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StepStone commissioned the Economist Intelligence Unit to write this Talent Management report. The report is based on an Economist Intelligence Unit survey of 395 senior executives. Forty percent of …

StepStone commissioned the Economist Intelligence Unit to write this Talent Management report. The report is based on an Economist Intelligence Unit survey of 395 senior executives. Forty percent of respondents came from organisations with over US$1bn in annual revenue. Firms were spread across 19 sectors, with the highest number (20%) coming from financial services. Close to half the respondents described one of their main functional roles as human resources. Thirty-two percent were c-level executives, with a further 13% directors, vice-presidents or senior vice-presidents. In addition, the Economist Intelligence Unit conducted a programme of interviews with senior executives and academics within the field of talent management.


In this report we look at the where the greatest
difficulties lie for organisations when it comes to
attracting and retaining top talent and highlight
the best practices of companies that are
successfully managing their global workforce.

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  • 1. A report from the Economist Intelligence Unit StepStone Total Talent Report 2008 Sarah Murray January 2008www.stepstone.com www.stepstone.com
  • 2. About the research Executive summaryStepStone commissioned the Economist As the operations of large multinationalIntelligence Unit to write this Talent Management companies become ever more broadly dispersed,report. The report is based on an Economist with increased investments in emerging markets,Intelligence Unit survey of 395 senior executives. competition for talent is becoming global.Forty percent of respondents came from Meanwhile, companies are navigating a complexorganisations with over US$1bn in annual set of demographic, social and economic shiftsrevenue. Firms were spread across 19 sectors, that vary from market to market.with the highest number (20%) coming fromfinancial services. Close to half the respondents For employers, this makes the task of talentdescribed one of their main functional roles management a highly complex business thatas human resources. Thirty-two percent were requires a strategic approach to designingc-level executives, with a further 13% directors, recruitment and retention programmes thatvice-presidents or senior vice-presidents. will supply the skills and leadership needed to remain competitive. However, some companiesIn addition, the Economist Intelligence Unit are still struggling to manage talent acrossconducted a programme of interviews with different borders and generations, oftensenior executives and academics within the because they have not established formal talentfield of talent management. management structures. In this report we look at the where the greatest difficulties lie for organisations when it comes to attracting and retaining top talent and highlight the best practices of companies that are successfully managing their global workforce.www.stepstone.com
  • 3. Key findings from this researchinclude the following:• A  s companies expand globally, they the business. Moreover, most attention need to establish talent management focused on individuals with the greatest strategies in new markets. Despite the leadership or performance potential. recent fears associated with the US credit Individuals within areas of acute skills crunch, businesses worldwide remain shortage receive less attention. positive – just – about their prospects. The Economist’s October global business • Career opportunities and linking pay barometer puts business confidence at +13 to performance are common tools (on a scale of -100 to +100). Within our in talent management. Whereas in own survey most respondents see Asia- the past companies have focused on Pacific as providing the best opportunities pay and benefits, there is an increasing for revenue growth. The findings suggest recognition of the importance of training that economic development and rising and development, as well as of the need skills in these emerging markets will be for mentoring and coaching programmes, an advantage to companies when it in overcoming recruitment and retention comes to recruiting talented individuals. difficulties. Respondents cite performance However, with demand for talent in the -related pay and bonuses for individual region far outstripping supply, firms will performance as the most common means have to ramp up pay and offer improved of rewarding employee performance. working conditions if they are to exploit Although providing the right basic salary is its potential. still considered important, offering career development opportunities is seen as the•  ecruiting and retaining top talent is R best way to retain key employees. becoming harder. Executives cite overly high salary expectations and a shortage • ndividual assessment remains the I of candidates with appropriate skills preferred method of tracking employee as obstacles to hiring skilled individuals. performance. Fewer respondents cite A growing tendency of employees to techniques such as 360-degree assessment, change jobs is fuelling talent shortages team appraisal and peer appraisal as tools in many companies, while lack of suitable used by their organisations. career opportunities provides a common barrier to retaining talented individuals. •  echnology is becoming increasingly T prevalent. Whether using company-branded• Many companies have yet to establish recruitment portals, social networking sites talent management at the strategic to promote a company’s image, “virtual” centre of their businesses. mentoring schemes or implementing Most respondents say that in their skills-tracking platforms, innovative use of company talent is managed on an informal technology is becoming one of the keys to basis, with a lack of alignment between recruiting and retaining talent. formal qualifications and the needs ofwww.stepstone.com
