The SHL Talent ReportBig Data Insight and Analysis of the Global WorkforceEugene Burke and Ray Glennon
Table of contentsForeword from Corporate Executive Board (CEB)      4Introduction                                       5C...
Foreword from CEBSince the early 1990s, the performance of major enterprises around the world has beenfueled largely by st...
Introduction                                                                                      People Intelligence is t...
Chapter 1The global availability ofcurrent and future leaders                    shl.com | 7
Perspectives on the supply of leadersfor today and tomorrowHow intelligent is your organization about identifying leaders ...
Chapter 1: The global availability of current and future leadersThe geography ofleaders for todayThose in the leaders for ...
The geography ofleaders for tomorrowThe next tier of potential leaders includes those who exhibit strengths in some of the...
Chapter 1: The global availability of current and future leadersLeadership by regionWhen we look at the global distributio...
Adapting leadership strategiesto regional needsViewing the supply of potential leadership talent for today and tomorrow su...
Chapter 1: The global availability of current and future leaders           The data suggests the value of People Intellige...
Which industries have the strongestsupplies of leadership talent?When looking at the data across both industry sectors and...
Chapter 1: The global availability of current and future leadersIndustries with the strongestleaders for todayFigure 4: Le...
Industries with the strongestleaders for tomorrowFigure 5: Leaders for tomorrow by industry sector globallyWhen we look at...
Chapter 1: The global availability of current and future leadersWhich industry sectors offer the strongest supplies ofleade...
The question is not whetherthere is leadership talentThe question is how intelligent is your organization in              ...
Chapter 2The global availabilityof innovation                   shl.com | 19
Looking for innovatorpotential around the worldIn a world full of volatility and challenges, innovation has become the sin...
Chapter 2: The global availability of innovationThe DNA of the innovator and the SHL Innovation                           ...
Mapping the supply ofinnovator potentialAs illustrated in the previous chapter, the supply of talent to be an effective to...
Chapter 2: The global availability of innovationTalent for innovationby regionWith the United States and Canada both ranki...
Developinginnovation talentInvesting in learning and development to close thegeographical gap in innovator talent.This rai...
Chapter 2: The global availability of innovationIndustries with the greatest supplyof potential innovatorsInnovation can t...
Industries with the greatestsupply of potential innovatorsFigure 9: Innovator talent ranked by industry sector globally, a...
Chapter 2: The global availability of innovationIndustries with the strongesttalent for innovation by regionFigure 10: Tal...
A comprehensive view ofglobal innovationRecognizing the growing importance of innovation, the past few years have seen the...
Chapter 2: The global availability of innovationCluster 4 countries have stronger challenges in both the economic and soci...
Innovation isn’t an option– it’s a must doEvents in recent years have forced governments, the public sector, and private b...
Chapter 3The landscape oforganizational risk                      shl.com | 31
The landscape oforganizational risk“Fortune favors those who dare” – or does it?21                                        ...
Chapter 3: The landscape of organizational riskBehavioral risk byIn contrast to our indices for leadership and innovation,...
Behavioral risk at the managersand professionals levelWith a global average of 12.2%, here is how 17 industry sectors rank...
Chapter 3: The landscape of organizational riskTurning from the analysis of risk in various sectors, Figure 13 illustrates...
Behavioral risk at the productionline and front line levelLevels of behavioral risk increase as one moves from the C-suite...
Chapter 3: The landscape of organizational riskThe geography ofbehavioral riskAs shown, levels of behavioral risk can vary...
SHL Talent Report
SHL Talent Report
SHL Talent Report
SHL Talent Report
SHL Talent Report
SHL Talent Report
SHL Talent Report
SHL Talent Report
SHL Talent Report
SHL Talent Report
SHL Talent Report
SHL Talent Report
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SHL Talent Report
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SHL Talent Report
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SHL Talent Report
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SHL Talent Report

  1. 1. The SHL Talent ReportBig Data Insight and Analysis of the Global WorkforceEugene Burke and Ray Glennon
  2. 2. Table of contentsForeword from Corporate Executive Board (CEB) 4Introduction 5Chapter 1: The global availability of currentand future leaders 7Chapter 2: The global availability of innovation 19Chapter 3: The landscape of organizational risk 31Chapter 4: The landscape of diversity 41Chapter 5: The global race for skills 53Conclusion 65Endnotes 68Appendix 70About the authors 71 shl.com | 3
  3. 3. Foreword from CEBSince the early 1990s, the performance of major enterprises around the world has beenfueled largely by steady gains in labor efficiency and productivity. Maintaining, and extending,those gains will be a significant challenge in the face of an increasingly complex workenvironment – characterized by unpredictable global economic forces, ubiquitous information,and rapid technological changes. It is no surprise that talent management has been elevatedto the top of the strategic agenda for corporate boards and executive teams worldwide.Numerous studies have shown that well led firms – those who are able to attract, retain,develop and engage the best talent – are more likely to hit their business objectives andgrow. How do you know if your organization is well led? Is your organization’s talent ready toperform in the new work environment? Are your talent development programs focused onthe right objectives?The SHL Talent Report for 2012 brings the best in talent analytics to bear to provide newinsights on important talent management topics: leadership, innovation, organizationalrisk, diversity, and the distribution of critical employee skills globally. SHL has a privilegedand unique position to help executives understand their current and emerging talent base.The insights in this report are generated from the work of more than 300 expert industrialpsychologists and data from almost 4 million assessments in close to 200 countries.The strategic importance of talent data and intelligence was a key driver for CEB’s acquisitionof SHL this past summer. Combined, our two organizations are able to provide unparalleledinsight and advice on leading and managing talent in the new global economy. As the leadingmember-based advisory company, CEB equips senior leaders with insight and actionablesolutions to transform their operations. We’ve done this for nearly 30 years by identifyingthe world’s best management practices, corporate benchmarks and data-based analytics.Combining SHL’s unparalleled knowledge of workforce skills, competencies and capabilitieswith CEB’s archive of more than 15,000 best practices, will help our members identify andact on their key talent management challenges – across their enterprises broadly, within theirmost important corporate functions (Sales, R&D, Marketing, and Finance), and in their newand emerging markets.Conrad SchmidtGlobal Research Officer, CEB4 | The SHL Talent Report
