Talent Executive Guidance for 2010

Talent Executive Guidance for 2010
by Brian Kropp

Most executives would like to put at least some part of 2009 behind them, and in most cases for good reason. Organizations in the present business climate have had to contend simultaneously with plummeting growth, an evaporation of capital, dramatically curtailed liquidity, commodity price volatility and global supply chain exposures and risks.

That has forced organizations to rapidly curtail spending, pare the workforce and exit some business lines and geographies, all the while trying to maintain morale among employees and the investor base. And, while the press has made much of the so-called "green shoots" portending economic recovery, for most of us today, those feel like much ado about nothing. In short, little about 2009 has been easy.

However, as organizations turn to 2010, there is a commonly held belief that an improving economic outlook will lift all boats. But it is critical to realize that recoveries are not restorations. Approaching the post-recession workforce landscape with the same viewpoint that organizations had in the middle part of the decade runs the risk of organizational underperformance.

After extensive surveys and thousands of conversations and corporate plan reviews. The Corporate Executive Board (CEB) has arrived at the following statistical analyses of past, ongoing and future business trends related to talent management. Further, it has identified six enemies of post-recession performance that can significantly undermine organization recovery, erode profitability and make past performance levels unattainable:

1. Sharply lower marketing and sales productivity due to changed customer needs.
2. Productivity losses due to top talent disengagement and flight.
3. Larger and more frequent losses due to increasing risk velocity.
4. Rising losses and steeper penalties due to high levels of employee misconduct.
5. Low returns from IT budgets due to targeting a shrinking share of enterprise information.
6. Productivity losses due to misplaced leaders.

Two of these enemies - top talent disengagement and misplaced leaders - fall squarely within the responsibilities of human resources officers and talent managers.

Top Talent Disengagement and Flight

As we would expect, in 2009, workforce reductions have driven down employee engagement. While most employees' discretionary effort levels have fallen, this has yet to translate into massive turnover due to a perceived lack of job opportunities. However, this does not hold true for the entire workforce. More surprising may be that the employee segment expressing the greatest likelihood of turning over is the high-potential employee segment, stemming in large part from a 15 percent decline since 2006 in organizational effectiveness at delivering a competitive employee value proposition. Not only is talent bench shortfall a leading cause of corporate stalls, but the typical organization faces an imminent 7 percent productivity hit from the combination of departing top talent and undermanaged recruiting pipelines.

Most organizations try to engage high-potential employees by stressing the stability of their jobs. They drive speed of change and execution by making top-down decisions and communications regarding reorganizations, job design, strategy and goals. And they have reduced recruiting costs by focusing only on candidate applications where they have a specific need.

In addition to not taking for granted the retention of high-potential employees, the best organizations are:

a) Nurturing a talent pipeline for future need, even if applicants aren't suited for current positions.

b) Setting accurate employee expectations of stability.

c) Involving employees in job design decisions.

d) Enabling employee mobilization at lower levels in the organization.

Employee turnover at most companies has hit a historic low this year. Yet, CEB surveys of tens of thousands of employees across dozens of countries have revealed an alarming trend: 25 percent of high-potential employees currently are searching for a new employer, up 13 percent from the pre-recession period. That's substantially higher than the 10 percent for all other employees.

Most executives express genuine surprise at this finding. After all, few employees have been leaving. But the retention levels of the past year provide false comfort. Employees, even the best, don't want to switch companies in such an uncertain climate. Workforce reductions and redundancies, lower incentive compensation, and diminished resources, combined with unrevised expectations, have reduced job satisfaction and created a pent-up demand for jobs at other firms. Absent aggressive intervention, as the economy improves, organizations will see their best people leaving for seemingly greener pastures.

Many different retention strategies can be deployed quickly to reduce the risk factor here, including building customized retention plans for high-potential staff. Most organizations focus on communicating a message of stability to this group. That sentiment motivates managers at all levels of the organization to overstate the stability of an employee's position. This includes not only one-off statements, but official communications as well.