  • 4. IntroductionCompanies are operating in a talent landscape expectations of what companies should bethat is far more complex than ever before. offering them in terms of experience andNot only do they need to recruit heavily from development. As a result, the ability to offernon-traditional markets, they must also design attractive career opportunities has become onestrategies to deal with demographic shifts of the most important elements of attractingthat are highly regionalised. As a result, talent and retaining talented individuals.management is an increasingly challenging partof business. In our survey, 41% of respondents Rates of remuneration remain important;believe attracting and retaining skilled 43% of executives seeing this as the mostemployees will become significantly harder, and important factor for retaining key employees.45% agree that their organisation is currently However, career development opportunitiesexperiencing a shortage of talent. are seen by almost half as the most powerful tool in this respect. And although 54% ofFor a start, employees are becoming more the respondents to our survey say they havedemanding. Today, top executives expect used the offer of higher starting salaries toto be offered a chance to move around overcome recruitment difficulties in the past,within the organisation, and young employees a significantly lower proportion (24%) say theyentering the workforce have high would deploy this strategy again in the future.Table 1 How would you describe the difficulty of recruiting and retaining top talent in the country where you work? Overall Asia Europe North America 0 20 40 60 80 100 Getting significantly harder Getting slightly easier Getting slightly harder Getting significantly easier More or less the samewww.stepstone.com
  • 5. Table 2 Which steps has your organisation undertaken in the past to overcome recruitment difficulties, and which would it consider undertaking in the future? Have Would Don’t undertaken undertake know in past in future Provide additional training so that positions 46% 36% 18% can be filled by internal candidates Improve benefits package 47% 33% 21% Offer higher starting salaries 54% 24% 22% Offer relocation packages 42% 23% 36% Flexible place of work 40% 31% 29% Select candidates who don’t fulfil all criteria 37% 30% 33% then provide training Flexible working hours 46% 28% 26% Consider older and semi-retired workers 26% 33% 40% Increased use of outsourcing 33% 33% 34% Provide financial incentives for staff to 36% 29% 35% recommend candidates Reorganise teams to reduce need for recruitment 41% 34% 25% Investing in recruitment management software 22% 31% 47% Advertise positions overseas 25% 31% 44% Developing company-branded Internet 37% 31% 32% recruitment portalwww.stepstone.com
  • 6. As well as meeting rising employee expectations, Update - January 2008companies are also facing an increasinglycomplex talent landscape. For global companies, To ensure that the results of ourthe highly regional nature of demographic survey remained relevant, in the lightshifts is a challenge. While workforces are aging of the toughening market conditionsin Europe, younger employees dominate in - particularly in the US - the Economistother markets. In China, the one-child policy Intelligence Unit went back to theis changing the demographic structure of the original survey panel in December tocountry – according to the World Bank, the check whether business sentiment hadproportion of China’s population aged 65 and changed since the questionnaire wasover will rise from just 10% in 1995 to 22% by first run in September. Interestingly,2030 – while in India the urban population is despite daily negative reports,growing quickly. executives remained sanguine about their companies’ prospects.At the same time, new talent pools are emerging Indeed, although the number ofin places such as Russia, Brazil, China and India. executives who believed they wouldOur research indicates that growth in these see significant improvement in theireconomies is assisting companies in their skills growth prospects over the nextacquisition programmes, with 38% of respondents three years fell slightly, from 50%citing economic development in emerging markets to 46%, the number who expectedas an advantage when it comes to the ability a slight improvement increasedto recruit talented individuals. However, despite from 37% to 44%. Furthermore,this potential, companies are under no illusion our survey suggested that the sub-that recruiting and retaining talent in emerging prime crisis is not the problem mostmarkets – and particularly Asia – will prove a hard concerning executives. More importantbattleground. With demand high, and staff turnover considerations, it seems, are a weakin the region running at 14% a year, having a clear dollar (39%) and the price of oil (38%).strategy will be a pre-requisite for success.www.stepstone.com
  • 7. Another challenge is that employers are faced fuelling staff shortages. Despite these challenges,with a workforce that now contains four our results indicate that many companies havedistinct generations, all with different career yet to establish a formal structure that wouldexpectations. In particular the youngest – the facilitate a more strategic approach to theso-called Gen Y – is entering the workforce management of talent. Some 34% of executiveswith skills and expectations that are markedly said that their company had only an informaldifferent from those of previous generations. approach to this part of the business, and 16% had no talent management strategy at all.However, in all demographic groups, the waypeople see their career developing is changing, It is perhaps not surprising, therefore, that fewwith executives demanding ever more flexibility respondents see their company as managingin the way they work and expecting to move talent “very successfully”. Only 13% believedjobs more frequently. In our survey, 37% of their organisation was excelling in attractingrespondents saw the increasing expectation of talent, with even fewer (7%) seeing the retentionemployees to move jobs or change careers as of talent as being very well managed.Table 3 How beneficial, or damaging, do you think the following economic and political trends will be for your organisation’s ability to recruit talented individuals? 1 2 3 4 5 6 Very Neutral Very Don’t beneficial damaging know Opening of labour markets 19% 31% 36% 5% 3% 5% Rising skills levels in 28% 42% 20% 6% 1% 3% emerging markets Economic development in 26% 38% 21% 11% 3% 2% emerging markets Increased use of older workers 12% 31% 43% 9% 3% 3% Increased participation of 24% 38% 34% 3% 2% 1% women in workforce Decline of unionisation 18% 22% 48% 5% 2% 5% Urbanisation in emerging markets 13% 30% 41% 10% 3% 4% Rise of protectionism 3% 7% 27% 34% 24% 5% Industry consolidation 7% 27% 38% 19% 5% 5% Shift from public to 15% 27% 42% 9% 2% 4% private ownershipwww.stepstone.com
  • 8. Table 4 In the next three years, which of the following social trends do you think is most likely to fuel talent shortages in general at your organisation? North Overall Asia Europe America Increasing expectation among employees to 37% 45% 40% 26% switch careers/jobs Lack of alignment between formal 23% 23% 15% 20% qualifications and needs of the business Migration of talent overseas 12% 13% 14% 19% Ageing population 10% 7% 13% 14% Low unemployment rates 9% 6% 9% 13% Declining standards of secondary/tertiary 7% 4% 8% 4% educationTable 5 Which of the following best describes your organisation’s talent management strategy? North Overall Asia Europe America We have a formal, company-wide talent 25% 26% 32% 19% management strategy We have a formal talent management strategy, 23% 27% 23% 23% but only in certain parts of the company We have an informal talent 34% 31% 30% 38% management strategy We do not have a talent management strategy 16% 16% 15% 19%www.stepstone.com
