Talent management is becoming an increasingly important issue for boards eager to better understand their organisation’s culture and attract, motivate and retain outstanding talent, writes Domini Stuart.
Directors manage talent at the highest level – they are, of course, responsible for selecting and supervising the chief executive officer (CEO). The ideal is for them to appoint someone who can lead the company forward and cement a relationship based on mutual trust and respect. But, inevitably, some boards fall short.
“One of the most common issues we see is miscommunication between the board and CEO about their respective expectations,” says Sophie McCarthy, executive director at McCarthy Mentoring. “Many CEOs, and especially those who are relatively new to the boardroom, find it difficult to ask direct questions for fear of appearing weak or inexperienced and, as a result, board meetings can be unproductive and challenging for both parties.”
Even well-intentioned directors can struggle to find a balance between involvement and interference. “There are still some boards that want to be very involved in day-to-day management, and CEOs can find that very difficult to manage,” says McCarthy. “A growing number of CEOs have a mentor to help them manage their new role and work more effectively with the board. They gain a clearer understanding of the unwritten protocols and gain insights from more experienced company directors.”
Taking a broader view
Traditionally, the board’s interest in HR has rarely extended beyond the executive. Fundamental changes in the workplace suggest it is now time to take a broader view. “The increasing complexity of business in the 21st century has sharpened the focus on talent,” says Suzanne Derok, director of Executive Talent Consulting. “Today, one of the board’s key roles is ensuring that the company is hiring the best people for its organisation.”
Managing talent is an aspect of managing risk. “There is an amazing opportunity for boards to help their organisations lift performance by focusing on people but, on the flip side, failing to do so will leave the organisation exposed,” says David Brown, leader of Deloitte Australia’s Human Capital practice.
“You only have to look at the financial services industry at the moment to see examples of inappropriate behaviour splashed across the front pages of the newspaper. Some of these individuals are bound to be bad apples but others reflect a dysfunctional culture and poor choices.”
Social media has laid companies bare to outside scrutiny. Negative comments from a disgruntled employee can attract world-wide attention in a matter of minutes and seriously damage the brand. And there’s also the risk that, as competition for good talent intensifies, companies will not be able to attract the people they need to achieve their longer-term strategic goals.
“The convergence of all these factors has triggered a considerable shift in our approach to talent management,” Brown continues. “Boards need to engage with this discussion because a company’s ability to execute its strategy depends on having great talent fully engaged and behaving in the right way.”
The millennial challenge
As routine tasks continue to be automated, most emerging roles are built around innovative thinking and problem solving. Some people who possess these skills are millennials, the generation born
approximately between 1980 and 2000 and who, according to Brown, now make up half of the workforce.
As a group, millennials are notoriously difficult to motivate. “Of course they want to be well rewarded financially for the work they do, but some researchers have found that purely financial incentives can actually reduce their productivity,” says Derok.
They’re also renowned for being highly demanding of their employers while offering low levels of loyalty.
“More than any other generation, millennials look for flexibility, autonomy, challenging work, social interaction and frequent recognition,” says Karen Cariss, CEO and co-founder of PageUp.
“On the positive side, that means there is huge potential for employers who are prepared to redesign the work they do and their working environment.”
Millennials grew up with the internet, mobile phones, email, texts and the fast-changing digital technologies that dominate today’s business world. “It’s important to make the most of that innate expertise by bringing some millennials into leadership roles,” says Peter Karlsson MAICD, managing director of P&P Global Leadership Experts. “Boards should ask management whether they have appropriate training, development and coaching programs in place.”
The right people
Just a few years ago it was common for companies to ban social media from the workplace.
Today, the most astute organisations are using it to share their employment value proposition, disseminate news and gather market feedback and insights.
“To shun the world of social media is to disconnect from a generation – the very generation that is now becoming the dominant cohort in the workplace,” says Cariss.
Bradley Birchall, CEO of talent management solutions company Seera, believes that personal networks are also the best places to find quality employees, particularly when you’re in search of the right qualities.
“Many organisations are still recruiting by job title – for people’s skills and abilities rather than their competency,” he says. “Competency frameworks lay a strong foundation for hiring the right people, setting their learning and development goals and even establishing effective succession planning. Competencies also provide visibility at every stage making return on human capital (ROHC) visible, measurable and repeatable.”
Boards should also pay attention to diversity. “Organisations that focus strongly on diversity and inclusion are recruiting from a much bigger pool and, as a result, securing an unfair share of the available talent,” says Brown.
A diverse workforce can also provide access to new market segments at home and overseas and make it easier to operate internationally.
“Research suggests that a significant majority of organisations find it very difficult to do business with people from cultures other than their own,” says Karlsson.
“The problem is that, when they’re recruiting, people tend to like and give preference to those who are a lot like themselves.
“But these are not always the ones with the most talent, and the board needs to ensure that there are people within the organisation with the skills and awareness to recruit, reward and nurture genuine talent, capability and performance rather than familiarity,” he adds.
