Sourcing, attracting, recruiting and retaining talented individuals that best meet the needs of your company is imperative and, at the same time, increasingly difficult in today’s highly competitive global market.
McKinsey & Company, a leading management consulting firm, who first predicted ‘the war for talent’ maintains that now, and in the foreseeable future, talent is the prime source of competitive advantage. “The value of hard assets has declined relative to the value of a company’s intangible assets – assets such as proprietary intellectual capital, winning brands and innovative ideas. Underpinning all of these is talent.”
It has been over a decade since the business community was first alerted to the fact that a major battle for talent was underway. Since then, the competition has intensified as a result of workforce demographics, globalisation and differences in the expectations of the latest generation of skilled workers. It would be wrong to assume that companies have been complacent. Organisations have invested time and resources into developing HR systems and processes to improve their ability to acquire and develop talent. However, research reveals a gap between the awareness of the talent issue and an effective response to it. As McKinsey consultant Edward G Michaels III states, “Our research suggests that executive talent has been the most undermanaged corporate asset for the past two decades. Companies that manage their physical and financial assets with rigour and sophistication have not made their people a priority in the same way.”
One of the biggest obstacles to effective talent management is short-termism. Talent management that is seen as a human resource initiative, separate from the business strategy, is doomed. The consequence of a short-term focus is that most talent management programmes have been inadequate and therefore have largely failed to deliver.
Research by Guthridge et al (2006) which included in-depth interviews with fifty CEO’s, business unit leaders and HR professionals from around the world, support this finding with nearly half of the interviewees expressing concern that their senior leaders don’t align talent-management strategies with business strategies.
Guthridge et al’s research also points to ‘all too human’ obstacles that prevent talent management programmes from delivering business value. Fifty-four percent of respondents agreed that senior managers don’t spend enough time on talent management and fifty-two percent believed that line managers demonstrated insufficient commitment to developing talent.
Companies that are gaining advantage in the war for talent have tackled both the strategic and human issues head on. Talent management is an integral part of the long-term business strategy and is jointly driven by senior management, executives and HR. These organisations have also radically adjusted the way that they manage people and have made great efforts to instil a ‘talent mindset’ within all levels of the organisation, that is ‘the deeply held belief that building a strong talent pool is critical to achieving the aspirations of the company.’ McKinsey (2001)
Again, the ‘talent mindset’ is steered by top management however it is crucial that every employee, at every level of the organisation, feels responsible for finding, championing, developing and helping to retain talent within the organisation.
The rewards of such actions are demonstrable. Schlumberger, a leading international oilfield service provided, for example, has a reputation for having some of the most talented employees in the oilfield services industry. They continue their aggressive pursuit and development of staff in good times and bad and have reaped the rewards, with over 80% of their top management starting with the company straight from school. McKinsey’s studies also consistently demonstrate that companies that are addressing the challenges of the talent war deliver far better results for shareholders. ‘Companies scoring in the top quintile of talent-management practices outperform their industry’s mean turnover by 22 percentage points. Talent management will not be the only driver of such a result but is clearly a powerful one.”
In his original work, McKinsey emphasised the recruitment and retention of the high performing 20% or so of managers. He found that these top-performers were twice as likely as average performers to improve productivity and increase sales and profits. McKinsey argued that these ‘A-players’ should receive greater investment and higher compensation than the average.
While it is still true that developing these leaders will pay dividends more recent studies have shown that such a narrow focus results in companies leaving a huge amount of human potential untapped.
Companies must make every effort to find and develop talent at all levels of the organisation including the front line staff, technical specialists and the capable, steady performers that often form the majority of the workforce. All but the underperformers should be included in a successful talent management strategy. It is important that underperformers are dealt with effectively, as they impact negatively on talent.
Read the concluding part to this series of articles next month.