Rethinking Talent Management by Corporate Research Forum

research C O R P O R AT E R E S E A R C H F O R U M

June 2016

Rethinking Talent Management

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“Effective talent management starts with business strategy and future priorities, not extrapolating forward from the status quo. It is built on well-executed, adaptable plans and processes that articulate and implement the steps needed to proceed to the desired future. It is underpinned by an organisation culture that supports development, and line leaders who visibly champion and follow through on developing others.” Jay Conger and Gillian Pillans, Report Authors

Sponsored by

All rights reserved. Rethinking Talent Management No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means without prior permission in writing of the publisher. Corporate Research Forum One Heddon Street Mayfair London W1B 4BD United Kingdom ISBN: 978-0-9934094-3-1

research C O R P O R AT E R E S E A R C H F O R U M

June 2016

Rethinking Talent Management

Jay Conger and Gillian Pillans

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CORPORATE RESEARCH FORUM

CONTENTS

Contents

Foreword

Acknowledgements

Introduction

Executive Summary

1 Talent management in context

2 Talent management today â&#x20AC;&#x201C; issues and opportunities

3 Rethinking talent management in a dynamic world

4 CRF Integrated Talent Management Model

5 Conclusions and recommendations

6 References and reading list

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FOREWORD

Foreword

Shannon Lawrence Consulting Manager, Europe Development Dimensions UK Ltd. (DDI)

Many business leaders I speak to feel a sense of alarm as they realise that the needs of the business are beyond the capabilities of the people inside it to deliver, and worse, that the talent investments they have made to build a stronger bench strength have not delivered the outputs they were expecting. As CRF’s report points out, only 20% were satisfied at the outcomes of their organisation’s talent management efforts. Many of the leaders who “own” the talent objectives in their organisations are at a loss as to how to respond. Talent management refers to organisational systems aimed at securing the talent needed to achieve business objectives. Essentially talent management is the sum of the organisation’s collective effort to ensure it acquires, develops and retains the talent it needs to be successful. The first step therefore must be to be have a clear understanding of whether your people, leaders especially, are ready to deliver business organisational objectives. Are leaders available and ready to deliver objectives or do gaps create business risk? Are people becoming more prepared for a world of constant change, or less? Is the “talent management” energy and capability inside the organisation increasing or decreasing? This report highlights that little new thinking has emerged in talent management in recent years and the tools and processes in use today don’t look very different from those in place a few decades ago. However the world is a very different place and as the world moves faster, it seems the efforts to help prepare people are themselves falling behind. As you will read in the report, it is not talent management tools and technology that is lacking but rather something less tangible but ultimately more powerful – energy. To accelerate the growth of organisational capability, we have to overcome inertia and generate the kind of energy necessary to break through barriers. Leaders grow leaders, not systems and processes, and if acceleration efforts are falling short, the fix will not come with more tools, technology or consultants and will instead come from boldness in the usage and application of the approaches and strategies outlined in this report. However ominous our people shortages may be, it is clear that we will not overcome them by attempting to cram more into the hyper-fast lives and overloaded minds of our employees. As I read this report, I am pleased to see that organisations are not trying to oversimplify this multifaceted discipline and I am optimistic that the energy to make real progress does exist. The title “Rethinking Talent Management” is indeed what we need to do. Shannon Lawrence Consulting Manager, Europe Development Dimensions UK Ltd. (DDI)

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ACKNOWLEDGEMENTS

Acknowledgements The authors would like to thank all the research participants, who generously gave their time and shared their insights. Interviewees are listed in the Appendix. We are grateful to all CRF members who took time to complete the online survey. Thanks also to Jane Simms for editing the report. Jay Conger

Gillian Pillans

CRF would like to thank DDI and KPMG for sponsoring this research and writing the foreword and introduction, respectively.

About the authors Jay Conger Jay Conger is one of the world’s experts on leadership development and talent management. He is the Henry Kravis Chaired Professor of Leadership Studies t Claremont McKenna College in California. As the faculty chair, Jay directs one of the nation’s leading academic centres for leadership development and research. He is also a senior research scientist at the Center for Effective Organizations (CEO) at the University of Southern California. Gillian Pillans Gillian Pillans has worked as a senior HR practitioner and OD specialist for several organisations including Swiss Re, Vodafone and BAA. Prior to her HR career, she was a management consultant with Deloitte Consulting and is also a qualified solicitor. Gillian has written various CRF reports on subjects including HR strategy, organisation design and development, leadership development, talent management, coaching and diversity.

About CRF Founded in 1994, Corporate Research Forum (CRF) is a membership organisation whose international focus is on research, discussion and the practical application of contemporary topics arising from people management, learning and organisation development. CRF has become a highly influential focal point and network for over 170 members representing a cross-section of private and public sector organisations. • Its annual programme of research, events and publications fully reflects members’ interests, in addition to the annual international conference. Side meetings and interest groups are also initiated to meet challenges that members might have. • Contributors are acknowledged experts in their field with a worldwide reputation as leaders and innovators in management thinking and practice. • Sharing and collaboration among members is a key feature of CRF’s activities. We actively encourage networking at all events, and especially through member lunches and HR director dinners. • CRF is led and managed by highly-regarded former HR professionals who have a passion for delivering excellence in the leadership and development of organisations and people. CRF’s goal is to be valued for excellence, rigour, relationship building and providing an independent view which, together, lead to measurable improvement in members’ people and organisation performance. For more details on how your organisation can benefit from membership to CRF please contact Richard Hargreaves, Commercial Director, on +44 (0) 20 7470 7104 or at richard@crforum.co.uk. Alternatively, please visit our website at www.crforum.co.uk.

About CEO The Center for Effective Organizations (CEO), at the University of Southern California’s Marshall School of Business, brings together researchers and business executives to jointly explore critical organisation issues that involve the design and management of complex organisations. The Center’s mission is to improve how organisations are managed. In order to carry out their mission, the Center focuses on research that leads to actionable thought leadership. • The Center’s research scientists and faculty are widely recognised as thought leaders in the fields of organisation effectiveness and design, change management, human resources management, strategy, sustainability, leadership, and other management areas. • Research results are published in leading academic journals, books, and practitioner publications. • The Center’s network of corporate sponsors is comprised of leading corporations that represent a cross-section of organisations with a global presence.

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INTRODUCTION

Introduction

Tim Payne UK Head of People & Change KPMG

Identifying, nurturing, developing and retaining those people who are going to be most important in driving your organisation forward – that seems to me to be the goal of talent management, and it seems a pretty important one. Why leave this to chance if there is a more scientific, effective way? My reading of the CRF survey results is that talent management is ripe for the treatment that has been meted out to performance management over the last couple of years, where many organisations have dropped the forced distribution and ratings approach. In other words, talent management is on the cusp of reinvention. It seems to need it. The results suggest only a fifth of organisations are satisfied with their process, and only 17% feel it is effective. Diversity and inclusion continues to be an afterthought rather than a central pillar, with only 10% of respondents seeing it as a top 3 priority. Surely there is more to talent management than the 9 box rating and a couple of names under the succession plan for some critical roles – names of people who probably haven’t even been asked if they are interested in the role. What I was expecting to see in the survey results, but didn’t, was a much stronger focus on two things. First, the use of analytics to put some evidence behind the identification of talent. Second, a much greater focus on ownership of top talent and indeed the talent management process by the executive team or senior management cadre. For me, this is where we need to begin with the reinvention of talent management for the 21st Century. Tim Payne UK Head of People & Change KPMG

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EXECUTIVE SUMMARY

Executive Summary “Someone’s sitting in the shade today because someone planted a tree a long time ago.” Warren Buffett

1. How to identify, attract, develop and engage the critical talent needed to execute strategy is a key issue for organisations today. Talent management regularly appears at the top of the priority list for CEOs. Studies show organisations that are more sophisticated at talent management also achieve better business results. However, levels of satisfaction with the results of talent management among both executives and the HR function are low. A survey of 231 respondents from CRF member organisations conducted as part of this research found that only 17% rated their organisation as effective at predicting and planning for future talent needs, and only 20% were satisfied at the outcomes of their organisation’s talent management efforts. 2. Talent management is defined as a set of integrated processes designed to attract, develop, assess, deploy and retain the people needed to achieve strategic objectives and meet future business needs. 3. Talent management has to take account of a number of social factors that are affecting the shape and attitudes of the workforce today. • Responsibility for managing careers continues to move away from employers toward individuals. • Career paths are less clear cut than in the past, and delayering has reduced the opportunities for upward progression. • On the one hand employers no longer routinely offer lifetime employment, and on the other hand employee loyalty and engagement is low and passive job-seeking is high. • Talented individuals are less attracted by careers in large organisations and increasingly seek careers as freelancers or entrepreneurs. We find, however, that little new thinking has emerged in talent management in recent years. Tools and processes in use today don’t look very different from those in place a few decades ago. The field and its practices appear to have evolved only incrementally. 8

4. Global competition, scarce skills and demographic shifts pose challenges for employers. • Local competition in emerging markets is making it ever harder for global players to find and keep the talent needed to grow. • Competition for talent remains high, with critical shortages in key areas such as skilled trades and engineering. • The rise of professional networking sites such as LinkedIn have lubricated the movement of talent in dramatic ways over the last decade. • Some countries face constraints on future growth due to labour shortages. • The profile of the workforce is changing, with older workers choosing to remain in employment post-retirement age and Millennials already making up around half of the workforce. 5. We identify the following key priorities for reshaping talent management. • Clear alignment with business strategy and the corporate culture, to enable the organisation to execute plans effectively through people. • Robust but adaptable workforce plans, so HR is clear about the actions required, but also has flexibility to respond to changing business conditions. • Building an organisation culture that values and prioritises people development. • Simple, effective processes that can be executed by business leaders, who must ultimately take responsibility for developing talent. 6. A key element of connecting business strategy with talent management activities is to identify and focus on critical roles, which are those that have the biggest impact on the organisation’s ability to build and sustain competitive advantage. This is where organisations need to focus their investment in developing talent, and they should also ensure the best talent is deployed to these positions.

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EXECUTIVE SUMMARY

“The right talent is the fundamental building block when it comes to creating an organisation capable of innovating and changing and using this as a source of competitive advantage.” Ed Lawler, Distinguished Professor of Business, University of Southern California

7. Strategic workforce planning enables organisations to translate strategy into concrete action plans for talent. This allows them to make informed choices about where to invest in people, where to build talent capabilities, and how best to identify the risks of being unable to execute strategy owing to workforce constraints. 8. Talent reviews, which bring together line leaders and HR to identify talent and agree actions for talent development, form the core of the talent processes for most organisations with defined talent processes. Organisations tend to use either one or combination of the two following techniques to develop and deploy talent to critical roles. • Succession planning is used by 75% of respondents to our survey. Although some experts think it is an outdated practice because of the pace of change in business today, it is still used widely. • Talent pools are a more fluid way of identifying and progressing key talent. 9. One of the common criticisms of talent management is that it focuses too much on the process of identifying talent, and not enough on making sure those identified as talent have opportunities to learn and progress. The best way to develop future leaders is by giving them job experiences that allow them to build and practise the skills required of leadership, along with coaching and feedback. Therefore, effective talent management programmes need to have at their heart processes for assigning people to strategically-relevant job experiences that provide the opportunity to develop key skills. 10. Technology is playing an ever-greater role in talent management. Many organisations now have sophisticated systems that make it easier to match talented individuals to positions within the organisation, and to undertake talent analytics. Technology also affords greater transparency, allowing people to share their experience and aspirations with their employer. This is placing a burden on organisations to open up the ‘black box’ of talent processes, share the organisation’s plans for individuals with them, and give people more insight into what leaders think of their performance and career prospects.

11. CRF has developed an integrated, strategy-driven Integrated Talent Management Model. The Model is underpinned by some principles we think are critical for well-designed talent management activities. • Led by business strategy and corporate culture. • Systems-driven, so actions are implemented consistently across different people and organisation processes. • Owned by the line, supported by HR. • Built on effective execution of processes that are kept as simple and targeted as possible. 12. We conclude by identifying some key success factors for effective talent management. • Talent planning needs to begin with imagining the future state of the organisation based on the business strategy, and working back from there to establish the steps to build the capabilities required. • It’s easy to get hung up on identifying ‘who’ is talent, but it’s more important to focus time and investment on developing and preparing talented people for critical roles. Talent management needs to prioritise outcomes, not processes. • Line leaders need to be committed to following through on actions around developing people, and HR needs to support them to make these actions happen. • Visible commitment to action from top leadership is one of the key differentiators of organisations that are excellent developers of talent. • Strategic talent management requires the HR function itself to develop a higher level of skills, including the ability to think strategically, deep business insight, expertise in the science that underpins talent management, and the courage to speak up and influence business strategy.

TALENT MANAGEMENT IN CONTEXT

Topics covered

Introduction

1.1

What’s the issue?

1.2

What’s the business case for investing in talent?

1.3

A brief history of talent management

1.4

Debunking the Millennials myth

1.5

What does talent management need to deliver today…and tomorrow?

In this chapter we introduce the concepts of ‘talent’ and ‘talent management’ and explore the key priorities for talent management today. We consider the impact of societal and demographic changes on how organisations manage talent.

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TALENT MANAGEMENT IN CONTEXT

“Talent is now a sexy word. We all want to have it, own it and get more of it, even if we are not necessarily able to identify or describe it, either in ourselves or others.” Professor Tomas ChamorroPremuzic, CEO, Hogan Assessments

1.1

Research method

What’s the issue? Developing talent has consistently ranked among CEOs’ greatest concerns over the past few years. However, both our research and many other surveys have found that organisations’ ability to develop the talent they need to grow in new markets, ensure smooth leadership succession, and even to survive in a fast-changing business context, is disappointing. • PwC’s 2014 Global CEO Survey found that 63% of respondents were concerned about the future availability of key skills at all levels. DDI’s 2014/2015 Global Leadership Forecast found that only 46% of critical positions could be immediately filled by internal appointments. • A 2010 study found that 74% of organisations and 83% of large organisations reported that effective talent management practices were a critical strategic goal (Scullion et al). • However, a 2013 global survey of over 1,000 board members found that fewer than 20% of respondents believed their organisations were doing a good job in attracting, hiring, developing, rewarding, retaining and firing talent, or in aligning talent management practices with business strategy (Groysberg et al, 2013). • Only 17% of respondents to our CRF member survey rated their organisation as effective at predicting and planning for future talent needs (see figure 1). • Similarly, companies report very low levels of satisfaction with the outcomes of their talent management efforts. Only one-fifth (20%) of respondents to our survey said they were satisfied, and only 1% were highly satisfied (see figure 2). • Research by Conger and Lawler (2015) found boards devote little time to talent and human capital issues, and the bulk of the time boards do spend on talent is narrowly focused on CEO succession and compensation. Boards rarely consider the overall talent management and workforce issues when they make important strategic decisions. This narrow focus often means talent issues such as recruitment, employer branding, turnover, or the depth of the leadership pipeline, may not come to the board’s attention until they have become serious problems.

This report is based on the following sources of data. • A focus group with 42 senior HR and talent practitioners to identify current issues in talent management and establish areas of focus for the research. • Interviews with 65 thought leaders, academics and practitioners in the talent management field. Research participants are listed in the Appendix. • An online CRF member survey, completed by 231 respondents in April-May 2016. Respondents were predominantly senior HR practitioners from a range of different industries. The majority worked for organisations with 10,000 employees or more. Four-fifths (82%) were UK based, the remainder predominantly from Europe and North America. • An extensive literature review of key academic and practitioner studies, books and articles. The Reading List in the Appendix contains relevant references.

• Some 85% of respondents to Mercer’s 2016 Global Talent Trends Study said their talent management programme and policies needed an overhaul. Figure 1: How effective is your organisation at predicting and planning for future talent needs? (1 = highly ineffective, 5 = highly effective) 1 9%

2 30%

Highly ineffective

3 44%

4 16%

5 1%

Highly effective

Source: CRF Member Survey

Figure 2: How satisfied are you with the outcomes of your organisation’s efforts in talent management? (1 = very dissatisfied, 5 = very satisfied).) 1 10%

2 24%

Very dissatisfied

3 46%

4 19%

5 1%

Very satisfied

Source: CRF Member Survey

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TALENT MANAGEMENT IN CONTEXT

“I don’t think it’s either talent management for everyone or for the few. You have to plan for and develop the whole workforce AND you have to focus on developing certain critical segments.” Dr Wendy Hirsh, Employment Researcher and Consultant

Defining talent

The challenging global business environment in which organisations operate these days is putting particular pressure on talent.

Cappelli and Keller (2014) define ‘talent’ as “those individuals who currently, or have the potential to, contribute differentially to firm performance by occupying strategic jobs.” The idea of connecting talent and business strategy through identifying ‘strategic’ or ‘critical’ jobs is a theme we return to throughout this research.

• Growth in global markets and the emergence of large local competitors in countries such as China, India and Brazil means demand for talent often outstrips organisations’ capacity to develop or recruit it.

We find there are as many definitions of talent as there are talent development programmes. The Economist (2006) notes: “Companies do not even know how to define talent, let alone how to manage it.” One-third (31%) of respondents to the CRF member survey said their organisation does not have a clear view of talent. A critical issue for organisations, therefore, is to be clear about ‘talent for what?’. From our interviews we see that organisations fall into two distinct camps when it comes to defining talent. 1. Everyone is talent, so we have to make sure all employees have the opportunity to build the knowledge and skills they need to do their best. 2. Talent is a small subset of people who generate disproportionate value for the organisation. In most cases the focus is on leadership talent, but sometimes includes key technical or commercial talent pools. The most advanced organisations tend to combine these two approaches: they focus on selecting the best, ensure there are development opportunities for all, and offer differentiated development for strategic roles. Silzer and Dowell (2010) sum it up s follows: “Our experience is that effective talent organisations balance these two approaches, providing basic learning and development opportunities for most employees, while having specialised and extensive developments for individuals in strategically critical areas or with the greatest potential to contribute at higher levels in the organisation.”

• Skills are scarce, particularly in areas – such as cyber security – that are critical to support the digital economy. A Manpower study found that 38% of global employers reported talent shortages in 2015 – a seven-year high. The hardest jobs to fill were skilled-trade workers, sales representatives and engineers. • Nine out of ten employers surveyed by Mercer’s 2016 Global Talent Trends Study anticipate that competition for talent in 2016 will grow even more intense. Key pinch points include leadership and people development skills, specialised technical skills such as STEM (Science, Technology, Engineering and Maths), IT, and analytics. Talent shortages are particularly pronounced in Asia and the United States, less so in European companies. • Significant labour shortages mean some countries may be unable to sustain their historical growth rates unless they find ways to improve productivity or increase the workforce through immigration. Boston Consulting Group (BCG) estimates that Germany will experience a shortfall of 2.4 million workers by 2020, and 10 million by 2030. China is forecast to have a surplus of up to 75.3 million workers by 2020, but a shortfall of 24.5 million by 2030. BCG estimates that the overall cost of labour shortfalls to the global economy will amount to some $10 trillion of lost GDP by 2030. • In response to competitive pressures, organisations have become flatter, more decentralised, and more focused on short-term business targets. As a result there are fewer of the middle management positions that were the traditional breeding grounds for senior executives, and fewer middle managers who can devote their time to growing others. What’s more, talent activities are fragmented across business units, and the time available for executives to focus on talent is constrained. In addition, significant changes in the workforce are compounding the challenge for organisations seeking to attract, retain and develop the best talent. • The trend towards encouraging staff to take charge of their own careers often forces employees to look outside for career advancement, and has eroded loyalty. For example, Towers Watson’s 2012 Global Workforce Study found that although around half of employees wanted to stay with their current employer, most felt they would have to move to a different organisation to advance their career. • This has led to the rise of the passive job seeker. LinkedIn estimates that around 60% of its 400 million users are passively looking for job opportunities (ie, they are open to hearing about job opportunities without actively applying for specific positions), and a further 25% are active job seekers. • It’s hard for employers to control internal talent moves. Misalignment between the interests of employer and employee makes talent planning difficult. Employers may have little information about individuals’ goals and ambitions, and employees lack insight into available career paths and development opportunities.

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TALENT MANAGEMENT IN CONTEXT

“Ultimately, talent management is about resource allocation. It’s about segmentation, and making informed choices.” Tim Walker-Jones, Group Reward and Capability Director, Imperial Tobacco

• Employees’ expectations of their work, career and relationship with their employer have changed. Some people are unwilling to make the lifestyle sacrifices required to reach senior positions – or are choosing alternative career paths. It is becoming harder for employers to persuade people to take on important – but unattractive – assignments, particularly when the needs of spouses or families are factored in. Younger workers in particular expect their employer to be transparent with them about whether they are considered as ‘talent’. This is pushing employers to be more open about the processes for talent and to provide feedback to individuals about how they are rated and what plans the organisation has for them. • An ageing workforce. Baby Boomers are retiring in ever greater numbers, but the pool of younger workers available to replace them is declining in many countries. (See the column on page 17 for further information on demographic trends.) • Self-employment is becoming an increasingly attractive career choice for many – hence the rise of the ‘freelance economy’. It tends to be more highly-educated people who choose self-employment, particularly in developed countries. In the UK, in spite of the economic recovery, there are 700,000 more self-employed people today than there were in 2008. Furthermore, despite the high failure rate of start-ups, entrepreneurship is particularly attractive to the highly-educated Millennials now entering the workforce. • A disengaged workforce. Global engagement surveys consistently show low scores. For example, a recent Gallup survey covering 142 countries found that only 13% of employees are properly engaged, and 24% are actively disengaged. This matters because studies have shown a connection between low engagement and a lack of opportunities for development and advancement. A vicious circle Peter Cappelli, Professor of Management at Wharton, describes a cycle where: “The lack of internal development of talent has increased the demand for outside hiring, which, in turn, causes retention problems elsewhere, undercuts the ability to develop talent internally, and creates a vicious circle that erodes talent.” This is a key dilemma for organisations: why invest in people when we may lose them to our competitors?

What do we mean by ‘talent management’? Talent management is often defined as getting the right people with the right skills into the right jobs at the right time. However, that definition misses out the element of anticipating future needs, which is critical to ensure the organisation has the talent required to execute its business strategy. We prefer Silzer and Dowell’s definition: “An integrated set of processes, programmes and cultural norms in an organisation, designed and implemented to attract, develop, deploy and retain talent to achieve strategic objectives and meet future business needs.” As we discuss in more detail in Chapter 4, organisations need to adopt a systemic approach to talent management, combining the following elements. • Alignment with business strategy, so it’s clear how talent management aids strategy execution and what the priorities are for action. • Culture and leadership, so the organisation context supports development, and the way talent is developed is a positive aspect of the corporate culture. • Organisation design, so talented people are deployed in roles where they can have high impact. • Simple but effective talent management processes and tools, expertly designed by HR but executed by the line.

1.2 What’s the business case for investing in talent? Many organisations don’t have an explicit talent strategy – they simply hire people into the organisation when required. However, those that choose to develop and operate a sophisticated, future-focused talent management strategy can reap significant benefits. We found evidence of a correlation between investment in talent management and higher performance. • BCG interviewed senior executives from over 1,200 companies globally and found a strong correlation between talent management capabilities and financial performance. Companies that scored well on 20 leadership and talent management factors increased their revenues 2.2 times faster and profits 1.5 times faster than companies that rated themselves weakest. At each successive level of performance, revenues rose by an average of 15-20% and profits rose by 5-15% (see figure 3).

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TALENT MANAGEMENT IN CONTEXT

Report purpose

Figure 3: GLTI scores correlate with financial performance

The purpose of this report is to explore the following questions.

Talent laggards

Low performers

Average performers

High potentials

1.9X

• What do we need from talent management in light of the complexity and uncertainty that surrounds global organisations today?

1.2X X

• How can we evaluate whether talent management is delivering on its promises?

1.5X

1.3X 1.4X 1.6X

1.1X

• How can organisations better plan ahead and connect talent management to business strategy?

