Insights from Prof. Shirley Zinn, Professor of Economics and Management at the University of Pretoria
While the natural reaction by the vast majority of organisations to difficult economic times is to go into ‘lockdown’ mode and focus, often exclusively, on capital protection and liquidity, this constitutes a somewhat short-sighted approach to business – and one that places companies at risk of missing out on significant opportunities for future growth and sustainable profitability through effective talent management. Prof. Shirley Zinn, CEO of Zinn Consulting and Professor of Economics and Management at the University of Pretoria, discusses the war for talent in a post-recession world and the implications for business strategy.
If the current economic crisis has taught executives anything, it is that the ultimate long-term success of any organisation depends heavily on its ability to manage, develop, retain, and attract talented and experienced staff. In an increasingly commoditised business environment, human beings offer the only real and lasting competitive advantage. But, unfortunately, it took a crisis of global proportions for this message to start sinking in – and still there are many companies that are yet to fully absorb its ramifications.
“Human capital is a core corporate asset, just like financial and physical assets. As such, it must be managed the way companies manage other assets. This requires thinking strategically about how to invest in human capital, and figuring out how to optimise and measure its return.” Allan Schweyer.
Although this is a useful perspective on human capital, the truth is that people are much more than “assets”. People build relationships, drive intangible value, and are ambassadors for companies. The ability to, “unlock the soul of the organisation” (Richard Barrett) ultimately leads to a high morale, and builds a “great” (Jim Collins) performance culture, improved productivity and customer service, and profitability. Talent is a scarce and precious resource and your talent is what differentiates you from your competitors! Talent management is a business imperative. Nurturing and engaging talent goes far beyond the HR function, to everyone who is a manager of others and interested in driving business success forward.
“Indeed, many companies do not even know how to define “talent”, let alone how to manage it. Some use it to mean people like Aldous Huxley’s alphas in “Brave New World”—those at the top of the bell curve. Others employ it as a synonym for the entire workforce, a definition so broad as to be meaningless.” (Economist, Oct 2006). Defining talent is a capability “in identifying and articulating the organisation’s critical talent needs for each area of the business…defining talent is an ongoing process” (Cheese, Thomas, Craig: 2008)
Talent Management broadly includes the systematic attraction, acquisition, retention and development of employees. This is linked to how the organisation is perceived and experienced both internally and externally by staff, customers, stakeholders and its business community. It is also linked to the supply and demand requirements within the organisation and the quality and quantity of talent in the labour market. The Talent Management portfolio, therefore, usually includes recruitment, employee value proposition, engagement, career management, succession planning, induction and on-boarding, psychometric assessments and develops integrated policies and frameworks that support and provide parameters for how each of these components have to be implemented. Organisations generally recognise multiple types of talent and provide differentiated development opportunities based on performance and potential. It is important to note that managing talent is not a mechanistic tick-in-the-box exercise but a dynamic process with changing requirements over time.
It is critical that we encourage an open and honest dialogue with employees about their aspirations, performance, their potential and requisite development opportunities. This requires meaningful engagement and understanding of each team member’s development requirements, performance improvement objectives and career aspirations. Customisation of talent planning that resonates with the requirements of each person as well as the business needs is key, and this is cannot be a one-size-fits-all approach. This leads to stronger involvement of employees that encourages passion, commitment (emotional and rational), and discretionary effort that leverage business success through the multiplier effect of cohesion and the sharing of common purpose.
Another key component of leveraging talent that supports innovation and creativity in businesses and nations, is the diversity of the talent pipeline. In South Africa, we have recognised the necessity for change and have passed laws enshrined in our Constitution, not only to drive our democratic principles, but also to ensure that we create a sustainable economy by building an inclusive socio-economic environment that embraces and reflects national demographics.
As we emerge from this global recession, the most proactive companies in positioning themselves in the labour market as great places to work are the ones, which will have the competitive edge on those slower and less smart in attracting talent.
What does all of this mean for the business?
As a result of these complexities, CEOs, line managers, and Human Resources practitioners around the world are currently faced with a crisis of their own; that of talent management.
Many are being called upon to urgently start and coordinate comprehensive and effective talent management strategies for the “new normal” that has emerged after recent events. For many, this represents massive challenges and a complete paradigm shift in the way organisations traditionally think about, and manage, their people. An inability, or unwillingness, to place effective talent management at the core of HR and corporate strategic thinking and planning, will now expose any business to levels of risk that, at best, will severely hinder its ability to remain competitive in the future.
It is time to go about talent management with strategy
Talent management is not only a domain of HR. It is critical for a CEO to connect with top talent within the company. Also key, is how line managers and the organisation more broadly acquire, retain, and develop their people.
Traditional talent management programs focused primarily on attracting the best High Potential (HiPo) workers within the organisation, and helping them develop into leaders and experts in their fields. The sudden shift in economic climate, however, demands a radical change to the methodologies with which we approach talent management in our organisations. Circumstances dictate that we now focus more on a strategic talent management approach, which, in addition to attracting, developing, positioning, and retaining talented staff, also requires that we concentrate on transferring their knowledge and expertise to others within the organisation with a view to building and developing our own, internal talent pools.
