Global corporations are struggling to manage their talent effectively, and companies are increasingly recognising that the ability to manage talent is a strategic priority. Ms Karine Kam from The Singapore College of Insurance stresses that talent management cannot be isolated from business strategy, and adds that the best outcomes are often achieved by actively involving senior leaders in talent development in the early stages of strategy formulation.
Companies that rely solely on their HR departments to drive their strategy for talent are failing to align the behaviour and competencies of the workforce with the priorities of the business. A talent management strategy is needed and companies must constantly rethink their plans to attract, develop and retain employees.
Growing challenges that organisations face
Both external and internal factors are responsible for the rising challenges that companies face in managing talent.
External factors such as demographic changes and globalisation are some of the threats. The Generation Y, people born after 1980, are quite different from their predecessors. Their outlooks are largely shaped by, among other things, the internet, information overload and parents who set high expectations on them. These workers generally demand greater flexibility with work-life balance, meaningful jobs, greater professional freedom and rewards. They are also likely to switch jobs readily and view their careers as series of chapters of two to three years each.
This poses risk to the company as attrition rate may be relatively high if their expectations are not met. As companies globalise and expand into new markets, executives are required to relocate overseas to work in these markets. Local talent is also needed in the various countries and they must have an international mindset while at the same time, understand local ways of doing business.
Internal factors also play a part in hindering effective talent management. Many companies are pressured by short-term performance and profit levels that they become “short-term” and reactive in their views and actions. For example, companies tend to hire additional sales and marketing people only when new products take off. This “short-term” behaviour diverts management attention from longer term issues such as talent sourcing and development.
Why is talent management important?
Companies like to think that their employees are their key resource of competitive advantage. Yet, most companies are unprepared for the challenges of attracting, motivating and retaining their employees.
The looming retirement of baby boomers in developed countries, the shortage of young people entering the workforce and the limited number of competent talent in emerging markets contribute to the acute, if not worsening, talent shortage. To make matters worse, too many organisations dismiss talent management as a short-term, tactical problem rather than an integral part of a long-term business strategy.
With such rising challenges and intensifying shortage of superior talent needed to run and lead companies’ critical functions, business objectives suffer and compensation packages sky rocket, affecting shareholder values and company bottom lines. Hence, a sound talent management strategy has to be developed and put in place early in order to manage and protect this competitive advantage of the company.
Components of a talent management strategy
A robust talent management strategy should include components to attract, develop and motivate, as well as retain employees. These key objectives lie at the heart of any successful talent strategy.
Different companies may use different ways or methods to achieve these objectives. For example, a leading insurance company with global presence adopts a talent management process based on the 70/20/10 Rule. It believes that 70% of one’s development comes from one’s experience on the job; 20% comes from coaching, mentoring and networking in the industry; while only 10% comes from training. As a result, emphasis is placed on employees attending career development conferences organised by the company which also promotes career aspiration discussions between managers and their subordinates. Job roles and profiles are monitored and tracked frequently based on knowledge, skills, attitude and performance. The company identifies those with high performance and potential to be developed for the organization’s talent pipeline to lead future key roles in the company.
Another insurance company, however, believes in inclusiveness – managing its total workforce rather than just focussing on its top performers or high fliers. Research on social capital shows the importance of inclusiveness. Top talent is more effective when it operates in vibrant internal networks with a range of employees. Strong networks also help in retaining the young Gen Y professionals who tend to be fickle in their jobs.
Apart from developing existing employees, recruiting fresh talent to replace those who eventually retire or choose to leave the company is crucial. Branding of the company, its corporate culture, compensation packages and benefits, clear career paths and advancement opportunities are some of the elements that can attract good people to join an organisation.
Retaining employees is equally important for any organisation. Financial incentives play an important role in retention, although money alone may not be the whole answer. A tailored mix of financial and non-financial incentives usually works better in keeping talent. For example, praise and recognition from managers, attention from leaders, frequent promotions, opportunities to lead projects and fast-track management programmes are often effective when combined with financial rewards. Continuous attention and timely communication every step of the way on top of a great employee value proposition spelling clarity about the future with the company are effective retaining strategies.
However, not all employees are high performers. Most organisations have a number of weak players who are neither failing nor leading the way. The cost of keeping these employees outweigh the contributions they bring to the company. Their low productivity affects overall performance and development of the organisation, discouraging the higher performers who will eventually leave. The rippling effect destroys the company’s employee value proposition.
While research shows that taking action to deal with poor performers is the most difficult and least adopted lever in talent management, the ineffective people will breed a culture of ineffectiveness in the organisation as they often stay in the position for years. One way to manage the weak performers, without eliminating them from the organisation, is to move them into other job roles where they can do better, while taking every care to make the transition tolerable.
Obstacles to talent management
Based on a survey by McKinsey, some common obstacles have been identified that hinder good talent management.
The greatest obstacle is that senior managers do not dedicate sufficient time or attention to talent management. Another top hindrance is that organisations mostly operate in silos, destroying collaboration and synergy. The table above describes the top most common obstacles to sound talent management. (See above Table).
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Top 7 obstacles to good talent management
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(% of Respondents; survey on 98 businesses and human resource leaders at 46 organisations)
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| 1 |
Senior managers don’t spend enough high quality time on talent management
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59%
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| 2 |
Organisation is “siloed” and does not encourage constructive collaboration, sharing of resources. |
48%
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| 3 |
Line managers are not sufficiently committed to development of people’s capabilities and careers |
45%
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| 4 |
Line managers are unwilling to differentiate their people as top-, average-, and under-performers |
40% |
| 5 |
CEOs, senior leaders are not sufficiently involved in shaping talent management strategy |
39% |
| 6 |
Senior leaders do not align talent management strategy |
37% |
| 7 |
Line managers do not address underperformance effectively, even when chronic |
37% |
Source: McKinsey Analysis
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The war for talent never ends
The war for talent has never been more pronounced and making talent management strategy a burning corporate priority has never been more important.
Just as account managers nurture and develop their key accounts, the company should also nurture and develop each of its key employees. Creating the right mindset starting from corporate leaders at the top, crafting a strong employee value proposition, meaningful talent sourcing, developing and retention strategies, are indeed challenging tasks for any organisation.
Some companies have powerful, sustainable employee value propositions, while others cannot even articulate why a talented person should join them. Some companies have a talent-building process but do not follow through, while others have none at all. Nonetheless, the fight for talent will never end. Intensifying demographic, macroeconomic and technological changes will continue to add pressure to the talent shortage.
A talent management strategy is most successful when it nurtures talent at all levels, instilling conviction among business leaders that people really matter. That they have to develop the capabilities of employees, nurture their careers and manage their performances. Regardless of where the company is in its talent management spectrum, the key is to start now. The war for talent is here to stay.
Ms Karine Kam is the Executive Director of Singapore College of Insurance