Designing Talent Management to Meet an Organization s Strategic Needs

Designing Talent Management to Meet an Organization s Strategic Needs By: Chris Miller Program Director UNC Executive Development Website: www.execdev.unc.edu Phone: 1.800.862.3932 Email: unc_exec@unc.edu

Introduction J ill Smith is an HR professional at a quickly growing shoe company, Sandalias. The founders started the company 10 years ago, and after several years of incubation and hard work, their market is expanding quickly. While some sales are online, most sales come from brick-and-mortar stores. Innovative design, great marketing, and an excellent customer experience have gotten the company to this point. On a recent Monday morning, Smith received a call from the head of marketing. Some social media attention the company received prompted a competitor to poach Sandalias best marketer. The head of marketing needs a replacement ASAP. Smith makes a note to talk to recruiting and heads to the break room for some coffee. While in the break room, she runs into Steve Palmer, vice president of manufacturing. Palmer tells Smith that he is worried because his two best managers are nearing retirement age, and he doesn t feel comfortable with any of their direct reports ability to replace them. Returning to her desk, Smith catches up on her emails. She finds a message from a district manager that says (in all caps) that her region needs three new managers pronto. Smith cringes at the message. Sandalias will be opening five new stores this year, and only two assistant managers are ready to assume a manager role, and lately, managers recruited from outside Sandalias haven t worked out too well. Smith has raised the idea of a more systematic approach to talent management in the past, but the founders thought they knew who the players were in the company, and managers were wary that new, more centralized programs would constrict their decision making. Smith needs a better way to make the connection between the success of the company and the need for talent. This white paper: Explores why many business executives overlook or underestimate the value of having a strategic talent management process in place in their organizations; Defines talent management and discusses why it makes sense for most organizations to have a structured talent management program; 2 P a g e

Frames talent management as part of the natural forces within an organization s life cycle in a manner that will help HR and talent management professionals understand if and when their organization is really ready for a formal talent management strategy, and; Identifies the business factors that support the creation of a formal talent management process and discusses how HR and talent management professionals can achieve senior leader buy-in for talent management by proposing it through a narrative and in a business-relevant manner. The Undervaluation of Talent Management in Organizations M ost business leaders pay little more than lip service when it comes to talent management. A survey on talent management by Bersin by Deloitte found that only one-third of employers in the United States said they had identified critical roles or talent segments in their organizations based on business goals. Further, less than 10 percent of respondents said they had reached a stage where talent management was part of their annual business planning process and that talent management was truly owned by business leaders and line managers, and only 7 percent of respondents said they had a strategic talent management program in place (O Leonard, 2010). For many organizations, particularly those in a growth stage, the lack of a strategic talent management program is costly. Organizations that have a strategic talent management program in place generate more than twice the revenue per employee than those without programs, have a 40 percent lower employee turnover rate, and have a 38 percent higher level of employee engagement (Bersin, 2012). There are any number of reasons why business leaders undervalue talent management. As Edward Lawler noted in an article for Forbes, some business leaders believe their organizations can survive without top talent. Other business leaders may acknowledge that talent management is important, but not as important as other business functions like finance or technology. Still other business leaders simply fail to see the link between talent and their organization s business strategy because their backgrounds are not in HR and talent management (Lawler, 2014). As Lawler notes, it is the HR and talent management professional s responsibility to help business leaders see and embrace that link. 3 P a g e

Talent Management and Strategic Talent Management Programs T alent management is an organization s formal plan to optimize its talent pool. It is a set of processes designed to attract, retain, develop, motivate, and deploy employees with a goal to create a culture that will meet the organization s current and future business objectives (Freschi, 2015). In the recent past, talent management efforts were often focused exclusively on employees with strategic value to an organization (for example, the C-suite and high-potential employees). More recently, however, employers have realized that they should broaden talent management to all organizational levels to develop a deeper talent pool (Freschi, 2015). Deeper talent pools can help widen an organization s leadership ladder and can help channel talent into skill-specific jobs. A talent management process is part of strategic workforce planning, and an exercise that helps determine the future talent requirements an organization will need to meet its strategic objectives. For most organizations, strategic workforce planning is vital because it helps them anticipate the changes that may take place in their marketplaces and the types of employees they will need to manage those changes. Organizations that have strategic workplace plans are generally Key Principles for Successful Talent Management In an extensive study, Stahl et al (2012) found that effective talent management did not come by focusing on activities like training and development, but rather by adhering to six key principles: 1. Alignment with strategy 2. Internal consistency 3. Cultural embeddedness 4. Management involvement 5. Balance of global and local needs 6. Employer branding through differentiation For more information about the study, see Six Principles of Effective Global Talent Management. more agile in assessing and meeting change than their peers, giving them a competitive advantage (Miller, 2012). 4 P a g e

