People run businesses and what is often forgotten is that people drive performance. It is the value of talent that drives business value. Hence, it makes sense that people strategy should drive business strategy. Executive leadership should realise and capitalise on the strategic value of employees by placing talent at the heart of strategic planning. Finding and developing people to execute vision and strategy should be a priority for all businesses looking to grow. Talent acquisition and skills development should be proactive and aligned with business goals. Talent management should be value driven and supported by evidence that is both empirical and based on qualitative judgements. This is both an art and a science.
Talent drives business value in three ways: productivity, leadership and know-how. Talent management is one of the major challenges every company needs to address in order to thrive. It encompasses how employees work, how managers manage and how companies plan and measure talent.
Investors often value businesses as independent from the people that run them. It is important to acknowledge that the structures and processes that underpin any business are irrelevant without effective leadership and talented teams working at each level within an organisation. Investing in a business without considering its people and their skills leaves no business to invest in. Valuing talent in a business is not about individual star performers or leaders. Rather, it is valuing how talent performs and is managed within the structures that frame the business. The annual World Management Survey consistently correlates the combination of management practice and talent development with successful companies.
The most effective businesses align talent strategy with business strategy. According to Harvard Business Review, Blackrock is an example of an organisation that does this well. It’s Human Capital Committee is comprised of senior managers responsible for each of the company’s business and geographic lines. Strategic talent planning is aligned with business objectives and line managers are accountable for people strategy, talent acquisition and skills development. Like Blackrock, successful businesses create value through people and performance by doing three things:
Firstly, the most successful firms recruit and compete for talent on an ongoing basis. They place a high value on finding and keeping great people. Companies that are astute about talent acquisition are constantly interviewing people, benchmarking and marketing the employee value proposition.
To plug any skills gap, companies have two options: acquire new skills or support the development of in-house skills. High performing businesses do both. They excel at talent planning, recruitment, developing employees, talent reviews and succession planning. Managers consider how business critical a role/person is for each role in the organisation. Those roles or people that are business critical are adequately resourced and planned for in the same way as a financial asset. This involves placing the right talent in the right roles at the right time. Responsibility for talent acquisition is reflected in budgets as well as performance goals.
The most effective recruitment strategy is for both the business and human resources to work together when hiring. There is an argument to have the human resources function represented at board level to grasp the strategic importance of a company’s workforce and strive to align performance with business strategy. Ideally, heads of lines of business within an organisation partner with human resources to develop and implement programs that meet financial objectives. Human resources acts as a strategic partner to the business and is not just be actively involved in cost savings and administration, which still tends to be the norm in many organisations.
Secondly, successful businesses create environments that foster high performance and continuous improvement. Realising the cost of losing great people is something many businesses do not take seriously or even factor into their planning. As the skills shortage, in the UK in particular, tightens businesses can expect to experience increased staff turnover as companies poach from each other. The cost of losing key talent is the equivalent of 6-24 months’ salary (PWC Global CEO Survey 2012), yet this financial loss is almost never accounted for when staff leave unexpectedly. Creating environments that enhance performance is achieved when executive management commits to company-wide goals and values and engages directly with talent management strategies and execution. Building a strong and sustainable talent strategy involves developing and maintaining a strong employee value proposition, as well as the right mix of incentives.
Thirdly, successful businesses build knowledge connections. At the moment, both the UK and other countries have access to a global pool of educated, talented and high-potential individuals. However, there is a shortage of people who have the specific skills and experience required to do the jobs at hand. Much of this is the result of the ongoing impact of the 2007/2008 financial crisis as well as fast-moving technological and regulatory changes. In his recent book, Matthew Syed makes a pertinent point about the skills shortage in business today. He writes that employing highly talented individuals is not enough to ensure high performance. Know-how is much more important than raw talent. It is this deep experience and technical knowledge that is scarce in today’s global market of highly educated and talented individuals. The challenge for business over the next few years is to nurture a workforce with the necessary skills to drive economic growth into 2020 and beyond.
The current skills shortage is an urgent priority for more than 60% of UK businesses (Inspiring Growth CBI/Pearson Education and Skills Survey 2015) with job creation on the rise and unemployment at its lowest rate for many years. Most newly created jobs in the next five to ten years are predicted to be highly skilled and business has no choice but to invest in skills acquisition and development of people. Business is also more active and engaged in education as it invests in helping to prepare younger generations to enter the workforce in the next decade.