January 2010
Talent Strategy
Volume 2 Issue 4
Published by Business Intelligence for talent professionals. To register for your free copy, go to: www.business-intelligence.co.uk
A defining decade for talent management First, Talent Strategy would like to wish you a prosperous New Year. This could prove to be the start of a significant decade when the talent community’s ability to deliver hard results is seriously put to the test. Reading the various articles in this issue drives home the huge gap between the best-in-class and the bottom of the league. If the CMI’s withering verdict on the state of UK management is on the mark, then talent management would seem to be a nonstarter in many companies.
backyard as the function struggles to build the business partnering capability. Elsewhere, the Hackett Group’s latest report on the strong link between talent management excellence and bottom line results is further evidence of what can be achieved when companies get it right. Further on you’ll find Geoff Ryan’s six-point plan for developing competencies that deliver performance benefits – the third and final article in his competence-improving manifesto.
However, the results of Adding Value through HR, a new study by Business Intelligence, publishers of Talent Strategy, suggests that many HR departments are determined to make a difference.
You can also read about the problems for talent managers in Indonesia and the way companies there propose to tackle the shortages they face.
It’s encouraging to see how much effort is being put into sharpening the business focus of HR. But it’s equally sobering to consider the talent challenges it faces in its own
Finally, do contribute to the New Talent Management Network annual survey (details P8). Talent Strategy is a partner in this project and will be covering the results.
Leadership development tops the HR agenda For 2010, talent tops the HR agenda with an emphasis on leadership development, performance management and employee engagement. Internally, HR functions plan to make business partnering their number one priority. These are some of the findings from Adding Value through HR, Business Intelligence’s study of how 240 companies
are supporting business performance over the next 12 months. The research shows that effective business partners, those HR functions that have won the confidence of the business, are twice as likely to exceed their performance targets in ten operational business areas compared with other respondents. These include making a measurable impact
Leadership development: HR’s top 2010 priority (P1) Talent management’s payoff (P1) Six steps to competence How Avon applies talent(p3) management (p7) Take the NTMN annual Why poaching survey (P8) doesn’t work (P1) Leadership capabilities for tough times (P2) The ideal talent manager (P4) Developing an engaging brand (P7)
In this issue: HR priorities - 1
Competencies – a six-step plan – 3
Tackling Indonesia’s talent woes – 7
Talent boost for the bottom-line – 2
The managers who alienate talent – 6 A survey all about you – 8
on business outcomes, contributing to strategic goals and performance. Adding Value through HR also reveals that sourcing and developing suitable candidates to fulfill the partnering role represents a continuing talent challenge that is unlikely to ease. However, the results suggest that, compared with their HR peers, effective business partners attach greater importance to nine partnering competencies and capabilities ranging from business literacy to interpersonal skills and customer focus, as essential as opposed to desirable. Most companies look for suitable candidates in both HR and business areas, although almost a quarter of respondents source partners exclusively from HR. Adding Value through HR, was undertaken by Business Intelligence on behalf of WTG Events, organisers of the European HR Directors Summit 2010, 19-20 January. The results will be published at the event. For more information on the Summit go to: http://www.hrevent.com/ Sourcing partnering talent is a perennial challenge for HR.
How talent oils the wheels of business According to the Hackett Group’s latest Performance Study on Talent Management Maturity report, companies with superior talent management practices net 18% more in earnings than the average Global 1000 enterprise. They also achieve higher net profits and a greater return on equity and assets. The findings are based on a three-year study of 60 major corporations. The report confirms is that talent management is a multi-disciplinary and collaborative effort. It is not just something that HR can implement on its own. It starts with strong commitment and involvement from the top of the organisation, but involves far more extensive participation at all levels of the organisation. In mature talent management organisations:
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“… employees’ direct managers are also far more likely to have responsibility for retention, employee engagement, performance management and talent development than those in the peer group. Each of these activities demands strong manager involvement and responsibility to succeed.” Companies with more mature talent capabilities were better all round at employee engagement, cutting recruiting cycle times and linking talent management to business strategy. One feature of high achievers is the more extensive use of measurement compared with peer companies. They typically track “retention (e.g., reasons for departure and first-year retention rate), engagement (e.g., employee engagement indices and correlation of activities to increased employee engagement), and staffing (e.g., source of hire and impact of branding on recruiting success).” Best-in-class companies also create an integrated set of talent management capabilities aligned with their business and talent strategies. They develop the appropriate organisation and culture and focus on people-management skills of managers and supervisors and employee engagement. They have superior processes for identifying talent needs, acquiring staff and managing them. In addition, they make smart use of technology to access information, track talent management development and enable improved decision-making. But they don’t spend more than others in the process. Hackett’s report concludes that superior talent management practices reflect an integrated approach in three areas: culture and organisation, core talent management processes, and technology and information. For an overview of the report, go to: www.thehackettgroup.com/tmmaturity
Improving competencies: a six-step plan By Ge of f R ya n, E uro pea n rep rese ntati ve o f C om petenc y Internatio na l This final of three articles concludes with a six-step plan for developing high-impact competencies. The following approach to validating competencies enables talent management executives to take the lead in introducing a more strategic approach that will have demonstrable added value for their organisation. Step 1 – Ide ntif y ke y or pi votal j ob s These are the ones most critical to executing your strategy successfully. They may not always be managerial roles. One international airline’s strategy was to compete on the basis of excellent in-flight service. In this instance the cabin crew positions were key to executing the strategy. One way to identify critical jobs is through key task analysis. The strategy, objectives as well as supporting activities are broken down into essential tasks that must be performed to a very high standard to ensure success. These tasks are then mapped on to the various jobs to see which jobs contain the largest percentage of key tasks to determine relative criticality.
