Talent management’s new challenges

By Vincent O. Abella

First Published in Business World (7/15/ 2013)

ORGANIZATIONS are on the brink of a talent crisis, and yet research shows that most companies around the world lack strategic talent management systems to match future market needs and business environments. We’ve heard of the phrase “the war for talent,” but many companies believe that the crisis point is still far in the future.

Unfortunately, it is not.

In the recent EY report, “Paradigm shift: Building a new talent management model to boost growth,” experts say companies that do not invest in talent management right now stand the risk of losing their competitive edge in the long run. The report calls for a complete retooling of traditional talent management mindsets in order to address the human capital shortfall that is already being felt around the world.

Consider, for example, a 2012 survey by the Corporate Executive Board that showed that 60% of organizations were experiencing a leadership shortage. Similarly, a recent Towers Watson study of employers worldwide revealed that 72% reported difficulty in finding and keeping high-potential employees. The study, which included the Philippines, showed that 48% of local companies had difficulty attracting top-performing and high-potential employees.

The EY report indicates that, while many companies understand where they need to be in terms of talent, they are still struggling with how to get there. One example is in the area of cultivating a global mindset. Companies understand the importance of this, yet have difficulty implementing effective mobility and diversity strategies. More and more, it seems that companies need to invest in talent management, flatten traditional organizational structures, and adopt more inclusive leadership styles.

Let’s look at the key challenges facing companies in terms of talent management:

Corporate workforces are becoming more global, but talent management is not. Corporations are increasingly becoming global, with a significant percentage of their personnel located outside the country of their corporate headquarters. Yet, despite this, most corporations are not focused on aligning talent development with the growth of the organization. To manage this, companies need to create career paths that give high-potential managers and executives exposure to different markets to broaden their knowledge and make them more appreciative of different cultures. This is still a struggle for many companies, sometimes due to logistical difficulties such as tax barriers or immigration requirements. Frequently however, the issue is of post-mobility attrition. The study shows that on the average, 38% of overseas assignees leave the company within a year and 61% leave within two years. This underscores the main problem — that many companies don’t know how to bring their people back into the organization after overseas assignments.

Companies have difficulty investing in measuring the effectiveness of talent management. Many business leaders find it hard to see the link between their strategic objectives and the talent required to meet those goals. Part of the problem is, the metrics that matter are difficult to capture. The usual quantifiable outputs include employee satisfaction and retention rates. Yet the question remains, how can the organization know if it is retaining the right people? What is crucial to find out is whether there is a gap between the person who took the job and the skills the position needed.

Talent has to be a top-level, strategic priority. By identifying the skill gaps in the organization, company leadership can better see what talent areas need more attention from a long-term perspective.

The skills and competencies needed by future business leaders are changing. Similar to the need for a changing view on talent management, companies should also understand that the skills commonly seen as vital to C-suite leaders are changing. Previously, there was a greater emphasis on industry and technical expertise, strong grasp of financials and similar areas. Now, companies are seeing that leaders need to have more “soft skills,” i.e., the ability to lead effectively in an international business environment, the ability to embody and articulate the organization’s culture and values, and the capability to command the respect of colleagues and subordinates.

Companies lack robust succession plans to identify the next generation of leaders. Many of the companies surveyed in the report indicate satisfaction with current leadership. However, when it comes to the next generation of leaders, only 54% of the top-performing companies agree that they have a strong pipeline of leadership talent, with the rest indicating a lack of confidence in the next generation of leaders. Lacking a clear set of qualifications indicators for candidates, many companies are also unsure about the right process to select future leaders.

Given these challenges, what can companies do to help alleviate their talent management issues? The EY study offers some possible strategies.

Think long-term. Companies should look beyond trying to make a direct connection between the investment and return on talent. Talent investment is a long-term process, and it may be years before a company sees results. Most programs such as mobility, performance management, awards and recognition are short-term. If companies begin identifying high performers and evaluating how these individuals can gain the critical market experience and skills to take over C-suite positions some day, it would put an altogether new slant on the return on investment.

Change the metrics to evaluate outcomes. Companies need to move away from traditional measurement forms such as satisfaction, productivity, engagement, collaboration and retention. Effective talent management should consider more practical measures, such as filling key positions with promising candidates from within the organization, developing specific competencies within employees, assessing and validating programs through recruitment, selection and development processes, and weighing the impact of talent management against key financial and non-financial performance objectives.

Adopt a disciplined approach. Talent management is difficult to define, and its processes and outcomes may vary across different organizations, industries and locations. Companies will need to treat talent management as a disciplined process of alignment with overall business strategy, integrating programs across the organization, and measuring results against business strategy executions. They should look at closing skills gaps, create customized training and development programs, and identify future leaders early in their careers. They should also focus on the “softer” skills to bolster not just a future CEO’s technical expertise, but also his people skills.

Training and developing talent is in fact something that we take deeply to heart in SGV. We have a structured leadership and development program for all staff and managers to ensure that our people gain not only the critical technical knowledge necessary in our field, but also skills such as business communication, facilitation, negotiation and others. What also makes our process dynamic is that the learning goes both ways; once an individual attains sufficient know-how and expertise in a particular field of training, he or she is then tapped to become instructors and facilitators, deepening the process of knowledge sharing and skills development within the workforce.

As with any critical business process, talent management is fluid and constantly evolving. It cannot be a rigid and inflexible process; nor can it lag behind the complex needs of today’s volatile business climate, if companies wish to remain competitive in the foreseeable future. This is true mainly because at the core of every corporation is people; and human beings of every generation acquire or create specific behaviors and aspirations. Talent management is simply addressing the fact that people change and we need to harness those changes to redound positively on business.

Vincent O. Abella is a principal in the advisory services group and is the People Leader of SGV & Co.

This article is for general information only and is not a substitute for professional advice where the facts and circumstances warrant. The views and opinion expressed above are those of the author and do not necessarily represent the views of SGV & Co.