Anecdotal evidence suggests that the level of confidence chief executives have in HR to deliver the key objective of defining and executing talent strategy varies considerably. In order to provide a more detailed picture of how organisations are faring at this, Orion Partners carried out research in the spring of this year. Our research involved 20 companies, all but one of them large global institutions.
We wanted to find out how HR linked talent strategy to the business strategy, and executed it using the levers of performance; learning and leadership – most people saw these as closely linked; resourcing; compensation; and culture. We conducted semi-structured interviews with heads of talent, HR directors and, in some cases, senior line managers in the participating companies. In addition to the interview data, we asked participants to rate themselves on a number of dimensions on a one to 10 scale, where 10 was the best they could be.
Based on the outcomes of the research, we have developed an assessment tool to help organisations review their talent strategy, and to indicate which areas of talent strategy and process might benefit from attention or revision.
The starting point for our research was to ask whether the company had a formal definition of talent that was encompassed in its strategy and supported by its approach to execution. Six of the 20 companies had no formal definition and most organisations, while aspiring to include all employees, in practice focused on leaders in senior roles and high potential employees.
Even those organisations that defined talent as “all employees” found it difficult to use talent strategy levers across the whole population. The closest we saw was in a number of retail organisations, which tended to have a two-tier approach: a set of processes for high potential and senior leaders, and a simpler process for succession planning and promotion at store level.
In line with our earlier research, The How Factor, we found that HR still has a way to go to fully engage business stakeholders in the creation of talent strategy and processes. For a few companies there was no distinction between talent (people strategy) and the business strategy, but only 25 per cent of organisations had a clear process for the formulation of talent strategy. We found that far too many HR people still sat in a dark room and formulated a statement of talent strategy to then “sell” to business stakeholders. We believe this lack of collaboration results in a struggle to gain buy-in to the activities necessary to execute talent strategy. Three related issues are:
1)Difficulties in defining potential, especially potential to meet future business plans rather than today’s needs. Even where a definition exists, managers struggle to let go of historical definitions of potential, and to identify the people who would be successful in the future.
2)The almost complete absence of measurement of talent strategy execution in terms of business results, rather than in terms of the health of the talent process. This means HR then struggles to demonstrate the value of its activities. Most organisations measure the health of their talent processes: for example, looking at the number of high potential employees, or successors for key roles, or internal vacancies filled. While these measures are important, relying on them works only if senior stakeholders already make the connection between the talent process and achieving business goals. Where buy-in has not been achieved, stakeholders are taking a leap of faith that the processes HR asks them to spend time on will actually result in better business outcomes. Where measures were directly related to business goals, we saw much greater impact and senior buy-in to activities. This put HR in a more powerful position, able to provide insight and to influence decision-making. But overall, participants rated themselves only 4.33 out of 10 on the quality of their measurement of business outcomes.
3)Lack of communication. Here the participant rating was 5.86 out of ten. There was widespread uncertainty about:
- whether to be transparent about talent ratings or people’s inclusion in specific talent pools;
- the extent to which the results of talent initiatives should be made available to senior stakeholders and people managers, or all employee;
- what format and channels to use for communicating the link between HR process and strategy results;
- how to communicate to the identified talent. We found some excellent examples of how to help staff understand the career paths they could pursue, identifying appropriate role-models and how to achieve success in the organisation. These efforts had a measurable, positive impact on turnover and retention as well as engagement in one notable case.
These issues, in combination, mean that HR still faces a challenge to show the value it adds to business strategy, and how its initiatives link to achieving business goals. Participants on average rated themselves only 6.13 on alignment of their talent strategy with business strategy.
Pitfalls in executing strategy
While we found some examples of excellent practice in executing talent strategy, others struggle to align this work across the talent levers of performance, learning and leadership, resourcing, compensation and culture. This is partly because of the demand for talent strategy to extend to new lines of business or new parts of the world. But organisations are struggling most to create common goals and ways of working across the centres of expertise.
Too many HR specialisms or centres of expertise still operate in silos, and this seems to be especially true of compensation and performance management. We found only a few examples of organisations that could point to successful alignment both geographically and functionally.
