Perspective   DeAnne Aguirre              Ashley Harshak              Laird Post              Sonia StorrInvesting in Tale...
Contact InformationBerlin                         Mumbai                        San FranciscoCarolin Oelschlegel          ...
EXECUTIVE        A company’s approach to talent is a core component of its                 overall strategy. Yet too often...
THE PEOPLE                             All too often, however, companies                                       don’t consi...
DEVELOPING                                           Aligning a company’s people strategy                                 ...
tailored products and services; HP                      have a disproportionate ability to                them. Investing ...
company found, for instance, that                         understanding the strategic value                 3. Create Segm...
as a critical employee segment           4. Implement the People Strategy          for product managers in which itgiven t...
Case Study: A Global Pharmaceutical Company’s New Way to Play   Booz & Company recently worked with a global pharmaceutica...
CONCLUSION   Creating effective people strategies             is a complex task that is often done                        ...
About the AuthorsDeAnne Aguirre is a senior          Laird Post is a senior principalpartner with Booz & Company         w...
The most recent             Worldwide Officeslist of our officesand affiliates, with        Asia                          ...
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Booz co: investing in talent for sustained growth


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Booz co: investing in talent for sustained growth

  1. 1. Perspective DeAnne Aguirre Ashley Harshak Laird Post Sonia StorrInvesting in Talentfor Sustained GrowthA Capabilities-Driven Approachto People Strategy
  2. 2. Contact InformationBerlin Mumbai San FranciscoCarolin Oelschlegel Jai Sinha DeAnne AguirrePrincipal Partner Senior Partner+49-30-88705-838 +91-22-6128-1102 deanne.aguirre@booz.comBuenos Aires Munich Laird PostAriel Fleichman Christian Burger Senior PrincipalPartner Senior Partner +1-415-281-4924+54-11-4131-0432 +49-89-54525-546 ShanghaiDC New York Sarah ButlerKristy Hull Reid Carpenter PartnerPrincipal Principal +86-21-2327-9800+1-703-682-5764 +1-212-551-6389 StockholmLondon Rio de Janeiro Per-Ola KarlssonAshley Harshak Paolo Pigorini Senior PartnerPartner Partner +46-8-506-190-49+44-20-7393-3405 +55-21-2237-8448 Rome SydneySonia Storr Alessandro Gazzini Varya DavidsonPrincipal Partner Partner+44-20-7393-3726 +39-06-69-20-73-1 Booz & Company
  3. 3. EXECUTIVE A company’s approach to talent is a core component of its overall strategy. Yet too often, we find a disconnect betweenSUMMARY how companies define their strategy and how they shape and invest in their workforce. This can be a costly mistake during the best times, let alone in today’s strained economic environment. Instead, senior leadership teams and human resources executives should develop focused people strategies that align with and support the foundation of their company’s success: its capabilities system, the few things the company does exceptionally well that distinguish it from competitors. By following four steps, executives can identify, prioritize, and develop the employee segments across the organization that are critical to its long-term differentiation and success— and in so doing, achieve sustained growth.Booz & Company 1
  4. 4. THE PEOPLE All too often, however, companies don’t consider their people strategies programs, recruitment drives, and reward packages.STRATEGY in the proper context. For instance,CHALLENGE when companies seek to grow, their leaders must decide where to invest There is a better way. Senior leadership teams and HR executives resources. And when they seek to can maximize the effects of their reduce costs, they must decide where decisions on people and performance to cut back. They tend to pursue by first asking what to focus on these objectives by spreading invest- and strengthen—by determining ments or clipping budgets across the few differentiating capabilitiesCompanies face a variety of chal- the board. Most leaders recognize that provide their company withlenges in today’s economy: reducing the limitations of such approaches sustained competitive advantage—costs, pursuing growth organically on corporate performance, and the before deciding if and where toand via M&A, implementing new negative impact these approaches invest or cut. Such a capabilities-business models, and expanding can have on their employees. But driven approach can measurablygeographically, among others. But in an effort to be fair, they treat all improve the chances of successfullyall the challenges have one thing in parts of the business the same, espe- meeting all kinds of strategiccommon: People are at the heart of a cially with regard to their people- challenges, and of resolving thesuccessful response. People imagine related spending, including head people-related issues that invariablychange and they make it real. count, talent initiatives, training accompany them. A capabilities-driven approach can measurably improve the chances of success.2 Booz & Company
