Talent management involves a lot of elements which include performance evaluations to identify potential; psychological testing and assessment centres to determine capability gaps; training and development programmes, relocations, project work and job experience to accelerate development. According to Lauren Dixon, Bravetta Hassell, Sarah Fister Gale and Frank Kalman on talent economy and management, savvy executives understand that talent leads in this new economy, and it is Talent Economy’s mission to be their guide and help them show others the way forward.
The chief executive officers (CEOs) today face the huge task of creating an environment in which people want to, and can, perform at the highest level of their potential. Indeed, chief executive officers that have not found out whether or not their organisations are attracting, developing and retaining talented employees for business continuity as well as seamlesssuccession are just doing stakeholders great business harm. This is because talented and motivated employees are a great source of enduring competitive advantage in the marketplace.
In the words of John Swainson, the CEO of CA Inc., “Companies that have strong management development and succession processes in place tend to have smoother transitions. When executives move on to other roles or leave the business altogether, that ultimately has a cost. Companies with sound talent management don’t wind up paying headhunters. But business continuity is the most important reason for strong talent management. The fact that people are prepared to move into positions rapidly and can assume those positions is an important thing.”
Research shows that talent management was traditionally the major responsibilityof the Human ResourceDepartment and the role of the CEO and COO was intermittent and distant. In the current digital age, the management of a corporate organisation’s pool of talent is now too important to be left to the Human Resource (HR) Department alone. Therefore, the chief executive officers (CEOs) are increasingly responsible for, and involved in, talent management while the heads of HR Departments play an important, supporting role in executing talent strategy.
Findings show that two factors largely account for increased CEO involvement in the past few years: the shift in focus towards intangible assets such as talent, and increased board scrutiny in relation to both ethics and performance. Now it is a strategic necessity for these executives not only to keep abreast of the latest developments in the company’s talent programme but also to plot strategy, own associated initiatives and regularly participate in events related to talent management. According to Maarten Hulshoff, the CEO of Rodamco Europe, “The competitive advantage of any company comes from excellent execution. The execution of strategy is driven by the behaviour of the leaders.”
The CEOs should endeavour to invest in talent for business continuity and seamless succession.While to some, the costs of properly investing in talent may seem unduly high, the benefits executives will receive for managing talent properly are unlimited and often overlooked.Rather than avoid developing talented employees and millennials because of the assumption that they will leave, executives should train and invest in them, said Joan Kuhl, founder of Why Millennials Matter, a New York -based research and consulting agency. Tapping millennials’ entrepreneurial spirit, passionate push for change and ability to think beyond traditional corporate norms should be atop executives’ talent strategies. “People should always be the priority,” Kuhl said. “People create ideas. People create culture.”
According to Lauren Dixon, BravettaHassell, Sarah Fister Gale and Frank Kalman in their article on talent economy and management, successfully attracting, retaining and developing the next-generation workforce will require executives to rethink their own development. The leadership skills that many executives acquired during their career likely won’t suffice to manage the needs of the future workforce. First and foremost should be an emphasis on collaboration. Open office environments, adopted by some firms, are a start, but to remain competitive in the war for talent, executives need to intentionally open the lines of communication and make their cultures more collaborative.
Emotional intelligence, or EQ, is another skill executives should develop. As workforces grow more collaborative, formerly command-and-control executives will need to soften up, learn to listen and engage in a more coach-based leadership style.
These skills will help executives manage a workforce that is increasingly dynamic. Full-time employees are not the only source of talent. The rise of the gig economy and continued value of freelancers has given executives new chess pieces to move when plotting their companies’ futures. Roughly 53 million Americans are independent workers, according to Freelancers Union, a nonprofit advocacy organization. That number is expected to rise. The challenge for business executives will be maintaining a dual view that assesses which skills now and in the future are best met by freelancers and which will benefit more from retaining employees full time.
