Your company prides itself on hiring the best. You consider your company a great place to work. You pay well and provide what you consider to be generous benefits. You train your workers, helping them to develop new skills to keep up with changing conditions in the marketplace. But even with all your efforts, you’ve found that your best employees are proving increasingly difficult to keep. You find that your most talented colleagues are leaving for other companies and your human resources department is finding it more and more difficult to fill vacancies at every level of your organization, even as your company spends more and more on search firms.
No, you are not in the middle of a bad dream. Consulting firm McKinsey & Company will tell you that you are in the middle of a war, a war for talent. McKinsey consultant Edward G. Michaels III presented the results of his firm’s research into the issue of how companies are struggling to attract and retain talented executives at a conference on Leadership Capabilities for Winning Companies held in Philadelphia and sponsored by Wharton’s Center for Human Resources and the Center for Leadership and Change Management. McKinsey is not a firm that tends toward hyperbole; its research and analysis led to the conclusion that businesses are in the thick of battle for talent and that battle promises to intensify in the future.
McKinsey’s study, which has appeared in the McKinsey Quarterly, focused on 77 large U.S. companies in various industries. The team’s focus was on the human resources department within each company and what their talent-building philosophies, practices, and challenges were. The team also surveyed nearly 400 corporate officers and 6,000 executives from the top ranks of these companies. In addition, the group conducted case studies of 20 companies that were perceived to have considerable talent. The study concluded, "What we found should be a call to arms for corporate America. Companies are about to be engaged in a war for senior executive talent that will remain a defining characteristic of their competitive landscape for decades to come." The report’s even more troubling conclusion was that "most companies are ill-prepared, and even the best are vulnerable."
Why are companies having such a difficult time attracting, managing, and keeping talent? A smaller supply of available executives is only part of the problem. The study observes that "a more complex economy demands more sophisticated talent with global acumen, multi-cultural fluency, technological literacy, entrepreneurial skill, and the ability to manage increasingly delayered, disaggregated organizations." The study also points out that a growing number of the best and brightest are avoiding larger companies, preferring to try their hands at smaller, more entrepreneurial organizations. Further, executives are far more willing to move; job mobility has increased tremendously over the past ten years. It is not surprising, then, to learn that fully three-quarters of the corporate officers surveyed said their companies had "insufficient talent sometimes" or were "chronically talent short across the board".
McKinsey’s findings are troublesome. Michaels and his colleagues stress, "our research suggests that executive talent has been the most undermanaged corporate asset for the past two decades. Companies that manage their physical and financial assets with rigor and sophistication have not made their people a priority in the same way." They supported their contention with the finding that a meager 23% of executives surveyed strongly agree that their companies attract highly talented people. Equally troublesome, a paltry 10% believe that they retain their high performers. Perhaps the most disturbing finding for business is that only 16% of the respondents think their companies even know who their high performers are.
"Superior talent will be tomorrow’s prime source of competitive advantage." It is critical that the senior executive team make the development of its talent a top priority. Where do you start? Human Resources. If your HR executives are not actively involved with the development of executive talent throughout the firm and if they do not have strong relationships with business units, then reengineer your HR department. Most companies acknowledge that their HR departments are not as actively involved in talent management and development as they should be.
Another key task is to create a strong "employee value proposition". Building a successful EVP begins with the simple question, "why would a talented person want to work here?" From there your company will need to focus on creating an environment and culture that everyone within the organization finds appealing and exciting.
A fundamental question you and your colleagues will ask is, what makes a "great job"? McKinsey found the following six characteristics:
- Elbow room to allow executives adequate room to maneuver.
- Head room, to allow executives to make decisions without seeking constant approval from above.
- A clear link between daily activities and business results (not limited to P&L)
- A position that stretches the individual.
- Something new to work on as often as possible.
- Great colleagues to work with, above, around, and below.
What about money? It too plays an important part. Companies must understand that money alone is not the key to attracting and retaining talent, but how it is shared sends a powerful signal to all employees. The most successful companies are not hesitant to make sure that the compensation of their best performers is considerably greater than that of their average performers.
Can big companies compete against smaller, more entrepreneurial companies? The answer is yes, if they make talent management a priority. Focus on the benefits a large firm offers: magnitude of impact, depth, capital and variety. Large companies are making a greater effort to create an atmosphere of entrepreneurship within the company, creating smaller business units and giving those units more autonomy.
The last piece of the puzzle for talent management is to create a good sourcing strategy. Determine what type of people you need and then determine where the best are. Michaels and his colleagues point out the weakness most companies have: they do not know what they want. The solution is to analyze the background and performance of current high performers and from there develop detailed profiles of the types of people you will seek in the future.
Your company is in the middle of a battle for its most important asset: the unique group of people who develop and implement your company’s business strategy each day. It is a battle that promises to grow more intense over the next decade. In the knowledge economy of the new millenium, your executive talent will determine your company’s success or failure. If you win the battle for talent, you stand a much better chance of winning the larger war in the marketplace.