  4. 4. Introduction People Intelligence is the insight into behavior,This report is about knowing. It is about questions that organizations worldwide ask ability and potentialthemselves every day. Questions such as “How do we know that our people can achievewhat we want to achieve?” and “How do we know that our talent management programs SHL offers to helpwill deliver?” organizations understand,Knowing requires data and insight benchmark and makeOur mission at SHL is to provide that knowledge and insight through People Intelligence. better decisions aboutThat intelligence is delivered through reliable, scientifically valid and objective measures people.of people’s talents, ranging from their potential to be an effective leader to the specificskills and knowledge required for the thousands of daily transactions that make or break anorganization.With the launch of the SHL Talent AnalyticsTM program this year, we have delivered a newmacro capability in People Intelligence. Organizations can now look at their people againsttheir industry and across the geographies in which they operate. This has helped leadingorganizations articulate their people issues and identify where they need to focus to addressthose issues.The program has also moved the talent conversation on from the cliché that people are ourmost valuable asset. Now organizations can see where the value of their people is and whatthey need to do to realize that value. SHL Talent AnalyticsTM is about actionable insight basedon hard data about talent.Delivering millions of assessments globally places SHL in a unique position to share a globaland a local view of talent. In this report, that view is shared in the context of the mostpressing talent questions of today. What does the supply of leadership potential look like by geography and by industry sector? What are the talents that drive effective innovation and how are those talents distributed globally? Which sectors are most at risk from the behavior of their people? Is the gender imbalance in favor of men for senior positions driven by differences in leadership potential? What are the implications of an aging workforce for the future supply of leaders and the dynamics of the workplace over the next decade? Which geographies are best placed in the global race for skills? Where can I find the talent I need?In the true spirit of big data, this report aims to provide you with a compass to help guideand improve the effectiveness of your talent programs. shl.com | 5
  5. 5. Chapter 1The global availability ofcurrent and future leaders shl.com | 7
  6. 6. Perspectives on the supply of leadersfor today and tomorrowHow intelligent is your organization about identifying leaders for today andfor tomorrow? Effective leadersMajor economic shifts, swift social and political change, and accelerating technological andcommunications capabilities are driving an ever-greater demand for effective leadership.Which begs the question: where will top leadership talent come from to meet high demand?At SHL, we believe that effective leadership is about influencing people so that they sharecommon goals and work more effectively towards the achievement of the organization’smission1. Effective leaders know how to develop a compelling vision that is based on clearand critical thinking; know how to articulate and communicate goals that motivate othersand provide direction; know how to communicate effectively and to support others throughchange; and know how to get things done and realize tangible goals and objectives.Finding individuals with this rounded repertoire of leadership talents is clearly a challenge,one recognized by both executives and the employees whom they lead. Recent surveysshow as few as 25% of employees believe their organizations have the leaders to succeed inthe future2 and only 33% identify their executives as being among the top leadership talent intheir industry 3.To help organizations understand the global landscape of leadership talent and to framestrategies for identifying, acquiring and developing effective leaders, we have harnessedSHL’s extensive data on leadership potential. We look at the supply of leadership talent fromtwo perspectives: those with potential to lead today, and those who have potential throughadditional development to become the leaders of tomorrow.Leadership gaps and succession riskWhether you ask executives looking at their people from above or employees judgingtheir organizations from below, both express a lack of confidence in the next generation ofleaders 4 – or in the ability of their organization to develop leadership talent5. Organizationsacknowledge this succession risk as one of the most critical factors facing them today 6.However, mitigating this risk requires the kind of intelligence about people’s potential that Only 1 in 4many organizations are missing or, if they have the data, fail to use effectively. employees believe their organizations have the leaders to succeed in the future.28 | The SHL Talent Report
  7. 7. Chapter 1: The global availability of current and future leadersThe geography ofleaders for todayThose in the leaders for today group have the strongest behavioral repertoire to be effectiveleaders. They are stronger in the more transactional, managerial and operational behaviors Table 1: Supply of potential leadersthat build effective relationships with people, can drill down to the essence of a problem and for today as a % of population:evaluate the data to identify a solution, can organize and mobilize resources, and can adapt to Top 25 countries7challenges and change effectively. They are also stronger in the transformational behaviorsthat can engage and influence others to get things done (rather than doing it themselves), 14.0% China (Hong Kong)can communicate effectively to gain the support of others, can think laterally and bring 13.4% Germanynew insights, and have the drive to see things through and achieve their personal careerobjectives. 10.3% United KingdomAnalysis of the data shows that a very small number – just 6.7% or 1 in 15 managers, 10.0% Australiaprofessionals or executives globally – fit this category. We have called them leaders for today 9.9% United Statessimply because they are the people who, with the right experience, are most likely to deliverin a leadership position. 9.8% Switzerland 9.5% Canada 9.4% Japan Leadership potential for today: People with the strongest 8.9% Singapore potential to be effective leaders. Most likely to respond to 8.0% New Zealand leadership development and realize that investment through performance in a leadership role. 7.4% Sweden 7.3% China (Taiwan) 7.1% FranceTable 1 shows the Top 25 countries for this level of leadership potential. Countries in North 7.0% ThailandAmerica (Canada and United States), Western Europe (notably Germany, United Kingdom,Switzerland, Sweden, France and Finland), and Australia and New Zealand emerge as the 6.7% Finland Averageglobal hot spots. While Asia as a region does not emerge as strongly in the supply of thislevel of leadership talent, China (Hong Kong), Japan, Singapore, China (Taiwan) and Thailand 6.6% Belgiumare emerging as top hot spots in Asia. 6.3% Spain 6.3% Turkey 6.1% Italy 5.7% South Africa 5.7% United Arab Emirates 5.6% Mexico 5.4% Denmark 5.3% Brazil 5.2% Norway Region 9 North America Africa Australia- Middle East New Zealand Eastern Europe Western Europe Latin America Asia shl.com | 9
