Who Is on the Front Line of Your War for Talent?

The global talent crunch—brought on by massive demographic shifts and steady economic expansion—is causing large-scale rethinking by organizations of what is needed to identify, recruit and retain the best. In this issue, the Human Resources Officers team at Russell Reynolds Associates present the firm’s findings on the rise of the talent management professional, the gap between the high demand and short supply of these individuals, and the key qualities that make for a successful talent management leader.

When McKinsey & Company issued its landmark study, The War for Talent, in 1997, the business consultancy further solidified its reputation for forecasting important business trends. Citing monumental demographic shifts and changing competitive dynamics, the report projected —quite accurately, it turns out—that people rather than capital would become the most important corporate resource in the decades to follow and that a protracted battle for the best would quickly ensue.

Today, more than 10 years later, that war for talent has spread globally across sectors and regions.

As the stakes have risen, forward-thinking corporations have examined with greater scrutiny their own human resources capabilities and practices."

That examination led to the realization that the traditional approach to the human resources  function—a collection of back-office, siloed components such as hiring, compensation, benefits, assessment and professional development—no longer was sufficient. What was needed instead was a new approach that holistically integrated those components and brought them into continuous strategic alignment with the business goals of the firm. So it is that talent management emerged as a distinct professional discipline.

That new discipline, of course, requires its own leaders—field commanders and generals in the War for Talent—who excel at a new set of competencies. The unparalleled need for these leaders has set off its own war within the War for Talent over the relatively small pool of seasoned talent managers who can transform human resources into a truly strategic function.

Over the last three years, the Russell Reynolds Associates’ Human Resources Practice has been called upon to execute an unprecedented number of searches for high-level talent managers. These engagements not only confirmed how intense the battle for the best in talent management has become, they also provided an opportunity to assess the current state of this increasingly important discipline and to better understand the challenges and opportunities facing talent management professionals and the competencies required for success.

This paper summarizes those findings, based upon our competency-based research, our in-depth interviews with successful talent leaders and our day-to-day consulting experience. We present the genesis of this field, the factors driving the intense battle for top-tier talent management professionals and the competencies that we have found differentiate the best from the rest. We also identify some issues that we feel will define the field and its trajectory in the critical years ahead.

The Forces at Work

As a discipline, talent management is fairly new; the term itself did not even exist a decade ago. Its profile quickly grew, however, during the rebound from the economic slump of the early 2000s. Although there were earlier talent management-like efforts within companies, today’s talent management is a far more sophisticated undertaking than any of its precursors. Broadly speaking, it is the integration of a variety of HR practices in a way that is designed to advance business results.

Though the scope of talent management varies by organization, those practices generally include hiring, developing, analyzing, leveraging and retaining the human assets of a corporation to achieve business success. 

There is, in fact, significant overlap between a talent manager and a broad-based HR leader. But in most cases, talent management executives do not have direct responsibility for the more data-intensive aspects of HR, such as compensation, benefits and HRIS.

A variety of market forces have helped define the field, including:

The daunting demographic shift

While the McKinsey study was the first to give a name and widespread recognition to the talent issues that would define this era, Peter Drucker should be credited for bringing early attention to the issues covered in that landmark study. It was in the 1980s, in fact, that the celebrated management theorist first posited that demographics—not economics—would emerge as the defining characteristic of the 21st century due to the combined effects of declining birthrates, longer life expectancies and the general aging of the populations of developed countries. As he predicted, the workforce in the United States, the United Kingdom, Germany, Japan and other developed countries is on the verge of a monumental reshuffling. The number of younger workers entering the labor force has been steadily decreasing, and the first of the enormous baby boom generation is poised to begin retiring now. In some industries, such as healthcare and energy, the demand for skilled workers already is outstripping supply. But, clearly, the worst of the talent shortage is yet to come.