  5. 5. DEVELOPING Aligning a company’s people strategy to its differentiating capabilities anyone else. Each of these capabili- ties is composed of skills, knowledge, THE RIGHT system can be achieved by following behaviors, processes, structures, and TALENT a four-step process (see Exhibit 1). technology. Sometimes, a company’s existing capabilities determine its 1. Define the Capabilities System way to play; sometimes its chosen A company must first know what way to play requires the development it needs to do to succeed before of new capabilities. it can identify who should do it. When defining its identity in the There are many ways to play and marketplace, senior leadership teams many more possible combinations must ask themselves three core of capabilities that can support questions: How do we create value them. The personal computer for customers? What capabilities industry provides a typical example. do we need to deliver this value Four of the biggest players in the proposition? What will we sell, industry—Apple, Dell, Hewlett- and to whom? Coherent companies 51% Packard (HP), and Lenovo—all THE THIRD BILLIO 51% purposefully ensure that their way Outputs different ways to play and have 70 to play, capabilities system, and different Average Zone systems. Yet capabilities On the Path to Success product and service portfolios36% are each has At the Starting Gate been very successful in South 36% 32% aligned (see Exhibit 2). the marketplaceRightits own way: Taking the in Steps 60 Forging Their Own Path Brazil Apple is an “experience provider” Average China The key to a coherent strategy is a that introduces market-changing 23%he Capabilities System 23% set of three to six mutually reinforc- products and services; Dell is a ing and differentiating capabilities— 50“customizer” that leverages Tanzania 12% 13% customer 13% 12% Ar things the company does better than 7% information and intelligence to offer Chadential Employee Segments 7% Turkey Sudan Morocco Jordan 40 India Overall Unskilled Skilled Engineers HR/IT/F&A Sales Customer Production Production Service UsedUnskilled Value Propositions Employee Skilled Engineers HR/IT/F&A Sales Customer Pakistan Syria Production Production Service Saudi Arabia Egypt Yemen 30 30 40 50 Inputsnt the People Strategy Guidelines: Exhibit 1 Exhibit 2 11.0 million = Subheads A Four-Step Approach The Capabilities-Driven Strategy in Subhead aölkdfölka = Plain text / Bullet point How do we create value? 32.8% = numbers in Way to 30.1% = just white t 1 Define the Capabilities System Play 100 % colo TABLE HEADINGS 2 Identify Critical Employee Segments Right A4 format: to Win - width for 3 columns: 169 mm = 6 - width for 2 columns: 111 mm = 4 3 Create Segment-Based Employee Value Propositions Capabilities Products What System & Services What will Letter format: capabilities - width for we sell? 167,64 mm = 3 columns: do we - width for 2 columns: 110,35 mm = need? 4 Implement the People Strategy Lines: 0,5 pt Lines for legend: 0,5 pt dotted, bla Source: Booz & Company Source: Booz & Company Note: Please always delete all unused co otherwise InDesign will import the s file. These colors can’t be deleted in In Booz & Company 3 Approved Colors, Tints and PattRETAILING PER CATEGORY N EUROPE Category Market Size
  6. 6. tailored products and services; HP have a disproportionate ability to them. Investing in improving is a “solutions provider” that sells create value and deliver competitive the performance of these critical devices as integrated solutions, with advantage. segments can be a major lever in a direct link between the device on a boosting organizational results. And desk or in a pocket and the cloud of The goal is to align your people by identifying segments that are services that support it; and Lenovo strategy with your company’s only required to be fit-for-purpose, is a “value player” that competes on capabilities system, so that the right companies can also reduce head price. people are in place to support the count and control costs in other capabilities across functions. For ways without destroying value. 2. Identify Critical Employee example, Apple’s capabilities system Further, the monies saved can be Segments requires people who have superior redirected in ways that make the A company’s differentiating branding and design skills, whereas most difference in employee and capabilities are almost always cross- Dell values people with sales and business performance. functional, thus the people needed to marketing and forecasting skills (see TH 51% Outputs execute them effectively will likely be Exhibit 3). For example, a major package Average Zone spread throughout the organization. shipping company was able to On the Path to Success But by zeroing in on the capabilities Identifying critical employee reduce costs and grow stronger At the Starting Gate 36% Taking the Right Steps32% that will provide their company with segments and their required by segmenting its workforce and Forging Their Own Path sustained competitive advantage, contribution to the company’s identifying which employee segmentsAverage Chin HR executives can begin to identify differentiating capabilities system 23% were critical to delivering superlative employee segments that support enables the company to determine service to its