Creating the Competitive Advantage. CEOs agree that human capital is the number one challenge globally

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1 Talent Management Creating the Competitive Advantage This year PMI will release its newest Thought Leadership Series on the topic of talent management at the 2014 PMO Symposium. The Thought Leadership Series is a year-long program focused on addressing the tough issues and challenges to one of business biggest pain points. The PMI series will deliver strategic level learning and takeaways, along with practical recommendations stemming from research with a variety of today s leading voices on the topic of talent management. Ultimately, the output of the series will help management and practitioners alike to better implement strategic initiatives by leveraging what s most important: their people. Research from The Conference Board and IBM shows that CEOs are shifting their attention to human capital and talent management activities: CEOs agree that human capital is the number one challenge globally 71 percent of CEOs see human capital as a key source of sustained economic value 77 percent of global CEOs anticipate making changes to their talent management strategies, with 23 percent planning major changes Despite this shift, many organizations have already begun to experience the adverse effects of a talent gap. Inability to fill positions has led to decreased product or service delivery quality, difficulty innovating effectively, cancelled or delayed key strategic initiatives, inability to achieve growth forecasts and inability to pursue a market opportunity. Furthermore, many organizations have not adequately invested in skilled project management talent and talent development initiatives. This has put many high value initiatives at risk. At a time when project success rates are declining and risks are increasing, organizational leadership needs to fill an anticipated 15.7 million new project management roles worldwide by If they don t, US$ billion in GDP will be wasted and that s not even counting the US$109 million that organizations already wasted for every US$1 billion spent on projects, according to PMI s 2014 Pulse of the Profession study. The talent gap calls for more than just investment in talent. Bridging that gap also involves aligning talent management to organizational strategy. PMI s Pulse of the Profession In-Depth Report: The Competitive Advantage of Effective Talent Management showed that organizations that align their talent management to strategy have more successful projects and waste fewer project dollars. The research revealed that high-performing organizations (those that achieve 80

2 percent or more of projects on time, on budget and meeting original goals) are more than twice as likely as their low-performing counterparts to align talent management to organizational strategy a significant competitive advantage. According to the Pulse report, alignment of talent management to organizational strategy has tangible benefits, including greater project success rates and fewer dollars at risk. In particular, the reduction of risk that can be attributed to significant or good alignment of talent management to organizational strategy is eye-opening organizations that do it well risk 50 percent fewer dollars on their projects. Aligning talent management to organizational strategy may create the competitive advantage required to sustain and grow an organization. PMI aims to find more answers to talent management questions. The PMI Thought Leadership series on talent management will describe the real value of talent management tied to strategic initiative management, identify successful talent management best practices and develop tools to help organizations use best practices. PMI has already partnered with the Economist Intelligence Unit for the first report of the series, which will focus on the C-suite perspective on talent management. Join over 600 PMO executives at the 2014 PMO Symposium to share ideas and gain behind-the-scenes insight into talent management. The symposium will feature Michael Porter, who will be discussing leveraging your people for competitive advantage. Register today. Following are two reports previously completed by PMI on the topic of talent management.

3 PMI s PROJECT MANAGEMENT TALENT GAP REPORT PROJECT ORGANIZATI ONAL MANAGEMENTBETWEEN AGILITY MARCH 2013 Project Management Talent Gap Report 1

4 INTRODUCTION Between 2010 and 2020, 15.7 million new project management roles will be created globally across seven project-intensive industries. Along with job growth, there will be a significant increase in the economic footprint of the profession; the project management profession is slated to grow by USD$6.61 trillion. This enormous anticipated growth, along with higher-thanaverage salaries, will make the next seven years an opportune time for professionals and job-seekers to build project management skills million new project management roles will be added globally across seven project-intensive industries by GROWTH OF PROJECT MANAGEMENT IN THE UNITED STATES Expanding job markets. Double-digit growth (more than 12 percent) in demand for project management professionals is expected between 2010 and 2020, resulting in almost 6.2 million jobs in This growth in demand will be matched by a 37 percent increase in the Gross Domestic Product (GDP) of project-intensive industries between 2010 and 2020, bringing the profession to $5.81 trillion. DEFINITION PROJECT-INTENSIVE INDUSTRIES Project-intensive industries describe those in which occupational employment has a high level of project-oriented work. In this document, those industries are: Rising salaries. High demand for project-oriented professionals is reflected in both average salary and salary growth. Project Management Professional (PMP) credential holders in the U.S. earned an average of 16 percent more (approximately US$14,500) than their non-credentialed peers in Additionally, between 2004 and 2010, high demand for projectoriented professionals drove faster-than-average salary growth of a Project Management Professional (PMP) ; salary growth among Project Management Professional (PMP) s averaged about USD$2,800 a year, while that of non-project-oriented professions was approximately USD$1,700. Manufacturing Finance & Insurance Business Services Oil & Gas Growing industries. Currently, project-intensive industries in the U.S. that support the greatest number of project management roles are business services and manufacturing, with 2 million and 630,000 project management jobs, respectively, in However, business services and healthcare (not currently a project-intensive industry) are expected to lead the pack in terms of growth between 2010 and In particular, the healthcare industry is projected to increase project management roles by 30 percent a higher growth rate than any current projectintensive industry. Information Services Utilities Construction 2 Project Management Talent Gap Report

