Published on July 28, 2009
Research We Are Drawing On Today 1. War For Talent 2. War For Technical Talent 3. Client Work Focused on “Top 200” Managers in large companies (“How to attract, develop, and retain executives”) Survey of over 5,000 Executives in 77 companies (44 top-quintile companies and 33 mid-quintile companies) “Gold Standard” case research at 20 top-quintile companies with terrific talent reputations Focused on CS/EE talent in “new economy” (“Applying hard product/market tools to talent market”) Survey of over 5,000 alumni of 8 top-20 universities Best practice research (with professors, anthropologists, and journalists) Service to over 50 clients on talent management issues 3
Our Observations Talent mattersThere is an escalating war for managerial talentMost companies are ill-preparedPast winning approaches not enough for the future5
There is an escalating war for managerial talent
Most companies are ill-prepared
Past winning approaches not enough for the future
Winners Know That Talent Matters “The scarce resource is talent.” – Keven Sharer of Amgen “It’s what allowed us to double our growth rate.” – Phil Humann of SunTrust “Winners make commitments; losers make excuses.” – John Schuerholz of Atlanta Braves 6
Economics of Talent are Compelling Modest improvement in talent doubles market cap Profits 94% higher at plants managed by “A’s” Profits 67% higher at plants managed by “A’s” More talented Associates over twice as productive Software services Paper plants Linen plants Investment banking 7
Talent Matters – a lot! Compared to competition, our talent pool is much or somewhat strongerPercentage of top 200 executives Return to shareholders 1986-95 Average annual percent Top-quintile companies Mid-quintile companies Top-quintile companies Mid-quintile companies 8
Supply of Future Executives Will Actually Decline 35- to 44-year-olds in the U.S. Index, 1970 = 100 Today X 15% drop 0 2000 Source: United Nations 9
Companies Ill-prepared Percentage of top 200 executives who strongly agree it reflects their company Knows who the high and low performers are Develops people quickly and effectively Removes low performers relatively quickly Retains almost all high performers Brings in highly talented people Source: Top 200 10
What Worked in the Past Not Enough for the Future Average American corporation(vast majority) Talent magnets(Most of our 20 case companies) Talent beehives(a few) 11
What Managers Are Looking for Percentage of top 200 managers rating factor absolutely essential Values and culture Well managed Company has exciting challenges Strong performance Industry leader Many talented people 58 50 38 29 21 20 Freedom and autonomy Job has exciting challenges Career advancement and growth 56 51 39 Great company (brand) Great jobs (products) Competitive compensation (price) Differentiated compensation High total compensation 28 23 14
Development and Compensation Are Biggest Gaps Percentage of Top 200 executives Value/culture Freedom/ autonomy Well managed Company effectiveness Meets/exceeds expectations High total compensation Career advancement Differentiated compensation Development 0 0 Importance to executives Absolutely essential or very important 15
Better Companies Pay More Percentage of companies positioned above median compensation levels Top-quintile companies Mid-quintile companies Base salary Salary plus annual incentive Long-term incentive 16
Better Companies Differentiate More Percentage of HR executives Top-quintile companies Mid-quintile companies Top performers make significantly more than average performers (strongly agree) We send strong messages about individual performance with our pay programs (strongly/somewhat agree) 17
Another Research Effort Quantified the Large Pay Differentials Total pay 33% higher At-risk pay 50% higher Hold over twice as much equity Total pay 69% higher At-risk pay 175% higher Outside directors hold over 3 times more equity* Executive team Board * McKinsey-sponsored paired comparison research conducted by Dr. Don Hambrick of Columbia Business School Source: McKinsey-sponsored paired comparison research conducted by Dr. Rakesh Khurana of MIT and Dr. Brian Hall of HBS 18
Executives Group Into 4 Clusters Go with a winner Emphasis on growth and advancement in a strongly performing company Company mission and geographic location less important29% of respondents Big risk, big reward Emphasis on compensation and career advancement/ growth Company mission and success not very important, nor is development 24% of respondents Save the world Looking for a company with an inspiring mission and exciting challenges Compensation relatively less important 23% of respondents Lifestyle Put personal issues at the forefront – respect for lifestyle, geographic location, fit with boss Company growth and excitement less important 19% of respondents 19
Leaders Instill a Talent Mindset Leaders passionately believe Talent winsBuilding the talent pool is a crucial part of their jobA talent gold standard must be establishedInstill a talent mindset Leaders “Own” the top 200-500Hold line managers accountableDrive a simple but rigorous talent review processLeaders infuse CandorDifferentiationConsequences managementHold line managers accountable Infuse the right behavior 21
Building the talent pool is a crucial part of their job
A talent gold standard must be established
“Own” the top 200-500
Hold line managers accountable
Drive a simple but rigorous talent review process