Other than engaging older workers to remain in the workforce longer, there are few avenues available for expanding the total size of the workforce to keep pace with corporate needs. In other words, the demand for qualified workers in all industries is going to continue to outstrip supply for the foreseeable future. Companies striving to fill their positions with the best and the brightest—and then to retain and develop them—will need leadership and guidance from experienced talent managers.

The current “seller’s market”

The current global economic expansion, combined with the demographic changes noted above, has resulted in a “seller’s market” for workers with in-demand skills and/or experience. And recent erosions in pricing power combined with new lows in unemployment have put upward pressure on compensation and incentive packages, making the proposition of switching employers for higher compensation packages far more attractive and viable than ever before. For employers aiming to hold on to their best performers, the timing could not be worse: Employee loyalty and engagement are at all-time lows, and top performers or those with needed skills can be easily lured to other companies.

Many organizations, in fact, already have learned through painful experience of the need for strategic talent management initiatives to ensure the continued retention of top performers and those with business-critical skill sets.

The impact of talent on business results

According to Laurent Bentitou, Vice President of Talent Development at T-Mobile USA, when organizations get talent management right, it has a powerful impact on business results—and those results are quite visible to other companies. “The organizations that do it well tend to have the right people in the right places at the right time. They tend not to overspend or underspend on labor or training. And the results get noticed. Those companies win ‘Best Places to Work’ competitions. They have good diversity and high productivity, and their labor costs are not disproportionate with industry best practices. The manifestations of strong talent management are very visible—and they are equally visible when companies get it wrong.”

There is much research to back up Bentitou’s observations. John P. Kotter and James L. Heskett were among the first to formally measure the impact that effective talent management has on revenue, profitability, stock price and other key indicators of business success. In the early 1990s, examining data over a 10-year period, they demonstrated how those companies that systematically integrated performance into corporate culture outperformed similar organizations that did not do so. Revenue at companies where the culture was well managed increased 682 percent versus 166 percent at those where it was not well managed. Stock price increased 901 percent versus 74 percent; net income increased 756 percent versus 1 percent; and job growth increased 282 percent versus 36 percent. Since that landmark research, Towers Perrin and others have shown a definitive link between the effective management of workforce, talent or culture initiatives and positive business results. While the proof points vary, the conclusion remains the same—performance and business improvements do increase dramatically when employees are strategically managed and incentivized. And with investors increasingly aware of that link, top management is under more pressure than ever to have effective and visible talent management practices in place to meet the growing demands of a vocal investor community.

The Critical Competencies

As these forces converge, they have created a pronounced interest in and need for corporate talent management programs and an unprecedented demand for HR professionals who can design and implement those efforts. Although there are more HR professionals who could accurately be called talent managers than ever before, only a small number appear to possess the broad-based, results-oriented, high-impact leadership qualities to truly excel in the role.

In the words of Mary Eckenrod, Vice President, Global Talent and Organization Development at Lenovo:

“There is never enough supply because there is a tremendous gap between the expertise organizations need and the skills most talent management leaders possess.”

Eckenrod continues: “Companies need global thinkers with sophisticated abilities in areas such as organizational design and the implementation of performance management in their 40s and 50s, and because of the downsizings of the early 2000s, there are few viable candidates underneath them. There’s no pipeline of candidates with a broader experience base.”

To build that pipeline of individuals with broader and more strategic experience, it is important to first identify the skills, qualities and abilities demanded by the new role. To do so, we examined the desired candidate competencies that were identified by our clients in the more than 65 talent management searches Russell Reynolds Associates has conducted in the last three years. Our clients consistently pointed to five key qualities that they sought in the executives who were to lead their War for Talent: 

1.    Manage and develop one’s own employees

The most frequently identified competency is the ability to manage and develop one’s own employees. On the surface, this appears to be blatantly obvious. But this finding points to the fact that there is a difference between managing a talent management pipeline and managing a talent management team. Thus, the successful talent management leader must be able to effectively identify and match his or her own team’s skills to current and future business needs and foster a culture of performance throughout the talent management organization.

