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The Top 10 Strategic Talent Areas … Where Most Firms Do Nothing

Posted By Dr. John Sullivan On January 7, 2013 @ 5:15 am In Advice and How-Tos | 10 Comments

Screen Shot 2013-01-03 at 10.49.22 AM [1]There’s no better way to start out a new year than to take one or more strategic actions. On the surface, selecting a new strategic area may seem to be difficult because at established firms, it would seem as though all of the important talent management areas would have already been addressed (i.e. with a full-time leader, a written plan, a permanent team, a yearly budget, and a set of metrics for assessing its strategic impact).

However, I have still been able to identify 10 potentially high business impact strategic areas in talent management where almost no firm has a permanent company-wide strategy, plan, and team. The fact that almost no firms do these things isn’t because they lack a potential impact (most agree it could be high), so the lack of action must be because either no one has been trained in the area or because the strategic area is highly complex or highly political. Even if you don’t have the bandwidth to take action in any of these areas, review the list to see if you see the potential for a high business impact.

The Top 10 Strategic Talent Management Areas That Firms Ignore

Here is a list of possible high impact areas where no more than a handful of firms have taken comprehensive action. Most are directly borrowed from the business side of the firm. They are presented with the highest impact areas appearing first.

  1. Measure and reward great people management -- research by both Google and Gallup have shown that, in most cases, an employee’s manager is the single highest-impact factor on the hiring, retention, innovation, productivity and the development of employees. Managers also manage a firm’s most expensive asset (on average 60% of all corporate variable costs are spent on labor). Yet one study showed that optimistically, only 39% of firms reward managers for great people management results. Measures and rewards are important because managers are laser focused on whatever is measured and rewarded. Although some people-management topics may be covered in the performance appraisal or 360° process, they receive no special weight or targeted bonus or reward. A lack of measures and rewards and the fact that senior managers don’t see quarterly reports covering the ranked performance of individual managers directly reduces the amount of time that managers spend on talent management activities. It is ironic that managers are not measured or rewarded on great people management results even though talent management “owns” all of the key components related to measuring and rewarding (performance management, performance appraisal, promotion processes, competencies, and compensation and bonus systems). The key strategic action step is to develop a “people management scorecard” for each individual manager and reward them based on their performance against key people management standards (i.e. team productivity and innovation, developing team members, retaining key employees, increasing internal movement, the quality of new hires, and their employees’ satisfaction with transparency, feedback, and best-practice sharing).
  2. Formalize internal best-practice sharing in talent management — talent management leaders spend a great deal of their time developing new programs in the search for “the next big thing.” While this is important, most talent management leaders fail to realize that they can have a much higher impact (with lower risk and at a reduced cost) if they simply focused on identifying and more widely spreading the best people-management practices that already exist within the firm. Most talent management functions simply have no formalized best-practice-sharing process that actually measures the time it takes for a new best practice to be shared throughout the organization. Rather than assuming that best practice sharing will occur naturally, a superior approach is one that proactively identifies the most effective practices, wherever they might be in the organization. Once identified, they are shared in such a manner that individual managers can easily understand the business impact of the practice, why it works, and who has successfully implemented it within the organization.
  3. Develop a workforce productivity improvement team – there is no single more comprehensive and important measure of talent management success than the yearly rate of improvement in the productivity of your firm’s workforce. Workforce productivity is merely an ROI calculation which compares the value of the output from your workforce (either the total revenue or the total value of the products and services that employees produce) with the cost of your workforce (total labor and talent management costs). Many talent management departments measure engagement (a precursor to productivity) but they don’t measure actual workforce productivity, and even fewer take proactive actions to directly increase it. Increasing productivity requires talent management to identify low and high productivity areas, identify the barriers that restrict productivity, and then to proactively provide the consulting advice, best practices, and tools that have been proven to increase both individual employee and team productivity. In addition to workforce productivity, you should consider other measures of workforce effectiveness including innovation, customer service, and product quality.
  4. Develop a process for identifying and fixing bad managers – in addition to rewarding managers for great people-management results, most organizations need to go an additional step to identify and fix bad managers. This is because there are so many bad managers (one study found that 40% were rated fair to terrible) and in addition, because bad managers can have such a dramatic and negative impact on key employee retention and your employer brand image. Yet only a handful of organizations have a formal program for continually identifying weak managers. Strategic actions would include implementing surveys and metrics to identify your weak managers and to provide your generalists with proven tools and approaches to improve an individual manager’s people-management behaviors and results.
  5. Convert talent management metrics into their dollar impacts – unfortunately, most traditional talent management metrics fail to impress executives because they are not expressed in the language of business: dollars. Saying we have a 12% turnover rate, a 54% engagement rate, or an 87-day time to fill generally won’t impress senior managers because the metrics are not expressed in their dollar impact on corporate revenue. In contrast, stating that every percentage point increase in regrettable employee turnover costs us $7.2 million get an immediate reaction. Work with the CFO’s office to credibly calculate the impacts but realize that other firms have found literally millions of dollars of business impact from: rapidly filling revenue generating positions, retaining top performers, increasing the quality of hire in key positions, increasing talent-management best-practice sharing, and rapidly redeploying talent internally.