  • 9. Table 6 How successfully do you think your organisation manages the following aspects of talent management? 1 2 3 4 5 6 Very Neutral Very Don’t successfully poorly know Developing talent in the 8% 45% 25% 16% 5% 1% organisation Attracting talent to the 12% 45% 21% 16% 5% 0% organisation Conducting and learning from 4% 18% 23% 26% 23% 5% exit interviews Identifying talent within the 12% 41% 25% 15% 7% 0% organisation Measuring performance of 9% 33% 29% 22% 7% 0% employees Linking performance metrics to 8% 28% 32% 20% 9% 2% broader business objectives Setting appropriate 10% 36% 29% 18% 7% 0% compensation and benefit levels Retaining talent in the 7% 32% 25% 24% 10% 1% organisation Linking performance with 10% 34% 25% 19% 13% 0% reward Succession planning for top 7% 28% 29% 18% 15% 3% management positions Forecasting talent requirements 4% 24% 33% 25% 12% 2% Ensuring diversity of talent pool 9% 24% 35% 21% 9% 2% Identifying weaknesses in 7% 25% 32% 22% 11% 2% current talent poolwww.stepstone.com
  • 10. A borderless talent worldThere was a time when globalising your workforce survey, 42% of respondents see rising skills levelsmeant sending expats to run operations overseas. in these markets as beneficial to their talentNow, however, talent is flowing in all directions, management strategies, and 28% see this aswhether that is the movement of executives from “very beneficial” (see table 3).mature markets to posts in emerging economiesor skilled executives from Asia or Latin America New population flows are easing the pressure.taking up positions in Europe or the US. The In the UK, for example, 75% of respondents toborderless flow of talent is such that it would now a 2007 survey from the Chartered Institute of Personnel and Development cited the benefitsnot be thought unusual to find, say, a Brazilian of targeting migrant workers from EU accessionin charge of the eastern European division of a countries.Japanese company. KPMG is one company starting to tap into newThe global flow of talent is in part a necessity. markets such as China, Russia and South AmericaCompanies that for many years have focused for its talent. It has launched a global careerson their traditional recruitment markets in website and is using podcasts and case studies towestern Europe and the US are starting to attract candidates.find competition for talent in those marketsintensifying, particularly in Europe, where the “We have programmes to bring people fromworkforce is ageing rapidly and there is more Argentina and Chile and other countries tocompetition for skilled, younger employees. Australia and the UK,” says Doug Jukes, the firm’s global head of people management. “Because theThe dramatic economic growth witnessed in biggest single issue is the fact that the surpluses ofemerging markets has also affected the supply talent aren’t necessarily where you need them.”of overseas talent in North America and Europe.Ambitious graduates from China or India who A similar strategy is in place at Merrill Lynch.once headed to the US or the EU for further “Our labour market is extremely global,” sayseducation and then employment, are now seeing Tracey Hahn, the company’s head of leadershipgreater opportunities in their own countries and and talent management for Europe, the Middleare returning home. East and Africa. “We’re increasingly hiring graduates from European or Indian schools rather“Over the past couple of years companies have than UK schools because they have the skill setswoken up to the fact that many of their markets we’re really after – they have excellent educationmay become constricted in the next few years due in sciences, engineering and maths.”to demographic changes,” says Matt Guthridge, aconsultant at McKinsey & Company. “The US has Companies are expanding their access to humana reasonable young population coming through capital overseas through other business strategiesbut in Europe, there are just fewer people in the too. As our research suggests, outsourcing iskey age brackets. Newer talent aged below 24 [is] becoming a greater part of the talent mix, withbecoming tougher to recruit.” 42% of respondents citing outsourcing as among the strategies that their organisation is likelyAt the same time, new talent pools are emerging to use to broaden its talent pool. At the samein Asia and other developing countries. In our time, embarking on joint ventures with overseaswww.stepstone.com
  • 11. Table 7 In the next three years, which of the following strategies is your organisation likely to use in locations where gaining access to new pools of talent is an important goal? Overall Asia Europe North America Use of headhunters/recruitment 46% 48% 45% 56% consultants Outsourcing 42% 44% 44% 45% Develop own-branded online 40% 42% 41% 35% recruitment portal to build and Mergers and acquisitions 36% 41% 32% 33% Joint venture with overseas 28% 34% 28% 23% company Greenfield investment in emerging 21% 30% 19% 19% markets Offshoring 16% 19% 14% 10%companies is seen by 28% of executives as a relationships with schools and universitiesmeans of gaining access to new talent, as is making by sponsoring scholarships and innovativegreenfield investments (21%) in emerging markets. academic programmes or establishing an on-campus presence with brand-buildingCompanies’ success in recruiting the right events. In September 2007, for example,employees often depends on the power of their Deloitte Touche Tohmatsu announced thatbrand in the markets in which they operate. it would be sponsoring a Global BusinessTraditionally that has meant that, for example, Journalism Programme at Tsinghua University,in Germany, BMW is consistently in the top ten the first such programme in China.recruiters, as is Shell in the Netherlands. For the past two years, in each of the mainIn overseas markets, companies whose products regions in which it operates, Dow Chemicaland brands are well recognised also have this has been targeting 10-20 universities that areadvantage, as with, for example, Coca-Cola producing graduates with the kind of technicaland Nike in markets such as China. Moreover, skills it needs. “We are forming more strategicin developing countries, multinationals can links with these key universities,” says Julieoffer local graduates the possibility of international Fasone Holder, head of human resources at Dowcareer development, which can be very attractive. Chemical. “We become well known on campus and students get to know Dow and our careers.”An important part of establishing this brand However, while Western companies mayadvantage in overseas markets is building local have successfully established their brandswww.stepstone.com
