India is at the crossroads of choosing between ‘business as usual' and 9% plus growth, and hence the need for reforms and new governance to enable the latter
73 % CEOs intend to spend more than 25 per cent of their time on talent related activities
One out of every three CEOs surveyed in this year’s Study spend more than half of their time on talent related activities. Last year, 73 percent of CEOs said they spent more than one-fourth of their time on talent related activities; in 2012, this number is up to 84 percent. This is indicative of the CEOs’ intent to take on the issue of talent management head on.
The present business context, defined by increased complexity, uncertainty and risk, has emerged as the ‘new normal’. Retaining talent, while it continues to be important to organizations, has dropped out of the top three HR priorities this year; building teams in line with business requirements, talent productivity and motivation top the CEOs’ list for 2012. The time and effort that CEOs are personally investing on talent continues to increase. 79 percent CEOs last year had predicted they would invest more time in the new fiscal, and this year’s results corroborate the same.
As CEOs see the linkage between the time they spend on talent and the readiness of their organization to adapt and thrive in a volatile market, will 2012 be the year of people?
Weakening business sentiments
Policy paralysis and governance deficit have often been used to describe the current state of affairs in India and more so, the dampening business confidence. So much so that Harold Terry, Chairman, US-India Business Council wrote to the White House deploring the leadership vacuum in New Delhi, chipping away at India’s investment climate. Such fears have been voiced by India Inc. back home; as Adi Godrej, President, CII puts it, “The scenario in India is worse than reality.” The reasons for dampened business sentiments could be manifold; declining pace of economic growth, lack of reforms, corruption and concerns over governance. Be it the D&B Composite Business Optimism Index (which has shown a decline of 18.2 percent in Q2 of 2012) or the NCAER-MasterCard Worldwide Index of Business Confidence, both invariably depict the declining business confidence. The Union Budget FY 2013, which has called for the controversial retrospective, IT amendments will further dent the investment potential in India. Add to this, the dampened business sentiment is also seen in the recent Q4 results declared by IT giants Infosys and Wipro, which paint a very gloomy picture for Indian software service providers and outsourcing companies, and reignites the debate of the sustainability of Indian off-shoring as a business model. Adi Godrej affirms that India is at the crossroads of choosing between ‘business as usual’ and 9% plus growth, and stresses on the need for reforms and new governance to enable the latter.
The renewed focus
Despite the volatility and uncertainty, there is a silver lining among the dark clouds. The CEO panel at the recent NASSCOM India Leadership Summit spoke their minds on similar lines. Shikha Sharma, Managing Director & CEO, Axis Bank said, “The mood may not be the right way to run a business, as it is always volatile. However, we are lot more positive as we go to the next fiscal year.” CEOs in India are confident that with the right focus and investment on enhancing productivity, companies can steer through this uncertain market scenario. Kris Gopalakrishnan, Co-Founder & Executive Co-Chairman, Infosys explained, “From our past experience, we have learnt to - manage downturn, address volatility and forecast in uncertain times. We need to criticize ourselves for not being able to increase at a growth rate of 9 to 10 percent, as I believe we have the potential to achieve it.”
The heads of businesses are increasingly looking at talent as a controllable factor within their reach to strengthen their capability to drive competitiveness and business growth. There is no questioning why more and more CEOs across industries are dedicating their time and effort in channelizing talent to drive business. Thus, the focus is on capability building, acculturation and building teams internally to spur growth for the business.
While CEOs continue to look at talent as a critical ingredient for business success, their focus has changed. The findings of the People Matters CEO Survey this year showcase the following as the top talent priorities:
THE FIERY FIVE - CEO’S TALENT PRIORITIES IN 2012
Build the team to build the business
Building teams remain the ’numero uno’ talent priority for CEOs this year once again; as expressed by 81 percent of the CEOs surveyed this year as against 65 percent who chose it as their top priority in 2011. Getting a team on board at all levels to execute the company’s strategy and to bring breakthrough innovation will take the company to the next level. Further, depleting job tenure over the past few years has left many organizations with a considerable vacuum in their internal talent pipeline.
