Raising The Talent Bar

December 2013

Driving real outcomes that impact the business

The positive upturn in the economy is significantly impacting the discussion of talent in business. The war for talent is back with a vengeance, but companies must focus on maximising and protecting their own internal talent as well as bringing in the right external talent.

The journey

Of course the reality is that good people always have, and always will, matter.

When McKinsey & Company first articulated its concept of the ‘war for talent’ in a McKinsey Quarterly article fifteen years ago, they arguably spawned a whole industry looking to help organisations identify, recruit, develop and retain the talent concerned. Related ideas of talent management and talent acquisition and a whole set of related sub-topics have persisted ever since – almost regardless of what was going on economically with the companies concerned.
In 2008, when the world economy shuddered and then kept shuddering, the war for talent seemed to take more of a back seat. But whilst the majority of organisations were more focused on reducing headcount and operating costs, the talent question has still always been there. As the opening statement says, good people always matter. So why wouldn’t you worry about keeping your best people, even when you are worrying about reducing headcount overall?

With the positive upturn in the economy in 2013, the pendulum has started to swing back again, and the ‘war for talent’ is now firmly back on the table for many companies – both to find and attract key talent to the organisation, but also to identify and retain the key talent you already have. Research by the UK’s Chartered Institute of Personnel & Development (CIPD), published in June 2013, headlined with ‘the War for talent increases threefold as labour turnover slows down’. This is based on the proportion of employers reporting an increase in competition for well-qualified talent has risen threefold; from 20 per cent in 2009 to 62 per cent in 2013. The research concluded that ‘the most common approaches for addressing recruitment difficulties were to up-skill existing employees for hard to recruit for positions, and to recruit candidates from a different sector’. Not only is the war for talent back, but it is escalating and becoming even more difficult to source those key positions externally. Leveraging your internal talent with targeted internal recruitment and development programmes has never been more important.

Research published in the Harvard Business Review in June 2013 shows this is a global picture, across all sectors and all geographies, albeit with some variations. Even in financial services, one of the sectors hit hardest by the global economic slowdown and one of the slowest to recover, 66% of companies were planning to hire staff and at relatively significant levels (between 10-20% of staff). Overall, geographic variations were larger than industry variations; e.g. 58% of Eastern European companies overall were looking to hire versus 73% in North America. Europe was on the lower end of the spectrum with 61% of companies intending to hire, but interestingly, the research also concluded that:

So, what are the ‘great talent management practices’, and what can organisations do to put them in place? And what are some of the key activity areas to really drive the talent agenda within a company? How do you raise the bar for talent management and deliver real outcomes in your business?

Starting from within

In our view, creating great talent management practices must start from within. To be successful, companies must focus on maximising and protecting their own internal talent as well as bringing in the right external talent. Doing this successfully needs:

• Clear recognition of internal talent
• Joined up thinking with external talent sourcing initiatives
• An engine room driving real internal talent outcomes
• Voracious talent retention
• Good data and talent systems that really add demonstrable business value

This paper explores each of these areas in turn, aiming to provide a framework for development of a strong talent strategy with real outcomes and impact for the business. Let’s start with the basics…

Clear recognition of internal talent

We have previously asked the question ‘Who is talent?’ This innocuous question turns out to be remarkably significant, and also a point of significant differentiation between the rhetoric from the US, and the realities in Europe.

In Europe, our research shows that the talent being managed by these kinds of organisations is not all staff, as it purports to be in the US, but a selected subset. Talent in Europe typically means a selected subset; executives and senior leaders, high performers, maybe graduate in-take and fast-track members, and in some cases, a new concept, critical talent roles.

Creating a clear recognition of your internal talent therefore has to be filtered based on the lens you are using to describe talent in the first place.

• Are you talking all staff, or are you talking a selected subset?
• How will you identify them as key talent?
• Is it an HR or a work view of performance?
• Who really are the high performers in the organisation?
• Where does the data come from to support that view?
• If your idea of talent is restricted to a selected subset, how is this subset defined?
• If your idea of talent includes critical talent roles (as many organisations now do), is than an absolute view of critical talent, or is it based on current priorities?

