The changing employment landscape means companies must adopt a more dynamic and technological strategy when it comes to attracting and retaining skilled workers. Domini Stuart reports.
Recruitment used to be simple. When someone resigned you looked for a replacement, or you advertised to fill a new role. You then sifted through suitable applicants before making your selection. These days, good people are so much harder to find that there is a real chance of having no suitable applicants. As a result, recruitment is undergoing a transformation from reactive and tactical to strategic and proactive.
“Organisations which maintain a pipeline of talent have a distinct strategic advantage,” says Karen Cariss, founder and CEO of talent management software firm PageUp. “Directors need to be sure that people managing recruitment activity are aware of new skills that will be needed in the future as well as those that might need to be replaced.”
Some companies have employed in-house specialists to manage this long-term process – a trend that Cariss expects to continue.
“Once you have identified a prospect you need to build the relationship in much the same way as the sales department builds relationships with customers,” she continues. “You need the right technology to support that. And the journey from initial contact to employment can take 12 months or more, so this is very different from the traditional search process.”
LinkedIn is the biggest recruitment story of the past few years but Jon Williams, managing partner of PwC’s people business, is concerned that it discourages diversity.
“There’s always a danger that you will employ people who reinforce the existing culture and behaviours,” he says. “LinkedIn exacerbates this risk because it creates communities of people who all know each other, and it can be hard to break into those groups.”
Recent PwC research found that Australians are far better at moving within industries than between industries.
“The problem with this is that if you move from, for instance, one major bank to another you do not create value – you are simply applying the same skills to a different environment,” continues Williams.
“But if you move from a major bank to, say, BHP Billiton you create value by taking the skills you have learned in one sector into another. I think it is important for boards to ask whether their company’s recruitment strategy encourages diversity and fresh thinking by hiring from outside its own industry, social groups and peer groups.”
Keeping good people
Williams believes that retention hinges on one thing – living up to your promises.
“The more you have to overpromise to get people in, the bigger the problems you’ll face when they start comparing the hype with the reality,” he says. “The worse your reputation, the more you have to overpromise, so it’s a vicious circle – and social media has made the experience of working in your organisation much more public than it used to be. Reputation depends, as it always has, on whether you have genuine leaders behaving transparently and walking the talk. That is what boards need to be looking out for.”
A good induction process is also crucial. “Many studies have shown a direct correlation between employees’ first impressions and the length of time they stay with the organisation,” says Marjukka Maki-Hokkonen, Australia and New Zealand president of NGA Human Resources. “Newcomers like to have a clear idea of what’s required of them and to feel they have some control. Induction systems that enable them to access information and allow them to update and alter their details support seamless integration into an organisation.”
A number of different technologies can help directors to keep track of morale. “Annual engagement surveys are now dead in the water because a year is way too long for your people to wait to be heard,” says Williams. “Instead, many larger organisations are using internal social networks such as Yammer to tap into what they are talking about.”
Innovative use of technology is on the increase, such as using an iPad to collect answers to one or two pertinent questions from people who are leaving a meeting. There is also a move towards quarterly or six-monthly polls, often with “pulse checks” in between.
“Everything is speeding up in our world, including how rapidly employees expect an organisation to respond to their feedback” says Cariss. “They’re used to instant communications in their social life and this is shaping their expectations as employees.”
In 2015, we could see more companies offering mid-term sabbaticals to executives as a way of reducing turnover.
“A break can help executives to feel refreshed and avoid burnout,” says Alison Gaines FAICD, global practice leader, board consulting at Gerard Daniels. “It can also generate some new ideas for the business – a well-organised sabbatical will include professional development and networking with innovators in the sector.”
There could also be changes to the way people are paid. “There is some evidence that, when people are satisfied with their base salaries, non-financial motivators can work better than extra cash,” says Williams. “But the same incentive will not work for everyone. There are four generations in today’s workforce, so it is important to understand what appeals most to the different groups.”
Williams also predicts a move to greater simplicity. “Research has shown that every degree of increased complexity in an incentive plan is matched by a decrease in its perceived value,” he continues. “And, if the plan involves more than six people, the individuals start to feel it is out of their control.”
