Tuning in to the talent
Attracting and retaining the best can be the difference between success and failure.
Recently three high-powered executives defected from supermarket chain Tesco.
It was the latest and most pronounced instance of the ferocious battle for brainpower sweeping through the boardroom. Across the globe companies of all sizes are having to face the fact that in tough times survival and success depend on attracting, developing and retaining key staff. Companies, like countries, are realising that their future prosperity depends not only on natural resources or even on financial capital, but as Fortune Magazine noted recently, on human capital.
"We've lost some good people," Tesco said when three of the company's senior people left, "but we've also recruited some good people. That's what happens in companies of our size." Where organisations have a strong team at the helm it can limit scope for others to move up and head hunters are quick to prowl for younger talent just below main board level with a good chance of a senior job with another concern.
The battle starts at the top. If a chief executive or managing director fails to achieve targets, they are unlikely to last more than three or four years. Finding and developing management talent is becoming a tougher challenge for businesses of all sizes. Ambitious smaller and medium sized companies recruit senior managers from larger concerns. The challenge of running even a small but growing company, and the prospect of stock options can have more appeal than waiting for promotion in a big firm.
The new paradigm is talent management, which focuses on developing and retaining good people. Companies that are known to practise talent management have a better chance of attracting recruits at all levels. One of the challenges they face, says Professor Cary Cooper of Lancaster University's School of Management, is to "identify and develop the next generation of talent. What do we do to develop them and groom them for senior jobs? What skills will be needed in the next five years?".
Hearts and minds
What is talent management, or talent development? "Organisations often try to set up talent management processes," say the authors of 'The Essential Guide to Managing Talent' but real success comes when you "engage with the hearts and minds of individuals. Individuals joining an organisation need to feel that they are valued and that their contribution will make a difference".
A decade ago, management consultancy Mckinsey published 'The War for Talent', which predicted that the most successful firms would be those that made attracting, developing and retaining their key staff a major strategic priority. You can win the war for talent, the consultants advised, but first you must elevate talent management to a burning corporate priority. To attract and retain the people you need, you must create and perpetually refine an employee value proposition - senior management's answers to why a smart energetic, ambitious individual would want to come and work with you rather than with the team next door.
Obviously the talents that Microsoft or IBM look for in their employees are different from those needed by engineers, consultants, retailers or banks. In 'The Circle of Innovation', Tom Peters examines different approaches to hiring talent. Perhaps the most extraordinary is that of Steve Jobs, CEO of computer manufacturer Apple, who hires people with an "intriguing background and extraordinary tastes", for example artists, poets and historians. Their magic, according to Jobs, is that they have exposed themselves to "the best things that humans have done and then brought those things into their projects". Job's original Macintosh team was a "marvellous mix or artists and engineers. Their aesthetic interests were as strong as their techie interests".
A new study by management consultancy Accenture has found more than two-thirds of executives are deeply worried about the threat of not being able to recruit and retain the best talent. The survey of more than 850 top executives from the US, UK, Italy, France, Germany, Spain, Japan and China found worries about talent management were growing, with 67 per cent this year putting it second only behind competition as the key threat, up from six out of ten last year.
Nearly half of British executives were worried about the effect of low employee morale, with nearly a third pointing to another talent management issue - instability at the top - as a major concern. Four out of ten of the UK sample were also concerned or very concerned about their ability to maintain a corporate culture, with 46 per cent worried about managing remote staff efficiently.
Globally, nearly two-thirds of those polled put competition at the top of their list of five key threats. The health of the global economy and an inability to attract and retain the best talent came joint second, followed by company reputation (62 per cent) and the inability to develop new products and services (just over half).
"In today's multi-polar world - where economic power is distributed among multiple centres of economic and business activity - the war for talent has gone global," says Mark Frost, Accenture's group chief executive management consulting and integrated markets. "Additionally, new technologies are transforming the nature of work, the skills demanded, the manner in which work is sourced globally, and the ways in which people collaborate. Leading organisations must build capabilities to understand and source talent more strategically, based on clear definitions of skills gaps and needs for the future," he adds.
Globalisation was a growing issue for the executives surveyed. More than half said they were concerned or very concerned about the impact of the global economy on business. A fifth said their organisations were not adequately equipped to succeed as global enterprises.
"Rapid global business expansion presents significant management challenges and opportunities," says Frost. "As companies expand and enter these new markets, their success will depend on streamlining their global operations and differentiating their products and services. At the same time, senior management must maintain and strengthen their company's core values and corporate identity, as well as secure a diverse and highly collaborative leadership team with knowledge that spans disparate markets," he adds.
Modern managers have a key role to play in developing team members or risk losing them to more progressive rival firms, according to Andy Hornby, who was headhunted from a senior management position at ASDA supermarkets to the role of retail director at HBOS, and two years ago became chief executive of the bank.
"In all consumer based businesses," he says, "we have to get the basics right: strong brands, aggressive marketing, low cost structures, and a unique culture are all crucial to success - but successful talent management is the hardest attribute for commercial competitors to replicate. It may be time consuming and hard work, but talent management is ultimately essential to create competitive advantage."
Companies that still doubt the value of attracting and developing talent should bear in mind that today and in the foreseeable future we have to compete with around 200,000 new computer science graduates leaving Indian institutes every year and the 820,000 engineers who graduated in China recently.
The authors of 'The Talent Powered Organisation' (published by Kogan Page) go so far as to argue that talent has become the most essential factor "in executing your chosen business strategy. Talent is a fundamentally new factor of production for any business altogether more volatile, dynamic and transformational than those described in conventional economics. A human capital strategy is essential to support your organisation's strategic goals".
The immediate concern, however, relates to finding talented people. Many companies send their most promising executives to business schools and recruit from universities. The latest trend is for companies to set up their own corporate universities to offer tailor made, rather than academic, training. For example, British Telecom University in the USA focuses on retraining to meet changing demands placed on employees as technologies are replaced and practices redefined. Other examples of corporate universities owned and controlled by a single company include Motorola in the USA, Barclays in the UK, Shell University in Europe, AVAYA, a leading Nielsen University, the learning arm of Nielsen Media Research and Unipart University, and the Automotive Components Parts Company, which involves suppliers and customers in its courses.
Of course investment in training and development is of little value unless effectiveness can be measured at regular intervals and there is definite improvement. At the Royal Bank of Scotland (RBS), significant growth since the late 1990s resulting in 135,000 employees and 35 million customers in 30 countries today. The role of its human resources function had to be transformed from transactional administration into a business focused and value driven business partner. "We had to introduce a human capital strategy to help our businesses to make more informed business decisions," says Greig Aitken, head of human capital strategy.
Information is gathered through joiners' and leavers' questionnaires, external benchmarking and 'pulse' surveys, linked to an annual global employee opinion survey sent out to all employees. This enables the group to monitor its eight drivers of employee engagement - employee recognition, performance and development opportunities, relationships, total reward, the work itself, product brands and reputation, leadership, and work-life balance.
"In an organisation of the size and complexity of RBS, the HCM strategy provides our business leaders with an understanding of the link between efficient people management, superior customer service and financial performance," says Aitken.