Strategic workforce planning is more than just good HR it s also good business. A Society for Human Resource Management survey found that a formal talent management process was the most important practice employers can engage in to improve workplace productivity. The international business consultancy, The Hackett Group, found that organizations with strong talent management programs were likely to see an 18 percent increase in their bottom-line earnings as compared to organizations without talent management programs (Teng, 2007). And a survey by Bersin by Deloitte found that organizations that practiced strategic workforce planning had, on average, a 28 percent higher score in efficiency, effectiveness, and business alignment of HR functions than their non-practicing competitors (Miller, 2012) With all this evidence, one could conclude that each and every company, no matter the size, should have a talent management strategy. But these studies overlook a key point; the companies surveyed were larger and more established than most, at least large enough to house a separate HR function. Talent management becomes critical at certain times in an organization s growth and should be formalized when the time is right. To understand when an organization should create a talent management strategy, it may be helpful to look at talent management in context of an organization s life cycle. Organizational Life Cycles O rganizational life cycles have been written about for more than 40 years. There are a number of organizational life cycle models, but they share the same idea that, like living organisms, organizations proceed through predictive stages of birth, growth, maturity, renewal, decline, and death (Costanza and Fraser, 2008). These stages are developmental and, for the most part, sequential. Organizational life cycles traditionally have been used to help leaders understand how they must change their organization s goals and strategies as they move through each stage, and have been used to inform leaders about when more formal processes are needed for assets such as logistics, finance, information technology, finance, etc. They have not, however, been used to inform organizations about how to leverage their greatest expense their people. There have been plenty of organizational life stage models proposed over the years, but one that has stood the test of time was proposed by Larry Greiner in a widely cited Harvard Business Review article published in 1972 (Greiner, 1998). 5 P a g e

Greiner identified five stages of organizational growth each characterized by evolution and revolution: Creativity Direction Delegation Coordination Collaboration The Creativity Stage The creativity stage (also often called the birth stage) is characterized by a focus on creating a product or service and a market for that product or service. The organization s prime concern at this stage is to acquire the resources it needs to survive. The organization s founders are usually technically or entrepreneurially oriented, and as a result, formal business practices are few and far between or nonexistent. Communication among employees is infrequent and when it does occur, it is informal. These characteristics work at this stage because there are not many employees and everyone is concentrated on a common goal to launch the product or service for which the company was formed and to survive long enough to reach the next organizational life cycle stage. This stage is also characterized by long work hours and minimal pay in exchange for stock in the company. Eventually, however, the very traits that lead to success at this stage creativity, innovation, and informality begin to cause problems as the organization grows. Eventually, as the company adds employees, it becomes impossible to continue working in the informal way. Processes must be put in place to manage finances and people. The founders, though, started the company because they were entrepreneurial, innovative, and had a product or service they believed in not because they wanted the day-to-day managerial responsibilities now thrust on them because of their success. This leads to a crisis of leadership and causes the fledgling organization s first revolution the admission that to continue to grow, the company has to find a leader who is a strong business manager. It is this revolution that leads the organization into the next stage, direction. 6 P a g e

The Direction Stage If the company survives the revolution in the first phase and installs a leader with business acumen, they will move into a period of sustained growth. Characteristics of this evolutionary period include: Establishing a functional organizational structure; Specializing jobs; Introducing formal accounting systems; Adopting budgets and work standards, and; Communicating more formally and impersonally as hierarchies are created. These more formal functions help channel employees energy. This more directive approach, though, eventually breaks down because employees start to feel restricted by the more centralized hierarchy. A crisis of autonomy occurs among employees, unleashing another organizational revolution in which managers must learn how to give lower-level employees the ability to make decisions. This revolution leads to the next stage, delegation. The Delegation Stage Decentralization is key to this stage. In this evolutionary phase, responsibilities are decentralized to allow managers to take on more responsibility. Bonuses are used to motivate employees and senior leaders manage by exception based on reports they receive from the field. Communication from the top is infrequent, but when it occurs, it is formal. This stage allows the organization to grow by motivating lower-level managers. The revolution in this stage happens when senior leaders begin to feel that they are losing authority of their operations, leading to a crisis of control. To regain a sense of control, additional formal systems are introduced that allow senior leaders to realize growth through more efficient allocation of the organization s resources. These additional formal systems, however, add more layers of procedures that start to take precedence over problem solving. This leads the organization into the next life cycle stage, coordination. 7 P a g e