  • 12. among graduates and other job candidates she says, “You’re just as likely to be sent in emerging markets, the increasingly outside of India as if you joined from the UK. global ambitions of local brands mean those So there’s massive globalisation of the talent organisations are providing stiff competition pools and of the competition for talent.” when it comes to recruitment. Examples include Indian companies such as Tata Group and All of which means that companies without Infosys Technologies, and Lenovo, the Chinese brand recognition in these markets are being company that took over IBM’s personal computer squeezed on two fronts and are having to work (PC) business, all of whom are expanding their hard to build their reputation. “There are ways operations into overseas markets. to compete on a global scale but you have to think about your brand, your employer value Furthermore, according to Lynda Gratton, proposition and creating local relationships professor of management practice at London with schools,” says Mr Guthridge. “Companies Business School, rising multinationals in India who are coming into this late are having to do and China will be able to compete with a bit of creative thinking.” Western firms because they will also be able to offer their employees mobility. “If you join Asia: opportunity costs Tata Consulting Group in India as an Indian,”www.stepstone.com
  • 13. Asia will prove to be something of an Perhaps it is an indication that while the enigma if the results of our survey are rewards could be huge, only those anything to go by. Most executives are organisations willing to go the extra mile adamant that they see the region as an when it comes to recruiting and retaining unparalleled business opportunity. Indeed, talent will be able to fully harness the 44% of executives said that it will offer the region’s potential. One example of this best opportunities for revenue growth of might include fast-tracking individuals’ any region over the next three years - three careers. Although this runs the risk of times more than cited North America, the promoting people beyond their ability, next highest. Furthermore, close to two- this can often be preferable to losing the thirds of respondents said that they saw employee altogether. Certainly it seems economic development in emerging markets that companies are thinking seriously at such as Asia as being either ‘beneficial’ or how they can retain talented individuals. ‘very beneficial’ to their organisations’ ability Our survey suggests that firms operating to recruit talented individuals. Paradoxically, in the region are more likely to try a however, executives also believed that it whole gamut of approaches compared would prove significantly harder to recruit with elsewherefrom coaching to personal and retain top talent in Asia than elsewhere development plans to mentoring schemes. (see table 8). So what lies at the heart of this However, in a market in which the demand seemingly muddled thinking when it comes for talented individuals far outweighs the to tapping Asia’s potential? supply, perhaps the most telling result from our survey is that 52% of companies said that Asian candidates’ pay expectations were too high, compared with just 42% in North America for example. Table 8 If your organisation has experienced recruitment difficulties, what are the most common reasons? Overall Asia Europe North America Shortage of candidates 58 59 59 60 Available candidates lack appropriate 48 55 47 42 skills Pay expectations too high 46 52 45 42 Available candidates lack “fit” with 26 29 26 33 culture of organisation Candidates unwilling to relocate 20 23 25 23 Available candidates lack 20 20 14 20 appropriate qualificationswww.stepstone.com
  • 14. Despite the fact that companies are “Also, as the economy grows the number obviously trying hard on the personal of options that qualified individuals have has development front, talented individuals in risen to the extent that it is easy for people Asia, it seems, are less likely to show loyalty to move jobs with great regularity. They to their employers and more likely to be shift jobs because they get a ‘better deal’ lured away by a firm offering a higher salary elsewhere. This is not necessarily defined or better working conditions. According by remuneration. Anything that sets a firm to Hewitt Associates, an accounting firm, apart from its competitors – remuneration, staff turnover in China was running at working conditions, reputation – could be 14.4% in 2005, with a turnover of 20% used as a tool to attract talent.” not uncommon in sectors with particular shortages of manpower. Economist Intelligence Unit forecasts suggest that such competition is going to Professor Elizabeth George, from the continue to fuel wage inflation. In China, Hong Kong University of Science & for example, we expect growth in average Technology Business School, says the key wages to run at an average of 20% a year issue is the sheer numbers of executives in 2007-10. Average wages in 2010 will be that are needed. “Economies in this region over three-and-a-half times higher than are growing so fast that the pressure is on they were in 2002. The idea of Asia as a for firms to fill positions at all levels – and low-cost utopia, with an abundance of business schools do not produce the number labour, it seems, is long-gone. of graduates that are needed,” she says. Table 9 Labour costs in China Average wages (monthly, US$) Growth in average wages (US$; % pa) 450 360 20.2.3 20.2 19.9 19.7 17.6 270 15.7 14.3 14.1 13.0 180 90 0 2002 2003 2004 2005 2006 2007* 2008* 2009* 2010* *Forecast. Source: the Economist Intelligence UnitManaging both locally and globallyMost companies are using a mixture of central strike a balance between setting strategies at acontrol and devolution of responsibility for corporate level and giving local business units atalent management. By doing this they hope to degree of responsibility for implementing those strategies on the ground. In our research, 26%www.stepstone.com