customers—one of its differentiating capabilities. These where to direct their investments in differentiating capabilities. This Tanzania are the people in the company who people, as well as where to reduce led to a number of insights. The Morocco India Pakistan Syria Saudi A Yemen 40 Guidelines: Exhibit 3 11.0 million = Ways to Play in the Personal Computer Industry aölkdfölka = 32.8% = Apple Dell Hewlett-Packard Lenovo Way to Play Way to Play Way to Play Way to Play 30.1% = - Experience provider - Customizer - Solutions provider - Value player Capabilities Capabilities Capabilities Capabilities TABLE HEADIN - Provision of customer experience - Direct sales - Direct B2B sales - Cost management A4 format: - Brand management - Product customization - End-to-end product/service - Lean manufacturing - width for 3 colum - Support and integration of - Automation and forecasting provision - Fast-follower innovation - width for 2 colum external partners Talent Needs Letter format: Talent Needs Talent Needs Talent Needs - width for 3 colum - Direct sales and marketing skills - B2B sales and marketing skills - Financial management and - width for 2 colum - Intuitive user interface modeling expertise - Customized manufacturing/supply - Solution development and development expertise - Lean Six Sigma skills chain management expertise engineering skills - Branding skills Lines: 0,5 pt - Engineering and analytics skills - Acquisition expertise - Competitor and supplier Lines for legend: 0 - Application platform engineering intelligence skills Note: Please always del otherwise InDesig file. These colors can’t Source: Booz & Company Approved Colors 4 Booz & Company
  7. 7. company found, for instance, that understanding the strategic value 3. Create Segment-Based Employee although its pilots were important, that each segment contributes to Value Propositions additional investment in the segment the organization and optimizing A segment-based employee value was not needed because they did not each according to that value. It is proposition needs to capture the contribute a disproportional amount important for leadership to address essence of the relationship between of value in terms of customer perceptions of inequality frankly, employer and employee, and articu- service. Thus, there was little payoff openly communicate the business lates the expectations for each (see in investing in developing better reasons for targeting specific Exhibit 4). A successful employee pilots because it would not greatly segments for greater attention, value proposition meets the employ- enhance the company’s competitive and be transparent about different er’s requirements while providing advantage. On the other hand, the value propositions offered to other, the competitive advantage needed company found that its delivery less critical employee groups. to attract and retain superior talent drivers were a critical segment Employee segmentation is not about in the company’s most critical roles. because they were customer facing. creating haves and have-nots: It is Such a value proposition is more As a result, it invested in improving a conscious approach for optimizing than a job and the compensation that 51% Outputs the customer service skills and investments in people by recognizing comes with it. It also encompasses 70 performance of its drivers, and which employee segments can the work environment, culture, Zone Average On the Path to Success generated significant additional make the most difference in the career opportunities, and chance to Gate At the Starting Taking the Right Steps revenue and profits by providing 36% a company’s success. Of course, do meaningful work. Forging Their Own Path 32% 60 better customer experience. over time, companies’ strategies Average may change, and the capabilities For example, a large U.K. financial 23% When it comes to employee and employee segments needed to institution undertook a major 50 segments, fairness doesn’t support those capabilities must transformation effort in its contact 13% 12% always mean equality. It means change with them. centers that identified team leaders Chad 7% Sudan Moro 40 IndiOverall Unskilled Skilled Engineers HR/IT/F&A Sales Customer Pakistan Syr Production Production Service Yemen 30 30 40 Exhibit 4 The Employee Value Proposition Guidelines 11.0 millio aölkdfölka - Compensation and benefits - Vision - Performance management - Integrity and trust 32.8% (including recognition) Reward & - Competency Leadership - Career development Recognition - Access and people management 30.1% TABLE H - Recruitment - Employer brand equity Employee Employer - Team performance - Differentiation Value Role & Team A4 format: Brand - Behaviors - width for - Opportunity Proposition - width for Letter form - width for - width for Social Work Responsibility & - Social impact Environment - Job design Purpose Lines: 0,5 - Corporate social responsibility - Challenge Lines for le - Community relations - Physical work - Work/life balance Note: Please alw otherwise Source: Booz & Company file. These colo Approved Booz & Company 5
