Survey and Research 2007

TALENTMANAGEMENT

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Why is talent management an issue?

Attitudes and trends

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What is talent management?

Introduction

Contents

5Practicalities of talent managementSelection and inclusionDevelopment methodologiesMeasuring impactPredicting future needs

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Conclusion7

Participating Organisations:

Abbey

Centre for Excellence in Leadership

Marks & Spencer

Network Rail

Aspire Housing

GE Healthcare

Marsh

Northern Foods

Bentley Motors

IMI

Mouchel Parkman

PricewaterhouseCoopers

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Introduction

1 Aon Consulting. 2005. UnitedStates @ Work, Ninth Edition.

2 Rosenblatt , Z. and Z. Sheaffer.2001. Brain drain in decliningorganizations: toward a researchagenda. Journal of OrganizationalBehavior, (22) 4.

3 Benchmark Research. 2001.The hidden cost of recruitment.www.benchmark-research.co.uk

Employee engagement isdeclining in every industry,age group, income group andjob classification.1

The level of top talent retention issignificantly lower in under-performing organisations.2

65% of organisations find it difficult to secure staff with the requiredtechnical skills and 60% find it difficult to recruit in a competitivemarket. 71% of HR managers suggest that vacancies have been filledwith individuals that are not an ideal fit for the job.3

Long-term organisational success depends upon the recruitment, development,reward, and retention of the right people. The research undertaken for this reporthighlights actions that leaders and HRM professionals are taking to get the rightbalance of skills, behaviours and attitudes in their organisations. We haveconducted in-depth interviews and gathered data from over a dozen verydifferent organisations - all of which share a deep concern and commitmentto talent management. Although no organisation claims to have found the'shining path', the direction is clear and there is plenty of evidence ofpositive moves being implemented. We hope you find the casestudies in this report useful andinspiring in the developmentof talent management inyour organisation.

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When an organisation is managing its 'talent' effectively, it willhave the right people, with the appropriate skills, when andwhere required, at a competitive cost.

Our dialogue with participating organisations, as well as asurvey of associated literature, indicates no single definitionof talent management. For some, talent management isabout the identification and development of high potentialindividuals. Other organisations see it as the naturalevolution of succession planning. A few interpret talentmanagement as 'HR-rebranded'. For an increasing number

of organizations, a more holistic definition isemerging which demands a greater

strategic conversation at thehighest levels.

The phrase the 'war for talent' was put forward in 1997 by EdMichaels, Helen Handfield-Jones, and Beth Axelrod in anarticle in McKinsey Quarterly 4. Followed by a deluge ofsubsequent articles and books, this has led torecommendations for a fundamental shift in the wayorganisations should approach people development. Thesepublications have served to highlight the relationshipbetween organisational performance and talentmanagement.

The terminology may be changing, but are therecorresponding changes in how organisations translate theseconcerns into new people strategies and actions? Ten yearson from the original publication by Chambers et.al., researchconducted by the Centre for Organizational Excellencedemonstrates that some organisations have revised theirperspectives and approach to talent management. What isclear is that all the organisations in our survey are makingtalent management a priority.

There are numerous factors that are driving this increasingawareness of talent management. The forecast changes inthe demographic profile of the workforce, is one of theseconcerns. In the United Kingdom, research undertaken byInstitute for Employment Research (IER)5 and the CharteredInstitute of Personnel & Development (CIPD) 6, amongothers, highlight various aspects of the changingenvironment for employment. Forecasts show an increasingdemand for management grade staff with a similar situationarising with technical or highly skilled staff (knowledgeworkers) 7. This is leading to a growing concern regardingwhether organisations will be able to fulfil workforcerequirements via the usual recruitment and retentionstrategies.

Another factor is the increased mobility of knowledgeworkers. According to a 2007 survey by the CIPD 8, overallretention rates in the UK remain steady between 18 and 23percent, however these numbers may mask a deeperconcern that 'dysfunctional attrition' - valued staff leaving forother jobs - have a disproportional impact on performance.The unexpected 'leakage' of skills and experience mayseverely constrain the fulfilment of organisational aspirations.

A third factor driving a re-consideration of talent managementis the issue of employee engagement. Towers Perrin-ISRidentified 40 global companies for which it had both financialand engagement data, and performed a regression analysis.It found that firms with the highest percentage of engagedemployees had a 3.74 percent higher operating margin and2.06 percent higher net profit margin than average.Conversely, in companies where employee engagement waslow, operating margin was 2.01 percent less and net profitmargin was 1.38 percent less than average9. The conclusionis clear - an effective talent management strategy canmeasurably support financial organisational performance.

What is talentmanagement?

Why is talentmanagement anissue?

4 Chambers, E.G, M.Foulon, H. Handfield-Jones, S.Hankin & E.G. Micheals. 1998.The war for talent. McKinsey Quarterly, (3).

5 R. Wilson, K. Homenidou and A. Dickerson. 2006. Working Futures 2004-2014:National Report. January. Coventry: Institute for Employment Research,University of Warwick.

