Talent management’s stumbling blocks

by 14 Nov 2006

UNCOOPERATIVE LINE managers and corporate culture are the two major factors that prevent talent management initiatives from delivering business value, a recent study has found.

While the ability to manage talent effectively is increasingly viewed as a strategic priority for companies, many companies struggle to deliver business value through their talent management practices.

“Senior executives largely blame themselves and their business line managers for failing to give talent management issues sufficient time and attention, and believe that insular, siloed thinking and a lack of collaboration across the organisation remain important handicaps,” said Matt Guthridge, a consultant with McKinsey & Company, which conducted the study.

Half of the study participants, which included 90 CEOs, business unit leaders and HR professionals from 40 multinational companies, expressed concern that their company’s senior leadership don’t align talent management strategies with business strategies.

Line managers were also found to be equally culpable, often failing to address chronic under performance and being insufficiently committed to developing talent.

Further, the study found companies with fewer critical talent management barriers significantly outperformed industry peers. Specifically, companies with less than ten critical barriers delivered up to four and a half times more profit per full-time employee than companies with many barriers.

“The best results are achieved by companies that actively involve their senior leaders in talent development at an early stage: those who rely solely on HR to drive talent strategy are missing the opportunity to align the behaviours and capabilities of their workforce with the economics of their business,” said Guthridge.

“Organisations should also make bold moves to break down internal silos by moving talent around and by creating social networks that encourage relationships to help share knowledge across divisions.”

Including human capital metrics in line managers’ performance scorecards will help strengthen their commitment to talent management, he said. “But without more compelling top team role models, it may prove an uphill struggle.”

The research also indicated that HR professionals need to acquire and employ a different set of capabilities, specifically skills related to mindset and culture change, to deliver business impact through talent management.

“In particular, HR directors must find ways to influence the amount of time the CEO and his or her executive team dedicate to talent management. The commitment of senior time sends a powerful signal to managers at all levels of the organisation about the importance of talent management in the culture of the business,”Guthridge said.

The good news for HR professionals is that the HR function was rarely blamed for the state of their company’s talent management barriers. The challenge, according to Guthridge, is how HR can influence the behaviour of senior leaders and the strategies of the company.

Internationally, there is mounting evidence that the HR function is less involved in business strategy development than it was a decade ago, he said. For instance, the number of HR directors in the US reporting directly to the CEO dropped from 81 per cent to 61 per cent over the last three years.

Several global developments affecting talent management have come into play in the past few years, according to Guthridge, including an accelerated pace of change in the corporate environment, characterised by high technological innovation and an increasing rate of executive turnover, and shifting centres of economic activity making developing countries more attractive places to do business.

Other developments include new sources of young skilled talent from developing economies and the increased proportion of women in the workforce, as well as the changing needs and values of the next generation of talent.

“Each of these developments will radically alter the way that companies need to acquire and manage their talent – the big question is whether the HR function will still be in a position to influence these decisions at a strategic level,” Guthridge said.


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