it is important to measure the degree of performance variability to establish the opportunity both for performance improvement and the capacity required to execute strategy successfully. Hard objective performance measures such as financial, quality, productivity and customer retention data should be used in preference to performance ratings that can be subject to a variety of problems that make them less suitable as performance criteria measures, unless no other relevant data is available.
critical jobs is through key task analysis.”
The more complex the job, generally the wider the variability. For example in the general manager’s job above, those managers whose financial performance was one standard deviation above the mean were found to have results that were on average over a two year period, 94% better than those managers operating at the mean. Other studies we have conducted for clients have shown that with one standard deviation managers can grow their profits twice as fast over a four-year period than average performers. This information allows talent management executives to size the problem/opportunity and to help build a business case.
An alternative method is to make a judgment call as to those jobs where the money is made or lost. In the case of a global production and logistics organisation, two jobs were identified as being critical to success. One of these was the job of General Manager of the various production/logistics units located around the globe. Subsequent analysis confirmed that this job was absolutely critical in terms of labour and material cost control, as well as maintenance of high quality standards and customer relations to meet profitability expectations.
Step 3 – Ide ntif y huma n fact ors unde rl yi ng perfo rma nce variabil ity
Step 2 – Determi ne sta nda rd deviati o n o f pe rf orm ance
Many alternative approaches to competency modelling have emerged over the years, mainly to save time and cost, but these approaches do not
Once the critical jobs have been identified
“One way to identify
The human element alone cannot explain all the variance in performance. However, we have found that a substantial proportion of the variance (approximately 40% on average) in the job samples we have studied is accounted for by the competency behaviours of the jobholder.
The goal: pinpoint the competencies that make star performers stand out from the crowd.
This is why we recommend that a formal job competency analysis be conducted following the original procedure as detailed by Spencer & Spencer (1993).
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provide the degree of granularity required for the type of analysis proposed.
Critical incident interviews are the best way to obtain details about key competencies. ”
Critical incident interviews are the best way to obtain the detail required. Interviews of approximately four hours duration provide a wealth of detail in terms of tasks being worked upon during the course of a successful event as well as the associated competency behaviours that are coded both for frequency and competency level. This data is then used to determine the amount of variance explained in the objective performance measure through the use of various statistical techniques such as multiple regression analysis and structural equation modelling. Other variables such as organisational climate or engagement survey scores can be included to provide incremental validity. It is also possible to include other variables such as the previous year’s revenue to see the extent to which these may explain the following year’s results compared to what can be attributed to the jobholder him or herself. Once it is known how much of the performance variance is due to the jobholder’s own competencies then the options open to talent management executives can be considered. Step 4 – De vel op a busi nes s ca se
Many talent managers are left to discover what they should be doing for themselves
Information from Steps 2 and 3 can be used to prepare a business case. The suggested procedure is outlined in Spencer (2001) where an expected rate of return is set or agreed and the probability of achieving this calculated to support talent management initiatives/investments. The business case should show the potential, i.e. the extra value-added by those managers that are one standard deviation above the mean and how much of this amount can be attributed to the competencies being measured. For example, if such jobholders generate 80% more than those at the mean and if their competencies account for 40% of this variation, then the potential exists to
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obtain 32% more added value. The question then becomes how much of this 32% added value due to competencies can reasonably be expected to be achieved either through developing the competencies of existing jobholders or replacing average performers with others capable of achieving performance one standard deviation above the mean. A further exercise that can be undertaken is to plot the distribution of jobholders’ competency scores that predict superior performance to see how many people within the initial interview sample of jobholders have the necessary levels of competence required for superior performance. This will provide talent management executives with a measure of capacity in relation to key jobs and can highlight the proportion of jobholders that are mission ready/capable, or close to it, depending on the cut-off point that is set. As an example, in an initial sample of 15 key jobholders only two had predictive competency scores at or above one standard deviation above the mean. In this case, a suitable/acceptable cut-off point would be .5 of a standard deviation. This would in addition identify those jobholders who could be considered to be mission ready/capable within the current period and brought in a further three jobholders. Out of the initial sample of 15, only a third could be classified as mission capable. Such analysis can allow talent management executives to plan their succession pipelines or selective replacement activities on a more informed basis. Step 5 – Co nduct j ob hold er asse ssme nts Ideally, every key jobholder should be assessed against competencies plus other factors that statistically relate to measured job performance. But we have found it is better to focus initially on a more tightly defined group. Until an organisation’s senior managers see
