Having the right people in place for the current and emerging needs of a business is not easy. First, the talent implications of the organisation’s strategy must be understood – and the more thought-provoking and clear the strategy is the easier this will be. Second, there must be effective processes for making sure that enough high-calibre staff are recruited or brought up through the ranks and given appropriate training and experience.
As the previous chapter outlined, many firms are struggling to recruit enough talented people, either because of skills shortages, mismatches between the location of jobs and suitably qualified people, or because of the difficulty of gaining access to hitherto untapped groups of talented workers. It has also become harder for firms to make longer-term predictions about the skills they will need and where these should be deployed across the business.
Staying ahead or playing catch-up?
Research for this book suggests that even firms that have a talent strategy lack confidence in it. Unilever, a multinational consumer-goods company, for one, has doubts about the effectiveness of its talent plans. It developed a new ten-year strategic plan in 2011 in response to the shift of economic power eastwards, the increasing focus on environmental sustainability and other trends. The company aims to double its turnover from €44 billion in 2010 to €80 billion by 2020.
Doug Baillie, president of western Europe and a member of the executive committee, admits that he is daunted by the talent implications of the new strategy, especially the goal of doubling the value of the business, commenting:
This is bold; it is really ambitious. We haven’t managed to grow turnover by 7% a year in our history for ten consecutive years.
The big question about integrating talent into strategy is whether we lay the road ahead of the business or follow behind. We have big goals. How do we go about it? How do I take that ambition and that strategy? How do we put talent right into the middle of that and try to drive it?
As well as needing more skilled leaders and managers, Unilever wants them to come from a wider assortment of nationalities. Almost all the projected growth will come from developing and emerging markets. Some 60% of Unilever’s business today is in these markets, but by 2020 the company estimates that this will be anywhere between 70% and 80%. Baillie explains:
If you think that 60–80% of our business will be in the South and the East of the world, the challenge is where do we find the leaders to lead this business? Our top 100 leaders consist of 22 different nationalities. This sounds not too bad but of those 100 leaders, 60% are British, Dutch or Indian. We have to develop more leaders from other geographies.
HR and business heads now work closely together to formulate a talent plan that will support the new strategy. In simple terms, the talent plan has three components:
Talent gaps across the business. HR works with business heads once a year to identify which leadership, management and functional skills are needed, how these align with roles and responsibilities, and whether the talent processes are producing people who will be able to plug these skill gaps.
Talent supply. Most of the focus is on management trainees and a smaller proportion of people who are recruited mid-career.
Talent development. Unilever prefers to recruit high-potential individuals at the start of their careers and take them through a structured development programme.
Unilever tries to keep talent plans aligned with the business strategy by incorporating the annual talent plans within business units into a three-year strategic review for the whole organisation. In addition, the top management team takes responsibility for the development of the top 100 managers worldwide, including senior vice-presidents, vice-presidents and directors. Baillie comments:
We spend a lot of time on the top 100 leaders. We regularly talk about them at our executive meetings. We spend a whole day every year putting them into a fairly standard nine-box performance grid and ranking them. We talk a lot about getting the right people for the right job and making sure that we have identified where we want them to be in five years’ time. We also ensure these individuals have opportunities to meet the executive team.
Despite joint planning between HR and business heads, a talent plan that directly feeds into strategy planning cycles and the close involvement of the top management team, Baillie still wonders if his talent plan will fuel Unilever’s growth or act as a brake:
The question that keeps me most awake at night is do I have the talent to achieve our goals? Can I get the talent in quickly enough to get ahead of the growth – or am I going to play catch-up over the next couple of years?
It appears that few other companies are taking the matter so seriously, however. A 2010 study of FTSE 100 companies by Heidrick & Struggles, a global executive search firm, found that while some senior managers believed having the right people on board and managing the process of recruiting, developing and getting the best out of them could be a source of competitive advantage, many companies do little more than engage in filling vacancies.
Furthermore, although Baillie is a member of Unilever’s senior management team, has been employed by Unilever for decades and has a previous track record running geographical regions inside the company, the Heidrick & Struggles report found this kind of career profile an exception for those in charge of talent strategies. In the FTSE 100 study, only 17% of those surveyed reported directly to the CEO. Some 90% had spent their whole career in HR. When asked “How well do you think your organisation manages talent?”, they gave an average score of 6 out of 10. Significantly, the average length of time the role of head of talent had existed in the company was only five years and the average time those surveyed had been in the role was three years.
