The War for Talent

6.3 - The War for Talent

L E A R N I N G O B J E C T I V E S

1. Define talent management.

2. Attract the right workers to your organization.

3. Understand how to keep your stars.

4. Understand the benefits of good talent management.

You have likely heard the term, the war for talent, which reflects competition among

organizations to attract and retain the most able employees. Agencies that track

demographic trends have been warning for years that the U.S. workforce will shrink in

the second and third decades of the 21st century as the baby boom generation (born

1945–1961) reaches retirement age. According to one source, there will be 11.5 million

more jobs than workers in the United States by 2010.Extreme talent shortage makes

competition fierce for key jobs and highlights needs for leadership development. (2007,

November 26). Business Wire, 27. Even though many boomers say they want to (or have

to) continue working past the traditional age of retirement, those who do retire or who

leave decades-long careers to pursue “something I’ve always wanted to do” will leave

employers scrambling to replace well-trained, experienced workers. As workers compete

for the most desirable jobs, employers will have to compete even more fiercely to find

the right talent.

What Talent Management Means

Peter Cappelli of the Wharton SchoolCappelli, P. (2008, March). Talent management

for the 21st century, Boston. Harvard Business Review, 17–36. defines talent

management as anticipating the need for human capital and setting a plan to meet it. It

goes hand in hand with succession planning, the process whereby an organization

ensures that employees are recruited and developed to fill each key role within the

company. Most companies, unfortunately, do not plan ahead for the talent they need,

which means that they face shortages of critical skills at some times and surpluses at

other times. Other companies use outdated methods of succession planning that don’t

accurately forecast the skills they’ll need in the future.

Interestingly, however, techniques that were developed to achieve productivity

breakthroughs in manufacturing can be applied to talent management. For example, it

is expensive to develop all talent internally; training people takes a long time and

requires accurate predictions about which skill will be needed. Such predictions are

increasingly difficult to make in our uncertain world. Therefore, rather than developing

everyone internally, companies can hire from the outside when they need to tap specific

skills. In manufacturing, this principle is known as “make or buy.” In HR, the solution is

to make and buy; that is, to train some people and to hire others from the external

marketplace. In this case, “making” an employee means hiring a person who doesn’t yet

have all the needed skills to fulfill the role, but who can be trained (“made”) to develop

them. The key to a successful “make” decision is to distinguish between the high-

potential employees who don’t yet have the skills but who can learn them from the

mediocre employees who merely lack the skills. The “buy” decision means hiring an

employee who has all the necessary skills and experience to fulfill the role from day one.

The “buy” decision is useful when it’s too difficult to predict exactly which skills will be

needed in the future. Buhler, Patricia M. (2008, March). Managing in the new millennium; succession planning: Not just

for the c suite. Supervision, 69(3), 19-23.

Another principle from manufacturing that works well in talent management is to run

smaller batch sizes. That is, rather than sending employees to 3-year-long training

programs, send them to shorter programs more frequently. With this approach,

managers don’t have to make the training decision so far in advance. They can wait to

decide exactly which skills employees will learn closer to the time the skill is needed,

thus ensuring that employees are trained on the skills they’ll actually use.

Attracting the Right Workers to the Organization

Winning the war for talent means more than simply attracting workers to your

company. It means attracting the right workers—the ones who will be enthusiastic about

their work. Enthusiasm for the job requires more than having a good attitude about

receiving good pay and benefits—it means that an employee’s goals and aspirations also

match those of the company. Therefore, it’s important to identify employees’

preferences and mutually assess how well they align with the company’s strategy. To do

this, the organization must first be clear about the type of employee it wants. Companies

already do this with customers: marketing executives identify specific segments of the

universe of buyers to target for selling products. Red Bull, for example, targets college-

age consumers, whereas SlimFast goes for adults of all ages who are overweight. Both

companies are selling beverages but to completely different consumer segments.

Similarly, companies need to develop a profile of the type of workers they want to

attract. Do you want entrepreneurial types who seek autonomy and continual learning,

or do you want team players who enjoy collaboration, stability, and structure? Neither

employee type is inherently “better” than another, but an employee who craves

autonomy may feel constrained within the very same structure in which a team player

would thrive.

Earlier, we said that it was important to “mutually assess” how well employees’

preferences aligned with the company’s strategy. One-half of “mutual” refers to the

company, but the other half refers to the job candidates. They also need to know

whether they’ll fit well into the company. One way to help prospective hires make this

determination is to describe to them the “signature experience” that sets your company

apart. As Tamara Erickson and Lynda Gratton define it, your company’s signature

experience is the distinctive practice that shows what it’s really like to work at your

company. Erickson, T., & Gratton, L. (2007, March). What it means to work here. Harvard Business Review, 23–29.

For example, here are the signature experiences of two companies, Whole Foods and

Goldman Sachs: At Whole Foods, team-based hiring is a signature experience—

employees in each department vote on whether a new employee will be retained after a

4-week trial period. This demonstrates to potential hires that Whole Foods is all about

collaboration. In contrast, Goldman Sachs’s signature experience is multiple one-on-one

interviews. The story often told to prospective hires is of the MBA student who went

through 60 interviews before being hired. This story signals to new hires that they need

to be comfortable meeting endless new people and building networks across the

company. Those who enjoy meeting and being interviewed by so many diverse people

are exactly the ones who will fit into Goldman’s culture.