• Where should organisations focus their investments in talent?

Talent magnets 2.2X

• What do we mean by ‘talent’ and ‘talent management’ in today’s context?

• When it comes to developing talent, what differentiates high-performing organisations from also-rans? What makes organisations like General Electric (GE), Unilever and PayPal ‘talent factories’ that generate talent for themselves and others? How can organisations build deeper benches of leadership talent?

High performers

1.2X

1.4X

-0.7

0.3

X -2.2

Average two-year growth (indexed) Revenues

1.0

1.8

2.5 Median score

Profit

Source: BCG Global Leadership and Talent Index, 2015

• The BCG study found that the three factors with the greatest payoff were all activities that require the active participation of leaders: translating leadership and talent plans into clear and measurable initiatives, devoting significant time to leadership and talent management, and making leaders accountable for talent development. This is consistent with one of our key conclusions: the visible commitment of line leaders is a critical factor in successful talent management. • The famous McKinsey War for Talent study of US companies in 2000 found that companies in the top 20% on talent management practices outperformed their industries’ mean return to shareholders by 22%. Similarly, a 2008 McKinsey study of global companies found a significant positive connection between talent management practices and financial results. • Aon Hewitt’s Top Companies for Leaders research has found that the companies that are most successful in developing leaders are more likely to have succession plans for the CEO and other executives, to have the CEO involved in talent planning, and to hold leaders accountable for developing their direct reports. However, although many studies point to a link between good talent management practices and business and financial outcomes, it is not necessarily causal. We don’t know whether better talent management drives success, or whether more successful companies have better talent practices because higher profits mean they have more resources to invest in these programmes.

1.3 A brief history of talent management To understand where we are today, it is helpful to trace the evolution of talent programmes – and the large multinational organisations that have been in the vanguard of implementing them – over the past 60 years. We found that many of what are considered to be ‘best practices’ today, such as rotational assignments, regular talent reviews at all levels in the organisation, leadership development programmes and coaching, were in place in organisations like GE as long ago as the 1950s. 14

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1 TALENT MANAGEMENT IN CONTEXT

“Virtually every contemporary practice in talent management was developed and in place [by the 1950s]” Cappelli and Keller, 2014

• The foundations of many of today’s practices were laid by organisations such as GE in the first half of the 20th Century, when they began to invest heavily in internal development. GE’s Manufacturing Leadership Program, implemented in the 1940s, developed the careers of employees once they joined as trainees. The programme combined elements including classroom work, increasing job responsibility, project work and line manager coaching. • In the 1950s GE began to actively manage the careers of employees after their initial training. Moves were based on the company’s view of where the greatest need lay, and where there would be best fit. In some cases it planned for succession two to three generations – or up to 30 years – ahead. Employees and their managers had limited control over their careers, which were largely directed out of headquarters. By the late 1950s, most large US and many European companies had adopted a similar model. A 1955 Conference Board study showed that 60% of companies with more than 10,000 employees had an executive talent development programme. Peter Cappelli says that this state of affairs was driven by a unique combination of demand- and supply-side factors. Stable markets made longer-term planning possible, and it was rare to recruit executives from outside. • This post-World War II era was also characterised by unprecedented stability, which gave rise to lifetime employment. Individuals could expect to spend their entire career with the same organisation. Career ladders were clearly defined and predictable. • Workforce planning was commonplace: according to the Society for Human Resource Management (SHRM), 96% of large companies had a dedicated manpower planning department in the 1950s. However, from the 1970s onwards, companies began dismantling these highly structured and sophisticated models. • The oil shocks of the 1970s and a steep recession during the 1980s led to delayering, re-engineering and downsizing, which reduced opportunities for on-the-job development and progression. Talent development took a back seat. • Globalisation and growing competition introduced an unpredictability that made it more difficult to do longer-term planning. • Many organisations all but abandoned a systematic approach to managing talent, unconvinced that recruiting people from school or university and developing them over 20 years was any longer a good investment. Peter Cappelli says: “Workforce planning (and the related processes of succession planning and employee development in general) began to fall apart when the ability to forecast the overall level of demand in the economy eroded after the oil shocks of the mid-1970s.” • Companies began to hire growing numbers of experienced employees from outside. This change was exemplified by IBM, which, between 1985 and 1993, took out 250,000 employees and hired 100,000 new ones with the capabilities the business needed to compete in new markets. Cappelli believes that external hiring worked well during the 1990s, in part because organisations were able to draw on a readily available pool of talent that was looking for work. But once business began to pick up again towards the end of the 1990s, retention became a greater challenge. As fast as organisations hired talent, they were losing it to competitors, which made them reluctant to develop it. This led to what McKinsey dubbed the ‘war for talent’, which coincided with the technology boom and bust of the early 2000s.

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Today, we find a mixed picture. • In many industries and organisations, the lifetime employment model has disappeared. By 2011 less than one-third of Fortune-100 leaders had begun their careers with their current employer, a reduction from 45% in 2001 and more than 50% in 1980 (Cappelli et al, 2014). • Competition for top talent remains strong, and retention is an ongoing challenge. • High levels of external recruitment continue. According to Cappelli and Keller (2014) large employers in the US fill an estimated 60% or more of vacancies from outside. • Strategic planning has become much more short term and reactive, and talent planning – to the extent it still exists – has had to adapt accordingly. • Organisations embark on mergers and acquisitions and outsourcing for reasons related to business strategy and talent strategy, and these often result in significant job losses, including at executive level. Organisation designs and structures are also changing rapidly. • Some of the largest and oldest companies still use many of the talent management practices they have deployed for decades. However, according to Cappelli and Keller: “Their use has been substantially diluted by the rise of outside hiring. Smaller and newer companies never had these practices.” Cappelli’s research found that, in 2005, only 17% of Fortune-100 company executives were lifers, compared with 52% in older firms. This shift is illustrated by figure 4, which shows significantly lower levels of lifetime employment in younger companies.

Figure 4: Lifetime employment for top executives Career patterns 1980 and 2001

26 Companies in both 1980 and 2001 samples

1980

All Companies in sample

1980

2001

53 45

30 29.2

28.4

27 24.1

23.2 20.6

21.1 15.1

0 1980

2001

Percentage of lifetime executives

1980

2001 Time to top

1980

2001

Organisational tenure

Source: Adapted from The Path to the Top: Changes in the Attributes and Careers of Corporate Executives, 1980 to 2001. Harvard Business Review, January 2005, 25-32

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TALENT MANAGEMENT IN CONTEXT

However, we find that after emerging from the recession following the 2008 financial crisis many organisations are re-engaging with talent management.

The demographic tectonic plates are moving

• Many of the companies we interviewed are building new talent management capabilities, and 75% of respondents to the CRF survey report their organisation conducts succession planning for critical roles. Mercer’s 2016 Global Talent Trends Study found that 82% of companies plan to increase development and promotion of talent from within.

We highlight here some of the key demographic trends affecting talent planning.

• While this is encouraging, we find that organisations have limited budgets for investing in expensive development activities such as assessment centres and leadership programmes. One of our interviewees commented: “The top team is up for this, but our budget is threadbare.” • There are also issues around the ability of leaders to engage in talent management. For example, DDI’s 2016 High-Resolution Leadership survey found that, since the 2008 crash, leaders’ skills in building organisational talent have slipped from being in the top four as ranked by skill level, to being bottom today (see figure 5).

Figure 5: Leader skills ranked by average skill level, 2006 – 2014 GLOBAL FINANCIAL CRISIS HIGHEST RANKING

Operational decision making Customer focus Cultivating networks Leading change

• Power shifting towards emerging economies. A 2015 Mercer report, A Workforce Tsunami is Approaching, predicts that, by 2030, seven of the world’s 12 biggest economies will come from the emerging markets compared with three currently. Two-thirds of college graduates will come from emerging economies by 2021. Local demand for workers will mean these countries will no longer be net exporters of workers. • Rapidly declining birth rate globally. Birth rates are already below replacement levels in many of the G8 countries (the group of leading industrialised nations, including Russia). • An increasingly mobile workforce, particularly young people and workers in emerging markets. A global study by BCG in 2014 found that nearly two-thirds (64.8%) of respondents would be willing to go to another country for work. • Millennials already make up 40-60% of the workforce globally. By 2050 the number of people aged 65 and over in the G7 (the G8 minus Russia) and BRIC nations will have doubled from today’s levels.

Driving execution Empowerment/delegation Establishing strategic direction Coaching and developing others Entrepreneurship LOWEST RANKING

Building organisational talent

2006

2008

2010

Source: DDI, High-Resolution Leadership, 2016

2012

2014

• Balancing multiple generations at work. Although the Baby Boom generation may be eligible for retirement, many are remaining in the workforce, either through choice or financial necessity. The erosion of pension provision makes this trend likely to continue. Organisations need to provide flexibility and different career options to cater for the demands of this demographic. • A lack of graduates in critical subjects. In the UK and US, fewer people are studying much needed STEM subjects, for example. There are concerns about whether school leavers and university graduates have the skills employers need.

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“The most striking thing … is how much workers of different generations have in common. They want roughly the same things regardless of when they were born: to be given interesting work to do, to be rewarded on the basis of their contributions and to be given the chance to work hard and get ahead.” The Economist, 1 August 2015 The impact of demographic changes on talent management Our survey suggested that catering for the particular talent management needs of younger and older generations is not a priority for most organisations. Only 4% of respondents ranked this as one of their top three talent management priorities. Furthermore, a majority (54%) said talent management approaches were unaffected by demographic changes such as Millennials and older generations in the workforce (see figure 6).

Figure 6: Is your organisation approaching talent management differently today as a result of demographic changes? Yes

34%

54%

Don’t know

12%

Source: CRF Member Survey

However, many organisations are changing their employment offer to attract younger workers. For example, Goldman Sachs recently canvassed the views of hundreds of its junior investment bankers to determine what would encourage them to stay with the firm. As a result it will offer them faster promotions and more diverse experiences, and will make better use of technology in order to reduce the amount of menial work they are required to do.

1.4 Debunking the Millennials myth One of the most discussed issues in talent management over recent years has been the arrival of Millennials – those born between 1980 and 2000 – in the workforce. But are they really that different from previous generations? If we analysed the attitudes of young workers in the 1950s, 1970s or 1990s, would we see similar patterns? And do we need to manage Millennials differently? Recent research by Jennifer Deal of the Center for Creative Leadership and Alec Levenson of the Center for Effective Organizations (see Reading List) sought to separate the hype from the reality. Deal and Levenson surveyed over 25,000 Millennials, 29,000 older workers – Baby Boomers (those born between 1946 and 1964) and Generation Xers (those born between 1965 and 1979) – from 22 countries. They found that Millennials across the globe had similar perceptions and expectations of work. They also found that much of what is true about Millennials also holds true for Gen Xers and Baby Boomers, so in reality there is far less difference between the generations than the hyperbole suggests. “In reality, a lot of what makes people tick doesn’t change from one generation to the next,” conclude Deal and Levenson. “We found that in most ways, Millennials’ expectations about work are strikingly similar to those of other generations. In many cases, Millennials are continuing a decades-long tradition of pushing organisations to change.” The research findings include the following. • The common perception that Millennials are more interested in leisure than working hard is incorrect. Millennials may question why ‘face time’ is necessary, particularly as technology allows for greater flexibility in working hours and location, but they are quite prepared to work hard and put in long hours to get the job done. • Millennials may feel a sense of entitlement, and do not wish to do boring or repetitive work. However, about the same percentage of older workers express similar feelings. • Millennials are often portrayed as needy, for example because they want frequent feedback. However, Baby Boomers and Gen Xers have also challenged their bosses to provide better feedback and mentoring opportunities, and have become more comfortable with challenging authority and ‘speaking truth to power’. Millennials are suspicious of authority but, as with their older colleagues, this is because they dislike the arbitrary exercise of authority. • Millennials are motivated by work with ‘a higher purpose’, but they are not prepared to forego comfort and compensation to achieve these lofty goals. They value working for organisations with a strong social purpose, but so do older generations. • Both Millennials and their older peers rely on technology, but they use different tools: the first group use social media and messaging, whereas the second prefer email, for example. Both groups put equal value on face-to-face communication. • Contrary to the popular stereotype, Millennials don’t wish to change employer every few years. Around half of the sample said they would be happy to spend the rest of their working lives with the same organisation. And although around one-third said they were looking for job opportunities elsewhere, so was a similar proportion of older workers.

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“Fundamental to [the new talent] model is acknowledging the uncertainty that appears to be a permanent part of the business world and being able to respond and adapt to it.” Peter Cappelli, Professor of Management, Wharton

Not only are Millennials little different from older generations in terms of their attitudes to and expectations of work, but also the typical recommendations about how to manage Millennials – pay transparency, feedback, opportunity and flexibility, for example – are simply good management practices that should apply to all generations of workers.

1.5 What does talent management need to deliver today…and tomorrow? In the original War for Talent research, Michaels et al identified three factors that they predicted would continue to fuel the war for talent and make it a defining feature of the business landscape for years to come. • The irreversible shift from the industrial age to the information age. • Intensifying demand for high-calibre management talent. • A growing propensity for people to move from one company to another. Our research suggests that these trends continue to present challenges for organisations. As we consider how talent management needs to evolve to support organisations’ growth plans, we would make the following observations. • We have encountered much criticism of current talent management practices, in particular that they are insufficiently forward-looking and overly bureaucratic. The risk is that, if talent management fails to anticipate the organisation’s future needs, it will simply produce ‘more of the same’, or even become largely irrelevant. It is critical that talent management is rooted in the business strategy, and that the organisation builds strong two-way connections between strategy and talent plans. This might require the HR and talent functions to develop new skills and foster different relationships with the senior executive team and internal strategy function. • Talent management plays a critical role in helping organisations manage risk, specifically by finding the right balance between external hiring and internal development, avoiding costly mismatches in employees and skills, and building flexibility into talent management processes. • Speed is of the essence. Peter Cappelli says: “The most important problem faced by virtually all employers is the need to respond quickly to changes in competitive environments.” But changing the shape of the workforce doesn’t happen overnight. The challenge for talent management is to anticipate what skills and capabilities will be needed in future, and to balance long-term development of future leaders and strategic capabilities with immediate business needs. Opportunities such as connecting the permanent and contingent workforce, which we discuss further in Chapter 3, will increasingly allow for the better balancing of short- and long-term needs. • Connecting the employer value proposition (EVP) and the customer value proposition. Most companies carefully consider their customer value proposition, articulating a clear and compelling reason why customers should do business with them. The more sophisticated organisations also have a compelling employer value proposition (EVP) that addresses the factors that are important to today’s talented employees, including internal progression, flexibility and international opportunities. But how often are the two connected? In a world where talented employees are motivated by intrinsic factors such as the organisation’s purpose and values, companies keen to attract and retain the best talent should give serious consideration to how these inter-relate. 19

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“How concerned would you be if your HR strategy fell into the competition’s hands? If your answer is ‘not very’, can your organisation be making world-class decisions where talent matters most to your strategic success?” Boudreau and Ramstad, 2007

• Organisations need to consider what the power shift from organisation to individual means for their talent practices. Rigid career hierarchies are no longer suitable. Useful strategies include allowing employees to shape their own careers by maintaining their own data on talent systems, making opportunities transparent, providing relevant information and maintaining relationships with alumni who may one day return. • Talent management is being called on to deliver more with less. A key challenge is to demonstrate to business leaders that investments in talent pay off – if not in strict ROI terms then at least in terms of the positive impact on business outcomes.

It is extremely difficult to predict future changes in the business environment and how those will affect organisations. For example, who would have predicted ten years ago that Amazon – an online retailer – would become one of the world’s largest providers of cloud-based computing infrastructure? Talent management will have to take account of growing uncertainty and remain sufficiently nimble to adapt and respond to changing business needs, while keeping an eye on the long term. Organisations that stay one step ahead by anticipating what business challenges will arise, and putting in place plans to meet them, will find talent can be a key source of competitive advantage.

TALENT MANAGEMENT TODAY â&#x20AC;&#x201C; ISSUES AND OPPORTUNITIES

Topics covered

Introduction

2.1

Current priorities for talent management

2.2

Connecting business and talent strategy to maximise return on investment

2.3

Focus on critical roles

2.4

Strategic workforce planning

2.5

Pools, pipelines and plans

2.6

Developing talent

2.7

Bringing it all together â&#x20AC;&#x201C; the talent review process

This chapter looks at the core processes of talent management, how organisations run them and what good practice looks like. We begin by considering how to better connect business and talent strategy. We compare and contrast succession planning and talent pools as mechanisms for identifying and developing talent, and discuss the critical role talent reviews play in talent management.

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“We need to get really good at implementing what we already know works, and focus on getting that right before we move on to the next level of thinking.” Caroline Williams, Former SVP HR, Ace Group

What’s going well?

2.1 Current priorities for talent management

We asked respondents to the CRF survey what their organisation does well. The following themes emerged. • Adopting a more bespoke, individuallydriven process, moving away from onesize-fits-all. • Tying together data from a broader range of sources than would have been possible in the past. • Moving away from a transactional activity towards one that is more strategic and value-adding. • Simplicity and clarity. • Active internal job markets, a wide range of flexible career opportunities, and improvements in providing job opportunities to accelerate learning. • Better identification and calibration of talent. • Senior management involvement and commitment. • Greater integration between all the elements of talent, including performance management, L&D/leadership development, retention and engagement. • Encouraging individuals to own their careers.

Talent management has seen a resurgence in recent years, as organisations have invested in growing leaders from within. In this chapter we explore the processes and tools that underpin organisations’ talent approaches. We look at how organisations can better link talent management to business strategy, which is a key challenge, and we highlight good practices and opportunities for improvement. Although talent management is rising up the business agenda, we find that there is little new thinking in the field. Talent functions are largely using the same tools that have been around for many years, despite consistently disappointing results. Organisations struggle with the persistent challenges of linking talent and business strategy, engaging line leaders and building an HR function with good business understanding and credibility.

The CRF online survey asked respondents about their current priorities for talent management. We uncovered the following key trends. 1. Talent management activities are predominantly focused on identifying and developing leaders. This was a top priority for 71% of respondents. The principal area of focus for talent activities is developing high-potential talent (49%) or executive talent (12%). See figures 7 and 8 on the next page. Only a small number of organisations focus on scarce technical or specialist skills. 2. Succession planning is alive and well. In spite of criticisms about the effectiveness of succession plans (discussed further below), succession planning for critical roles was a top priority for 62% of respondents. 3. Less pressing priorities among survey respondents were the retention and engagement of critical talent (37%) and developing talent for known future business needs (36%). 4. Many of the organisations we interviewed are attempting to increase the movement of talent across business-unit or divisional boundaries, but they are finding it hard to make this work in practice. 5. Others are using talent management practices to encourage culture change or to build more collaborative leadership capabilities. 6. A key challenge for all organisations is how to link their talent practices to business strategy, to ensure that talent management is delivering what the business needs. Many organisations struggle to articulate how their business strategy translates into capabilities that they need to develop.

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“Talent planning and management is perhaps one of the longest-term things you do as an organisation – tough to do in a world where everything has to have immediate impact.” Matt Nixon, Principal, Disraeli Group

Figure 7: What are the key priorities for talent management in your organisation today?

What needs to improve? We also asked what respondents to the CRF survey would most like to improve.

Identifying and developing future leaders

71%

Planning for succession of critical roles

62%

Retaining or engaging key and pivotal talent

37%

Developing talent to meet known future business needs, such as developing new products or markets

36%

• Engagement and role-modelling at the most senior level in the organisation.

Ensuring high performers are in post to deliver current business objectives

19%

Strategic workforce planning

15%

• Better data sharing so those making decisions about talent deployment can see who is available.

• Greater future focus and better (or any) workforce planning. • Less focus on process, more on content and outcomes. • Better follow-through for those identified as ‘talent’.

• Facilitating internal movement to help people develop and build experience.

Effective deployment of key talent

14%

Sourcing key talent externally

13%

Building enterprise leaders

12%

• Better integration of talent pipelines across business units.

Supporting diversity programmes

10%

• Visibility between actions taken and business outcomes.

Meeting the needs of younger or older generations in the workforce

• Better focus on the middle of the organisation, not just senior levels. • Consistency from year to year and across different parts of the organisation.

• Building external talent pools. • For several, the answer was “All of it!”

Source: CRF Member Survey

Figure 8: What is the primary focus of talent management in your organisation today? High potential future leaders

49%

Other (please specify)

13%

Executive talent

12%

Developing general managers or commercial capability

11%

Managers transitioning to bigger roles

Critical or scarce technical skills

Developing specialists

Source: CRF Member Survey

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“Many organisations think they have a talent strategy, when in reality what they have is a plan to execute a series of tactics.” Matt Paese, VP Executive Succession, DDI

Time horizon to talent planning

2.2 Connecting business and talent strategy to maximise return on investment

Although building talent is a long-term game, talent time horizons are fairly short, which perhaps reflects the prevailing short-term business planning outlook in organisations today. Our survey found that two-thirds (67%) of respondents are looking at a two-to-fiveyear timeline for talent management. Only 10% are looking five to ten years out, and just over one-fifth (22%) has a much shorter time horizon of one to two years. Interestingly, although there is much discussion about the pace of change in the business environment, the majority of respondents (57%) said their time horizon had remained the same over the past five years, and only 17% reported their time horizon had shortened. Encouragingly, just over one-quarter (27%) reported their time horizon is longer today. A recurring theme of our research was the need to connect business strategy and talent planning. However, this can be extremely difficult when the time horizons of the two processes are not aligned. Interviewees reported that business forecasts have reduced from five to ten years, to three years or less. And firms in different industries have different perspectives on what constitutes ‘long term’ and ‘short term’. In organisations with very short planning horizons, talent planning may be looking way ahead of what the business is thinking about. Nina Swanson, Global Lead Talent and Performance for PayPal, sums up the challenge: “Given that 18 months is long term for PayPal, but development goes on for much longer, how do we extend the talent agenda so it looks beyond the business planning horizon?” A critical dilemma is how to make talent management sufficiently agile to respond to changes in strategy, while at the same time building capability for the longer term.

It seems obvious and logical that talent strategy should follow on from business strategy. Talent strategies do not stand on their own – they are relevant only to the extent that they support strategy execution. So talent plans should answer the question: “How does (and should) the workforce contribute to the firm’s competitive advantage?” Yet we find that many organisations are overly focused on the supply side – they simply take what they have today and extrapolate forwards. Jill Foley, Founding Partner of talent consultancy On3 Partners, likens the approach of many organisations to “steering your boat by looking backwards at the wake” – which can mean you fail to spot the looming iceberg. Like business strategy, talent strategy involves making choices about where to invest, and this means differentially investing in critical roles that have a disproportionate impact on business outcomes. Indeed, Aon Hewitt’s Top Companies for Leaders research has found that the best developers of talent differentiate their investments much more aggressively than average companies do. The challenge for Talent Management is to work out what these critical roles are, given the organisation’s strategy and business plans. The starting point is to work out from the business strategy the key priorities for talent investment. However, many organisations find this is easier said than done. • Leaders appear to find it difficult to articulate how strategy translates into the skills, capabilities and specific roles that need to be developed to support the implementation of the strategy. Shannon Lawrence, Consulting Manager, DDI UK, concurs: “We find organisations struggle to translate the outcomes of future-focused conversations into tangible talent actions. So they might recognise the need to develop a B2B growth strategy, but can’t articulate what that means in people terms.” • Few companies have distinct strategies; what differentiates them is how strategy is executed. • Strategy is constantly changing, but building talent requires focused development over the long term. Peter Cappelli says: “Aligning talent practices to business strategy has turned out to be next to impossible because business strategies are less and less clear, and they change all the time.” • The senior HR people who should engage in discussions around business strategy often lack the business knowledge, change leadership and political skills and credibility to make a useful contribution. • Those who can hold their own in these debates sometimes find that executive teams or strategy functions don’t recognise the value that good people insights can bring to strategic planning. Mary Eckenrod, formerly VP Talent at Johnson Controls, Cisco and Blackberry, recalls: “In the 80s and 90s, when the talent imperative was perceived by some leaders as owned by HR, we had to push hard to have talent discussions included as a component of the business strategy and planning process. The implications and risks could easily be overlooked until execution problems arose.” • Rebecca Homkes, Teaching Fellow at London Business School, says there may only be a small element of talent strategy that’s about building completely new capabilities. “There’s a balance between focusing on generic capabilities you need to develop regardless of any shift in strategy, which makes up anything between 70 and 85% of what you need to do, and the 15-30% that’s building specific capabilities to back up strategic bets. Where the balance will lie depends on the maturity of the organisation, and the pace of change in the industry.”

