02_25354_HR_F-la_eh_HR 5/18/10 10:38 AM Page 20 for Honing a Talent Retaining Talent Smart chief financial officers understand the real cost of losing talented people in a recession and having to recruit them again. Knowing that more than numbers affect the bottom line is a key ingredient of their business’s success. © THINKSTOCK E European executives have often looked askance at the United States in the parlous times of economic depression, believing that the phrase “quick to hire and quicker to fire” accurately described the nation’s employment practices. Against historic trends, however, some workforce experts say U.S. employers have worked harder to retain their employees in the current economic environment. Göran Hultin, a former deputy director general of the Geneva-based International Labor Office, said, “Indeed, they [U.S.] have practically matched Europe in their outright zeal to not resort to mass dismissals.” Is this a change of heart on the part of America’s employers? According to Hultin, who publishes the quarterly Global Employment Outlook, U.S. industry has held off By Mike dropping the axe for highly pragmatic reasons. “In Europe, employers have been reluctant to fire during this recession for the key reason that employment laws make it cost a lot to dismiss people — you think twice, possibly three times.” But in the U.S., he continues, employers are reluctant for one reason: They don’t want to lose skills and talent they worked so hard to hire and train. Lose them, he says, “and it’s a very costly exercise to get them back.” Hultin’s right. People cost money and talent costs even more. Most organizations seem to be adept at separating people and money into two piles: Human resources is concerned with employees and the finance department is responsible for counting the results of www.financialexecutives.org those efforts. The problem for many organizations is that people make up as much as 99 percent of the corporation’s assets. Consider, when these employees leave every evening it is their choice to return the following morning. More than that, employment costs — especially for today’s people-centric businesses — make up a staggering amount of the overall operating charges of most corporations. Recruitment, retention, redundancy, reward, training and development — not to mention the astronomic costs of dealing with increasingly litigious former employees — all add up to being the most significant line in many corporate budgets. Anthony McAlister, a partner of Thorburn McAlister, a London-based executive search and Johnson employment analysis firm that specializes in helping organizations deal with “the difficulties of transition” for senior executives, says, “The problem is that with hiring and firing, risks are practically impossible to quantify, and therefore most CFOs ignore them.” There’s good reason for that, he adds. “Historically, CFOs operated on the principle ‘we only measure what can be measured.’ That view doesn’t work in today’s complex and increasingly ambiguous world.” McAlister explains that poor hiring and firing practices directly impact bottom lines. Although it may be difficult to audit and hang numbers on, a “recently removed angry, loose cannon can do untold financial damage in a very short space of time. Bad-mouthing the june 2010 | financial executive HUMAN RESOURCES r1_02_25354_HR_F-la_eh_HR 5/24/10 9:15 AM Page 21 21 r1_02_25354_HR_F-la_eh_HR 5/24/10 9:15 AM Page 22 Firing people in 2010 puts the organization at considerable reputational risk and must be the responsibility of the leadership team, not just HR. — Anthony McAlister, partner, Thorburn McAlister organization, stealing talent from it, moving to the competition, taking key accounts — all these hit the bottom line big time,” he says. All that potential for doing damage from a disgruntled, poorly handled ex-employee, he says, has now been magnified by today’s technology. As McAlister suggests, “remember that social media works both ways. While your HR department is trawling around Facebook and LinkedIn for hot candidates your exemployee is there, too — trashing your corporate reputation to anyone at the click of a mouse.” His view is that in today’s world, the costs involved — financial and reputational — mean that smart CFOs need to be part of the transition process from an early stage. action. Allegedly wronged employees (especially at a senior level) can wipe a lot of percentage points off a struggling bottom line. Tip for CFOs: Make sure there is a robust, practical system in place to identify and deal with these types of issues at all levels and be prepared to intervene early at the top level. n Audit the costs of hiring and firing. Turnover costs money and too much of it. Both exit and recruitment processes become very expensive. Too little and you starve your business of new talent and new ideas. Auditing recruitment, retention and redundancy should be an integral part of every CFO’s budget process. n Create a talent register. Force this issue if you have to, it’s often a life saver, and maybe even for your plement training courses and off-site events by concentrating on coaching and mentoring (using the best of your own, in-house talent). n Clear out the “same old consultants.” During this recession, many smart CFOs have used the time to challenge convention. It’s a chance to stand tradition on its head and look at other ways of doing things. No organization is going to come back from this recession looking like it did two years earlier. As part of that, CFOs can lead the efforts to look for new suppliers of talent (e.g. recruiters, executivesearch firms), rework contracts and challenge convention on everything. Tip for CFOs: There is nothing that should not be up for review. The One ‘Must-Buy’ for CFOs For CFOs, however, there is one ‘must buy’ that should be on their managerial shopping list for dealing with senior talent departures. There is little doubt that top-end departures make headlines. What the CFO doesn’t need is that news headline making headlines in the annual report. “Senior executives leave organizations all the time for a wide variety of reasons — Knowing who you’re going to hire as a replacement underperformance, personaliwhen one of your executives quits is the difference ty clash or simply a casting between being on the front foot or back foot. It error at the recruitment stage,” makes the crucial difference about who is McAlister says. And, with the exception of retirement, he really in control. adds, “it is nearly impossible — Lindsay Thorburn, partner, Thorburn McAlister to plan for. But it is possible to manage it better.” He points out that “firing own job. In today’s highly specialHere are some other areas where people in 2010 puts the organization ized world, it is vital that the organCFOs can get involved in the peopleat considerable reputational risk and ization knows not only who the taland profit-equation and help impact must be the responsibility of the ent is but what it is prepared to do. that bottom line: leadership team, not just HR.” Senior Tip for CFOs: Work with your executives that distance themselves n Productivity increases. Happy human resources department on this. from these developments, he says, employees are the most productive. n Internal coaching saves money. If “not only demonstrate poor leaderBudgets for developments that make you want to hold onto those producship but worse, misunderstand the employees feel better about their jobs tivity increases, improve retention and great opportunity that is presented to make sense. make sure your business is a talent make things better for the business.” n Litigation. Bad firing practices are magnet, one sure-fire way to ensure McAlister advises: “You have to beexpensive. The way around that is to productivity increases is to keep degin to think differently. Don’t stick with set up the right sorts of systems and veloping your people. You can supthe status quo. You can’t afford to.” tackle issues before they result in legal 22 financial executive | june 2010 www.financialexecutives.org 02_25354_HR_F-la_eh_HR 5/18/10 10:38 AM Page 24 to accommodate better As McAlister suggests, the needs of the organi“using national one size fits Watch Those ‘Dotted-line’ zation. all” outplacement consultanAmong the benefits cies for senior executive exits Relationships of hiring smarter are is both short-sighted and not Managing talent — especially talent you don’t fully ensuring you have bestas cost effective as you think. control — is always fraught with potential difficulty. of-breed candidates, Large outplacement consulRichard Savage, a United Kingdom-based organizational reduced cost of promottancies rarely have the adviser, points out that many chief financial officers get ing internal candidates, knowledge, contacts and into tough situations because they don’t insist on havdemonstrable “good commitment needed for a ing responsibilities spelled out in black and white. governance,” faster onsuccessful senior executive boarding time for extertransition,” he says. Often, he says, “with large international organizanal hires and effective As Hultin noted previtions, you’ll find that businesses are broken up by risk management of key ously, corporations across regions or business streams. In structures like this, it is executives. the U.S. have worked hard quite usual to have local finance directors (FD) report Here, the CFO can — using strategies such as to their heads of business sector or region, with a dottake a real lead and also furloughs, part-time