2.    Have an impact on the organization

The second most-identified competency for effective talent managers is the ability to have an impact on and make an impression at all levels of the organization. We have consistently seen a premium placed on talent management leaders who interact nimbly with the board of directors, can quickly build credibility with the executive team, mobilize line managers and motivate employees.

Just as with any outstanding CEO, the best talent management leaders are those who build trust, respect and confidence and thus are viewed as a leader by management as well as by the overall workforce.

3.     Build relationships and teams

Given that talent management leaders need to work across virtually every function and level within the organization, it is no wonder that the ability to collaborate is another frequently cited competency.  Top talent management executives develop relationships effectively across the organization and build their own effective teams. After all, most talent-related processes require significant buy-in from and coordination with people at all levels of the organization. Line managers, for example, are essential in driving performance initiatives and also figure critically in employee retention and loyalty.

The best talent management leaders are adept at building and leveraging relationships across business unit and geographic boundaries in order to drive business forward.

4.     Effectively manage communications

At first glance, it might appear that this competency is a subset of the ability to make an impact on the organization. But it is a distinct quality, highlighting the ability to leverage the internal communications function to maximize understanding and buy-in—from the C-suite to the front-line workforce—for the firm’s hiring, assessment, development and compensation strategies. While most top talent management leaders are dynamic executives who can be compelling in front of a room, they also are masters of a communications toolkit that extends far beyond motivational speeches to include everything from diplomatic outreach to key decision makers to company-wide campaigns geared at increasing engagement. Top talent management leaders are excellent communicators and integrate this in all that they do.

5.     Drive business results

What the fifth competency suggests—and our expert sources affirm—is that successful talent management requires not just traditional HR skills but numerous high-level business and strategic abilities as well. Those business requirements, in fact, may be a large part of the reason that the pipeline is so thin. Marc Effron, Vice President of Talent Management for Avon, notes that there currently are very few MBAs in the talent management field, but MBA training and business experience—such as line experience in operations, finance or marketing—are critical requirements of the discipline.

“Of course, talent managers need to know basic behavioral psychology to understand why people do what they do in the work environment. But that’s just the ticket for entry. When you start looking at what differentiates great talent managers from the merely good ones, you’ll find that it comes down to business experience.” 

Capitalists at Heart

This last competency, in fact, points the way to where the field is headed. As a small example, Effron mentions one of his first actions at Avon, which was to streamline a performance management assessment form that had been designed by the HR department. It was nine pages in length and was used by only about 35 percent of the company’s managers. Effron, who has a business background and an MBA, trimmed the form to a single page and immediately boosted participation to 95 percent, dramatically improving the effectiveness of the performance management system. Effron says:

“Successful talent management is about under-standing the firm’s core business objective and then creating a simple talent management solution that responds to that.”

Effron continues, “For example, the goal of performance management is to communicate goals and fairly evaluate employees on their performance at year end. We can make that a very straightforward process, not a complicated and lengthy one.”

Lenovo’s Eckenrod and T-Mobile’s Bentitou also believe that business savvy is as important, if not more so, than traditional HR experience. “The ability to think strategically and analytically is critical,” says Bentitou. “You need a core expertise in HR, of course. No one can succeed in the role without understanding the supply chain of talent—how candidates get to your door—and that is a skill learned purely in the HR domain. But strong talent managers have to have razor-sharp business acumen because they need to understand the financial implications of every employee action. It requires very MBA-like capabilities in order to draw the line between the decision you make on the talent side and the results that the decision will have on the business.”

Eckenrod lists business and financial savvy and the ability to drive organizational change as among the most important requisites for success. Indeed, she believes that while talent management and HR have many overlaps and connection points in terms of content, talent management brings with it a significantly different perspective and attitude.

“Talent management, as I define it, is based upon a very broad set of capabilities. It means knowing everything from how to do an effective individual assessment, to understanding what a proper leadership training course looks like, and the best way to coach employees,” Effron says. “But most of all, to do this work effectively, you have to have people who really love business—who are capitalists at heart—and most HR people, in my experience at least, just don’t love business in that way.”

