low-cost countries will change—there will be “new” low-cost countries. There is likely to be increased economic development and agreements established between countries to mitigate the loss of jobs and to identify ways for achieving greater employment within a region. Over the longer term, there could be a shortage of skilled labor throughout the world, fueling this trend and increasing immigration. As employment opportunities move from one country to another, there is potential for disrupting employment stability, as well as potential for backlash as jobs are lost in certain industries and countries. There may be continued government intervention in these situations to maximize the acquisition of work for citizens of their respective countries. Over time, the cost of labor overseas is likely to increase gradually. If labor costs offshore rise significantly, job migration ultimately may diminish. Alternatively, governments could pass laws to protect jobs at home, which could contribute to a decline in this trend. Such protectionism may diminish as workers are retrained and the cost of goods declines.

Offshoring from one country is direct foreign investment for another, mostly from the so-called first world countries to third world countries. This investment improves the economy of (mostly third world) countries, thereby reducing the aid and support pressures from the third world on the first world. HR in first world countries has an opportunity to engage fundamentally and continuously with their counterparts and colleagues in the third world to examine ways of making this process as much of a win-win as possible. Additionally, HR should understand the business as well as local regulatory environment in order to evaluate when offshoring is appropriate and when it is not. HR should be prepared to deal with resentment in the workplace over offshoring to ensure continued productivity of all operations. Professionals in this role will need to work with line managers to strengthen intercultural competencies, thereby better supporting offshore business units. To ensure continued quality standards and consistency across operations, HR will need to help devise and implement global standards. Training dollars may shift overseas in an effort to prepare local staff to deliver consistently with organization standards.

SHRM Update

At the Annual Conference and Exposition held this June in San Diego, SHRM unveiled the Human Capital Benchmarking Study. This report tracks key HR metrics such as cost-per-hire, HR expense per full time employee, health care expense per covered employee, annual salary increases, revenue per full time employee, and more. There were 702 respondents from US companies, and the executive summary of the data is available online here :
http://www.shrm.org/research/benchmarks/Benchmarking_ExecSummary.pdf