In the late 1990’s McKinsey & Co introduced the term War for Talent. At the time the global economy was ‘burning white hot’ and internationally companies were scrambling to hire and retain the people they needed, then the bubble burst and the economy took a nose dive so do we still need to worry about the War for Talent? Delia Goldring FSN contributing writer, visiting Professor in HRM at Middlesex University and Director Performance Options, suggests that HR strategy and processes needs to change direction if companies are to retain talent coming out of the recession.
How often do organisations say that their employees are their biggest source of competitive advantage? Yet it seems that many organisations are unprepared for the challenge of finding, motivating, and retaining capable and high performing employees whilst at the same time proactively managing or rather weeding out those who under perform.
So the question is about whether there is still a pressing issue for organisations about retaining talent or are employees just sitting tight anyway? According to a recent survey globally resignations from large and medium sized businesses have increased in the year to February 2010, despite growing fears over job security with restructuring and job insecurity causing many employees to ‘jump ship'. Employers felt that their failure to offer career opportunities and training contributed to employees leaving and that employees with specialist skills were the hardest to retain, since headhunters and recruitment consultants have ‘turned their employees' heads and enticed them away’. Businesses must therefore be engaged in working hard to keep key individuals and working just as hard to identify and either change or remove under performers.
A recent report by The Economist Intelligence Unit indicates that it is fashionable to declare the War for Talent as being over, the logic being that recessions bring cutbacks and redundancies, leading to a glut of people on the job market. Surely, then when it comes to finding talent firms ought to find themselves in a buyer‘s market. But not necessarily. Their survey of over 480 senior executives within large global corporations shows that, despite the economic gloom, companies are paying close attention to their talent strategies. The findings indicate that the War for Talent is not over; it is merely the nature of the battle that has changed. While employers tighten their belts through redundancies, the need to fill key roles remains critical. In many developing markets, growth is expected to continue, albeit at a reduced rate. Consequently, competition to hire skilled employees remains fierce for local firms and multinationals alike, especially in Asia and Latin America.
Success, according to Michaels, Handfield-Jones, and Axelrod, requires ‘the talent mind-set’: the ‘deep-seated belief that having better talent at all levels is how you outperform your competitors.’ It is the justification for why such a high premium is placed on degrees from first tier business schools, and why the compensation packages for top executives had become so lavish. This has been preached by consultants and management gurus all over the world but none, however, had spread the word quite so ardently as McKinsey, and, of all its clients, one firm took the talent mind-set closest to heart. It was a company where McKinsey’s billings topped ten million dollars a year, where a McKinsey director regularly attended board meetings, and where the C.E.O. himself was a former McKinsey partner. The company, of course, was Enron.
The management of Enron, in other words, did exactly what the consultants at McKinsey said that companies ought to do in order to succeed in the modern economy. It hired and rewarded the very best and the very brightest and ended up in bankruptcy. The reasons for its collapse are complex, needless to say. But what if Enron failed not in spite of its talent mind-set but because of it? What if smart people are overrated?
Tim Osborn Jones, of Henley Business School, says there's a lot of "froth" talked about talent management, however, he also acknowledges that managing people in a way that "keeps them engaged and prepared to go the extra mile" is important for employers during a downturn. It could be said that a lot of this "froth" is down to the fact that talent management is a trendy 21st century label for the kind of things good people managers should be carrying out as a matter of course - namely developing employees, recruitment and retention but what has been missing from the process in many organisations is a good performance management system.
The way that HR processes are implemented in an organisation combined with the mindset, beliefs, actions and convictions of the senior managers leading the organisation will be influential in managing talent within an organisation so it is incredible therefore that research shows many businesses do not know who their high and low performers are. How can companies promote and keep their most talented people if they don’t systematically identify who they are? And more importantly how can under performers be helped or ‘moved on’ by companies if they are not identified either?
It is well known that employees perform better if they have a clear understanding of their organisation's goals and what they can personally do to contribute towards these. So setting good objectives and getting performance management communication right, especially for the weaker members of a team, is of vital importance. Managers seem to find it easy to manage top performing employees but find it harder when it comes to improving under performers, where they need to give feedback and support and in some cases manage out the weakest performers.
Under performance is clearly a problem when times are tough, because companies can’t afford to be carrying those employees who are not fully contributing but according to Roffey Park Institute in January 2010, the overriding view of managers they surveyed was that performance management is too complicated and time consuming. In other words, when they have so much else on their plate, the last thing they want to be doing is jumping through the hoops of a capability or disciplinary process, with all its procedural demands. Employment legislative rules and good practice are a perfectly valid way to protect employees but it is easy to sympathise with the managers points of view since these HR processes do undeniably make life more difficult for managers.
Recession causes redundancies, but under performing staff are not always the first to go as Chiumento HR Consultancy warned in January 2010 there is a real danger that the proportion of under performing employees actually increases once constraints on job mobility are lifted. While younger employees leave for better salaries and promotion, many of those left behind are what Chiumento describes as 'corporate prisoners' who stay on without being fully engaged in their work. Their numbers include 'lifers' who lack career ambition and are often resistant to change, and 'economic prisoners' who want to move but fear this will lead to a drop in salary or loss of pension rights.
Tolerating poor performers only compounds the frustration of productive colleagues left to pick up the slack. As Hubbard said in 2008, ‘the world’s most successful companies go the extra mile to identify, reward, engage and enable their best performers, while addressing deadwood. Those that fail to do so risk high-performing staff become frustrated, demotivated and potentially seeking pastures new.’
This adds weight to the argument that high performers are more mobile and that therefore War for Talent is still on. Many businesses continue to see talent management as a key survival strategy to differentiate them from competitors and position them to benefit from the eventual upturn. As David Woods recently said ‘HR teams are having to rethink their priorities and many are trying to redirect their resources away from recruitment. The new strategic focus, even for organisations that have not cut their HR budget, seems to be around identifying, engaging and retaining those employees who are high performers, while more proactively managing areas of underperformance.’