  8. 8. The geography ofleaders for tomorrowThe next tier of potential leaders includes those who exhibit strengths in some of thekey behaviors but lack fully-rounded potential. They may have strength in some of the Table 2: Supply of potential leaderstransactional facets of leadership and can deliver programs to time, cost and quality, but lack for tomorrow as a % of population:strength in areas such as communication, influencing and lateral thinking. Or they may have Top 25 countries 8strengths in these transformational areas but lack strengths in the areas that turn ideas intoeffective programs of work. 53.9% MexicoThese are the people who would benefit from additional development and we have called 49.5% Turkeythem leaders for tomorrow simply because they have a longer personal journey to become 44.1% Egypteffective and rounded leaders. 43.4% SwitzerlandOrganizations ignore this tier of leadership at their peril. From a supply side perspective, 1 in3 managers and professionals have this level of leadership potential – six times the proportion 41.8% Brazilin the leaders for today tier of leadership potential. Realizing the potential of leaders for 41.3% Indiatomorrow requires targeted learning and development, which in turn requires a deepunderstanding of their strengths and challenges. 41.2% Italy 41.0% United States 40.1% Germany Leadership potential for tomorrow: People with the potential 39.9% Netherlands to become well-rounded leaders, but who have a longer personal 39.4% China (Taiwan) journey to take in order to reach that level of effectiveness. 39.3% United Arab Emirates 39.1% DenmarkThe landscape changes quite a bit when we look at the supply of leaders for tomorrow (see 38.6% Sweden AverageTable 2). The availability of leadership potential for tomorrow is strongest among emergingeconomies, notably the BRICS countries: Brazil, Russia, India, and China (Taiwan) – with 37.3% PortugalSouth Africa at 32.3% falling outside the Top 25. Additional strong geographies for leadersfor tomorrow are found in the newly coined TIMS emerging economies: Turkey, Indonesia, 36.9% RussiaMexico, and South Korea. Latin America and the Middle East also feature strongly as hot 36.8% Spainspots for leaders for tomorrow (see Figure 2). 36.7% Ireland 36.7% Indonesia 36.6% China (Hong Kong) 36.6% United Kingdom 35.9% Norway 35.2% Poland 34.5% Canada 34.3% China (Mainland) Region North America Africa Australia- Middle East New Zealand Eastern Europe Western Europe Latin America Asia10 | The SHL Talent Report
  9. 9. Chapter 1: The global availability of current and future leadersLeadership by regionWhen we look at the global distribution of leadership potential, we see a marked differencebetween leaders for today and leaders for tomorrow.Figure 1: Regional view: Leadership for today 3 7 1 4 6 8 5 2 Region 9 North America Australia-New Zealand Western Europe Asia AfricaFigure 2: Regional view: Leadership for tomorrow Middle East Eastern Europe Latin America 6 4 3 2 7 1 5 8 shl.com | 11
  10. 10. Adapting leadership strategiesto regional needsViewing the supply of potential leadership talent for today and tomorrow suggests thatorganizations need to adapt their strategies to reflect different needs in different regions. Emerging economies haveLooking at the supply of leadership in the countries ranked in the Top 25 for today and strong supplies for leaderstomorrow, and comparing them to the global supply, four distinct groups emerge requiringdistinct leadership acquisition and development strategies. for tomorrow, provided development programs Leaders for today Leaders for tomorrow are targeted to realize that potential. 1. Strongest potential overall. In the first group, the supply of leadership for today and tomorrow is stronger than the average global supply. While competing for leadership talent remains a challenge in these geographies, the odds of finding effective leaders for today are significantly higher at 1 in 10 versus the global average of 1 in 15. With the right intelligence on the leadership potential of their people, leveraging the supplies of leaders for today and tomorrow offers a source of competitive advantage for organizations in these geographies as they engage in an increasingly global economy. This group includes: Asia: China (Taiwan) Western Europe: Germany, Sweden, Switzerland North America: United States 2. Strong today – challenged tomorrow. The second group identified has a different challenge – stronger than global average supply of people with the highest potential today to move into a leadership role, but succession risk in terms of available leadership talent for tomorrow. For this group, the challenge will be to use People Intelligence to maximize the investment in learning and development to build leadership bench strength for the future. Geographies facing this challenge are spread around the globe: Asia: China (Hong Kong), Japan, Singapore, Thailand Western Europe: France, Finland, UK Australia-New Zealand North America: Canada 3. Weaker today, but the future looks bright. Flip the challenge around and we find several countries from the emerging BRICS and TIMS economic blocs with a short supply of top potential leadership talent today, but showing greater potential for available future leaders. In order for this group to stay competitive, using People Intelligence is even more critical to identify leaders now since the odds of successfully doing so are 1 in 20 – half the odds of the strong group one countries.12 | The SHL Talent Report