Building teams is no more restricted to sourcing talent where an employee is hired for a particular position, but CEOs are looking at bringing in people onboard for their competencies and their ability to bring exponential value to business.
Raise productivity levels
The key concern for CEOs this fiscal is to channelize their energy towards enhancing productivity of talent. As a matter of fact, this year’s Survey shows that productivity has moved from being at fourth position last year to second in 2012. 64 percent CEOs in this year’s Survey saw it as a critical HR priority as opposed to 49 percent CEOs last year. The new business focus is on enhancing efficiency, building synergies and efficacy. This finds consonance with the Kronos-People Matters Survey on Workforce Productivity 2012 that captured views of HR Heads across verticals, which shows that productivity of workforce is a key challenge for 84 percent of the respondents.
Increase employee motivation
Aligned to CEOs’ focus on building teams and enhancing productivity, employee motivation rightfully maintains its number three position in this year’s survey. Further, the new workforce is characterized by restlessness, resulting in increased job movements. CEOs seek to invest on ensuring that employees are motivated and focus towards meeting employees’ individual aspirations. 51 percent of the surveyed CEOs hold employee motivation as one of the top three HR priorities. CEOs are increasingly focusing on measures to have a pool of talent that display high levels of discretionary effort and shows higher levels of motivation rather than restricting oneself to a stereotyped zone.
Don’t let talent jump the ship
48 percent of CEOs surveyed affirmed that retention of talent is one of their top talent priorities this financial year. While retention no more appears in the top three priorities of CEOs, it continues to be crucial for many industries. Employees might not have the same number of job options in the market as last year, but high caliber professionals are always in high demand. Additionally, with Gen Y joining the workforce, the challenge of talent retention has taken a new meaning. The new workforce is ambitious and ready for higher roles within a span of 2-3 years. While the bigger roles in the business may not always be available instantaneously, this leads to friction and restlessness among employees.
Focus on capability building
The sheer benefits of building an internal talent pipeline, equipping teams for present and future requirements, and the knock-on effects this has on employee retention and motivation, make learning & development an obvious pick. CEOs, from companies across sectors, affirm that they spend a significant amount of time on capability building, be it at the entry and middle levels, by supporting the strategy and design of programs and monitoring results, or at the senior level, by coaching and mentoring the next line of leadership.
WHAT’S KEEPING CEOS BUSY?
The CEO’s talent priority continues to be centered on hiring talent, optimizing productivity, culture building, building internal capability, and enhancing engagement & satisfaction.
The Survey shows that in 2012, 73 percent CEOs intend to spend more than 25 percent of their time on talent-related activities, either formally or informally. Building teams being a top priority, CEOs are increasingly spending more time and effort on hiring and retaining talent. 67 percent of the CEOs spend more time on hiring the right talent and 63 percent spend more time on retaining talent. The second critical talent priority for CEOs is to raise productivity. This is reflected in 67 percent CEOs claiming more time investment on restructuring the organization in line with growth expectations, while 44 percent focus on instilling systems to increase workforce productivity. Increasing employee motivation being the third important priority, more CEOs are striving to invest time on coaching and mentoring employees as confirmed by 45 percent CEOs as well as 61 percent CEOs investing their time on building a succession plan to cope with the increasing aspirations of the new workforce. CEOs across sectors admit that the time invested on HR policies, processes, grievances and managing wage costs, has reduced over time.
A CEO’s role continues to be significant in articulating and communicating the vision and mission of the organization, as well as that of driving and internalizing the required organizational culture. The new workforce does not seek a job alone, but is more interested in orchestrating the individual’s own agenda through that of the organization. Therefore, there is an immense need for talent to identify with the larger objective of the organization. This makes aspects like ‘culture’ and ‘values’ that define the workplace essential to provide the glue that keeps critical talent engaged and motivated.
