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The Top 10 Critical Human Capital Issues of 2014 - i4cp

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Enabling Sustained Growth through Talent Transparency

Enabling Sustained Growth through Talent Transparency

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  • 1. The Top 10 Critical Human Capital Issues: Enabling Sustained Growth through Talent Transparency An i4cp Report Peers. Research. Tools. Data.
  • 2. © 2014 by Institute for Corporate Productivity (i4cp). All rights reserved. No part of this publication may be reproduced, distributed, or transmitted in any form or by any means, including photocopying, recording, or other electronic or mechanical methods, without the prior written permission of the publisher, except in the case of brief quotations embodied in critical reviews and certain other noncommercial uses permitted by copyright law. For permission requests, write to i4cp.com/contact. Cover photo by Victor1558 (flickr.com) For copies of this report Research reports published by i4cp are made available to member organizations and can be shared internally on an unlimited basis. For non-member access or information on i4cp membership, visit the i4cp website at i4cp.com or call 1-866-375-i4cp (4427). i4cp REsearch Chief Research and Marketing Officer: Kevin Martin Senior Vice President of Research: Jay Jamrog Senior Researcher: Joe Jamrog Research Coordinator: Andrew Dixon i4cp Editorial Staff Managing Editor & Director of Research Services: Lorrie Lykins Senior Editor & Graphic Designer: Eric Davis
  • 3. About i4cp i4cp is a human capital research firm that discovers the people practices that drive high performance. Years of research make it clear that top companies approach their workforce strategies and practices differently. i4cp works with its network of member organizations to: • Reveal what high-performance organizations do differently • Highlight the people practices that have the greatest impact on market performance • Identify best and next practices for all levels of management • Provide resources that demonstrate how workforce improvements have bottom-line impact. Through its exclusive, vendor-free network―in which peers collaborate to drive strategic research, as well as share tools and insights—i4cp provides a unique, practical view of how human capital practices drive high performance. Visit i4cp.com to learn more. Find us on: About this report The Institute for Corporate Productivity (i4cp) has been conducting this annual study of criti- cal issues in one form or the other since 1986. This research study reveals the human capital issues that organizations with at least 1,000 employees deem most important, yet also indicate they are least effective at managing. As a result, the top 10 critical issues highlight- ed in this report are considered prime areas of focus that can, if addressed well, result in the greatest boost to organizational perfor- mance. On the other hand, if not addressed well, these issues can also derail an organiza- tion from sustaining high-performance. This study was conducted by i4cp in partner- ship with the American Management Associa- tion (AMA), MicroPower and ABRH. Market Performance Index (MPI) i4cp’s Market Performance Index, or MPI, is based on self-reported ratings of organizational performance in four key areas—market share, revenue growth, profitability and customer satisfaction—as compared to the levels achieved five years previously. The average of the four ratings determines MPI score. High-performance organizations (HPOs) are those in the top quartile of MPI scores. Low-performance organizations (HPOs) are those in the bottom quartile of MPI scores.
  • 4. Contents Executive summary. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Setting the stage: Economic and employment outlooks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 The implications for human capital. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Taking action. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Use internal know-how to close gaps. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Create an organization of learn-it-alls, not know-it-alls . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Collective, collaborative, and continuous knowledge in action. . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Forget succession planning, focus on succession management. . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 The rise of the influencer. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Double-down on development and make it purposeful. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Continuous leadership learning in action. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Bring out the telescope. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 A culture of coaching in action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Measuring and rewarding results in action. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Ensure meaningful interactions through quality communications . . . . . . . . . . . . . . . . . . . . . . . . 13 Purposeful and meaningful communications and interactions in action. . . . . . . . . . . . . . . . . . 13 Pursue an omni-channel approach to talent branding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Conclusion. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 Author and contributors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 About the survey. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 References. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Survey partners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 American Management Association. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 MicroPower . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 ABRH . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 © 2014 Institute for Corporate Productivity (i4cp). Use of all results, analysis and findings requires explicit permission from i4cp.
