In 1997, a study from McKinsey & Company [i] gave us a new war to fight. This unusual war was anonymous, there were no armies to fight nor a punctual victory to score, however, the battle is still undergoing and it will have a long lasting effect in all global economies. Some even venture to say that the war is over, and talent already won.
A follow up study by McKinsey in 2001 [ii] indicated that return on investment was “22 percentage points better” in companies committed to Talent Management programs, although the causality couldn’t be directly drawn. This study also found significant differences comparing average employees with top performers: top performers showed 40% increase in productivity when sitting in operations roles, 49% increase in profit in general management roles, and 87% increase in revenue in sales roles. In every subsequent study, the problem has been reported as more acute than before, the issues around Talent Management remain unresolved.
The circumstances that now define the global business environment are becoming more extreme, and corporations require a workforce that performs well in an environment with greater levels of uncertainty. Let’s take a look at some of these paradoxes:
- Global businesses are struggling to achieve both economies of scale and local responsiveness. To achieve these new frontiers of cost and adaptation, firms require in-depth consumer insights, efficient logistics and excellence in operations. A good case is Pepsi's Frito Lay in China, if you go to the corner store in Shanghai, the flavours, packaging and product line of Lay’s, will for sure surprise even some of the most highly creative marketers in America. If you look behind the scenes, you probably will be amazed by the logistics and manufacturing facilities.
- We live in a global, interconnected world, where local events matter more than before, news nowadays literally travel at the speed of light. The reputation of many global brands lies in the hands of local operators and will be determined by local business practices.
- We all have a sense of a shared human consciousness, however, now more than ever, culture and national differences matter. Large corporations need to win in these fragmented markets, one consumer segment at a time. Firms innovating with products or services in remote markets should quickly bring high potential products to traditional mature markets. A product that may be a best seller in the north of India may not sell in the south, but it may be a hit in the US.
- Although we have all these new tools and channels, communications with relevant stakeholders is even more difficult. Firms have to be more cognocent than ever about diversity and culture sensitivities.
- Strong local players are being forced to compete abroad. There are different reasons for that, either they must follow existing customers to continue being relevant, or they face new entries in their markets so they have to come abroad seeking diversification and growth. We are witnessing the birth of first-class multinationals in the former manufacturing and low cost outsourcing destinations, which are now targeting mature markets and competing for the same workforce. Good examples are the Brazilian miner Vale and the aircraft manufacturer Embraer; the Indian conglomerate Tata Group and the IT powerhouse Infosys; and the Chinese appliance manufactures Haier and Midea.
- Innovation has forced organizations to become agile making business practices and processes more difficult to enforce. Significant knowledge and innovation are needed to achieve organic growth. Ironically, the employees holding specific knowledge are now more mobile than ever. Employees don't hold loyalty to corporations anymore and the concept of free agents is more common.
- Significant growth is happening in emergent markets but in order to capture it, corporations have to find more creative ways for delivering products adapted to target specific segments at a lower price. While the west debates and watches the stagnant state of their economic growth, emergent economies like China and India are being the epicentre of a transformation from rural to urban with a growing demand like in no other time in history.
- Labour arbitrage now is not only available to corporations but to employees as well. In many nations the workforce is highly mobile reaching location that will pay higher wages for skills in high demand. Some governments have opened the door for skilled immigrants but beyond that, regional treaties, like Nafta and the European Union, have actually enabled that phenomenon. Some employees also prefer small instead of large firms in part due to the growth opportunity and potential financial reward. Emergent markets like the BRICKS are now becoming an attractive location to former skilled immigrants; recapturing this talent has become a key success factor.
The motto "People is the most important asset", hanging somewhere in your workplace, is problematic at best. Individuals have their own mind, interest, and needs. Corporations now have to deliver a unique value proposition to top talent which requires a significant individual understanding. The right people empowered at the right levels seems to be the ingredient that determines the outcome to address those paradoxes that require a deep understanding of the firm's mission, values, business and products; an agile, creative and diverse leadership; a clear cultural understanding; a well rounded value decision making; and excellence in business practices.
Interestingly, corporations have sought shelter in technology to address a human problem without looking at the root cause. Senior managers are struggling to incorporate Talent Management practices to their list of top-of mind activities, lacking the skill in absence of previous exposure to such programs, in part because people were not at the top of their agenda before. Human Resource departments are fighting their way around these initiatives to carve their own niche. Who should be in charge? Who should own it? One of the sore points is that HR leaders have a low passing grade in business knowledge and in many organizations little saying in the key strategic decisions.
Today more than ever, Talent Management as a business practice really matters. Talent Management activities as presented in the Talent Wheel Model must be well understood, controlled, weighed, measured and aligned to develop an intentional strategic position.
[i] McKinsey & Company, “The War for Talent”
Elizabeth G. Chambers, Mark Foulon, Helen HandÞeld-Jones, Steven M. Hankin, and Edward G. Michaels II
THE McKINSEY QUARTERLY 1998 NUMBER 3
[ii] McKinsey & Company , “The War for Talent, Part Two”
Elizabeth L. Axelrod, Helen Handfield-Jones, and Timothy A. Wels
THE McKINSEY QUARTERLY MAY 2001
© 2011 by Juan Manuel Moreno - all rights reserved.
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