David Smith, managing director of the talent and organisation performance service at Accenture, a multinational management consulting company, confirms the patchy nature of corporate commitment revealed by the survey:
A great many of our clients are putting talent management at the heart of their business strategy and are integrating it into their thinking and decision-making and driving it very strategically. The key point is the integration into business strategy. Talent management is front and centre in their scenario planning and analytics.
At the other end of the spectrum there are some organisations that pay only lip service to talent management. They talk about the importance of it yet when you work with business executives, it is apparent that it is not rated very highly. There is a focus on day-today HR administration but not really talent management.
In the middle there are those who say it is hard to get the right sponsorship from the top and to get senior executives to carve out specific time to deal with recruitment and retention and leadership development issues.
Much of the problem is the difficulty of getting the HR function to operate at a strategic level. McKinsey’s 2012 analysis in “The State of Human Capital” of the ills besetting the HR function showed that many HR staff felt they did not have the necessary status or capability to work effectively with operational heads or the top management team. Responses from the business units of 72 firms confirmed this, giving the lowest ranking to how well the HR function “sourced” and recruited talented staff. Overall, the business units ranked HR functions as more effective at transactional tasks such as payroll administration than at strategic tasks which added value to the business.
Devising a talent strategy
Organisations must devise talent plans that reflect their strategic priorities. The research for this book suggests that the formulation of a plan that has the best chance of being effective involves carrying out strategic and talent reviews and setting up systems for measurement and evaluation, accountability and governance.
Strategic review
The top management team, heads of operations and the talent management team work together to build a shared understanding of the strategic goals for the whole business as well as the priorities for each business unit. This review should
/> incorporate discussions about the cultural values and behaviours that the company desires and how these help employees to achieve or aspire to outstanding performance;
give the talent management function specific information about the yearly business plan and also the strategic direction for the next 3–5 years.
With these priorities clear, senior leaders can identify the capabilities that help achieve the company’s strategic objectives and provide a competitive edge. These capabilities are identified initially at a high level to make sure that they directly underpin the strategic plan and are not just tactical or operational skills, which, although important, do not have as much of an impact on business performance and profits. Operational heads and the talent management team then break down each capability into its constituent parts, such as specific skills, knowledge and expertise. They look at how these skill sets enable each business unit to deliver their part of the strategic plan.
This analysis should reveal the roles where knowledge and expertise are deployed for maximum business value. These are not automatically senior leadership or management roles. They also extend to technical and specialist roles or to previously overlooked roles – for example, positions within the organisation that help make sure that vital expertise from one part of the business flows to another. Part of this review may necessitate a fresh look at knowledge-management processes across the business.
The HR team should also review its own ways of working and thinking to make sure that its processes for recruitment, selection, learning and development, appraisal, reward and recognition, and so on foster the skills, cultural values and behaviours most critical to business performance.
Talent review
The aim of a talent review is to assess how well employees are performing currently in the critical roles, identified by the strategic review, and their potential to move into more demanding roles. Some of the required data will be held centrally by HR, but, almost certainly, the team carrying out the review will need to speak directly to operational and line managers to get feedback about the performance and potential of key individuals.
Managers often struggle to make judgments about potential, and if this is the case, part of the strategic review should include a discussion of it to make sure that the organisation is not working to historical and possibly outdated notions of potential. The top management team is just as likely to be as prone as anyone else to unconscious bias on what potential is and how you spot it. Managers have to leave aside the factors that made them successful in their careers and think objectively about what an outstanding leader, manager or specialist will look like in five years or so. Devising or revising a nine-box grid of performance and potential related to future business plans is helpful in getting to a shared definition (see Figure 1.1).
The review should also look at the talent work that is currently taking place, such as high-potential and leadership development programmes, or diversity initiatives designed to accelerate the development of promising individuals from an underrepresented group of employees. One important question is whether there are any activities that are not badged as talent management but support its agenda, such as staff exchanges, going on between the organisation and a valued supplier or strategic partner.
As part of the review, gap analysis will help identify gaps in skills necessary to carry out the business’s strategy and plans, and whether any critical roles are unfilled. Succession planning is a crucial factor here as it may well be that insufficient numbers of potential successors have been identified for certain critical roles.