The added benefit of hiring workers who match your organizational culture and are

engaged in their work is that they will be less likely to leave your company just to get a

higher salary.

Keeping Star Employees

The war for talent stems from the approaching shortage of workers. As we mentioned

earlier in this chapter, the millions of baby boomers reaching retirement age are leaving

a gaping hole in the U.S. workforce. What’s more, workers are job-hopping more

frequently than in the past. According to the U.S. Bureau of Labor Statistics, the average

job tenure has dropped from 15 years in 1980 to 4 years in 2007. As a manager,

therefore, you need to give your employees reasons to stay with your company. One way

to do that is to spend time talking with employees about their career goals. Listen to

their likes and dislikes so that you can help them use the skills they like using or develop

new ones they wish to acquire. Kaye, B. (2008). Love ’em or lose ’em. San Francisco: Barrett-Koehler.

Don’t be afraid to “grow” your employees. Some managers want to keep their employees

in their department. They fear that helping employees grow on the job will mean that

employees will outgrow their job and leave it. Field, A. (2008, June). Do your stars see a reason

to stay? Harvard Management Update,. But, keeping your employees down is a sure

way to lose them. What’s more, if you help your employees advance, it’ll be easier for

you to move up because your employees will be better able to take on the role you leave

behind.

In some cases, your employees may not be sure what career path they want. As a

manager, you can help them identify their goals by asking questions such as:

• What assignments have you found most engaging?

• Which of your accomplishments in the last six months made you proudest?

• What makes for a great day at work? Butler, T. (2007). Getting unstuck. Boston: Harvard Business

School Press.

What Employees Want

Employees want to grow and develop, stretching their capabilities. They want projects

that engage their heads as well as their hearts, and they want to connect with the people

and things that will help them achieve their professional goals. Deloitte Research. (2007). Do you

know where your talent is? why acquisition and retention strategies don’t work. Geneva, Switzerland: Deloitte-Touch Research

Report. Here are two ways to provide this to your employees: First, connect people with

mentors and help them build their networks. Research suggests that successful

managers dedicate 70% more time to networking activities and 10% more time to

communication than their less successful counterparts. Luthans, F., Yodgetts, R., & Rosenkrantz, S.

(1988). Real managers. Cambridge: Ballinger. What makes networks special? Through networks, people energize

one another, learn, create, and find new opportunities for growth. Second, help connect

people with a sense of purpose. Focusing on the need for purpose is especially important

for younger workers, who rank meaningful work and challenging experiences at the top

of their job search lists. Sheahan, P. (2006). Generation Y: Thriving (and surviving) with generation Y at work.

Victoria, Australia: Hardie Grant Books.

Benefits of Good Talent Management

Global consulting firm McKinsey & Company conducted a study to identify a possible

link between a company’s financial performance and its success in managing talent. The

survey results, reported in May 2008, show that there was indeed a relationship

between a firm’s financial performance and its global talent management practices.

Three talent management practices in particular correlated highly with exceptional

financial performance:

• Creating globally consistent talent evaluation processes.

• Achieving cultural diversity in a global setting.

• Developing and managing global leaders. McKinsey global-talent-management survey of over 450

executives. (2007, December). Retrieved January 30, 2009,

from http://www.mckinseyquarterly.com/article_print.aspx?L2=18&L3=31&ar=2140.

The McKinsey survey found that companies achieving scores in the top third in any of

these three areas had a 70% chance of achieving financial performance in the top third

of all companies. Guthridge, M., & Komm, A. B. (1988, May). Why multinationals struggle to manage talent. McKinsey

Quarterly, 19–25.

Let’s take a closer look at what each of these three best practices entail. First, having

consistent talent evaluation means that employees around the world are evaluated on

the same standards. This is important because it means that if an employee from one

country transfers to another, his or her manager can be assured that the employee has

been held to the same level of skills and standards. Second, having cultural diversity

means having employees who learn something about the culture of different countries,

not just acquire language skills. This helps bring about open-mindedness across

cultures. Finally, developing global leaders means rotating employees across different

cultures and giving them international experience. Companies who do this best also

have policies of giving managers incentives to share their employees with other units.

K E Y T A K E A W A Y

The coming shortage of workers makes it imperative for managers to find, hire, retain,

and develop their employees. Managers first need to define the skills that the company

will need for the future. Then, they can “make or buy”—that is, train or hire—employees

with the needed skills. Retaining these employees requires engaging them on the job.

Good talent management practices translate to improved financial performance for the

company as a whole.

R E F L E C T I O N S

1. How might a manager go about identifying the skills that the company will need in the

future?

2. Describe the “make or buy” option and how it can be applied to HR.

3. How would you go about attracting and recruiting talented workers to your

organization? Suggest ideas you would use to retain stars and keep them happy working

for you.

4. What skills might an organization like a bank need from its employees?

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