A related challenge was pacing the roll-out of talent process to match the buy-in and skills of those delivering it. Time and again we heard HR leaders say that people managers lacked the ability to execute process. The most sought-after skills were the ability to: have courageous, tough conversations; identify and nurture potential; and coach for development and performance. HR business partners were rated as marginally better skilled in talent processes but also lacked skills in challenging, guiding, and coaching managers.
We also asked people about the use of technology to aid decision-making in the execution of talent processes. All but one of the organisations were working from spreadsheets, or manually updating stand-alone systems. This provided information, but limited their ability to deeply analyse data and to utilise some of the decision-making capabilities of modern talent software. In many places, things were in a state of flux: up to three-quarters were actively implementing or evaluating new talent systems.
For those in the evaluation stage, confusion had been created as a result of the recent mergers among software providers and they were unsure of the distinction between the competing systems available, particularly software-as-a-service (SaaS) verses enterprise systems.
Organisations rated themselves at 6.24 on their alignment of talent levers with business strategy; 6.00 for their alignment of talent levers with each other; and 5.69 for overall success in talent strategy execution. These ratings suggest there is a way to go for most organisations.
CASE STUDY
Data drives Deutsche Bank strategy
The talent and development function at Deutsche Bank – a leading global investment bank with more than 100,000 employees globally, operating in more than 70 locations – has taken an analytical and data-driven approach to engage with senior leaders on why good talent strategy and execution matters. It developed a “People Performance Dashboard”, which focused on four key metrics with a clear impact on business performance. These were: leadership bench strength; succession planning and mobility; gender diversity; and creating a performance culture.
Next, extensive data was drawn up on each of these four areas, working in partnership with the management information team and other specialist areas within HR to provide insight on key people practices. One example of this was creating predictive analytics on how to move the needle on gender diversity through the three levers of hiring, promotions and attrition.
The People Performance Dashboard has created greater transparency across the organisation, as well as driving action and strengthening accountability for shaping the people agenda in the future. In tandem with the dashboard, there have been a number of business-owned talent and leadership initiatives, which have been underpinned by SaaS technology to provide a common technology and reporting platform.
CASE STUDY
Indian service centre boosts retention
Based in Mumbai, Willis Processing Services India Ltd (WPSIL) is the service centre for global insurance broker the Willis group. It has grown rapidly in recent years and now employs some 1,650 people. One of the challenges of the location is the tendency for people to move job roles frequently, seeing their career path as moving between different service businesses in the region.
Chief executive Olivia Cooper and her HR director, Sandhya Kini, saw that they could improve the effectiveness and efficiency of the business by reducing turnover – and that one way to do that was to educate people about the career opportunities available. They also recognised this would increase the benefit of the company’s investment in training.
WPSIL developed a programme using the idea of a talent showcase. Each month focused on a different employee sharing their story of career progression in the organisation, and how they had built their skills and experience. The results included an increased interest in internal vacancies, an emerging pipeline for key roles, and more internal appointments for roles such as team leader. A by-product of the programme was a greater interest and involvement of managers in identifying employees with potential, and beginning to nurture them.
Cooper said of the impact on the business: “This initiative has proved to staff that growth opportunities really do exist for people with high potential. The resulting business benefits have been higher retention levels, leading to cost savings on recruitment and training, and the ability to continue to service our clients to a high standard with long-tenured staff.”
CONCLUSION
The ideal talent strategy
This research suggests that organisations which get it right tend to end up with a clear long-term strategy that has been created collaboratively with stakeholders. Moreover, updates to the strategy are integrated with business plans, and backed up with HR metrics that link talent with business results.
Another common feature of a successfully executed talent strategy is tailoring it to the particular culture and maturity of the business, paying attention to developing people managers to take on new processes and skills, and ensuring those talent processes are simple and well communicated.
Finally, it makes a big difference when HR business partners are skilled in talent processes, as well as in helping managers get the best from them; and when talent levers are in alignment, or at least an assessment has been done on the impact of leaving certain levers as they are.
Jan Hills is a partner at Orion Partners and runs the firm’s talent strategy, HR capability and change leadership practices