5 INTERNATIONAL GROWTH OF THE PROJECT MANAGEMENT PROFESSION Expanding job markets. In 10 countries with established or quickly developing project management industries, project management roles are expected to increase by over 13.4 million between 2010 and 2020, to over 41.5 million. In addition, between 2010 and 2020 the economic output of the profession in these 10 countries will increase by over USD$5 trillion to USD$12.37 trillion. China and India will lead the growth in project management, generating approximately 8.1 million and 4 million project management roles through 2020, respectively. Increasing demand. Total employment for project managers will increase in nine of the 10 countries, Germany being the exception. In fact, employment will increase by almost 60 percent in India, more than 33 percent in China and by more than 40 percent in the United Arab Emirates. Improving GDP. GDP the standard measure by which we understand economic growth will increase across all ten countries between 2010 and Among those showing the strongest expected improvements are China and India, each with over 140 percent growth extraordinary data that only underscores the potential of project management to drive economic prosperity worldwide. Countries with established or quickly developing project management industries Projected new job demand for project management roles by 2020 Australia 375,757 Brazil Canada China 1,364, ,366 24,906,557 Germany India Japan Saudi Arabia 1,642,058 8,857,845 2,610, ,616 United Arab Emirates 57,731 United Kingdom 946,648 Project Management Talent Gap Report 3

6 CONCLUSION The rapid growth of demand for project management roles and the exceptional salary levels in the profession make the project management profession highly desirable to job seekers. Currently, demand for project management professionals is not matched by availability of resources with relevant project management skills. This will create an unparalleled opportunity for discerning job seekers to build valuable project management skills. Discerning job seekers should find the next seven years to be an unparalleled opportunity to build valuable project management skills and enter this flourishing market. ABOUT THE REPORT The Anderson Economic Group s Project-Oriented Employment Trends and Costs of a Skills Gap: 2010 to 2020 report, commissioned by the Project Management Institute, provides projections on the growth of the project management profession globally in project-intensive industries. To create a holistic view of growth of the profession in this decade, this report builds on forecasts developed in The results of the report point to immense growth of the profession globally. ABOUT PROJECT MANAGEMENT INSTITUTE (PMI) PMI is one of the world s largest not-for-profit membership associations for the project management profession. Our professional resources and research empower more than 700,000 members, credential holders and volunteers in nearly every country in the world to enhance their careers, improve their organizations success and further mature the profession. PMI s worldwide advocacy for project management is reinforced by our globally recognized standards and certification program, extensive academic and market research programs, chapters and communities of practice, and professional development opportunities. Visit us at and on 4 Project Management Talent Gap Report

7 Between 2010 and 2020 an estimated 15.7 million new project management jobs will be added globally, reaching an economic impact of over $18 trillion, across seven project-intensive industries. ESTIMATED PROJECT-ORIENTED JOB OPENINGS, 2020 Australia 375,757 Brazil 1,364,932 Canada 582,366 China Germany 1,642,058 India Japan 2,610,663 Saudi Arabia 103,616 UAE 57,731 United Kingdom 946,648 USA 6,146,600 8,857,845 24,906,557 $ ESTIMATED ECONOMIC IMPACT, 2020 (BILLIONS) Australia 519 Brazil 1,027 Canada 649 China Germany 1,290 India 1,022 Japan 1,974 Saudi Arabia 279 UAE 176 United Kingdom 891 USA 4,540 5,813 In the United States, the demand for project management professionals will grow by nearly 700,000 jobs. Strong demand will be reflected in average salaries far higher than non-project-oriented professionals. In the United States, the demand for project management professionals is significant, especially in business services and manufacturing. The highest growth rate for project management roles is expected in the health care sector: m m JOBS JOBS PROJECT MANAGEMENT ROLES ARE HIGHLY VALUED, WITH HIGH SALARIES REFLECTING THE HIGH DEMAND FOR PROJECT MANAGEMENT SKILLS (USD): $91k $93k $98k PROJECT-ORIENTED OCCUPATIONS $81k $49k $50k $54k $43k NON-PROJECT-ORIENTED OCCUPATIONS Project Management Talent Gap Report 5

8 PMI s Pulse of the profession In-Depth report Effective The competitive Advantage of ORGANIZATI talent management ONAL AGILITY March 2013 PMI s Pulse of the Profession In Depth Study: Talent Management