  • 5. Enabling Sustained Growth through Talent Transparency Institute for Corporate Productivity | 1 Results of the Institute for Corporate Productivity’s (i4cp) 2014 Critical Human Capital Issues Survey show that high-performance organizations with more than 1,000 employees have moved beyond planning and data collection and now must take specific actions that will build change-ready organizations. These actions reflect the imperatives to develop deep bench strength in critical roles with highly targeted talent segments, minimize the loss of organizational knowledge, and ensure consistent, high-quality interactions and behaviors in order to drive desired results across the organization. The key to each is transparency. The findings of this year’s annual study amplify those of the previous year’s, Building a Change-Ready Organization: Critical Human Capital Issues 2013, which found the need for top-performing organizations to build change-ready organizations. High-performance organizations—challenged by the uncertainty of continuous change—needed to turn to workforce analytics and workforce planning to help gain visibility into gaps pertaining to the critical roles and skills needed to support sustainable business success now and longer-term. While the global economy and hiring slowed at the start of 2014, most experts believe both will improve in the coming months. When that happens, top companies need to be prepared for attrition in two key groups: high- performers and those who will soon be eligible to retire. This, coupled with talent shortages in specific disciplines and geographies, has revealed a glaring reality for most organizations: they simply do not have the internal bench strength of talent to enable sustained high-market performance. Transparency is the common thread that correlates with effectiveness in virtually all human capital processes and programs. This applies to everything from ensuring employees know where they stand with regard to their Executive summary The Top 10 Critical Issues for 2014 1. Strategy Execution/Alignment 2. Succession Planning 3. Managing/Coping with Change 4. Employee Engagement 5. Performance Management 6. Talent Shortages in Critical Areas 7. Knowledge Retention 8. Managing Organizational Change 9. Leadership Development 10. Measuring/Rewarding Results Low-PerformanceOrganizations 1. Succession Planning 2. Leadership Development 3. Knowledge Retention 4. Coaching 5. Managing/Coping with Change 6. Succession Planning (Non-Executives) 7. Measuring/Rewarding Behavior 8. Talent Shortages in Critical Areas 9. Measuring/Rewarding Results 10. Internal Communications High-PerformanceOrganizations
  • 6. 2 | Institute for Corporate Productivity The Top 10 Critical Human Capital Issues work expectations, progress, and development opportunities, to establishing accurate visibility into specific talent pools within the workforce, as well as building and communicating organizational strategy. In 2014, transparency must be purposefully incorporated in the following three-pronged roadmap for high-performance organizations: • Build deeper and broader pools of highly-targeted talent. Only 27% of top companies have competent successors ready to fill executive-level roles and even fewer (18%) are prepared with successor candidates for mission-critical roles that extend beyond the executive level. • Improve leadership development skills with a focus on better interactions and communications. Thirty-four percent of top companies indicate they are effective at developing leaders, and they are getting worse at it. The influx of Millennials as well as the move to flatter, more matrixed organizational structures dictates the need for improved skills in areas such as coaching and the use of technology tools to collaborate effectively. • Fully understand what supports the organization’s strategy and culture and reward it. Thirty-four percent of top companies are effective at measuring and rewarding results and only 25% are effective at doing the same with behaviors. The behaviors of executives and middle managers have a very high correlation to market performance. Contrast this to the continuing struggle among lower-performing organizations, which continue to be paralyzed by inability to execute strategy—in large part the result of three major impediments: • The pervasive lack of alignment (among strategy, goals, supply and demand of workforce talent, etc.). An abysmal 12% of low-performers indicate they are effective at strategy execution. Not surprisingly, only 8% of these lower-performers are effective at internal communications. • The general lack of organizational agility that results from a combination of insufficient and/or ineffective longer-term planning. Only 13% of low-performers indicate they are effective at strategic workforce planning, a figure that has not improved over last year. • Leaders who are unwilling or unable to adapt to the changing needs of the workforce and markets they serve. A mere 11% of low-performers indicate effectiveness in leadership development.
  • 7. Enabling Sustained Growth through Talent Transparency Institute for Corporate Productivity | 3 Setting the stage: Economic and employment outlooks The implications for human capital We entered 2014 following of one of the most robust years of growth in market valuation in decades. The U.S. stock market had its best annual performance since 1997, London's benchmark FTSE 100 index enjoyed its largest annual increase since 2009, and Japan's Nikkei recorded its strongest performance in four decades. While this had a net- positive effect on global unemployment last year, job growth and the global equity markets have all suffered weak starts to the new year (Martin). Despite this, most experts believe the hiring climate will improve in the coming months as a result of general improvement in the economy, among other factors. Data from a Manpower study of 65,000 hiring managers found that employers in 34 countries and territories expect to increase payrolls (Manpower, 2013). Many of the newly hired are, and will be Millennials, and many of those who have left the workforce and will continue to leave are Baby Boomers. As a result, a technology savvy and always-connected generation is entering the workplace, and a seasoned generation with significant institutional and experiential knowledge is on its way out. In addition, continued economic recovery brings opportunity for individuals who are high-performers and high-potentials (irrespective of generation). This will manifest in increased numbers of undesired (and voluntary) departures on the part of key personnel, which will undoubtedly contribute to the talent woes of organizations in the years ahead. Across the globe, the hiring forecast is mixed: Japan anticipates its strongest hiring in nearly six years, while China forecasts no change in its plans; Brazilian employers forecast positive hiring, but it will be their weakest since Q4 2009; and U.S. employers expect modest, yet cautious, hiring. Meanwhile, according to MarketWatch, unemployment in the euro zone is expected to remain flat at 12.2% (Martin). Any decline in the unemployment rate is not all good news as it does not take into account three trends: Baby Boomers are exiting the workforce, youth unemployment is nearly twice that of the general unemployment rate in most countries, and many (from all generations) have simply given up looking for work, including 155,000 people in December 2013 in the U.S. Economic recovery brings opportunity for individuals who are high-performers and high-potentials (irrespective of generation). L L