  11. 11. Chapter 1: The global availability of current and future leaders The data suggests the value of People Intelligence extends beyond the hiring phase into development programs to strengthen the effectiveness of those in senior positions; as well as identifying potential in the richer supply of leaders for tomorrow in these geographies. Asia: India Western Europe: Denmark, Italy, Netherlands Latin America: Brazil and Mexico Middle East: Egypt and Turkey 4. Weakest potential overall. This group requires a strategy to build a strong alignment between talent acquisition and development. In these geographies, identifying potential leaders early and ensuring they have the personal and career development to realize their potential is essential. This strategy will also be critical for companies operating across diverse geographies who wish to avoid a crucial error: using a one-size-fits-all approach to identifying and developing leaders everywhere they operate. Such an approach ignores socio-economic and cultural differences in leadership potential and development needs and that these differences require a flexible and localized approach (see Figure 3). This group includes: Middle East/Africa: South Africa Asia: China (Mainland), Indonesia Eastern Europe: Poland, Russia Western Europe: Ireland, Norway, Portugal, SpainFigure 3: The supply of leadership talent in emerging and mature economies10 1 8.7% 4 37.4% 2 6.8% 2 38.5% 3 6.6% 3 38.1% 4 6.3% 5 37.0% 5 5.3% 1 42.6% 6 4.5% 5 37.0% Percentage of population Leaders for today Leaders for tomorrow shl.com | 13
  12. 12. Which industries have the strongestsupplies of leadership talent?When looking at the data across both industry sectors and geographical regions, specificareas of strengths and weaknesses in the leadership talent pools for today and tomorrowemerge (see Figures 4-6 on pages 15, 16, and 17).Strongest sectors overallBanking, Insurance and Financial Services sectors have the advantage of strong suppliesof leadership both today and tomorrow across most geographies, with the exception ofWestern Europe.Weakest sectors overallIn contrast, the Oil & Gas and Utilities sectors face challenges in the supply of leaders forboth today and tomorrow, particularly in Eastern Europe and North America, despite NorthAmerica being one of the geographical hot spots for leadership talent.Strong today – challenged tomorrowMining, Professional Services and the Public Sector emerge as sectors attracting strongertalent for leadership today but face likely succession risks in the future, with risk highest inAustralia-New Zealand for Mining; in the Middle East and Africa for Professional Services;and in Asia for the Public Sector.Weaker today, but the future looks brightOther sectors are weaker in attracting strong leaders for today but attract stronger suppliesof leaders for tomorrow. For these sectors – Consumer Goods, Healthcare, Telecoms andGeneral Business Services – we see the need for a two-pronged strategy of strengtheningleadership attraction and acquisition programs while also using People Intelligence to meetdevelopment gaps.The data also suggests that relying on recruiting leaders on the basis of sector specificknowledge and experience is simply the wrong strategy for many sectors seeking to build apool of effective leaders for today and tomorrow. For several sectors, taking a broader scan ofleadership talent including talent pools from outside their traditional sectors is essential.14 | The SHL Talent Report
  13. 13. Chapter 1: The global availability of current and future leadersIndustries with the strongestleaders for todayFigure 4: Leaders for today by industry sector globallyThe data was cut by 17 industry sectors11 to provide a picture of which sectors are moreeffective in attracting strong leadership for today. 1 Professional Services 1 10.3%* Public Sector 10.3% 11 10 Healthcare 5.9% 11 Business 3 Services Telecoms 6.1% 5.9% 13 Mining 9 8.8% Consumer Retail 17 Goods (Heavy Goods) 6.5% Oil & Gas 5.8% 5.1% 14 15 Consumer 4 6 Goods (Leisure Engineering 15 & Personal) Food, 5.7% 5.4% Travel Insurance Beverages & & Leisure Tobacco 5.4% & Financial 6.6% Services 8.6% 6 5 Utilities 6 Banking 6.6% 8.4% Technology 6.6%* i.e. 10.3% of people working in the Professional Services sector have the potential to be leaders today. shl.com | 15
  14. 14. Industries with the strongestleaders for tomorrowFigure 5: Leaders for tomorrow by industry sector globallyWhen we look at the supply of leadership for tomorrow, we geta very different picture by industry. 1 Consumer Goods (Leisure & Personal) 2 59.8% Insurance & Financial Services 56.5% 11 Engineering 10 43.3% 12 Travel 3 Retail & Leisure 44.1% 38.9% Business Services 9 13 55.0% Consumer 17 Mining Goods Public 32.9% (Heavy Goods) Sector 46.4% 22.8% 14 16 Professional 8 Services Utilities 24.3% 15 32.2% 4 Food, Oil & Gas Beverages & 29.2% Tobacco Banking 46.6% 52.0% 7 5 Technology 48.2% 6 Healthcare 51.3% Telecoms 50.5%16 | The SHL Talent Report
  15. 15. Chapter 1: The global availability of current and future leadersWhich industry sectors offer the strongest supplies ofleadership talent in the geographies you operate in?Figure 6: Industries with strongest leaders for today and leaders for tomorrow, by region Eastern Europe North America Western Europe Leaders for today: Leaders for today: Banking, Insurance & Leaders for today: Consumer Goods (Leisure Financial Services, Technology Asia Retail, Banking, Insurance & Personal), Mining, Public & Financial Services Sector Leaders for tomorrow: Leaders for today: Leaders for tomorrow: Insurance & Financial Insurance & Financial Leaders for tomorrow: Services, Technology, Travel Services, Professional Banking, Consumer Goods Consumer Goods (Leisure & & Leisure Services, Public Sector (Leisure & Personal), Telecoms Personal), Retail, Technology Leaders for tomorrow: Banking, Healthcare and Technology Middle East & Africa Latin America Leaders for today: Australia-New Zealand Banking, Mining, Oil & Gas Leaders for today: Leaders for today: Consumer Goods (Leisure & Leaders for tomorrow: Insurance & Financial Services, Personal), Healthcare, Insurance Consumer Goods (Leisure Professional Services, Public Sector & Financial Services & Personal), Food, Beverages & Tobacco, Telecoms Leaders for tomorrow: Leaders for tomorrow: Consumer Goods (Leisure & General Business Services, Insurance Personal), Insurance & Financial & Financial Services, Consumer Services, Professional Services Goods (Leisure & Personal) shl.com | 17
  16. 16. The question is not whetherthere is leadership talentThe question is how intelligent is your organization in Data shows that therecognizing that talent and developing it. demand for effectiveA more hopeful picture of leadership talent emerges from the data when you look beyond leaders and the demand tothe highest tier of talent to the next tier, where there is potential to be realized if the rightPeople Intelligence is applied to identify and develop it. This talent pool is much more be increasingly thoughtfulevenly distributed globally and much stronger in many geographies, notably the emergingeconomies, and will require time and investment to grow. Organizations will need to put in about managingplace clear and targeted programs to address development gaps. leadership talent will onlyThe supply of leadership talent varies by sector increase.Industry sectors are facing significant challenges both today and tomorrow and need toreconsider their assumptions about the strength of their leadership talent. Many need torecognize succession risks. They especially need to develop greater intelligence aboutthat talent, how to leverage it more effectively, and put in place development programs forthose they hope to move into senior roles.Geography mattersFinally, organizations need to be aware of future leadership challenges at the countrylevel. Organizations need to understand the supply of leadership where they operate andadapt their leadership development and succession programs accordingly. More matureeconomies run the risk of relying on the stronger supply of leadership talent for todaybut failing to recognize a potential future shortfall of effective leaders for tomorrow. Inemerging economies, with an ever more globalized economy predicted to be as volatileas our experience in recent years, the demand for effective leaders and the demand to beincreasingly thoughtful about managing leadership talent will only increase. Just 1 in 15 managers or executives globally have the potential to become a top leader.18 | The SHL Talent Report
