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TALENT MANAGEMENT – HOW TO “INVEST” IN HUMAN CAPITAL IN TIMES OF CRISIS
Attention firms: each lost talent costs at least one year’s salary, plus recruiting expenses, missed billing during the period of reduced activity, and costs from loss of know-how.
Competition, inflation, stagnation, recession. These are the specters that agitate the nights of entrepreneurs and managers just about everywhere on the globe, but in a way certainly felt in our country. One thing, however, is now established: the shaky contemporary economy needs ideas, new energy, and an unprecedented sprint to deal with the complex scenarios ahead. With a prepared and capable team that can put forward the best and displace competitors, the game is all to play for. Otherwise, the challenge is lost at the start.
In times of fiercest competition, when there is a risk of business contraction, in order to maximize efficiency and reduce costs, the temptation is strong: cut everything that is not immediately essential, suspend investment, drastically reduce commitment on development programs, obsessively focus on market and production to shift into a gear that will allow low-speed travel … hoping it will pass! A reaction that in the very short term perhaps allows for the recovery of a limp balance sheet, but which, maintained over the longer term, can prove a lethal boomerang for companies that have long since learned to travel lean and make cost saving and careful oversight of operations an unquestioned dogma.
A hasty response that from the perspective of human resource management often means re-staffing, incentive redundancies, resources to the bone. And that it also frequently leads to so-spend virtuous mechanisms that have made the company, whether small or large, a brand of excellence. There is also a danger of jeopardizing investments already made and of seeing not only the human capital of the enterprise, made up of the people, skills and relationships that constitute its most valuable intangible assets, but also the (expensive!) processes and practices that generated it, evaporate in short order.
These are processes that have, over time, made it possible to hire the necessary resources (selection), to develop the deserving and position them on the most critical activities (development), to ensure generational change and succession (succession planning), and to create the right environment for talent to flourish (and apply) where it was appropriate. Creating that firm and engaging relationship between the company and the people who work there, so valuable in times when we need to grit our teeth and roll up our sleeves to make that extra effort that can take us out of the turbulence.
If because of the increased workload, staff reductions or postponed hiring are also added to a suspension of the performance or talent management systems laboriously put in place, the mess is made! It will certainly take just as much effort and investment to regenerate them, make them operational again and suitable for the changed conditions.
COMMITTED AND INFORMED = SUCCESSFUL ENTERPRISE
To counter market instability and a faltering economy, is it really useful to mobilize corporate talent in business design? Much international research unequivocally indicates that a key determinant of business success is precisely the high motivation of people to support the success of the organization, combined with visibility and alignment toward corporate strategies. In other words, the key is to be able to retain employees who want to make an active contribution and, above all, know what the company expects of them to achieve business results. Previous surveys had already shown that people with high levels of commitment work in companies with the best financial results (which could also just mean that more prosperous companies are able to motivate people better). Now it has been found that the reverse is also true. Striving for people to be “engaged” (according to the happy expression used by Kahn in the 1990s) is a really important lever for improving financial outcomes. The formidable mixture made up of high motivation and focus on where you are aiming and what results you want to achieve thus appears to be one of the decisive ingredients for achieving success in business.
From a human resources perspective, what is the right way to sustain business and deal with an uncertain market full of pitfalls? Before answering this challenging question, some terminological clarification.
WHAT DO WE MEAN BY TALENT MANAGEMENT?
Every business needs to know who they have in house and how they work. It also needs to know trades and skills needed, to find the right people to perform the activities to the best of their ability, and to pay them in a manner consistent with the market. Better then if he can identify and value those who make valuable contributions and can grow, if he gets to place them where they can express the most, to get the most profit. Great then if its incentive systems are stimulating and appropriate, strictly proportionate to business results, and if people get on board with them and see them fairly related to efforts made and effects achieved.
In short, talent management today means the entire set of strategies and actions necessary to preside over the human and intellectual capital of the enterprise in order to achieve results without inefficiencies from the perspective of resource management. In other words, “having the right person, in the right place, at the right time” and possibly with a salary in line with market levels. It sounds easy, but with the speed at which we move, with the need to stay on top of the game, with the struggle to stay within limited budgets, the elements to take into consideration are-are really numerous! And furthermore, talent is not a given, acquired once and for all: it is an extremely dynamic factor that can be nurtured and allowed to grow, or neglected and allowed to wither away.
This is all the more true for industrial or service entities that have reached the size of the medium-sized company, not to mention those who now have headquarters and operations in other countries, and who have fully entered the logic of multinational corporations. In short, without a coherent system of processes and systems, homogeneous in different geographic locations, which allow governing the variables related to the so-called “talent pipeline” the mission becomes truly impossible, and the management of personnel in an artisanal or familistic logic proves to be an overbearing limitation to the company’s development and growth, forcing it to scale back expectations.