  • 8. 4 | Institute for Corporate Productivity The Top 10 Critical Human Capital Issues At first glance, this year’s top 10 critical human capital issues may suggest nothing new to inspire strategy adjustments—many of the issues cited appear on i4cp’s top 10 critical human capital issues list every year. Indeed, leadership development has been on this list continuously since 1986. But what’s new and different is the environment that is driving these issues and the ability to effectively manage them by adopting the practices of high-performance organizations. Over the years and across all of i4cp’s studies, findings show that the key differentiator is how organizations approach these issues. And transparency is the common critical success factor. Transparency is highly correlated with effective implementation of virtually every issue on this year’s top 10 list. Transparency creates structure, consistency, and trust, and it applies to everything from ensuring that employees know where they stand with regard to their work expectations, progress, and development opportunities, to establishing accurate visibility into specific talent pools within the workforce, as well as building and communicating organizational strategy. The top 10 critical issues among high-performance organizations this year reflects awareness of the need to take specific actions to build change-ready organizations; transparency is at the core of each. For high-performance organizations, those actions fit into three broader initiatives: 1. Develop strong and targeted talent and leadership pools that go broader and deeper within the organization and provide a funnel for the succession planning pipeline. 2. Equip those talent and leadership pools with the skills to have more purposeful and productive interactions. 3. Establish better ways to measure and reward the behaviors and results required for a change-ready organization. The resulting gaps will pose major problems for organizations lacking strong pipelines of talent. This shifts more focus on the processes and programs to transfer and retain key knowledge, and the capacity to identify, attract, develop, and keep engaged those who can propel the organization forward. Considering that the 2014 survey data shows that only 31% of larger employers plan to increase spend on recruitment and selection this year (down 18% from 2013), most organizations will have to turn the telescope inward as they seek to manage and maximize the internal development and mobility of their existing workforce. Compounding the challenges posed by these generational trends is a dynamic macro environment that is awash in regulation, political and monetary instability, and an increasingly diverse customer with ever-changing expectations. All of this places massive pressure on organizations to be more responsive to shifts in the markets, more knowledgeable of and sensitive to the cultural nuances in the global markets in which they compete, as well as execute according to plan. Taking action
  • 9. Institute for Corporate Productivity | 5 Enabling Sustained Growth through Talent Transparency Use internal know-how to close gaps For the first time in many years we see growing concern about competition for talent. High- performance organizations are more prepared for this because they have invested in processes to identify the roles or talent segments critical for sustainable growth. Usually referred to as strategic workforce planning, this investment is helping top companies gain visibility into potentially disruptive talent gaps ahead, which, in turn, will enable them to implement highly targeted programs that span from talent acquisition through succession planning. This also provides transparency into why certain talent segments are considered critical, which helps explain to workers why certain talent segments may receive more budget or have more stringent competency and performance requirements. Today, there are 76 million Baby Boomers in the U.S. alone. And for the next 15 years, according to the Pew Research Center, on average 10,000 people in the U.S. will reach the eligible retirement age (65 years) every day. However, there are many high-performing and high-potential workers— irrespective of generational group—who will increasingly have more employment options, especially as the economy continues to recover. While the majority of these workers do not occupy C-level positions, they do occupy most organizations’ critical roles, and this is something no organization can afford to overlook. Retaining and managing the collective understanding of how things get done in these critical roles is essential. So too is identifying, capturing and maintaining historical knowledge and information about how and why decisions have been made, and about the relationships (among employees as well as with external customers and partners) that drive productivity and performance. All of these factors establish greater transparency and are vital to the viability of an organization now and in the future. Only one-third of high-performance organizations view themselves to be effective at managing knowledge retention, and perhaps most importantly, even fewer are effectively managing and interpreting the information once it's been gathered. There are multiple means and methods for capturing and sharing this essential knowledge, all of which help establish greater organizational transparency. Examples include: Coaching Effective coaching for knowledge retention has a high correlation with market performance. Whether its peer coaching, executive coaching or team coaching, when done well, the ability to show someone how to do something, introduce them to a new way of thinking, or even teaching them how to navigate the political structure of the organization can elevate the productivity and performance of every individual in the organization. Incentives As opposed to offering retention bonuses to key personnel who are eligible to retire, some companies are offering bonuses tied to the number of targeted personnel a leader mentors and how well that person purposefully shares knowledge. Social software Using technology-enabled collaboration or social- media tools to share knowledge has a very high correlation to innovation effectiveness.
