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Winning the War for Talent
By Emily Meyertholen, Beyster Institute Staff
Nine years ago in a study titled “The War for Talent,” a team of authors from the management consulting firm McKinsey & Company asserted that U.S. companies would struggle with a severe and worsening shortage of executive talent for decades to come.
The study involved 77 large and mid-size companies and almost 6,000 managers and executives. It determined that the most important corporate resource over the next 20 years will be talent: smart and savvy leaders for management and executive positions. They stressed that to compete, companies must devise more imaginative hiring practices and work harder to keep their best employees. With competition becoming more global, capital more abundant, ideas being developed quickly and cheaply, and people willing to change jobs often, they say talent is the only thing that will really matter.
The authors also stress that while talent becomes more important, its supply will decrease. In 15 years, there will be about 15 percent fewer 35- to 45-year-olds in the U.S., while the economy is expected to grow by 3 to 4 percent per year. These numbers, along with the changing business environment, caused the authors to foresee an imminent talent war whose victors would be the only survivors in the new marketplace.
Are American corporations starting to see the impact of the talent war yet? How can they prepare for its first blows and instigate a shift in strategy and culture that will appeal to the best and brightest of today’s young workforce who will drive the American economy in the coming decades?
These were the questions addressed at a recent Rady School of Management Align Executive Series seminar. The series, a collaboration between the Rady Center for Executive Development and outplacement consulting company Challenger, Gray & Christmas, aims to facilitate communication between chief executives, board members and HR professionals within the San Diego corporate environment. Considering the McKinsey study’s warning, this series couldn’t be timelier.
The study’s authors recommended making talent a priority at all levels, creating reasons for top talent to come, revamping recruiting strategies, creating development opportunities, and identifying and investing in A-players. Despite its potential impact, few companies promptly acted on the study’s advice. A 2000 update of the study supported the prediction that the war for talent was indeed intensifying: 89 percent of corporations reported that they found it more difficult to attract talent, 90 percent found it more difficult to retain talent, and only seven percent felt they had the talent necessary for growth. Furthermore, about 30 percent of MBA holders and 37 percent of computer scientists and engineers preferred startups to large companies. The updated study also found that companies which did focus on managing talent delivered far better bottom-line results, outperforming their industries’ means by 22 percent. Companies reported that their ability to attract top talent had decreased between the 1997 and 2000 studies, and their ability to develop talent remained about the same.
In “workplace 2.0,” as Rick Cobb of Challenger, Gray and Christmas calls it, a company’s internal brand is even more important than its external brand in regards to attracting the best people. Prospective employees have more insight into their potential employers than ever before, and they consider factors far beyond what the company has presented to them at an interview or on the company website. Blogs, wikis and social tagging are major internal branding mediums, whether companies can control them or not. Employees share their thoughts about their job and employer, and more people read them than one would expect. Today almost no one accepts a position without at least performing a quick web search that reveals something about the work environment within the company.
To create a culture with an appealing internal brand, we must understand what the workforce wants. The “greatest generation” wanted careers that provided tangible symbols of loyalty like a good pension and the baby boomers wanted personal appreciation; Generation Xers are more concerned with free time and the Millennials (those born after 1980) want acknowledgement of their credibility. “I’ve been here five minutes and no one has asked for my opinion yet” is a sentiment Cobb says we’ll hear from Millennials who are now entering the workforce.
Cobb says to compete for top talent in workplace 2.0, a company’s culture would need to focus on work and life balance, great management, challenging work and special projects, training and development options, career advancement and mobility options, mentoring and recognition.
Of course compensation will also always play an important role, but money is often just a way of keeping score, not something that makes people like their job or their company. According to Rady School of Management Professor David Schkade, “People who make it to upper management all work hard and expect to be paid well, but if you want to keep them happy, you need to think outside of the compensation box.” Even though they may be hard workers and high performers, it doesn’t necessarily mean that they like their jobs.
His research suggests that executives would be more satisfied if leadership roles were redesigned in ways that help executives pursue enduring personal interests within the company, nurture the people the executive is committed to and keep them close, and set difficult but clear goals. Unsupportive bosses, lack of control over the resources needed to overcome challenges, excessive red tape and unrealistic goals are some of the things which make executives unsatisfied, causing them to be ineffective or to move on.
Larry Cabaldon of the executive search firm DHR International shared his perspective on why the talent war is tough to win. “Historically, companies were built to last, but now they’re ‘built to cash.’ It’s not about people and company building.”
The task is clear: Corporations need to start shaping themselves into organizations that appeal to the short supply of tomorrow’s business leaders or be left in the dust. Despite rapid innovation, globalization, and all the other factors which will determine the new face of American business, tomorrow’s executives have already started the employer popularity contest. The winner gets the brightest stars, and the keys to continued success.
©2008 The Beyster Institute and its authors and their entities. All rights reserved.
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