Executives also need to manage the freelancer-employee dynamic so that there remains a cohesive organizational culture around productivity and innovation. Not being able to integrate these worker groups toward a shared mission will put firms at a disadvantage, according to Jeffrey Wald, co-founder and president of Work Market Inc., a New York City-based software company that helps organizations engage on-demand workers.
This means both should be included in formal employee development, another corporate component constantly being reinvented. Companies like General Motors Co. are encouraging informal development conversations between leaders and employees so that employees take more ownership in their development. Employees at the company are told that leaders are there to “champion” their learning, but it is on the employee to make the most of the resources provided to them.
Outside of traditional hiring, executives need to consider more creative, unconventional approaches to ushering talent into the organisation. Some strategies may simply be new takes on old models. For instance, rather than hiring people for indefinite terms out of college or university, some companies have embraced the apprenticeship model, a practice that dates back to the Middle Ages.
Aon PLC is one such firm. It uses two-year apprenticeships to fill roles in account management, client support, financial analysis and technology. After five successful years in the U.K., Aon is now rolling out a similar programme in the United States, according to Margaret Heneghan, global head of leadership and talent development at the firm.
If people are the core of the talent economy, how executives organise and manage them to contribute is the next significant lever propelling companies forward.The CEOs should also endeavour to dismantle barriers of office space arrangement and demarcation. Much of this is driven again by the influence of millennials, a younger, more agile demographic that entered the corporate world with drastically different notions about how work is done and how groups of people should be organised.
Many firms now feature entirely open office plans, where the CEO is just as likely to sit among interns as the rest of the C-suite.These environments help enliven a sense of shared community and collaboration; they also break down formerly bureaucratic structures that slowed decision-making. In 2012, global engineering technology firm Siemens AG began rolling out its “New Way of Working” campaign in offices across Europe and North America.
“Executives need to recognize that they are not the demographic that represents their workforce,” said Dominique Jones, chief people officer for Halogen Software in Ontario, Canada. “It means letting go of how we think about managers and career development, and finding the courage to listen to what the organisation wants.”
Other significant organisational strategies in today’s economy require that executives consider eliminating long-held human resources practices around paid time off and work-life balance. Just as the evolving nature of the physical office has changed how talent performs, executives need to rethink their expectations around workers’ ability to get away from work.
Consider the amount of time employees are allotted for vacations. While many firms still operate on a formal accrual system or paid time off allocation, some progressive companies — like Netflix Inc. and Virgin Group — now offer unlimited vacation time for their employees. So long as they don’t leave their teams hanging and communicate with their managers, employees there can take time off whenever they want as often as they need. Moreover, because U.S. workers are historically bad at taking time off, roughly 3 percent of firms even provide employees with a “vacation stipend,” according to 2016 survey data from the Society for Human Resource Management.
This will again require a change in executives’ mindsets and some initial discomfort. But for firms keen on remaining competitive in the talent economy, their leaders need to acknowledge the value of time away from work and its positive influence on performance, said Maura Thomas, founder of Regain Your Time, a consultancy based in Austin, Texas.
A re-imagined vacation policy alone won’t suffice. Executives, many of whom are challenged with burnout themselves, need to build their cultures around work-life balance, from revised policies around maternity and paternity leave; to building team and reporting structures compatible with anywhere, anytime work; to flexibility with regard to when employees respond to company-related communication.
Recent Study by the Economist Intelligence Unit of “The Economist”
In a recent study conducted by the Economist Intelligence Unit of “The Economist” magazine in collaboration with the Development Dimensions International (DDI), all the 20 corporate leaders interviewed for the study said that talent management is their responsibility.
Of the 18 chief executive officers (CEOs) and two chief operating officers (COOs) interviewed, seven said they spend 30-50% of their working time on talent management, and another seven executives estimate their time commitment to be about 20%, a substantial percentage, given a top executive’s crowded agenda. The remaining executives said it is a priority and either spend 5-15% of their time on talent management or could not provide a time estimate. According to Tom Wilson, the COO of Allstate Corp.: “The most important thing I have to worry about is people.”