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“We have to balance the desire to take time to get things right with the fact we’re in a world where things move very quickly. We need to balance the need for a longer planning horizon with staying agile enough to deal with volatility.” Tim Walker-Jones, Group Reward and Capability Director, Imperial Tobacco • What this means for many organisations is that they simply look at all roles above a certain level. However, even at the most senior levels, some roles will be more critical than others for the future success of the organisation.

Identifying Critical Roles

• Others get around this by focusing on learning agility or potential. A high-tech business we interviewed said: “When we ask the business to imagine the future state, they struggle to imagine and articulate it. So we focus on building agile talent that can grow as our business expands and changes.”

In a paper Identifying Critical Roles, Easier Said Than Done! (available on the CRF website) Colin Beames, Managing Director of consultancy Advanced Workforce Strategies, suggests focusing on two key elements.

• Similarly, culture fit may be much more important than specific skills for some organisations, so they promote and develop people whose values and behaviours are in line with the company’s mission and values.

1. Value creation. Value can be manifested in many ways, both financial (eg, sales) and qualitative (customer satisfaction).

A ‘Future Back’ view of talent management

2. Strategic impact. Roles that make the biggest contribution to the organisation’s competitive advantage or core capabilities.

Jill Foley has developed a ‘Future Back’ process, which helps executive teams think through what they need to do well to execute their strategy, and what that means for talent. This involves working through a series of questions. © On3 Partners

Figure 9: Working ‘future back’ Core Work

Imperatives

Goals

What’s the work we must be brilliant at to deliver these imperative? What’s the ‘stretch’ looking ahead... • Different work? • Same work, but delivered in a different way? • Are we looking for a different performance outcome? • Do we want people to bring a different skill or attitude to the work?

The conditions we must create in order for us to deliver our goals (the things we have to put in place, fix, change to be successful)

Quantitative, qualitative goals we must deliver along the way

Implications What roles to make it happen? (4 types) When/where do we need them? Capability/Capacity Culture (‘the deal’) Where are the biggest gaps... What risk to the business?

North Star Direction of Travel Big ambitions and why they are important What good looks like when we get there

Other critical roles might include those that are ‘high risk’ (because appointing the wrong person could have disastrous repercussions), and legally required roles (failure to have a suitably qualified person in place would shut down the business). It is important not to confuse seniority with criticality, and traditional job evaluation tools can often give the wrong answer. What’s more, hard-to-fill roles may be a headache for HR but are not necessarily critical: the scarcity of suitable candidates may simply reflect a tight market or an unappealing employer brand.

So while it may not be necessary to have a fully formed strategy, there does need to be clarity about the direction of travel. Matt Paese, VP Executive Succession, DDI, suggests focusing on three or four key business drivers – the few broad leadership hurdles that an organisation must clear to execute its strategy. Wendy Hirsh suggests working from the science fiction author William Gibson’s premise: “The future is already here, it’s just not evenly distributed.” In other words, rather than asking managers to envisage what the world will look like in 20 years’ time, begin by posing simple questions such as: “What are you trying to do to advance the business that you can’t get done today because you don’t have the capability?”

2.3 Focus on critical roles Critical or pivotal roles are those that have the biggest impact on building and sustaining competitive advantage. Talent Management needs to base decisions regarding investments in people on these. Correctly identifying and investing disproportionately in these roles should lead to better organisation performance and competitive advantage.

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“Roles come first before people, without diminishing the importance of the latter.” Colin Beames, Managing Director, Advanced Workforce Strategies

Case Notes Below and on the following page are some examples of a change in strategy resulting in a need for different skills and capabilities. • Following its privatisation last year, the Post Office in the UK is looking to build its business through developing retail franchises. This strategy requires new capabilities such as customer and network management, which need to be either bought in or developed internally. • BAE Systems’ business has changed over recent years, requiring a shift in thinking about critical skills. Previously BAE would typically be the prime contractor on a programme, whereas the business model is now predicated on sharing the value chain with others. From a talent perspective this has meant a greater focus on building partnering skills. • Imperial Tobacco looks at a number of what-if scenarios. For example what would happen if e-cigarettes take off much more than we are planning for? Could we buy in capabilities? Could we accelerate some talent pools? • IBM maps its annual Global Technology Outlook research against the business plan to identify skills gaps in its portfolio of businesses. It then evaluates which of three options – or which combination of options – is the best solution to fill the gap. 1. Make an acquisition to bring in the needed talent. 2. Run a major internal education programme. 3. Enter into partnerships with third parties. A key consideration in setting up a partnership is how to exchange talent between the partner and IBM, and how to share new thinking and skills.

This has a number of implications. • Make sure you deploy your best talent (‘A’ players) in the roles that make the biggest competitive difference. • Appoint ‘good enough’ people to roles where there is no additional benefit in having star performers. • Differentiate investment in development to focus on roles with greater strategic impact. • Differentiate compensation. Rather than choosing to pay all employees at the same salary benchmark (eg, at the market mid-point) you can choose to pitch reward at different levels depending on their strategic contribution. • Make sure that critical roles are central to succession planning and talent development activities. • Review which roles are ‘critical’ as strategy changes. For example, entering a new market, a regulatory change or an emerging technology may require a rethink. There is no universally agreed definition of what constitutes a critical role, and we found numerous definitions and techniques to determine what they are. Each organisation needs to work out the most effective way of identifying them in its own particular context. For example, Boudreau and Ramstad (2007) define pivotal roles as those that have a disproportionately large impact on business outcomes. Putting it differently, John Boudreau suggests asking: “Where would improving the talent pool have the biggest strategic impact?” Often, critical roles are important commercial or general management roles that make a significant and visible contribution to the bottom line. However, they are not necessarily the roles held by the most senior people. For example, DHL has found that the quality of its delivery drivers has a bigger impact on business performance than the quality of its pilots. All pilots have to meet a minimum standard, so a pilot who is 10% better than the rest does not automatically produce better metrics, such as the number of on-time deliveries. Higherperforming drivers, on the other hand, have a more marked effect on business measures, so this is where DHL concentrates its investment in improving performance. Sometimes critical talent might be employed by your suppliers. For example, Boeing needed to find ways of replacing metal aeroplane parts with plastic parts in order to increase fuel efficiency and decrease cost per passenger mile. Boeing lacked in-house plastics expertise, so it turned to its suppliers for help. By building partnerships with suppliers it was able to tap into the expertise it needed without having to employ specialists directly. Jill Foley recommends plotting the complexity and contribution of different roles on a matrix to help determine their criticality. Through this process organisations can identify the following. • Pivotal roles – Game changers. Create future value. • Growth driver/high-risk roles – key to improving performance. • Sustaining roles – mature positions that are well rehearsed. • Enabling roles – support/enable day to day delivery. By evaluating roles and then mapping existing talent to them in this way, organisations can develop rich insights into where their future success might be at risk – for example, where the skills of the individual are not matched to the future requirements of the role, or where high potential people are under-stretched.

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“The more important differentiation is between those things you have to do well, but doing them even better doesn’t drive any advantage, and those roles where increased investment results in higher competitiveness.” Tim Walker-Jones, Group Reward and Capability Director, Imperial Tobacco

We often make the mistake of placing our best people in the biggest jobs. The biggest jobs in organisations are typically the most mature (sustaining) roles where there is a clear ‘blueprint’ for success. Organisations can take a risk by making these roles stretch assignments for emerging high-potential talent, knowing that success will not be completely dependent on the performance of that individual. It follows that we should put our best people in the roles which are game changers for the future (pivotal) on the basis that they are concerned with the most complex and ambiguous challenges. Case Notes The Entertainment company Sky plotted its critical roles in terms of their complexity and strategic importance. According to Ralph Tribe, Director for People, UK & Ireland, the company was surprised to discover that some of the most important and challenging jobs in terms of future business success (establishing an internal start-up, for example) would come out as quite small in scope using traditional job analysis. Sky’s analysis allowed it to better assign some of its best people to these roles – people who traditionally might have been kept in the core business, which made the biggest profit. The analysis also demonstrated that Sky could take some risks by putting people in stretch roles in the core business, which was well protected by strong infrastructure and succession.

2.4 Strategic workforce planning Having identified the talent implications of the business strategy, the next stage is to build up a more detailed picture of future talent needs, the gaps between the current and the desired state, and key actions required to bridge the gap. Strategic workforce planning (SWP) is a central element of the CRF Integrated Talent Management Model, which we set out in Chapter 4. SWP identifies key priorities and actions that feed into other parts of the framework, such as succession planning, talent acquisition and development. Definition Strategic workforce planning is a process that enables the strategy to be executed. It allows organisations to • make choices about where to invest in people • identify the risks of being unable to execute strategy owing to people constraints • identify actions necessary to acquire, retain, develop and deploy the workforce to best support the strategy. As we outlined in Chapter 1, workforce planning was prevalent in the 1950s and 1960s but began to disappear in the 1970s. However, the SWP concept has become more prominent over recent years as organisations try to meet uncertainty head-on by preparing for different business scenarios.

Case Notes continued • Over its nearly 100 year history, Tesco has built a reputation as a formidable talent factory. Developing leaders from within helped propel Tesco’s growth from its humble origins in London’s East End to currently the fifth largest retailer in the world by sales. Finding and developing talent is a key element of being a people manager at Tesco. Each manager has a target of developing between 1 in 10 and 1 in 20 of their people to the next level. Mark Thomas, Head of Resourcing and Talent, said: “In a UK business of 300,000 people, at any one time there are 30,000 people being developed for the next level. This has played a major role in building Tesco’s competitive advantage.” However, although the retailer was extremely successful in developing people within the stores organisation, attempts to develop general managers by broadening their commercial and functional experience were less successful. Since Dave Lewis joined as CEO in 2014, the business strategy has been refocused on building Tesco’s reputation for customer service. One element of the strategy is to develop joined-up thinking across functional silos. This means moving from a function-by-function to a group-wide view of talent, and should over time allow the retailer to reduce its reliance on external hiring for senior leaders. “We need to give people breadth at an earlier stage by giving them functional, international and commercial experience to round them out as general managers. That’s a key strategic focus for us now.” said Thomas. • TalkTalk has identified ‘Launchpad’ roles – business change managers, for example – which have proved to be a good starting point for different career routes in the organisation. Staffing these roles allows the company to develop pipelines for different scenarios. So the company is building a supply of flexible talent that can be turned up or down in line with demand coming out of its workforce plan.

SWP is still something of a minority interest. Less than one-quarter (24%) of respondents to the CRF survey said their organisation has a strategic workforce plan that drives talent management (see figure 10). Only 15% of respondents said strategic workforce planning is one of their top three talent management priorities. 27

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“I think of workforce planning as more of an impressionist painting than a digital photograph – it gives us a rough idea of where we need to go. So we’ll identify we need more of X, but we’re not sure if it’s 50 or 100 more.” Nigel Sullivan, Group HR Director, TalkTalk

Scenario planning It’s challenging for organisations to build robust strategies in today’s unpredictable business environment, and plans need to be adaptable. More organisations are turning to scenario planning to map out alternative futures, and this is increasingly being used in talent management too. The goal of scenario planning is to come up with a set of alternative futures, and to ensure you’re prepared for as many of them as possible. This involves • evaluating multiple options, not just the obvious scenario • identifying a range of future options • determining the probability of each • establishing the feasibility of each option and the resulting implications and actions • keeping alternative scenarios under regular review. Questions to ask include the following. • What actions are required to increase the likelihood that the most desirable scenario comes about, or to avoid the least desirable? • Do we need to kick off actions to prepare for more than one scenario? Preparing for multiple talent scenarios can be difficult, because some scenarios might involve recruiting people you may not need, while others might require letting people go and maybe having to rehire them later. The world’s leading semiconductor IP company ARM Holdings tackles this by taking account of the different scenarios in the business plan, but concentrating on the most likely. Paul Schoemaker, Founder of the consultancy Decision Strategies International, says the thought process itself can be helpful: “By thinking through different scenarios ahead of time, you can be better prepared to make sense of and respond to new information more quickly.” He suggests asking questions such as “Where is our current plan fragile?” or “What would really throw us off course?” to identify key areas on which to focus.

Figure 10: Does your organisation have a strategic workforce plan that drives talent management activities? Yes

24%

62%

Don’t know

14%

Source: CRF Member Survey

Organisations tend to get better at workforce planning with practice. BAE Systems has now been through a couple of cycles of workforce planning (although they call it ‘long-term skills planning’ to avoid alienating business leaders with the terminology). Through practice it is becoming better integrated into the business cycle. John Whelan, UK HR Director, said: “We try to keep it as simple as possible. We focus on getting leaders to think about how their organisation will look different from the way it looks today, the different skills and capabilities they’ll need, the quality of the pipeline for building those skills, and if we don’t have a pipeline, what are we doing about it?” Given the inherent complexity and uncertainty in today’s world, it is all the more important to consider the range of different scenarios that might arise, and to think through in advance the various options available. Having a plan that can be adapted to changing circumstances means organisations are better prepared to deal with unexpected events as they arise. Clearly, the strategic workforce plan should focus on what’s required to support and develop the roles and capabilities that are critical to execute the strategy. The list is not exhaustive, but we would also highlight the following considerations when formulating a strategic workforce plan. • Create a picture of the employment context for the organisation. What are the demographic trends in the markets we are in? What is the balance of supply and demand in these markets for the critical capabilities we need? What is the profile of the current workforce – age, gender, length of service etc? • Identify key workforce risks. Are there pools of people with critical skills who are due to retire soon? Are our competitors targeting specific groups? • Decide whether to make or buy. Be explicit about what talent we choose to ‘make’ by developing internally or ‘buy’ by recruiting from outside. Peter Cappelli says that, for most organisations, the correct balance is an important strategic judgement “that differs across organisations … depending on internal capabilities as well as the relative costs of overshooting versus undershooting talent needs.” Key considerations would include the following. o For how long the talent is needed and how long it takes to develop. o Availability of career paths and opportunities for development internally. o Whether there is sufficient scale to justify investment in internal infrastructure. o How readily available external talent is, and how much it costs.

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• Deal with potential surpluses. Where is there a risk of being left with an oversupply of out-of-date skills? What actions should we take to retrain or redeploy people to future-proof the business? For example, Ricoh, the photocopier and printer manufacturer, recognised that, as demand for photocopiers diminishes, it would require fewer engineers. Rather than lay off engineers, Ricoh has struck a deal with Amazon to supply and install lockers that enable customers to collect online purchases from locations including shops and railway stations. The deal with Amazon was possible because the geographic footprint of Ricoh’s field force matched Amazon’s needs. Ricoh is also upskilling some of the engineering field force to maintain 3D printers, which is a new and growing business area for the company. • Build future supply. Are there shortages of university graduates in key skills areas such as engineering that will have an impact on our future success? Should we adopt outreach programmes in schools to generate interest in long-term careers in our field? Should we be developing apprentice programmes to increase the supply of skilled workers? • Take a ‘whole workforce’ perspective by highlighting alternative workforce models. What’s the optimal configuration in terms of permanent and part-time employees, contractors etc? Are there opportunities for outsourcing? Can we balance peaks and troughs by tapping into the contingent workforce (see Chapter 3)? • Build retention and engagement strategies. Where do we need to put in place retention plans and for which groups of people? What are the engagement scores for different parts of the business? Where do we need to take action now to avoid future risks? • Build the Employee Value Proposition. Where are we struggling to attract or retain the kind of people we want to work in the organisation? Do we need to develop differentiated employee propositions in different parts of the organisation? • Analytics. What questions would we like our analytics function to be able to answer? What data do we need to start collecting in order to build better insights?

Getting the timing right If you are going to align business and talent strategies, you have to think about the practicalities of how talent planning processes interconnect with business planning activities. How can talent strategy influence business strategy if the HR process occurs after the business strategy process is complete? According to Boudreau and Ramstad: “It is not unusual to encounter organisations where the talent planning process occurs long after the organisational planning process has concluded, and where HR basically distributes the allotted budget for headcount or training.” In practice this may mean that the timeframes for talent processes need to change so that the talent cycle is co-ordinated with the business planning and strategy cycle. It also means that the relevant HR/Talent people need to be sitting in the meetings where business planning and strategy are discussed. At Whitbread, for example, the talent plan is presented to the board three months before the business strategy is signed off, because talent is seen as a potential constraint on the ability to deliver strategy.

The outcome should be a set of clear priorities and an action plan that can be communicated, implemented and its progress tracked. Don’t make this process too bureaucratic or write lengthy reports that will gather dust on a shelf. You need to bring the plan to life through regular reviews and updates. Building and implementing the plan requires co-ordination across multiple disciplines and business units, so ownership is important. The whole executive team needs to champion it, not just the HR director. Sometimes the process of workforce planning can highlight issues that bring into question the quality or viability of the strategy, which can force the top team to think again. Natalie Jacquemin, Head of the Talent Strategy Practice at Mercer, said: “Sometimes we find that the process of workforce planning forces organisations to improve the clarity of their thinking around what the strategy is and where they need to go. The process forces the issue.”

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“The fundamental shift in thinking comes when organisations move from developing talent for today’s model to building talent for the future organisation.” Mark Williamson, Partner, KPMG

The case for succession planning in changing times

2.5

CRF’s study Planning for Succession in Changing Times (Hirsh, 2012) found that succession planning is not anachronistic, but rather a vital discipline to help executive teams think through future demands of critical roles and how to best prepare key people for these future challenges. This helps to make sense of US President Dwight Eisenhower’s gnomic claim that “plans are useless, but planning is indispensable.”

When you ask HR people to talk about talent management, discussions usually turn quickly to the ‘plumbing’– talent pools and pipelines, succession plans and talent reviews. In this section we consider the direction of travel in terms of which techniques to use in what circumstances, and identify critical success factors.

Hirsh notes the following reasons why succession planning – if done well – can be useful in a turbulent world. • It starts with a sharp and practical question – “Can you see this person doing this kind of job in the future?” – rather than dealing with abstract considerations of potential. • It links directly to changing business demand and resourcing strategies. • It assesses readiness and timeframes, not just future potential. • It informs career discussions and job moves, and leads to focused development. • It readily accommodates diverse types of jobs, including specialists and experts.

Pools, pipelines and plans

Succession planning

In today’s volatile, fast-changing business environment, many people are questioning the value of investing in succession plans that presume to predict the requirements of a role – and potential successors – several years into the future. Many people think succession planning has had its day, because today’s jobs either won’t exist or will look substantially different by the time you need to consult the plan. Peter Cappelli believes one reason succession plans don’t work is that the events that trigger them – often dismissal – signal that the organisation wants to move in a different direction, rendering redundant any plan to replace the individual with someone similar. “It is almost impossible to predict when the organisation will want to look in a different direction for replacements, and the desired new direction, as well as the needed new competencies, is almost impossible to predict.” However, our research shows that succession planning is alive and well. Many of the experts we interviewed felt that succession planning was perhaps more important today than in the past, and there was certainly a strong view that succession planning is more widely used today than it was ten or 15 years ago. Indeed, three-quarters (75%) of respondents to the CRF survey said their organisation has succession plans for critical roles (see figure 11). However, when we probed deeper we found that organisations don’t prepare people properly to take on these roles. Only 17% of respondents judged their succession planning to be ‘effective’ in preparing internal candidates to take on critical roles, and none thought their efforts were ‘highly effective’ (see figure 12). Figure 11: Does your organisation have succession plans for critical roles? Yes

75%

20%

Don’t know

Source: CRF Member Survey

Figure 12: How effective are your organisation’s succession planning efforts in preparing internal candidates to take on critical roles? (1 = highly ineffective, 5 = highly effective) 1 8%

2 33%

Highly ineffective Source: CRF Member Survey

3 42% Highly effective

4 17%

5 0%

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“In preparing for battle, I have always found that plans are useless, but planning is indispensable.” Dwight D Eisenhower

We find many of the more enlightened organisations are seeking to avoid the common pitfalls by approaching succession planning in a more sophisticated way. Key trends include the following. • Building pipelines to support groups of jobs rather than just individuals. • Growing recognition of the importance of senior professionals and experts as a source of competitive advantage. Therefore, while the focus continues to be on senior leadership positions, organisations are giving more consideration to selected ‘critical’ positions at all levels. • Identifying potential external successors. Fast-moving business are less likely than others to be planning for succession deep in the organisation, and may not look much beyond a one-to-two-year timeframe. For example, PayPal plans succession for the most senior positions where there’s a regulatory requirement to have identified successors. Our research has highlighted a number of critical success factors in succession planning as part of talent management. • Succession planning should not just consider who is in the pipeline to fill a position, but also what is needed to ensure they are equipped to perform effectively once they’re appointed. • It needs to be a developmental rather than mechanical process. Unless succession plans lead to tangible actions to develop the people on the list, they are useless. You need to ask: “What development experiences does this person need to prepare them for this future role?” Each person on the list should have a carefully-considered, tailored development plan for how they might make the moves necessary to get there. You then need to agree actions and follow them through to ensure they happen. • Executive team members need to be accountable for making sure actions are followed through. Plans should be reviewed and updated several times a year to ensure they are current and progress is being made against actions. • Plans need to go deep enough in the organisation. If you are looking to identify and develop potential successors to members of the executive team in five to ten years’ time, you need to start deeper than one or two layers below the executive team in order to give potential successors enough time to develop skills they will need at that level. • Strategy and succession plans need to be interlinked. Succession should focus on the roles that have been identified as critical to competitive advantage, not simply those at a certain level on the organisation chart. • Plan succession on the basis of what roles will look like in future, or even plan for jobs that don’t yet exist. Standard Life’s talent team is working with executives to map out what executive roles might look like in three to five years’ time. Lynne Connolly, Head of Talent, said: “We call this ‘career navigation’ and it allows us to think through the different scenarios we’re planning for, so we can be explicit with people coming through about what they need to do in order to grow.”

Case Notes TalkTalk completes an annual organisation capability review, which connects future business direction and the talent agenda. It starts with individual discussions between the Group HRD, Nigel Sullivan, and the executive team. The output is a two-page summary of what the business is trying to achieve that will influence the talent strategy. Executives then discuss this at an offsite meeting, identifying critical roles and mapping them on a nine-box grid according to the complexity of the role and its criticality to the business. The exercise typically covers the top 250 roles in TalkTalk. Once they have mapped the roles the executives discuss the current incumbents to determine whether the right people are in the right positions, and any development moves and actions required. One exercise involves looking at the ‘stretch’ between an individual’s current position on the grid and the job they’re in, which allows the business to identify where an individual could do with more stretch, so may be ready for a move, or, alternatively, where they may need additional support. Individual executives take ownership of actions for their areas. The process has now been running for five years, and the executive team is highly engaged and committed. Sullivan says that he and the CEO had to impose some discipline at the outset to make sure the executive team adopted the process consistently, but once the executives began to see the benefits, the process took on a life of its own. According to Sullivan, one of the most challenging aspects of this process is moving from a broad picture of future strategic direction to the specific skills and capabilities required to get there. “We’re good at defining future direction, but it’s hard to tie it down in terms of how many more people we’re likely to need doing html programming, for example.”

• The list of potential successors should be short and realistic – can you really see that person in that position? If not, don’t include them. • Cross-check to avoid the same person appearing on multiple lists, which is an indicator of a weak succession pipeline.

