Shrewd employers have kept talent management firmly on their agendathrough the dark days of recession and are in pole position for growthas things pick up. Many, though, will be caught out, suffering shortagesof the talent that they need to compete successfully in an unfamiliareconomic landscape. How many have talent mapped out for the next fiveyears - and is HR the driving force behind it?
"There was a realisation in many forward-looking companies thatstripping out people development and succession planning in a downturnwould be too risky, so there has been a degree of continuing investmentin talent, albeit scaled down," says Cindy Mahoney, chief executive ofCedar Talent Management. "Now, as proper budgets come back, HR has theperfect opportunity to prove its worth by aligning smart talentmanagement with the commercial needs of the business," she says. "Thisis not a time for development for development's sake. Talent programmesmust be aligned to the strategic aspirations of the business, helping itplough forward. This is where HR becomes an enabler of growth."
But there are doubts as to whether HR is successfully taking ownershipof this focus on talent. How many HR departments can claim to be talentchampions? Cedar's research shows that 42% of HR departments surveyedhad a budget for talent management, while only 22% could rate theirability to identify talent as 'good'. Anecdotally, many firms have putthe brakes on graduate recruitment and the development of high-potentialpeople, so will have a lot of work ahead.
Online assessment company Talent Q's annual Assessment and TalentManagement Survey gives insights into talent strategies across both theprivate and public sector. Its 2010/11 report revealed that only 19% of140 HR respondents (interviewed last September/October) considered 'highpotential identification' a priority for 2011 and just 33% thought'employee development' to be a big issue. The fact that 60% say'headcount reduction' is a priority and 76% also say 'organisationalrestructuring' is, confirms that the economic environment is stilldriving a climate of cost reduction, which is clearly affecting theattention given to talent.
"HR practitioners continue to face many talent challenges," says SteveO'Dell, CEO of Talent Q UK. "This survey indicates there is still muchto be achieved."
O'Dell sees clear water between the private and public sectors. "Thebiggest challenge for the public sector is the controlled reduction inheadcount, to ensure that the best talent is retained." In the privatesector, headcount reduction is still common, "but post-restructureconsolidation, identification and nurturance of talent and potential arekey priorities".
Business advisory giant Deloitte has re- focused on growing its talent.In December, it announced a major investment to expand its graduatescheme, hiring 1,100 graduates this year. Plans are also afoot toincrease the number of places on the Deloitte Summer Vacation Scheme -which places final year students as interns in Deloitte offices - to 240by 2012 (up 80%). It is to grow its university scholarship scheme by20%, and, for those now thinking twice about university costs, will hire100 school leavers in 2011 through its 'Bright Start', an A Level entryscheme. "Talent is the lifeblood of a business and it is crucial we doall we can to ensure that talented young people can find their way intoDeloitte, whatever their background," says John Kerr, managing partnerfor talent.
Similarly, insurer Lloyd's Register will be busy in 2011 nurturingleadership talent, extending its development programme to middlemanagement, thereby broadening the talent pool. "We need to have theleadership capacity to succeed as a business, to know our talent andwhere it is," says John O'Connor, head of talent management, Lloyd'sRegister.
Such companies are using talent as a means of future-proofingthemselves, but it is easier said than done. Paul Sparrow, director ofthe Centre for Performance-led HR at Lancaster University ManagementSchool, believes HR departments and talent managers need to be moreclosely involved in organisational design if they are to be champions oftalent. He is particularly concerned that fast- changing sectors arelosing sight of what kind of talent they need and how to make it deliverresults in the business.
"In sectors such as financial services, where there is massive changegoing on, the line managers are less likely to have been given the toolsto develop high-potential people," says Sparrow. "Organisational designarchitects are reshaping roles and processes, changing the structure oforganisations, and the skills for a new trading landscape are evolvingfast. But this raises huge questions about who is talent and who is not.We have to ask: How many talent directors are involved in thisorganisational re-shaping? If they are not, there is a knowledge gap atthe line around talent."
Sparrow feels organisations must make use of qualitative andquantitative information about what gets specific people deemedtalented. "When HR makes judgements about who is in - or out - of thetalent pool, there is a temptation to protect the existing pool, basedon criteria that have been used for years," he says. "But in reality,people need to move in and out of that population as roles and skillsevolve. The top 50 or top 100 grouping needs to be much more fluid. Thetalent pool shouldn't be allowed to stagnate."