  • 10. 6 | Institute for Corporate Productivity Create an organization of learn-it-alls, not know-it-alls Knowledge is not power, but it is powerful. And shared knowledge is even more powerful. However, knowledge that is collective, col- laborative, and continuous is unstoppable. Hoarding institutional knowledge should be an ethical violation in any company; ignoring the collective know-how within the organization should be a crime. Organizations need to take steps to enable all employees to con- tribute creative and practical information and ideas that others can utilize and build on. Only one-third of high-performance organizations indicate they are effective at managing the skill level of their workforce and far fewer (a mere 19%) indicate they can effectively manage the predicted talent shortages. User-generated content is most likely an organization’s best strategy in building and sharing the knowl- edge and skills of its workforce. A couple of ways in which collective know-how is captured and disseminated are via informal learning (i.e. learning through daily interactions and shared relationships) and social learning (microblogs, online communities of prac- tice, etc.). The paradigm of learning being primarily classroom-based shifted years ago, but organizations need to formalize this movement toward the informal. An i4cp study conducted in partnership with American Society for Training and Development (ASTD) found that informal learning is effective for helping employees learn institu- tional knowledge such as who the “go-to” people are for specific information, learning the names, faces, titles and responsibilities of key personnel, and getting new hires up to speed on company history and happenings during their onboarding process. It’s also very effective at help- ing employees learn how to get things done from a process standpoint. Yet, while 75% of organizations report that informal learning helps improve the performance of their employees, and 55% indicate it will become an increas- ingly larger portion of their overall learning offering in the next year or two, only 19% of all organizations (22% of high-performers) indicate they have a recognized informal learning program (ASTD & i4cp, 2013a). The Top 10 Critical Human Capital Issues Only 19% of HPOs indicate they can effectively manage the predicted talent shortages.
  • 11. Institute for Corporate Productivity | 7 Enabling Sustained Growth through Talent Transparency Organizations are experiencing, and will increasingly see, competition for critical talent segments, the exodus of valuable talent and experience from the labor force, and the flattening of their structures into leaner, more global, matrixed and connected organizations. This combination creates the need to accelerate and broaden leadership development, develop different and more relevant leadership competencies, and create deeper, more targeted levels of bench strength to fill the succession pipeline. That succession pipeline should extend several layers below the executive level, but never lose focus on the future needs of the business, especially when it comes to product and market opportunities. As a result, organizations must ensure they have an ample bench of successor candidates at multiple levels in the organization that align (via skills, competencies, cultures, etc.) with those opportunities. They must also provide a clear and transparent link between those roles and the programs required to develop and provide exposure and visibility to their high potentials. Succession activities also need to focus on critical roles, regardless of where in the organizational hierarchy they are found. These critical roles are those that, if left vacant for an extended period of time, will expose the business to serious risk. A mere 18% of high-performance organizations perceive themselves as effective in extending succession planning beyond senior organizational leadership positions. This purposeful application of planning for successors both layers below the executive level as well as more broadly across critical roles— which must also be integrated with other talent Forget succession planning— focus on succession management Collective, collaborative, and continuous knowledge in action Canadian communications company Telus uses a variety of platforms and channels, including microblogs, video, webinars, and more to increase workforce engagement and productivity. An internal platform called Buzz (akin to Twitter) is currently used by a majority of their 40,000 team members to openly exchange thoughts and comments on any topic. For example, during any of the dozen webinars Telus conducts each month, the chat among team members via Buzz is rampant. Employees instantly comment on the information presented, provide links to resources that answer a question posed, and ask questions of their own. They’ve also found that Buzz is often used by senior execs to pose a question. In fact, recently the CIO asked a question about Telus’ call center and received a considerable amount of constructive feedback. This platform is one of many Telus attributes to helping improve their engagement scores over a four- year period from 53% to 80%—tops in Canada for a company of this size and in the top 1% globally.
  • 12. 8 | Institute for Corporate Productivity The Top 10 Critical Human Capital Issues management processes such as talent acquisition, onboarding, performance management, learning, and leadership development—is one of succession management. Based on the most critical human capital issues facing high-performance organizations, what makes this more holistic approach all the more necessary are two leadership elements: The role of the influencer to manage change; and the ability to think strategically about the future. Joint research by i4cp and the American Management Association (AMA) has revealed a couple next practices with regard to both of these leadership elements, and both are instrumental in developing leaders with global skills and competencies. These next practices—defined as those with very high correlation to market performance, yet low current adoption rates among top companies—should be top of mind among high-performance organizations when pursuing succession management: Redefining leaders: A strong majority (59%) of high-performance organizations with more than 1,000 employees identify leaders based on influence rather than organizational hierarchy. This is based on factors such as ability to influence groups, individual performance, and whether or not they are in or can fill a critical role. Thinking strategically about the future: The majority (77%) of top companies also indicate they use longer-term (strategic) workforce planning to define the curriculum based on the future-focused competency requirements of the organization (AMA & i4cp, 2013). 59% of HPOs identify leaders based on influence rather than organizational hierarchy The rise of the influencer Leaders need to clarify the reasons and purpose of change and it must be communicated effectively and repeatedly enterprise wide. Leadership behavior plays a critical role in building trust in the message. The amount of time leaders spends on this issue is not as important as the actions and sources of influence they leverage to make change happen. For example, it is important to know when to use features of the culture to enable change and when to challenge features of the culture in order to make change happen. In addition, leaders who are successful at change initiatives take the time to identify concrete and clear behaviors they want people to enact and then help employees build new behaviors to support the desired outcomes. In many cases leaders use storytelling and personal experiences as a means to influence others. Indeed, the role of the “Influencer” to manage change is on the rise.