and ted-line report to the CFO at corporate headquarters.” act as the “conscience” job-share initiatives — to Still, this relationship can lead to problems. “Local FDs of the organization. hold onto the talent they have to please their boss and so the CFO [at corporate] Whether it is seeking want to keep. can be put into a very difficult situation in trying to get ways to make people But transition, of course, things achieved that he or she sees as necessary for the better (and saving monworks both ways. Even in whole business.” ey at the same time) these tough times companies Savage’s advice: “From the very beginning, get it clear finding new ways to find themselves with the in writing what part of the dotted-line relationship is berecruit, being sensible other need — recruitment. tween the CFO and the local FD. Spell out what part of the with removing those Here, McAlister’s partner, relationship is between the local FD and his [or her] local that need to move on, or Lindsay Thorburn, highboss. That way it is all too clear who takes responsibility knowing just what tallights a few items that too for what.” A note of caution: “This is especially true when ent you have and what often get left out. First, she things begin to unravel — usually around year end.” that talent is prepared says, “knowing who you’re to do, the CFO has both going to hire as a replacean active and a goverment when one of your nance role. senior executives quits is the Few companies will come back usually indicate that your retention difference between being on the front from recession the same as they strategies are world-class.” foot or the back foot. It makes the cruwere two years ago. And they According to Thorburn, partnering cial difference about who is really in shouldn’t. Smart companies and with a flexible and innovative search control.” smart CFOs know that there’s a lot consultancy can do the following: Second, she says, taking the easy that can be done to not only n Analyze all key roles in the organioption and going for the natural improve the bottom line but hone zation and understand exactly what internal candidate (usually because it and sharpen the people power that the role entails. Most organizations is quicker and cheaper) may reduce leads to those improvements. only do this when there is a vacancy the risk of failure somewhat, but usuAuditing people power rather and often key elements are crucially ally means that “what you get is a than simply adding up dollars may overlooked. person who is ‘fit for purpose’ but not be the new-look CFO recipe for a n Identify the “heir apparent” and ‘best of breed.’ ” healthy corporation for the next benchmark them against best of breed. Thorburn believes that talent mandecade. Effective corporate overAdvise on development where releagement, like communism, “works in sight — a key role for any CFO — vant, but have a third party deliver theory, but not in practice.” When you should not only include balancing this to avoid a conflict of interest. have the right person ready to step into the company’s books, but ensuring n Identify four people externally for a vacant senior role it is usually a cointhat its employees are balanced too. each role who are interested in joincidence of timing. She says the “acid test ing the organization. in any organization is how often its peon Be transparent and inclusive with ple are being headhunted.” MIKE JOHNSON is chairman of the global all candidates and establish personalIndeed, adds Thorburn, “if your think-tank FutureWork Forum and a conity and culture fit as early on as you people are not being poached, you sultant and writer. He’s author of 11 books inreasonably can. might want to think what that really cluding the just-published Starting Up On n Innovate different fee structures means. In my experience it doesn’t Your Own, Financial Times, June 2010. 24 financial executive | june 2010 www.financialexecutives.org Copyright of Financial Executive is the property of Financial Executives International and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. [In 2020] technology will be more prevalent in other parts of the business and not just the purview of IT. TIM FERRARELL, CIO. W.W. GRAINGER INC. • • \ SPECIAL REPORT When the cloud blots out the classic IT shop, only the techsavvy business experts will weather the storm. BY JULIA KING ELCOME TO the IT organization of the year 2020 — and brace yourself, because it's a far cry from the department you ñnd yourself in today. Computer programmers have gone the way of the typing pool. So have one-dimensional technology specialists like network engineers. Deeply technical professionals with multiple certifications in virtualization, networking and security technologies work primarily as component engineers and IT architects. Job titles include cloud architect, cloud capacity planner, cloud infrastructure administrator and integration architect. The people who work in these roles design and maintain the underlying framework or architecture. On top of this architecture sits a shifting inventory of cloud services, plug-and-play Web-based applications and easy-to-use proprietary software components that together represent the key source of a company's competitive advantage. How these various components will be innovatively mixed and matched will largely be decided by marketing, supply chain and IT Careers C0MPUTERW0RL0.COM 15 NEW ROLES IT CAREERS 2020 Do you think your current IT job function will exist in 2020? Yes. but it will have changed dramaticallv: 26% -Yes: 5 7 % You need to get skilled in emerging technologies and develop a deep technical skill set. Not likely: 7% NO: 1 0 % MARKO'GARA, VICE PRESIDENT. HIGHMARK INC. NEW SHOPS In 2020, will tbere be a traditionai IT department as we now know it? Yes, the functions of the IT department will change only — slightly by the year^ 2020: 2 7 % M ml HH mm^H Yes. there will be an IT department as we now know it: 9 % • •/ ^ H ^ V • 1 Don't know: 2 % HH No. thelTdepart^ ^ ment will become ^^^k a dramatically ^^^^^ different kind ^ ^ ^ ^ ^ of operation by ^ ^ ^ B ^ the year 2020: ^^TT^ M am. má y V 1I • ^^^W ^ ^ ^ ^ ^ Other: 3 % No.thestandalone IT department won't exist 2020:11% NEW WORLD What do you tbink tbe IT sbop of 2020 will look like? IT will be fully embedded in the business units: 16% other: 6 % IT won't exist as a stand-alone department: 7% n IT will he a career backwater of IT/technical specialists: 9 % SOURCE: EXCLUSIVE ÍOUPUllSI'HO!>Lt¡ SURVEY OF 465 IT PROFESSIONALS. JULY 2010 IT will be a two-tiered organization, with some people embedded in business departments and other strictly technicallyfocused people within a smaller IT department: 62% other business functions and divisions that will be guided by a second tier of IT professionals: super-IT-savvy business experts who reside in the business. They don't build software, but they work with the business to invent new products and services. They also assemble the software components needed to bring those offerings to market. They have titles like business systems analyst and business solutions consultant. Sound far-fetched? It's only 2010, but already, the sawiest companies are well along the path of implementing this kind of two-tiered IT workforce structure. "2020 is already here," says Ian Patterson, CIO at St. Louisbased Scottrade. There, the IT organization includes project managers and business analysts with deep analytical and communication skills, and technical architects, who make sure "we don't step on ourselves by doing something that will negatively impact the business from a technology standpoint," Patterson says. Going forward, CIOs and IT employment experts predict that this bifurcation of IT roles will vastly accelerate, with most professionals falling into one of two major categories: technical specialists and business specialists. Tier 1: Tech Specialists Technical specialists are the people who work in a centralized IT or business services organization. If you want to work here, you need to know about data standards, information standards, virtualization, networks, mobile technology and IT architecture, among other things. "You need to get skilled in emerging technologies and develop a deep technical skill set," says Mark O'Gara, vice president of infrastructure at Highmark Inc., a health insurer in Harrisburg, Pa. Overall, this organization will have far fewer people than today's IT department, but these workers will have an extremely rich set of technical skills, and they will understand precisely 1 6 COMPUTERWORLO AUGUST 23. 