Critical talent priorities have a habit of being dynamic, reflecting changing business priorities, new market opportunities or specific business challenges. This can make it difficult to consistently apply the same filters to recognise who your talent is.

Joined up thinking with external talent sourcing initiatives

A second key area of alignment is to join up internal and external talent sourcing initiatives and processes. Although this sounds logical, in reality organisationally this is more difficult than it should be. One of the key reasons is the silo’d nature of the HR sub-functions – in particular the main talent related functions of recruitment, learning and development, performance and succession, and potentially compensation, benefits management etc.

Historically, these functions have remained relatively independent, staffed in the main by specialists, and working with their supply chain partners, processes and systems. Joining them up isn’t that easy. That’s one of the reasons many companies are now looking for integrated talent management systems and processes.

The silo’d nature of the recruitment function means it tends to be separated from internal talent assessment and management. But there are clear synergies to align internal and external resourcing strategies; whether that’s using internal talent pools, employee mobility programmes, or just using employee referrals and their external networks. Talent acquisition (recruitment, job advertising, hiring management etc.) is possibly the segment of the talent lifecycle undergoing the greatest change, and integration of internal and external sourcing with their related social networks is at the heart of that change.

There are also clear business benefits for sourcing candidates internally. According to research from the Saratoga Institute, hiring externally costs on average 1.7 times as much more than filling positions internally. Other research shows that externally hired positions fail 40-60% of the time, compared to around 25% internally. These numbers are significant, and cumulatively they really add up, especially when you add the increased onboarding costs of external candidates. If you also consider the positive impact on employee morale/satisfaction delivered by internal sourcing, and the case for optimising use of internal sourcing becomes pretty compelling.

An engine room driving real internal talent outcomes

Finding and sourcing talent is one thing, developing what you already have further is another and much broader strategy, and is critical to ensuring your talent supply matches demand. In a previous Fosway paper, we outlined the pivotal role that L&D has within the overall talent management agenda.

That’s why L&D is the engine room of talent management. Whether it is about onboarding new team members faster and more effectively, raising current business productivity and performance, filling current skills gaps, or by developing the strategic capabilities needed to succeed in the future – learning is key.

Effectively integrating learning within the talent cycle can yield big dividends. It enhances the outcomes from other talent processes. It reduces complexity and increases productivity for users, and due to the faster ‘rhythm’ of learning over other talent processes. It also ensures more accurate people data and therefore better analytics. See the Learning for Talent paper (Fosway Recommended Reading) for a more detailed discussion of the role of learning within the talent Lifecycle.

A voracious talent retention agenda

There is not much point in being great at talent acquisition or talent development, if you are not great at talent retention, i.e. keeping the talent you have in the organisation. Retaining key talent is one of the clearest returns on investment you can show related to your people, but money is only one of the factors at play here.

The benefit case for retaining talent is obvious; if key staff leave, you:
• Negatively impact your current performance, as well as reduce your current skilled capacity for work
• Accelerate talent gaps within the organisation, increasing the need and costs for external hiring
• Create additional onboarding and training costs to bring people up to peak performance
Losing key talent can also have a disproportionate impact on overall staff morale and lead to further defections from their internal network. Overall the case is compelling and almost any reasonable programme of activity that impacts talent retention in a positive way is likely to pay for itself very quickly.

But to retain your best people, you have to know who they are and to know why they might leave. Research shows that blanket one size fits all approaches to talent retention rarely work effectively. Key talent are individuals and individuals have their own motivators, aspirations, life realities and challenges. Understanding and responding to those factors is the key to retaining the individuals they relate to.

Research on key talent retention and the role of rewards by World at Work and the Hay Group, published in June 2012, concluded that:

It also found that ‘organisations that identify, define and manage key talent deeper into the organisation are more confident that they will be able to retain these individuals’.