  • 13. Institute for Corporate Productivity | 9 Enabling Sustained Growth through Talent Transparency Continuous leadership learning in action FedEx Express follows a continuous leadership learning path that begins on day-one of employment. This holistic leadership continuum provides FedEx Express employees at all levels with a blended learning experience throughout their careers with the company. Leadership programs are totally transparent and employees can self-select these programs. FedEx Express’ Chief HR Officer Shannon Brown discussed the practice at i4cp’s 2013 annual member conference, noting an ancillary benefit of self-selection: employees may opt-out of a program if they decide it’s not a good fit for them. Employees who have done so say they have a greater appreciation and respect for their colleagues who have completed the program because they are aware of the sacrifice and discipline required. i4cp research has found there are four distinct practices that are incorporated into succession management: Identification, Assessment, Development, and Measurement. 1. Identification of top talent Transparency also leads to a consistent, structured approach to identifying an organization’s future leaders which, in turn, builds trust in the process. This applies to identification of top talent that spans new-hire management programs, to high-potential development programs, to development programs that target ready-now successors. It also applies to those not selected for such programs. Lack of clarity around the criteria coupled with insufficient opportunities to develop professionally will not only disengage employees, but will also build a sense of distrust and may ultimately lead to undesired turnover of quality talent. 2. Assessment i4cp research shows that high-performance organizations use a range of assessment tools. These can also serve as relatively objective ways to establish a person’s potential, performance and organizational fit. The most popular assessment tool is a 360 or multi-rater feedback instrument, but other types of assessments—such as psychological testing—have a very high correlation with succession management effectiveness. Not all assessment tools are equal of course. In a recent study of over 25 assessment tools, i4cp found that one-half had a negative correlation with market performance. It is important that before an organization selects or designs an assessment tool, the behaviors that are desired for individual and organizational growth are articulated. There are many different leadership characteristics, competencies, and attributes depending on the level and role in the organization. Based on i4cp’s research and interviews, the most effective leaders tend to have five primary strengths: execution-oriented (i.e. make things happen); they influence others; they establish and build relationships; they think strategically; and they build a highly engaged workforce. Double-down on development and make it purposeful Express ®
  • 14. 10 | Institute for Corporate Productivity 3. Development Planned developmental job assignments (e.g. rotational assignments, high-profile projects) are highly correlated with effective leadership development and market performance. These programs help answer questions such as: How will top talent expand their knowledge of the business? How will they accrue varied experiences? How will they gain exposure beyond their direct manager? Effective coaching is a hallmark of performance- focused organizations, incorporating skills development, continuous improvement, and goal achievement, both individually and as a team. Coaching, done well, also establishes trust, builds relationships, and facilitates knowledge transfer. In a business environment that is increasingly reliant on internal communications and interactions, effective coaching is an important component. Yet, while providing quality one-on-one coaching has a high correlation to market performance, i4cp's research reveals a sixty-five percentage point difference between what frontline managers should be doing and what they are currently doing. Compounding the critical need for effective coaching is data from the i4cp/ASTD study on leadership development for Millennials, which found the top methods and approaches most highly correlated with the development of Millennials center on coaching. Additionally, other i4cp/ASTD research found that ineffective coaching actually drives good talent out of the organization; in fact, it’s the greatest inhibitor to the success of high-potential development programs (ASTD & i4cp, 2013b). The Top 10 Critical Human Capital Issues Bring out the telescope The ability to see and plan for what’s ahead is essential to an organization’s ability to prepare and respond appropriately (i.e. to be agile) as well as execute longer- term strategy. Two imperatives standout: 1) Discipline to build today’s programs based on what your organization needs in the future; and 2) Brutal honesty and clarity with your talent mapping process pertaining to the critical roles and related skills and competencies required to drive sustained growth and agility. Transparency with both will enable top organizations to put in place the most impactful succession management programs. Recently, Pat Wright, facilitator of i4cp’s Chief Human Resources Officer Board and the Thomas C. Vandiver Bicentennial Chair in the Darla Moore School of Business at the University of South Carolina, shared a key to CEO succession planning: ensuring that the criteria used is what’s needed in the next CEO, not the current CEO. This same discipline needs to be applied throughout the organization.
