Divide andAre you winning the 'war for talent'? Matthew GuthriJge and Emily Lawson, fromthe consultancy that invented the term, explain how companies can gainground by recognising the differing needs of all segments of the workforce
18 SEPTEMBER 2008 www.peoplemanagement.co.uk/features
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Talent
C fjmpanics regularlypromote the idea thatemployees are theirbiggest source ofcompetitive advantage.
Yet 10 years after McKinsey dre\\'attention in its .stiidv, ThelMir forlalent,to the looming shortage of executives,the challenge of Unding, motivating andretaining talented .staff remaln.s acute.
If anything, it has intensified,bolstered by trends in demography,globalisation and the rise of theknowledge worker. A recent survev bvTbe McKinsey Qiiartcrly revealed thatfinding talented people was the singlebiggest managerial preoccupation oíthe next Hve vears. And three in fourrespondents said the cost andavailability of talent continued to beeither a "significant" or "verysignificant" constraint on growth.
It would be a mistake to blame thislack of" |)rogress on corpcjrate apathy.Ortjanisations bave invested beavily inHR system.s and processes and talenthas definitely moved up the boardroomagenda. But very few organisationsare getting it right. Our research atmany global corporations hashighlighted the obstacles executivesface.These include short termistmindsets, minimal collaboration andtalent sharing between businessunits, and a lack ofclarity about HR'srole in managing talent.
Another issue is a lack of coherentstrategy. One recent study, the CranciSurvey on ¡niernaiional Strategic HR
Management (www.cranct.org),revealed that 39 per cent of UKcompanies don't have a written HRstrateijy.This severely Hmits thefunction's ability to shape thedevelopment and execution oftalent strategies.
It is higb time companies adopted amore strategic approach to talentmanagement - by wliich we mean tbeactivities of senior leaders and HRtbat generate business value andcompetitive advantage throughemployees. Executives must realisethat there is more to talent thansimply the top performers and thatv\bat attracts people to come to work(and stay there) \aries according tothe needs of different employeesegments. HR needs to play a moreactive role in strategy developmentand execution, particularly whenmanaging talent globally.
Three external factors -demoi^raphic change, pressure toglobalise and the rise oí knowledgeworkers - present both challengesand opportunities. All of these shouldprompt organisations to take talentmore seriou.sly.
While the developed world isexperiencing ialling birth rates andincreased longevity, the emergingmarket populations are producing asurplus oí youn« lalent.Thesemarkets are generating more thantwice as manv university' graduates asthe West. Yet capitalising on this new-pool of talent is far irom
straightforward.Tbe challenges forHR professionals inmarkets include finding candidateswitli the necessarv skills in English,and managing cultural diflerencessuch as lack of team experience or areluctance to take on leadership roles.
Similarly, "GenerationY" workers- those born alter 1979 - with theirfocus on flexibility, professionalfreedom, hiijher rewards and a betterwork-life balance, present newchallenges. As one US HR directorexplained : "These kids want adifîerent deal.They have seen theirparents work all their lives for thesame company and then get fired.They are not interested in killingthemselves for work."
For many companies, anincreasingly globalised economyprovides opportunities. Yet tosucceed in countries such as Brazil,Russia, India and China, they needexecutives who are able and willingto work outside their htmie countriesas well as talented local staff with aninternational mindset.
Lastly, there are tbe specific needsand demands oí knowledge workers -those wbo.se job invoU'es the refining,manipulating and trading oíinformation.This is the fastest growingpot)l of talent in mo.st organisations.One estimate in the US cla.ssified 48million of the country's 137 millionemployees as knowledge workers.
These staff create more profit thanother employees - up to three times
survivwww.peoplemanagement.co.uk/features 18 SEPTEMBER 2008
more, according to our research — andcan operate with minimal oversight.The performanic of knowleclge-intcn.sivf conipanifs, however, variessigniHcantly, suggesting that somebusinesses strut^gie to extract valuefrom tiiis new tvpe oi woikiorce.
Meanwhile, company practices alsohave an impact on talentmanagement. Shareholflers antiinvestment analysts share someresponsibility for driving the currentfocus on short term pcrlormancc.Managers, however, too readily treattalent in a reactive way - hiring moresales and marketing people only whena new product takes oH', lor example.
Such short-termism divertsmanagement attention fromlonger-term issues, such as talentsourcing and career development.Investments in talent intangibles areexpensed, not capitalised, provokingmanagers to cut discretionaryspending on people development todeliver stronger earnings. This cancreate a vicious circle lack (ïf talentblocks corporate growth, creatingadditional performance pressurestliat further divert executiveattention towards the short term,
When companies do make the timeto prioriti.se talent, they irequenllyfall into another trap: focusinir too
narrowly on HR systems andprocesses. This diverts attention fromwhere most of the obstacles can befound, w hich is in people's heads.