Good data and talent systems

Implicit to all of this journey in raising our standards and practices for talent sourcing, management and retention is having good data of the people concerned and their performance in the business, and being able to use it within the context of the business.

This seems straight forward, but for many organisations today this is still a huge challenge because:
• Core people data is often held in multiple systems – especially true in large multi-national multi-business unit corporations with a legacy of mergers & acquisitions
• Key talent functions are silo’d and using functionally separate processes and systems focusing on their own needs and outcomes
• Key parts of the talent assessment and capture process are often still operated through paper processes and spreadsheets, and therefore difficult to track and use without additional manual workarounds
• Reporting across systems is currently weak and difficult to analyse – especially for line managers and executives
• Current aggregated analysis tends to be in HR, not by the business and related to business KPIs

There is much discussion currently about a concept of Big Data – the ability to cross-analyse data from multiple sources in order to create deeper insights about company performance. Big Data is and will be increasingly important, but so is ‘Little Data’ – inline reporting and analysis of talent data within the work flow or business process in which they occur.
Reporting from talent and HR systems is notoriously poor – especially for the business itself. Improving this requires both an improvement in the accuracy of the data itself as well as better ways of presenting it. That doesn’t just mean in the HR and talent systems, it also means being able to contextually embed talent related data within work systems and vice versa. There are many obvious examples of this and it goes both ways, e.g:

• Being able to embed performance support and learning around sales and customer service processes
• Being able to pull skills and competency information into work planning and scheduling tools
• Pulling sales and service information directly into a performance review process and development planning
• Cross-analysis of business KPIs in succession and compensation discussions

If HR and talent is to become more strategic in organisations, more effective business application of talent data is going to be key to that journey.

Our view

The positive upturn in the economy is significantly impacting the discussion of talent in business. The war for talent is back with a vengeance, but companies must focus on maximising and protecting their own internal talent as well as bringing in the right external talent. The business case for this is clear, as is the need for organisations to do it. Talent management is now a key focus for many organisations, but creating great talent management practices starts from within.
The risk is that talent management becomes just another piece of HR jargon – something the business doesn’t really understand or relate to. That would be a mistake. Understanding how to drive real business outcomes from our investment in people, but also in talent and HR systems and processes is massively important. Doing this successfully needs:
• Clear recognition of internal talent
• Joined up thinking with external talent sourcing initiatives
• An engine room driving real internal talent outcomes
• A voracious talent retention agenda
• Good data and talent systems – that really add value and are used to deliver demonstrable business goals

As we said at the start, the reality is, good people have always mattered and will always matter…but how do we make that obvious to everyone in the company, and in a way that helps us better attract, develop and retain them more effectively?

The summary headlines

• Research by the UK’s Chartered Institute of Personnel & Development (CIPD), published in June 2013, headlined with ‘the War for Talent increases threefold as labour turnover slows down’
• Talent in Europe typically means a selected subset; executives and senior leaders, high performers, maybe graduate in-take and fast-track members, and in some cases, a new concept, critical talent roles
• Retaining key talent is one of the clearest returns on investment you can show related to your people
• Learning and development is the engine room of talent management
• According to research from the Saratoga Institute, hiring externally costs on average 1.7 times as much more than filling positions internally – and external hiring positions fail 40-60% of the time, compared to maybe 25% internally
• There is not much point in being great at talent acquisition or talent development, if you are not great at talent retention
• Research shows that blanket one size fits all approaches to talent retention rarely work effectively.
• Implicit to raising our standards and practices for talent sourcing, management and retention is having good data
• If HR and talent is to become more strategic in organisations, the better application of talent data is going to be key – both Big Data and ‘Little Data’
• Understanding how to drive real business outcomes from our people investment, along within talent and HR systems and processes is massively important to your business’ future success

Recommended Fosway Reading

For further Fosway analysis relating to this topic, please see the following papers or resources:

•    Fosway Core Insights: Talent Market Consolidation
•    Fosway Core Insights: SaaS Impact on Talent and Learning Systems
•    HR Critical Realities Research Series 2015-16

Accelerate and de-risk

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