Are you aware of the decisive impact of talent on your organisation’s success? Have you devised a game plan to retain your competitive advantage? Did you know that despite fluctuating unemployment rates, the competition to source, hire and retain top notch candidates has remained consistent and fierce across most industries? Finally, while every other aspect of business is being easily replicated (products, services and infrastructure) isn’t it amazing to learn that talented people are the ONLY lasting competitive advantage?
McKinsey’s study, which has appeared in the McKinsey Quarterly (1998), 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 offices 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 that 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. ” This new age economy, with its attendant paradigm shifts in relation to the human capital, in terms of its acquisition, utilisation, development and retention, has placed a heavy demand on today’s HR professionals.
Today HR is expected to identify potential talent and also comprehend, conceptualise and implement relevant strategies to contribute effectively to achieve organisational objectives. Hence a serious concern of every HR manager in order to survive this ‘War for Talent’, is to fight against a limited and diminishing pool of qualified available candidates to replace valuable employees when they leave, dramatically underscoring the difficulty to attract, motivate and retain the best employees in an organisation.
You will find out more as we reveal our findings from our interactions on the subject with the country’s top HR people from some of the best known and admired companies. To analyse the reasons, we first need to understand what “TALENT” means. People have different views and definitions. According to Leigh Branham, vice president, consulting service at Right Management Consultants and author of the book, “Keeping People Who Keep You in Business”, a talent is not rare and precious. Everyone has talent – too many to possibly name all. Talent is behavior; things we do more easily than the next person.
We speak of “natural born talent” but those with a gift, knack, ability or flair for something can refine and develop that talent through experience. Talent, however, cannot be taught. As someone once said, “you can teach a turkey to climb a tree, but it is easier to hire a squirrel”. Vice President, HR of Seagram, Mr. Gopi Nambiar, says talent can be best described as a combination of abilities and attitudes. The real trick is to match the right motivated talents to the right role, individually and collectively, harnessing and harmonizing this crucial attribute to achieve the objectives of your company.
Today, companies have become fiercely competitive when it comes to attracting and retaining talent. According to Branham, 75 per cent of the senior executives admit that employee retention is a major concern today, the obvious reason being the ‘increasing rate of turnover’. This dynamically changing and volatile demand-supply equation with such erratic attrition trends and cut throat competition has led organisations to focus on mechanisms pertaining to attracting and retaining talent.
It is an accepted truth that turnover will happen and companies need to device a strategy to curb unprecedented turnover from affecting organisational success. As the Director, HR (Asia) of Bausch & Lomb, Mr. P. G. George declares, achieving zero percent turnover is neither realistic nor desirable. People tend to seek change for a variety of reasons—more money, better benefits, the appearance of a greener pasture- and this has been a practice from the very beginning. Then, what is it that has really changed?
Despite intense competition being the key to market development and success, organisations have failed to identify some of the major reasons which highlight why ‘good performers’ leave. In his study, Branham clearly states that one major reason why people leave their organisation is because of the organisation’s failure to bring about a correlation between pay and performance. Human Resource experts in the industry believe matching the right blend of talent with the right job profile can lead to superior performance.
This paradigm shift in the focus of companies is a repercussion of our ground breaking post liberalisation era. Mr. George asserts, “liberalisation brought a sharper focus on the criticality of talent. ” Mr. Johnson Damu, vice president HR, GE Capital, drew attention to the ‘shift in industry’ that took place as a result of liberalisation. Initially the industry was very stable and dominated by PSUs. However, post 1992-93, there was a shift from ‘manufacturing’ to ‘services’ which brought about a change in the job market requirements.
Today, even a graduate has adequate job opportunities and is more empowered in his options towards charting a career path. Talking of new upcoming areas in the service sector, Mr. Damu gave us an insight by citing the instance of the Call Centers. This change has brought about the importance of talent in the present scenario and redefined the terminology. Earlier talent was restricted to the skill-set that one possessed but now it is a much wider term and its meaning encompasses skills, abilities, attitude and knowledge.
The HR heads of Seagram and GE Capital unanimously believed that “talent” and “competency” can be easily used interchangeably. The present scenario with abundant opportunities has triggered a wave of employees, perpetually “on the move”, forever seeking better opportunities whenever, wherever and however they can. What is behind the restlessness of these hard to keep employees? By focusing on productivity, organisations are realising that it is imperative to hire employees who can do the job and be successful at it.
The organisation no longer wants to just hire to hire, in fact they are striving to find the right people, bring them into the organisation and retain their services. One of the critical functions of HR is a sound Human Resource Planning through which they are able to project the demand for human resource and thereafter formulate strategies for acquiring them. As the leading HR heads of the country point out, the solution is not just about finding the correct retention mechanisms , but it starts from the very beginning by devising ways to acquire the right people for the right jobs.
Today’s hiring mistakes can be tomorrow’s attrition. Casey F. Thomas, principal, human resource management BPO and Tony Jackson, principal, employee pay and rewards leader at Mellon Human Resources and Investor Solutions have conducted surveys which clearly show that attraction and retention issues remain a crucial challenge. For The Best Talent, Money Alone Has Little Retention Value. Great workplaces do not win employee morale, confidence or loyalty by merely giving out fat pay packages.
They do so by striking the right balance between compensation and performance management. In most companies employees do not see a direct correlation between their pay and their performance. Due to dissatisfaction as a result of poorly structured pay packages, many companies now seek respite by adopting the ‘variable pay approach. ’ Companies like Apollo Tyres, Ranbaxy and Dabur have successfully and tactfully implemented this approach. In fact, variable pay at Ranbaxy is about 60-70 per cent and at the CEO level, it goes up to 80 per cent of the compensation package.