  17. 17. Chapter 2The global availabilityof innovation shl.com | 19
  18. 18. Looking for innovatorpotential around the worldIn a world full of volatility and challenges, innovation has become the single most importantfactor for both private and public sector organizations to transform a crisis into an opportunity. “Management knows itAdditionally, rapidly changing business models highlight the importance of innovation and so does Wall Street:to the success and survival of today’s organizations. The ability to innovate impacts theorganization broadly; whether in the application of technology, development of new products The year to year viabilityand services, marketing, or day-to-day operations. As business management expert Gary of a company dependsHamel has said, “Every company worth its low-salt lunch has identified innovation as a corecompetency.” on its ability to innovate.There are at least three conditions that determine whether the investment in innovation will Given today’s marketdeliver value to an organization: Organizational processes to stimulate, support and translate the innovation of its people expectations, global into tangible value competitiveness, and Geographical context – both economic and social – for supporting innovation the extent and pace of People with the right talent to be true innovators structural change, this isMuch has been written about innovation processes. Global indices such as those producedby the INSEAD and the Boston Group12 (discussed in detail on page 28) have recently been truer than ever.” 13developed to tell organizations what the state of play is geographically in terms of theeconomic and social conditions for innovation. But equally important, what talent is available Harvard Business Reviewto become innovators? How is that talent distributed geographically and across industrysectors? These are the questions we will address in this chapter. The ability to innovate impacts the organization broadly, whether in the application of technology, development of new products and services, marketing, or day-to-day operations.20 | The SHL Talent Report
  19. 19. Chapter 2: The global availability of innovationThe DNA of the innovator and the SHL Innovation “Every company worthIndex its low-salt lunch hasWhen you think of innovations in recent years, do Apple products come to mind? If so, you identified innovation asshare a common association with the iconic status of Steve Jobs as an innovator, and hewould more than likely point out that effective innovation calls for more than just coming up a core competency.”with new ideas. Gary HamelEffective innovators need the intellectual capability to see new associations and possibilities,and the analytical skills to interpret and translate market and customer data into specificofferings. They must be able to focus, to persist in the face of initial failures, to be able tomake right hand turns in thinking, to articulate a need, be able to persuade, influence and sellan innovation to others, and to work collaboratively as well as work through potential conflict.Innovation is, after all, about change.To capture this unique blend of talents that mark the true innovator, we have exploredbehaviors that drive effective innovation and captured these in the SHL Innovation Index.This index takes into account two key domains of innovator talent in Table 3 below.Table 3: Index for behaviors that drive effective innovation Focus & Insight Networking & Collaboration Ability to reason Capacity to build effective relationships Capacity to think laterally – or ‘outside Ability to navigate social networks effectively the box’ Capacity to focus on a particular need Strong communication skills required for influencing others Ability to adapt to new data Ability to sell an innovation into an organization or to raise investment capital Ability to persist through those moments when an initial idea does not work, or when an experiment presents challengesYou will find more on the SHL Innovation Index in the Appendix. shl.com | 21
  20. 20. Mapping the supply ofinnovator potentialAs illustrated in the previous chapter, the supply of talent to be an effective top leader isscarce at 1 in 15 of the assessed population. Similar results are found when examining the Table 4: Supply of innovator talent:data from the SHL Innovation Index for innovator potential. Just 1 in 17 or 5.8% of graduates, Top 25 countries by % of population14managers and professionals have the potential to be a true innovator.What does the supply of innovator talent by geography look like? 11.1% United StatesNorth America, Western Europe and Asia featured heavily on the list. Countries in Eastern 10.6% China (Hong Kong)Europe emerge as centers for innovator talent, with Hungary, Poland and Russia featured in 10.5% Australiathe Top 25 (see Table 4). 10.1% GermanyThough individual countries such as China (Hong Kong), Japan, Singapore and South Korearank in the Top 25 list for innovator potential, Asia as a region factors lower than North 9.8% SingaporeAmerica, Australia-New Zealand, and Western Europe. In spite of its reputation as an IT 9.7% United Kingdompowerhouse, India did not feature strongly in talent for innovation. 9.4% Sweden 9.1% Canada 8.6% Netherlands 7.3% Denmark 7.1% New Zealand 7.1% Switzerland 6.9% Ireland 6.3% France 6.1% Japan 6.0% Italy 5.9% Spain 5.8% Belgium 5.8% South Korea Average 5.7% Hungary 5.7% China (Mainland) 5.6% Russia 5.4% Iceland 5.4% Poland 5.2% China (Taiwan) Region North America Africa Australia- Middle East New Zealand Eastern Europe Western Europe Latin America Asia22 | The SHL Talent Report
  21. 21. Chapter 2: The global availability of innovationTalent for innovationby regionWith the United States and Canada both ranking in the top 10, North America understandablyrates as the top global region for overall innovation, followed by Australia-New Zealand andWestern Europe.Figure 7: Innovator talent by geographical region 3 5 1 4 6 7 2 8 Region15 10.1% North America 4.7% Eastern Europe 8.8% Australia-New Zealand 3.0% Middle East 7.0% Western Europe 2.6% Africa 4.9% Asia 1.0% Latin America shl.com | 23