Organisations with high rates of employee turnover spend a disproportionate amount on replacing their workforce. The board needs to know whether poor retention is affecting the bottom line.
“In most industries, a turnover rate of about 10 per cent would be considered healthy,” says Birchall. “Anything above 20 per cent suggests there’s a problem with the way people are being managed.”
Alison Gaines, global practice leader of board consulting at Gerard Daniels, is concerned by how few boards have any real interest in engagement and retention.
“This is particularly worrying in sectors that rely on knowledge management, such as professional and financial services, research, health and education,” she says. “Industries like resources, manufacturing and agriculture are also increasingly reliant on complex skills.
“And those that depend on strong client engagement are most likely to thrive when their customers interact with enthusiastic, knowledgeable and committed employees. Developing and retaining these frontline people is critical to customer satisfaction and core organisational performance,” she says.
Millennials are not inclined to obey instructions blindly – they want to know what lies behind their job and what their work will achieve. “Effective communication is vital, so it’s important to remember that millennials are used to processing information electronically in easily-digested chunks,” says Stefano Masiello, marketing director ANZ, NGA Human Resources.
“Like everyone else, they want to know how any announcement will affect them personally but they expect to be able to scan this in the first couple of seconds. If they can’t, it’s unlikely they will read on.”
The contingent element is fast-approaching 30 per cent of the total workforce, adding another layer of complexity to retention.
“Treating contractors, casuals and freelancers as part of the overall talent solution is very much an emerging trend but organisations must work hard to make themselves attractive to this community,” says Brown. “With the transparency of social media at their disposal, these people are in control of their own destiny.”
For many years, employers have been using engagement satisfaction or climate surveys to gather employee feedback. Now technology has made it much easier to collect information and to customise these surveys.
“Layering systems over payroll data is one way of identifying worrying trends such as fast turnover and regular absenteeism,” says Masiello. “Payroll data is the most accurate information in any organisation – people want to be paid so they are highly motivated to make sure it’s up to date. The more you empower them to manage their own data, the stronger it will be.”
Some larger organisations use weekly or monthly “pulse” surveys to gather feedback, and “mood apps” can track the atmosphere in the workplace on a daily, or even hourly, basis.
“Mood apps are simple, fast and inexpensive, but their simplicity is also a limitation,” says Cariss. “Without appropriate detail, the outputs could be interpreted quite subjectively. They’re not a replacement for more discerning tools but they can be a useful add-on.”
The internet has made it possible for many laborious or difficult functions to be completed far more effectively, faster and cheaper. “Succession management is one area that has benefited enormously from the technology revolution,” says Cariss.
“Succession dashboards can now give executives and directors an instant overview of strengths and weaknesses in succession pipelines. And online succession planning software can also help HR managers to identify rising stars by providing an objective assessment of performance, potential and succession readiness,” Cariss adds.
Gaines is a strong advocate of setting a personal key performance indicator (KPI) for the managing director or CEO. “This can be a very effective way of enlivening succession planning and driving change,” she says.
“For example, one CEO we worked with was asked whether there was a three-deep layer of talent within the organisation with the capacity to fill both long- and short-term vacancies.
“He was motivated to implement an independent succession analysis of his executive and management teams and then work with HR to re-engineer his hiring strategy to fill gaps in the succession pipeline.”
Another CEO had identified her talent pool but failed to give succession planning her full attention. “The remuneration committee gave her a key performance indicator to implement a management talent program, which included improving retention strategies for key managers,” Gaines continues.
“Together, the CEO, HR director and high-performing employees mapped a development program that included external coaches, executive education, project rotations and more exposure to strategy and board conversations.”
Softer business drivers
This year, for the first time, Deloitte’s annual Global Human Capital Trends survey identified culture and engagement as the most important issue overall.
”Directors and executive teams have a history of concentrating heavily on creating as much value as they can from the hard wiring – improvements to the use of capital, technology, process, systems and so on – but our report exposes the soft underbelly of culture,” says Brown. “If we don’t attend to both, we are failing to create and protect value for our shareholders.”
However, Cariss is frustrated that so many boards are still dragging their feet. “Some directors do demonstrate a genuine interest in employee engagement, but the predominant assumption is that the financial metrics of the organisation tell the story,” she says. “At the board level, HR rarely gets airtime. This is quite worrying given the obvious fact that these functions are delivered by the organisation’s people.”
Questions for board to ask management
Deloitte’s David Brown believes that asking the following questions will help boards to oversee the company’s talent more effectively.
What is the talent strategy?
How does it support the business strategy?
How are we measuring progress?
What are the key risks and mitigation plans?
Do we have the right succession planning process in place?
What are we doing to engage and retain our top talent?
What is our approach to diversity and inclusion?
What type of culture do we want and how are we measuring it?
How are we promoting the right behaviour and mitigating the risks associated with bad behaviour?
How are we holding our leaders accountable for our talent?
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