The Coordination Stage This stage is characterized by the implementation of even more formal systems that allow better coordination among senior leaders. Where the last stage decentralized systems and managers took a more hands-off approach, the coordination stage requires senior leaders to accept more responsibility for the administration of the new, more formal systems. At this life cycle stage: Formal planning procedures are established; More staff is hired to develop company-wide programs intended to control line managers; IT becomes a centralized function but daily operating decisions remain decentralized, and; Stock options and profit sharing plans are offered to increase employee loyalty and retention. These more formal systems help managers look beyond the needs of their individual units, and they begin to learn to justify their decisions to senior managers. The revolution at this stage occurs when lower-level managers and employees begin to feel that these formal systems are overkill. A red-tape crisis occurs. The system has become too bureaucratic and innovation is stifled. The organization, as Greiner notes, has become too large and complex to be managed by the formal systems put in place. This leads to the next stage, collaboration. The Collaboration Stage This stage tries to minimize the red-tape created in the coordination stage. This stage is characterized by more spontaneity and innovation through the creation of teams. Employees are taught how to minimize interpersonal conflict and differences through skillful confrontation. Social control and self-discipline replace formal control, and problem solving is done through unit and cross-functional teams. Rewards are geared toward teamwork rather than individual accomplishments. 8 P a g e

Life Cycles and Talent Management W hen Greiner proposed his life cycles in 1972, talent management as a strategy was yet to be created. But thinking of talent management in terms of where an organization is in its life cycle can help HR and talent management professionals determine if, when, and what type of a talent management strategy would benefit their organizations. Businesses in the creativity and direction phases are typically growing rapidly. In turn, the complexity of the business begins to outstrip the ability of senior leaders to effectively manage it. Just like the formalization of other organizational processes and systems Greiner wrote about, the need for talent management is a direct result of this new business complexity. Every organization will eventually need a talent management strategy, whether formally or informally. As organizations grow, they hit a wall where there are not enough leaders to manage the new business. They need new leaders to continue to grow and evolve, but there are none in the pipeline because talent management has not been part of the business strategy. Most organizations neglect talent management through the delegation stage. The formalization of the business processes during the direction stage (finance, logistics, operations management) may have caused decision-making bottlenecks, and there is little appetite for formal HR processes when delegation to regional and departmental leaders is the more pressing need. It is this delegation, however, that allowed the organization to grow, and by doing so, increased complexity to the point that a return to more centralized coordination is needed. The collaboration stage is typically the place where an organization is ready to accept the strategic importance of talent management. At this stage, it becomes apparent to senior leaders that some talented employees are being underutilized and that their skills would be valuable in other areas. Senior leaders also realize at this stage that the focus on each unit s own needs has led to silos that have damaged the organization s overall health. Organizations with highly complex, uniquely-skilled positions can be stymied by talent issues regardless of their size or speed of growth. When an organization is in the creative stage of its life cycle, the founder and a few key employees may have the necessary technical skills grow the business, but as the organization expands, those technical skills may need to be added to or replaced. Larger, more mature organizations can also be affected by the loss of 9 P a g e

highly specialized people (for example, employees who manage their research and development or employees with skills that the national market for employees with those skills may number in the tens). It is also important for HR professionals to recognize that for some organizations, the best advice is, if it ain t broke, don t fix it. For organizations experiencing slow growth, with low turnover and easily replaceable employee skills, a formal talent management process may not be necessary. In those organizations, HR and talent management professionals should keep close tabs on where the organization is in its life cycle, however, and be prepared to propose a talent management strategy well before the organization is negatively impacted by a talent scarcity. Making the Talent Management Strategy Pitch A lthough a talent management strategy may not have to be implemented immediately in all organizations, HR professionals should have one in their back pockets because organizational change is inevitable. All organizations that grow will move from a relatively stable, evolutionary stage into a revolutionary one, and HR and talent management professionals should use these stages to frame a relevant business case. The challenge for HR and talent management professionals is to convince senior leaders of the value and necessity of having a talent management strategy. As Lawler Company Spotlight: Right Management Management consulting firm Right Management has developed a talent management strategy that works well for them. The process starts annually in July and begins with a review of their strategic execution framework. The framework includes the organization s goals and initiatives identified in their three- year strategic plan. As part of the review, senior leaders divide business objectives into five main sections; revenue, business development, profitability, thought leadership, and organization and culture. From there, HR leaders can analyze the implications of those business objectives on talent management strategy and planning and communicate those implications to the team. From there, they can identify their talent commitments for the year. Talent commitments may include communicating with and engaging employees, developing and launching new programs for high-potential employees, and expanding the company s succession plan. Source: O Leonard, 2010. 10 P a g e