tangible evidence of the benefits of this approach, they can remain sceptical. A Pareto-type analysis will separate out a sub-sample of jobholders whose collective job performance represents a substantial amount of the larger group. Accordingly, out of a total population of 100 key jobholders, 20 of these would account for 80% of the performance of the total group. It should be easier to justify the cost of conducting a full interview assessment for this sub-sample which has the potential for developing a competency model that should predict performance over several years where tasks remain the same. One longitudinal study conducted for a client showed that the original competency model continued to predict financial performance over a four-year period. If this interview option is not available, then a competency questionnaire developed from the interview data obtained in Step 3 can be used as an assessment tool. The predictive validity will not be as good as an in-depth interview but should provide better information than an off-the-shelf product because it will be based on what superior performers in the key job actually do which underpins their success. Results from the questionnaire approach can be improved in two ways. The first is to calibrate the questionnaire against data from Step 3 showing cut-off points for superior, average and unacceptable performance. This will require raters to make more considered judgments against clearly stated/marked standards. Group rater training can also improve accuracy. Illustrative examples of actual behaviour from the key job, preferably taken from the data in Step 3, are presented to the group and variations in ratings debated until a consensus is reached. This can substantially improve standards of accuracy and minimise ratings drift. The data obtained from this step can then be analysed to determine the distribution of competency strengths and weaknesses. This provides the basis for
the development and implementation of an appropriate talent management strategy. Step 6 – De vel op, im pleme nt a nd mo nito r tale nt ma nage ment strateg y There are several options available to make optimal use of the data generated in previous steps. • Where a goal is to ensure an adequate supply of superior job holders in the key positions, then selection and promotion tools and methods can be developed from the information gathered in Step 3. The critical-incident interview is used for both internal and external candidates. Asking candidates to recall events when they felt they were particularly effective and which provided a benefit for the organisation gives a better picture of a person’s competencies than using preset, situational-based interview questions.
Pareto-type analysis can be used to identify the 20% of jobholders who account for 80% of the total group.
• To improve accuracy, training can be provided on conducting interviews and evaluating candidates’ responses which incorporates behavioural examples from Step 3. • Subsequent tests or surveys, such as organisational climate surveys for internal candidates, can be used to supplement the interview data and provide incremental validity. • Job-specific case study material can be developed from critical-incident interview data in Step 3 to improve existing key jobholder performance for example, by assigning people to projects identified as providing specific competencydevelopment opportunities.
Critical-incident interviews can be used to identify opportunities for competency-developing assignments.
• For either recruitment or development strategies, a specific performance tracking system should be put in place. This will provide talent management executives with evidence that their initiatives are working as planned using measures already in place and accepted as valid by senior management. One client collected before-and-after performance data to evaluate their selective replacement strategic initiative.
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References: Competence at work, Lyle M. Spencer and Signe M Spencer John Wiley and Sons 1993, Chapter 11 The Emotionally Intelligent Workplace - Cary Cherniss and Daniel Goleman – Editors 2001, Chapter 4, The Economic Value of Emotional Intelligence competencies and EIC-Based HR Programs, Lyle M. Spencer
Trend lines of key leading indicators as well as performance outcome measures were plotted before the appointment of the replacement jobholder, who had been selected against the competency model defined in Step 3, and compared to the period after the change in jobholders. After a relatively short period trend lines stabilised and then showed an increasing or decreasing trend depending on the variable being measured which could be attributed to the replacement jobholder. Co ncl usi on This may appear to be a complicated procedure, but once started the pieces naturally fall into place and understanding grows quickly. Given that job holders can be expected to remain in place for several years this system more than pays for itself and provides a longer term, more strategic solution that has greater predictive power. One particular benefit is that it will help facilitate greater levels of interaction with other functions, for example finance, by using the primary business language of finance to discuss and review talent management related issues. In this way talent management executives can raise their profile and be confident that what they are proposing is based upon well known and proven approaches integrated into a complete system.