2 0 1 0 IT Job Seekers Need Not Apply Megatrends 2020 As IT operations become inextricably linked with business A operations, it seems likeiy that whatever big trends affect the business will have ramifications for IT. s IT ROLES MOVE UP the value chain, companies like Johnson & Johnson. State Street. W.W. Grainger. General Mills and Xerox are looking to hire smart, tech-savvy, collaborative business professionals for 20- or 30-year multi- faceted careers, not for IT jobs. Big businesses w ger. Small businesses' proressionais win wor "I believe the idea of hiring people for a job is well past." says for either very big compa- survive. And midsize busi- nies or very smaii ones. nesses will be squeez"* And IT vendors will ^ - out. Expect more mi either giants or boi LaVerne Council. CIO at Johnson S Johnson. Instead. Council and other savvy IT and business leaders are more focused than ever on developing sophisticated job-rotation programs and flexible career paths that offer employees exposure and expe- and acqu rience throughout the enterprise and significantly boost their Government opportunities to move up and branch out within the company will take up a g overtime. portion of management's "We have a talent management process where we help people compliance and audits. coach their careers into various different roles - business to IT. time and effort and IT to the business. But we do it as well within IT. from infra- Consumers will "social responsibility" to help their empioyers from the companies they meet consumer expecta- do business with. tions for ethicai behavior, structure to applications to change management and to all of the other various functions within IT." say: W.W. Grainger CIO Tim Ferraren. So far, it's a strategy that appears to be working. Ferraren, for honest accounting, privacy example, started out at Grainger in merchandising and product safeguards and g r e — management, then progressed through marketing and strategy IT shops, which are before moving to IT seven years ago. Grainger's CEO. Jim Ryan, creasingiy involved is a former CIO. At Xerox Corp.. the trend is similar. The executive driving time a product Is invented new-product deveiop- to the time it's imitated - ment, will need to help the Xerox's transformation from a hardware vendor to a services is shrinking rapidly. company get products to provider is a former applications portfolio manager. The former head of IT architecture has moved over to take charge of the market at warp speed. company's global supply chain. "The movement of talent between organizations is at the most SOURCES; BUSINESS TRENDS ADAPTED FROM A REPORT BY FORECASTING INTERNATIONAL LTD.. EXCERPTED IN THE FUTUfll^T MAGAZINE (JULY-AUGUST 2010) IT IMPLICATIONS BY MITCH BETTS, senior levels and pretty significant." says Xerox CIO John McDermott. "The previously impenetrable wall between IT and the O MORE PREDICTIONS: http://tinyurl.COm/MB-IT-2O2O business became permeable." At General Mills Inc.. the career strategy revolves around hiring the best and the brightest and then keeping them engaged and how their business makes and loses money and how all transactions flow through the enterprise. This is where the enterprise's overall business process and technology architecture will be maintained. The infrastructure will be made up of multiple services furnished by a variety of outside suppliers, coupled with software components that were designed both externally and in-house and that are extremely intuitive and easy for various business functions to assemble and use competitively. As business units put together these applications, "the critical role the IT department will play is ensuring that business value is not lost through fragmentation, " says Andrew Morlet, global director of the strategy and transformation practice at IT consultancy Accenture PLC. "IT will play a central coordinating role that protects the interests of the entire enterprise over the divisions themselves." Cummins Inc., a worldwide supplier of diesel engines that's based in Columbus, Ind., is in the process of completing a major COMPUTERW0RLD.COM 17 challenged enough to want to spend the rest of their careers with the $14.8 billion company. The average tenure at General Mills is about J3 years for an IT staffer and J6 years for an IT manager. Turnover is below the industry average of 5%. Also notable is that more than 15% of the company's IT staffers hold MBAs. "Having an MBA is something we value because of our business process focus. The main focus is on the business and always has been." says Mike Martiny. vice president of information systems at General Mills. Still, he adds, "the starting point for everything is technical competency. There's time to grow everything else." "With the growing importance of architecture, companies realize how valuable highly tenured people are." says State Street CIO Chris Perretta. "We're desperately looking for ways to attract people who are talented and want to stay for the long term. When we hire someone, we really want to hire them with the mind-set of belonging to the organization." - J U t I A KING IT CAREERS 2020 The Rise of the Chief Architect B USINESS PROCESS FRAMEWORKS, en- terprise road maps, end-to-end operations and Ten years from now, it will be all about how to assemble software, not how to build it. centralized architecture: Savvy CIOs use terms like those a lot these days. They all refer to an en- terprise's highly complex yet continually tweaked and modified processes and their IT blueprints for doing business and turning a profit. In many cases, they represent the very source of a company's competitive advantage. Developing these blueprints and then ensuring that various busi- KEN SPANGLER, ness units and divisions sprawled about the globe operate in sync CiO, FEDEX GROUND with them is the increasingly critical role of the chief architect. "Architects are really important, and they're going to be growing in importance," says Brian Cobb. senior vice president of mortgage operations and former vice president of technology infrastructure and operations at Fannie Mae. Cobb and his team have spent 18 months re-engineering business processes at the government-sponsored enterprise and developing what he calls an "enterprise reference model" on which to run a more flexible and responsive business. "Now we're building against that architecture, which is a key tool to compete in the current economic environment," he says. Xerox Corp. CIO John McDermott describes the role of chief architect as "the hardest job in any IT organization." "The most difficult set of skills to recruit are blindingly brilliant IT architects." McDermott says, "it's an almost impossible job because of the scope of process knowledge you need to possess and the scope of [technical] knowledge you need on how to enable that process architecture." At Xerox, the role is filled not by a single person, but rather in a center of excellence "where we combine and collocate business process owners with technology piatform owners. That makes the challenge more manageable," he says. Cummins CIO Bruce Carver says his company "has just made a fairly sizable investment in the architecture function." The reason, says Carver: "It's central to our success." The diesel engine maker's goal is to streamline operations by. among other things, ieveraging the same fundamental business rules and technology across its various divisions and business units, which span 70 countries. At the same time, Cummins is dispersing more and more technology-savvy business experts into various business functions. The upshot: "As we start to have more technology-savvy people in the organization, they'll go off and convince business restructuring of IT. CIO Bruce Carver estimates that in the end, "only about 5% of IT roles will be purely IT, and these roles will be few and far between." Cummins' centralized IT department is staffed by technical experts charged with creating standards and structure and managing the overall cost of the IT function. This is the home of the IT architecture group — and architect is fast becoming the hottest role in IT (see story at left). Another services and support group is made up of third-party service providers and a limited number of Cummins employees. All other employees are business specialists in what Cummins calls "business-facing roles." All indications are that by 2020, a big chunk of technical specialists' work will involve integrating a broader array of technologies and services into the overall enterprise infrastructure, CIOs say. That's why a broader set of networking, software, virtualization and other skills will be required. This trend hasn't been lost on vendors like EMC Corp., which is developing a cloud certification to complement its storage certification. Additionally, EMC is working with its security division, RSA, and virtualization vendor VMware Inc. to develop multidisciplinary certifications for technical specialists, says Tom Clancy, vice president of education services and productivity at EMC. leaders that they need a solution, and at the end of the day, it will drive up costs and we'll have incompatibiiity issues," says Tier 2: Business Specialists Carver. This, he says, is where the chief architect plays a critical The work of business specialists is matching the right IT tool to the business need at hand. These are super-IT-sawy business experts who understand how the business works, how transactions flow, what makes and loses money for the company, and where and how technology can help or hinder the business. As futurist and Computerworld columnist Thornton A. May sees it, this is where the upwardly mobile career action is, as well as the greatest coolness factor. "IT's future revolves along three interrelated dimensions," May role in building or buying any and all technology so that it fits into the overaii blueprint. At State Street, the architect role is so important that CIO Chris Perretta elevated the position to report directly to him. "The reason and the fact of the matter is that how we build things matters." he says, "it's not just an intellectual exercise. It has a material impact on the performance of the organization." - JULIA KING 1 8 COMPUTERWORLO AUGUST 2 3 . 