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“The best way to grow your own leaders is not to earmark specific backup people for specific jobs. It is much more effective to identify and develop a pool of people who have the potential to fill multiple senior management positions.” Byham et al (2002)

Can you really predict ‘readiness’?

• Succession planning needs to be much more than a bureaucratic exercise in maintaining lists. If you never appoint anyone from the list, you should ditch it.

Succession plans often score individuals on how ‘ready’ they are to take on the position in question. This is often along the lines of ‘ready now’, ‘ready in one to two years’ and ‘ready in three to five years’. We question the value of measuring readiness in such a crude way.

• Succession planning needs to be part of an integrated set of systemic talent processes that bring together assessment, development, performance management and retention.

• It’s often a ‘finger-in-the-air’ measure. Someone might be scored as ‘ready in three to five years’, but on what is this based? Three to five years out is too far ahead in most organisations today. • People often don’t become any ‘readier’ from one year to the next. • Readiness doesn’t happen by accident; it depends on individuals having the right experiences to develop the skills they need, and being able to learn from those experiences. Matt Paese, VP Executive Succession, DDI said: “Thinking that someone will become more ready just because they’ve done a certain job for a while is a cop-out. There needs to be a plan for that person to build the right experiences to get closer to being ready.” Marc Effron, President, The Talent Strategy Group, suggests readiness ratings are unnecessary if you’ve already assessed someone’s potential. “I don’t see why you need both a potential rating and a readiness rating. If they’re high potential, they should be on a succession plan and you should be planning for how they can be developed to close the gap.” Discussions around readiness need to be more nuanced. What are the gaps between a person’s current capabilities and those required if they took on this role? What and who will it take to get that person ready? Are they already ‘ready enough’? What risks might you be prepared to take if you appointed that person before they are fully ready? The answers to such questions can drive an action plan for an individual rather than assigning a vague and meaningless label to them.

Talent pools

Succession planning starts with the role, but many organisations focus their talent management efforts on individuals who have potential to progress more generally, not just as a potential successor for a specific job. They build pools or lists of talented people on whom to concentrate attention. Talent pools are a good way of overcoming the downsides of succession plans. • When the time comes to make a senior appointment many organisations either don’t consult their succession plans or find that none of the potential successors is good enough or ready enough to step up. They then implement an external search, effectively disenfranchising all the people on the plan whom they’ve overlooked, and consequently squandering the investment they’ve made in their development. • By trying to plan at the job level, succession plans assume that the future is more predictable than it actually is. • Succession plans can create a false sense of security, while tying up time and resources. Peter Cappelli says: “The problem with [traditional succession planning] is that the organisation chart is restructured with each change in strategy, reorganisation or change in top leadership.” He suggests it’s better to develop talented individuals more broadly for a wide range of jobs, to allow for more flexible deployment of talent as and when required. One of the advantages of talent pools is that they support the direction of travel in talent management, which is about encouraging the individual to take greater responsibility for their own development. Being in a pool affords the individual opportunities for development and progression – provided they are sufficiently engaged. You should bear in mind a number of key factors when setting up talent pools. 1. Which pools and how many? This should be determined by the business strategy and workforce plan. Some organisations have multiple pools at different levels with the aim of building a pipeline of potential future leaders at all levels. Others have specialist pools designed to develop critical technical or commercial capabilities. However, we have noted a trend away from the complexity of managing multiple pools towards a more dynamic approach based on managing a single larger talent pool for the whole organisation. For example, IBM has adopted a single talent pool for people with the potential to progress to executive positions. Managers can add individuals to the pool at any time, not just when annual reviews come round. The pool includes both technical and business talent, but their common characteristics are leadership, innovation and commercial capabilities. This particular trend is consistent with our observation that organisations are increasingly focusing talent activities on people with highly adaptive skills such as ‘learning agility’, who can be deployed to address different business challenges and be relied on to learn quickly. PayPal is focusing its talent programmes on people who are ‘game-changers’ – skilled in navigating through a volatile environment.

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Nine-box grid

MEDIUM MEDIUM

ENIGMA

GROWTH EMPLOYEE

FUTURE LEADER

High potential to advance further although underperforming

Demonstrates high potential to advance further

Highest potential – best for senior succession

Maybe in wrong job/wrong manager; needs intervention

Valued talent, challenge, reward recognise and develop

Top talent, reward, recognise, promote, develop

DILEMMA

CORE EMPLOYEE

HIGH IMPACT PERFORMER

Likely to have scope to move one level/challenge is necessary as under performing

Motivate, engage and reward

Strong contribution, challenge, reward grow and motivate

Provide coaching

LOW LOW

P OT E N T I A L

HIGH HIGH

Figure 13: Nine-box performance/ potential grid

UNDERPERFORMER

EFFECTIVE

TRUSTED PROFESSIONAL

Has reached job potential and is underperforming

Specialised or expert talent reached career potential

Performance manage or exit

Engage, focus, motivate

Retain, reward, help with developing others

LOW

MEDIUM

HIGH

PERFORMANCE

Peter Cappelli suggests that businesses with multiple divisions should treat their talent pools like an investment portfolio and take a cross-divisional view. This would help them balance the risk of having a surplus in one area and a deficit in another, and afford a broader range of opportunities for developing talent.

2. Who gets into the pool and how are they selected?

One of the most commonly-used items in the talent toolkit is the nine-box performance/ potential grid (see figure 13 opposite). Its simplicity is appealing, but it has many drawbacks. Several of the organisations we interviewed are trying to phase it out, but have yet to find a suitable replacement. The grid comes into its own when it encourages managers to distinguish between performance and potential. When it is used to stimulate structured dialogue about individual progression and development, it can be helpful. But too often populating the grid becomes an end in itself. Managers can find it extremely difficult to differentiate between past performance, future potential and readiness for promotion. It also inevitably over-emphasises the top right-hand corner – high performing, high potential ‘stars’, who are not necessarily the people who add most value to the organisation today. Sometimes managers are tempted to game the system if they think being in a particular box will mean a better bonus for their team member or give them access to a popular development programme for example. Judgements are often made without a proper examination of data and evidence, and the grid gives spurious precision to an imprecise subject. We would urge organisations to use it with caution.

Usually it is people who are deemed ‘high potential’. Some organisations have sophisticated data-driven processes for assessing potential, with ratings calibrated for consistency across different populations. Others rely on line manager ratings of potential, or select high performers and presume they have got what it takes to be successful in a more challenging role. Many firms use a nine-box grid or similar to plot performance and potential. Some organisations allow people to put themselves forward for consideration, but this is rare. The CRF report Assessing Potential (Chamorro-Premuzic and Pillans, 2016), explores this topic in more detail. Clutterbuck (2012) suggests a much simpler way of identifying talent. People belong in the talent pool if they demonstrate the following attributes. • Significant continued investment in their own development. • A track record of assisting the development of others – for example, through coaching or mentoring. • Ambition to achieve greater responsibilities. • High motivation and ability to learn.

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Case Notes – Succession planning and talent pools The more advanced organisations tend to have numerous talent pools and programmes covering various levels and functions. For example, Hilton Worldwide has a wellembedded corporate philosophy of viewing all people as talent, but also runs high-potential and top-talent programmes. It has fast-track graduate schemes for general management roles, and functional talent pools in areas including Engineering, Commercial, Sales, Finance and HR. The talent team runs quarterly talent reviews by level across the whole organisation, down to supervisor level in hotels. Where there is lots of change going on, reviews can happen more frequently. The company is also up-front with people that they will be expected to move every few years. As a result Hilton makes 85-90% of senior appointments from within. Succession planning at the John Lewis Partnership has become more fluid in recent years. Plans used to identify three-to-four-year successors, but the Partnership now plans only for emergency cover and one-year succession for individual roles. Looking further out, the Partnership identifies pools of people who might be able to take on various senior executive roles in the future. Similar roles, such as commercial positions, are clustered together. Conversations around succession planning at senior levels now consider a wider group of people who could go down various routes.

Many organisations are now tracking external talent pipelines, either through engaging headhunters to map the talent landscape or using internal recruitment teams. For example, Standard Life works with external partners to understand what the top 10% of talent looks like in the market and regularly undertakes externally benchmarked assessments to shape development plans for key internal talent to increase their likelihood of securing a senior internal appointment. Increasingly, firms are building sophisticated search capabilities inhouse, which assist with identifying external talent and keeping it warm. Social networking platforms such as LinkedIn are making it easier for companies to identify and connect with high performers who currently work for competitors or in related fields. Some organisations task line leaders with building relationships with these people with a view to employing them at some stage. 3. What do you tell people in the pool? One of the key areas of debate around talent management is how transparent to be with people who are deemed ‘talent’. Only 58% of respondents to our survey said they inform individuals in talent programmes of their status as ‘talent’. CRF’s research on assessing potential (Chamorro-Premuzic and Pillans, 2016) found that even fewer organisations are transparent with individuals about ‘potential’ ratings. We find this surprising. People who know they are valued by the organisation and are aware of the development opportunities that are available to them are more likely to be committed and engaged. Some employers worry about setting expectations they can’t meet, or are concerned that ‘talented’ people will let their designation go to their heads, or make them more likely to leave. In fact, the CRF research underpinning the Assessing Potential report found that people who are made aware of their status are less likely to leave. A concern is that the majority of the employee population who aren’t judged to be ‘talent’ will be demotivated. We suggest the way to tackle this is to have a compelling EVP for all employees, and opportunities for all to develop and grow.

Individuals labelled as ‘talent’ should be treated as grown-ups. • Let people know they are in a pool or on a succession list, but be clear about what this means. For example, you may wish to emphasise that while it will give access to specific development programmes, it is no guarantee of promotion. • Discuss the commitments on both sides. Clarify what the organisation is prepared to invest and what it expects of the individual in return – for example, the kind of moves they may be required to make in order to advance. Are they up for it? “By being honest with them, you are empowering them to make decisions about their careers. You are treating them like adults.” (Effron and Ort, 2010). 4. How long should they stay in the pool? One of the advantages of talent pools is that they can be dynamic – individuals drop in and out of the pool as their circumstances change. Decisions about how long to keep someone in the pool and what would prompt their exit (for example a promotion, or failure to progress) will depend on each organisation’s talent strategy. Peter Cappelli suggests that, as the business planning horizon has shortened, it makes sense to shorten the time people spend in talent pools. Our view is that to avoid becoming stagnant the pool needs to be cleaned out and topped up regularly. That implies reviewing it at least once a year. Some organisations have regular quarterly or six-monthly reviews; others keep their talent pools under continuous review.

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“Moving people across the organisation is 1,000 times harder than bringing them in from outside.”

5. What happens to people once they are in the pool?

Adult learning theory in action

We have heard stories of people being appointed to talent pools as a ‘reward’, but nothing happens as a result. It is vital to think systemically about how talent pools connect with other people processes such as leadership development, reward, internal appointments and retention. CRF’s Integrated Talent Management Model described in Chapter 4 provides a structure for thinking through how being included in a talent pool should connect to other elements of the people strategy. Key points to consider include the following.

The design of talent development programmes needs to be rooted in adult learning theory. The CRF report Leadership Development – Is It Fit For Purpose? (Pillans, 2015) covered this topic in greater depth. Here, we summarise the key findings.

• What happens when vacancies arise for critical positions? Do pool members get priority over other internal candidates? Are all vacancies open to all employees or are some only available to people in talent pools? Who decides which are ‘open’ and ‘closed’ vacancies, and how? HR needs to develop carefully considered, coherent policies on these issues. • What development opportunities are available to people in the talent pool? This might include a range of things, including opportunities to attend leadership development programmes, being assigned a mentor, and being offered a rotational assignment. Again, this is where business strategy and the future talent needs of the organisation must drive choices. • How actively does the organisation manage the careers of people in the talent pools? Where does the balance lie between individual and organisational responsibility? We found that most organisations do not view succession planning and talent pools as an either/or choice. For example, they might have succession plans for key executive roles, and use talent pools to highlight and plan the development of emerging talent lower down the organisation. Our concern is that there is significant scope for over-complication, particularly where succession plans and talent pools have to connect. Time and again we hear the message that line leaders are put off because the process is unwieldy. We therefore suggest focusing on the following priorities. • Make sure your approach is driven by the strategic priorities of the business. • Focus on identifying and following through on actions to develop – not just identify – talent. • Keep lists and plans fresh, up-to-date and relevant through regular reviews. • Be clear about the purpose of talent pools and succession plans in your context. Should they be connected or do they operate independently? How do people move between succession plans and pools? If you’re in a pool, should your name be on one or more succession plans and vice versa?

Neuroscience is beginning to shed light on ways of designing learning in line with optimal brain function. The main conclusion is that traditional classroom-based teaching alone is not the most effective way to learn. The features of well-designed development interventions include the following. • Building in space for reflection, discussion with peers and senior leaders, and practice. • Making content, experiences and exercises as relevant to the real work of leaders as possible. • Engaging different senses and emotions, for example through stories, video and handson experience. • Recognising that it takes years of practice to master skills such as leadership; they can’t be taught in a five-day programme. • Making sure that the work context is receptive to the new skills being developed and allows for those skills to be put into action. A key recommendation is to make learners aware of how they learn, teach them how to reflect on what they have learned and how they can apply it in practice, and to make line managers accountable for supporting their learning.

• Make sure the process is owned by the business, not HR.

2.6 Developing talent So you’ve identified your most talented high-potential people and you’ve put them in a pool or on a plan. Now what? Research by Wright et al at the Center for Executive Succession at the Darla Moore School of Business, found that the practices for developing executives that were seen as most important by CHROs revolved around giving ‘talent’ access to senior leaders (both directly and as mentors), and developing them through on-the-job experiences such as rotational assignments and real business challenges (see figure 14). 35

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What to do about blockers “Failure to remove blockers can seriously impede an organisation’s ability to follow through on development plans.” Effron and Ort, 2010. What do you do when you have a ‘rising star’, but the job you’d like to move her into is occupied by someone who’s a steady performer but unlikely to progress further? Working out what to do with ‘blockers’ who restrict the flow in the talent pipeline is one of the elements of talent strategy that needs particularly careful thought. Some organisations include in their talent reviews a check on people who are no longer progressing, to determine whether the time has come to move them aside, down, or even out of the business in order to create growth opportunities for others. One of our interviewees commented: “It’s a really important element of our talent planning – it breathes life into succession. Without this, we would only create half to two-thirds of the opportunities we need to allow people to progress.” Another organisation reviews all people above a certain salary level, asking questions such as: “Are they still energised?” and “Are there people coming up who we need to keep or create opportunities for?” Another tactic is to pay close attention to people in the middle of the nine-box grid. If they stay there for more than a short period, it may be time to think about moving them. Moving someone who is not necessarily a poor performer may be difficult, but there is a significant opportunity cost in allowing an average performer to stay in a role where a high performer is likely to make a bigger contribution.

Figure 14: Relative importance of practices for developing future C-suite talent Provide high-potentials access to senior leadership Identify real business challenges for high potentials to tackle and solve Develop high potentials through job/role change to give new challenges and fill experience gaps Provide rotational assignments for high-potentials across departments and/or functions Provide mentoring/coaching from inside the organization Provide experiences required for critical leadership positions and mapping your high potentials Regularly re-assess and reconstitute (move in and out) the existing high-potential pool Sponsor and fund executive MBAs to develop business acumen/strategic thinking Formally assigns development responsibilities for each high potential Conduct formal assessments (360, cognitive/personality tests, assessment centers, etc. for skill gaps in HiPos Leverage external leadership development programs

Identify opportunities to serve on non-profit boards

Provide mentoring/coaching from outside the organization Conduct internal leadership development programs that are unique to your organization’s strategy Ensure candidates gain experience working and living abroad Identify opportunities for external presentation and visibility (events, conferences) for high-potentials

Not

Less

Somewhat

Important

Very

Critical

Source: Center for Executive Succession, 2015

CRF’s Assessing Potential research found that the most commonly offered development activity for high-potentials is the opportunity to attend an internal high-potential or leadership development programme (offered by 75% of survey respondents). So what’s more effective, on-the-job or classroom-based development? We would argue that both have their place, but the focus should be on the first. Research going back over many years has shown that the best way to develop future leaders is through experience. Therefore, in order to build a pipeline of talent, the organisation and the individual need to work together to build a portfolio of job assignments and career moves that allow the individual to gain the experiences they need to grow into critical roles. This has some important implications.

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1. Organisations need processes to help talented employees build the right experiences. These are likely to include facilitating internal job moves, often across functional or geographic boundaries, and/or ensuring the individual has the opportunity to build and practise new skills in their current role – for example by assuming project responsibilities on top of their day job or participating in an action learning programme. Assigning people to managers who are known as strong coaches is another means for development. 2. The effective deployment of people in talent pools is a key skill that successful talent developers need to master. Wendy Hirsh said: “The hot money should be on better deployment of talent. People still look at it one job at a time, which is not very strategic. They should be saying: ‘We need to get some of our best people into this function or this part of the world, and here are the steps to get there.’” 3. It is important to help individuals learn from experiences, so they can reflect on what they have learned and how they can use the lessons to improve (see the column ‘Adult learning theory in action’). This could be something they work on with their line manager, or it may be built into the design of talent development programmes. 4. Organisations need to be prepared to take calculated risks on people, but also to deal with the consequences if it doesn’t work out. Unfortunately, this usually results in people leaving. One interviewee commented: “We do take punts on people, but we have a low tolerance for failure, and if it doesn’t work out, they get spat out.” 5. Delayering has meant that many of the development roles for future leaders that used to exist have disappeared. For example, country managers have been replaced by functional lines of management reporting to general managers or executives with responsibility for a continent or sub-continent. It may therefore be necessary to ‘manufacture’ developmental roles. For example, GE was known for creating ‘Popcorn Stands’ – small businesses with profit and loss accountability that could otherwise have been consolidated – to help develop general managers. Another option is to put promising employees in charge of internal start-ups or joint ventures. McCauley and McCall (2014) have developed a framework for using job experience more systematically to develop leadership capability. The underlying principle is if talented individuals are given the opportunity to take part in strategically relevant experiences, and something is done to ensure they learn the lessons of these experiences, it increases the probability of having the leadership talent necessary to lead the business strategy.

Is there a process to get talented people into the right developmental opportunities when they need them?

Is there a career-long perspective and a focus on transitions?

McCall et al (1988) identified a set of key experiences that successful executives had typically gone through. Organisations can use these as a basis for designing a set of critical experiences for their own potential leaders. There may also be experiences that are specific to particular organisations – for example, negotiations, joint ventures and alliances, implementing a new business process, or running a major change programme. Setting the Stage - Early work experience - First supervisory job Leading by Persuasion - Project/task force assignments - Line to staff switches Leading on Line - Starting from scratch - Turning a business around - Managing a larger scope When Other People Matter - Bosses Hardships - Personal trauma - Career setback - Changing jobs - Business mistakes

Figure 15: A framework for learning from experience

Critical learning experiences for developing leaders

Is leadership development an integral part of the business strategy and organisational culture?

- Subordinate performance problems Source: McCall et al, 1988

Mechanisms

TALENT

Business Strategy

EXPERIENCE

THE RIGHT STUFF

= Catalysts

Are people with leadership potential identified and their development progress tracked?

Are potentially valuable developmental experiences identified and treated as corporate assets?

What is done to increase the odds that people will learn the appropriate lessons from their experience?

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Building strategic skills Among the hardest skills for future leaders to learn are strategic skills – for example, being able to make sense of complex sets of information and trends, to craft a clear vision and strategy, and to operate effectively crossfunctionally. Paul Schoemaker, of Decision Strategies International, commented: “Few managers get concrete advice on how to be ‘strategic’ – the concept is fuzzy, ill-defined and hard to grasp. As a consequence, organisations are ineffective in developing strategic leadership ability at multiple levels.” As individuals move towards the executive ranks, they need to become more ‘strategic’. But people rarely get the chance to develop or practise these skills until they’re one step away from an executive role, or – even worse – they’re in post. Organisations don’t begin addressing the strategic gap until it’s too late; they need to do the groundwork earlier. When planning development for talented individuals, organisations should consider carefully what to do to help people exercise their strategic muscles sooner. Indeed, mastering strategic skills should be a criterion for progression beyond middle management. You can develop this experience without deploying people into ‘strategy’ jobs. For example, putting someone in charge of an important customer project, a cross-functional change programme or a market development role can be an effective way to build strategic capabilities.

Learning from experience will become even more important as industries become more dynamic, competitive and fast-paced. The ability of leaders to learn and develop as they go, and adapt to changing circumstances, will become even more consequential.

Talent reviews (discussed in more detail in the next section) are the ideal forum for executives to explore questions such as • who is ‘talent’ within the organisation? • which strategically relevant experiences can we make available to these talented individuals? • what job moves can and should we make happen? • what actions will we take, in what timescale, and who will be held accountable? However, organisations find it very difficult to do experience-based development well, for the following reasons. • The organisation culture and senior leadership team is not supportive. • Leaders are not prepared to take a risk on putting someone untested into a critical role. • Managers try to shield valued talent to avoid losing a key person, or offload a poor performer. • Immediate business priorities take precedence over developing future talent. • Talented individuals are reluctant to move. But people don’t have to change jobs to develop new skills; organisations can craft learning opportunities into everyday work. Options include • stretch assignments • project roles • action learning • deputising for a more senior person • using maternity cover as a short-term assignment • teaching a new skill to someone else • non-executive directorships or pro-bono work. For example, the John Lewis Partnership helps high-potentials find opportunities for non-executive director roles through charity partnerships. Differentiated development for all employees Some organisations use the same tools they utilise to identify talent to differentiate their development offer based on performance and potential. One example is InterContinental Hotels Group (IHG), which maps development opportunities to the nine-box talent/performance grid (see figure 16).

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Figure 16: Development actions for 9 box grid Top performer

Exceptional candidate

Next generation leader

• Understand what they’re passionate about and find opportunities to play to this • Help them build their expertise and consider lateral moves / assign to our most critical roles & projects • Find opportunities to coach or mentor others to share their expertise • Find ways to become an ambassador for IHG externally • Use their expertise to help build talent at IHG i.e.; Career Insights assessor, Leading Others facilitator • Invite to be part of IHG HiPerformer Talent Deal

• Identify what’s missing in their work experience or skill set and build a plan to address these • Provide challenging & visible projects / roles to accelerate development Priority candidate for leadership programmes • Set up mentor / coach • Get them to mentor other HiPo’s • Candidates for international moves • Invite them to be part of IHG HiPotential Talent Deal

• Identify critical skill/experience gaps; put in place bold, stretching development e.g. high risk assignment • Prime candidates for international & cross functional moves • Significant senior management exposure • Priority candidate for leadership programmes • Mentor / Coach • Get them to mentor to other HiPo’s • Invite to be a part of IHG HiPotential Talent Deal

Highly regarded professional

Strong candidate

Future next generation leader

• Explore motivations and understand if role is a good fit for them • Build confidence – providing support, feedback and opportunities to develop in this or other roles • Build development plan with goal to help them become a ‘top performer’ • Understand whether aspirations are for specialist and general management roles – consider job rotations or lateral moves to gain relevant experience

• Focus on new projects or roles to increase their scope & broaden skill set • Stretch & test: via on the job targets or through special projects to observe their performance & potential • Build development plan with goal to help them become exceptional candidate • Explore aspirations & consider for roles at next level

• Identify critical skill / experience gap; put in place stretching high risk development • Prime candidates for international & cross functional moves • Build development plan with goal to help them become next generation leader • Significant senior management exposure • Priority candidate for leadership programmes • Mentor / Coach • Get them to mentor other HiPo’s • Invite to be a part of IHG HiPotential Talent Deal

Lower performer

Inconsistent leader

Too New

• Identify the root cause beneath their current performance • Discuss what improved performance looks like and what support is needed to get there • Closely monitor following performance management process and implementing a performance improvement plan

• Identify the root cause beneath their current performance • Consider what development is required to help them perform in current role • Consider what the organisation could be doing differently to create the right environment for them to perform • Explore what motivational factors may be at play • Understand whether alternative role is likely to be a better fit to help them fulfil their potential

• Ensure strong induction • Build clear KPO’s & 100-day plan • Focus on development plan to build relationship knowledge & capabilities to accelerate their onboarding

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“We believe that if a company did nothing more than have regular discussions about talent every six months and followed up on each decision, talent quality and depth would soon eclipse the nearest competitor’s.” Effron and Ort, 2010

Talent reviews – what tends to go wrong

2.7 Bringing it all together – the talent review process

• Discussions don’t go beyond the superficial. Senior leaders quickly tire of talent reviews if they feel they have learned nothing new about the people being discussed. • Discussion descends into a gossip session. The meeting facilitator must keep participants focused on evidence and actions. • Too much time is spent on assessment and not enough on action and follow up. A common complaint we hear goes something like this: “80% of the discussion is focused on identifying who is ‘talent’ and why. Only 20% of discussion and effort is spent on thinking about how to develop them.” Meetings can easily become a boxticking exercise. • A climate of fear or the presence of a domineering personality will lead to honest views left unsaid, and tacit agreement in the room followed by subversion of the process outside. Discussions need to be open and honest. • Insufficient data. As many objective data points as possible should be included, to avoid vague discussions. These might include performance ratings over multiple years, engagement survey scores, sales figures, feedback from customers, 360degree assessments and input from potential assessments and psychometrics. Managers need to provide evidence to back up their opinions.

