The nature of the workforce is changing as younger generations enter the workforce
Competition for talent is threatening to derail growth as companies are looking for increased market share
According to a survey conducted in 2000, Bill Gates was among a small percentage (only 11%) of Fortune 500 CEOs who spent more than 50 per cent of their time on recruiting. 73% believed they should be spending only 10-20 per cent of their time on recruitment. 16% said 35 per cent of their time was enough, while 11% of CEOs said 50 per cent was the right amount.
In 2006, Unilever outsourced most of its HR services across the world to Accenture. As part of the agreement, Accenture will provide recruitment services, payroll administration, reward administration, performance management, workforce reporting, core HR administration and manage third party service providers. In order to provide Unilever with these services, Accenture would deploy and manage critical HR software applications for the client. Under the learning portion of the contract, Accenture was to provide content sourcing and development, program planning and delivery, learning system hosting, and management and administrative services.
2011: Arun is a software engineer who is on his third job after campus in just four years. This time, however, when he is on the bench, he is not disengaged from his organization anymore. His organization has a “social network” which enables him to keep in touch with his colleague friends on projects, lead discussions about technology, and to take on special interest projects when he is not on any specific project. While Facebook and Twitter are banned at work, Arun thinks his company’s social network is a great substitute. More and more Indian IT firms like TCS, Wipro and Cognizant have such social networks to tap into the discretionary knowledge of their employees.
In 1997, McKinsey & Co. published an article titled “The War for Talent” with data showing how talent was an intangible that separates high performing companies from the laggards. They also looked at demographic trends to suggest that over the next 20 years, the competition for talented people in organizations will get worse, as managerial talent will be less and less available. In India, of course, the issue is more complicated, as it is not just managerial talent we are grappling with, but also basic skilled workforce.
We can trace most of today’s talent management initiatives to the suggestions given in the McKinsey article. Those suggestions include, instilling a talent mindset, creating a winning “EVP” (Employee Value Proposition, also referred to as “Employer Branding”), recruiting talent continuously, growing great leaders, and acknowledging and differentiating high performers (focus on growth, proportionately reward top performers and move out bottom performers).
HR leaders, who wanted to influence their organizations in a strategic role, grabbed the opportunity with both hands, focusing on the “high-end” work of Talent Management and outsourcing much of the “non-value add” administrative HR tasks to third party vendors, sparking off the HR outsourcing business.
These got reinforced by the business boom in India, with the export of IT and ITES services, and then the growth of domestic consumption.
And then 2008 arrived - and the recession in the West - and with it, the slowdown in India. The mild slowdown that India experienced caused spending on people issues to take a backseat. Why spend more on hiring and retaining, some felt, when people did not have options? Many a HR leader privately exulted at the change. It was a correction, most business leaders felt, that was much needed. And they heaved a collective sigh of relief.
However, as the McKinsey article authors had noted, there would be business cycles that would impact the short-term availability of talent, however the long-term reality would not change much. And that reality is that there are more roles than people talented for those roles.
The Wheels Begin to Turn
Over the last year, things have returned to normal, a normal that in India represents in excess of 8% growth. As 2011 starts, business and HR leaders are gearing up for the changes they are planning to make to their talent management systems, structures, and processes. The triggers are many.
The nature of the workforce is changing as younger generations enter the workforce. Companies are cautious with their investments in a bid to keep control on liquidity; the macro-economic spoilsport of inflation is looming large, and the consumer, who is suddenly not looking at splurging like (s)he did before.
Markets are also changing. Large MNCs which were still contemplating setting shop in 2008 are opening their India offices and launching their products and services, to one of the world’s largest consumer populations.
Talent Challenges Today
The backdrop to talent management challenges and trends for the coming years is now simplistic and is defined thus:
Talent is in short-supply and is crucial for the business. As companies are looking at increasing market share and acquiring costumers quicker than competitors, competition for talent is threatening to derail growth for many companies and, in some cases, for entire industry groups.
Talent is expensive and is getting more so. Increasing demand in exploding industries of the day pushes up salary levels as talent supply pools become insufficient. Sometimes emerging industries start poaching even from other industries, leading to a ripple effect of talent becoming expensive across the board.
Talent is more mobile than it ever was. As Indian companies increase their global presence and exposure, building global talent becomes crucial to manage their operations both in India and abroad. Companies require leaders who have a global mindset and are able to adapt, extrapolate and take decisions relevant to each local market.