  • 15. Institute for Corporate Productivity | 11 Enabling Sustained Growth through Talent Transparency 4. Measurement The ability to measure how effective they are at managing talent (e.g. hiring, developing and retaining better quality talent) is another hallmark of high-performance organizations. All employees must know what is being measured and how it is being measured. As referenced previously, this brings consistency and structure to the process. The organization should also be transparent about the type of rewards that signal success. However, it’s just as important that the organization reward the behaviors and results it desires. For example, i4cp’s ground-breaking research, Human Capital Practices that Drive Innovation found that contrary to conventional wisdom and academic research, tying individual bonuses and/or salary increases to innovation has a strong positive impact on innovation effectiveness. i4cp's People-Profit Chain™—a model that consists of 25 specific human capital key performance indicators (KPI) that statistically account for 28% of the variance in a firm’s market performance – includes the two human capital KPI with the highest correlation to market performance: the alignment of executive behavior to strategy and the alignment of middle manager behavior to strategy, respectively. The desired behaviors of leaders must reflect each organization’s specific strategy and culture. For example, Telus pays out $200M each year in bonuses; 50% of which is based on how people exemplify Telus’ leadership values. A culture of coaching in action An excellent example of using coaching to further strengthen and reinforce what’s been learned, as well and ensure more quality touch-points throughout the organization is at i4cp member company W.W. Grainger. This 2013 Fortune 100 Best Places to Work company has established an alumni network of employees who have completed their First-Time Managers program, and coaching is an important part of their continued development. Details about this program, including another case study about coaching at Campbell Soup Company are provided in i4cp’s 2014 research on coaching. The report also outlines the business case for and the roadmap to establishing a culture of coaching. Measuring and rewarding results in action i4cp member company Qualcomm employs a matrix of different employee motivators to reward and recognize those who create patents and other valuable intellectual property. The mix includes financial rewards such as bonuses and stock awards, recognition such as awards and meetings with the CEO and Chairman of the company, and sometimes furnishing increased autonomy to workers to allow them to commercially develop their innovations.
  • 16. 12 | Institute for Corporate Productivity The Top 10 Critical Human Capital Issues Additionally, i4cp’s research report Talent Management in the Trenches revealed two areas where frontline managers must be held accountable, and both are dependent on consistent, high-quality behaviors: the development of their direct reports and the engagement of their direct reports. In fact, the inclusion of engagement ratings in manager performance appraisals and development plans is in place at twice as many high- performance organizations than low-performance organizations (40% vs. 19% respectively); it’s also a practice that highly correlates to increased employee engagement scores. At i4cp member company 3M, one of the foundational elements of engagement is trust. A few ways 3M builds that trust is by: Expecting leaders keep their promises, involving people in decision-making, distributing work equitably, communicating openly and demonstrating concern; and emphasizing engagement in all leadership classes and through mentoring initiatives such as “Leaders Teaching Leaders.”
  • 17. Enabling Sustained Growth through Talent Transparency Doug Conant, former CEO of i4cp member organization Campbell Soup Company, and a past presenter at i4cp’s membership conference discussed what he viewed as the crucible leadership challenge of our next generation: “How do we walk in a moment to moment world, delivering against short-term expectations on-demand, in an enduring way that we feel good about?” His answer: One touch point at a time; the key being our interactions. The quality and consistency of our personal interactions help establish clarity (of the issue at hand), certainty (of what needs to be done), and trust (in those you are working with). While leaders in high-performance organizations are twice as likely to be viewed as good communicators, there is a lot of improvement that is needed. Only 36% of these high- Institute for Corporate Productivity | 13 Purposeful and meaningful communications and interactions in action i4cp member company Lincoln Financial Group ensures purposeful communications and interactions both internally and externally to its enterprise. The sentiment shared by Lincoln Financial’s chief marketing officer (Jamie DePeau) puts it all into perspective: "Effective marketers map out the customer experience and highlight the touch points where there is interaction. They then ensure that at each interaction the experience is one that delights the customer. This leads to brand loyalty. The HR communications program at Lincoln Financial is the most comprehensive I've seen. HR has mapped out the employee experience and outlined what employees need at every stage and at every touch- point. This helps us ensure the most positive employee experience possible." Ensure meaningful interactions through quality communications Only 36% of HPOs view their organiza- tions as effective in managing internal communications
  • 18. 14 | Institute for Corporate Productivity The Top 10 Critical Human Capital Issues performers view their organizations as effective in managing internal communications. And, only 43% perceive their organization to be effective at communicating the company vision—and this is down a whopping 36% from just the year before. When organizations and individual leaders communicate effectively in a consistent, purposeful, and authentic manner with the workforce, positive business results follow. Two communications practices revealed by i4cp’s research that have demonstrable impact on market performance as well as engagement and strategy execution effectiveness (respectively) are: • Ensuring leadership helps employees see and feel how they are contributing to the organization’s success and future. This can be accomplished through routine conversations between manager and direct report regarding clarity about and progress against objectives, including individual development plans and career paths. • Regularly communicating progress to all employees on where the organization stands against its objectives and its priorities going forward. This can be accomplished through regular company or business unit updates from the leaders in charge. Among the important benefits of more frequent and purposeful interactions is the positive impact it has on the trust line workers have with their immediate supervisor, as well as the increased perception of workers about their employer. This transcends into greater employee engagement which, in turn, yields benefits such as quality employee referrals, increased retention among highly engaged key personnel, greater organizational productivity, and stronger customer loyalty. And only 43% of HPOs perceive their organizations to be effective at communicating the company vision