  • 15. of respondents report that in their organisation the emotional needs of potential recruits andresponsibility for talent management is the employees. “In India and China, where ourhands of the chief executive. Similar numbers research shows a critical shortage in seniorsay that this responsibility is managed by the managers, job titles and promotion grades –human resources director (24%) and by the all symbols of status and visible careerheads of local business units (25%). progression – need to be built into recruitment and retention strategies,” he explains.This global-local management mix is driven bythe fact that great regional variations prevail in Employees in emerging markets see scholarshipsthe demographic profile of companies’ labour and oversees training possibilities, careerspool. In Asia, for example, the demand for postings and employment contract bonds as atechnical and leadership skills far outweighs demonstration of an organisation’s commitmentsupply, particularly in India and China, where to young professionals, Mr Lash adds.salaries have escalated and often are notcommensurate with the position and experience At Pfizer, a pharmaceuticals company, talentof the individuals receiving them. Frequent job is managed locally but with the agenda set atchanges are common among young executives, corporate level. The company’s current focuswho see moving around as a means of gaining on diversity in the workforce, for instance, isa salary increase, costing companies dearly in an initiative that has been set by the seniorrecruitment and training expenses. management team but one that will be rolled out by local business units.As a result, Rick Lash, North American head ofleadership and talent at Hay Group, believes “We know that what this looks like will becompanies operating in these areas need different depending on where you are,” saysto adapt their HR strategies to local cultural Chris Altizer, the firm’s vice-president of humanconditions, creating strategies that appeal to capital policy. “So locally, you have to adaptTable 10 Who in your organisation is most responsible for talent management? Overall Asia Europe North America Chief executive 26% 28% 23% 19% Human resources director 24% 27% 27% 20% Individual heads of business units 25% 25% 18% 34% HR managers 8% 9% 9% 10% Line managers 9% 5% 10% 8% Other, please specify 3% 1% 6% 2% No one has overall responsibility 6% 4% 6% 6%www.stepstone.com
  • 16. Struggling with strategy your recruitment and retention strategies in terms of application. But the principles have to Although leading companies are fine-tuning be established by the centre.” the balance between local and global talent strategies, our research indicates that many Mr Altizer also points out that Pfizer, unlike organisations are still struggling to establish companies made up of many divisions, is a any kind of formal management strategy for single, large organisation. “That means we this part of the business. have to manage talent cross-functionally as opposed to cross-businesses, which is in some The largest group (34%) of respondents to ways more complicated.” our questionnaire said that their organisation’s talent management strategy was an informal As a series of national practices linked by a one. Some 23% said that their organisation common brand, KPMG has an altogether had a formal talent management strategy, but different structure. However, the firm has a only in certain parts of the company, while four-year-old group called People, Performance 16% had no talent management strategy and Culture that initiates talent management (see table 5). Only 19% of executives said programmes at a global level. This sets the that talent management covered everyone standard and allows different units in different in their organisation. countries to share best practice. At the same time, the firm has a senior partner in each Part of this is because companies have yet country who is head of people. to define what talent management means for their business. In our research, 19% of At Royal Bank of Scotland, core principles respondents said that lack of clarity about the and practices are established for talent scope of their strategy was the single biggest management and these are replicated barrier to implementing or maintaining a throughout the group’s operations. “However, formal talent bearing in mind the different markets in which management we operate, each group chief executive and strategy in their HR director will have responsibility for creating organisation. talent pools for their function, their geography At the same or particular marketplace,” says David May, time, leadership head of leadership development at Royal Bank appears to be of Scotland and of the RBS Business School. lacking in many firms, with 19% claiming that talent management in their company lacks the support of senior management.www.stepstone.com
  • 17. Table 11 Which of the following groups of individuals fall within the scope of your organisation’s talent management strategy? Overall Asia Europe North America Individuals with the best 34% 37% 43% 35% leadership potential Individuals with the best 34% 35% 39% 32% performance potential The highest performers of 29% 35% 32% 27% the organisation Current leadership 28% 29% 31% 27% The “marzipan layer” (level below 23% 27% 23% 25% current leadership) Everyone in the organisation 19% 23% 22% 19% Individuals within areas of acute 19% 20% 16% 17% skills shortage None of the above 8% 5% 10% 8%Table 12 Which of the following is the single biggest barrier to implementing or maintaining a formal talent management strategy in your organisation? Overall Asia Europe North America Difficulty measuring return on investment from talent 20% 23% 23% 26% management strategy Lack of support from senior 19% 18% 18% 18% management Lack of clarity about scope of 19% 18% 16% 18% strategy Lack of human resources 17% 17% 14% 15% Lack of financial resources 14% 12% 14% 13% Concern among employees 8% 9% 11% 6% that strategy is “elitist”www.stepstone.com
  • 18. Table 13 Which of the following metrics does your company report to external stakeholders? (%) Employee turnover 21.8 % Diversity measure 20.8 % Employee satisfaction 19.1 % Average salary 17.6 % Employee productivity 13.7 % Average length of service 11.5 % Absenteeism rate 7.6 % This haphazard approach, say experts, is no Although other employees should certainly not longer adequate given that a company’s be ignored, experts argue that the days when human capital is seen as an asset and, a one-size-fits-all approach could be used for increasingly, as part of risk management. developing a company’s human capital are over. Only a minority of firms currently report to external stakeholders on talent management “Segmentation is going to become very metrics (see table 13). However, although no important because you will have different jurisdiction has yet mandated that information requirements for mission-critical workforces on talent and leadership should be included in than you will for services workforces,” says the annual operating financial review, the idea David Smith, managing