Nearly every organisation we interviewed conducts some form of regular talent review meeting as a core element of the talent process. However, we find that the quality of talent reviews varies considerably, depending on the commitment and skills of the line leaders who are involved in the discussions, the quality of the data on the individuals being discussed and the level of credibility and expertise of HR. Some organisations, GE being a notable example, view talent reviews as just as important as financial or business strategy reviews, with executives prepared to carve out significant time in their diaries to dedicate the time needed. Purpose of talent reviews

The purpose of talent reviews is to review consistently and systematically the talent in the organisation. Reviews typically include the following. • Set the business context for the discussion. • Review the quality and depth of talent in the part of the business being reviewed. • Identify individuals with potential to advance. Some organisations make sure all employees are discussed at some point in the talent review cycle. • Provide relevant data on individuals’ performance, potential, career history and aspirations. Many organisations often consider retention risk too. • Discuss critical roles and potential successors. • Agree who should and shouldn’t be included in talent pools. • Agree actions such as development moves, assigning mentors etc. We would highlight the following critical success factors that differentiate the most effective talent reviews. 1. Follow through. Actions need to be agreed, noted and regularly followed up, both outside the meeting and at the next session. The focus needs to be on identifying and committing to development actions. 2. Make it a sequence of ongoing discussions rather than an annual event. More sophisticated organisations tend to conduct talent reviews more frequently than once a year, particularly for key talent pools. For example, at Sony Europe, VP HR Hew Evans has monthly discussions with business leaders and the Head of Talent about what moves should happen within the business. “Country by country, we look at which bits of the business need developing and who needs to move. Each country head has four or five objectives around strengthening the function or rotating people around the business. Rotation is business-led with HR as the catalyst. HR also has visibility across different geographies so, for example, we are well placed to identify a need in one country and fill it from another.”

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“If it was well known that decisions about potential and succession were based on objective data going back several years, people would take the whole process much more seriously.” James Martin, Global HR Practice Leader, Egon Zehnder

3. Tie in with the regular business cycle. This signals the importance of talent discussions within the business cycle. Matt Paese, VP Executive Succession, DDI, commented: “Aligning your talent discussions with your business discussions means your organisation is more likely to sustain its focus on talent development over time. If they are separated, talent discussions will eventually be edged out of mind entirely.” For many organisations, one annual review is unlikely to be enough. Indeed, we have noted a trend towards more frequent reviews that slice and dice the organisation in different ways. For example, Unilever runs talent reviews at all levels that cut across geographies, functions and categories. Some individuals will be reviewed more than once depending on where they sit in the organisation matrix – such as by function and location. 4. The right people should be in the room, with the authority to make decisions. Attendees need to be well briefed and armed with the information that allows them to make appropriate decisions about the individuals being discussed. People should only be allowed to express a view if they have worked with the person in question. The meetings should be facilitated by a senior HR person with good business understanding, credibility and expertise in the talent processes. Part of the HR leader’s role should be to check that criteria such as potential ratings are being consistently applied. 5. Involve peers from other business units. This can often enrich the quality of discussion, including through pushing for evidence to support a position. It may also lead to opportunities for sharing talent across organisational boundaries. At TalkTalk, members of the executive team act as mentors for talent in parts of the business outside their own, so they get to know a broader base of talent. 6. Include relevant personal information, such as mobility, career ambitions, destination roles etc. Many organisations now have talent management technology systems that allow employees to complete these details themselves. 7. Bring in information on relevant job openings that the people under discussion may be considered for.

GE’s ‘Session C’ process The most famous talent review process is probably GE’s ‘Session C’, which has been in place for decades. Following a strict calendar, the CEO and Head of HR spend one month every year meeting leaders and HR heads from each business unit to review leadership potential and talent pools. The process takes at least as much time as financial reviews. All levels of the organisation are covered, down to ‘promising new hires’. Discussions are focused on actions arising from the reviews. The agenda for the discussion includes • succession plans – identifying three or four potential successors to key roles • retention risk • a temperature check for that part of the organisation • a summary of actions. Session C meetings are not optional and have become part of GE’s corporate DNA, surviving the transition from Jack Welch to Jeffrey Immelt as CEO. One of the key success factors is the degree to which line leaders hold each other – and not HR – accountable for actions and results.

8. Make provision for individuals to receive feedback on discussions after the event. It is easier for individuals to take ownership of their career progression if they are aware of what the organisation has in mind for them. This doesn’t need to be a verbatim record of who said what, merely the headlines. 9. Provide training and ongoing support for managers, both in terms of how to run the meetings and how to provide feedback and ongoing development support to their people.

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Case Notes British Airways In Standard Life, all executives (approximately 70 people) are given an internal career development coach. This is a qualified coach who works with the executive to make sure they are keeping their skills current and are continuing to develop. Development is structured around three areas. 1. Experience – identify the next, and next again, role and suitable timescales for making the moves. Experience may be internal or external, including, for example, sitting on another board as a non-executive. 2. Profile and Exposure – both internal and external. This would highlight whether the individual needs more contact with the board or the regulator, shareholders or customers. 3. Learning – identify specific development needs such as an external coach, or a business school programme.

British Airways is a good example of a number of the trends we have noted in talent management. • Greater transparency. Alison Fleet, Senior Manager, Organisation Effectiveness, said: “We’re lifting the lid on the talent process, so it’s a lot more visible to people. We are much more open with people that they are either on or being considered for a succession plan, and we give them the opportunity to say yes or no.” • Shift in culture. According to Fleet: “It’s moving away from ‘BA will do it for me’. Now it’s more that the company will provide ingredients and opportunities for you to take more of an active role in creating your career recipe. So you might end up making either a cake or spaghetti bolognese, depending on what’s important to you.” • Better use of technology. Jane McGill, Talent Manager at British Airways, said: “We’ve been pleasantly surprised by the functionality of the new talent system. All the data we need for talent reviews are on one page, and we don’t need to spend hours creating Powerpoints like we used to.” BA’s careers website provides psychometric tools that help people think about their strengths and motivations. There are also role profiles and career stories that show how people have moved from one part of the organisation to another. McGill said: “This helps counter the view that the only way to progress in the organisation is upwards.” • Strategic workforce planning. British Airways has completed a proof of concept in Engineering and in Mixed Fleet (one of its cabin crew fleets), and is using the lessons to improve the process. It’s helping the airline identify and mitigate risks around key talent pools. Fleet said: “In Engineering this has given us much better information to bring in the right resource and is also helping us consider how to optimise training, ensuring we’re optimising our Engineering talent and matching it to the operational needs of the business, both today and two to three years out. In Mixed Fleet it’s helping us address more short term attrition challenges.” Longer term, it’s also helping the airline plan for how jobs are likely to change in the future. Fleet said: “We’re looking to provide managers information to work with their teams to improve their overall future employability.” • More flexible career structures. British Airways has developed a career framework, which is not a rigid ladder, but demonstrates what types of role people could do at different level. McGill said: “It’s more about drawing a picture for people of the types of experience that would be required to be successful in a more senior role.”

RETHINKING TALENT MANAGEMENT IN A DYNAMIC WORLD

Topics covered

Introduction

3.1

Shifting responsibility from employer to employee

3.2

Leveraging talent technology and analytics

3.3

New employment and resourcing models

3.4

The globalisation of talent

In this chapter, we consider the impact of a number of key trends â&#x20AC;&#x201C; the shift in responsibility for career management from employer to employee, the rise of technology, the impact of new employment models, and globalisation.

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“It’s time to democratise the process and liberate the market for talent. We need to be more transparent and trust the talent to make the right choices. Put the information out there and let the creativity come from the bottom up. Use the technology that’s available to connect people and opportunities. Trust that the creative energy of a whole organisation of 20,000 or 40,000 people will find better answers than you can find top-down.” Stephen Dando, Operating Partner, Bain Capital Case Notes Until around three years ago, the Entertainment company Sky followed a similar talent process to other blue chip organisations, involving talent review meetings, identification of highpotentials and succession planning. However, despite its efforts, insufficient movement was happening. Sky has now stopped trying to manage supply and demand centrally, except for its most senior roles. Talent reviews may still happen locally, but generally the company allows talented individuals and opportunities to connect in an open marketplace. It advertises all senior vacancies, and leaves it to individuals to opt in or out of applying for positions, depending on their ambitions and interests. This has widened the choice of people for critical roles, and Sky has uncovered talent it might not otherwise have spotted. Also, because the process is transparent and fair it helps the organisation achieve its goal of building an inclusive culture. A precursor to this change was a major push on gender diversity. Sky has implemented a women’s leadership programme to help build women leaders’ confidence in putting themselves forward for key positions. Studies suggest that women tend to wait to apply for promotion until they feel completely ready, whereas men are typically more bullish. Providing support to promising female leaders has helped ensure they are not put at a disadvantage in a more openmarket talent model.

Many of the practices we describe in Chapter 2 don’t look very different from what organisations were doing several decades ago. Indeed, you could argue that there’s not much new thinking in the world of talent management today. However, many societal changes, such as the rise of individualism, advances in technology, and globalisation, are making their mark on how we manage talent. In this chapter we consider the impact of four key trends. 1. The shift in responsibility for career management from employer to employee. 2. The rise of technology and analytics in talent management. 3. The impact of new employment models and different ways of sourcing employees. 4. Globalisation.

3.1 Shifting responsibility from employer to employee One of the trends we observe is a more open market for talent, which is characterised by the following factors. • Job opportunities are highly transparent. All jobs, including senior positions that would normally be appointed from succession plans, talent lists or via an external search, are being advertised internally. For example, at any one time, IBM has around 10,000 open positions on its internal job board system. • Employees are expected to manage their careers and decide which jobs to apply for. • Employers are much less likely to orchestrate career moves. However, they may still seek to shape the outcome by encouraging certain individuals to apply. Cappelli and Keller (2014) say: “What has emerged is a system in which employees and employers actively seek opportunities to make good short-term matches inside the firm and assemble them in ways that meet talent needs and lead to meaningful careers.” However, the challenge to this open-market model for talent is that traditional career paths and ladders have largely disappeared. It can therefore be very difficult for people to work out how to build a meaningful career over time and what their next move should be. David Creelman, CEO of Creelman Research, said: “Often, junior people don’t have a clue about what sorts of career opportunities and tools are available, and may not have the selfawareness to ask the right questions.” Many employers, therefore, are providing information to help individuals make better career choices. • Educating people about what talent deal the company offers. See, for example, InterContinental Hotel Group’s ‘Talent Deal’ framework in Chapter 2. • Providing tools such as internal talent systems to allow individuals to populate their talent profile with information including previous experience outside the organisation, mobility, language and other skills, and career plans and aspirations – and share it throughout the organisation. Off-the-shelf talent systems now offer this functionality, but organisations such as Procter & Gamble have for many years had internal systems that allow employees to maintain their own profile. Organisations can call up this information in real-time when an individual is being discussed in a talent review.

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“For us, it’s a change of emphasis. Whereas in the past we might have talked about long-term careers, now we focus on equipping our Partners to be the best they can.” Deborah Strazza, Head of Organisation Effectiveness and Talent, John Lewis Partnership

• Often it’s not evident to employees what jobs and opportunities are available more than one move out. The problem with internal job boards is there is no roadmap to help employees work out what move they should make next. • Some organisations have career portals that provide careers advice and career planning tools, or virtual (and sometimes physical) career centres to help people analyse and plan their careers. For example, Bacardi is building an internal search team that offers individuals who wish to progress the opportunity to have a career coaching conversation with an internal headhunter. The outcomes of the discussion are logged and this information is used to facilitate moves internally. The internal search team also offers a service to help candidates prepare for internal job interviews. • Some organisations map out career paths and job ladders, but these are becoming increasingly irrelevant as hierarchies flatten and organisations find there are many potential routes to the top. Some companies tell stories of senior executives’ career paths. But the reality of how people progress through their career is often quite haphazard and non-linear, so although the stories themselves may be inspiring, they may not be very instructive for individuals looking to craft a coherent career plan. Quintin Heath, HR Director at AB Sugar, said: “We tried career paths but we couldn’t get them to work because we couldn’t find a model that operational managers found useful. It led us to question whether we were just inventing career paths for their own sake, because we thought it was the right thing to do.” We find the following can also be helpful. • Share the strategy and business plan so people can work out for themselves where new opportunities may lie and what they may need to prepare for. • Highlight what skills and knowledge are likely to become more important in the organisation over time. • Help people build their own individual ‘brand’, their social media profile and their network. • Create platforms for employees to share information with each other, rather than funnelling everything through HR. • Give people feedback from discussions in talent reviews so they have a clear idea about where the organisation sees them going, and the steps they need to take to get there. • Train line managers to have good career conversations with their people. The need for better careers support and information extends into the education system. Many employers complain that young recruits lack skills such as communications and teamworking. In some countries there is also a shortage of graduates in critical areas including STEM. Many of the companies we interviewed have outreach programmes with schools, universities and the local community to build pipelines of future talent, in some cases many years before they would join the organisation.

Onboarding Many forward-thinking organisations seek to engage with new hires before they even join. They are laying in place processes to help new hires establish constructive working relationships quickly as well as to socialise the cultural demands of the organisation. • PayPal has a strong culture of collaboration, which can be difficult for external hires at senior level to navigate. In order to mitigate the risks of failing to adapt to the culture, the company prepares the ground for new executives. Before they join PayPal, a consultant from the People team works with the new joiner’s line manager to identify expectations and key priorities. On joining, they receive a detailed list of objectives, priorities and key areas to focus on in the first 30, 60 and 90 days. • At accountancy and consultancy organisation EY, new joiners, particularly graduates recruited in their last year at university, often have to wait a long time after their interviews before joining. EY makes sure it stays in touch with them during this hiatus, for example by sending materials such as video clips providing information about the organisation. The first 90 days are also a critical time for integrating new joiners into the culture. EY has onboarding consultants in each region who are responsible for helping new joiners become and remain engaged. It does temperature-check surveys among new joiner cohorts, and there’s an online portal exclusively for new joiners to help orient them with information and insights about the organisation. • Procter & Gamble begins conversations with new recruits about their interests and potential career plans even before they join the company.

• ARM Holdings’ ARM University programme provides ARM technology and materials to help teach engineering students in universities. The semiconductor IP company has also built strategic relationships with schools and universities that specialise in teaching subjects relevant to ARM’s core expertise. The best students have the opportunity to complete internships while they’re still studying. Jennifer Duvalier, EVP People, said: “This makes ARM the obvious choice for them when they graduate.” 45

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“The end-to-end talent management market is fairly mature. Many ERP providers offer these tools integrated with a core HRMS, payroll, and a wide range of other incorporated technologies.” Josh Bersin, Principal and Founder, Bersin by Deloitte

A new employment deal – ‘the tour of duty’ In The Alliance: Managing Talent in the Networked Age, LinkedIn founder Reid Hoffmann describes a different model for framing the employment relationship in a post jobs-for-life era. This involves signing up employees for a two- to four-year ‘tour of duty’, during which they have the opportunity to make an important contribution to a part of the business. In return, the company helps advance their career, either internally or outside the firm. This model works well in Silicon Valley, where making several job moves over the course of a few years is not unusual, and retaining key people for two to four years counts as reasonably long-term. LinkedIn employs many software engineers, most of whom are unlikely to be promoted to management positions. But a tour of duty, which makes explicit what an individual will learn and the contribution they’ll make, can be an attractive element of the employer value proposition, allowing LinkedIn to attract better quality staff. Setting up a tour of duty involves answering three questions. • What is the overall objective of the tour? • What do the results of a successful tour of duty look like for the company? • What do the results of a successful tour of duty look like for the employee? For LinkedIn, being explicit about the deal on offer creates an atmosphere where people can be more open about their career goals and ambitions, and where it’s acceptable to talk about realising some of those ambitions outside the company. So the company asks both prospective and current employees: “What job do you envision doing after you leave LinkedIn?” This allows it to try to craft a role that meets the employee’s short- and medium-term ambitions. Hoffman says: “Acknowledging that the employee might leave is actually the best way to build trust, and thus develop the kind of relationship that convinces great people to stay.”

• Standard Life, the insurer, has run the Edinburgh Guarantee Scheme, which helps school leavers find jobs with the company, for four years. According to Mark Smith, who runs the programme, it began as part of the company’s agenda to tackle the high levels of youth unemployment in Edinburgh, but has evolved into a successful talent stream. In four years approximately 150 school leavers have participated in the scheme. They stay for six months, are given a real job, and earn The Living Wage. They have a mentor for the duration of the programme and are eligible to apply for internal jobs and training schemes. The company selects programme participants on attitude rather than ability, so there is a broad range of people, many with no or few qualifications. The scheme has been a great success – approximately 75% of participants have graduated to permanent jobs with the company, around 20% have moved to jobs elsewhere and only 2% have left the programme with nothing to go to. • When John Lewis opens a new store, it works with the local authority to offer job opportunities to local long-term unemployed people and ex-armed forces personnel. • Rolls-Royce, the global power systems group, has a number of school outreach programmes, which are run by a business leader who returned from an overseas assignment. Eleanor Radbourne, Head of Global Talent Management, said: “It’s made a real difference to have a business leader in that role. It’s changed the perception of its value and grounded it in business imperatives.” Realising that role models such as teachers and parents are highly influential on young people’s choice of career, Rolls-Royce refocused its activities a few years ago and now targets the teaching profession in particular. It provides materials to schools, parents groups and school governors to help spark children’s interest in science and engineering. Rolls-Royce’s STEM education programme also provides opportunities for accelerated development for internal talent through acting as a STEM Ambassador, a board trustee, or a mentor or coach. It also works closely with Teach First, which trains graduates to be teachers, helps them find leadership roles in education or jobs in industry after a period of teaching. This connection has also established a pipeline of engineers for Rolls-Royce. • Engaging Minds, the strengths consultancy, has found that schools often struggle to provide the careers support that they would like which means children are ill-prepared to choose subjects that are right for them and in which they will thrive at school. This can have an impact on the number of students taking STEM subjects at university, if they are not choosing the right enabling subjects at school. Engaging Minds has developed a tool for young people to work out their strengths and motivators, which helps guide them towards careers they would be best suited to. Thirty-five schools in the UK and hundreds of individuals around the world now use the tool.

3.2 Leveraging talent technology and analytics Talent management systems

Over the past few years many large corporations have adopted integrated talent management systems. Often these are integrated with core HR systems such as HRMS, payroll and learning management systems. However, despite the widespread availability of these systems, less than half of respondents to the CRF survey use technology to enable talent processes (see figure 17). Our interviews suggest that many other organisations are either in the process of implementing the latest technology, or about to adopt it. The most commonly cited systems are Workday, SuccessFactors, Oracle/Taleo and Cornerstone OnDemand.

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“Flattening organisation hierarchies combined with broader job definitions [have] led to the gradual disappearance of well-defined job ladders.” Cappelli & Keller, 2014

Figure 17: Do you use technology to enable your talent processes? Yes

44%

46%

Don’t know

10%

Source: CRF Member Survey

We find that such systems are having a marked impact in ‘democratising’ talent management. • They allow employees to input and edit their own data. Individuals can treat their records as a dynamic CV, so they can regularly add recent experience and new skills. This makes it easier for the organisation to search for specific skills, or to allocate the right people to roles and projects. Some companies find that giving a higher profile to employees’ experience outside the firm highlights valuable skills that they might otherwise overlook. • They make it easier for internal talent acquisition teams to fill jobs, thus reducing costs and increasing internal movement. For example, employees at PayPal can import their LinkedIn profile onto the talent system. This has increased the likelihood of being approached by an internal recruiter for a new role, and therefore helps with retention and lowers recruitment costs. Lynne Connolly, Head of Talent at Standard Life, said: “It means, if we need a Finance person in Hong Kong who speaks Mandarin, we can search for that on the system. Previously, if we knew it at all, it was only because people held it in their heads.” • They can be a way of engaging talent, because individuals can flag up their motivations and career plans. One interviewee commented: “People used to feel like talent reviews were ‘done to them’. Now, because individuals have more control over their data, in particular their aspirations, they feel more ownership.” • They can allow for richer conversations to take place in talent review meetings. For example, at Standard Life, managers have career conversations with their people, and then populate the nine-box grid online before the talent review meetings happen. They arrive at the meeting with the information required for a meaningful discussion. • At both Standard Life and TalkTalk, the new talent system is allowing talent management to reach a wider audience in a ‘light touch’ way. Standard Life encourages all people to update their talent profile in preparation for talent reviews. • Some systems combine self-completed data by employees, with career path information, in order to match people to opportunities and facilitate moves. However, there are some downsides to the new talent technology systems. • Some talent practitioners feel that the processes that are programmed into the systems dictate a standard talent solution, and that there’s little room for customisation. • Legacy systems and poor quality data can compromise the effectiveness of the systems. As one interviewee said: “Every time we run the numbers, we get a different answer on headcount!” 47

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“So far, I don’t think the promise of analytics has really delivered. At best we’re seeing incremental gains.” Marc Effron, President, The Talent Strategy Group

Talent management analytics – examples • Detecting correlations between employees’ performance and their activity on email, social networks, and network mapping, to identify high-potential people who might be missed by traditional assessments. For example, PA Consulting mapped the connections of its partner group, and found that the most connected partners were also the most successful in winning business. The firm is now looking at how it can use these insights to identify talent below partner level who display similar behaviours, but who might not otherwise have been spotted. • Predicting employee populations at risk of high turnover based on historical patterns of behaviour. For example, Morgan Akari, People & Change Director, KPMG described how an outsourcing business process provider employs algorithms to predict hot spots of retention risk. Recruitment for those areas would then be accelerated, so the company has a continuous stream of labour to call on to replace leavers quickly. • Improving the success rates of recruitment. • Identifying ideal career paths for accelerated development. For example, when a partner retires at PA Consulting, the firm maps their career journey through the partnership. It wants to see if it’s possible to identify critical points in the journey when there were significant leaps in performance, and if these can be applied to craft better career experiences for others. For example, it found that a recently retired partner had completed international assignments before each promotion, and it is now investigating whether it can use this insight to help build others’ careers. • Connecting engagement scores with business performance measures such as sales and profits. For example, Starbucks is able to put a monetary value (increased sales) on differences in engagement scores in its stores. • Using analytics to model different talent scenarios.