2 0 1 0 .,i\ s, all of which converge in this IT career track. Those dimenbusiness rather than how we provide the technology," says Ken sions are innovation, which he defines as the ability to convert Harris, CIO at Shaklee Corp., a nutritional products company in ideas into money; business analytics, which involves operations Pleasanton, Calif. research, data mining, data integration, reporting and statistics; At Boston-based financial services company State Street Corp., and risk management, which requires a keen knowledge of busiCIO Chris Perretta says that with a two-tiered IT workforce, ness processes. This is one of the best areas to look for work if "there are opportunities for our IT personnel to take much more your job is being automated or outsourced. "Each of these critical of a leadership position on how business processes are designed disciplines promises good future career opportunities," May says. in the long term." Regarding educational degrees, May anticipates a new breed State Street is formally defining the skill sets it wants in its of sheepskin, one that reflects workforce, says Perretta. both business knowledge and Architectural skills are absostatistical analysis expertise. lutely critical, and for pure Business specialists will technologists, "there's an opTOUGH QUESTION #51 play a leading role in various portunity to go much deeper business functions, performinto technology." For those ing work that today can often "with more of a business only be performed in IT, says solutions bent, there is an Tim Ferrarell, CIO at Chicagoopportunity to get upstream a based industrial distributor lot farther," he says. W.W. Grainger Inc. Harris puts it this way: In 2O2O, "technology will "When IT people move be easier to use. Therefore, it out into the business, IT will be more prevalent in other moves up the value chain," parts of the business and not because it moves closer to just the purview of IT," says the customer and closer to Ferrarell. "We're more and the revenue line. "Within more attracting and rotating the IT department, all the people through business and IT remaining IT roles require a functions so people understand higher level of proficiency," how technology can be used he says. SONICWALL to serve customers better. It's Ken Spangler, CIO at about having employees who FedEx Ground, says his are versatile and who know THE ENTERPRISE. company has historically various technologies and busifocused on the role of business processes. It makes us ness specialists in managing SonicWALL's network security solution integrates next more flexible and reduces risks. large, complex projects. But generation firewall defenses and intrusion prevention. Rotation creates versatility." going forward, it will further Further, the solution scans all traffic for malware while (See story, page 17.) sharpen this focus, dedicatproviding Application Intelligence and Control to manage and visualize by applications—not just by port and protocol. ing those experts to business Many CIOs share the view functions so they can come that the emerging job title of Loam how SonicWALLs solution can visualize and control up with technology solutions business specialist is an indinny type of application at sonicwaM.com/control to business problems early cation that IT roles are moving on, before they have a chance up the value chain. 50HIŒALL to evolve into large projects. "The IT role becomes much more about how to "The transformation is © 2010 SonicWALL. Inc. SonicWALL and the SonicWALL logo use technology to help the well under way," he says. • are reqistefed trademarks of SonicWALL. Inc. HOW DOES AN ENTERTAINMENT GIANT CONTROL WEB 2.0 APPLICATION USAGE? SECURES People who are purely involved A lot more things that we do in technology operations - the today inside the technoiogy user companies wiii shrink, "run" part of the business - function will be able to be and the new IT tasl(s will will be outsourced over time. done outside the technology be much more aiigned with These are the peopie who wiii function. The real techies wiii using technoiogy in the busi- across a wide swath of industries find jobs with service providers. go to the vendors and service ness rather than creating for their boldest predictions about - ANDREW IWORLET. global providers. technology. the IT organization of 2020. Here's director, strategy and transforma- - TIM FERRARELL. CIO. - KEN HARRIS. CIO, a sampling of their responses: tion practice. Accenture PLC W.W. Graingerlnc. Shaklee Corp. Peering Into The Crystal Ball Computerworld asked IT leaders The IT environment at C0MPUTERW0RLD.COM 19 Copyright of Computerworld is the property of Computerworld and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. www.hbrreprints.org Stop losing out on lucrative business opportunities because you don’t have the talent to develop them. Make Your Company a Talent Factory by Douglas A. Ready and Jay A. Conger Included with this full-text Harvard Business Review article: 1 Article Summary The Idea in Brief—the core idea The Idea in Practice—putting the idea to work 2 Make Your Company a Talent Factory 11 Further Reading A list of related materials, with annotations to guide further exploration of the article’s ideas and applications Reprint R0706D This document is authorized for use only in Laureate Education, Inc.'s WAL MHRM 6110 Talent Management-1 at Laureate Education - Baltimore from Jan 2019 to Mar 2020. Make Your Company a Talent Factory The Idea in Brief The Idea in Practice An astonishing number of companies are struggling to fill key positions. This talent shortage is putting an enormous strain on their potential to expand into new markets. One London-based real estate development firm recently had to pass on a €500 million major reconstruction job in Berlin after realizing it hadn’t groomed anyone capable of leading the project. BUILDING FUNCTIONALITY COPYRIGHT © 2007 HARVARD BUSINESS SCHOOL PUBLISHING CORPORATION. ALL RIGHTS RESERVED. Talent shortages have two causes: Companies’ talent development strategies are out of sync with their strategic goals. And senior executives lack a deep-seated commitment to talent management. To create a free-flowing pipeline of current and future leaders, Ready and Conger recommend marrying “functionality” (rigorous talent processes that support your company’s strategic objectives) with “vitality” (a passion for talent cultivation among executives). At Procter & Gamble, for example, the CEO and senior team personally teach all the leadership development courses for the company’s top 300 executives. Ready and Conger recommend these processes to help you put the right people with the right skills in the right place at the right time: • Help people understand your strategic objectives. For example, financial services giant HSBC holds conferences to educate employees about the firm’s strategy for increasing cross-unit collaboration and to highlight collaborative initiatives. At one conference, some general managers explained how they transferred a client from the commercial banking unit to the private banking unit. Previously, the first unit to “own” that client wouldn’t have shared him with other units, because the original unit wanted to still be associated with that client’s revenues. After each conference, participants are asked to commit to doing one or two things differently to strengthen the firm’s collaborative capabilities. • Groom people for complex, challenging jobs. Consumer products company P&G’s growth strategy hinges on winning in emerging markets. To help high-potential employees advance, the company moves them through a portfolio of senior-level jobs categorized according to strategic challenges, size of the business, and complexity of the market. First-time general managers might initially take a relatively small country-manager position and then be placed in charge of larger countries and, later, of regions. by working on important projects. The company takes on former interns as fulltime employees at a percentage well above that of most competitors, modeling commitment to talent development. • Encourage engagement. HSBC requires each unit to have a talent implementation strategy. These plans explicitly link a unit’s growth objectives to its people development activities. The corporate head of talent works closely with each unit to develop its proposed strategy and presents the aggregated plans to the group head office, highlighting any talent gaps that could threaten the firm’s growth objectives. This process keeps talent management high on the agendas of line and corporate leaders, and prevents them from getting distracted by seemingly more pressing problems. • Ensure accountability. Hold all managers and executives accountable for doing their part to make talent processes work. P&G’s CEO A.G. Lafley claims ownership of career planning for all the general managers, vice presidents, and talent pools involved in the company’s top 16 markets, customers, and brands. FOSTERING VITALITY To foster vitality: • Build commitment to talent development. P&G hires 90% of its entry-level managers straight from universities and grows their careers over time. It also sponsors a college intern program that offers participants chances to assume real responsibility page 1 This document is authorized for use only in Laureate Education, Inc.'s WAL MHRM 6110 Talent Management-1 at Laureate Education - Baltimore from Jan 2019 to Mar 2020. Stop losing out on lucrative business opportunities because you don’t have the talent to develop them. Make Your Company a Talent Factory by Douglas A. Ready and Jay A. Conger COPYRIGHT © 2007 HARVARD BUSINESS SCHOOL PUBLISHING CORPORATION. ALL RIGHTS RESERVED. Despite all that is known about the importance of developing talent, and despite the great sums