6 Chartered Institute of Personnel & Development (CIPD). 2007. Talentmanagement: Research insight. London: CIPD.

7 Wilson, R et.al. 2006.

8 CIPD. 2007.

9 Clark, Ron. 2007. Learning: A key to profits. Resource Magazine. December.

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results. In other words,when talent managementis understood andowned throughoutthe organisation, thiscreates conditionsfor success.

Our researchshows that this is

being done by smallteams responsible for

talent management orleadership development.

This delegation of talentmanagement to those in a

Human Resource Managementfunction is common, but ultimately

leads to questions regardingbuy-in from line managers

and employees generally.One observation is the

small, but growing, number oforganisations that are re-

aligning HR towards servingclear business requirements (via

HR business partners).

A more innovative and fruitful process isthe integration of talent management

dimensions into the operational responsibilities of linemanagers. In many of the organisations contacted, the roleof line managers encompasses coaching, facilitator andlearning partner. For some organisations, talentmanagement is being highlighted as a critical performancemeasure. "Talent management is something that allmanagers must live and breathe. It is an absolute priority thatimproves our competitive advantage - it's not just a HumanResources function," explains Russell Houghton, Head of theManagement Development team at IMI.

Responsibility for the development of talent also lies with theindividuals themselves. The more traditional approach of theindividual employee as the recipient of recognition,development and career management is changing. Potentialleaders are expected to take responsibility for their ownlearning and to invest time maintaining and acquiring theskills and knowledge they need to progress. Once individualshave received formal or informal training and development,the onus is on them to apply their learning. To do so,opportunities need to be provided for people to demonstratetheir talents.

The Centre's 2007 in-depth survey focused on talentmanagement strategy, performance and trends. Ourresearch indicates that although there is no singleprescription for success, a range of approaches can produceeffective outcomes. We are pleased to highlight a number ofbest practice principles arising from our discussions withsenior managers across a cross section of sectors andindustries. Some of the most competitive and thrivingorganisations operating in the UK, Europe and internationallytook part in our survey. Issues explored include:

Who is responsible for talent management?Which factors influence talent management strategy?How do organisations identify and develop talent?What might the future require?

Organisations are shifting away from locating the talentmanagement function solely in the hands of 'personnel' orhuman resources departments. Our research reveals astrong interest in talent management at board andexecutive level.

Top executive and board level sponsorship oftalent management enables organisational andtalent management strategies to be effectivelyintegrated. In the majority of cases, the primaryconcern at board and executive level is successionplanning as well as reviewing the performance of seniorexecutives aspiring for entry into a 'top talent pool'.Organisations are becoming skilled at identifying, nurturingand promoting internal talent to prepare them for tomorrow'svacant roles, and our survey confirms that the notion of thetalent 'pipeline' is well established. Increased competitionand skill shortages are a powerful motive to engage withtalent management, "If you don't have the best person for thejob, then you will lose market share," states David Waller,Midlands Regional Chairman for PricewaterhouseCoopers.

Although talent management is regarded as a strategicissue, the drivers are often short-term and reactive. Thelonger-term perspective (for example 'what sorts of skills,competencies and behaviours will we need in 5-7 yearstime?') appeared to be of less concern. A similar disinterestappears when examining the interest of the top managementteam in looking beyond the current aspiring leaderpopulation.

Aside from overall responsibility of the design of talentmanagement strategies, there is also a requirement todisseminate the conclusions to a wider managerial audience.Leadership Development Manager of Bentley Motors, JohnWilson, explains, "Our managers need to know 'What's thestrategic goal of the business' and 'What decisions supportBentley's strategy'." Once aligned, talent managementpolicies and organisational strategy empower individuals,teams, departments and divisions to deliver high quality

Attitudes andtrends

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We asked our participating organisations what elements ofcurrent HR activities are most tied into an overall talentmanagement strategy. The responses are shown below.

On first glance, one conclusion is that everything is tied toTalent Management! Although selection and careermanagement activities were most frequently cited as veryimportant elements of talent management, even the lowestscoring category (compensation) was seen as relevant.There are any number of factors affecting theseconclusions. The first is that the practice of talentmanagement may be insufficiently distinct from the otherelements of Human Resource Management. Another factormay be the recognition that talent management needs aholistic approach and cannot comprise of any single action.Therefore, in spite of the lack of a supporting theoreticalmodel upon which to hang talent management decisions,HR professionals are implementing (to the extent they can)a model of talent management which brings in elements ofother areas of expertise.

Selection and inclusionOrganisations vary enormously in how inclusive theirdefinition of talent is. Most seem to focus on a smallpercentage of individuals close to the apex of theorganisation; others look upon talent management morewidely. In terms of access to development opportunities,many managers have to compete to win places onprogrammes (via assessment / development centres) whileothers are nominated by their line managers or HR function.A number of organisations use performance managementreviews to identify emerging talent, while others welcomeenthusiastic and ambitious volunteers. At Mouchel

Parkman, HR Director, Ruth Mundy says, "Wetake a holistic view of talent and believe everyonecan be developed further".

