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Thursday, January 10, 2008

The War for Talent - an update (long post)

In 1997 McKinseys undertook a study and released the findings called ‘The War for Talent’ Well, ten years later they have revisited the subject and I thought that it might be useful to summarise some of the findings. As in 1997 most of them are ‘unprepared for the challenge of finding, motivating and retaining capable workers as they were a decade ago.’

The problem hasn’t gone away, in fact it has got worse because of demographics and a question mark of the talent in some of the BRIC countries and other emerging markets. In addition globalisation and the rise of the knowledge worker have forced this issue up the managerial agenda.

A recent survey by McKinseys highlighted that for 50% of global business leaders this was likely to be the single most managerial preoccupation for the remainder of this decade.

Although some progress has been made, the article highlights that for too many organisations, ‘talent management is dismissed ‘as a short term tactical problem rather than an integral part of a long term business strategy’

One of the main reasons is that managers aren’t ‘rewarded’ for their efforts in developing this side of their business (just like knowledge management also) In a number of respects, as I have highlighted earlier, it is that sometimes talent management is seen as cultivating the ‘A’ players and not as DeLong et al in a HBR article in 2003 recommended, also looking to set up your B players.

(Interestingly De Long has a section in this months HBR on Leadership and Strategy covering how mentoring employees can also deliver success in developing talent - intriguingly he highlights that the same amount of time given to a B player as an A player goes just as far.) Once I have read the article, then I shall comment on it in more detail.

Top talent in a firm is not restricted to just you’re A players – you need to manage the vital many who can be alienated by an exclusive focus on high flyers. As McKinsey highlights it picks up on how the knowledge management use of internal networks can improve the effectiveness of top talent by being part of a vibrant internal network covering a range of skills and issues. As we have known since Hawthorne in the 1930’s, performance can suffer when social networks either constrict or are absent.

Interestingly HR professionals at multinational companies highlight that candidates for engineering and general management positions exhibit wide variations in suitability. Poor language skills esp in English, and doubts about the validity of educational qualifications were amongst two of the reasons most widely cited. Another concern is the lack of executives willing and able to work abroad but also talented local people with an international mind set but who can understand local ways and local consumers.

So what are the top 7 obstacles to good talent management by % of respondents?

  • Senior Managers don’t spend enough high quality of time on talent management 59%

  • Organisation is siloed and does not encourage constructive collaboration sharing of resources 48%

  • Line Managers are not sufficiently committed to development of people’s capabilities and careers. 45%
  • Line Managers are unwilling to differentiate their people as top, average and underperformers. 40%

  • CEO’s, senior leaders are not sufficiently involved in shaping talent management strategy. 39%

  • Senior Leaders do not align talent management strategy with business strategy. 37%
  • Line Managers do not address underperformance effectively even when chronic 37%

However I think that McKinsey’s biggest criticism is levelled at executives, the declining impact of HR departments leading to talented managers wanting to avoid working in this area of an enterprise; thus restricting the business knowledge in the HR team and that some HR managers are seen as administrators rather than aids in contemplating and producing proposals on this issue.

The biggest gap of 33% points between HR professional and line managers is ‘HR lacks capabilities to develop talent strategies aligned with business objectives. However the more interesting one to my mind is the 28% gap where HR is not held accountable for the success or failure of talent management initiatives.

Executives as mentioned earlier tend to have a short term view and ‘treat talent as a knee jerk manner hiring additional people ‘ say when a new product takes off.

Also from an accountancy view point investment in talent tends to be an expense rather than being capitalised – and therefore when say there is a downturn in the economy companies cut discretionary expenditure on training their people. As the article cites this can lead to a vicious spiral ‘a lack of talent blocks corporate growth, creating additional performance pressures that divert the attention and thinking of executives towards the short term’

So what does the article suggest as a remedy?

  • Develop a number of value propositions – currently a lot of companies do utilise a VP however it tends to be one only. Basically the writers recommend that as in marketing so the VP for different segments of the work force is different. As I have pointed out in earlier posts, the lifestyle choices of Gen Y is different from those of Generation X as well as different cultures and the article concludes that a one size fits all proposition won't work especially in global companies.

  • It also suggests bolstering HR and move it away from being an administrative backwater just developing and implementing standard processes i.e. recruitment, training and compensation. Some heads of HR are perceived as being distant from the shop floor and not knowing where the talent is.

I’m not sure that this is the best approach as I think that this is likely to be an abdication for senior management of one of their core roles. Larry Bossidy who worked at GE – feels that one of the core responsibilities of any manager is to develop the talent around them.

This needs to be a deep conviction amongst managers to avoid the lure of short term pressures and maybe look to spend 20 to 30% of their time developing the capabilities of their team and developing the leaders of the future. HR can help in developing this but at the end of the day managers need to commit to the future of their companies by developing the future.

However they could be supported by an HR team who were held accountable for helping devise and implement the success of talent management initiatives. Perhaps though companies need to consider whether as they do in Japan that a stint in the HR team should be part of a manager’s rotation so that both parties benefit from the input.

It’s a long post and one of my first of the New Year but I do believe that talent and knowledge management are two of the key managerial issues that will help organisations primarily survive but also as an engine of growth for their businesses.

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