Instill a pervasive talent mindset Percentage of corporate officers who strongly agree, unless otherwise noted Top-quintile companies Gold standard companies Mid-quintile companies Improving the talent pool is a top-three priority Time spent on people management by senior-line officers (percentage) Number of positions on which corporate officers exert significant influence 31 24 139 34 26 179 59 35 393 Source: Corporate Officers survey and/or Human Resource department 22
Instill a Talent Mindset Talent wins “Talent is superordinate to strategy . . . A great strategy can go up in flames quickly . . . But talented people know how to respond.” Dick Vague, CEO First USA (BancOne) “I focus on talent management. We have systems and reports for everything else.” Bill George, CEO Medtronic It’s my job “In our manufacturing managers, we want leaders, not micromanagers; empowerers, not administrators; real expertise and judgment, not technicians. Against this standard, we changed 50% of our 400 manufacturing managers.” AlliedSignal, senior executive Need a gold standard 23
Infuse the Right Behaviors Percentage of HR executives who strongly agree Mid-quintile companies Top-quintile companies Gold standard companies Discussions in our people meetings are frank and open Real consequences result from assessments in people reviews Top performers make significantly more than average performers 24
Formality of the Process Not Important Of those companies that conduct a review, the percentage that do these things Mid-quintile companies Top-quintile companies Identify backups Assign responsibility for taking action Articulate action plans for each individual Formally review follow-up actions at next review meeting Source: McKinsey War for Talent HR executive survey 25
Accountability for People Percentage of corporate officers who strongly agree Should line managers be accountable for the quality of their people? Believe this philosophy Think their companies actually do this 26
Know Who You Are Looking for Profile of high and low performers at Company X High performers Low performers Percent with honors or top 10% of class 40 14 Personal attributes* Drive for results70 60 Encourage innovation and risk taking60 13 Attract talent and build strong organization53 25 Manage company’s resources carefully53 75 Like to know what is going on in my department27 75 * Percentage of respondents who say they demonstrate attribute essentially “all the time” 28
Drive for results
Encourage innovation and risk taking
Attract talent and build strong organization
Manage company’s resources carefully
Like to know what is going on in my department
Choose a Primary Talent-sourcing Strategy Cherry pick the best talent from acquisitions program Acquire Bring in at all levels with intense development focus to augment/shape Multiple channels Let others provide the basics, you reap the dividends Outsource Home grow superior talent from entry level onward Insource 29
Be Creative About Talent Sources Earlier Technology company that provides summer internships and part-time jobs for hundreds of high school and college students Biotech company that hires entrepreneurial “refugees” from the R&D departments of big pharma companies Later Global industrial company that hired 650 military officers in 2 years Different One company hired 50 of 300 graduating students from an elite Indian high school and brought them to the U.S. Outside U.S. 30
Better companies reach outside more Percentage of respondents Top-quintile companies 7 13 16 Level at which executives join the company (position) Top 20 21-100 101-300 Mid-quintile companies 6 12 16 Gold standard companies 15 24 25 Source: Corporate Officers survey and/or Human Resource department 31
Jobs and Feedback Drive Development Percentage of top 200 executives Stretch/ developmental jobs Formal training Company effectiveness Excellent or very good Feedback/mentoring Importance to my development Absolutely essential or very important 33
Informal on-the-job coaching and feedback to 30 perform a task better Being told my strengths and weaknesses by my 32 superior(s) Being mentored 25 Flood the Joint With Feedback Percentage of top 200 executives “Company is very good or excellent at providing” “Essential or very important to my development” 73 71 60 34
Retention: the Silent Battlefield “Today’s high performers are like frogs in a wheelbarrow. They can jump out at any time” Only 25% of companies said theirtop 300 attrition data are accurate Retention of 3-8 year group becoming a “black hole” 35
Early-tenure turnover now double pre-1990 levelsOver 2/3 with under 10 years job experience expect to change jobs again within next 3 yearsAverage employee offered over 20 new employers annuallyExample of the Silent Statistics of Turnover Technology graduates Source: 1999 survey of over 5,000 CS and EE alumni of eight U.S. universities 36
Early-tenure turnover now double pre-1990 levels
Over 2/3 with under 10 years job experience expect to change jobs again within next 3 years
Average employee offered over 20 new employers annually
C Players Create a Vicious Cycle Keep Cs in critical jobs Performance in job is low Productivity and morale of group is low Subordinates not developed Development/ advancement opportunities blocked Fewer “A” players attracted to join the company High performers leave the company 37
Move C Players Out or Aside Percentage of HR executives who strongly/somewhat agree Mid-quintile companies Top-quintile companies Gold standard companies We regularly identify the 10-20% least effective people with the intention of taking action to upgrade the talent pool The company regularly dismisses its least effective people 38
This talent stuff may be common sense, but it isn’t common Yogi Berra 40
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