Development methodologiesThe wide range of approaches to inclusion is matched by aplethora of development methodologies. Psychometrictests, assessment centres and annual appraisal sitalongside traditional classroom sessions and structuredsupport in the form of coaching or mentoring. Someorganisations have developed effective partnerships withbusiness schools and other leadership developmentproviders. Bespoke programmes developed in-houseensure complete alignment with high level strategic aims.Eleanor Morrisey, Head of Organisational Development atAspire Housing attributes the success of their talentmanagement programme to its customisation, "TheAspiring Leaders Programme was tailored to meet theneeds of Aspire by the people who work here. It wasdelivered in-house and written by our people." The scale ofthe talent management population also seemed to be adriver for creative solutions to personal development.Larger organisations appeared more advanced in terms ofidentifying and promoting electronic or web-based learningand support.

Measuring impactDepending upon the degree of organisational commitmentto a talent management policy, the investment must bejustified. Among organisations participating in our study, abroad range of methods to measure success werehighlighted: individual performance measurement, multi-level evaluation, ROI formulae, career tracking,retention/promotion statistics and business results areemployed in different combinations. Marc Auckland, Headof Leadership and Resourcing at Network Rail monitors theeffectiveness of talent management, "We track individualcareer progression, degree of employee engagement usinga 360 degree model, as well as performance and potentialevaluations."

Predicting future needsA survey of the ever-increasing literature on talentmanagement indicates a shift away from a reactive towardsa proactive approach. Being proactive focuses on gettinginvolved in the organisation's long-term business decisionsabout the type of competencies and capabilities that theorganisation needs to adapt to the future. However, theviews of the organisations involved in our study indicatethat the majority are still some way from this position.

Practicalities oftalent management

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organisations about talent management. We have sought toreflect the nature and content of this dialogue in our casestudies. We believe they represent an excellent cross-section of the approaches being taken on this subject.

The Centre for Organizational Excellence invites you toread the case studies we have produced in partnership witha wide range of blue-chip organisations. We also hope youwill join experts and practitioners atour dissemination event inSpring 2008 where we willexplore the trends andchallenges facingtalent managers.

Where talent managementis making an impact is on the

identification and development ofhigh potential leaders - although the

paradigm appears to be that the nextgeneration of leaders will need to be roughly similar

to what the organisation needs today.

Competition in the chosen markets, along with increasingcompetition for resources are driving organisational leadersto consider the longer term impact of their talentmanagement decisions. Our survey shows clear evidencethat organisations are recognising the implications ofpresent-day talent management decisions on a range ofissues, including:

A move away from a one-size-fits-all approach todevelopment towards a mixture of individual initiativesand broader knowledge sharing activitiesA more critical eye towards developing competencyframeworks that are aligned to the strategic businessrequirements of the organisationIncreasing emphasis on ensuring career managementdevelops cross-functional and commercial awareness Developing a set of metrics which provide insight into the'bench strength' of the organisation in key parts andlevels of the organisation.

ConclusionBased on the collective input from the organisationsparticipating in the study, there are plenty of examples ofbest practice in all aspects of talent management. Mostnotable are the utilisation of competency frameworks,developing succession planning strategies, and providing arange of leadership development opportunities. Anotherpositive finding was the degree of interest that board andexecutive level leaders were devoting to the developmentof the organisation's talent. Our discussions also highlightsome areas of concern. Most notable was the challenge inlinking the long term strategy of the organisation with thedevelopment of the right sort of talent. Another concern wasthe challenge of encouraging line managers to view part oftheir role as developing talent for the organisation ratherthan for supporting their immediate objectives. Thedevelopment of consistently high performing organisationsdepends upon a vigourous and high profile dialogue in

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This report is provided by The Centre forOrganizational Excellence:

Dr Robert Rosenfeld (Author), Morven McLean (Author),with Laura Toner (Researcher), Laura Ferguson(Research Manager), and Leoni Antoniazzi (Editor).

At the Centre for Organizational Excellence, we believethat there is considerable value drawn from sharing bestpractice with other organisations. Our approach is towork together with organisations committed to highperformance and leading edge thinking. Aside fromengaging in the research of the key challenges facingorganisations, we provide expertise in helping developmanagers to fulfil their potential.

An international provider of executive education andleadership development, the Centre's team understandsthat people learn and develop in a variety of ways, andwe work with organisations to determine which learningroute will have the greatest impact on the managementpopulation.

Our approach is to work together with our clients todefine objectives, develop targeted learning anddevelopment opportunities, review progress andcontinually refine the process. From the initial researchand design phase, through project development andimplementation, we actively promote dialogue andevaluation with our clients. In a similar fashion, we workclosely with specialist partners and associates to alignnew technologies, media, and complementary learningand development methods.

About the Centrefor OrganizationalExcellence

Dr Robert Rosenfeld: AuthorMorven McLean: Author Leoni Antoniazzi: EditorLaura Ferguson: Research ManagerLaura Toner: Researcher

Authors & research team

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Centre for Organizational Excellence350 Muswell Hill BroadwayLondon N10 1DJ+44 (0) 20 8815 5700enquiries@corex.netwww.corex.net

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