of money dedicated to systems and processes that support talent management, an astonishing number of companies still struggle to fill key positions—which puts a considerable constraint on their potential to grow. We conducted a survey of human resources executives from 40 companies around the world in 2005, and virtually all of them indicated that they had an insufficient pipeline of high-potential employees to fill strategic management roles. The problem is that, while companies may have talent processes in place (97% of respondents said they have formal procedures for identifying and developing their nextgeneration leaders), those practices may have fallen out of sync with what the company needs to grow or expand into new markets. To save money, for example, some firms have eliminated the position of country manager in smaller nations. Since that role offers high-potential employees comprehensive ex- harvard business review • june 2007 posure to a broad range of problems, however, the company’s initial savings may well be outweighed by the loss of development opportunities. Even if a company’s practices and supporting technical systems are robust and up to date, talent management will fail without deep-seated commitment from senior executives. More than half the specialists who took part in our research had trouble keeping top leaders’ attention on talent issues. Senior line executives may vigorously assert that obtaining and keeping the best people is a major priority—but then fail to act on their words. Some managers still believe they can find talented employees by paying a premium or by using the best executive recruiters, while others are distracted by competing priorities. Passion must start at the top and infuse the corporate culture; otherwise, talent management processes can easily deteriorate into bureaucratic routines. The challenge of filling key positions has, in a sense, crept up on businesses, many of page 2 This document is authorized for use only in Laureate Education, Inc.'s WAL MHRM 6110 Talent Management-1 at Laureate Education - Baltimore from Jan 2019 to Mar 2020. Make Your Company a Talent Factory Douglas A. Ready (dready@icedr.org) is a visiting professor of organizational behavior at London Business School and the founder and president of ICEDR, a global talent management research center in Lexington, Massachusetts. He is the author or coauthor of several HBR articles, including “How to Grow Great Leaders” (December 2004). Jay A. Conger (jay.conger@cmc.edu) is the Henry R. Kravis Research Chair in Leadership Studies at Claremont McKenna College, in California, and a visiting professor of organizational behavior at London Business School. He conducts human resources research with the Center for Effective Organizations at the University of Southern California’s Marshall School of Business, in Los Angeles. His most recent article for HBR is “Developing Your Leadership Pipeline,” with Robert M. Fulmer (December 2003). harvard business review • june 2007 which used to view development almost as an employee benefit. Today, demographic shifts—notably, the impending retirement of baby boomers—along with changing business conditions, such as significant growth in largely unfamiliar markets, like China, have combined to produce something of a perfect storm. Leadership development has become a much more strategic process, and faulty processes and executive inattention now carry a tangible cost. We’ve attended multiple executive committee meetings where companies have been forced to pass on hundreds of millions of dollars of new business because they didn’t have the talent to see their growth strategies through to fruition. One Londonbased real estate finance and development firm, for instance, was gearing up for a major reconstruction job in Berlin—an effort that would represent not only a €500 million boost in revenues over two years, but also an opportunity to get in on the ground floor of many other projects in that part of the world. When the executive committee reviewed the list of people who might be ready to take on such an assignment, the CEO noticed that the same names appeared as the only candidates for other critical efforts under consideration. And when he asked his business unit heads for additional prospects, he was told that there weren’t any. The firm’s growth strategy hinged on these projects, but the company had failed to groom people to lead them. Some companies, by contrast, face the future with confidence because they don’t just manage talent, they build what we call “talent factories.” In other words, they marry functionality, rigorous talent processes that support strategic and cultural objectives, and vitality, emotional commitment by management that is reflected in daily actions. This allows them to develop and retain key employees and fill positions quickly to meet evolving business needs. Consider, for example, how one talent factory, consumer products icon Procter & Gamble, found a leader for a burgeoning joint venture with an entrepreneur in Saudi Arabia. The role required someone with emerging markets experience, who had worked in other countries and in the laundry detergent business, and who was ready and willing to relocate on short notice to Saudi Arabia. For most companies’ HR departments, finding and hiring such a senior manager would entail pro- tracted dialogue with internal and external candidates and might well end in failure. P&G, however, searched its global database of talent profiles and came up with five very strong potential candidates in just a few minutes. In the end, they found just the right fit, and the new manager was fully on board three months after the start of the search. In this article, we look at the people processes in two talent factories: Procter & Gamble and financial services giant HSBC Group. We selected these companies because even though they approach talent management from slightly different directions, both illustrate the power of a twin focus on functionality and vitality. P&G has established a plethora of elaborate systems and processes to deploy talent; HSBC has worked mightily to incorporate talent processes into the firm’s DNA. Both companies can claim a free-flowing pipeline of current and future leaders. Functionality: Effective Execution Functionality refers to the processes themselves, the tools and systems that allow a company to put the right people with the right skills in the right place at the right time, as P&G did in Saudi Arabia. Good design isn’t just a matter of technical excellence; clearly linking processes to the company’s objectives is equally important. In particular, processes should support most CEOs’ top concerns: driving performance and creating an effective climate. So, for example, after years of growth through acquisition, HSBC in 2002 shifted its strategy to focus on organic growth. The goal was to strengthen local resources in multiple geographies for the firm’s increasingly global customers. Achieving this objective required an accompanying cultural shift, since HSBC had always operated as a confederation of fiercely independent, stand-alone businesses. As part of the move, the bank committed to a new brand promise: to be “the world’s local bank,” guaranteeing the availability of a local resource for customers, wherever they do business. Stephen K. Green, HSBC’s chair, views performance and climate as inextricably linked: “If we don’t create the proper climate internally and live up to our brand promise, we won’t be able to achieve our strategic objective—managing for growth.” To develop local talent while maintaining page 3 This document is authorized for use only in Laureate Education, Inc.'s WAL MHRM 6110 Talent Management-1 at Laureate Education - Baltimore from Jan 2019 to Mar 2020. Make Your Company a Talent Factory Mapping Functionality and Vitality The functionality and vitality of your company’s talent management processes determine how well you can groom your high-potential employees to fill strategic management roles. To show how to assess these processes, we’ve mapped the strengths and weaknesses of a typical, though hypothetical, company. In this example, the organization is pursuing a “one company” strategy, hoping to achieve better global integration. In other words, it wants to be able to serve its customers anywhere they do business. Clearly, this requires a talent pool that can easily move across regional, functional, and unit boundaries, as well as the capacity to find and develop local other key stakeholders accountable for developing talent. Despite high commitment, all the segments in this firm are weak on accountability, and the top team is weak on engagement as well. Since a company’s talent management process is only as strong as its weakest link, and vitality falls apart without mutual accountability, this company plainly has a lot of work to do. Identifying weaknesses in functionality and vitality can help a company clarify its talent management agenda. If this organization wanted to grow in China, for instance, it could improve its sourcing by developing relationships with Chinese universities. talent “on the ground.” The Functionality Wheel shows that this firm is weak on sourcing, deployment, development, and rewards; better at retention, assimilation, performance management, and engagement. The firm may be able to keep its local talent happy and productive, but it struggles to place people in key positions or move them across unit or geographic borders. Corporate vitality is manifested