We are talking about operations that are also dissimilar to each other, but which constitute the true core of those who really want to implant an intelligent way of managing talent. These range from the activity of defining what skills need to be developed or acquired, to recognizing who is truly a repository of them and being able to bring them on board, to rewarding and incentivizing those who achieve excellent results.
We adopt the term “talent” here in a very broad sense, to identify at least three important meanings, which can and should be the subject of effective guardianship.
The first is talent as a collective dimension, as a successful result of organized action, capable of making a special and recognizable match between smart people and business needs (“a company full of talent”).
The second refers to particularly gifted people, the so-called high potentials, on whom to bet to launch a new initiative, to put themselves forward in a difficult market, to build from within valuable managers through a well-rounded experience (a choice practiced by more than 60 percent of companies, according to a recent international survey).
Instead, the third refers to the talent components, to each person’s areas of excellence (what we are particularly good at, the areas of personal talent), to be identified and put to use by orienting people toward the trades in which they can excel.
In short, to nurture the overall talent of the enterprise, the areas of focus are many.
EIGHT KEY QUESTIONS TO BOOST TALENT
THE ACTIONS FOR TALENT MANAGEMENT
First of all, more effort should be devoted to identifying and knowing the talent already in the home, to grasp all its implications and fully utilize its potential. Starting from the management levels, whose impact on the organization is multiplied by the number of resources managed (who really leads the business, who has talent for strategies, who really presides over the market?) down to the people in key sectors. Attractive results in terms of economic feedback can be achieved quickly by focusing investments on areas that are decisive for the business, such as Sales, customer-facing areas, Production, Research and Development, …
This is the recent case of a service company that, in the process of restructuring, felt the need to see all the resources in the sales area evaluated to see if they were in line with the required skills and if their level of preparation and ability was comparable with those of competitors. This made it possible to verify their optimal placement, to retrain a few misplaced people, to offer growth opportunities to resources whose high potential was confirmed, and, in a general sense, to manifest to everyone the company’s intention to deal carefully and no longer postpone strategic skills.
Another important front for action is motivation and desire to do: how can people in the company be informed and made to participate, what are the organizational conditions to enable them to perform at their best, to let them know the results that are expected of them, how to support them more in carrying out their work to make them feel an integral part of the company’s mission and culture? For example, one manufacturing company under particularly challenging market pressures set up a program to feedback on the involvement of perso-nees and thus the ability to communicate strategies and commitment by conducting an internal survey and subsequent improvement actions. At a time when maximum tension on the outcome was needed, the management gave the initiative the green light to make sure it had a motivated workforce fully on the job.
While the issue of compensation is less sensitive in “rich” eras, when there is a need to keep labor costs under tight control, well-calibrated and allocated rewards and incentives become an indispensable tool of good management. I cite the case of another manufacturing industry, at a particularly strenuous stage after a period of intense development, which felt the need to get its hands on the compensation system and the enhancement of benefits offered to employees, in order to have tools and processes that could focus even more sharply on performance. Clear and shared metrics linked to measurable outcomes are of great help to leaders and the company especially if you are able to employ all the tools at your disposal to maximize effectiveness and adequately discriminate different engagement.
In addition, in times of hardship, stress and fatigue can keep us company for prolonged periods. Helping to set the stage for two very related phenomena: you generate disaffection, people perhaps begin to look around, and at the same time you open the door to those competitors who will identify your firm as an excellent recruiting pool.
The current mentality, inherited from a not-too-distant paleo-industrial past, leads people to view people as mere cogs in a system that works by itself, and as such are easily replaced. Experience tells us that this is not so much true, especially for managers with greater responsibilities, and that any replacement needs time to be effective (we are usually talking about six months to a year, to bring a person to a good performance in a new job setting).
Each lost talent is estimated to be worth at minimum one year’s salary (the period required to get his or her successor fully operational), plus recruiting expenses, plus lost billing during the period of reduced activity, plus costs resulting from loss of know-how. And it often natural- ly happens that the best people are taken away, which can contribute to higher labor costs if the company decides to revive to conserve the resource.
In short, as was the case last year at a medium-sized pharmaceutical company, when the going gets tough it might be just the case to ask: Do we have in place the necessary tools, reward systems, and culture to consistently use the talent in the company? And then carry out a comprehensive audit on the effective integration between human resource strategies, talent management actions and reward systems. The important thing is not only to carry out this or that inda-gine, but also to ensure rigorous overall consistency and real practical application, supported by the appropriate IT tools. Verifying this in the vicinity of a particularly challenging situation is a card to be played!
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Barbara Parmeggiani
Anthropologist, Consultant & Executive Coach
He has directed major HR projects with Italian and multinational companies.
She is the author of the book “We Put Our Face on Every Day.”
bparmeggiani@gmail.com