  6. Develop a plan for handling a world of permanent VUCA [2] uncertainty most business leaders have already accepted the fact that the business world will remain in turmoil for at least the next decade. This “VUCA” environment will require every business function to be adaptive and nimble. Unfortunately, few in talent management have accepted this reality of permanent uncertainty and volatility. But eventually all will be forced to restructure every talent management program so that each one has the capability of rapidly increasing labor capability in some business areas, while simultaneously cutting labor costs and others. Each talent program will also need to have the capability of rapidly scaling up and down, moving faster and slower and continually redeploying talent resources into higher ROI areas. The incredible speed of change will require every talent management program to continually obsolete itself and to produce superior results to a firm’s talent competitors.
  7. Calculate the unintended consequences of talent-management cost cutting – most business leaders are experts in identifying and calculating the cost of unintended consequences that follow excessive cost-cutting. For example, if you reduce the quality of the materials in the shoes you sell to save costs, you may see those cost savings soon dissipate as a result of higher product returns and lower sales. Unfortunately, talent management is frequently forced to undergo cost-cutting but almost no one in the function seems to understand how to successfully demonstrate to a CFO the real-dollar consequences of reducing funding to training, recruiting, and retention or leadership development. For example, reducing safety training budgets may save money in the short term but the reduced training levels may eventually cost more in increased accidents, higher insurance rates, and higher employee turnover. I sometimes call these “other ledger costs” because the real costs do not appear in the same accounting ledger as the cost-cutting. Talent management leaders must work with finance and cost accounting to develop a process that can predict the dollar costs to the business down the road as a result of cutting resources to high-impact talent management areas. These unintended consequence costs should cover business areas including reduced customer service, higher error rates, reduced innovation, lower sales, slow response time, and brand damage.
  8. Adapt predictive metrics and trash the historical ones – almost everyone agrees that talent management’s efforts in the metrics area have been unsatisfactory. If you take the time to study the best practices in the rest of the business, the most impactful metrics are not historical (what happened last year) but instead predictive (what is likely to happen this upcoming year). Unfortunately, 100% of all corporate talent metrics are historical. Rather than telling you about last year, predictive metrics or analytics give you a “heads up” alert about upcoming talent opportunities and potential problems. Historical metrics have always had inherent weaknesses but in a rapidly changing world, they are now misleading and damaging. The key action step is to work with your corporate statisticians or math whizzes to develop a process for identifying precursors and using probability analysis, so that managers and HR generalists will know well in advance what to prepare for.
  9. Conduct a talent competitive analysis – in areas of the business like product development and marketing, competitors are continually monitored so that “our firm” can counter their actions and everything we develop includes the assumption that our competitors will attempt to rapidly copy it. Unfortunately, although the fight for attracting and retaining key talent is fought between talent competitor firms, most recruiting and retention functions are primarily internally focused. Few in talent management conduct continuous competitive analysis to ensure that each of “our” key talent management processes are superior in features and results to “theirs.” Recruiting seldom maps the talent at competitor firms and the people who work on retention almost never identify who, when, and how competitors will try to poach from us. An effective competitive analysis allows a firm to increase recruiting when competitors are in trouble or have a hiring freeze. It also lets managers know when retention issues may increase because a competitor is ramping up hiring.
  10. Use a CRM model to improve individual employee motivation and management – for decades customer service management professionals have known the importance of fully understanding each customer as an individual. That includes what they like, dislike, and the most successful approach to get them to purchase. Unfortunately, a similar CRM-type file does not exist for individual employees. For example, when a new manager takes over (or when a new hire or a transfer moves into a new job), there should be an accompanying file that outlines for their new manager each employee’s: key motivators, what frustrates them (including why they quit their last jobs) and the most effective ways of managing them. Not only could this information help increase performance and innovation, but it could also lead to reduced turnover. Although some functions do collect engagement and satisfaction data, this information cannot be tied directly to an individual employee. Information on employee motivation and “how to best manage me” can be collected during onboarding, during performance appraisals, or as part of the transfer/promotion process. Talent management could also provide individual managers with a toolkit that covers a variety of ways to motivate and manage, based on the employee’s profile.

Final Thoughts

In my research and writing throughout the years, I have found that the very best talent management and HR practices have been based on already proven business practices. Competitive analysis, predictive analytics, CRM, and the cost of unintended consequences for example have long been common practices throughout most of the business.

My advice to those that want to be truly strategic is to look at the successful practices in other business functions and adapt them to talent management. And don’t steer away from trying a practice simply because most in HR have found a way to avoid it. If you truly want to be strategic, you must learn to do the hard things first!


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[1] Image: http://www.ere.net/wp-content/uploads/2013/01/Screen-Shot-2013-01-03-at-10.49.22-AM.png

[2] VUCA: http://www.ere.net/2012/01/16/vuca-the-new-normal-for-talent-management-and-workforce-planning/

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