Identification, assessment and development

We are seeing a number of interesting developments in the way companies use technology to assess talent. Some of these are a bit gimmicky, and not all have been scientifically validated, but they offer some interesting possibilities. • Use of simulations and immersive digital experiences, including gamification. For example, global consumer goods business Reckitt Benckiser has developed Insanely Driven, a game that claims to “get inside your head and find out who you really are.” Candidates are immersed in scenarios that test decision-making under pressure and the choices they make between ‘getting ahead’ and ‘getting along’. • Tools and methods are being developed that can form a picture of someone’s personality based on what they write in emails and blogs. IBM is experimenting with its Watson Personality Insights engine for talent assessment. The system generates a detailed personality profile based on text written by the person being assessed. • The new science of social media analytics has shown that it’s possible to derive insight about an individual’s personality and intelligence from analysing their activity on social media, such as Facebook ‘Likes’. In future, such information may be used to better identify talent and match people to roles. According to Professor Tomas Chamorro-Premuzic, CEO of Hogan Assessment Systems, over half of the variability in the personality and intelligence scores that are measured by psychometric tests can be predicted by a person’s ‘Likes’. • IBM looks at how active employees are on Twitter and LinkedIn, and how many followers they have. Mia Vanstraelen, Director of Human Resources for IBM’s GTS Infrastructure Services Division, said: “If you have lots of Twitter followers, you’ve demonstrated that you can get your message across to lots of people, and that’s an important leadership capability.” Development

• We are seeing the emergence of increasingly sophisticated virtual classrooms and learning portals that are available via mobile devices on-the-go. • Tools have been developed that allow for more collaborative learning and development. The online games company Riot Games has built a system – Growth Profile – for learning from others. It allows individuals to record their areas of strength and identify areas where they need to build capability. The system matches people who are looking for help with those who are willing to give it, and they support each other through informal mentoring and shadowing programmes. Analytics

The proliferation of talent management systems is making it easier for organisations to track and measure the performance of their talent management programmes and processes (see Chapter 4). Rather than simply reporting on what’s happened in the past, the new frontier is to use talent data to predict outcomes – which is the goal of analytics. Organisations are building people analytics functions, but in terms of results achieved, it’s early days. All the main talent systems include analytics tools, but so far the results don’t justify the hype. See the column for some areas that could potentially improve the results of talent management activities. Dave Millner, Executive Consulting Partner at IBM, said the HR function faces two key challenges in implementing talent analytics: a lack of capabilities and low confidence. “One of the difficulties is knowing which questions to ask and where to start,” said Millner. A good place to start, he suggested, is to identify some critical business issues and build a set of questions to test out data and make connections.

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3.3

Alumni networks

New employment and resourcing models Organisations are getting smarter about how to use new technologies and new employment models to meet their resourcing needs. In this section, we explore recent trends in talent acquisition, and how the ‘contingent workforce’ is affecting thinking about talent. External hiring

We are encouraged to see better joined-up thinking between recruitment and talent teams. Many of the organisations we interviewed have sought to break down organisation silos by grouping these functions under the same head. Organisations are trying to do more with less when it comes to recruitment: they may be hiring more people than they were a few years ago, but they are trying to do it at lower cost. Many organisations have built in-house headhunting teams, who not only fill open vacancies, but are also responsible for mapping external talent and developing and maintaining external talent pools. This allows them to be ‘on the front foot’ when they need to recruit externally for a critical role or refresh the internal talent pipeline. The rise of networking sites such as LinkedIn, which allow employers to identify and connect directly with external talent, has helped facilitate this. Having in-house search capability is particularly attractive for line managers with tight budgets, who can find good candidates while avoiding search fees. Recruitment is also becoming increasingly technology-enabled. There are many tools on the market that promise to make hiring through social networks cheaper and easier. For example, TalkTalk is about to consolidate two sites in the north-west of England into a single office in Manchester. The company is trialling a tool – Wanted Analytics – that monitors job boards, Twitter feeds and other social media to determine the ‘heat’ of the market for different types of talent. The tool monitors both supply and demand, such as how many people are responding to advertised jobs, so the company can see how active the market is for that particular skill. It allows companies to tailor their talent attraction strategy to make it more appealing to people with skills that are in high demand. For example, a company might choose to redesign roles for difficult-to-fill jobs, so that people need to be in the office only three days a week – effectively widening its geographical net for prospective employees. In the UK in particular, government-supported apprenticeship schemes are increasingly popular. These allow organisations to attract and train talent directly from school, as well as meet their objectives to recruit people from a variety of social backgrounds. Apprenticeships are proving increasingly attractive to bright young people who are put off higher education by course fees and student debt. KPMG’s KPMG3600 programme, for example, recruits school leavers directly to the firm. They complete rotational assignments in different parts of the organisation over a three- to six-year period and the firm may also sponsor them to complete relevant professional qualifications. Employer brand and Employer Value Proposition

In the ‘war for talent’, the employer brand and employer value proposition (EVP) can be potent weapons, provided they are developed and deployed effectively – and are consistent with the talent strategy. For example, a talent strategy focused on technical excellence might have an employer brand that emphasises the opportunities to create new things or use the latest technology. If the focus is customer service, you may choose to emphasise the working environment, and the impact of the company’s products and services on customers’ lives.

A significant opportunity for organisations is to build better networks with alumni, who may act as advocates for the employer brand and might even choose to re-join the organisation later in their career. Smart companies are reaping benefits from thinking creatively about how to engage with alumni. For example, EY’s definition of talent is very broad and encapsulates pre-joiners and alumni. Finola Harrington, Talent and Development Leader at EY, said: “It’s part of our culture to keep in touch with people and see how they’re progressing. We have a high success rate in bringing people back into the organisation.” During the IT downturn after 2001, Cisco offered voluntary sabbaticals to some employees. It paid them one-third of their salary if they went to work for a non-profit organisation. Cisco maintained a relationship with these employees, who were less likely to be hired by competitors than if they had taken redundancy, and whom it could therefore quickly re-engage when work picked up again. Some organisations engage well with alumni, but on the whole organisations approach it in a haphazard way. LinkedIn hosts over 100,000 corporate alumni groups, but most are run independently of the employer. Some talented employees may benefit from spending a period of their career in another organisation before returning to a more senior position. For example, McDonald’s CEO Steve Easterbrook left the fast food chain several years ago to run Pizza Express and Wagamama, before returning in 2013. EY is beginning to provide support to individuals who wish to leave to build experience in industry. “We look at where we have networks, so we can make introductions for people. We also look at how we can help people get experience in their target industry, so the transition to industry is as smooth as possible, once that individual chooses to move on,” said Amanda Fernando, Coaching and Leadership Development Leader. Organisations may also wish to consider whether they can craft opportunities for top talent to build skills they would not otherwise acquire internally, through secondments or partnerships.

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Case Notes • Riot Games is a Los Angeles-based online games developer. It competes with technology companies to hire the best software engineers. Riot’s employer brand is differentiated by a strong team culture, agile work practices, an emphasis on development and an empowering environment. The value proposition is “You will work with the smartest people in the world, who are also motivated to teach you things.” The bar is set high for recruitment: technical excellence is a given, and candidates also have to demonstrate the right mindset. As a result, recruitment can take some time. The company will often ‘court’ prospective employees over a period before there’s an opportunity to bring them on board. For example, Carl Kwoh, who’s now Head of Talent Operations, joined as a project manager. He first met the Riot team at a gaming show, and the company kept in touch for over a year before he joined. But the payback is retention – turnover is in single digits. Kwoh said: “We recruit people who are intrinsically motivated to work in the way we do – in highly autonomous, empowered, agile teams. People then stay because they love the environment. For those people who aren’t suited to this environment, we encourage them to work out what does motivate them and to go and do that.” • Google is well-known for allowing people to spend 20% of their time on their own work projects. However, there is still significant turnover of people leaving for start-ups. To tackle this, Google has created Area 120, a start-up incubator that allows employees to pursue personal projects fulltime. ‘Googlers’ can submit business plans, and those that are successful spend several months developing their idea with support from the company.

Increasingly, organisations are thinking about whether the employee and customer experience are consistent. Jill Foley, Founder of talent management consultancy On3 Partners, said: “I’m noticing that organisations are paying much more attention to their employment proposition so they can attract the right people. They’re also getting a better handle on the connection between the internal employee experience and the experience for customers – so, ‘if we create a good environment for our people, they are likely to do the right things for our customers, and that will help our business results’.” It is also critical to ensure that the organisation culture, the quality of work and career development opportunities are consistent with the external branding. Where they are not aligned organisations will be punished. Sites such as Glassdoor and Vault offer great visibility into what it’s really like to work for an employer, so there’s nowhere to hide. See the column for some examples of technology companies differentiating their employer brand to attract and retain the best technical talent. The contingent workforce

“The contingent workforce is a provisional group of workers who work for an organisation on a non-permanent basis, also known as freelancers, independent professionals, temporary contract workers, independent contractors or consultants.” (Wikipedia) The use of contingent workers is on the rise. Mercer’s 2016 Global Talent Trends Survey found that 40% of organisations are planning to increase their use of temporary and/or contract workers in 2016. However, we find many employers’ workforce plans fail to consider how to integrate the contingent workforce. John Boudreau, Professor of Management and Organization at USC Marshall School of Business, estimates that: “In many organisations, HR is not involved in discussions and planning around the contingent workforce, and it’s not integrated with the workforce plan.” Our survey indicates that the picture may not be quite so bleak: 43% of respondents to the CRF survey said they take into account contingent workers or external talent pipelines in their talent activities (see figure 18). However, the results of our interviews suggest this figure may be optimistic: most companies are in only the early stages of thinking about how this fits with the overall talent strategy. Figure 18: Do you take into account contingent workers or external talent pipelines? Yes

43%

45%

Don’t know

12%

Source: CRF Member Survey

As in many other aspects of talent management, technology is enabling contingent workers to connect with organisations in ways that would not have been possible a few years ago. Sites such as Upwork and Amazon Mechanical Turk allow organisations to source workers anywhere in the world for one-off work assignments. Workers are awarded ratings based on their performance on assignments, so there’s visibility about their performance and capabilities. McKinsey (2015) estimates that online talent platforms such as Upwork could add $2.7 trillion, or 2%, to global GDP by 2025, as they make it easier to connect the unemployed with work. McKinsey calculates this will equate to increasing employment by 72 million full-time equivalent positions.

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“There’s still a considerable amount of value placed on individuals who have global experience.” Shannon Lawrence, Consulting Manager, DDI UK

The contingent workforce is not just about low-skilled workers or IT contractors, of course, and there are also work exchanges for professional workers. • PwC has developed Talent Exchange, an online marketplace that directly connects skilled independent professionals with PwC consultants looking to staff consulting projects. • Law firm Berwin Leighton Paisner has set up Lawyers on Demand, a flexible legal resource that connects freelance lawyers with clients, and allows customers to bypass the high costs of retained law firms.

3.4 The globalisation of talent As companies have globalised over recent decades, the need to develop executives who can lead outside their home market, or across different markets, has become more pressing. For many employers international experience is now a prerequisite for promotion to a senior executive position. Historically, organisations tended to send expatriates from their home market to run local operations, build new ventures or lead and integrate acquired businesses. However, over the past 20 years the trend has been towards local sourcing and development of talent. This reflects both the cost of expats and the desire to build a workforce that’s consistent with the global footprint and customer profile of global businesses. Increasingly, organisations are also looking to develop ‘global leaders’, who may come from anywhere, including emerging markets, but who are capable of being posted to any region in the world. Among the strategies being adopted is recruiting individuals from target markets while they are students on MBA or university programmes in the West, and then deploying them back in their home country when their courses are complete. Many global organisations also require local leaders to spend time in corporate headquarters or in a different region before taking on a leadership role in their local market, in order to develop a better understanding of and affinity with the organisation culture. Organisations also need to look at what talent is available before committing to expansion in new markets. Those that prepare the ground well are more likely to be successful. For example, Hilton Worldwide starts preparing the talent two years before it enters a new market. Before it had even established a presence in Russia it began partnering with universities that had a speciality in hospitality, and identifying Russian talent. It also found pockets of Russian students in some UK universities who were another source of potential talent for its new hotels.

The contingent workforce – talent implications • In considering the balance of ‘make’ and ‘buy’ in the workforce strategy, organisations should take into account the availability of flexible or contract workers, and the workforce plan should consider the contingent workforce. • Organisations need to decide who is responsible for co-ordinating the contingent workforce – is it HR, or another function such as procurement, or is it a free-for-all where individual managers can hire who they like? Some internal recruitment functions hold a remit to hire all freelance or contract workers on behalf of the firm, which allows the organisation to control costs and apply uniform standards. For example, Perform Group, the digital sports content and media business, hires several thousand independent contractors who provide match data or summarise or commentate on games. The Perform HR team has set up and runs a process to recruit and manage this network. It assesses potential contributors using a cut-down version of the process it uses to hire permanent staff. • To what degree should organisations consider contingent workers when they design internal people processes such as talent management and performance management systems? Should they be concerned about the engagement levels of contract workers? Organisations may wish to reflect on such factors as they grow increasingly reliant on contingent workers. Younger and Smallwood (2016) discuss these issues in more depth in their book Agile Talent (see Reading List).

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Expatriates

China

Notwithstanding the trend towards developing local talent, the CRF member survey found that, for the majority of companies, the use of expats has either stayed the same (31%) or increased (22%) over the past five years (see figure 19).

In today’s world, it’s difficult for an organisation to claim it’s truly global unless it has established a successful operation in China. With a population approaching 1.4 billion, and an average annual GDP growth rate of around 15% over the past 30 years, China clearly affords significant opportunities for growth. It has moved from being a low-cost producer of goods for other markets to developing as a key market in its own right. It is also, for an increasing number of industries, a source of research and development for the broader Asian market. However, China is a challenging market for non-Chinese businesses.

Figure 19: How has your organisation’s use of expatriate assignments changed over the last five years? Increased 22% Decreased 24% Stayed the same 31% Don’t know 23% Source: CRF Member Survey

Whatever the direction of travel, there is clearly a problem with the repatriation of expats once they complete their assignment. According to The Economist, up to 60% of returning expats leave the company within two years, which would seem to be a huge waste of investment. Organisations that manage repatriation well tend to do the following. • Give expats a clear remit for their time abroad, such as transferring knowledge to local staff. AB Sugar employs expats in China purely to provide advice and knowledge transfer to Chinese teams, and does not use them to run operations directly. • Have good processes for managing expats while they are away, such as a strong advocate in their home market or at headquarters who champions their interests, and helps them find meaningful job opportunities for their return. • Encourage expats to maintain their networks back home so they are not ‘out of sight, out of mind’. • Make sure there is a ‘proper’ job for them to return to, rather than let them languish on ‘special projects’ until they resign.

• Retention of local staff has become a huge issue for multinationals. Increasingly, while Chinese talent may choose to work for a multinational for a time to learn the ropes, local employers (particularly those offering international careers) are becoming more attractive. Research by PwC found that the proportion of Chinese workers keen to work for a Chinese employer rose from 9% in 2007 to 28% in 2010. • Global talent management practices may be incompatible with the Chinese culture. Some personality traits that signify high potential in the West do not play out in the same way in China. For example, to get its global standard for assessing potential to work in China, pharmaceuticals giant Eli Lilly had to apply slightly different potential criteria. In Chinese culture, showing ambition can be perceived as negative, so Eli Lilly had to downplay this factor. • The education system, a history of planned economy, and lack of experience outside China means many Chinese people now approaching senior management positions lack understanding of market-based business models. • Language skills are limited. However, there are some success stories. AB Sugar has succeeded in bringing locals up through the Chinese organisation to prepare them for leadership roles. The company has thought more carefully about where to use different types of talent, which has led to significant operational improvements. 1. It tends to employ Chinese people who have previously worked for multinational corporations in specialist functions such as Finance and HR. These people speak both English and the local language and understand local culture, but they also understand how large global businesses work and can therefore liaise effectively with the corporate centre. 2. In its factory operations, it is building a leadership pipeline based on locally-trained Chinese nationals. They may not speak English fluently, but they understand and manage the local workforce well. 3. A small number of expats are on secondment for a fixed period of time, with the remit of transferring good practice from other parts of the world to China. They do not hold operational jobs or run a P&L. Allowing expats to take on only knowledge transfer roles forces local development of talent. Quintin Heath, Group HR Director, said: “The performance of our factories has accelerated since we took expats out of management positions in the model. What happens is that the expats are not in positions of power, so they can’t tell the local Chinese what to do. They have to help them work out the answers for themselves. It’s more empowering for local talent.”

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Case study – Lenovo One of the most remarkable developments in China over the past few years has been the emergence of Chinese companies as global players. There are 98 Chinese companies in the Global Fortune 500 – including the likes of Huawei, Lenovo and Haier – compared with just eight in 2003. So how do Chinese companies go about developing local Chinese executives to be global leaders? In 2005, the acquisition by Chinese business Lenovo of IBM’s PC business propelled Lenovo onto the global stage – despite the fact that most of its management team had never set foot outside China. Over the following three years, the company put in place an accelerated talent development programme to deliver the leadership capability required to meet its objective of becoming a global supplier of personal computers, and the first Chinese global company. One of the striking features of Lenovo’s approach, according to Mary Eckenrod, who was VP Talent and Development at the time, was the amount of investment the company was prepared to make to achieve results quickly. “While they were humble and recognised they had a lot to learn, they were not willing to wait. The IBM track of developing general managers over ten years was just not going to be fast enough.” The company implemented a two-year immersion programme to build a cadre of Chinese leaders who could operate globally. The challenge was to allow the Chinese team to learn while preserving the goodwill in the IBM business. The programme included the following elements. • Immersion in English language. Senior executives attended an intensive six- to 12-week programme at the Monterey Language Institute in California. During this time, executives’ sole focus was learning the language – they were not even allowed to do their day job in the evenings. • Assessment. The top 50 Chinese leaders identified as capable of becoming global leaders went through a leadership assessment process. At the time it was difficult to find useable tools, because few were available in Mandarin, there were few Chinese psychologists who could administer them, and Western tests were compromised by cultural and language bias. • Experience-driven development. According to Eckenrod: “Due to the cultural difficulties we really focused on working out what experiences leaders needed to get.” So, for example, one Chinese executive was assigned to Paris to help him understand European markets. The company prepared the French team so they knew what to expect. People were also moved to roles in the US. • Accelerated general management programmes. At the time there were no such programmes available in China. Executives attended open programmes at Harvard and Stanford. Open programmes worked well as the executives benefited from being exposed to non-Chinese people across a broad array of industries. • Cultural development programmes. Executives attended a programme called ‘East Meets West’ to help them understand Western culture. Eventually this programme was rolled out to the US and Europe as ‘West Meets East’ to help cultural acclimatisation in both directions. Eckenrod found the attitude of Chinese leaders to developing global leaders very different from that in Western businesses. “We found the Chinese are willing to invest in the longer term, whereas Western companies are looking for a two- to three-year return on investment. If someone needed to come off the job for six months to do this, then that’s what happened.” Today, Lenovo continues to be one of the most successful examples of a Chinese company that was able to go global.

Mobility For global organisations, global talent often also means mobile talent. In spite of the reported willingness of Millennials in particular to move countries, there are many barriers in practice, particularly when dual-career families are involved. Some organisations are becoming much more creative about getting around mobility constraints. Examples include the following. • Short-term assignments that avoid longterm commitments that might involve uprooting a spouse and children. • Making arrangements that also suit the spouse’s career. • Allowing individuals who might previously have been expected to relocate, to commute instead. • Allowing regular return journeys to the home location. BAE Systems has a particular challenge posting engineers to Saudi Arabia. It has introduced a number of initiatives to tackle this at different levels. • Recruiting a surplus of technical skills in the UK to develop a pipeline for the Middle East. According to John Whelan, UK HR Director, the company is being much more explicit about the fact that part of the deal for these new hires includes an expectation that they will work in the Middle East for at least some of their time with company. • Building a mirror school in Saudi Arabia to develop local talent. • Getting clients to agree to more flexible arrangements that don’t necessarily require people to live in the country full-time. • Bringing students from the region over to the UK for development before sending them back to the local market. • Workforce planning has brought greater visibility to the issue, and has enabled the company to get traction quicker on what actions to take.

CRF INTEGRATED TALENT MANAGEMENT MODEL

Topics covered

Introduction

4.1

CRF Integrated Talent Management Model

4.2

Integrated talent processes

4.3

Organisation culture and context

4.4

Roles and responsibilities for talent

4.5

Evaluation

In this chapter we introduce an integrated model for strategy-driven talent management. We discuss the implications for various stakeholder groups, including business leaders, HR, line managers and individuals. We also consider how to evaluate talent management.

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CRF INTEGRATED TALENT MANAGEMENT MODEL

“[An effective talent] system is like an automobile, run by systems that operate in sync: ignition, transmission, suspension, exhaust, heating, cooling and so on. [However], many organisations are like a car that comes off the assembly line missing essential components – no matter how high quality the car’s components, it simply won’t run as it should.” Paese et al, 2016

4.1

Case Notes

CRF Integrated Talent Management Model Talent management can be deployed as a strategic differentiator, given the right organisation context and culture, talent strategy and processes. Here, we present the CRF Integrated Talent Management Model, which brings together the elements to consider in constructing a systemic talent management approach. The model is underpinned by the following principles. 1. Led by the business strategy. We discuss in Chapter 2 what this means in practice. 2. Talent-oriented corporate culture. The organisation culture needs to be one in which talented people can develop and thrive. Attempts to manage talent in an organisation context that does not support talent development are bound to fail. The most effective talent management systems have clear cultural dimensions that determine the characteristics, values and behaviours of those the organisation chooses to recruit, promote and develop. The best organisations also articulate and socialise these to everyone. 3. An integrated system. Talent management should be integrated with other organisation core processes, recognising that actions taken in one area affect other aspects of people management. For example, how do our long-term incentive plans reward hipos for sustained development over time? 4. Based on clear definitions. What do ‘talent’ and ‘potential’ mean in the context of our particular business? For what purposes are we developing talent? 5. Rooted in social science. It is easy to be distracted by the latest fad or gimmick, but it is important to understand the theory underpinning any process or tool – does it make sense and is there evidence it works?

Imperial Tobacco’s talent philosophy is evolving, both as a reflection of changes in organisation design resulting from a shift in business strategy, and to keep up with workforce trends. Tim Walker-Jones summarised the thinking that underpins the direction of travel for talent management. • Broad – involves all levels of the organisation. • Transparent – employees are informed of the organisation’s assessment of their potential and what it means for them. • Meritocratic – opportunities and investments are directed towards the best candidates. • Devolved – talent is managed locally, with some central coordination. • Balanced – looks both at managing talented individuals and the needs of critical roles. • Informed – decisions are based on rigorous, data driven assessments.

6. Analysis before action. Do we understand enough about the problem we are trying to fix? Are we jumping to conclusions? 7. Clear objectives. What are the key objectives for talent management? How will we know we have met them? 8. Owned by the line. HR may own development and execution of talent processes, but actions and outcomes need to be owned by the business. 9. Process simplicity. Keeping the processes of talent management as simple as possible, without over-simplifying a complex subject. It can be tempting for HR professionals to add every conceivable bell and whistle, but that often alienates line leaders who have to operate the process. 10.Execution. Good execution of the processes of talent management is critical to success. It’s often the execution – rather than the content – of talent processes that makes one organisation better than another.

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CRF INTEGRATED TALENT MANAGEMENT MODEL

Do you need to be â&#x20AC;&#x2DC;world classâ&#x20AC;&#x2122; at every aspect of talent management?

Figure 20: CRF Integrated Talent Management Model The Talent Management Context

Is it necessary to be excellent at every aspect of talent management, or is it acceptable to do a smaller number of key things well? We would suggest the answer depends on the degree of talent maturity of the organisation, and its strategic priorities. More sophisticated organisations, whose processes have been well established and continuously improved over many years, tend to aim for excellence in all aspects of talent management and are always looking to improve. However, for organisations at earlier stages on the journey, the decision about where to focus should be driven by the strategic priorities for talent arising from the business strategy. For example, if the key business priority for talent is to build digital capability, that might mean developing a compelling EVP and investing in the resourcing function. By contrast, if the priority is to build a strong leadership pipeline, then the focus might be on identifying high-potentials and providing experience-driven leadership development.