  • 19. Pursue an omni-channel approach to talent branding In the retail industry, omni-channel is the evolution from multi-channel. In omni-channel retailing, the prod- ucts, pricing, and promotions are the same across all shopping channels. Because data from merchandising and inventory, including store traffic patterns, consumer purchase history and even the consumer’s social networks is all shared, retailers allow the consumer to experience the holistic brand, not just a single channel within that brand. With omni-channel retailing, merchandise and promotions are not channel specific, but rather consistent across all retail channels. This also allows marketing at omni-channel retailers to be more personalized and real-time, as they can extend offers that are relevant to a specific consumer. All of this helps ensure the most positive consumer experience possible. The #1 and #3 human capital issues of 2014 that high-performance organizations report the greatest decrease in their effectiveness to manage are their employer brand (a 40% year over year decrease) and building/re-building their corporate brand (a 25% year-over- year decrease), respectively. Applying retail’s omni-channel process to human capital, prospec- tive employees must not only have a great experience during the application and interview process of a company, but they must also have a consistent experience once they’ve accepted the position and are onboard. This will help to address the #1 and #3 branding issues that employers are clearly struggling with, while also reduc- ing turnover due to unrealistic job expectations. Additionally, information gathered from the prospective employee during this process should be utilized to craft their development plan and designate their subject matter expertise so others can tap into it. That same data, coupled with their performance data (once onboard) should be leveraged for consideration in company ad- vancement or acceptance into a specific leadership development program. All of this helps deliver a dual benefit: increasing the perception of the company as a great place to work (em- ployer brand) which will also help improve the ability to attract and keep critical talent. Done right, this creates a talent brand by marketing the employer brand to specific segments of current or potential employees viewed as ideal for critical roles or to fit the organization's unique culture. A talent brand results from building an identity among those specific segments as a place where they can achieve their individual goals. Establishing strong employer and talent brands will also help strengthen the corporate brand. Employees will not only be great brand ambassadors, but the quality of the customer experience (as a result of better interac- tions with employees) will also improve. See i4cp’s TrendWatcher What HR Must Learn from Marketing for more details. Institute for Corporate Productivity | 15 Enabling Sustained Growth through Talent Transparency HPOs report a 40% decrease in ability to effectively man- age their employer brand and a 25% decrease in ability to effectively manage building/rebuild- ing their corporate brand
  • 20. The Top 10 Critical Human Capital Issues 16 | Institute for Corporate Productivity The high market performance that top companies have ex- perienced over the past few years will be challenged in the future without more attention to the talent pipeline. i4cp’s annual study of the issues employers perceive as most important, yet least effective at managing, reveals a glar- ing reality: most employers do not have the internal bench strength of talent needed to enable sustained high-market performance. Based on data collected for this study from nearly 1,400 ex- ecutives worldwide, i4cp recommends the following actions for organizations intent on sustaining high-performance over the next decade: • Never lose sight of what your organization needs in order to grow and sustain success in the longer term. Know what market opportunities your organization plans to capitalize on over the next few years. Then, determine which roles, skills, and competencies are mission-critical to achieve that objective and sustain high-performance. Tight partnership with the business is essential for clarity on where the organization is heading. This will dictate the workforce planning and preparation that needs to work in parallel. i4cp’s Workforce Planning Activity Assessment Checklist will help gauge your organization’s workforce planning progress. • Build strong pipelines of talent that target critical roles, skills, and competencies. Go beyond the executive-level and look to all roles that are mission critical to success both now and in the future. Integrate these efforts with your other talent management initiatives, from recruitment to development. Also, work with (or target) your internal communications and corporate branding efforts so that your organization is maximizing and synchronizing its branding to key talent segments—both current and prospective employees—and to its customers. • Ensure knowledge retention and sharing around those roles, skills, and competencies. Align programs, processes, and technology so as to encourage, capture, and utilize the information and insights that proliferate. While knowledge is powerful, what you don’t want is for key institutional and experiential knowledge to go undocumented or leave the organization without a purposeful plan to maintain and build on it. Conclusion Most employers do not have the internal bench strength of talent needed to enable sustained high-market performance. L L
  • 21. The People-Profit ChainTMEnabling Sustained Growth through Talent Transparency Institute for Corporate Productivity | 17 • Enable the organization and its leaders to have more frequent and purposeful interactions and communications. This must be inclusive of everything from announcements from the CEO to discussions project leaders have with their teammates, to coaching future leaders on how to successfully navigate the internal and external political environments that affect the business. Enabling a broader group of leaders to be effective coaches will have positive effects throughout the organization. • Measure and reward desired behaviors and results. An uninspiring 35% of employers with at least 1,000 employees indicate they are effective at managing and rewarding behaviors and even fewer (27%) indicate they are effective at managing and rewarding results. These behaviors must align with an organization’s business goals, values, and culture. Executives and managers must be held accountable to model and communicate those behaviors to, as well as develop them in, others. While none of these recommendations may be new to your organization, what is new—and is reflected in what i4cp research has consistently shown—are insights into the singular and common key success factor that spans each of the aforementioned bulleted items: a culture of transparency.
