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Making Talent a Strategic Priority
-Jeffrey W. Brown, Pres. Comprehensive Search

This month’s article is primarily quotes from the 2008 The McKinsey Quarterly entitled Making Talent a Strategic Priority.  The original study was entitled “The War for Talent” and was conducted in 1997 and was then published as a book in 2000. 

This update started in 2006 when more than 10,000 respondents completed a survey.  This was followed by one in 2007 when 1,300 executives were surveyed.

In my opinion McKinsey is probably the foremost management consulting company in the world.  Why reinvent the wheel for an article when somebody appears to have done one with the depth of research they have and it is done by someone who is so credible.  Therefore what follows are excerpts from that study.

The astonishing reality is that most companies are as unprepared for the challenge of finding, motivating, and retaining capable workers as they were a decade ago.

The 1997 study drew attention to an imminent shortage of executives.  Despite that, the problem remains acute—and if anything has become worse.  The looming retirement of baby boomers is but one of several reasons.

The 2006 survey indicated that the respondents regarded finding talented people as likely to be the single most important managerial preoccupation for the rest of this decade. The second, conducted in November 2007, revealed that nearly half of the respondents expect intensifying competition for talent—and the increasingly global nature of that competition—to have a major effect on their companies over the next five years. No other global trend was considered nearly as significant.

Too many organizations still dismiss talent management as a short-term, tactical problem rather than an integral part of a long-term business strategy,

Emerging markets are producing a surplus of young talent; in fact, they graduate more than twice as many university-educated professionals as the developed world does.

Two key obstacles to good talent management as a % of respondents are:

1. Senior managers don’t spend enough high-quality time on talent management – 59%
2. Line managers are not sufficiently committed to development of people’s capabilities and careers. – 45%

Generation Y—people born after 1980—whose outlook has been shaped by, among other things, the Internet, information overload, and overzealous parents. HR professionals say that these workers demand more flexibility, meaningful jobs, professional freedom, higher rewards, and a better work–life balance than older employees do. People in this group see their professional careers as a series of two- to three-year chapters and will readily switch jobs, so companies face the risk of high attrition if their expectations aren’t met. The Gen Y cohort, already representing 12 percent of the US workforce, is therefore perceived as substantially harder to manage than its predecessors.

By one estimate, 48 million of the 137 million workers in the United States alone can be classified as knowledge workers

Knowledge workers are different because they create more profit than other employees do—up to three times more, according to our research—and because their work requires minimal oversight.

Since investments in talent intangibles are expensed rather than capitalized, managers may try to raise short-term earnings by cutting discretionary expenditures on people development.

The HR department’s declining impact and the dearth of talented people willing to serve there haven’t helped at all.

Senior sales, finance, marketing, and IT managers earn up to 50 percent more than their HR counterparts.

A recent survey by the Society for Human Resource Management, for example, found a third of US companies have done nothing about the aging of the workforce.

We’ve extended our War for Talent thinking in three important areas in which we believe that talent strategies can have a greater impact:

1 – Target talent at all levels

We argued in 1997 that top performers deserved up to 40 percent higher compensation than their average counterparts received.  While the impact of top talent on corporate performance hasn’t diminished organizations can’t afford to neglect the contributions of other employees.  Several authors in recent years have rightly emphasized the valuable contributions of B players: capable, steady performers who make up the majority of any workforce. 

2 – Develop a number of value propositions

With demographic and other trends in mind, successful businesses are adapting their employer brands to target segments with different values, ambitions, and expectations: for example, generations X and Y, middle-aged women, older workers, and people from specific cultural backgrounds.

3 – Bolster HR

·               Only HR can translate a business strategy into a detailed talent strategy.

·               HR departments need to get a better feel for segmentation and internal marketing in order to create and define a number of different employee value propositions.

·               HR directors should acquire deeper business knowledge. 

Our recent work emphasizes our belief in the importance of getting this “soft side” right; otherwise, we often observe, managers easily succumb to short-term pressures and fail to embed a talent strategy in the overall strategy of the business. 

What is needed is a deep rooted conviction that leaders must develop the capabilities of employees, nurture their careers, and manage the performance of individuals and teams. 

Finally, senior executives must invest significant amounts of time in creating strategies that attract, motivate, and retain talent.

The full article from the 2008 The McKinsey Quarterly entitled Making Talent a Strategic Priority can be found at http://www.mckinseyquarterly.com/article_page.aspx?ar=2092.