WHAT GETS MEASURED, GETS DONE
Measures on CEOs’ scorecards are aligned with their talent priorities; talent productivity targets, talent development & motivation, along with retention top this year’s CEOs scorecard.
Enhancing talent productivity
Clearly on top of the agenda and hence, finding its place into the CEO’s scorecard is enhancing talent productivity. 76 percent of the CEOs surveyed this year, state that they track talent productivity and effectiveness on their personal scorecard. There has been a jump of 6 places, from 7th with only 22 percent of the CEOs confirming they actually tracked this measure on their scorecard last year, to it becoming the number one concern today.
Building internal capabilities
CEO’s ability to build internal capability is gauged by the number of people groomed internally to fill key positions, focus on training & development to bridge the skill gaps, and coaching & mentoring to prepare future leaders. 71 percent of CEOs say that they track building internal capabilities on their scorecard. Further 45 percent of CEOs say that they spend more time on formal and informal coaching & mentoring.
Employee retention and high engagement scores are measures that indicate employee satisfaction. While 69 percent CEOs track employee satisfaction, engagement and motivation on their scorecard; 67 percent CEOs say that they spend more time on building employee motivation.
Retention of high potentials
Number of leaders groomed internally to take up leadership position indicates that there is a considerable focus on retaining high potential. CEOs’ track their involvement in nurturing home grown leaders is tracked on their personal scorecard. For instance, at HCL, the leadership team comprises of 50 percent people who are homegrown. While 65 percent of CEOs track retention of high potential and high performers; 61 percent track succession planning on their personal scorecard. Further, the survey shows that 44 percent of CEOs spend more time on leadership planning and development.
Is the investment on talent worth it?
CEOs across sectors agree that their direct attention to talent related activities has a ripple effect on business performance. However, there are mixed responses with respect to whether or not the impact on business performance can be measured in numbers. While there are companies that agree that ROI on CEO’s time spent on talent activities can be quantified and have metrics in place to measure this, there are others who desist from quantifying it.
Going by two reputed lists that rate best companies to work for, there is a correlation between best employers and business performance. On the one hand, the analysis by Great Place to Work Institute® on comparative annualized stock returns of best companies (Fortune 100 Best Companies to Work For) over the years (1997 -2010) shows that ‘great workplaces’ performed three times better than the rest. On the other hand, the Aon Hewitt research shows that the more a CEO communicates with people through different mediums, the greater the business performance. The ‘Aon Hewitt Best Employers’ registered 14 percent growth in profits, as opposed to 8 percent profit growth for the ‘rest’. Further, a decade long engagement score of the ‘best’ and the ‘rest’ reveal that the score for ‘best’ employers have been over 80 percent, while that for the ‘rest’ range between 50-60 percent.
N. V. 'Tiger' Tyagarajan, CEO, Genpact, says, “Particularly in our business, there is a definite correlation between the amount of time that the CEO spends on talent related activities and business performance. For us, the intellectual capital is really the people. The better people you have and the better processes you have in place to develop them, the more chances of a competitive advantage.” Aruna Jayanthi, CEO, Capgemini further argues, “The return on investment today is largely measured in terms of retention and employee satisfaction scores. We still need to refine it to reflect more accurately the talent and leadership development investments.”
While it is difficult to measure the impact that a CEO’s increased time and effort on talent activities has on business performance, there is enough indication to show that a correlation exists. The Bersin & Associates Report shows that companies, where talent management is strategic and integrated with business leaders taking charge, generate more than twice the revenue per employee, experience 40 percent lower turnover rates and 38 percent higher levels of employee engagement. Further, companies that invest heavily on talent are often the ones that feature in the list of best employers.
These tangible as well as intangible benefits that can be derived as a result of the CEO’s investment in talent activities are reason enough for CEOs to continue the momentum. The need for businesses to meander through the constraints of market slowdown, economic reforms and lack of governance, is forcing CEOs to invest in optimizing the more controllable factor - TALENT.