Implementing Talent Management Strategically David Collings Ph D

Implementing Talent Management Strategically David Collings Ph. D. @collingsdg

Session outline Ø Talent management matters Ø Often poorly understood Ø Talent critical to organisation sustainability and performance Ø Often misaligned driven by misguided beliefs around value Ø Key is greater alignment

TM in Ireland Ø CEOs perceive availability of talent & skills as key threat to growth prospects Ø Talent retention top priority (40% of HR leaders) Ø 54% of org had formal and developed TM programme in place- significant increase (ROI? ) Ø Ability to manage talent one of top skills gap for HR function (29%) PWC, Leadership Pulse Surveys, 2014/5

Source BCG 2013

• Is talent management important in your organisation? • How is talent management defined in your organisation?

Definition • Key weakness – Only 20% of managers had formal definition (CIPD) – Roughly five different streams of thought

Collings & Mellahi framework • Strategic TM: – Activates & processes that involve the systematic identification of key positions which differentially contribute to the organisation’s sustainable competitive advantage, the development of a talent pool of high potential & high performing incumbents to fill these roles, & the development of a differentiated HR architecture to facilitate filling these positions with competent incumbents & to ensure their continued commitment to the organisation

Collings & Mellahi framework

Pivotal talent positions Ø A performers or A positions? Ø When employees are able to contribute to a firm’s strategic objectives they have (strategic) value however …not all strategic processes will be highly dependent on human capital (Becker and Huselid)

Pivotal talent positions Ø “disproportionate importance to a company’s ability to execute parts of its strategy &…the wide variability in the quality of work deployed by ees in these positions” (Huselid et al) Ø Fundamental shift ØJobs traditionally differentiated in terms of inputs ØNew focus on potential outputs

Value to Org (Customer experience) ROIP for a Pilot (Boudreau & Jeuthasan 2011) Legally required Elements of job Airline’s minimum Performance expectations Discretionary services or behaviour

Value to Org (Customer experience) ROIP for a Flight Attendant (Boudreau & Jeuthasan 2011) Legally required Elements of job Airline’s minimum Performance expectations Discretionary services or behaviour

Developing a talent pool Ø High potential and high performing incumbents which the org can draw upon to fill pivotal talent positions

Talent pools Ø Proactive identification of talent Ø Manage the risks associated with pivotal positions (Cappelli, 2008) Ø Potential mismatch between ees and skills – Qualitative- skills required – Quantitative- too many- redundancies, too few inability to execute strategy

Developing a talent pool Ø Combine internal development & external recruitment Ø Systematically identify future business needsknowledge, skills and capabilities-that may be required but are currently unavailable Ø Develop talent in organisational context rather than for specific roles? Ø Prevents developing employees to fit narrow specialised roles

Scenario planning

Looking 3/5 years into the future • How will your organisation look? – Scale – Products – Markets • What are the implications for talent – KSAs, quantity, location? – Make or buy

Differentiated HR • More recent recognition of differential contributions of specific groups of ees to firm performance (Lepak and Snell) • For talent pools commitment-orientated HR • Shift from transactional to relational psychological contract

Sustainability & value Ø Most thinking on talent is linked to creating shareholder value Ø Shareholder wealth can be a poor indicator of long term sustainability Ø Value proposition becomes self-perpetuating-driving practice & behavior Ø 63% of respondents felt pressure to generate short-term returns had increased over past five years Ø 79% felt performance was evaluated in a two year window (Mc. Kinsey, 2014)

Wal-Mart Ø Wal-Mart Believes that shareholders are best served if employees do all they can to hold costs down including cost of labour

Costco Ø Ethical principles, core beliefs & values • ‘We remain committed to running our company and living conscientiously by our Code of Ethics every day: to obey the law; take care of our membership; take care of employees; respect our suppliers; and reward you our shareholders’

Productivity Ø Sam’s Club 110, 200 employees deliver $37. 1 billion sales Ø Costco $43. 05 billion sales with 38% fewer employees. Ø $21, 805 profit per hourly employee V $11, 615

CEO Response On Wall Street they’re in the business of making money between now and next Thursday. I don’t say that with any bitterness, but we can’t take that view/ We want to build a company that will be here 50 and 60 years form now’ Ø Between 2001 and 2006 (index 100) Ø Costco stock rose 55%, Wal-Mart’s fell by 10% Ø Costco shares traded at 24. 8 times expected earnings, Wal-Mart at 17. 4%

Short-term HRM Ø Downsizing Ø Correlates with decreases in subsequent firm performance Ø Particularly in firms with R&D intensity Ø High-levels of pay dispersion Ø Short-term gain, long-term performance benefits poor Ø High usage of part time labour Ø Negatively related to firm performance

Why • “Who would the majority of rational employees want to give their all for the benefit of shareholders they are never likely to meet? Who, other than the shareholders themselves, gets excited by the shareholdings of shareholders? ” (Paul Kearns)

A sense of purpose

Talent alignment Ø Companies defined by a sense of purpose & that prioritise employees as stakeholders generally have higher revels of alignment between organisational and employee goals & more highly motivated employees (Birkinshaw et al, 2014) Ø Focus on relational elements rather than transactional Ø Three axes of alignment Ø Capabilities, commitment, contribution

Capabilities alignment Ø How do the capabilities of the individual match the org and vice-versa Ø Organisation Ø Pivotal roles- KSAs required- Sustainable Ø Dynamic- scenario planning Ø Importance of firm specific capabilities Ø Employees Ø Fit with experience, potential for growth & development Ø Values & priorities

Commitment alignment Ø Context of reduction of long-term internal labour markets and demand flexibility from employers Ø Orgs need to forecast talent risks to minimize redundancies or reactive hiring Ø Key decision around design of talent systems- exclusivity, talent pools etc. Ø Employees need to find organisations with opportunities to match capabilities Ø Sense of fairness & consistency of systems key

Contribution alignment Ø The ROI as perceived by both parties Ø For org Ø Does the reward package negate all of value? Ø Evidence from sport and movies- UEFA Ø Is performance aligned with org values? Ø For individual Ø Fairness of reward- high wage dispersion diminishes cooperation, increases manager turnover, decreases financial performance

Commitment ctd Ø The importance of pro-social goals Ø Normative corporate goals that underlie employee motivation for joint production Ø A higher order purpose Ø Underlies perception of intent of HR practice

Conclusions Ø Talent critical to organisation sustainability and performance Ø Often misaligned driven by misguided beliefs around value Ø Key is greater alignment

David. collings@dcu. ie @collingsdg