Managing the risk
As businesses become more dependent on their people, boards must manage a growing risk. They need quality information – but the rate of change has left some directors struggling to catch up with what they can and should be asking.
“We envisage more boards taking advantage of the specially-designed analytics and dashboards that enable them to assess human capital risk in the same way they would assess financial or operational risk,” says Cariss.
Heleen Cocu-Wassink, director of global clients at Hay Group, recommends scenario-planning tools such as DynaPlan.
“These can help directors gain a better understanding of what management should be doing now to ensure they have the right workforce in the future,” she says. “Directors should also ask for a rigorous stocktake of the current labour supply and encourage the executive to challenge the current organisational design. The board needs to know whether the relative size of departments and business units is still in line with the strategy, whether the number of people in each area reflects the key areas of focus and whether people are committed and empowered to do the work.”
Smart use of data
Since their inception, newer companies like Google and Facebook have collected and analysed vast amounts of data relating to talent management.
“That is how they are able to execute such a rapidly-growing and changing business plan,” says Cariss.
Michael Specht, head of HR services and strategy at HR technology firm Navigo, believes that smart use of data will play an increasingly important role in this area.
“A combination of social, mobility, analytics and cloud-based technologies, known as SMAC, is driving new business models,” he says. “We’re heading for a divide between the organisations which have built new digital business models based around these technologies and those which have not.”
Modifying pre-data management practices is a transformational process, but it is less about implementing technology than managing change.
“It is vital that key people are retained during periods of upheaval so leaders need to be sure they are being looked after,” Specht continues. “And, while many advances in technology involve automation and simplification, organisations cannot commoditise their talent. We need to remember that people are at the heart of every company. How they react to what happens around them can have a profound impact on business success.”
Establishing the culture
The culture of an organisation encompasses everything from values, leadership and how people work to ways of dealing with external stakeholders. Yet culture is still considered a low priority by many boards.
“We believe they will be under growing pressure to change,” says Henriette Rothschild MAICD, managing director, Pacific at Hay Group. “In 2015, the most effective boards will be discussing their definition of the ‘as is’ culture and agreeing on a shift to a ‘to be’ culture. This will clarify expectations and ensure that, as the organisation changes, it will not lose its identity or the aspects of its culture that provide a competitive difference.”
No board wants to be the last to know about any degrading of organisational culture. “It shakes their confidence in the executives’ leadership,” says Gaines. “Good CEOs will normalise cultural surveys as part of the performance cycle and take the board into their confidence with a frank appraisal of cultural performance and risks.
The board should encourage management to divulge any bad results promptly, ideally with remedial strategies.”
Williams favours demographic research for assessing cultural risk. “Properly done, it will uncover who holds the power, who makes decisions and whether people follow the rules – someone who is willing to break the rules to get around small things is more likely to break the rules to get around regulations,” he says.
The prevailing culture is also a critical factor in recruitment. “An example is a company’s attitude to new and emerging technologies such as mobile, social and cloud,” says Cariss.
“Boards are right to be concerned about the threats they might pose but restricting their use could drive away people who expect to have everything at their fingertips.
“Younger people in particular, do not want to work for an organisation that appears to be trapped in the past,” she said.
Gerard Daniel’s Alison Gaines discusses what lies ahead:
- The last few years have seen sluggish executive remuneration growth so there may be some pent-up expectations among executives. How boards respond will depend on the performance of their sector – for example, there is likely to be little pay increase in the mining sector because of its focus on cash preservation.
- There has been little in the way of innovation in salary packaging. Lots of companies are holding firm on fixed remuneration, or awarding modest increases linked to the Consumer Price Index. I think we will see companies overhauling their key performance indicators to ensure they are quantifiable and linked to award of short-term incentives.
- There is some development of modest incentive schemes for executives in the not-for-profit sector. This sector is managing the risk of affordability by making the achievement of targeted budget surpluses a condition and by capping the maximum bonus.
- Depending on the success of the federal government’s deregulation program, 2015 could see the return of favourable conditions for employee equity plans.
- Boards in unlisted sectors are implementing, or at least considering, split short-term bonus payments that award 50 per cent of the payment immediately and hold the remainder as escrow for another year or two. This is a retention strategy where long-term incentives are not possible; continued employment is the performance measure that unlocks the escrowed money.
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