by the passion for talent management among four constituencies: the top team, line management, human resources, and talent itself. As the Vitality Wheel shows, this company neither champions the process nor holds The Functionality Wheel The Vitality Wheel TOP EXECUTIVE TEAM committed assimilation sourcing engaged accountable accountable development retention TALENT POOL HR/TALENT STAFF Global Integration Global Integration engaged deployment engagement rewards committed engaged committed accountable accountable performance management committed engaged LINE MANAGEMENT Performance Index high low The Functionality Wheel, on the left, shows that this company’s processes are weak on sourcing, development, deployment, and rewards; better when it comes to retention, assimilation, performance management, and engagement. The Vitality Wheel, right, demonstrates a high level of commitment, but engagement—the inclination to dig into the work of talent management—is low among top managers. As for accountability, the company is weak across the board. harvard business review • june 2007 page 4 This document is authorized for use only in Laureate Education, Inc.'s WAL MHRM 6110 Talent Management-1 at Laureate Education - Baltimore from Jan 2019 to Mar 2020. Make Your Company a Talent Factory global standards, HSBC centrally designed its human resources practices and policies but built in some flexibility to accommodate local variations. The firm now has companywide processes for assessment, recruiting, performance and career management, and leadership development, but local offices can adapt them (within limits) to their own resource capabilities and cultural requirements. When making assessments, for example, each office must choose at least two from a menu of tools, such as psychometric tests, individual interviews that probe people’s aspirations, and 360-degree feedback. They must also use a standard rating scale and include performance data from the most recent three years. This way the company can ensure a degree of objectivity and establish a common measurement language across all the businesses and locations. To help instill a global mind-set, HSBC created a system of talent pools that track and manage the careers of high-potentials within the firm. After those employees have been identified, they are assigned to regional or business unit talent pools, which are managed by local human resources and business unit leaders. Employees in these pools are then selected initially for new assignments within their region or line of business and, over time, are given positions that cross boundaries. They are viewed as having the potential to reach a senior management role in a region or a business. Managers of the pools then single out people to recommend for the group talent pool, which represents the most senior cadre of general managers and is administered centrally. These managers are considered to have the potential to reach the senior executive level in three to five years and top management in the longer term. Leaders maintain talent relationship dialogues with members of each pool, in face-toface conversations where possible, to address their development needs and concerns. In new relationships, the dialogues are time intensive and available to the employee on demand; in established relationships, the conversations tend to occur two to four times a year, as needed. The aim is to structure a set of experiences that leads to a deep knowledge of all aspects of the business as well as an understanding of the many different cultural environments in which HSBC operates. harvard business review • june 2007 In fact, people are told that if they want to reach the highest levels of management they must expect to work in at least two very different cultural environments. The number of people making such moves has increased exponentially over the past few years. “We have a Brazilian working with one of our affiliates in China, our insurance affiliate,” Green told us. “We have an Armenian working in India in the IT function, a Turk working in New York. There are…hundreds and hundreds of examples of this.” Green acknowledges that this approach is expensive—it’s nearly always cheaper to fill a role with someone local—but considers it a vital investment in achieving the firm’s global goals. HSBC is still tweaking the process. The bank learned, for instance, that assessing each employee on a scale of one to five was demoralizing for some people, so it modified the process to rate only people in the top two levels of some areas. Feedback for the rest is framed in terms of development needs and support, rather than “you haven’t made it into a talent pool.” This change takes into account early-stage career development, which entails gaining a certain amount of expertise before a person is ready to advance. HSBC also learned that, talent pools notwithstanding, leaders of the local units still behaved as princes of their domains—they weren’t connecting across units in ways that would benefit the firm overall. In short, the model of international teamwork was still more an aspiration than an operating principle. To close this gap between aspiration and reality, HSBC resolved conflicts in its reward system and took steps to build relationships on a more personal basis. So, for example, the top executive team launched what it called collective-management conferences, where employees could learn about the company’s strategic objectives and operations around the world—another way to help people feel like part of an organization that extends beyond their own unit or locale. Each conference is attended by about 40 senior managers, who have been nominated by their country, functional, or customer group leader because they’ve demonstrated a potential for growth and because their roles have policy implications across the enterprise. These meetings, which are held twice per year, have become a vehicle for senior people page 5 This document is authorized for use only in Laureate Education, Inc.'s WAL MHRM 6110 Talent Management-1 at Laureate Education - Baltimore from Jan 2019 to Mar 2020. Make Your Company a Talent Factory in the company to share knowledge and ideas across corporate borders and customer groups. During one conference, the general manager for Mexico told his colleagues how he managed to rebrand a recent acquisition, Grupo Financiero Bital, literally overnight. His story shed light on the value of collaborating across company boundaries. At another gathering, one of HSBC’s senior executives explained how acquiring the U.S. firm Household International gave the organization much deeper capabilities in customer analytics and buying behavior. During yet another meeting, a couple of general managers explained how they built on their preexisting relationship to ease the transfer of a client from commercial banking to private banking. (In the past, the client would have been jealously guarded because his profitability would have been attributed to whichever group “owned” that customer.) After each conference, participants are asked to commit to doing one or two things differently to strengthen the firm’s collaboration capabilities. The company also established networks across countries, so that, for instance, the head of personal financial services in Hong Kong knows her counterpart in Mumbai, in Mexico City, in São Paulo, in Vancouver. These networks allow executives to participate in important virtual meetings on a regular basis for each line of business and provide them with opportunities to gather face-toface in occasional off-site meetings. Like HSBC, Procter & Gamble has tied its talent management processes to its strategy for growth, which means a focus on winning in the emerging markets of China, India, Latin America, the Middle East, and Eastern Europe. The company is building what amounts to a global talent supply-chain management process, coordinated worldwide but executed locally. Hiring and promotions are the responsibility of local managers, but highpotential prospects and key stretch assignments are identified globally. New hires tend to be local talent. Line managers in China, for instance, hire Chinese recruits. That’s been the case for some time, but it used to be that key corporate roles in emerging markets went to expatriates. Now, local hires are considered growth prospects for the firm; those Chinese recruits are expected to become managers in that market. harvard business review • june 2007 Key stretch assignments and senior positions, however, are managed globally, at the executive level. The emphasis on hiring nationals translates into a diverse pool of leadership talent for the entire corporation, especially at more senior levels: At the geography and country leader level, there are almost 300 executives who come from 36 countries, and 50% are from outside the United States. The top 40 executives come from 12 different nations, and 45% are from outside the United States. As high-potential employees advance, they move through a portfolio of senior-level jobs that are categorized according to strategic challenges, size of the business, and complexity of the market. Leadership positions for businesses or countries are earmarked for either novice or experienced general managers. A relatively small country-manager position—in Taiwan, for instance—is considered appropriate for first-time general managers. Such assignments then set up the incumbents for placement in larger countries, like Italy or Brazil, which in turn can lead to roles in