A gap analysis is a standard part of workforce planning that looks at current operational needs in the context of short-term plans. A talent-based gap analysis takes a more strategic line in that it:
focuses on hiring and/or training needs as part of a talent strategy;
is integrated with the company’s strategic planning process;
draws on a wide source of data, both internally and externally, such as industry benchmarks;
looks at strategic needs both current and future, and makes judgments about operational needs based on this wider context.
This analysis determines whether the right talented people are in the right place at the right time. Looking at the intersections between these three factors can highlight where talent planning needs to be improved. For example:
Right people, wrong time. For example, people who might not be being used currently because of a downturn in markets but who the organisation does not want to lose as it takes too much time and money to replace them when demand increases. The organisation must therefore determine its strategy for retaining and motivating them.
Wrong people. The people in place are not the right people to perform the work. This suggests a misalignment between HR processes and the business strategy. Learning and development processes may not be keeping pace with changing business needs. There may be some flaws in appraisal and promotion decisions that are leading to a mismatch between roles and people.
Right people, wrong place. For example, people who can do the work but are in the wrong location as a result of a reorganisation and constraints on mobility. The organisation therefore needs to reduce barriers to staff mobility, make more creative use of temporary assignments and virtual working, or relocate work to where it can be done by the most skilful employees.
Once the talent review has identified any shortages of talent, an organisation has three options:
Buy talent through external recruitment.
Build talent through tailored learning and development programmes that involve work experiences that will help pinpoint as well as nurture talent.
Borrow talent by resorting to temporary workers or outsourcing.
These three options are discussed later in this chapter. A fourth option that is rarely pursued by firms but is likely to become more important is broadening talent. This entails building an “ecosystem” of talent by extending talent processes to incorporate previously overlooked groups of individuals within and outside the business; this is the focus of Chapter 6.
Measurement and evaluation, accountability and governance
The talent plan that emerges from the strategic and talent reviews should have the following components:
a clear strategic vision and set of objectives that are explicitly linked to the overall business strategy;
a set of critical success factors and measures for evaluating progress and return on investment;
the scope of talent management in terms of which groups of employees have been targeted and the main talent activities;
detailed costs;
risks and dependencies – the internal and external factors that will influence the success of the talent plan;
the governance structure to ensure that problems are managed and resolved and everyone is held accountable to the plan, including the talent management function and any operational heads or line managers who are involved in implementing the plan;
an internal communications strategy to ensure that everyone understands the aims of the talent plan and why it is important to the business. A compelling business case is especially important if some parts of the business do not see the need for any form of extra support for high-flying employees.
It is only through some system of measurement and evaluation that the effectiveness (and credibility) of the talent management strategy can be gauged. There are a number of measures that can be used, including:
overall costs (development programmes, cost of time spent overall on talent management, internal resources such as a dedicated talent management office);
turnover and retention levels in critical roles;
length of time required to fill vacancies;
the percentages of key roles that are filled internally and externally;
employee engagement data;
average performance ratings for new employees in critical roles;
promotions from within the various talent
pools within a specified timeframe;
savings from recruitment costs;
increases in the number of successors in succession plans for critical roles;
survey results gauging the effectiveness of development programmes. This could be based on how the participants rated the experience as well as workplace feedback to assess whether their performance improved.
Jan Hill, a partner at Orion Partners, a consulting firm, says talent management will gain more credibility if measurements are explicitly linked to business results. She explains:
Most organisations measure the health of their talent processes; for example, looking at the number of high-potential employees … HR then struggles to demonstrate the value of its activities.
While these measures are important, relying on them works only if senior stakeholders make the connection between the talent process and achieving business goals.
Foundations of a talent strategy: buy, borrow, build
As outlined earlier, companies have three options when it comes to filling talent gaps: to buy, borrow or build.
Buying talent
An obvious choice when a company needs particular skills or expertise that it does not have the time or ability to develop in existing staff is to buy in that talent. The task is then to source this expertise, and offer the right set of inducements to recruit and retain individuals with the desired skills.
The downside is that buying talent can be costly as the going rate for sought-after specialists is high and they are often in a strong negotiating position. Swift recruitment processes and flexible remuneration packages help in getting such people on board, but just as important will be that the work is satisfyingly stretching and that it enables someone to remain at – or reach – the forefront of their field. Boredom and repetition are likely to send them into the arms of rival firms.
Managing Talent Page 4