director of Accenture’s is beginning to take hold. Human Performance practice in North America. “Segmentation through modular choice, “In the annual reports it’s one of the biggest management practices and flexible policies areas of risk people are building plans around,” is something organisations are stumbling says Linda Holbeche, research and policy director their way through, and they’re not all getting at the Chartered Institute of Personnel and through it at the speed they probably need to.” Development. “Talent is more significant in many sectors than corporate reputation, and is definitely And if companies are facing greater diversity seen by many as the biggest risk in terms of the in terms of the geographical sources of talent, organisation being able to compete.” their workforces are becoming increasingly complex as they try to manage generations So companies are paying attention – ranging from Gen Y and school-leavers to older particularly when it comes to mission-critical workers remaining in work beyond the official staff. In our research, executives report that retirement age. individuals with leadership potential (34%) as well as those with the best performance “Companies are encountering the complex potential (34%) fall within the scope of their issue of four generations in the workforce organisation’s talent management strategy. and in industry, we’ve never before seen four generations in the workforce,” says Mr Smith. “Managing that becomes quite challenging,”www.stepstone.com
  • 19. Gen Y The generation of school-leavers now As a result some companies are starting entering the workforce is the group to communicate with Gen Y candidates that is providing companies with the through media channels with which greatest headaches when it comes they are familiar. Dow Chemical posts to attracting, engaging and retaining a large amount of material about promising employees. the company on the Internet, along with web cams and podcasts. “We’re This generation is racially and ethnically reaching out to the generation coming diverse. They are also extremely out of school in the way they’re used to confident. Most agree that members getting information,” says Julie Fasone of Gen Y, or the Millennials as they Holder, head of human resources at are also known, think and work Dow Chemical. in completely different ways from previous generations and have far Ernst & Young has gone a step further. higher expectations of what their In 2006 the firm launched a corporate employers are going to deliver in terms page on Facebook. The site, which now of career development. has more than 10,000 members, is not used for direct recruiting or posting For a start, these young workers resumes, but for raising awareness of are the first to have grown up with the firm’s brand among students and technology. They connect with friends potential job candidates by allowing and colleagues globally through virtual members of the site to exchange communities on social networking sites. information among themselves. This has implications for companies And with the popularity of websites trying to connect with these such as YouTube in mind, the firm is individuals. “The way they look for this year launching a video competition jobs is different,” says Lesley Uren, called “Reel Influence” for US and chief executive of Jackson Samuel, a Canadian college students recruits, UK-based talent management firm. in which teams are asked to create “The old days of the graduate milk compelling videos around the question round are changing. New media have “Why professional services?” entered the arena and they are using networking and networking sites “More than any generation we’ve ever to find jobs. So it’s a very different seen, these people put a lot of stock dynamic, and organisations are only in the information that they can glean just coming to terms with what it will from each other,” says Dan Black, take to attract these people.” director of campus recruiting for the Americas at Ernst & Young. “So we felt the need to reach this group through a medium they are comfortable with.”www.stepstone.com
  • 20. Older workers At the same time, Gen Y job candidates At the other end of the generation scale, are scrutinising more intensely than more workers are staying in their jobs previous generations the values of beyond retirement age. In Europe, the the companies they are considering age discrimination legislation now in working for. Not only do they want to place means employers are unable to know that the salary and benefits force staff to retire on age grounds below match their expectations – they also 65 and have a duty to consider requests want to be assured that they are to work beyond 65. The challenge for working for a company whose companies, therefore, is to engage these ethical behaviour and policies on the workers who, like Gen Y, may also be environment and approach to society looking for greater flexibility in their work match their own philosophies. patterns and an opportunity to give back to society. “Talent management people can put out wonderful pieces about the organisation In our survey, only 10% of executives see and how it develops talent but if you’re an aging population as fuelling talent a young recruit or candidate, the first shortages in their organisation while thing you’re going to do is Google 31% of respondents see increased use the company,” says Prof Gratton. “So of older workers as beneficial to their technology is changing things.” organisation’s ability to recruit talented individuals. Although in our survey results an image problem in an industry or company was However, these employees need to be cited by only 15% of respondents as offered a range of options to keep them hampering efforts to hire top candidates engaged at a time in their careers when and by just 12% as impacting retention, marching upwards through the company recruitment specialists and talent directors may no longer possible and their career believe that, for the generation now structures, rather than being vertical, entering the workforce, the sustainability are horizontal. These employees want and ethical credentials of a company will to work longer, but on their own terms, be an important element in their choice often in a consulting role. of employer. “There’s a lot of talent in the older age Companies are finding these candidates group and a lot of people want to do asking detailed questions about their portfolio type working where they go community programmes or initiatives to work two or three days a week and to reduce the carbon footprint of their then do something else,” says Mr Jukes. operations. “Lots of organisations are “We’re seeing they have great skills to being more forthright about their green offer, particularly in the advisory services. policies and responsible citizenship,” Professional services firms have had far says Ms Hahn. “It’s becoming almost a too young retirement ages and we’ll all competitive edge issue.” be reviewing that now.”www.stepstone.com
