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Make Talent, Not War

From Serendipity to Strategy
December 14, 2011 by Jean-Michel Caye and Karin Hinshaw
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In This Article
  • An effective approach to talent management treats human capital with the same rigor as a capital asset investment. It should include an explicit talent strategy, metrics to track the talent pipeline and level of employee engagement, and tactics to accelerate development of high-potential employees.
  • Companies like Goldman Sachs and Nike have become magnets for talent because they back their good intentions with infrastructure and programs that resonate with multiple generations in the workforce. Some companies even extend their appeal to talent beyond company borders, as Apple has done in cultivating third-party developers.
  • BCG considers six building blocks essential to an effective talent program.  The foundation must be the company’s strategy and growth objectives, with metrics put in place to measure progress and return on investment.

This article from The Boston Consulting Group’s Organization practice is the first in a series on talent challenges. Future articles will examine the implications for talent management of several trends:

  • The shift in growth opportunities and competitive threats in high-growth markets, where culture, work habits, and demographics may differ substantially from a company’s familiar markets

  • National economies that are slowing and might be sliding into another recession

  • The ever-faster pace of technological change and innovation, which puts greater demands on employee learning and retraining

  • The unprecedented number of generations working side by side in an organization

Build your bench of talent soon, or fall behind competitors that are far better prepared. This imperative now confronts organizations in virtually every industry and location, in mature markets and emerging economies alike. Because executing one’s business strategy hinges on having the right talent in the right places at the right time, the talent issue touches the entire organization, not just the HR function. All executives are therefore responsible for making their companies talent magnets.

Talent is variously defined as the narrow slice of staff with senior-leadership potential, as the employees who fill critical jobs, or as an even broader set of highly skilled people in certain functions. We focus here on managing in a specific way the people who bring competitive advantage to a company.

Where’s the greatest vulnerability? Talent is already in short supply for many positions. For example, in a worldwide survey conducted by BCG in 2010, 56 percent of responding companies cited a critical talent gap for their senior managers’ successors, in part because their internal talent pools are too shallow.

In mature nations, despite slow economic growth and continued high unemployment, most companies are hard-pressed to find high-performing, high-potential individuals to serve as tomorrow’s middle managers and senior leaders. Roughly 75 million baby boomers are nearing retirement in the U.S., for example, with only 30 million Generation Xers set to replace them. Mature economies are also contending with talent shortages in functions such as engineering and IT. And multinational companies based in mature nations will face intense competition for talent as they expand abroad.

In high-growth markets, the challenge often lies in finding sufficient numbers of skilled workers. It’s a question of quantity, as growth in the number of university graduates in some regions lags GDP growth by a factor of two or three. It’s also a question of quality, with only 25 percent of Indian and 20 percent of Russian professionals considered employable by multinational companies, according to a BCG analysis.

The shortage of skilled people will worsen over the next decade, making it more difficult for organizations to penetrate new markets and compete effectively in volatile ones. Where industry leaders could once remain dominant in market share and profitability for decades, companies now face fierce battles to maintain their lead for just a couple of years. Volatile markets often demand new business models and new types of talent to make a company’s business strategy successful.