  8. 8. as a critical employee segment 4. Implement the People Strategy for product managers in which itgiven their role in developing Once employee value propositions enhanced their decision making byand executing a strong service are created, the company needs to developing their cross-functionalcapability. It developed a new value determine and execute the practical skills in manufacturing, engineering,proposition for these employees, steps needed to bring them to life and marketing. Another companywhich articulated the organizational and deliver on their promise of focused on recruiting talentexpectations of the team leaders attracting, developing, and retaining instead, and developed a strategicand the organization’s commitment people in the segments critical to relationship, including an endowedto develop and provide them with the company’s success. This requires professorial chair, with a singlerewarding careers. This included asking several key operational university that it identified as its bestspecialized training in products, questions: source for engineering talent. A thirdperformance management, and company also focused on recruitingcustomer service; new career paths • What is the optimal way to attract new talent, but chose to hire itthat encouraged experienced team the best talent in our most critical away from a competitor that was aleaders to mentor and develop segments? good trainer of talent but did notpeers; and new opportunities, offer attractive career developmentsuch as transfers to other contact • What is required from HR to opportunities.centers and internal assignments deliver the tailored segment valuethat were previously offered only to propositions? In each of these examples, HRoperational managers. played a leading role in marshaling • How will the organization ensure the resources needed to deliver onIn designing the value propositions that it is achieving the outcomes the company’s people strategy andfor critical employee segments, articulated by the employee value enhance its people is necessary to elicit employee propositions? And in each case, HR needed toparticipation. Often there are understand the people prioritiesdisconnects between what employees The answers to these questions of the business in order to decidevalue and what their employers think will vary widely by industry where to invest and not to invest,they want (see “Case Study: A Global and company. For example, one and develop the skills the companyPharmaceutical Company’s New Way manufacturing firm, whose product needed to effectively implement theto Play”). Not only does involving managers were a critical employee solutions it proposed.employees ensure the relevance of segment because of their role inthe proposition, but the act of giving ensuring a differentiating capabilitypeople an opportunity to voice their in the innovative design andviews about what they want builds timely delivery of new products,engagement and buy-in. established a unique talent model In designing the value propositions for critical employee segments, it is necessary to elicit employee participation.6 Booz & Company
  9. 9. Case Study: A Global Pharmaceutical Company’s New Way to Play Booz & Company recently worked with a global pharmaceutical company that followed the process described earlier to refresh its people strategy in response to changes in its corporate strategy. Like many others in the industry, the company’s long heritage of producing blockbuster drugs eventually led to an overly complex product portfolio and broad customer focus. In response, the senior leadership team reexamined the company’s way to play and decided to focus its efforts on a new more targeted strategy. The leadership team identified three key capabilities already in place within the company that were needed to support its new way to play: its expertise in developing deep insights into patients’ needs and real world use of medicine, entrepreneurship, and product development. By analyzing the people skills, knowledge, and behaviors required to support these capabilities, the company identified its critical employee segments—and one key area was medical affairs. To energize and enable medical affairs to play its key role in the way to play, the executive team defined and articulated a new set of expectations for the segment’s members and, with the help of a series of focus groups made up of the function’s staff, sought to identify the critical elements of the segment’s employee value proposition. The results were surprising: Most notably, compensation was found to be a lower priority than recognition and flexible working arrangements. It was also discovered that the company’s brand image as an employer, which was a significant factor in recruiting, was less important in retaining employees. The redesigned employee value proposition was subsequently used to inform, prioritize, and invest in HR activities. For instance, HR introduced a series of programs for the medical affairs staff, including the following: • Peer-to-peer manager coaching to encourage multidisciplinary teaming and innovative thinking, including skill building and informal groups that share new insights and experiences • Targeted skill building to close gaps, including training to increase customer insight capabilities and recruiting new talent with the required skills • Exciting and challenging career paths and stretch roles designed to further engage employees • Professional community building to share experience and insights, disseminating best practices and enhancing individual development The close alignment of people strategy with the company’s differentiated capabilities ensured that the organization focused its people efforts and investments where they mattered most for business success. Many hundreds of employees participated in pilots that helped improve awareness of expectations and drove engagement in exploring new behaviors and skills. At a higher level, management took greater ownership of people issues and the credibility of HR was strengthened.Booz & Company 7