  22. 22. Developinginnovation talentInvesting in learning and development to close thegeographical gap in innovator talent.This raises questions as to what should organizations focus on to be able to strengtheninnovation among their employee populations.Developmental needs for those with innovator talent in Asia for example, lie in theNetworking & Collaboration domain of the SHL innovator model and index. Specifically,talent management programs designed to leverage innovator talent potential in this regionneed to focus on improving competencies such as Building Effective Networks, Influencing& Persuading, and in Communication. This enables those charged with innovation tounderstand how to navigate the culture of their organizations and leverage social networkslocally and internationally, as well as within and outside their organizations.A need for learning and development is also apparent when we compare the more matureand emerging economies (see Figure 8).Figure 8: The supply of innovator talent in emerging and mature economies16 G8 1OECD 2 G20 2 EU 4BRICS 5TIMS 6 Percentage of innovators for todayThis data shows how important it is for organizations to understand regional variations in thebench strength and availability of ‘true innovator’ talent so they can create programs thatstrengthen their ability to execute innovation projects effectively.24 | The SHL Talent Report
  23. 23. Chapter 2: The global availability of innovationIndustries with the greatest supplyof potential innovatorsInnovation can take many forms: from creating new products and services, to finding newsupply sources, developing new markets and new ways to reach existing markets, or For the Public Sector asidentifying new ways of organizing. This means the supply of innovator talent is critical across well as other sectors suchall aspects of economic activity and not just in the most obvious ones such as R&D.Figure 9 shows which industry sectors are strong in attracting and employing innovator as Banking, attractingtalent, and which sectors are not. and developing innovatorTechnology ranks No.1, but we see Professional Services, Food, Tobacco & Beverages, talent appears to be aRetail, and Insurance & Finance sectors also ranking high.Regarding the Public Sector ranking near the middle of the list: significant economic, social key priority for talentand political challenges place increasing pressure on how public services are financed, management programs.delivered and measured in terms of value. Finding new ways of organizing has become a keymission for governments and their agencies, particularly in Europe and North America, andthat means innovation.For the Public Sector as well as Banking, attracting and developing innovator talent appearsto be a key priority for talent management programs. These and the sectors that rank lowerdown the list need to reconsider the profile of talent they have traditionally attracted andemployed in order to create the talent profile they will need to move forward and succeed intoday’s increasingly volatile environment.Variations across sectors appear when we factor in geographical region (see Figure 10)showing that organizations need to be aware of and sensitive to the supply of innovator talentwhere they operate, and have the People Intelligence to know where to invest in their peopleto build their talent strength locally. ‘True innovator’ 1 in 17 or 5.8% of the population shl.com | 25
  24. 24. Industries with the greatestsupply of potential innovatorsFigure 9: Innovator talent ranked by industry sector globally, as a percentage of population 1 Technology 6.4%* 2 Professional Services 6.2% 11 10 Healthcare 12 4.8% Business 3 Services Banking 4.9% 4.6% Food, Beverages 9 12 & Tobacco 5.9% Consumer Goods 17 Telecoms (Personal & 4.6% Travel Leisure) & Leisure 5.3% 4.1% 14 15 Utilities 8 Oil & Gas 15 4.3% 3 4.2% Engineering Public Sector 4.2% 5.4% Retail 5.9% 6 5 Mining 6 Consumer Goods 5.6% (Heavy Goods) Insurance & 5.8% Financial Services 5.6%* i.e. 6.4% of people working in the technology sector have the potential to be true innovators.26 | The SHL Talent Report
  25. 25. Chapter 2: The global availability of innovationIndustries with the strongesttalent for innovation by regionFigure 10: Talent for innovation by industry sector and region Western Europe Eastern Europe North America Stronger innovation talent: Professional Services, Asia Stronger innovation talent: Stronger innovation talent: Technology Consumer Goods (Personal Stronger innovation talent: Retail, Technology, & Leisure), Professional Insurance & Financial Telecoms Weaker innovation talent: Services Services, Professional Banking, Oil & Gas, Telecoms Services Weaker innovation talent: Weaker innovation talent: Consumer Goods (Personal & Oil & Gas, Retail Weaker innovation talent: Leisure), Travel & Leisure Oil & Gas, Travel & Leisure Middle East & Africa Latin America Stronger innovation talent: Australia-New Zealand Food, Beverages & Tobacco, Stronger innovation talent: Mining, Oil & Gas Stronger innovation talent: Food, Beverages & Tobacco, Insurance & Financial Services, Public Sector Weaker innovation talent: Professional Services Consumer Goods (Heavy Weaker innovation talent: Goods), Travel & Leisure Weaker innovation talent: Engineering, Telecoms Retail, Travel & Leisure shl.com | 27
  26. 26. A comprehensive view ofglobal innovationRecognizing the growing importance of innovation, the past few years have seen thedevelopment of global innovation indices to provide policy makers and business leaderswith a view of the global landscape for innovation readiness. These indices combine dataon the ‘inputs’ for innovation readiness, such as the infrastructure to support innovation andbusiness sophistication, and data on the scientific and creative ‘outputs’ to rank countries interms of the economic, financial and social context for innovation.We have looked at data from two such indices, one from the United States produced by theBoston Consulting Group with the National Association of Manufacturers in the U.S., andone from INSEAD located in Europe and Asia17. We extend this view of human capital byadding SHL intelligence on innovator potential and the behaviors and attitudes that turn theknowledge inputs to innovation into tangible outputs that create value.Analysis shows both the Boston and the INSEAD indices correlate strongly with the SHLInnovation Index. It also shows that insight into the ‘talent to innovate’ combined with data oneconomic and social conditions provides a more comprehensive view of the global innovationlandscape. Of note is the strong correlation we found between both economic indices andthe Networking & Collaboration component of the SHL Innovation Index, emphasizing howcritical social and interpersonal factors are to effective innovation.We combined data on both the Boston and INSEAD indices to create an overall score wecalled ‘context for innovation’ (business confidence, social, economic and financial factors).Figure 11 shows the results when this was plotted against the SHL Innovation Index18.What we found were four distinct clusters. Cluster 1 countries have both stronger economiccontext and stronger supplies of innovator talent, and are countries with a clear globalcompetitive advantage for innovation. This cluster includes: Asia: particular strength in China (Hong Kong) and Singapore Australia Western Europe: particular strength in Germany, Sweden, Switzerland and the U.K. North America: both Canada and the U.S. featuring stronglyCluster 2 countries have the economic and social infrastructure in place but have weakersupplies of innovator talent. Clearly identifying and developing innovator talent will yield ahigher economic return from the investment potential available in these countries. In thiscluster we find: Asia: China (Mainland) Western Europe: Finland, Norway and Portugal Eastern Europe: Hungary Middle East: United Arab EmiratesCluster 3 involves just three countries – Italy, the Netherlands and New Zealand. These arecountries with stronger supplies of innovator talent but weaker infrastructure to realize thepotential that a stronger supply offers.28 | The SHL Talent Report