pointed out in his Forbes article, most executives lack a human resource background and often feel their organizations don t need a formal talent management strategy or don t realize when the time has come. To convince senior leaders about the value of a formal talent management process, HR and talent management professionals should consider the following steps: 1. Create a narrative. 2. Create absolution. 3. Identify current and future business needs. 4. Find champions. Create a Narrative HR and talent management professionals should prepare to win executives over by creating a narrative that offers talent management as a solution to the pain of a given revolutionary cycle. Like Smith in the example on the first page, HR is in a unique position to capture business-relevant stories related to talent across multiple business units. In telling the story, HR and talent management professionals should weave together the frustrations that keep the business from achieving its goals into an understandable story where talent management is the tie that binds. People make sense of their reality through narratives, and HR professionals who can describe accurately the evolutionary phase the company is in will have an advantage when creating these stories. Hallmarks of Future-Focused Talent Management All aspects of talent management recruitment, development, retention, and transition are integrated in advance of any need. Successful future-focused talent management strategies: 1. Continuously monitor workforce demographics, costs, and issues with an eye on the future. 2. Have clearly defined roles and competencies that align with business objectives. 3. Include a process for effective recruitment and onboarding and hire the right people for knowledge, skills, experience, and cultural fit. 4. Include a strong focus on leadership development. 5. Have a strong succession plan. Source: Leisy, n.d. 11 P a g e

Create Absolution When creating the narrative, it is important that HR and talent management professionals also offer absolution. The lack of a formal talent management process is not a poor reflection on existing leaders. There may have been many piecemeal attempts at talent management in the past, perhaps during an annual meeting where the organization s top ten performers were recognized. HR and talent management professionals should acknowledge past attempts, but explain why those attempts are no longer sufficient. In fact, HR and talent management professionals should point out that the need for a formal talent management approach is a testament to senior leaders abilities to get the organization to this point of complexity that a formal talent management process is part of the next phase of the successful organization. Identify Current and Future Business Needs To convince senior leaders of the value of a talent management process in the organization, HR and talent management professionals should be prepared to offer several examples of failed initiatives or the loss of key employees that restricted growth. In addition, offer senior leaders a glimpse into the amount of money the organization spends on its people compared to other cost centers. When identifying current and future needs, ask the following questions to HR, peers, and senior leaders with talent management firmly in mind and share those answers with senior leaders: 1. Where has our organization been? 2. Where is it now? 3. Where do the answers to these questions mean for where we are going? (Greiner, 1998). Other questions to ask when identifying current and future needs may include: 1. What are the growth strategies and services that will drive our future growth? 2. What competencies do we need to keep, develop, and/or acquire to meet this growth? 3. How can we make our HR function more strategic, effective, and efficient to support these growth initiatives? (Leisy, n.d.). 12 P a g e

The responses to these questions when asked across the organization, will help frame the talent management strategy and create buy-in for the process. Find Champions There are powerful and influential people in every organization who get it and will support the development of a talent management process. They realize that they can t achieve their goals without the right people in the right places. It is the job of HR and talent management professionals to find those people and educate them about the benefits talent management can bring. Talent management should not be sold as an HR process, but rather a business practice facilitated by HR. HR can guide the process, but the knowledge of current talent and many of the future solutions will come from managers. In making the pitch, HR and talent management professionals should feel free to include HR data that illustrates key points. The most powerful data, though, will be found in the sales and production numbers of the leaders who cannot complete their goals because of a lack of talent. The wise HR practitioner should not even pitch talent management to executives themselves, but rather create a core set of enlightened operations managers to explain why they need better talent to execute the company s strategy. Conclusion A ll organizations will need a formal talent management process at some point during their life cycle. HR and talent management s role in developing that process is to be able to recognize when the time is right and to make the business case that a process needs to be executed. HR and talent management professionals should be prepared to make the case for talent management, achieve senior leader buy-in, and be ready to help link talent management back to an organization s bottom-line. 13 P a g e

About UNC Executive Development Our approach to program design and delivery draws upon the power of real-world, applicable experiences from our faculty and staff, integrated with the knowledge our client partners share about the challenges they face. We combine traditional with experiential and unique learning to ensure that all individuals gain relevant new skills that they can easily implement within their own organizations. Through action learning and business simulation activities, we challenge participants to think, reflect and make decisions differently. Our Approach: The Partnership Our team customizes each leadership program through a highly collaborative process that involves our clients, program directors, faculty and program managers. We are dedicated to following-up with our clients and individual participants to ensure that their learning experiences have been meaningful and impactful. This integrated approach consistently drives strong outcomes. Our Approach: The Results Our executive education programs are designed with results in mind, and we are focused on successfully meeting our clients' business and academic expectations. Below are a few examples of the results our client partners have achieved: Leadership refocused with new strategy and cohesive vision Strategic plans created for the global marketplace Supply chains streamlined Products redefined New markets targeted Cost-saving measures developed Silos leveled Teams aligned Participants leave empowered to bring in new ideas, present different ways to grow business and tackle challenges. The result is stronger individuals leading stronger teams and organizations. Contact Us Website: www.execdev.unc.edu Phone: 1.800.862.3932 Email: unc_exec@unc.edu 14 P a g e

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