Inadequate managers scare off talent Almost half of those who have left jobs in a 3,000 respondent Chartered Management Institute study did so to get away from their managers. A similar proportion said they would take a pay cut if this meant that they could work with a better manager. The results have some clear messages for talent managers and the way managers are selected and developed. • More than two-thirds say they ended up in a managerial role by mistake • Two in five managers claim they would prefer to be without managerial responsibility • Almost two thirds have had no management training • Only 28% have some kind of formal qualification. These 'accidental' managers have a corrosive effect on staff engagement. Unsurprisingly, half the respondents believe that they could do a better job than their current bosses. “The sad truth is that UK managers are no longer regarded as professional, competent or accountable,” says CMI chief Ruth Spellman. In response, the CMI has launched its ‘Manifesto for a Better Managed Britain’ asking Government, employers and managers to pledge to turn round the situation. If the CMI claims are as dire as they sound, then it seems that many organizations need to recalibrate their talent management goals on getting the basics right. Chartered Management Institute: www.managers.org.uk
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How to solve the Indonesian talent crisis Less than four percent of Indonesian business leaders believe that their HR organisations are playing a role in managing talent, according to a new book Managing Human Capital in Indonesia: best practices in aligning people with strategic goals. Yet, these same business leaders rated “to attract, maintain, develop and retain talent,” as the second most important role that the HR organisation will be expected to play over the next three years (just behind “improve the productivity of the organisation.”) Organisational leaders are claiming that they are experiencing an ever deepening “talent crisis.” This might seem surprising as with about 230 million people, this nation of 17,000 islands boasts the world’s fourth biggest population. Moreover, with 30% under the age of 14 and 300,000 babies born every year it is hardly facing the “aging workforce” pressures endemic in other nations. Indeed, there is a substantial oversupply of well-educated labour. The Central Bureau of Statistics recorded in 2008 that the total number of unemployed citizens was 9,427,610, of which 1,461,000 (15.5 per cent) held university degrees. Nor has the credit crunch been a factor. Indonesia was only marginally affected by the economic downturn that devastated other countries. The hard truth is that while millions lie idle, Indonesian companies are crying out for people with the right skills. Developing the right skills is more than just an organisational challenge. Repeated research finds that the education system is simply not equipping students with the skills required to succeed in a commercial landscape. As the Indonesian Government’s Director General of Higher Education recently commented: “The high rate of unemployment is caused by the low level of skills outside of their core competency as scholars” stressing that the focus is
more on enabling students to graduate quickly rather than inculcating within them the skills required by this fast-developing nation that will soon join the BRIC group of growing economies. Some of the few Indonesian companies that take talent management seriously are forging skills-building partnerships with academia. For instance, one engineering company was frustrated by not getting suitably qualified technicians. To resolve this, the organisation collaborated with technical schools and universities and placed equipment in laboratories for students to work with. The company then tracked the students through their studies and brought the best performers into the organisation. Rather then struggling to find suitably qualified employees, the company’s proactive interventions meant that they could choose the cream from the annual crop of graduates – who entered the workplace already familiar with the core operations of the corporation. Managing Human Capital in Indonesia serves as a “call to arms” to those responsible for developing talent within the nation. As well as urging the transformation of the education system to become more “business friendly,” the book calls for a massive up-skilling of the HR function. However, this upskilling is likely to prove a Herculean task for most organisations. After decades of being a “second class” function, noted as a place to dump unwanted or poor performing staff, HR is being asked by business leaders to become a strategic partner to the enterprise – providing talent management and other high-value services. Those HR organisations that step up to the plate and accept the challenge will be providing a service that is not just of value to their enterprise, but also of national importance.
James Creelman – co-author, Managing Human Capital in Indonesia .
Naresh Makhijani, Krishnan Rajendran, James Creelman: Managing Human Capital in Indonesia: Best Practices in Aligning People with Strategic Goals (Azkia, Indonesia, 2009). ISBN: 978979-18673-2-0 A free copy of a white paper describing the finding to the HR in Indonesia survey commissioned to support the book can be obtained from James Creelman at james.creelman@googlemail. com
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Creating the Talent-Driven Business -
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