Organisation context and climate, leadership, values, structure and processes Need

Plan

Activity

Results

Business Strategy

Strategic Workforce Plan

Integrated Talent Management Processes

Evaluation

Communication

Organisation & talent review

Business Goals

Resourcing & Assessment Costs

Demographics - Shortages - Surpluses - Trends Critical Future Capabilities

Learning & Development

Hire or Develop?

Underpinning principles Strategy-led Talent-oriented culture Integrated system Clear definitions Rooted in social science Analysis before action Clear objectives Owned by the line Process simplicity Excellent execution

Talent Pools/ Succession Management

Business Outcomes

Workforce Risks Critical Roles

Retention

Talent Objectives

Business Measures

Deployment

4.2 Integrated talent processes We have found that the most effective talent management systems are not only directly linked to the business strategy, but also that the different elements of the system are themselves integrated. Research by the New Talent Management Network found a correlation between the degree of integration across all elements of the talent management system and the effectiveness of talent management. See figure 21.

Percent saying that their talent practices on average are...

Figure 21: Integrated Talent Management Systems are more effective 45%

Always effective

40% 35% 30%

Rarely effective

25% 20% 15% 10% 5% 0% All areas independent of each other

Between not integrated and partially integrated

Partially integrated

Between partially and fully integrated

Degree to which talent management system is integrated Source: Effron and Ort, 2010

Fully integrated

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“Talent management is an ecosystem of different people processes and when they all work together significant step change in organisational performance is achieved. To maximise return on investment in talent management, organisations need to look at talent in a holistic, end-to-end way, and be able to connect the dots across their talent pools, particularly for critical roles. Analytics, based on the now and the future, must be integrated throughout.” Morgan Akari, People & Change Director, KPMG Looking at each element of the integrated talent management processes in the CRF model, what might integration mean for each?

Keeping processes simple

1. Resourcing and Assessment. Are we looking for the same things when we assess talent externally and internally? If not, why are there differences? Should our potential model be used for external recruitment? Is the resourcing function aware of the talent strategy and priorities? Are they simply hiring for immediate vacancies or are they looking further ahead? Are the rewards for internal versus external hiring consistent with our talent strategy? For example, at TalkTalk the resourcing team (which is a managed service provided by an external third party) is equally incentivised for placing an internal or external permanent employee or a contingent worker. Are the EVP and employer brand consistent with the talent strategy (and the customer brand)? Do we need to develop differentiated EVPs to target different talent segments?

Talent management is a difficult and complex subject. One of the most valuable contributions that HR can make is to translate complex issues such as how individuals learn or how to assess potential into language and processes that don’t alienate the line managers who have to use them. HR often falls down here: it becomes fixated on the ‘shiny new thing’ rather than looking at what actually works. HR also has a tendency to become obsessed with designing complex forms that have to be completed, rather than getting the process itself right.

2. Deployment. Do our internal deployment processes assist talent to get the job experiences they need to drive their career progression? Do we take into account individual development plans when preparing shortlists for internal positions? Are there mechanisms for individuals to declare what job moves they would like to make to support their career progression? 3. Retention. Do the people in critical talent pools or succession plans have retention plans? Do they have a stretching role, clear objectives, and is their contribution clearly recognised? How well embedded is critical talent in the organisation, for example through strong relationships with the CEO and executive team? Do we understand the factors that lead to key talent being more engaged and more likely to stay with the organisation, and do we act on that? 4. Learning and development. Do people in talent pools and succession plans have up-todate development plans? Is the highest-potential talent being managed by the line managers who are best equipped to coach them and support their development? Are the people who are invited to attend key business programmes the people who appear on succession plans or talent pools? 5. Communication. Do we have a clear policy about what we tell people in talent pools or succession plans, and why? How transparent are we with the rest of the employee population about our talent programmes?

Many managers are sceptical of the value of HR processes and tools. If HR stood in the shoes of the most sceptical managers, they might be better able to think differently about what would be most effective in practice. John McCusker, Global Head of Talent Management at Bacardi, said: “Having managers who question the value of complex and timeconsuming people processes has forced us to keep a keen eye on keeping things elegantly simple to really add value. Our CEO has ‘talking talent’ conversations with his direct reports each quarter. He doesn’t want a 64-page slide deck, or to map people on a nine-box grid. But he is convinced that leaders build leaders and he follows through to make sure his people are developing their talent.”

4.3 Organisation culture and context The organisation context and culture must be supportive if efforts to develop talent internally are to succeed. However, in practice, it’s often the case that the organisation philosophy is at odds with development. For example, a prevailing view that ‘the cream rises to the top’ can lead to complacency about the need to plan for talent development. A development-focused culture is one where, faced with difficult decisions around balancing short-term results and longer-term development, the organisation is prepared to make tough calls to prioritise development. • The best organisations have development built into the corporate DNA, so it is taken as read that a core part of being a leader is the requirement to develop others. This is underpinned by talent practices that have been rehearsed and refined over many years. Companies such as Unilever, Diageo and Procter & Gamble have an ingrained talent mindset, where all managers see developing talent as a fundamental aspect of their role.

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“I very much see it as my personal responsibility to take on the development of future leaders. I don’t hand this off to anyone else – it’s a key accountability I will be judged on.” Andy Street, Managing Director, John Lewis

• Tone is set at the top, or, as the saying goes, ‘the fish rots from the head’. The top team needs to be visibly supportive of development, making the necessary time available in diaries and making the right calls when conflict arises between immediate results and investing in development with a longer-term but less certain payoff. Mary Eckenrod, who was Head of Talent at Cisco when John Chambers was CEO, said: “Chambers was all over this, and he was our biggest supporter. He was the one who pushed the dialogue around talent.” Jack Welch, when he was CEO of GE, was known to personally call promising MBA students who GE recruiters had identified as ideal candidates. • Senior business leaders should drive key development processes – with support from HR. • Leader selection should favour leaders who are focused on developing others. • Managers who fail to support development efforts – through hoarding talent, for example – should be penalised. • It may be necessary to build some slack into the system so there’s capacity to take risks with people. Unfortunately, in seeking to create economies of scale, many companies have eliminated roles that used to be key preparation for top management positions. CRF’s research report Organisation Agility (Worley and Pillans, 2015) found that one of the differentiating characteristics of agile organisations is their willingness to carry some excess capacity, which allows them to move resources around flexibly to staff-up emerging opportunities, and also creates opportunities for development. • It’s also important to consider the context for individuals who are considered as ‘talent’. Are they in a role that plays to their strengths, gives them a degree of stretch and fully engages them? Do they have a manager who supports or hinders their development? • Development-focused cultures accept that a degree of failure is inevitable when people are encouraged to learn through being stretched. Organisations can mitigate the risks by establishing the right support mechanisms, and having a back-up plan. A word of warning. For most organisations, building an inclusive culture that values diverse talent equally is a key goal. However, they must avoid being so prescriptive in the way they identify and develop talent that only people with a particular profile get through.

4.4 Roles and responsibilities for talent Who owns talent management within the organisation is a critical, but challenging, question. Comments such as: “We lack a clear sense of ownership,” or “We’re trying to shift ownership away from the talent management function towards the board/executive team,” came up repeatedly in our interviews and the CRF survey. The ownership picture is very mixed. The CRF survey found that for the majority of respondents, ownership lay within HR – either in the talent management function (34%) or with the HR director (27%). For one-fifth of respondents (20%) ownership lay with the executive team, and in only a handful of organisations did ownership lie with the CEO (6%) or the board (6%). See figure 22 on next page.

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“Unless you’ve got leadership from the CEO on the talent agenda, it’s a waste of time. The CEO has to passionately believe in it, live it and breathe it, and stick ruthlessly to the process.” James Martin, Global HR Practice Leader, Egon Zehnder

Figure 22: Who owns the talent management process?

Talent Management Function

34%

HR Director

27%

Top executive team

20%

Other (please specify)

CEO

Board

Source: CRF Member Survey

We find the most effective CEOs demonstrate common behaviours. • They are visibly involved. They spend time participating in talent reviews, teaching on leadership programmes, and recruiting critical talent. • They articulate their role as a steward of talent. • They hold leaders accountable, following up on actions, calling out leaders who fail to develop their teams, and making it clear that managers will not get away with ignoring or subverting the talent process. • They act as role models by developing and mentoring people who report to them. • They make sure there’s an ongoing dialogue about talent in executive team meetings. • They look to the long term, maintaining the focus on talent even in a business downturn. Jack Welch at GE thought talent management deserved as much focus as financial management. Procter & Gamble chairman AG Lafley claimed to spend between one-third and half his time developing talent when he was CEO.

Raising the profile of talent management Regardless of whether your corporate culture strongly supports talent development, there may be other ways of bringing talent management up the business agenda. • A change in organisation strategy can be a good opportunity to get people to think about what’s needed from a people perspective to execute the strategy. • A major acquisition or disposal can be an opportunity to re-evaluate talent within the organisation. • Aligning with a new CEO or an influential executive with a different view of the value of talent. • Work with the prevailing culture, and build on what’s most likely to grab leaders’ attention. Jennifer Duvalier, EVP People at ARM Holdings, said: “One of the things we did was to build the currency value of management. For example, we conducted research and shared a lot of data about the value of good management at ARM, which worked well in this culture.” For John Whelan, UK HR Director at BAE Systems, that meant focusing on delivery of results. “Our culture is very achievement oriented. So once you make something into a task, people will do it. That’s helped us get leaders focused on making the right talent moves.” • Make the numbers visible. Elly Tomlins, Talent & Leadership Development Director at Whitbread, said: “We started measuring the proportion of external hires at senior level, and it was lower than the leadership team felt comfortable with. That generated pressure to improve, and the rate has already gone up.” • Build a proof of concept. Will Tasho, Group Talent Management Director at Hays, said: “We ran some pilots around the world, and that generated enough trust to make some broader changes to processes.” • Build recognition or incentive plans to drive the right behaviour (but this can be a blunt instrument). • Selling talent management as an important element of risk management.

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“Managers simply lose interest if the process is too complicated or excessively sophisticated.” Paul Chesworth, Chief People Officer, Perform Group

Case Notes Rolls-Royce has recently revamped its talent management processes, which has involved a fundamental change in philosophy: • repositioning talent development as an enterprise-wide leadership obligation • building the leadership pipeline to more closely resemble the company’s global footprint and future sources of growth (45% of future growth will come from Asia) • a renewed focus on growing from within. A key element of success was engaging the Executive Leadership Team (ELT) and Board. Eleanor Radbourne, Head of Global Talent Management, first sat down with ELT members individually to understand their needs and judge the degree of alignment between them. She reached agreement at the high level around the company’s talent philosophy and aspirations. Engaging directly with the ELT and the Board has paid off. According to Radbourne: “I’ve never before known the level of commitment we have now. We have an annual talent rhythm with an agreed calendar of meetings which has been published.” This includes five ELT talent and succession reviews per year of 90 minutes each, and four sessions with the main board every year. The ELT also meets as a team an additional five times a year without the CEO to discuss practical issues arising such as significant resourcing issues. The ELT is also keen to improve the connections between different talent programmes. For example, the ELT requested a group to be set up to review how people are pulled through early career pipelines into mid-career high potential programmes.

Board

Boards need to take an active role in directing and monitoring talent efforts and outcomes. According to Ed Lawler, Distinguished Professor of Business, University of Southern California: “Board attention can have an enormously powerful and positive impact on a company’s efforts to manage its talent effectively.” Talent is an important element of risk management, which is a key board responsibility, and is also becoming a more pressing concern for investors and regulators. • Boards need to be given good information and to have the opportunity to quiz those responsible for developing talent. This means that the HR or the talent management function need to raise awareness of how good talent management drives corporate performance, and provide evidence about how the company is progressing against key metrics. The CEO and executive team, with the support of the HR director, need to keep the board engaged with talent issues. • Boards, in turn, should reserve agenda time to discuss talent. The board needs to consider the overall health of the organisations’ talent pipelines below the CEO and executive level, not just narrowly focus on CEO succession. • Boards can play a role in ensuring that the executive team pays sufficient attention to talent management, and that talent management is integrated with business strategy. Executive team

• The executive team should have and communicate a shared philosophy around talent. Specifics such as a target level of promotion from within, policy around transparency with individuals, and how to make sure potential future executives get the right career experiences are important factors. • A key test is the quality of dialogue about talent in executive team meetings. Are individuals well informed and engaged? • Job descriptions, targets and incentive plans for executives should reflect what the organisation expects of them when it comes to involvement in talent management. • The executive team needs to be accountable for ensuring that agreed actions about developing talented individuals are communicated and implemented. • Executives should ‘walk-the-talk’ by acting as role models and being available to support and mentor people who are in the talent pipeline for C-suite positions. They should make a point of getting to know talented people further down in the organisation. Ben Bengougam, VP Human Resources EMEA at Hilton Worldwide, commented: “What makes the difference at Hilton is less about what we do, and more about the high level of engagement of the executive leadership team in talent development.” The company invites senior leaders to volunteer to spend three days facilitating on talent development programmes. According to Bengougam: “Even though three days is a big commitment for senior people, we get oversubscribed. The whole executive team and the CEO participate.” Line managers

Line managers act as a linchpin in ensuring the corporate rhetoric translates into tangible impact on individual development. They create micro-cultures that can either support or work against corporate talent strategies, and determine how well individuals learn and develop. In the best organisations, managers feel ownership for talent across the whole organisation, not just within their own team. Organisations should do the following.

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“Most organisations fail to appropriately reward managers for developing individuals and individuals for developing themselves.” Ed Lawler, Distinguished Professor of Business, University of Southern California

• Make it clear to all line managers what their responsibilities for developing their people are, and reinforce this in job descriptions, goals and incentives. Consider how to recognise and reward good people developers. • Select managers on the basis of management skills, not technical proficiency. Jonathan Cormack, Director, Talent and People Strategy at the UK Post Office, said: “The greatest leverage HR can achieve in talent management is by making sure the organisation appoints great people managers to management positions.” • Identify the best talent spotters and look to deploy them in ways that allow them to use their skills more widely, such as mentoring newly appointed line managers who are learning the ropes. • Encourage managers to have ongoing dialogue with team members around development rather than making it an annual event. Many organisations are changing their performance management processes to make development discussions more regular. • Teach managers how to spot potential, how to distinguish between performance and potential, and how to support development of individuals in the team. • Educate line managers on the shadow they cast on their team as a leader. For example, at AOL International, Talent Development Manager Nick Henley has embarked on a different approach to talent management. Anchoring it in financial metrics (for example the cost of staff turnover and the opportunity cost of organisational underperformance), talent management is aligned with employee engagement using empirical criteria. Rather than a ‘top down’ delivery of competencies, talent development focuses on a change in manager behaviours that drive engagement consistently. Experiential workshops help managers understand what they need to do to drive engagement both with their employees and customers, and thereby deliver sustainable organisational performance.

Individuals Because individuals are expected to take responsibility for their own career development these days, they need the tools and resources to plan effectively, and the environment has to support them. • Make sure they’re aware of the business strategy and what that might mean in terms of future demand for skills, and future roles. • Publicise and reinforce the cultural qualities that distinguish leaders and in turn provide competitive advantage for the organisation. • Create a context where they feel comfortable sharing their interests, ambitions and motivations, so that you can align their needs with those of the organisation. • Provide tools to allow them to flag up their past experience and future aspirations. • When you move an individual into a development role, make it clear not just what you expect them to deliver, but also what you expect them to learn. • Consider how to reward individuals for developing themselves.

Strategy-driven talent management has important implications for the capabilities required of the HR function. 1. HR needs to build a strong partnership with business leaders in order to understand where the business is going and to influence discussions around the development of strategy and the implications for talent. HR has an opportunity to lead the business in thinking through the impact of demographic and societal changes on talent. In particular, HR could benefit from being more closely connected to the marketing function so as to connect customer insights with talent implications. 2. HR should lead the thinking around talent strategy and design and drive the talent process, but ultimately the outcomes have to be owned by the business. This is a tricky path to navigate, and requires strong consulting, political, critical thinking and facilitation skills. This is about helping the organisation work out the implications of various strategic options, not just acting on orders. 3. HR people need a strong feel for strategy in order to help business people make the connections between strategy and people actions. 4. They should avoid over-reliance on models, frameworks and competencies for their own sake. HR needs to critically evaluate these to determine whether they work and help solve real business problems. 5. Given that data and analytics are going to play an ever-increasing role in talent management, HR needs to get more comfortable with this and build the necessary capabilities.

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“HR needs to view talent in a much more holistic way, seeing the connections between different parts of the talent process. And it needs to bring deep expertise in what motivates people and what drives development.” David Creelman, CEO, Creelman Research

What’s the ideal profile of the talent manager? Given the strategic importance of talent management to the future success of the organisation, the choice of who runs the talent function is critical. It’s an extremely challenging role, combining deep functional expertise, business savvy and political nous. Some organisations choose to appoint a business leader into this position, but our concern with this approach is that it can downplay the importance of functional expertise. Understanding and applying the principles and science underpinning talent management, and the behaviour change required to develop talent, is not something you can do intuitively. Ed Lawler says: “HR staff should have the deep subject matter knowledge that is typically present in leading consulting firms. [HR] should have … the kind of talent management expertise for which many companies today turn to third-party consultants.” The ideal talent manager combines a broad range of capabilities. • Strong interest in and credibility with the business. This would include a good understanding of the company’s performance and key financial ratios, strengths and weaknesses relative to the competition, what key customers think, and deep curiosity about industry trends. • Deep functional expertise, in particular understanding what drives behaviour change. • Ability to build a compelling business case for investing in talent management, in the specific context of their particular organisation. • Influential, with the courage to push back and challenge, and with sophisticated political skills that allow them to build strong relationships with senior executives.

6. HR needs to ensure that development activities for the function itself equip people with strategic skills as they rise through the HR hierarchy. Boudreau and Ramstad say: “The HR profession should be among the most influential and strategically important. Yet this is not the typical reality for HR, even in organisations that highly value their HR leaders.” Shape of the talent management function

The CRF survey explored where in the organisation responsibility lies for delivering talent management activities. Less than half (42%) of respondents have a dedicated central talent management function. The remainder either delegate it to HR Business Partners (22%) or business leaders (13%), or distribute it across specialist HR functions (8%) (see figure 23). Both our survey and interviews reported a fairly complex web of central resource and local execution, which can lead to confusion about who’s responsible for what. Difficulties often arise when top-down corporate-led and bottom-up processes in business units have to connect somewhere in the middle. This is one of the key challenges for many organisations. Figure 23: Where does responsibility sit for delivering talent management activities in your organisation? Dedicated central talent management function

42%

Delegated to HR Business Partners

22%

Other (please specify)

16%

Delegated to business leaders

13%

Distributed across other specialist HR functions

Source: CRF Member Survey

Another key challenge is to break down the HR silos of talent, leadership development, recruitment and performance management, for example. A systemic, talent management process that is aligned with strategy depends on all the elements of the people agenda operating in an integrated way. We observed that responsibilities in the talent function have broadened. While this raises issues around the capabilities required of talent leaders, the fact that organisations are seeking ways of breaking down silos within HR is a positive development. Talent management is less likely to operate as a standalone function than it used to. In our interviews we saw many examples of what is labelled ‘talent management’ also including performance management, resourcing, employee engagement and leadership development, all reporting through the same Head.

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“If Talent was involved earlier when new strategies are being developed, it could really help operational managers determine what’s realistic.” Rebecca Homkes, Teaching Fellow, London Business School

This was borne out in our survey, which enquired about the scope of talent management functions. Unsurprisingly, a clear majority of respondents’ talent teams were responsible for running talent management processes (82%), designing and delivering talent development programmes (71%), and succession planning (68%). However, what was more surprising was that only 59% of talent teams were responsible for running high-potential programmes, which is less than the proportion of talent functions that are responsible for leadership development (67%). More concerning, only 17% of respondents said their talent management function was responsible for workforce planning, and only 10% of talent functions are responsible for employer branding. Just over 40% of talent functions also include responsibility for performance management (41%), learning and development (44%) and coaching (43%), and around one-quarter are involved in the recruitment and deployment of talent. Surprisingly, only 8% have responsibility for retention. Figure 24: Scope of the talent management function Designing and running the talent management process Designing and delivering talent development programmes

82% 71%

Succession planning

68%

Leadership development

67%

Running high potential programmes

59%

Learning & development

44%

Internal coaching programmes

43%

Performance management

41%

Deploying talent across the organisation

29%

External resourcing

23%

Employee engagement programmes

22%

Workforce planning

17%

Employer branding

10%

Retention programmes

Reward

Source: CRF Member Survey

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“It would be wonderful if it were possible to draw a straight line from talent practices to specific business outcomes, but it is not.” Effron and Ort, 2010

Typical measures

4.5 Evaluation

We found that organisations tend to focus on the following measures. • Percentage of roles where there are internal successors. • Percentage of appointments from succession plans to role. • Percentage of roles filled by internal promotion. • Engagement metrics from attitude surveys. • Succession coverage for critical roles (although that says nothing about the quality of candidates). • Rates of turnover, particularly for critical roles. • Percentage of ‘regretted’ turnover – people you didn’t want to lose. • How ‘stretched’ people are in their current role and whether it the appropriate level of stretch for their capability.

Measures such as those in the column can be helpful in tracking how effective the organisation is at attracting, developing and retaining talent, and in highlighting the direction of travel. However, it is also important to conduct a qualitative analysis of whether the programme is achieving its objectives, and is delivering results in line with what the organisation expects. This might involve asking questions such as the following. • What do the key stakeholders for talent management think about the results achieved relative to the costs incurred or the effort involved? • How has our approach to talent management allowed us to differentiate our talent from that of our competitors?

• Whether leaders are getting ‘more ready’ year on year.

• What contribution has talent made to our strategic success (or, conversely, to what extent has our failure to develop talent contributed to our poor results)?

• Retention and promotion rates and speed of career progression for high potentials.

• How often did we have to go outside to fill a role that we should have been able to fill internally?

• Completion rate of development plans (although that says nothing about the quality). • The proportion of people on succession plans who receive a promotion within three years. • The success of the succession candidate after appointment. This particular measure needs to be treated carefully, as there may be a dip in performance for a period until the individual is working at full capacity.

The question of how to evaluate talent management is a vexed one for HR. There are many measures available, but they generally give an incomplete picture about the outcomes that can be directly attributed to the talent programme, and at what cost. Although 64% of respondents to the CRF survey say they evaluate the outcomes of their talent management activities, in reality most organisations simply track a number of measures. Ideally, it would be possible to determine some sort of financial measure that compared costs versus outcomes, but this is virtually impossible to do with any degree of certainty. We did not encounter any organisations that calculate ROI for talent management. In 2004, David Creelman wrote: “There are no proven methods for putting a number on ‘the value of human capital’ and perhaps there never will be.” That statement remains true today.

• Is the management team comfortable not just that development plans are in place, but, more importantly, that people are making acceptable progress against them? • Do we really have our best people in critical roles? • Do people on the succession plan end up where we predicted they would? • Do we have critical roles with no clear successors? • Where have we seen the biggest improvements in talent? Why? Building an effective evaluation process should begin with the design of the talent process in the first place. Questions to consider include the following.

• Turnover of people on retention plans versus others.

• What are our talent management objectives and how do they connect to the organisation’s strategic priorities? What outcomes would constitute ‘success’?

The talent management scorecard also needs to track key business measures, such as costs, customer perceptions, sales, success rates of new products, time to market and quality. For example, turnover may be reduced by 10% over five years, but does that represent good value for money, given the cost of the talent management programme? Have we seen a commensurate improvement in customer feedback?