Swainson reinforced this assertion thus: “I would say on a long-term basis, as the CEO, I have primary responsibility for the issue of organisational health and ensuring that the management team remains vital, relevant and refreshed, and that we create a process to nurture and facilitate our own succession. That is one of the two or three most important things that a CEO must do.”
Almost all the companies whose senior executives were interviewed generate at least $1billion in annual revenue and possess strong brand recognition. They cover a broad cross-section of industries, includingretail, manufacturing, financial services, energy, technology, consumer goods, real estate, consulting, pharmaceuticals and medical devices.
The 20 corporate leaders interviewed are located in ten major industrial countries, including the US, the UK, Japan, Australia and India. The firms include CA (formerly Computer Associates) of the US, which was founded just 30 years ago and the Co-operative Group, a UK-based conglomerate with roots in the mid-19th century. One company, Johnson & Johnson China, is a subsidiary of the New Jersey-based pharmaceuticals giant.
According to the findings of the Economist Intelligence Unit of “The Economist”, even though CEOs spend a large amount of their time—often more than 20%—on talent management, this effort is not typically guided by a formal talent strategy explicitly linked to the company’s overarching goals or embedded in the business planning process. Rather, CEOs engage in selected supporting activities where they believe they will add value. Talent management has become more important because of a growing recognition that it helps to drive corporate performance, even though the exact impact is hard to quantify.
Good talent management is not undertaken in a piecemeal fashion but consists of comprehensive development programmes. These include the identification of leadership potential, performance evaluations, targeted development activities and job experience. Many of the interviewed CEOs mentor executives in their organisations—an additional and important part of the programme. They regard the development of the next generation of leaders as one of the best ways of leaving a strong legacy.
Research shows that talented executives plan and execute strategies better and create a positive work environment. Therefore, good talent management leads to greater productivity and even faster revenue growth. “We’ve been able to show that there’s a definite correlation between high leadership scores on our leadership scoring process and success,” explained Ken Glass, the CEO of First Horizon National Corporation. “We have a whole lot of confidence that that’s just not soft and fuzzy stuff. It’s performance related.”
The interviewed executives said developing their most senior executives is especially important because if these leaders have the right skills and experience, their direct reports and middle managers below them will thrive. “Our ultimate financial results are a reflection of the success or lack thereof of our development programme,” said William Hawkins, the COO of Medtronic.
“At the end of the day, what differentiates us from some of our competitors is the quality and capabilities of our people.” Medtronic’s sales increased from $6.4billion to $10billion between 2002 and 2005while net income almost doubled from $984 million to $1.8billion. The executives interviewed said good talent management increases job satisfaction and improves retention rates. Retention is particularly challenging in Asia where, according to regional CEOs, competition for strong managers is fierce.
It is expensive to recruit and train new executives and estimates of the cost vary widely. Wayne Cascio, the U.S. Bank Term Professor of Management at the University of Colorado, Denver, said the cost of hiring and training an executive is about twice the recruit’s annual pay. Some executive recruiting firms believe the cost is closer to 150%. Others estimate that it is even higher. These estimates include the cost of lost productivity while positions go unstaffed and new executives learn their jobs—which may take up to a year.
All the 20 corporate leaders interviewed by Economist Intelligence Unit of “The Economist” said it is becoming more difficult to keep people. Employees who feel that their career path is blocked are more likely to leave and these employees have an increasing number of companies from which to choose. “People need to be lifelong learners,” said Scott Erker, the senior vicepresident of selection solutions for DDI. “Companies have to provide them with opportunities to learn and develop and to further their careers without organisation-hopping. It is important for creating a positive work environment and full engagement.”
Despite the variety of backgrounds, all the interviewees share a similar understanding of the importance of talent management in identifying and grooming employees at all levels of the company so that they can rise faster up the corporate ladder.Few of the executives appear to have a strategic approach to talent management of the same rigour as other business planning processes. One who does is Martin Beaumont, the CEO of the Co-operative Group, who sets clear targets. The Co-op wants to generate about 70% of its promotions from internal candidates; at present, the company uses headhuntersto discover about 80% of its executives.