When organizations tell employees that they have high job stability and it proves true, they see a boast in employee commitment. But when it turns out that organizations have overstated stability, employee commitment falls 46 percent, from a 29 percent increase to a 17 percent decrease. In short, if organizations tell employees that all of the changes that they have been through are done, and more come, employee commitment is destroyed. The early read on 2010 is that organizational change, while not at the same clip of the past 18 months, will continue.

Executives are driving rapid changes in business operations and associated leadership roles as well as shifting job responsibilities to compensate for workforce reductions. Changes to people's roles and responsibilities come fast, and they come top down.

While faster in the near term, this approach is counterproductive when it comes to retaining and engaging employees. When organizations ask employees to express their degree of satisfaction with their job, they find that if they haven't involved staff in their job design, only 31 percent express high job satisfaction. By contrast, that goes all the way up to 82 percent whenever employees believe they have a high degree of involvement. But what is truly powerful here is not that employees need to own their job design, but rather that a small degree of involvement dramatically increases their perception that they are in the right job.

Misplaced Leaders

It is not surprising that many organizations have responded to the financial downturn by focusing on improving the quality of the leadership bench. The difference in team productivity between high-performing leaders and lower-performing leaders has significant impact on corporate performance. Examining data from the first half of 2009, teams led by the best leaders are not only 30 percent less likely to experience attrition, but they also work 26 percent harder than teams led by the worst leaders. But improving the strength of the leadership bench is no easy task and has left most organizations wondering - where are all the good leaders? The answer: they are already at these organizations, just likely to be in the wrong job and stymied by a significant number of organizational constraints. Not only does solving these challenges improve workforce outcomes, but proper support of a company's existing leaders can support revenue and profit by more than 10 percent.

The knee-jerk reaction in many organizations to any real or perceived legacy leadership issues is to get rid of the old leaders - a strategy adopted to varying degrees by 62 percent of organizations - or conduct another round of leadership training and development exercises - a classic buy-versus-build approach that moves leader by leader. This is not wrong per se, but it is often an inadequate response to what is a much more systemic problem because less than 10 percent of leaders are truly underperforming, and only one-third of leaders have the capabilities gaps that would benefit from these sorts of development exercises.

Most organizations already have plenty of leaders with the capabilities necessary to succeed; 86 percent have the right talent buried in the wrong places. It is the process for assigning, and then supporting, leaders that limits performance. Going into 2010, the strategy to improve the performance of the leadership team should focus on activating existing capabilities and deploying leaders in the right way, rather than massive, across-the-board development exercises.

The second common approach that organizations have pursued to improve the performance of their leaders is to restructure the organization and in turn the leadership team, adopted by more than 16 percent of organizations. In reality, the massive restructuring is certainly a function of organization strategy, but neglecting the implications of these restructuring initiatives on leaders is hugely damaging because 40 percent of leadership performance is driven by organizational factors. Organizational obstructions include lack of role clarity, poor goal alignment, poor job and work design and weak knowledge transfer systems.

In order to limit the impact of these obstructions, organizations must surface all barriers to leadership performance, both the soft and the hard. The soft assessment involves an examination of barriers such as culture, interface tensions and business processes. The hard barriers involve structural factors such as lack of strategic oversight, resource misalignment and complexity of job design.

But this should also become a dynamic process both in terms of developing the capabilities of individual leaders and organization design. What the best organizations are doing to ensure that they avoid future misplaced leadership challenges is to better align the trajectory of the personal growth of their leaders with the trajectory of the change in needs for a specific role. By more effectively aligning these two, organizations will be able to ensure the effectiveness of the leadership team well into the future.

Building the Workforce Plan for 2010

As mentioned, recoveries are not restorations. As the economy continues its slow improvement, HR executives have two critical focus areas. The first is ensuring that as the labor market improves, the disengagement and potential flight of their top talent doesn't prevent their organizational recovery. The second is to re-examine organizations' approach to the performance of their leaders and to shift from improving the performance of individual leaders to determining how to activate and deploy all leaders to improve the performance of the entire leadership bench.


[About the Author: Brian Kropp is managing director in the HR practice of The Corporate Executive Board.]
Posted by : Hemant Gade
Hemant@JobsEnsure.com
http://www.JobsEnsure.com