Talent management is an increasingly important issue for many organisations. Dan Cook looks at some key issues for HR professionals and examines how to secure executive support for talent management initiatives
Talent management is an increasingly important issue for many organisations. Dan Cook looks at some key issues for HR professionals and examines how to secure executive support for talent management initiatives
The nature of the global workforce is changing. Our labour force is aging dramatically, and companies are facing a shortage of qualified tradespersons and skilled labourers. This looming demographic shift and talent crisis is rapidly shifting from a conversation piece to an action item in boardrooms today, and CEOs are now turning to HR for answers.
A recent study by Deloitte Research, It’s 2008: do you know where your talent is? challenges executives to look beyond investing in only recruitment and retention activities. The study suggests that successful talent management strategies must invest in activities that develop, deploy and connect with people in meaningful ways. It raises a number of questions CEOs should be asking their HR leaders, such as: which segments of the workforce create the most value in the marketplace; which areas will be most impacted by impending waves of retirement; and how ready and capable is our organisation to address these changes?
This recent shift towards talent management has raised the profile of the workforce as a strategic asset, with the potential to create and sustain a competitive advantage in the marketplace. The diminishing return of other corporate investments (technology, outsourcing, mergers and acquisitions) is also increasing the focus on the workforce as a point of differentiation.
How should HR respond?
To address the CEO’s questions, HR must approach the workforce in the same way that the marketing department manages brand, or the CFO manages financial assets. The strategic questions are about trade-offs, returns, segmentation and differentiation. Consider the contrast between typical ‘people’ investments and ‘product’ investments. Most people strategies offer uniform programs, across the whole organisation regardless of the criticality of the role or potential return.
A product strategy, however, typically focuses on the few critical products and brands that create value, and over-invests in programs to support them (advertising, placement, promotion). Activity around these key products is then heavily scrutinised – how much management attention is it receiving? What is the pricing strategy? What are competitors doing?
Products that are less successful in the marketplace, or create less value for the organisation, receive less investment and attention from the organisation. A one-size-fits-all approach is inadequate for managing a product or market. And it also fails to address the complexities and differences inherent in managing human resources. A typical approach under-invests in the top talent in key roles and over invests in less strategic roles, ultimately undermining talent retention efforts, increasing turnover in key roles and inflating recruitment costs.
Three key steps for HR
HR can address the workforce from a strategic perspective in three ways;
Step 1: segment key roles. The first step in building a talent management agenda is to segment key roles and skills based on the value they bring to the organisation. In many cases, the key roles are not the most senior, nor the highest paying, but ones that are critical to executing the strategy of the organisation.
Deloitte’s enterprise value map (see box) is a practical way to identify activities that drive improvements to shareholder value. The key drivers – revenue growth, operating margin, asset efficiency and expectations – can be linked to activities, projects and ultimately key roles within the organisation. The map provides a way to segment roles to the pockets of value in the organisation, and their relative contribution towards strategy execution.
Identifying critical workforce segments also involves an assessment of the risk, or ‘replaceability’of the talent. A few key roles may provide a disproportionate amount of value, but if they can be easily replaced, or others trained easily into the roles, the talent risk diminishes.
Too often HR and line managers equate replacement costs with recruitment costs. Yet, reframing in terms of workforce segments shifts the discussion from cost to investment: what will this HR investment generate in terms of our ability to execute strategy; how much time and energy will the organisation need to invest to train a newcomer to the role; and should we build or buy talent?
Workforce segmentation allows the HR team to guide priorities and programs based on changes to the firm’s direction or influences from the market. The value map and critical roles should also be revisited annually, or when any significant change to strategic direction occurs.
Step 2: assess the internal and external workforce. Workforce planning involves analysis of the supply and demand of critical skills needed in the future. Job descriptions and skills inventories are largely historical, reflecting organisational strategies and priorities of the past, whereas, workforce planning should consider the workforce scenarios of the future: what are the growth plans; where will growth occur; are we launching new products, entering new markets or consolidating our position; and what are the implications for skills and types of experiences needed?
A simple HR data review can provide a clearer view of how the various workforce segments are tracking. Differences between segments in key variables such as performance rating, training hours, pay, age, tenure and turnover, will provide some insights into how each segment is performing and how the organisation is investing in them.
Metrics for key roles becomes more critical –underperformance in these areas will directly affect the organisation’s ability to execute its strategy. Workforce analysis should also look outside the organisation to understand the supply requirements. Projecting new hires, turnover rates and historical trends will support investment proposals. Incorporating local demographic data, labour market trends, industry forecasts, and educational levels will support hiring programs for critical areas, and development efforts aimed at connecting or developing current skills and talent.
Step 3: build talent programs that develop, deploy and connect people. Talent programs address the ‘so what?’ of workforce segmentation. Equipped with relevant information about the workforce, HR can credibly position programs, initiatives and projects for investment consideration.
The challenge is to resist programs that are largely reactive and only focus on recruitment and retention, and focus instead on the proactive internal programs that develop, deploy and connect talent. Deloitte’s research indicates that successful talent management programs develop people in ways that stretch their capabilities, deploy them on meaningful projects and activities and connect them to like minds to help them achieve their objectives.
Workforce segmentation also drives design changes at the program and process level. For example, on-boarding programs can be customised for critical roles to ensure early connections to key leaders and influencers. The develop, deploy and connect model, offers a comprehensive model to create capabilities, increase commitment, and manage performance for key talent.
A new agenda
The talent crisis gives HR professionals an opportunity to lead discussion and actively manage investment in people. Following the three key steps will begin a shared ownership and accountability for talent management.
For executives, talent management is rapidly becoming a priority issue. HR must lead the way in developing a new language, creating guiding frameworks and investing in programs that address both the talent needs and the strategy of the organisation.
For HR and executives, viewing the workforce as a strategic asset, segmenting key roles and investing in customised talent strategies requires brave leadership across the entire organisation.
Dan Cook is a member of Deloitte’s Human Capital Practice.