  • 21. Nevertheless, the large number of well-developed leadership skills. Hay employees retiring over the next few Group’s research shows that the retiring years will present companies with population has four key abilities – team a challenge. In the US alone, 75m leadership, organisational awareness, employees will be eligible for retirement, impact and influence, and initiative. with only 45m workers to replace them, “These competencies take longer to according to research conducted by Hay develop and come from experience and Group with Chief Executive Magazine. maturity,” says Mr Lash. “The implication is that organisations will need to find This means companies will soon be ways to rapidly accelerate the growth of losing large numbers of employees with these abilities in younger talent.” Inside or out While internal development programmes are Another reason to turn to external recruitment seen as a crucial part of employee engagement firms is when companies are expanding into new and succession planning, the departure of product or services areas and need to increase retiring leaders as well as rapid changes in rapidly the number of senior managers with certain industries mean organisations will also expertise in those areas. need to bring in individuals from outside to fill talent gaps. Almost half (46%) of respondents At Cisco Systems, as the company moves into to our survey cite the use of headhunters software and consumer markets more aggressively, or recruitment consultants as among the the organisation is looking to bring in talent from strategies their organisation is likely to use outside, increasing the proportion of senior leaders when gaining access to new pools of talent hired externally from 20% currently to a target (see table 7). of 40%. “That’s not to say we won’t continue to develop talent inside,” says Annmarie Neal, vice- Part of the reason for this is that, in many president of talent management at Cisco. “But we industries, the pace of change is such want to stretch out the newness of our thinking by that organisations cannot rely on bringing bringing in a lot of talent from outside.” employees in at a junior level and developing their skills inside the company. For Royal Bank of Scotland, the solution was to establish its own in-house executive search “Where there is significant change in an function to co-ordinate recruitment, conducting industry, a firm’s needs may change radically executive-level searches across the globe. “We’ve in a two to three year period,” says Mr used and continue to use external firms, but we Guthridge. “And in those environments, if also thought this would give us an extra capability you’re developing someone over a ten-year internally, greater flexibility and the ability to career journey, it’s likely they’ll get to senior build and retain our own knowledge base,” says levels in the organisation without the necessary Mr May. “It enables us to keep an eye on the capabilities because everything has changed by market when we review areas such as succession the time they get there.” planning. So we are doing research as well as specific searches.”www.stepstone.com
  • 22. Another option is to use a company-branded is to close the experience gap and erode recruitment portal. In our survey 37% of generational differences by putting both executives said that they had used them to executives on equal ground. overcome recruitment difficulties (see table 2). At their most basic, recruitment portals “What’s great about reverse mentoring is it can serve as an obvious first port-of-call for helps people think differently,” says Ms Calo. anyone interested in working for a particular “You can impart the wisdom of time and company. They can also be a good way experience and they help you think about what for companies to promote their culture to the next generation is excited about.” applicants. However, to be truly effective, they also need to incorporate software that IBM is also taking mentoring into virtual reality enables a business to pool all applicant data on Second Life, the 3D online virtual world. across different regions and divisions within There, the avatars – the online personae the company. At the communications company created to navigate the site – of the mentor Orange, for example, introducing a careers and mentee meet in an environment that helps portal enabled them to centralise 80,000 CVs break down cultural and geographic barriers. and made tracking candidates easier. The company says that it has even helped them As companies lose older employees in recruit highly experienced executives, who leadership positions, companies will have to would normally have been recruited through use these tools more frequently to accelerate an executive search firm. A happy by-product the development of younger executives and of this has seen Orange cut its yearly spending expose high-potential leaders to stretching on recruitment by £1.1m. tasks and positions. When it comes to staff development, although “I think the most powerful development much has been made of e-learning and comes not from development programmes but professional training in recent years, our from on-the-job opportunity,” says Katherine research indicates that on-the-job learning, Thomas, BT’s group talent director. “So a lot of coaching and mentoring are emerging as the our talent agenda is about deploying people most powerful tools being used by companies rapidly to the right kind of opportunities.” to foster skills and retain their employees. Mr Lash believes that these kinds of strategies The largest group of respondents (66%) cited will be what companies need to focus on in on-the-job training as a method used by their order to mitigate what he calls the “looming organisation to develop talent, while 58% talent crisis” arising from the numbers of the cited coaching and 47% cited mentoring. senior leaders retiring in the coming years. “Using older workers as mentors and coaches Moreover, new forms of mentoring are earlier in their careers will be critical,” he emerging. At IBM a junior employee, explains. “Organisations that can put in place sometimes even a brand new hire, will become the systems and support to make this happen a mentor for a senior-level executive. The will be able to fill their talent pipeline more idea behind reverse mentoring, says Karen quickly to meet the leadership gaps they will Calo, vice-president of global talent at IBM, face in the next five to ten years.”www.stepstone.com