  27. 27. Chapter 2: The global availability of innovationCluster 4 countries have stronger challenges in both the economic and social conditionsfor innovation as well as weaker supplies of innovator talent. For this cluster, a key priorityhas to be the identification and development of innovator talent to sustain and build on theeconomic growth that many of these countries have enjoyed in recent years. This clusterincludes: Africa: South Africa Asia: India, Indonesia and Thailand Eastern Europe: Poland, Romania and Russia Western Europe: Greece Latin America: Brazil and Mexico Middle East: Egypt and TurkeyFigure 11: Combined data on the economic and social conditions for innovation with the supply of innovator talent.19Higher Cluster 2 Cluster 1 Singapore Switzerland Finland Sweden China (Hong Kong) Ireland Denmark U.S. Japan Canada U.K. Norway France Germany Belgium Australia China (Mainland) Spain Hungary Context for innovation Portugal United Arab Emirates Italy South Africa Thailand Poland India Greece Russia Romania Turkey Brazil Mexico Netherlands New Zealand Egypt IndonesiaLower Cluster 4 Supply of innovator talent Cluster 3 Lower Higher shl.com | 29
  28. 28. Innovation isn’t an option– it’s a must doEvents in recent years have forced governments, the public sector, and private businessesin the more mature economies to think hard about how they are organizationally andfinancially structured. Adopting new technologies in the search for productivity gains andcost reductions has driven efficiencies. In Europe, North America and Australia-New Zealandorganizations are already leaner or will be soon. However, more is necessary to ensure asecure future. New ways of working, new and more sophisticated goods and services, aswell as innovative ways of delivering those goods and services are becoming critical globally.In the emerging economies, product driven growth achieved by scalable and low costproduction processes is set to come under increasing pressure for two reasons.First, broader economic growth globally will bring new challenges to the powerhouses ofChina and India. Other countries will become more competitive for a share of the globalmarket for goods and services. From a talent perspective, SHL’s data indicates that China isbetter positioned to weather this competition, India less so. Our research also points to thecountries in Eastern Europe being well placed, with the innovator talent to compete for agreater share of the global market.The second reason is what the Economist has recently called a “third industrial revolution”in which digital manufacturing will change the landscape for manufacturing, service deliveryand ways of working. To quote “... some of the business of making things will return to richcountries.”20 Despite their travails, the older economies are not finished yet and results fromour study indicate they have the talent to make this third industrial revolution happen.Innovation will be key to moving up the value chain from more traditional goods and servicesto more value-intensive goods and services in the future, particularly under challengingeconomic and trading conditions.Knowing that innovation is a critical core competency will not be enough for organizations tosucceed.SHL’s data shows that the sectors with the greatest need to recognize this and take actioninclude Travel & Leisure, Oil & Gas, Banking, and the Public Sector. They face significantchallenges, including reduced consumer spending, environmental concerns, distrust of theirproducts and services, and a need to work within constrained government budgets.Whatever the geography or sector, those organizations with the People Intelligence toidentify, acquire and develop innovator talent will be the organizations to thrive.30 | The SHL Talent Report
  29. 29. Chapter 3The landscape oforganizational risk shl.com | 31
  30. 30. The landscape oforganizational risk“Fortune favors those who dare” – or does it?21 “Perceptions of risk haveTypically, analyses of risks by geography and industry look at regulation, legislation, and evolved significantlya variety of social, economic, political and financial factors. Few indices of organizationalrisk look at the behavior of the people employed by organizations. This is a key flaw in in the intervening twohow organizations approach risk. There is a wealth of scientific research showing that it isprecisely what people do or fail to do that are key to an organization’s resilience to risk. With years. In all regions ofrecent news of a judicial inquiry into telephone hacking by the media22, the continued falloutin the finance sector resulting from Lehman Brothers bankruptcy 23, and a parliamentary the world, across allcommission in the U.K. into the banking sector 24, we are again seeing evidence that how sectors, business leaderspeople act at all levels in an organization is a fundamental driver of risk. now perceive the worldHow confident are you that your organization is as an inherently riskierresilient to risk? place.”26 Lloyd’s Risk IndexWhile many organizations are waking up to the need to understand the behavioralrisk profiles of the people they employ, most are at an early stage in developing that 2011understanding. Few have begun to look to their talent management programs as a significantcontributor to their risk management strategies.The Lloyd’s Risk Index surveys business leaders’ sense of how well they are preparedto manage operational risks. To quote their 2011 survey, “More than 70% of surveyrespondents report that their company is better prepared to manage business and productionline risks than they were two years ago... One should not ignore the fact that, for manycompanies, there will be a difference between actually 25 being prepared and simply believingthey are prepared.”The goal of this chapter is to fill this gap between perception and reality by providingbusiness leaders, risk managers and talent managers with data on levels of behavioral riskfrom three perspectives: by employee job level, industry sector and geography. The note ofcaution about confusing the perception that you are prepared and actually being preparedis backed up by what our findings show, and that gap is likely to be greatest in sectors thatrank highest in our analysis of behavioral risk.32 | The SHL Talent Report