One company that has spent the past two years addressing its talentneeds is UK engineering consultancy Atkins. "We have had a number oforganisational design interventions, which have affected the kinds ofpeople and leadership qualities that we need to take," says BrianFitzgerald, HR director, group talent management. The firm has becomemore global, with an acquisition - design firm, PBSJ - and 3,500 newemployees in the US. It has restructured how big projects are managed,so that design of buildings or transport systems can be carried outacross a number of global locations. "This means we have designers andengineers working together in different countries and across time zones- Bangladesh, China, US and the UK," says Fitzgerald. "So talentedmanagers will be those who are excellent communicators, who can bereally flexible and adaptable, able to take on the challenges of workingin this way."
Atkins has realised it needs highly talented people to stay on astechnical gurus or project managers, rather than all hankering for headoffice executive roles. "So, we have done a communication and designpiece around three routes: people will be valued and rewarded, whetherthey excel in business management, or on the technical side, or inproject management," says Fitzgerald. "The CEO and chairman arepassionate about talent, and we feel we have a broad picture of thecapabilities we need for future success. We are trying to engage withindividuals more closely to find out what they can offer and what theywant to achieve, and this is informing how we spend on peopledevelopment, alongside our performance and talent intelligence."
O'Dell at Talent Q thinks there's a dangerous over-emphasis on thedevelopment needs of top-end leadership. "This neglects the needs ofmore junior employees and misses opportunities for potential among thewider employee population," he says. "Many organisations have a limiteddefinition of who or what 'talent' is, the natural focus being on thosein the upper echelons of the business."
Assuming that agreement is reached on what talent looks like,responsibility for developing it should fall into four camps, with ajoined-up strategy across all parties, asserts Cedar's Mahoney. "Thereshould be a board-level champion putting weight behind the talentstrategy; HR should own the processes and ensure diversity within thetalent pool; line managers should be in charge of identifying talent,motivating and managing high-potential people with KPIs encouraging themto develop talent in their team; and individuals should take ownershipof their own development," she says. "Any organisation that doesn't haveall four of these stakeholders working on talent will not be maximisingthe potential of their brightest people."
Mahoney firmly believes talent management is an area where HR can proveits worth as a valuable business partner. "Talent managers need to showthey understand the business and get involved in this by putting theirhead above the parapet and establishing metrics that demonstrate thevalue of what they do." For instance, performance management data andretention figures will show improvements over time in line with a talentprogramme. "One big area is developing people onwards once they havebeen through a graduate programme," says Mahoney. "So often, bigcompanies release graduates into the business with little ongoinginvestment in their potential. These people might feel disillusioned andmove on, leaving the company compelled to use headhunters to bring innew talent. If the employer had focused on developing and retaining theoriginal people, that significant investment in search fees wouldn't benecessary." People developed internally are also more likely to succeedin leadership roles, as they are familiar with an organisation'sprocesses, values and culture.
It was in 1997 that McKinsey established the concept of 'the war fortalent', warning big employers that the knowledge economy and changingglobal demographics would cause tougher competition for high-calibrepeople. It continues to argue that strategic talent management willincreasingly have an impact on business success, saying that topperformers outperform the average by 40% to 50%, and that companies thatexcel in talent management achieve total returns to shareholders thatare 22 percentage points better than the average in their industry.McKinsey's 'war' was for the top-level corporate stars, but there isacceptance among employers and academics today that talent managementshould be more inclusive. Developing everyone, or at least targetedgroups, will help retention where it's needed, reassure those who areworried about job security, and, it's to be hoped, drive engagement andencourage more discretionary effort.
The prizes for getting talent right are numerous, but defining andgrowing talent in an era of economic change and measuring andcommunicating success will be a big challenge for HR this year andbeyond.
The first step for many will be gaining board-level credibility, thenbuilding a fully supported, respected talent strategy. "Evenorganisations with well-established talent practices say it can be astruggle to make talent management a strategic business activity," saysSparrow. "It is useful to benchmark and explore current thinking andguidelines, but at the end of the day, you have to design your ownsystem for talent management."
CASE STUDY - Lloyd's Register seeking 'the right people, right place,right time'
For John O'Connor, head of talent management at Lloyd's Register, theinsurer's future is dependent on guaranteeing it has the right people,at the right place, at the right time.
An extensive development programme is being designed in partnership withCedar Talent Management that will help Lloyd's Register decide on itsdevelopment priorities and spot and develop its future seniorleaders.
Due to a positive response from employees, the programme will beextended this year to include middle managers and 'high potentials'.
Some 180 managers, from senior positions to executive directors, haveparticipated so far, by completing a suite of online assessments,including occupational work preference, interpersonal leadershipbehaviour and emotional intelligence.
Each individual is then given feedback from Cedar, driving theirdevelopment and giving guidance on skills needs. At the same time,Lloyd's Register is receiving robust data that O'Connor says "is helpingus to shape, drive and deliver our key priorities over the next fiveyears".