  • 23. Tracking it In order to assess where the greatest At KPMG, an extensive tracking system talent gaps are likely to lie, companies monitors key performance indicators need to track their workforce closely. such as turnover by level, gender and Our research shows that the most number, days spent on learning and common indicator tracked by companies development, number of incoming is employee turnover, identified by 65% recruits coming in and the percentage of respondents. Equally prominent in the of those recruits that came from the results is the absenteeism rate (64%). first offer. However, the firm also monitors employee engagement and When it comes to performance tracks this globally. management, peer review and 360- degree assessment are techniques Mr Jukes says that a healthy competition that have received a lot of attention between national practices helps keep in recent years. However, in our the focus on levels of employee research only 26% executives cited engagement and allows remedial 360-degree appraisal as a tool used by programmes to be put in place when their organisation to track employee scores slip. “There’s a lot of pride in peer performance while just 14% highlighted pressure between the countries on peer appraisal. By far the largest group engagement scores, which is good,” of respondents (68%) cited the annual he says. individual employee assessment as the Another challenge for companies method used by their organisation to with operations in different countries track this. is establishing a common language through which to ensure that the However, experts suggest that organisation is keeping its skills in line numbers are only part of the picture with business requirements. To do and that companies need to look so, IBM has developed an “Expertise closely at how employees previously Taxonomy” system that defines terms identified as having high potential have for certain skills and roles so that they actually performed. have consistent meaning across its operations globally. “It’s about going back every so often and having a look to get a better sense The company uses this in conjunction of what talent is needed for the future,” with its Professional Marketplace tool, says Ms Holbeche. “And companies through which employees regularly should be looking at the people who update their skills and engagements have come through and delivered and on a web-based database. “That’s a how they differ from those that haven’t huge competitive advantage for the come through – rather than just getting company,” says Ms Calo. “Because we everyone ticking the boxes.” know what all our capabilities are and when they’re available.”www.stepstone.com
  • 24. Rising up the agenda “The way we manage talent in BT, this is As a result of the complex economic, social actually one of the small number of areas in and demographic shifts now taking place, the overall HR that is reported on regularly talent management is moving up the agenda, to the PLC board,” says Ms Thomas. “I go with many companies citing this as a board- twice annually to the board with updates on level issue, and one that is seen more broadly the whole agenda and, in addition, I spend as part of risk management. The largest group time with the operating committee. So this is of respondents to our questionnaire (26%) something that definitely has board visibility.” say that responsibility for this part of their organisation’s business is in the hands of the In many organisations talent management chief executive (see table 10). is no longer viewed as an HR issue but as an enterprise-level issue that requires the “It’s valued [at senior level],” says Mr Jukes. attention of senior executives. And while HR “Because essentially our biggest strategic departments provide the support, tools and issue is not having the right people in the right guidelines needed to roll out leadership place and right time so people management development and performance management has risen to the top of the list.” programmes, the person with responsibility for shaping and driving these programmes is Increasingly, talent management is in the increasingly the line manager. hands not of the human resources director but executives with titles such “Companies no longer see a separation as “vice-president of talent management” between talent strategy and business or “chief talent officer”, newly emerging strategy,” says Mr Guthridge. “So that means positions that many believe will – like the management, particularly senior executives and chief information officer during the 1990s the chief executive, should be seen as the chief – become an increasingly powerful executive talent officers in any organisation.” post in the corporate organisational hierarchy.www.stepstone.com
  • 25. Conclusion As the world’s talent pools become more Given these challenges our survey reveals the global, companies are faced with a complex surprising fact that many businesses have yet to set of demographic scenarios that will affect establish a formal talent management strategy. their skills acquisition. In addition, they need Even in organisations that have established to respond to changing expectations from a a strategy, it is only an informal one, often workforce that is looking for greater flexibility, lacking clarity of scope. Moreover, according to challenging career opportunities and the respondents, talent strategies frequently do not chance to work overseas. receive senior management support. With a number of employees destined to Yet industry commentators and professional retire in the coming years, companies are likely advisors say it is essential that talent to experience severe shortages of talent at management be viewed as an integral part of senior leadership levels. At the same time, the a company’s overall business plan – something ambitiousness, ethical consciousness, global that receives board attention and that is aspirations and technical literacy of Gen Y included in risk management considerations. candidates mean organisations need to devise ways of attracting and retaining this new The challenge for companies, therefore, generation now entering the workforce. is to establish programmes and strategies – supported by senior management and rolled Although our survey shows that companies see out by line managers in local business units the expansion of non-traditional talent pools in – that will turn talent management into a regions such as Asia-Pacific as a beneficial trend systematic, measurable process, guaranteeing when it comes to hiring skilled employees, the pipeline of skills and appropriate leadership many executives believe that the general needed for them to remain competitive. acquisition of talented staff is becoming much more difficult.www.stepstone.com