Talent come with many needs – ambition, fulfillment, connect etc. The new generation entering the workforce is transforming the world at work with a curious mix of ambition and the need for partnership & flexibility. Of course, this new generation is a reflection of the world around us - one with a greater emphasis on wealth and wealth-creators, enhanced means of communication & collaboration, flexible working styles and avenues to perform in a virtual partnership environment.
Talent definition is also changing. The requirements from talent today go beyond the resume. Organizations are seeking a dynamic and constantly refreshed set of skills, competencies and sensitivities from the past because of the evolving the business environment.
In this backdrop, we look at the 7 most relevant and hard-to-ignore trends that ‘Talent managers’ - CEOs, HR Heads and Senior Managers – should pay attention to.
7 Key trends to watch out for
1. Predictive talent analytics
As more and more money is being spent in the areas of developing and acquiring talented people, organizations are no longer content with fuzzy ideas about their ‘Return on Investment’ (ROI). Forget return, some large organizations want to predict how people will behave before they spend their money on them. This is causing a few pioneering firms to look at data analytics and predictive analytics. Starbucks, Limited Brands, and Best Buy, can precisely identify the value of a 0.1 per cent increase in engagement among employees at a particular store. At Best Buy, for example, that value is more than $100,000 in the store’s annual operating income. In an HBR issue, Cognizant analyzed social media contributions on its internal social network, particularly internal blogs. It found that employees who contribute in the form of blogs were more engaged and satisfied than others, and performed about 10 per cent better, on an average.
An article in Businessweek magazine talked about an employee retention program developed by the software company SAS, which crunches data on employees who have quit in the past five years, detailing their skills, profiles, studies, and friendships. Then it uses this data to find current employees with similar patterns, and flagging them off as potential attrition risks. Another SAS program pinpoints the workers who are most likely to suffer accidents. The Wall Street Journal in May 2009 (iii) reported that Google was starting to analyze data from employee reviews, promotion, and pay histories in a mathematical formula to identify which of its 20,000 employees are most likely to quit. Google said that the algorithm had already identified employees who felt under-used, which is a key complaint among those who contemplate leaving the company.
This view is echoed by Sanjay Modi of Monster.com. “Technology will help organizations move from present analysis on what is happening, to futuristic analysis of what is going to happen. The more capable the organization is in predicting what is going to happen, the better are their chances to be competitive in the market”, he says.
CXOs and HR heads, at companies where employee expenses form a significant part of total costs, will increasingly need to think in terms of quantifying their employee initiatives – effectiveness of engagement programs, impact of engagement on performance, ROI from employee development initiatives, most likely profiles who need successor planning – and, act on the rational basis of such analysis.
2. Backward integration in the people supply chain
As organizations run into a shrinking or slow-growing talent pool, with increasing competition, the only thing they can do to stop the wage bill from shooting through the roof is to come together and build more skilled and talented people at the entry level.
This is the story that is being played out in the BPO (Business Process Outsourcing) as well as the BFSI (Banking, Financial Services and Insurance) industries. Organizations with large talent needs, like Genpact and ICICI Bank, have tied up with education providers like NIIT to create a highly skilled talent pool, to benefit themselves as well as most organizations in their respective industries. This is making organizations think long-term about collaborating with other organizations for developing talent pools while they simultaneously compete in the marketplace.
3. Focusing on Core Talent
Companies are increasingly looking at bringing exceptional talent on board for those roles that are core to their business as opposed to spending on talent across functions that are not so core to the business. There are two main reasons for that: one being a general scarcity of talent, and secondly, that companies are growing between 20 to 30% and cannot afford not having the adequate core talent.
Hence they tend to concentrate in recruiting those key people, and focus their attention and resources on developing them. The consequence is that a marketing company will look at bringing in the best talent in the areas of sales and marketing, and a technology company will look at bringing technology experts, and so on. This obviously requires the company to outsource non-core functions, to be handled by the external experts, who specialize in those processes. “We are seeing a clear trend of companies looking at outsourcing to ensure they also have the best talent and systems in those areas that are non-core to them” says Tiger Tyagarajan, COO, Genpact.
At the HR operational level, there are two challenges, on one hand, the mandate is to become more effective, while on the other, there is a need to enhance employee experience. As HR people focus more on strategic roles like talent management, they realize they have to farm away from the administrative routine tasks like payroll processing and employee records management to specialists who can reduce costs, as well as increase efficiency in turnaround times by using scale. As a result, the Indian HR outsourcing providers are seeing high growth by focusing on HR service delivery for large organizations.
4. Getting Social with Talent
As more and more students have grown up using Facebook and other social networking platforms through school and college, when they look at legacy email systems in large corporates with little or no external access to the internet, they get disengaged. Most of them then access these sites on their mobile phones.