  • 22. 18 | Institute for Corporate Productivity The Top 10 Critical Human Capital IssuesThe Top 10 Critical Human Capital Issues Author and contributors Kevin Martin, Chief Research and Marketing Officer, and Jay Jamrog, Senior Vice President of Research, co- authored this report. For more information or to contact the authors, please go to i4cp.com/contact About the survey This report provides analysis of the results for i4cp’s 2014 Critical Human Capital Issues Survey, which was conducted in December 2013 and had 1,367 respondents. Previous iterations of this survey—formerly titled the Major Issues Survey—have been conducted by i4cp and its predecessor, the Human Resource Institute, over the past three decades and provide rich longitudinal perspective that informs our research and, in turn, aids our members in setting organizational priorities. Data for this study have been filtered for organizations with 1,000 or more employees. Breakouts by organization size, industry and other demographic factors are available in the interactive data workbook for this study, which is available to all member organizations through the i4cp website. References American Management Association and Institute for Corporate Productivity. (2013). Global Leadership Development: Everybody's Game. ASTD and Institute for Corporate Productivity. (2013a). Informal Learning: The Social Evolution. Web. ASTD and Institute for Corporate Productivity. (2013b). Leadership Development for Millennials: Why It Matters. Web. Institute for Corporate Productivity. (2013). Building a Change-Ready Organization: Critical Human Capital Issues 2013. www.i4cp.com Institute for Corporate Productivity. (2013). Human Capital Practices That Drive Innovation. www.i4cp.com Institute for Corporate Productivity. (2013). Purpose-Driven Performance Management in High-Performance Organizations. www.i4cp.com Institute for Corporate Productivity. (2012). The People-Profit Chain™. www.i4cp.com Institute for Corporate Productivity. (2012). Talent Management in the Trenches. www.i4cp.com Manpower. “Promising Signs for Global Hiring Heading into 2014, According to Manpower Employment Outlook Survey.” 12 10 2013. Web. Martin, Ben. "Market report: FTSE 100 enjoys biggest rise since 2009." The Telegraph, 12 31 2013. Web. Pew Research Center. "Baby Boomers Retire." 12 29 2010. Web. Sjolin, Sarah. "European stocks retreat from five-year high." MarketWatch, 05 11 2013. Web.
  • 23. The People-Profit ChainTMEnabling Sustained Growth through Talent Transparency Institute for Corporate Productivity | 19 Study partners American Management Association American Management Association (AMA) is a world leader in professional development and performance-based learning solutions. AMA provides individuals and organizations worldwide with knowledge, skills, and tools to achieve performance excellence, adapt to changing realities, and prosper in a complex and competitive world. Each year, thousands of customers learn new skills and behaviors, gain more confidence, advance their careers, and contribute to the success of their organizations. AMA offers a range of unique seminars, workshops, customized corporate programs, online learning, newsletters, journals, and AMACOM books. AMA has earned the reputation as a trusted partner in worldwide professional development and management education that improves the immediate performance and long-term results for individuals and organizations. For more information on how you and your organization can gain a competitive advantage, visit www.amanet.org AMA Enterprise, a specialized division of American Management Association, drives talent transformation and business excellence for corporations and government agencies. AMA Enterprise leverages an unsurpassed array of resources to unleash hidden potential in the human capital of organizations and transforms talent to fuel a culture of innovation, high performance and optimal business results. Visit www.amaenterprise.org for more information. MicroPower Founded in 1994, Brazilian-based MicroPower’s mission is commitment to its customers’ success by implementing talent management consulting and technological best-in-class solutions. MicroPower is recognized by the Brazilian talent management market as a pioneer and leader in promoting high-performance culture implementation, supported by Expanded Corporate University Architecture, an innovative solution to promote productivity and competitiveness in a sustainable way. Visit MicroPower’s website at www.micropower.com.br/uca_en
  • 24. 20 | Institute for Corporate Productivity The Top 10 Critical Human Capital IssuesThe Top 10 Critical Human Capital Issues ABRH ABRH is a non-governmental, non-profit entity created in 1965 from a gathering of professionals involved with the cause of promoting human resources as a processing agent that contributes to the formation of more productive organizations. The goal is to assist organizations in becoming better at and more aware of their roles in the socio-economic context of the country. Today, there are 23 chapters integrated into the mission of promoting the development of HR professionals and managers of people through events, research and exchange of experiences, as well as through collaboration with public authorities and other entities in matters relating to their area of expertise. The following chapters contributed to this research: Amazonas, Goiás, Maranhão, Minas Gerais, Mato Grosso, Paraíba, Rio de Janeiro, Santa Catarina, Rio Grande do Sul and São Paulo. Visit their website at www.abrhnacional.org.br/
  • 25. Peers. Research. Tools. Data. i4cp focuses on the people practices that drive high performance. Learn more at www.i4cp.com