In the BT- Hewitt survey (September, 2003) carried out for the Best Employers in India, the top most companies (Procter & Gamble) in the survey are those who have adopted retention strategies such as performance recognition. NTPC was rated third for their ‘performance oriented culture’. Glaxo Smith Kline was ranked fifth because of their ‘performance driven results, comprehensive developmental and learning programmes and direct correlation between performance and career progression’.
Another survey conducted by Mercer Human Resource Consulting measuring the return on total rewards further reiterates the same by identifying that larger companies (>10,000 employees) view ‘pay for performance’ as a top priority. Attracting/ retaining the ‘right’ talent being one of the parameters for measuring return on total rewards indicates that this issue of attracting and retaining the right talent is of outmost importance being backed by 85 per cent agreements. Talented people want to be a part of something they believe in and not just a fat pay package.
A culture of commitment is the key to employee retention- a culture that concentrates on vision, mission, values and ambitious goals to attract and hold on to talented people. This culture of commitment can only set in if there are guiding principles or core values that are of intrinsic importance to those in the organisation. By sharing a common vision, companies can give their employees a sense of belonging- a ‘we feeling’. The greatest example of this is Bausch & Lomb whose vision is “To be No. in the eyes of the world” and each and every employee at Bausch & Lomb is aware of and identifies with the same. IIPM Factored… From our research, it is evident that today’s war for talent is a direct result of the desire of companies’ to identify the key factor which is essential to keep people loyal to the organisation. Soaring pay packages as a result of liberalisation which brought in competition from multinational companies failed to recognise the fact that after a certain point, money fails to be an effective incentive.
There is also a direct correlation between successful retention and tools of motivation used by the employer. It is not that companies do not recognise the need to allure employees to motivate them for better performance but what companies often fail to identify is- “Are you giving them what they want (status, value, self-esteem, pride, job satisfaction, challenge and mentoring)? ” Because if you are not giving something they want, then it’s sayonara! One’s loyalty towards his/her organisation is based on his/her level of satisfaction from their job.
However, attrition tends to take place due to dissatisfaction as a result of ignorance of the `need hierarchy’ of the employees while deciding their motivators. Some reasons why good performers leave are : • No link between pay and performance • They don’t perceive any growth or advancement opportunities • Their contributions are not recognized or valued by the organisation • They don’t get a chance to use their natural talents • They don’t perceive transparency in the system As Mr. Damu puts it, at GE they feel that if there are no right systems, policies or career growth, people do not feel the need to stay on.
Hence, it has become extremely important for companies to give its employees the perfect environment to work in. GE, for example, teaches ‘People Leadership’ from line managers to its executives. They coach their employees the art of looking after their subordinates. Their policies and programs are focused on improving work environment and providing growth opportunities for their employees.
Peter Capelli of the Wharton School clearly expresses his changed view in the Harvard Business Review that the old goal of HR management — to minimise overall employee turnover — needs to be replaced by a new goal: to influence who leaves and when. Today with the rise of a market driven approach to retaining talent, companies desperately need to resort to various retention mechanisms such as compensation, social ties, location and hiring. Capelli also states the two mechanisms essential for employee retention- job design and job customisation.
Aggressive development strategies often complement retention strategies in a big way. Providing opportunities to the employee for both professional and career growth and giving due priority to this important activity makes the company’s IMAGE in the market for talent, attractive and compelling. However, on the whole, the basic question remains, “Why would talented people want to work in your organisation? ” Organisations with superior employee value propositions have a compelling answer to this question.
A McKinsey study (1998) that analysed 77 companies from a variety of industries to investigate talent problems, suggests that ‘creating a winning value proposition means tailoring a company’s ‘brand’ and ‘products’- the jobs it has to offer - to appeal to the specific people it wants to find and keep. It also means paying what it takes to attract and retain strong performers - the ‘price’. Reviewing the retention problems against the perspective of enduring employee value propositions about these three dimensions, namely brand, products and price helps to clarify the focus.
All retention strategies must be built around a compelling, distinctive and exciting employee value proposition. These strategies may be diversified into three distinct domains, i. e. cultural, transformational and transactional. Cultural dimensions as a tool to retain talent zeroes in on functional, technical and control aspects, while simultaneously dealing with inspiration, emotion, energy, enthusiasm, collaboration and camaraderie, openness and a sense of belonging.
A culture that is open, trusting, nurturing, authentic as well as empowering tends to attract and retain top talent. Transformational strategies that impact retention are mentoring, coaching, counseling, competency and performance development programmes, retraining, re-skilling, redeployment and job rotation, challenging assignments, job enrichment and above all, promoting and propagating a knowledge-building and knowledge-sharing culture.
Transactional Strategies for effective retention include innovative, dynamic and competitive compensation strategies, tailored welfare initiatives, social and community activities, workload balancing, effective work-life integration, reward and recognition, establishment of good communication and feedback network as well as anti poaching measures. However, in order to be able to meaningfully orchestrate and implement effective retention strategies, the first step should be to understand the scope of the retention problem that is unique to one’s organisation.
Companies need to identify their crucial target group, instrumental in enhancing organisational success. It is a paradox that the companies which invest heavily in recruitment and development and make a good job at that, are prone to a greater risk of poaching. A sound sensing and tracking system to assess the volume and causes of attrition by performance level is the key to conquering this talent war. The ability to identify good performers, who tend to leave for any job or management elated issues and timely intervention to address these issues, could be effective.
At the end of the day, creating and delivering a great employee value proposition is clearly the best way to retain good people. Research shows that companies which have recognised the need to give priority to its people management-driven strategies are the winners. In the midst of this ‘war for talent’, most importantly, it is only when an organisation is successfully able to convey the message that it cares for employees that retention becomes a strategic advantege.