There are also challengeso
associated with the internalreputatit)n of the I IK function.Separate research by McKinsey andthe Saratoga In.stitutc f"ound that lessthan two-thirds of IIR directorsreported directly to the chiefexecutive (2003 - 2006). What'smore, recent salary surveys in theUK show that senior HR managersearn up to 50 per cent less than theirpeer.s in other functions, including ITand marketing.
Our research also highlights issuesrelating to how HR is regarded.Many of the professionals weinterviewed perceived a lack ofbusiness knowledge among HRexecutives. They believed thefunction focused on administrativeissues rather than long-termstrategies such as talent management.As one HR director explained:"Senior executives don't sec us ashavintj the business knowledge toprovide any valuable insights. Theydon't see HR as a profession."
The robust talent .svstems andprocesses for recruiting, de\elopingand retaining employees emphasised
A gap in perœption about talent management:what line managers think of HR professionals
Human resourcesprofessionals
Line manageis % of Interviewees In each category who agree
0 25 50 75
HR lacks capabilities to develop talent strategiesaligned with business objectives
HR is administrative department, not strategicbusiness partner
HR relies too much on best practices - some af whichare tnapproprldte - when designing systems
HR Is not held accountable for success or failure oftalent management Initiatives
HR lacks authority/respect to influence the wayit people are managedzÎ5 Talent management is viewed as responsibility af HR
^ HR doesn't provide enough supportg to line managers
Gap,percentagepoints
33
28
9
22
15
in TheWar[orTalem still lie at theheart of any successful talentstrategy. But much bas happenedsince then to redefine the challenges.So we've extended our thinking infour areas where talent strategies canhave more impact.
1. Target talent at all levelsTheWar for Talent emphasisedrecruitment and retention of"A-players" tbe top performing 20per cent of managers. Our researchshowed how these high performerswere twice as likely to improveoperational productivity and raisesales and profits than averageperformers. We argued that theydeserved up to 40 per cent morecompensation than the average.
The impact ol top talent oncompany performance has notdiminished, but what is now clear -not least in the context of theknowledge worker trend - is thatorganisations also need to invest in(tther employees. .Several authorsha\e rightly stressed the valuablecontribution of "B-players" - thecapable, steady performers that makeup the majority of any workforce.
Ihe insurer A\ iva, with its strategyto manage "the vital many", is onecompany that makes its commitmentexplicit. Research into social networkshas also highlighted the importanceof inclusiveness.Top talent is moreeffective when it operates withinvibrant internal networks, whileperformance suffers when suchnetworks are absent or w itlidrawn.
Companies must address the needs ofemployees at all levels. Front-line staH",technical specialists, suppliei's andcontractors are often as critical toi.T>rporate sucxess as high-flyers. .A moreinclusi\e approach invokes tJiinking ofthe workforcx' as a collection of talentsegments all engaged in creating value.
2. Develop multiple valuepropositionsTen years ago we stressed tbeimjïortance of defining andI'ommunicating a compelling
18 SEPTEMBER 2008 www, peoplema n ag em en t, co.uk/features
Talent
employee value proposition (EVP) -why a smart, energetic ami ambitiousperson might want to work for onetumpany rather than another.Yetwhile the toncept is now widelyemployed, many organisationspromote only a single EVP.
Successiul businesses adapt theirt'mpk)yer brand to target and attractemployee segments with a variety ofvalues, ambitions and expectations.Sometimes the segmentation must befiner still - GenerationY's lifestylegoals, for instance, may be consistentacross Europe and North Americabut are not necessarily the same inA.sia or South America.
Tesco divides its potential front-linerec ruits into th<we joininy the workforcestraight from school, stucJents looking towork part-time and graduates, tailoringits ofier to each group. Asda is the UK'sbiggest employer ol people over 50,equating them with better customerservice, improved team morale andl<mer turnover. In China, multinationalHrms such as GE, Citigroup and
HSBC - fiercelycompeting against
local bu.sinesses lor talent -adapt their EVRs to highlight
opportunities for autonomy, careerdevelopment, housing and learning.
Tailoring ilevelopment paths in thiswav is not only a persuasiverecruiting technique but alsomotivates many people to stay.