In fact, there are quite a few Indian players, like Infosys’s iEngage product to Qontext, MangoSpring, Cyn.in and KineticGlue, who offer SaaS (Software as a Service) based “social environments” to worldwide clients. World leaders in this space are Socialtext, Jive, Yammer and Socialcast. Now even large ERP vendors like Oracle and Salesforce, and software firms like IBM and Microsoft are building a social layer around their products, to enhance collaboration and communication.
Organizations which have to work with and engage today’s generation will need to provide them with a technology ecosystem that is similar to the technology ecosystem they access in their personal lives. Clunky email systems and static intranets will cause a workplace to be labeled “not cool”.
However, it is not just about the technology, but the values behind these tools, that organization would be wise to heed. These technologies accord primacy to the value of the great idea, co-creation, the wisdom of the crowds, and radical transparency. These values are what compete directly with most organizational cultures - based on command and control. Tomorrow’s talent would want both the values to be congruent - old values along with new technology will merely work in the short-run. In the long-run it would be a waste of money.
5. Leveraging Technology
As employees spend more and more of their work on technology platforms, they are going to leave digital trails about what they do and how they perform. The activity stream of the social intranet will meet the traditional talent management suite, and unless all aspects of an ‘Employee’s Life Cycle’ can be represented in it, the dollars spent on it would be a waste. For example, an employee referral application on the company social network should tie into the Applicant Tracking System, or the recruitment process module of the HRIS, seamlessly. And perhaps in the future, should also look at mobile integration, for the employee to easily check the progress of his referred candidate.
Most talent management systems are strong in one aspect of talent management, having grown from one module, and then developing the other modules. However, what employees and HR professionals need is an integrated system that seamlessly combines talent acquisition, talent development and career development modules, and where the data is dynamically kept alive by constant updation by the employee and mentors/supervisors.
6. Just-In-Time Talent
This refers to talent brought in to address specific tasks for really short periods of time. Some examples of such just-in-time talent could be for getting their inputs on tactical choices or designing or focused answers around an industry. Small and medium businesses in the US use websites like Elance.com to invite freelancers to pitch for small jobs. On the other hand, firms like Gerson Lehrman Group act as platforms where large investment firms can tap rare experts across the world - for an affordable sum like $100 for an hour’s conversation.
We expect large firms to increasingly need short-term talent and expertise, and will need to start building their own “expert networks”, or partner with other firms to build such networks. In the future, the ability to attract creative individuals for specific consulting engagements will be critical for organizations.
7. The CEO as the Chief Talent Officer
In themselves, the ideas suggested in McKinsey’s ‘The War for Talent’ article were not revolutionary. Many of the most admired firms which were great places to work have been following these practices since a long time. The difference that the article did was that it made talent management a CEO-level priority. And it showcased that organizations which did not have a talent mindset could stand to lose as the “War for Talent” intensifies in the future.
And this made CEOs look at the HR function with new eyes. The talent imperative is forcing CEOs to increasingly discuss people issues - who are the people ready to lead businesses, who are ready to take over from them, and who are being groomed for business lines of the future. He will also need to know who the key talents are, without whom the competitiveness of the firm will erode. Is it the hot-shot sales overachiever, or is it the R&D scientist who is getting his fifth patent this year? Or is it someone else?
The trend in companies is to identify who key people who have special skills and losing them would set back the organization. Is it the DBA who knows the innards of the database unlike any one else? What’s the risk mitigation strategy if he decides to leave? HR professionals and general managers will need to have anticipated questions such as these.
Sanjay Modi of Monster.com shares this sentiment. “30 to 40 per cent of the of the CEO’s time will be spent in people-related issues and decisions. The reason is that talent is a business driver, so the CEO cannot take an eye away from people issues. The need for HR and the CEO to work together will intensify because the war for talent, like we saw in 2007, is back. Overall, I think what is new is the mind shift; issues like retaining talent, use of technology, focus on communication, will become central, to both the HR and CEO, in terms of understanding and sincerity to execute.”
Talent Management is more and more business critical to organizations, bringing with it, new visibility and challenges, for HR people. This new age also means that other business leaders and the CEO will seek to influence the ‘Talent Agenda’. HR must welcome this reality and work to create an organizational culture where talent is accorded top priority. HR must facilitate members of the leadership team to act as talent ambassadors, constantly thinking of new innovative ways of building their talent and keeping a track of external talent. These factors are fast becoming crucial requirements in the process of creating “talent magnets” in each industry – companies with the best employer brand among peers will ultimately contribute to market leadership.