All the firms evaluate executives annually or more frequently using scores and documenting the outcomes. CEOs hold follow-up meetings to discuss results and determine what programmes and job experience their subordinates need to improve on their weaknesses. HR advises on what programming is most appropriate from a range of options, including off-site retreats, classroom and Internet learning, executive coaching and formal mentoring. Most of the executives mentor their direct reports and others on a more informal basis. Good talent management promotes people based not only on their performance but also on the manner in which they have made their mark.
A number of executives help their subordinates to address pressing issues and provide career advice. “With mentoring, I’m looking at the people in terms of discussing their job content, discussing what to do next month and evaluating what they have done,” said Hulshoff. In other cases, mentoring overarches immediate job challenges and helps mentees navigate the organisation. Ms Lau held two one-on-one conversations late last year to persuade a talented executive to remain with Johnson & Johnson.
The executive had received an offer at a higher salary from another firm before Ms Lau persuaded her that job satisfaction and opportunities for promotion were more important. The executive is now in line to fill one of Ms Lau’s seven senior jobs. But much of the involvement of top executives in talent management occurs on an ad hoc basis.
All of the interviewees said they are available to their direct reports and executives well below that rank for casual coaching conversations about business issues and career decisions. In most of the companies in the study, directors expected the CEO or COO to take charge of talent management and to update them regularly on individual executives. MrZollars has allocated as much as 40% of board meetings to talent management, and some of the executives wish they could spend more time on talent management.
“[Talent management] is about making sure that you have the right people in the right places for both themselves and the organisation, and needing to make sure that you as the chief executive are taking responsibility for the development of your leadership talent,” said Michael Wilkins, the CEO of Promina of Australia, an insurance company. “It’s one of the best legacies that you can leave any organisation.”
CEOs must regularly evaluate their direct reports as a basis for top-level talent decisions, often with written performance evaluations. Their companies must conduct at least one lengthy formal assessment of top executives each year.
CEOs must mentor subordinates one or more levels down the organisation. A number of executives help their subordinates to address pressing issues and provide career advice. “With mentoring, I’m looking at the people in terms of discussing their job content, discussing what to do next month and evaluating what they have done,” noted Hulshoff.
The Importance of Succession
All of the executives interviewed said that succession planning is a crucial part of talent management and that transparency in this regard motivates employees to perform at a high level, thereby fostering stability. “You need to be able to justify and communicate to people why they are on a list or not on a list. If you articulate why you have the views that you do, you lose fewer people,’’ respondedMr Care.
According to most of the interviewees, firms that allow workers to languish without hope of advancement could lose them. About four in five of the Co-operative Group’s senior executives were recruited from other organisations. Mr Beaumont found that ratio unacceptable when he became CEO in 2002 and has overhauled the company’s talent management approach. Bob Rogers, the president of DDI, says companies are focusing more on succession partly because of pressure frominvestors.
Strong talent management leads to greater workforce productivity and other benefits. Indeed, companies are increasingly realising that they cannot be successful unless they have a good strategy for developing talent.Given its importance, the strategy needs to be driven from the top. CEOs and COOs should oversee talent management strategy rather than delegating it to HR departments. HR, in turn, should be made responsible for supporting the strategy and executing it.
A varied business background is the best grounding for the CEO and COO roles. As today’s corporate leaders face such diverse challenges and opportunities, firms are looking for people with wide experience in terms of function, role, and, increasingly, geography.
Indeed, to win in today’s talent-driven economy, executives need to take the reins of their talent strategies and avoid delegating them to overly tactical human resources managers. Embracing unconventional strategies like apprenticeships; learning to manage and integrate the growing freelance workforce; adopting new leadership skills, etc., will make it easy for the CEO to achieve business continuity and seamless succession.