And therein lies the crux of the supply problem:

It is a rare executive who has spent time in both the business and HR camps and has fluency, expertise and passion for both people issues and pure business imperatives.

Some companies have responded to the shortage by rotating top-performing line executives into the talent management leadership role, where they can leverage their strong business and management skills and learn the content through their team, outside development and on-the-job experience. It is our hope that identifying the skill set that differentiates the best can help identify the most effective talent managers regardless of their origin and thus address the intensifying market demand.

Looking Ahead

For those of us in human resources-related fields, it is satisfying to see so many businesses realizing the positive impact strategic talent management has on business success. Despite the current optimism and enthusiasm for talent management, however, several key questions loom on the horizon, including:

Will current talent management efforts continue through the next downturn?

When a short-term survival mentality returns with the next dip in the economy, will the focus on talent management lose steam, or will businesses continue to view strategic talent development as a critical means of navigating market shifts and economic volatility? It is an important question with an historical precedent. Recall that the early 1990s saw a wave of talent management-like efforts led by individuals with a mix of HR and business skills. After the dot-com bust and the September 11 terrorist attacks, those initiatives seemed to largely disappear from the business landscape, along with some of the executives who were at the vanguard. Given the importance of people-based business strategies in the highly competitive, knowledge-based global economy, a turn away from talent management could have a disastrous long-term effect on business.

Will the talent management field practice what it preaches?

Given the perception that there are only a limited number of highly effective talent management professionals in the field today, will the human resources profession find ways to develop new or existing talent to broaden the pool of talent leaders?

In other words, can today’s talent management leaders develop their own ranks in the same way that they develop their employers’ workforces? Exceptional talent managers must foster an environment of knowledge sharing in which others can be educated and motivated to lead their own successful talent initiatives.

Will the talent management field develop the education and standardization needed to be truly credible?

Like Six Sigma certification programs or MBA programs in marketing or entrepreneurship, will the talent management profession evolve to include substantial educational programs built around accepted best practices and methods, standardized benchmarks and rigorous analytical tools? Given the pronounced demand for effective talent management professionals and the rapidly growing body of knowledge within the field, we believe these programs will, in fact, begin to emerge, resulting in a larger and more robust talent pool from which candidates can be selected.

Getting from Here to There

What can a forward-thinking HR executive do to become a true talent manager and to instill his or her organization with the outlook demanded by the current talent crisis? Bentitou, Eckenrod and Effron all agree that the first step is to effectively integrate the traditional HR components.

“You can’t do talent management in isolation,” says Eckenrod. “In early iterations, staffing was a silo unto itself. So were rewards and compensation. But integrating these and other components gives the overall function more leverage to transform employee behavior and produce business results.” Rewards and compensation, for example, are powerful reinforcers of positive performance and thus should be part of the performance management system and larger talent management initiatives.

Organizations must focus on creating a more formalized definition of the discipline, a clearer picture of the value it brings to organizations and an agreed-upon set of best practices for realizing that value.

“Talent management as it is now practiced is a somewhat undefined area, composed of practitioners with varying skill sets, varying areas of focus and varying methods, each applying our trade in a different way but calling it the same thing. I think that’s why we’re seeing such different levels of success within companies,” says Eckenrod. “What we need is a clear definition of what talent management is and what its best practices are, so that it can be a more disciplined process that can be replicated in different organizational environments around the world.”

Conclusion

The idea of talent management is not new—it is simply the binding together of many previously distinct HR disciplines as a means of harnessing human assets to drive business results.

But its practice is more sophisticated, complex and demanding than ever, and the professionals armed with the required skill set and experience are in great demand. In other words, there is not enough talent in talent management.

Rather than fighting over the same small group of proven leaders, it is our hope that organizations will identify and develop a broader population of leaders in this field, drawing upon the success criteria we have outlined as well as new competencies that will emerge as important in meeting the talent challenges we will face in the coming years.