clusters of countries, such as Eastern Europe or the United Kingdom. Those last roles then become springboards or crucibles for leaders who demonstrate the potential to become senior executives. P&G offers formal training and development programs and sometimes sends managers to external executive education programs. The lion’s share of development, however, takes place on the job, with the immediate manager’s support and help from mentors and teammates. A typical marketing manager, for example, will have worked with a number of different brands over a period of time. A finance manager will have gone through various assignments, ranging from financial analysis to treasury to auditing to accounting. Most managers are also placed on important multifunctional task forces or project teams from time to time. New postings and task force participation are expected to challenge employees, and they signal to managers that P&G will always offer new opportunities. Consider the career progression of Daniela Riccardi, who has been with the company for 22 years. She started as an assistant brand manager in Italy, where she stayed for six years, advancing to brand manager. A three-year stint in Belgium as a marketing manager for cleans- page 6 This document is authorized for use only in Laureate Education, Inc.'s WAL MHRM 6110 Talent Management-1 at Laureate Education - Baltimore from Jan 2019 to Mar 2020. Make Your Company a Talent Factory Assessing Your Company’s Overall Capability To get a sense of your company’s current capability, rate its strength on a scale of one to ten in the following areas. Then, write down one thing you will do to address any weakness. Your ratings will give you an idea of the areas you need to focus on. 1 Do you know what skills your company needs to execute its growth objectives? What will you do to strengthen your company’s capability in this area? 2 Does your company have a process for identifying, assessing, and developing its next generation of leaders in all its businesses and regions? What will you do to strengthen your company’s capability in this area? 3 Do you have specific development plans for your high-potential leaders? What will you do to strengthen your company’s capability in this area? 4 Are you able to deploy the right people when emerging opportunities arise, quickly and without significant disruption to other parts of your organization? What will you do to strengthen your company’s capability in this area? 5 Do you have diverse and plentiful pools of talented employees who are ready, willing, and able to be deployed to new opportunities at the technical, managerial, and leadership levels of your organization? What will you do to strengthen your company’s capability in this area? 6 Do you have a diverse and plentiful pool of leaders who are capable of moving into your organization’s most senior executive roles? We’re OK, but nothing to cheer about We’re poor performers We’re at or near benchmark status 1 2 3 4 5 6 7 8 9 10 1 2 3 4 5 6 7 8 9 10 1 2 3 4 5 6 7 8 9 10 1 2 3 4 5 6 7 8 9 10 1 2 3 4 5 6 7 8 9 10 1 2 3 4 5 6 7 8 9 10 1 2 3 4 5 6 7 8 9 10 1 2 3 4 5 6 7 8 9 10 1 2 3 4 5 6 7 8 9 10 1 2 3 4 5 6 7 8 9 10 What will you do to strengthen your company’s capability in this area? 7 Do you offer managers and executives developmental experiences specifically aimed at preparing them for the unique challenges of leading large, complex, global organizations? What will you do to strengthen your company’s capability in this area? 8 Have you, as a leader, used words and deeds to unequivocally demonstrate that you are fully committed to developing talent globally in your company? What will you do to strengthen your company’s capability in this area? 9 Would the people around you consider you actively engaged in your company’s talent management initiatives? What will you do to strengthen your company’s capability in this area? 10 Do you hold your managers and leaders accountable for identifying and developing talent in their businesses, functions, and regions? What will you do to strengthen your company’s capability in this area? harvard business review • june 2007 page 7 This document is authorized for use only in Laureate Education, Inc.'s WAL MHRM 6110 Talent Management-1 at Laureate Education - Baltimore from Jan 2019 to Mar 2020. Make Your Company a Talent Factory Unlike processes, which can be copied by competitors, passion is very difficult to duplicate. Nevertheless, there are measures that companies can take to build it into their cultures. harvard business review • june 2007 ers and bleach followed. She then spent seven years in three Latin American countries, holding the positions of marketing director, general manager, and vice president of ever-larger divisions. From there, she became a vice president of Eastern Europe, and in 2005, she was promoted to her current position—President, Greater China. When the development of a career like Riccardi’s has to be managed across business units and countries, the planning process is led collaboratively from the center by the company’s CEO, A.G. Lafley; the vice chairs; the global HR officer; and the global leaders of the various functions for their people. All this is done in partnership with the president and human resources manager at both ends of the reassignment. People and positions are tracked in a technology-based talent management system that is sufficiently robust to accommodate all the company’s more than 135,000 employees but is primarily used to track 13,000 middle- and upper-management employees. The system captures information about succession planning at the country, business category, and regional levels; includes career histories and capabilities, as well as education and community affiliations; identifies top talent and their development needs; and tracks diversity. It also makes in-house talent visible to business leaders, who no longer have to scour the company to find candidates by themselves. To keep the systems relevant, P&G has instituted a global talent review—a process by which every country, every function, and every business is assessed for its capacity to find, develop, deploy, engage, and retain skilled people, in light of specific performance objectives. For example, if the company has stated diversity hiring objectives, the review is used to audit diversity in hiring and promotions. Determinations made in these reviews are captured in a global automated talent development system and can be accessed by decision makers through their HR managers. The company also pays close attention to the effectiveness of its recruiting processes. P&G interviewers record detailed assessments of each candidate and assign them a quantitative score, using uniform criteria. The company then regularly assesses performance against the baseline set during the interviews. P&G also evaluates the success rate of its key promotions, using quantitative and qualita- tive measures that cover a three-year period. Managers who improve the business and its capabilities are deemed “successful”; the company has a success rate that exceeds 90%. When derailments occur, P&G conducts a thorough “lessons learned” review. Vitality: The Secret Weapon If functionality is about focusing your company’s talent management processes to produce certain outcomes, vitality is about the attitudes and mind-sets of the people responsible for those processes—not just in human resources but throughout the line, all the way to the top of the organization. Unlike processes, which can with some effort be copied by competitors, passion is very difficult to duplicate. Nevertheless, there are measures that companies can take to build it into their cultures. Our research shows that the vitality of a company’s talent management processes is a product of three defining characteristics: commitment, engagement, and accountability. Fostering commitment. P&G hires and develops people through a set of principles— such as the rules to hire at entry level and build from within—that are specifically designed to foster commitment. While people typically have long careers with the company, the average age for all employees is only 39; 38 for all managers. More than half the organization has been with P&G for less than five years. That’s because the company constantly pumps in new talent and has integrated huge numbers of people through its acquisitions of Clairol, Gillette, and Wella. So, even with the relatively low attrition rate of 7.5% (including retirements), more junior managers are always coming in. P&G hires 90% of its entrylevel managers straight from universities and grows their careers over time. (The relative youth of the workforce may also reflect that this approach often allows for retirement earlier than usual.) All the vice chairs and corporate officers either joined the company from universities or arrived via acquisitions. Lafley himself joined P&G right out of Harvard Business School and, over the subsequent 25-plus years, went through numerous assignments before becoming CEO. To gain commitment early, the company also established a college intern program that offers the chance to assume real responsibility by working on important projects with the page 8 This document is authorized for use only in Laureate Education, Inc.'s WAL MHRM 6110 Talent Management-1 at Laureate Education - Baltimore from Jan 2019 to Mar 2020. Make Your Company a Talent Factory full resources of the company. Extensive intern programs can be a drain on an organization because of the time that managers must