  10. 10. CONCLUSION Creating effective people strategies is a complex task that is often done that demonstrates an employer’s commitment to its critical segments improperly, without clear connection and articulates what must be done to to corporate strategy, causing ensure that both the employer’s and sub-optimal business performance the employees’ needs are satisfied. and inefficient use of resources. With that in place, business units These outcomes can be avoided by and HR can prioritize their activities aligning people and HR activities and gain maximum leverage from the with the company’s way to play and company’s investment in people. capabilities system. This process ensures not only that people strategies A firm commitment to critical and the investments associated with employee segments across functions them are optimized, but that current on the part of the company and gaps in critical people segments are its senior leaders is extremely exposed. The benefits of such an important, but we must also approach include a greater return acknowledge that strategic change on investment, increased motivation is inevitable. When companies face among employees who are essential new challenges, their ways to play to the company’s success in the may require modification. Often, marketplace, and, most important, this will also cause changes in enhanced business performance. their capabilities systems—setting off corresponding alterations in Companies must ensure that the terms of which employee segments people in each critical segment know are deemed critical; the skills, exactly what is expected of them. behavior, and knowledge required And because each segment typically of those employees and their value has its own recruiting, development, propositions; and HR activity. Thus, and retention considerations, it will distinctive capabilities are the key to require a tailored value proposition to one of the great, ongoing challenges attract, motivate, and retain people. in HR: creating a people strategy This combination of expectations and that is coherent, and aligned with benefits adds up to a de facto contract corporate strategy.8 Booz & Company
  11. 11. About the AuthorsDeAnne Aguirre is a senior Laird Post is a senior principalpartner with Booz & Company with Booz & Company basedbased in San Francisco. She in San Francisco. He worksis an expert in talent effective- with global organizations in theness and leadership, and areas of talent management,advises senior executives HR effectiveness, and sustain-globally on people strategy able change.and human capital. Sonia Storr is a principal withAshley Harshak is a partner Booz & Company based inwith Booz & Company based London. She assists majorin London. He specializes organizations in achievingin people capabilities and large-scale transformationchange management, helping through people capabilities,global organizations tackle performance management,their most pressing people and cultural change.challenges.Booz & Company 9
  12. 12. The most recent Worldwide Officeslist of our officesand affiliates, with Asia Middle Eastaddresses and Beijing Canberra London Abu Dhabi Detroittelephone numbers, Delhi Jakarta Madrid Beirut Florham Parkcan be found on Hong Kong Kuala Lumpur Milan Cairo Houstonour website, Mumbai Melbourne Moscow Doha Los Seoul Sydney Munich Dubai Mexico City Shanghai Paris Riyadh New York City Taipei Europe Rome Parsippany Tokyo Amsterdam Stockholm North America San Francisco Berlin Stuttgart Atlanta Australia, Copenhagen Vienna Boston South America New Zealand & Düsseldorf Warsaw Chicago Buenos Aires Southeast Asia Frankfurt Zurich Cleveland Rio de Janeiro Bangkok Helsinki Dallas Santiago Brisbane Istanbul DC São PauloBooz & Company is a leading global managementconsulting firm focused on serving and shaping thesenior agenda of the world’s leading institutions.Our founder, Edwin Booz, launched the professionwhen he established the first management consultingfirm in Chicago in 1914. Today, we operate globallywith more than 3,000 people in 58 offices aroundthe world.We believe passionately that essential advantage lieswithin and that a few differentiating capabilitiesdrive any organization’s identity and success. Wework with our clients to discover and build thosecapabilities that give them the right to win theirchosen markets.We are a firm of practical strategists known for ourfunctional expertise, industry foresight, and “sleevesrolled up” approach to working with our clients.To learn more about Booz & Company or to accessits thought leadership, visit Our award-winning management magazine, strategy+business,is available at©2012 Booz & Company Inc.