• What baseline are we measuring against? • What data do we need to measure and how can we make sure the process allows for that data to be collected? Can we connect the measures to tangible business outcomes such as reducing costs, increasing profitability or decreasing time to market? • What’s the feedback loop between the outcomes of the process and making further improvements? • Who needs to know about the results and what mechanisms do we have for communicating them? • Were the results achieved in line with what we expected/predicted?

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CRF INTEGRATED TALENT MANAGEMENT MODEL

“To answer the question, Is our human capital in good shape? we need simple metrics, easily understood by management, that clearly have a causal impact on performance.” David Creelman, 2004

GSK Global pharmaceuticals company, GSK, has an integrated framework for managing talent that incorporates the following steps. • Planning • Identification • Development • Measuring progress. Planning

Talent is a key consideration in the GSK business planning cycle. For example, by considering the talent implications of the growth plan for Asia, the company decided to reorganise the Asian commercial organisation to better meet the business goals. GSK has also implemented a strategic workforce planning tool, which helps identify the potential impact of internal and external talent trends and churn, and identify capability gaps and skills required for the future. Some businesses review their workforce plan annually, and others review it every 2-3 years. Each business conducts talent reviews focused on business critical roles. These are identified on three criteria: strategic impact, business continuity and operational continuity. Make or buy

GSK has a strong culture of development from within, which is championed by the CEO and the board. The board receives regular updates on the results of talent activities via a measurement dashboard. The company has been successful in promoting from within: for those roles covered by succession plans, 85% have been appointed from people listed on the plan. Where the company chooses to recruit externally, this is predominantly to build critical skills, top up pipelines or to meet inclusivity goals. A key concern for GSK is to build a workforce that’s representative of the geographies in which it operates, so that means building talent in emerging markets, which requires some external recruitment. The ultimate aim is not just to develop people to take on leadership roles in their local markets, but also to build enterprise talent that can be deployed anywhere globally. GSK is creating movement among talent in emerging markets by, for example, appointing them to stretch roles within the corporate centre. Attraction

Particularly at the graduate level, GSK is competing against other blue chip multinational employers – not just in the pharmaceutical sector – to attract the best talent. The company’s Employer Value Proposition focuses on how GSK is differentiated. The company emphasises the sense of purpose underpinning its business, and talks about building ‘careers with a purpose’, as well as opportunities for building a broad, international career. It also emphasises its ambitions with regard to building an inclusive culture, which is a key attractor for top talent. GSK has found that talent shortages in critical areas have led it to be more innovative and open-minded about potential sources of talent. For example, the vaccines business used to primarily bring in technical skills by recruiting from competitors due to the highly specialist requirements. However, the evolution of technology has opened up new sources of expertise in sterile development and manufacturing, such as from the brewing industry. This has meant not only that the company has access to a wider pool of talent, but these people have brought in expertise in new technologies which GSK has successfully deployed to improve existing manufacturing processes. Pipelines

GSK’s talent philosophy is that everyone is talent, and this means there are development opportunities for all employees. However, talent management activities pay particular attention to specific groups. The company has pipelines at junior, middle and senior ranks but views these as a single pipeline, with each feeding through to the other. There are specific talent cohorts such as graduates and MBAs. At the top of the pipeline, succession planning focuses on senior executive roles.

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CORPORATE RESEARCH FORUM

CRF INTEGRATED TALENT MANAGEMENT MODEL

The company has some special cohorts to address strategic capability gaps which are identified in the planning phase, or to accelerate particular populations. For example, there’s a science ladder in R&D, which enables accelerated development for talented scientists who wish to stay in a specialist career track, and in Manufacturing there’s a focus on high-demand technical skills. Development

In common with many multi-divisional businesses operating in different markets globally, GSK is keen to help talented individuals build broad careers across different businesses. The company is taking steps to facilitate lateral moves across functions or divisions at an earlier career stage than might have been the case historically, to build breadth earlier in career. Graduates in particular undertake rotational assignments which include international experience. Similarly to other large, complex organisations, getting sufficient talent movement in the middle ranks of the organisation is a particular challenge. GSK has taken a number of steps to oil the wheels. • Identifying typical career plans for critical roles such as General Managers and site directors. These are not prescriptive, but indicate the types of experience someone would need to build to progress to these roles. • Appointing Development Partners, HR professionals who work with key talent in the middle of the organisation to provide career support for people coming through pipelines. Natalie Woodford, SVP Talent, Leadership & OD, said: “The business still takes responsibility for development, but the Development Partner provides active guidance and expertise to add quality to that individual’s career and development plan.” • GSK has tried to run talent reviews across business divisions, but has found this works better when HR works as an informal broker to enable talent moves across businesses. • Some specialisms, such as manufacturing, meet regularly across divisions to explore opportunities for sharing talent. Measurement

GSK uses a measurement dashboard to track the results of talent activities. This is reported annually to the board, as well as regular updates to the executive team. Measures tracked include the following. • Succession status for the executive team minus 1, 2 and 3 levels. • Are the people in key roles also those we consider key talent? • Gender breakdown of talent pipelines and people on succession plans. • Ratio of appointments of successors identified in succession plans. • “Same leader” analysis: the scores of individual leaders on the employee survey are cross-checked over time to see how their leadership skills are progressing. Natalie Woodford says that paying attention to results has had a substantial impact on performance. “It’s been a really good lesson in how measuring makes a huge difference to performance. As we’ve tracked our bench strength over the last five years, we can see how much it’s improved. We can also see the quality of our pipelines improving. Now we are getting more granular on diversity, holding up the mirror so it gets more focus.”

CONCLUSIONS AND RECOMMENDATIONS

Topics covered

Introduction

5.1

Conclusions

5.2

Recommendations

This chapter summarises the key conclusions of our research and sets out some recommendations for improving talent management practices.

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CONCLUSIONS AND RECOMMENDATIONS

“One of the challenges for listed companies is the quarterly reporting cycle, which works against investing in longer-term development. Private and public sector organisations can take a much longer view.” Mike Falvey, Partner, KPMG

Key features of strategy-driven talent management Silzer and Dowell (2010) highlight the following features of strategy-driven approaches to talent management. 1. Driven by business strategy. 2. Requires differential investment. 3. Accepted as a core business process. 4. Integrated across HR practices and processes. 5. Engrained as an organisational and cultural mindset. 6. Practical, efficient and easy to use. 7. Rigorous, objective talent decisions based on strategically important data. 8. Includes relevant outcome measures. 9. Future looking.

5.1 Conclusions • We live in a world where change happens at a rapid pace, and the pressures on organisations to show consistent improvements in results from one quarter to the next are intense. However, sustained performance over the longer term requires investment in the capabilities needed to execute strategy and build and sustain competitive advantage. Good talent management practices, rooted in the business strategy, are a core enabler. • The most effective talent management systems share a number of features. They take as their start point the strategy and future priorities of the business, not where they are today. They build robust but adaptable non-bureaucratic plans that articulate the steps needed to proceed from today’s situation to the desired future, and identify the critical roles required to get there. They are run by leaders who are committed to building a culture that supports development, and who act as role-models by visibly engaging with talent processes and spending time helping others develop. And they think about talent in a joined-up way. • Leaders are also culture-carriers when it comes to promoting the mindsets, values and behaviours that differentiate the organisation from its peers. Ownership for talent management needs to be broadly shared by board members and executives at the top, to the line managers who promote and implement the processes, to the human resources managers who build and adapt talent processes, to the talent itself who find great value in them. • In many ways, the core processes of talent management are similar today to how they looked a couple of decades ago. However, talent management needs to adapt to the dynamic environment that’s the current context for organisations. That means being more agile, transparent, process-light, data-driven, technology-enabled and creative about the sources of talent. • An effective talent strategy doesn’t necessarily mean winning the ‘war for talent’ by beating competitors to hire the best and brightest people. It can mean finding new and innovative ways to meet organisation needs, such as engaging with external partners, outsourcing or using freelance workers. • It’s important to avoid getting bogged down in process, and to stay focused on outcomes. It can be easy to spend too much time identifying and assessing talent, and not enough time and energy on identifying and activating the development opportunities that will enable these people to grow, or removing the blockers that impede others’ development. Redressing the balance of energy and time, and striking the right balance between analysis and action, can make a substantial difference to the performance of talent management systems. • Consistency is also key. It can take persistence over several years for the results to show. Caroline Williams, formerly SVP HR at Ace Group, said: “It takes at least three years for talent processes to bed down, and four to five years to really start to bear fruit.” • HR functions need to challenge and push themselves by engaging with the business in conversations about strategy and its impact on talent, and by demonstrating how good talent management can add value. HR needs to strive for simplicity, ease of use, and utility in talent management processes, to ensure line leaders value them. • There is no ‘right’ answer about how to manage talent. Each organisation needs to work out the most suitable roadmap, based on its unique strategy, culture and business context, and focus on execution and follow-through.

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CONCLUSIONS AND RECOMMENDATIONS

“As a Head of Talent, you have a judgement call to make. You can spend all your time assessing people, or you can get the right balance between understanding enough about who your talent is and working with them to really accelerate their development.” Lynne Connolly, Head of Talent, Standard Life

5.2

Strategic talent questions

Recommendations 1. Connect talent management to business strategy. Is the business strategy clear and compelling? Could you explain it to others? Can you articulate the specific implications for talent? What’s the appropriate planning time horizon for talent? What’s the right balance of make and buy? 2. Make sure HR is sufficiently equipped to be involved in strategy discussions. Does HR need to get involved earlier in the process? Are there insights HR can provide that would help shape strategy, such as key talent trends? Do the HR people who should be involved have good strategic and consulting skills? Are the people running the talent function considered by the business (and not just HR) to be ‘talent’? 3. Clearly define ‘talent’. Is it clear what ‘talent’ means in the specific context of your organisation? Is the focus on developing leaders, technical skills, or building broader capabilities across the organisation such as becoming more digital? Does the talent strategy need to be differentiated for different parts of the business? 4. Focus on critical roles. Have the strategically critical roles been defined for your organisation? Are those roles filled by your best people? Do you need to move people currently in critical roles to open up opportunities for talented people to develop? 5. Build flexible workforce plans. What mechanisms do you need to build to connect strategy and talent plans? Do you need to plan talent for different business scenarios? What are your priorities and what targets need to be set? 6. Communicate the plan. Do business leaders know enough about the plan to be able to support it? Are leaders clear what’s expected of them? Is the plan communicated to employees?

• Where does our strategy require that our talent and organisation be better than our competitors’ to work? • Where would an improvement in the quality of talent and organisation make the biggest difference in our strategic success? • Where should we spend more on pivotal talent programmes and practices than our competitors, and why? • If we shifted our strategic goals, which of our employees or organisation structures would have to change the most? • What do our pivotal employees do that makes the biggest difference to our business? • How does their activity blend with others in the organisation to create that value? • What are the key processes in the business where these activities have their biggest effect? • How does improving these processes contribute most to our ability to build and sustain an advantage in the marketplace? Source: Boudreau and Ramstad, 2007

7. Keep processes as simple as possible and execute well. Are you clear about which talent processes need to be ‘world class’ and which just need to be good enough? Are your talent processes overly complex/full of jargon? Do you know what leaders think about them and how they could be improved? Are you giving processes long enough to bed in or chopping and changing to accommodate the latest fashion? 8. Get the balance right between analysis and action. Are discussions driven by evidence and data? Do discussions genuinely add value to decision making for leaders, or do they simply confirm what they already know? What’s the quality of follow-through? 9. Build an integrated talent system. Are talent management processes integrated and consistent with other people processes? Does the frequency of talent review meetings meet the needs of the business? Do they need to happen more frequently? Are they consistent with the cycle times of other business process such as financial and strategy development processes? 10. Engage leaders in the process. How committed are senior leaders to engaging with talent? What does HR need to do to ‘sell’ the concept to leaders? Is there a particular hot spot within the business, or a particularly supportive leader, who can give you an ‘in’? 11. Develop appropriate supporting policies. Are you clear about when you advertise open positions internally and when you recruit directly from a talent list? Do you have a clear policy about what you communicate to people in talent pools, and who is responsible for telling them?

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CONCLUSIONS AND RECOMMENDATIONS

12. Make succession plans action-oriented. Do succession plans identify tangible development actions for all individuals on the plan? Are they followed up and is progress tracked? Are individuals making progress or are they stuck at ‘ready in two to three years’ for several years? Do people on the plan actually get appointed when the position is vacant? Do you have a good view of potential external successors? Do plans take account of how roles are likely to change? How are succession plans and talent pools connected? 13. Develop your talent through experience. Are there processes in place to get talented people into the right experiences at the right time in their career? How do you assist talented people to learn from their job experiences? Are there plans more than one job move ahead for high-potential talent? Is there a clear and compelling talent deal for all employees? Is there enough spare capacity in the system to allow for development opportunities or is the organisation so lean that moves cannot be made? 14. Equip line managers to develop their people. Do you need to provide additional training or support to help line managers? Do you reward or promote line managers who are good people developers and penalise those who aren’t? 15. Be imaginative about how you acquire talent and your EVP. How closely connected are your EVP and customer brand and value proposition? Do you need to differentiate the EVP to attract particular groups of talent? Are your talent acquisition processes sufficiently. 16. Focus on retaining key talent. Is there a retention plan in place for top talent? Do those identified as ‘talent’ have an interesting, stretching role, a development plan, an appropriate level of remuneration, and exposure to senior leadership? 17. Evaluate. Are you clear about the process for evaluation and what needs to be measured? Are there clear, measurable objectives for talent management? Do you have a baseline against which to measure progress?

REFERENCES AND READING LIST

2015 Talent Shortage Survey, Manpower Group A Workforce Tsunami is Approaching: How You Can Be Prepared and Manage Workforce Risks, Mercer, 2015 Beames C, Identifying Critical Roles, Easier Said than Done!, Advanced Workforce Strategies, 2016

Conger J, Fulmer R, Developing Your Leadership Pipeline, Harvard Business Review, December 2003 Conger J, Lawler E, Addressing the Human Resources Knowledge Gap in Corporate Boardrooms, People + Strategy, Volume 38, Issue 2, Spring 2015

Beames C, Workforce Strategy Audit Survey Report, Corporate Research Forum, London, 2015

Creelman D, Return on Investment in Talent Management: Measures You Can Put to Work Right Now, Human Capital Institute, 2004

Becker B, Huselid M, Beatty R, The Differentiated Workforce: Transforming Talent into Strategic Impact, Harvard Business Press, Boston, 2009

Deal J, Levenson A, What Millennials Want From Work: How to Maximise Engagement in Today’s Workforce, McGraw-Hill, 2016

Bersin J, Predictions for 2016: A Bold New World of Talent, Learning, Leadership and HR Technology Ahead, Bersin, 2016

Effron M, Ort M, One Page Talent Management: Eliminating Complexity, , Adding Value, Harvard Business Press, Boston, 2010

Bhatia V, Caye J, Haen P, Lovich D, Ong C, Rajagopalan M, Sharda S, The Global Leadership and Talent Index: The Smart Way to Improve Capabilities – and Create Value, Boston Consulting Group, 2015

Future-Proofing HR: Bridging the Gap Between Employers and Employees, Mercer, 2016

Bidwell M, Paying More to Get Less: The Effects of External Hiring versus Internal Mobility, Administrative Science Quarterly, 2011; 56(3):369-407 Boudreau J, Ramstad P, Beyond HR: The New Science of Human Capital, Harvard Business School Press, Boston, 2007 Byham W, Smith A, Paese M, Grow Your Own Leaders: How to Identify, Develop and Retain Leadership Talent, FT Press, New Jersey, 2002 Cappelli P, Talent on Demand: Managing Talent in an Age of Uncertainty, Harvard Business Press, Boston, 2008 Cappelli P, Keller JR, Talent Management: Conceptual Approaches and Practical Challenges, The Annual Review of Organizational Psychology and Organizational Behaviour, 2014 (1) 305-31 Cappelli P, Hamori M, Bonet R, Who’s Got Those Top Jobs?, Harvard Business Review, March 2014 Chamorro-Premuzic T, Pillans G, Assessing Potential, Corporate Research Forum, London, 2016 Clutterbuck D, The Talent Wave: Why Succession Plans Fail and What to do About it, Kogan Page, London, 2012

Groysberg B, Chasing Stars: The Myth of Talent and the Portability of Performance, Princeton University Press, Princeton, 2010 Groysberg B, Bell D, Talent Management: Boards Give their Companies an ‘F’, www.hbr.org, 28 May 2013

McCall M, Lombardo M, Morrison A, The Lessons of Experience: How Successful Executives Develop on the Job, New York, Free Press, 1988 Michaels E, Handfield-Jones H, Axelrod B, The War for Talent, Harvard Business School Publishing, Boston, 2001 Not-so-happy returns, The Economist, 7 November 2015 Paese M, Smith A, Byham W, Leaders Ready Now: Accelerating Growth in a Faster World, DDI Press, Piitsburgh, 2016 Pillans G, Leadership Development – Is It Fit For Purpose?, Corporate Research Forum, 2015 Ready D, Conger J, Make Your Company a Talent Factory, Harvard Business Review, 2007 Silzer R, Dowell B, Strategy-Driven Talent Management: A Leadership Imperative, JosseyBass, San Francisco, 2010 Strack R, Baier J, Marchingo M, Sharda S, The Global Workforce Crisis: $10 Trillion at Risk, Boston Consulting Group, 2014

Hirsh W, Planning for Succession in Changing Times, Corporate Research Forum, London, 2012

Strack R, von der Linden C, Booker M, Strohmayr A, Decoding Global Talent: 200,000 Survey Responses on Global Mobility and Employment Preferences, Boston Consulting Group, 2014

Hoffman R, Casnocha B, Yeh, C The Alliance: Managing Talent in a Networked Age, Harvard Business Review Press, Boston, 2014

Succession Matters: Strengthen your leadership pipeline to shape future business strategy, Korn Ferry, 2015

Kaiser R, Curphy G, Leadership Development: The Failure of an Industry and the Opportunity for Consulting Psychologists, Consulting Psychology Journal: Practice and Research 2013, Vol. 65, No. 4, 294-302

Tichy N, Succession: Mastering the Make or Break Process of Leadership Transition, Portfolio/Penguin, New York, 2014

Krupp S, Schoemaker P, Winning the Long Game: How Strategic Leaders Shape the Future, PublicAffairs, New York, 2014 Lawler E, Talent: Making People Your Competitive Advantage, Jossey-Bass, San Francisco, 2008 Manyika J, Lund S, Robinson K, Valentino J, Dobbs R, Connecting Talent with Opportunity in the Digital Age, McKinsey, 2015 McCauley C, McCall M (Eds), Using Experience to Develop Leadership Talent: How Organizations Leverage On-the-Job Development, San Francisco, Jossey-Bass, 2014

When one crisis meets another: Focusing on talent for the long term, KPMG Global Energy Institute, 2015 Worley C, Pillans G, Organisation Agility, Corporate Research Forum, London, 2015 Wright P, Call M, Nyberg A, Schepker D, Ulrich M, Building the C-Suite Talent Pipeline: Insights from the 2015 HR@Moore Survey of Chief HR Officers, Center for Executive Succession, University of South Carolina Darla Moore School of Business, 2015 Younger J, Smallwood N, Agile Talent: How to source & manage outside experts, Harvard Business Review Press, Boston, 2016

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REFERENCES AND READING LIST

“The thing that will have the biggest impact on HR organisations’ capacity to deliver is the extent to which they are able to align different processes and practices. There’s still too much silo thinking going on. The ability of HR people in different specialist areas to work together is one of the biggest success factors.” Natalie Jacquemin, Partner and Head of Talent Strategy Practice, Mercer

Research Participants

Quintin Heath, HR Director – AB Sugar

Morgan Akari, People & Change Director – KPMG

Wendy Hirsh, Employment Researcher and Consultant

Jo Attenborough, Head of HR – IMH Group

Nick Holley, Director of CRF Learning – Corporate Research Forum

Ben Bengougam, Vice President Human Resources EMEA – Hilton Worldwide Sally Bibb, Founder and Director – Engaging Minds Stephanie Bird, Associate Director – Corporate Research Forum John Boudreau, Professor of Management and Organization USC – Marshall School of Business Paul Chesworth, Chief People Officer – Perform Group Lynne Connolly, Head of Talent – Standard Life Jonathan Cormack, Director, Talent and People Strategy – Post Office David Creelman, CEO – Creelman Research Bev Cunningham, Senior Vice President Human Resources – Ricoh Europe Stephen Dando, Operating Partner – Bain Capital

Deborah Strazza, Head of Organisation Effectiveness & Talent – John Lewis Partnership Nigel Sullivan, Group HR Director – TalkTalk

Rebecca Homkes, Teaching Fellow – London Business School

Nina Swanson, Senior Director, Global Lead, Talent Development and Performance – PayPal

Natalie Jacquemin, Partner, Head of Talent Strategy & HR Effectiveness Practice, UK – Mercer

Will Tasho, Group Talent Management Director – Hays

Gemma Jones, Group Talent Innovator – TalkTalk

Mark Thomas, Head of Resourcing and Talent – Tesco

Carl Kwoh, Head of Talent Operations – Riot Games

Elly Tomlins, Group Talent & Leadership Development Director – Whitbread

Edward Lawler, Distinguished Professor of Business – University of Southern California

Ralph Tribe, Director for People, Sky UK & Ireland – Sky

Shannon Lawrence, Consulting Manager – DDI

Mariano Tufro, Director – Leadership Minds

Alec Levenson, Economist / Senior Research Scientist – Center for Effective Organizations (CEO), University of Southern California

Mia Vanstraelen, Director of HR – IBM

James Martin, Global HR Practice Leader – Egon Zehnder

Michelle Weeks, HR Director – The Economist

Jennifer Duvalier, EVP, People – ARM

John McCusker, Global Head of Talent Management – Bacardi

Mary Eckenrod, Principal – Eckenrod Consulting Group

Jane McGill, Talent Manager – British Airways

Marc Effron, President – The Talent Strategy Group

Nick South, Partner & Managing Director – Boston Consulting Group (BCG)

Annelies Missotten, Global Talent Business Leader Vaccines – GlaxoSmithKline (GSK)

Hew Evans, Vice President, Human Resources – Europe Sony

Simon Mitchell, General Manager – MultiNational Segment & European Marketing Director – DDI

Mike Falvey, Partner – People Powered Performance – KPMG

Kate Nicholson, Group People Strategy Manager – John Lewis Partnership

Faye Farrant, Director, L&OD EMEA – PayPal

Matt Nixon, Principal – Disraeli Group

Amanda Fernando, EMEIA Coaching & Leadership Development Leader – EY

Matt Paese, Vice President, Succession Management and C-Suite Services – DDI

Alison Fleet, Senior Manager of Organisation Effectiveness – British Airways

Eleanor Radbourne, Head of Global Talent Management, Diversity & Inclusion – Rolls-Royce

Jill Foley, Managing Partner – On3 Partners

Anna Sabit, Head of Talent – Tesco

Emma Hardaker-Jones, Group Head of HR – PA Consulting Group

Paul J. H. Schoemaker, Executive Chairman – Decision Strategies International

Finola Harrington, Talent and Development – Leader EY

Evan Sinar, Chief Scientist and Vice President – DDI

Debbie Harris, Talent Manager – John Lewis Partnership

Mark Smith, Sustainability Programmes Manager – Standard Life

Tim Walker-Jones, Group Reward & Capability Director – Imperial Tobacco John Whelan, UK HR Director – BAE Systems Caroline Williams, Former SVP HR – Ace Group Mark Williamson, Partner – People Powered Performance – KPMG Natalie Woodford, SVP Talent, Leadership & OD Centre of Excellence – GlaxoSmithKline (GSK) Sally Young, Director, People Experience – BUPA

Corporate Research Forum One Heddon Street Mayfair London W1B 4BD United Kingdom T + 44 (0) 20 7470 7104 F + 44 (0) 20 7470 7112 www.crforum.co.uk info@crforum.co.uk @C_R_Forum