spend sponsoring, coaching, and advising the interns. P&G, however, converts former interns to full-time employees at a percentage well above that of most competitors, so the company is compensated for its investment with high-quality hires who can hit the ground running. It also assigns interns to multifunctional teams that work on business and organizational issues and present solutions to the CEO and senior management sponsors. The company often ends up implementing the suggestions those teams come up with. One of the four ideas presented in 2006, for instance, may result in accelerating the launch of a new brand; two other projects have been partially implemented. At HSBC, commitment to talent is personified by Green, who explains, “There is nothing more important than getting this right…all the way from intake through the most influential senior positions.” Line executives participate directly in the process, partnering with the central and regional HR functions to fill important positions. Building engagement. Engagement reflects the degree to which company leaders show their commitment to the details of talent management. P&G engages employees in their own career development the day they start with the company. They work with their hiring managers to plot moves that will build what the company calls “career development currency.” For high-potentials, P&G identifies “destination jobs,” which are attainable only if the employee continues to perform, impress, and demonstrate growth potential. The purpose is to view job assignments through a career development lens. For instance, a manager whose destination job is to become a president of one of P&G’s seven regions will go through assignments in different locations to acquire international experience and work in a global business unit with responsibility for a major product category. University recruiting is a line-led activity at P&G, and many senior managers personally lead campus teams at top universities around the world. These executives are held accountable for hiring only graduates with outstanding track records in both academic and nonacademic performance (such as summer jobs, harvard business review • june 2007 clubs, and entrepreneurial activities). To bolster ties with these institutions, the campus team leaders also fund research, make technology gifts, participate in the classroom, and judge case study competitions. As for HSBC, a conversation with Green makes his engagement immediately clear. Green has a remarkable knowledge of the company’s day-to-day people processes and can speak at length about how the company approaches recruitment, where managers are deployed, how their careers are progressing, and what they will need to do to continue advancing. Down through the ranks, line engagement in talent management is ensured by specific policies and practices, such as the requirement that each unit have a talent implementation strategy. These plans explicitly link a unit’s growth objectives to its people development, so the company won’t be surprised by any deficits. Barbara Simpson, HSBC’s group head of talent, works closely with each unit to develop its proposal and presents the aggregated plans to the group head office, highlighting any gaps in talent to meet the firm’s growth objectives. This process keeps talent management high on the agendas of line and corporate leaders and prevents them from getting distracted by seemingly more pressing problems. What’s more, talent management, succession planning, international moves, and senior-executive development are standing agenda items at meetings of business executive committees and the group’s board. The bank fosters engagement in new hires by sending them to the United Kingdom for a seven-week training program, typically in groups of 30 to 40, whose members represent about 20 nations. At these sessions, held several times a year, new employees have a chance not just to meet one another and members of the leadership team—Green or his most senior colleagues spend some time with them—but also to share their own ideas about the bank. Ensuring accountability. Talent factories hold all stakeholders (including talented employees themselves) accountable for doing their part to make systems and processes robust. At P&G, Lafley claims ownership for career planning of all the general managers and vice presidents and for the talent pools that comprise what he refers to as the company’s page 9 This document is authorized for use only in Laureate Education, Inc.'s WAL MHRM 6110 Talent Management-1 at Laureate Education - Baltimore from Jan 2019 to Mar 2020. Make Your Company a Talent Factory Any company aiming to grow—and, in particular, to grow on the global stage—has little hope of achieving its goals without the ability to put the right people on the ground, and fast. harvard business review • june 2007 “top 16s”: P&G’s preeminent 16 markets, 16 customers, and 16 brands. He reviews the top talent assignment and succession plans for each business and region annually. Along with the company’s vice chairs and presidents, he personally sponsors and teaches all the leadership development courses for the company’s most senior 300 leaders, signaling that talent management is both a leadership responsibility and a core business process. All of P&G’s managers and executives understand that they will be held accountable for identifying and developing the firm’s current and future leaders. They are evaluated and compensated on their contributions to building organizational competence, not just on their performance. HSBC’s Green holds his group management board, which comprises about a dozen executives, accountable for the company’s talent pools. Each member is responsible for a region, a customer group, or a product. Members oversee the list of people in their own business in the regional talent pool as well and select managers for the group pool. Executives are also held accountable for maintaining honesty in the talent manage- ment process, which is easier said than done, says Green. “We’ve had people who got into talent pools who shouldn’t have. You can either let it ride, or you have that hard conversation saying, ‘Sorry, this wasn’t right,’ or ‘You were a legitimate member of the talent pool but you started to coast and lost it a bit.’ You don’t do people a favor by being nice all the time.” ••• Leaders have long said that people are their companies’ most important assets, but making the most of them has acquired a new urgency. Any company aiming to grow—and, in particular, to grow on the global stage—has little hope of achieving its goals without the ability to put the right people on the ground, and fast. Companies apply focus and drive toward capital, information technology, equipment, and world-class processes, but in the end, it’s the people who matter most. Reprint R0706D To order, see the next page or call 800-988-0886 or 617-783-7500 or go to www.hbrreprints.org page 10 This document is authorized for use only in Laureate Education, Inc.'s WAL MHRM 6110 Talent Management-1 at Laureate Education - Baltimore from Jan 2019 to Mar 2020. Make Your Company a Talent Factory Further Reading ARTICLES Growing Talent as If Your Business Depended on It by Jeffrey M. Cohn, Rakesh Khurana, and Laura Reeves Harvard Business Review October 2005 Product no. R0510C The authors agree that companies need better talent development strategies, and they explain how people at every level in an organization can play a role. Through what the authors call an integrated leadership development program, CEOs and VPs develop plans for replacing themselves. Board members actively identify and develop rising stars. And line managers willingly relinquish their best performers to other units so emerging leaders can gain cross-functional experience. When everyone pitches in to develop talent, your company attracts high-quality future leaders, you establish the bench strength you need to execute crucial strategic initiatives, and you boost shareholder confidence in your firm. And because rivals can’t copy your program, it becomes an enduring source of competitive advantage. Developing Your Leadership Pipeline by Jay A. Conger and Robert M. Fulmer Harvard Business Review December 2003 Product no. R0312F In the middle ranks of your organization, managers acquire the broad range of skills they’ll need to succeed in higher-level positions. To support their development and keep your leadership pipeline flowing: 1) Identify which skills future senior leaders will need and how they can master them. Pair classroom training with on-the-job experiences that solve real organizational problems. 2) Identify linchpin positions, those essential to your company’s long-term health. Give high-potential candidates linchpin assignments coupled with team support, training, and mentoring. 3) Tell managers where they stand on the performance and potential ladder and what they must to do advance. 4) Ensure that there are enough attractive jobs to retain your most promising mid-level managers. To Order For Harvard Business Review reprints and subscriptions, call 800-988-0886 or 617-783-7500. Go to www.hbrreprints.org For customized and quantity orders of Harvard Business Review article reprints, call 617-783-7626, or e-mai customizations@hbsp.harvard.edu page 11 This document is authorized for use only in Laureate Education, Inc.'s WAL MHRM 6110 Talent Management-1 at Laureate Education - Baltimore from Jan 2019 to Mar 2020. 
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