9 talent management is a driver of organizational success As revealed by PMI s 2013 Pulse of the Profession TM, an organization s ability to meet project goals, timelines, and budgets significantly impacts its ability to thrive. While the imperative to improve project management success is evident, organizations are faced with various constraints: A do more with less economic climate Expanding global priorities Necessity to enable innovation Despite existing constraints, there are lessons that can be gleaned from high-performing organizations and their approaches to project, program, and portfolio management. PMI s 2013 Pulse of the Profession TM highlights two activities that bolster organizations project success rates: Alignment of project management to organizational strategy Cultivating project management talent Yet, despite the promise of project success, organizations are currently not placing adequate emphasis on these activities. In a climate of economic uncertainty, growing global priorities, and an increasing necessity to enable innovation, activities that support organizational success should not be overlooked. PMI s Pulse of the Profession TM In-Depth Report: Talent Management explores the link between alignment of talent management strategy to project management performance and organizational success. It reveals that high-performing organizations are more than twice as likely than low-performing organizations (69 percent and 31 percent) to have talent management programs aligned to organizational strategy. Alignment of talent management to organizational strategy has tangible benefits, including: Greater project success rates Fewer dollars at risk In particular, the reduction of risk that can be attributed to significant or good alignment of talent management to organizational strategy is eye-opening organizations that do it well risk 50% fewer dollars on their projects. High performing organizations are more than twice as likely as their low performing counterparts to align talent management to organization strategy a significant competitive advantage. Alignment of talent management to organizational strategy dollars at risk significant/good alignment US$100 Million US$2.5 Billion US$5 Billion Moderate/weak alignment US$150 Million US$3.75 Billion US$7.5 Billion Project size US$1 Billion US$25 Billion US$50Billion US$50 Million Fewer Dollars Risked US$1.25 Billion Fewer Dollars Risked US$2.5 Billion Fewer Dollars Risked Figure 1. Project dollars at risk in organizations by level of alignment of talent management to organizational strategy. 2 PMI s Pulse of the Profession In Depth Study: Talent Management

10 Today s Environment Demands Improved Talent Management As reported by PMI s Project Management Talent Gap Report, between 2010 and 2020, 15.7 million new project management roles will be created globally across seven project-intensive industries. Along with this significant job growth will be a momentous growth in the economic footprint of the profession, which is slated to grow by US$6.61 trillion. While these figures are impressive, if organizational leadership fails to equip employees with the skillsets required to fill future project management roles, US$ billion in GDP will be at risk. As a result, CEOs are shifting their attention to human capital and talent management activities 1 : CEOs agree that human capital is the number one challenge globally 2 71 percent of CEOs see human capital as a key source of sustained economic value 3 77 percent of global CEOs anticipate making changes to their talent management strategies, with 23 percent planning major changes 4 Despite the shifted attention to human capital and talent management by their CEOs, many organizations have already begun to experience the adverse effects of this talent gap. Inability to fill these positions has led to: 31% Decreased product or service delivery quality 29% Difficulty innovating effectively Cancelled or delayed key strategic initiatives 27% 25% 20% Inability to achieve growth forecasts Inability to pursue a market opportunity Three critical project management skillsets needed for successful projects are technical project management skills, leadership skills, and strategic and business management skills. Two in three organizations (66 percent) found the greatest difficulty in finding resources with adequate technical project management skills. However, many organizations (over 90 percent) believe that technical project management skills and strategic and business management skills are teachable, and as such, are likely to search for talent with good leadership skills whose technical project management and strategic and business management skills can be honed through training. technical Project management strategic AND BUSINESS management leadership 1 The Conference Board s CEO Challenge The Conference Board s CEO Challenge IBM s 2012 Global CEO Study 4 PwC s 16th Annual Global CEO Survey (2010) Figure 2. The new triple constraint of project management skills. 3 PMI s Pulse of the Profession In Depth Study: Talent Management

11 Training and career development, recruiting, and hiring contractors all constitute talent management activities that can help organizations increase project management performance. Yet, what is crucial to talent management efficacy is its close ties to organizational strategy. Unfortunately, only 45 percent of organizations have significant or good alignment of talent management programs to organizational strategy, indicating that 55 percent of organizations must still take lengths to improve the efficacy of their talent management programs (as referenced in Figure 3). 10% 35% 38% 17% significant good moderate weak Figure 3. Organizations level of alignment between talent management and organizational strategy. How Talent Management Affects Organizational Success increased success = Reduced Risk The level of talent management alignment to organizational strategy has a clear impact on the success of projects meeting their original goals and business intent. Organizations in which talent management is aligned to organizational strategy have an average project success rate of 72 percent, while organizations in which talent management is not effectively aligned to organizational strategy have an average project success rate of 58 percent. The difference of 14 percentage points in project success rates equates to risking 50 percent more project dollars when talent management is not effectively aligned with strategy. Financial Benefit of Aligning Talent Management to Organizational Strategy Alignment of talent management to organizational strategy Percent of projects meeting original goals and business intent dollars at risk significant/ good alignment 72% US$100 Million US$2.5 Billion US$5 Billion Moderate/ weak alignment 58% US$150 Million US$3.75 Billion US$7.5 Billion Project size US$1 Billion US$25 Billion US$50 Billion Figure 4. Project dollars at risk decrease as the alignment of talent management to organizational strategy increases. 4 PMI s Pulse of the Profession In Depth Study: Talent Management