Re-assessing the war for talent
In recent years, we’ve heard much about the skills and talent shortage in South Africa. The result of this talent gap has been an ongoing war for talent that has seen organisations battling it out to attract the few individuals in the country with the skills they need. But we are now faced with a talent battlefield of a somewhat different nature; the global economic crisis resulted in widespread retrenchment, and the result is an availability of many talented and experienced employees looking for placement. It could be claimed that this retrenchment of experienced and valuable staff members, is not so much a result of financial difficulty within companies, but rather demonstrates a short-sightedness and lack of understanding of how important it is to balance short-term number crunching with long-term sustainability requirements. Are we ready for the upturn?
Much like the naïve investor sells when the market reaches its lowest level, so does the naïve business attempt to rescue its financial figures by retrenching staff at when the economic cycle reaches its bottom. Fortunately, this error on the part of some, represents a significant opportunity for others who understand the importance of continuing to plan for growth during difficult times – giving the prudent business a unique opportunity to strengthen its ranks with some highly employable and skilled people.
Interestingly enough, a recent survey by Deloitte showed that only four in ten executives are using the economic crisis to seek out talented staff members with hard-to-find skills. This means there is probably a glut of talent out there waiting to be recruited, and even if it means finding other, innovative ways to cut costs, these are people, often with extensive international experience, who should be finding their way onto the payrolls of forward thinking South African and more broadly, emerging market, companies.
Do not always think about cost; think Return on Investment
The problem with the typical knee-jerk business reaction to economically difficult times is that organisations become so focused on managing costs, that they lose sight of potential return on sensible, wise investment in their people. Nowhere is this more obvious than in executive decision-making regarding HR and recruitment policies. Many South African companies still subscribe to the archaic belief that controlling costs starts with cutting staff or limiting benefits and development opportunities. This could not be further from the truth. While it is understandable that businesses feel the need to freeze recruitment and, at best allow for natural staff attrition or, at worst, start retrenching, these practices should be approached with caution and due consideration of the long-term impact they will have on the company.
A more appropriate approach is to recognising the richness and talent of current employees, despite the economic circumstances, find innovative and cost effective ways of retaining and nurturing that talent wherever possible, and keep one eye open for opportunities to strengthen your staff complement with new talent that becomes available as a result of other companies not following similar talent management practices.
Ultimately, before any company reacts to the financial crisis by retrenching people, the true cost of losing those people, and the time and money already invested in them, should be considered. HR departments need to become highly focused on working closely with line managers and executives in developing solutions to address potential staff losses, whether through attrition or retention, recognise and nurture the potential that exists, and improve the effectiveness of overall talent management in their organisations regardless of economic, or other, challenges. Equally importantly, we need to assign clear monetary values and return on investment indicators to such solutions, as well as to the talented staff they help retain.
While many of the economic signs appear to be slightly more positive of late, a change in global economic circumstances does not mean the corporate world will be getting back to business as usual. Hard lessons have been, and are still being learned. The immense pressure on HR departments to cut costs will continue to make effective talent management a key strategic imperative for the foreseeable future. Businesses will always remain wholly-owned subsidiaries of the environment in which they operate – meaning that effective processes and approaches to managing talent, through good times and bad, will always be of the utmost importance.
While we must continue to jealously guard our tried and tested corporate values at all costs, these must now serve as the foundation for innovation, empower and equip our people, and a preparation for the natural upward trend that will invariably occur as a part of the economic cycle.
Unfortunately, however, this upward trend in the cycle is not likely to be the wave that indiscriminately carries all South African businesses along with it. Only those companies that have demonstrated the foresight to prepare themselves for it by effectively preparing their people will get to ride its crest. Those that fail to implement effective talent management strategies in preparation for it will, almost certainly, find themselves left behind in its wake.
Ø Businesses should prioritise their talent management strategies.
Ø They should be as systematic about talent as they are about their financial strategies.
Ø They should measure talent management to ensure it is given the focus in the boardroom.
Ø Organisations should genuinely care for their people and build environments, in which people can thrive.
Ø Organisations should be value-led and vision-driven and treat all people with respect and dignity, simultaneously holding employees accountable for their behaviour and their deliverables. Values are more important than rules.
Ø We should focus on building unique, differentiated and competitive organisational cultures that “unlock the corporate soul” (Richard Barrett) and truly engages people with passion.
Ø Organisations should continue, even during tough times, to invest in the development of talent. Education is a key pillar to building a sustainable business.
Ø Retaining talent has to do with the total experience and not only with remuneration.
Ø In managing talent, organisations should be mindful of the importance of the necessity for diversity, which goes beyond race and gender to understanding people’s mentalities, experiences, and generational differences and the impact of said factors in the workplace.
Ø Business needs to support the philosophy that talent is at the heart of business success.
Ø Talent management is a leadership imperative.
Nelson Mandela once said: “Education is the great engine to personal development. It is through education that the daughter of a peasant can become a doctor, the son of a mineworker can become head of the mine, that the child of farm workers can become the president of a great nation”.