In addition to its traditional linemanagement roles, oil services groupSchlumberger offers technical
o
recruits promoti(ín, statusretiognition and compensationcomparable with senior managers. Italso gives them opp<irtunities toshape research and productdevelopment, subject to review andapproval by a hierarchy of technicalpeers rather than line managers.
Schlumbergcr is also a leadingrecruiter of female engineers for tlieexploration and production industry,having introduced flexible workpractices to accommodate mobilityand other work-life needs.
3. Rotate talent across unitsA recent McKinsey survey ofmanagers at some of the world'sbest-known multinationals suggeststhat the movement of employees
'Generation Y want a differentdeal. They have seen their
parents work all their lives forthe same company and then getfired- They are not Interested in
killing themselves for work'between countries is still surprisinglylimited. Many people tempted torelocate fear that doing so willdamage their career prospects. Yetorganisations with the strongestglobal talent management practicestend to outperform tho.se withweaker practices.
Multinationals should focus onrotating selected talent globally,across divisions and locations. Thiswill support development andpromote greater cultural awarenessand diversity. Some companies nowmake overseas assignments aprerequisite for certain promotions.
Global Hrms should considerdevoting more resources andsenior manai^ement time toliberating talent "trapped" innational silos and morewholeheartedly supporting globalmobility prosjrammos. Instilling acommon set ol talent evaluationprocesses throughout the world willunderpin this cftort and boost theconfidence of line managers.
HR can play a crucial role in thedevelopment and execution of global \talent management. Our researchshows that companies with an HRdirector reporting to the chiefexecutive have stronger talentpractices than those companieswhere the HR director reports toanother executive team member.
4. Bolster HRHR specialists need to assert theirinfluence over business strategy,rhev .should pro\ ide credible andproactive counsel and support forindividual business unit heads andtheir line managers.Yet thecredibility and influence of HR
www.peoplemanagement.co.uk/features 18 SEPTEMBER 2008
Talent
executives has declined over thepast decade. Critical functionalcapabilities - such as workforceplanning - have been neglected,pcrhap.s partly down to a .shifttowards quarterly reporting as wellas .short term prcs.surcs.
There may also lie a perceptiongap. According to our research,while 58 per tent of line managersbflifvc their HR function lack.s thecapability to develop talentstrategies in line with tlicircompany's business objectives, only25 per cent ot the HR professionalshold the same view.
And HR leaders should be carefulnot to neglect the front line. "HRserves only the ttip layers," observedone global HR director interviewedin our survey. "My head of HR inNorth America only work.s with thechief executive - nobody knows herand she doesn't know where thetalent lies in the business."
In the same spirit, HR departmentsneed to accjuirt- the sort of skillsdcmoastrated by HR manager.̂ at
Southwe.st Airlines. They treatfront-line employees as internalcustomers and research their needsand preferences as enertjeticallv asthe company does those of itsexternal customers.
Companies will also benefitfrom greater cross-fertilisationbetween HR and other businessfunctions. At Procter & Gamble,for example, a.spiring HR managersare expected to take a job in a plantor alongside a key account executiveto gain knowledge and credibilitywith business unit managers. AtCoca-Cola Enterprises, top-linemanagers are rotated into HRpositions for two to three years tohelp bulk! skills in this area andimprove tbe overall credibility oftbe function within the businessunits tbev serve.
McKinsey research higbligbtsthe importance ot instilling adeep commitment to talentthroughout tbe organisation. It'su|) to tbe HR function to make itscontribution by nurturing talent
at all levels, developing multipleemployee value propositions tf)attract and retain talent, movingtalent between locations andboosting its i>M n functional roleand capabilities. I£JB
About the authorsMatthew Gutbridge is associate principal
and Emily Lawson is a partner based inMcKinsey & Co's London office.
• [email protected] reading• The War for Talent by Ed Micbaels,Helen HandfieldOones and Beth Axelrod,Harvard Business Scbool Press.• See also cover feature, page 22f K w j V T . < ! < - > . . . . - 1,-
Annual conferenceGuthridge and Lawson are speaking at the
CIPD annual conference and exhibition in
Harrogate this week, www.cipd.co.uk/ace
NCIPD ANNUAL5 conferenceeo& exhibition
SirRi
The same can be said of opportunities in HR, Some of the best and mostchallenging roles are interim. And, in our constanfly evolving business climate, flexibility isto everyone's advantage. So, why not get in touch. You definitely don't want to be left standing.
MDHLONDON AND SOUTH 0 2 0 7 5 5 1 4 6 6 8 [email protected] - MIDLANOS AND NORTH Q 1 6 t SOS 8 2 4 4 lhlTE)t [email protected] UH *
LONDON H-iri
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