The data will be used in conjunction with performance reviews andemployee engagement results. Longer term, it will be used in theperformance management nine-box grid.
This will give Lloyd's Register, it hopes, the ability to set stretchtargets and metrics for improvement year-on-year.
CEO + HRD: IT TAKES TWO TO TALENT-TANGO
In its 2010 whitepaper, Gaining Board Interest and Engagement: Achallenge for talent management teams, the Centre for Performance-led HRdeclared that the roles of both CEO and HR director within talentmanagement were absolutely critical.
"Gaining CEO buy-in, helping them understand that they own this agenda -and taking their direction - will make or break the success of talentendeavours," said the paper. "Equally, the HR director and his or herrelationship with their board colleagues significantly impacts on thesuccess of talent management. Ideally, the HRD should be able to playthe role of support and challenge, uphold the principles agreed to andtackle behaviour that contravenes the organisation's values."
Having explored talent management in 30 different organisations, theresearchers found that some organisations benefited from a 'goldentriangle' of aligned interests between CEO, finance director and HRdirector, making the HR function particularly influential. "Where thisalignment does not exist, HR is often perceived as simply the gatekeeperand administrator of the talent process," the paper concluded.
WAYS FOR HR TO GAIN BOARD CREDIBILITY ON HANDLING TALENT
- Understand - and reflect - the business's direction and priorities
- Engage with the CEO early and understand their talent concerns andpriorities
- Identify practices that support the organisation's culture andvalues
- Be clear on the roles and responsibilities within the process - HR,line manager, talent board
- Ensure that alent activities support the business planning cycle
- Help the board to develop a shared understanding of 'talent' and'potential'
- Speak to high potentials in the organisation to understand what theyare looking for
- Make explicit the links to organisation design and other HRprocesses
- Keep process and paperwork to a minimum
- Restrict the numbers of people being discussed to a realistic level -and ideally to a target grouping that the board members will knowpersonally
- Avoid the use of jargon terms and acronyms - speak plain English
- Follow through on actions agreed and ensure that feedback goes to thevarious individuals who have been discussed
- Seek feedback regularly to ensure the meetings are useful andvalued
Source: Centre for Performance-led HR, Lancaster University ManagementSchool - www.lums.lancs.ac.uk/cphr
- Lowell Bryan, partner at McKinsey:
"You can hire all the intrinsically talented people you want. There is amarket for talent ... but the real challenge is making profits off thosetalented people, combining talent and technology and organisationaldesign to generate much higher profits per employee than was possiblebefore."
Source: 'Making Talent a Strategic Priority,' McKinsey Quarterly,January 2008
- Cindy Mahoney, chief executive, Cedar Talent Management:
"Our recent research shows that 78% of organisations say they are notadequately spotting talent, yet the business case for doing so isincredibly strong. It is about retaining your best people, growingleadership talent and nurturing diversity and innovation. Businesssuccess can be delivered by understanding the value that investing intalent can deliver for the organisation and aligning development to theneeds of the organisation."
- Jonathan Ferrar, director of human resources, commercial engagements,Europe, Middle East and Africa, IBM:
"Leaders in IBM can manage small, discrete teams or very largeorganisations of several thousand people. Leaders can manage large callcentres, small software teams or even an R&D department. But whatevertheir role, all leaders have a common responsibility - namely, theresponsibility to identify and nurture talent."
Source: Reflections on Talent Management, CIPD 2006
HR VISION INTERVIEWS
- Paul Sparrow, professor of international resource management atLancaster University and director of the Centre for Performance-led HRat Lancaster University Management School
"We have just carried out research with 30 talent managers from leadingorganisations and they all face one common problem: engagement with topmanagement. The challenge is: how do you convey your messages as atalent manager to the board in ways and with language that isacceptable?
"When CEOs see HR understanding new, mission-critical roles comingthrough - what the new equation looks like and what HR's contribution tothat should be - then they are onside and will provide whatever isneeded to fulfil that talent remit."
- Bob Marsden, director of development and people, Balfour BeattyUtility Solutions
"Talent is about producing results for the business. My first target isto get the CEO onboard. Once you've cracked that, things get easier.
"Most organisations are in a 'dash for cash' at the moment and what theyare trying to avoid is cash leaving the organisation. That means youhave to get existing people to perform, to make the business efficient.But then there isn't the growth, with sexy projects to stretch people'sabilities, so it is more challenging. It makes you look harder atindividuals, working with them to identify where they want to go, andline it up with what the organisation is trying to achieve."