  31. 31. Chapter 3: The landscape of organizational riskBehavioral risk byIn contrast to our indices for leadership and innovation, SHL’s behavioral risk index flags theproportion of people who are most likely to create risk. At the manager and professional level,the greatest risk comes from lower decision quality and lower communication quality. SHL’sdata shows that 12.2% or 1 in 8 managers and professionals exhibit high levels of thesebehavioral risks.The greatest risks at the production line and front line level are lower compliance and qualityand lower commitment. Data from assessments of production line and front line employeesshows that 12.5% or 1 in 8 exhibit high levels of these behavioral risks.Table 5: Behavioral risk components by job level Managers and professionals Production line and front line Decision quality risk: Compliance and quality risk: Miss or ignore data Failure to comply with procedures Ignore decision impact on organization Lack of attention to detail Fail to seek other views and opinions Communication quality risk: Commitment and teamwork risk: Inability to articulate decisions Inability to accept individual or shared objectives responsibility Inability to persuade or influence Lack of team orientation Lack of credibility Failure to build networks/relationships Average level of high behavioral risk 1/8 employees shl.com | 33
  32. 32. Behavioral risk at the managersand professionals levelWith a global average of 12.2%, here is how 17 industry sectors rank in terms of behavioral risk inthe people they attract and employ.Manager and professional rolesFigure 12: Levels of behavioral risk for managers and professionals by industry sector globally 1 Travel & Leisure 18.2%* 2 Oil & Gas 16% 11 10 Telecoms Business 10.5% 12 Services Banking 10.7% 10.2% 3 9 13 17 Utilities Healthcare Consumer Public Sector 14% 11.3% Goods 9.9% (Personal & Leisure) 8.3% 14 16 Insurance 8 15 & Financial Technology 8.8% Food, 9.8% 4 Engineering Beverages 11.4% & Tobacco 9.2% Professional Services 7 12.9% 5 Consumer Goods (Heavy Goods) 6 Retail 11.5% 12.4% Mining 11.7%* i.e. 18.2% of people working in the Travel & Leisure sector exhibit high levels of behavioral risk.34 | The SHL Talent Report
  33. 33. Chapter 3: The landscape of organizational riskTurning from the analysis of risk in various sectors, Figure 13 illustrates which job levels mostindicate behavioral risk among managers and professionals, from individual contributor toexecutive level.On a positive note, it appears that behavioral risk is lower at more senior levels: calculated tobe 1 in 15 of executives and 1 in 10 of senior managers.As organizations depend upon senior leaders to account for and mitigate risk, finding thatthose leaders exhibit lower levels of behavioral risk should be reassuring. However, there isstill behavioral risk at the top, which means organizations should examine how effective theirsenior leaders are when managing behavioral risk.Additionally, the increasing level of behavioral risk from middle managers down indicatesthat organizations cannot rely on the effective communication of decisions from the C-suite.Middle managers sit at the intersection between strategy and operational execution. Theymust be able to translate executive decisions into effective action or execution fails.Given the higher levels of behavioral risk at the team leader and individual contributorlevels, organizations need to ensure middle managers are equipped to identify and addressbehavioral risk from the people who report to them.Figure 13: Where behavioral risk sits among managers and professionals by job levelExecutive 1/15 6.7%Senior Manager 1/10 10.4% Global Average 12.2%Middle Manager 1/8 13.2%Team Leader 1/7 14.7%Individual Contributor 1/7 14.2%Percentage of high behavioral risk shl.com | 35
  34. 34. Behavioral risk at the productionline and front line levelLevels of behavioral risk increase as one moves from the C-suite to lower levels in anorganization. The next set of data shows trends in behavioral risk on the production line and outon the front line. Figure 14 shows how industry sectors rank when looking at SHL’s index forproduction line and front line employees.While the global average rate for behavioral risk on the production line is about the same as formanagers and professionals, the rankings by sector differ. Consumer Goods (Personal & Leisure)and Technology move up when we look at the production line and front line, while Oil & Gas,Retail and Utilities move down, as does Travel & Leisure. What do these differences mean? Aswe will explore in more detail later, having a full understanding of where behavioral risk exists iscritical for organizations to have a clear view of where they are most at risk from the actions oftheir employees.Production line and front line rolesFigure 14: Levels of behavioral risk for production line and front line roles by industrysector globally27 5 5 Business Services 7 Banking 15.7% Food, 15.7% Beverages & Tobacco 4 15.6% 8 Consumer 15 Goods Engineering (Heavy Goods) Public Sector 15.3% 20.8% 7.1% 14 Retail 8 8.4% Insurance & Financial 3 13 Services 15.3% Utilities Technology 9.9% 21.4% 10 12 Travel Oil & Gas 11 & Leisure 11.3% Healthcare 12.9% 11.9% 2 Telecoms 23.9% 1 Consumer Goods (Leisure & Personal) 24%36 | The SHL Talent Report
  35. 35. Chapter 3: The landscape of organizational riskThe geography ofbehavioral riskAs shown, levels of behavioral risk can vary significantly at different job levels and acrossindustries. Combining both of those indices gives a more complete understanding of the Behavioral risk variesgeography of behavioral risk. by region:Managers and professionals in Australia-New Zealand rank highest for behavioral risk. Andwhile much lower levels of risk are found at the manager level in Africa and the Middle Managerial risk is highest inEast, those same regions exhibit increased rates of behavioral risk at production line and Australia-New Zealandfront line level.These trends are illustrated in Figure 15. This graph shows that for most geographies Front line risk is highest in thethe levels of behavioral risk are higher on the production line than at the managerial and Middle Eastprofessional levels. However, Australia-New Zealand bucks the general trend by havinghigher levels for managers and professionals than on the production line, while fororganizations in Western Europe, behavioral risk between job levels is generally aligned.Figure 15: Levels of behavioral risk by geographical region28 Percentage high behavioral risk Managers & professional Front line & production line 28 Average Overall ranking for risk globally 24.1 19.6 18.9 19 18.4 17.5 17.2 1 2 16 16 15.3 3 3 5 13.5 12.9 12.7 12.4 6 12.3 12.1 11.6 11.3 7 10.8 9.7 8.7 See Endnote 28 Africa Asia Australia- Latin North Middle Eastern Western New Zealand America America East Europe Europe shl.com | 37

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