12 Additional Organizational Benefits Organizations that have successfully aligned talent management to organizational strategy reap additional benefits they are much more likely to be successful at: 1 Meeting common talent challenges Engaging people to deliver organizational goals Developing high performance teams Managing talent through change Managing performance effectively Developing high potential individuals 2 Implementing career paths Selecting best talent for internal promotions Succession planning Career progression from new hire to advanced project manager Career progression from advanced project manager to senior project manager Career progression from senior project manager to senior management 3 reducing communication challenges Communication across disciplines Communication across age cohorts 4 Effectively filling open positions and managing contractors?? Identifying high potential employees Assessing best talent to join the organization Finding talent externally Success with contractors 5 PMI s Pulse of the Profession In Depth Study: Talent Management

13 Organizations with Effective Alignment of Talent Management to Organizational Strategy Conduct Talent Management Differently Organizations with significant or good alignment of talent management to organizational strategy are much more likely than other organizations to have key talent management practices in place: 1 2 They are more likely to offer employees multiple forms of talent management offering. In particular, organizations with significant or good alignment are more likely to have talent management programs around training and development. They are more likely to have multiple project management career paths: one which retains project managers and one which elevates those with business acumen to higher levels of the organization. are more likely to have various talent management offerings paths for Project Manager employees 85% 69% 84% 66% 73% 54% train in soft skills make training a priority evolve talent program 0% 50% Significant/good alignment NEW HIRE TO ADVANCED Project manager ADVANCED Project manager TO SENIOR Project manager 0% moderate/weak alignment 3 94% 64% 83% 62% 77% 46% SENIOR Project Manager TO SENIOR Management 100% have integrated Talent Management Significant/good alignment 50% 100% moderate/weak alignment 4 measure Talent Management across the organization They are more likely to integrate Talent Management across their organization using various methods, including performance management, learning and training, leadership development, and recognition rewards. They are more likely to measure both financial and nonfinancial Talent Management outcomes that affect an organizations ability to remain strategically aligned with organizational goals and values. INTEGRATE TALENT management ACROSS organization 10% PERFORMANCE MANAGEMENT LEARNING AND TRAINING 0% Significant/good alignment 6 are more likely to have career 62% 75% 60% 58% 35% 75% 45% 66% 45% revenue/ profit growth staff turnover/ attrition 66% 49% 61% 44% 50% outcomes employee satisfaction/ engagement employee Retention 100% moderate/weak alignment PMI s Pulse of the Profession In Depth Study: Talent Management 0% successful 50% unsuccessful 100%

14 the way forward Despite the job growth in the project management profession, a gap still exists in the number of professionals fully prepared to lead and manage projects. This talent gap is negatively impacting the growth and profitability of organizations. Quality, innovation, strategic projects, and market opportunities have all been adversely affected by that talent scarcity. To ensure success, organizations need to both recruit smartly and align their people strategically. An effective approach organizations can take is recruiting potential project managers with strong leadership skills whose technical skills and strategic and business management skills can be enhanced through training. Most would agree that smart investments are those that are aligned with the organization s strategies. However, few organizations have significant alignment of their talent management programs to organizational strategy. Highperforming organizations understand the value of aligning talent management to organizational strategy and are already realizing these benefits: Greater project success rates Fewer project dollars at risk Figure 4. Factors contributing to the competitive advantage of talent management. Organizations with strong alignment of their talent management programs to strategy are focusing their efforts on: Prioritizing and evolving talent management offerings Clearly defining career paths Integrating talent management programs across the organization Measuring talent-related outcomes Aligning talent management to organizational strategy may create the competitive advantage required to sustain and grow an organization. About PMI s Pulse of the Profession TM In-Depth Report: Talent Management PMI s Pulse of the Profession TM In-Depth Report: Talent Management research was conducted in January 2013 among 277 project, program, and portfolio management directors, managers, and practitioners who make or strongly influence hiring decisions for project, program and portfolio managers for their organization or who design and/or administer their organization s talent management program. 7 PMI s Pulse of the Profession In Depth Study: Talent Management

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