Business is at an inflection point. Digital innovation is disrupting almost every industry, and organisations must adapt to remain competitive. While many business leaders understand this transformation and are acting out of necessity, their strategy to do so often fails to carry over into an updated hiring and talent strategy. This results in lack of execution. Bringing on talent to take a business where it wants to go, not just for where it is today, is crucial. It is risky to continue to only hire people who meet the requirements of the current job and tasks at hand. Instead companies must look into hiring talents that fit the strategy at hand and future ambitions of the company.
To respond to global competition, firms are using new technologies to provide better, low-cost solutions for their customers. But these technological innovations have led to constant movement of customers and competitors. At the same time, organisations are pressured to be innovative and reduce costs. All these trends are pushing companies to manage their assets as effectively as possible – including their human assets (SHRM, 2008).
Hiring the wrong talent can be time consuming and expensive. The same can be said for not being able to retain the current talents. Still, this is a trend we see in businesses of all sizes. Why does this keep happening? How can companies ensure not wasting their time? Our answer is twofold – 1) look at the leaders and their alignment to organisational strategy, and 2) assess your current human capital.
Where the problem (possibly) starts
According to Harvard Business Review one of the main reasons for difficulties in hiring and retention situations can be boiled down to one aspect – internal versus external hiring (HBR, 2019). In today’s corporate world, openings are filled more often by hiring from the outside than promoting or rearranging from within. In the era of lifetime employment, from the end of World War II through the 1970s, corporations filled roughly 90% of their vacancies through promotions and lateral assignments. Today the figure is a third or less. Only 28% of talent acquisition leaders today report that internal candidates are an important source of people to fill vacancies – presumably because of less internal development and fewer clear career ladders (HBR, 2019). This also impacts employee motivation and therefore employee retention. According to Census and Bureau of Labor Statistics data, 95% of hiring is done to fill existing positions. LinkedIn data indicates that the most common reason employees consider a position elsewhere is career advancement – which is surely related to employers not promoting to fill vacancies (HBR, 2019).
This indicates the need to investigate the internal structures and talent acquisition/retention strategies in organisations. Do you have the right people and competencies to complete your organisational strategy? Is your strategy aligned?
The first aspect to take into consideration when analysing misalignment is to look into the leaders and their alignment with the company’s strategy. What is their behaviour like? How do they support the company’s strategy? If the leader is not aligned with the strategy, it can be very difficult for the team and individual team members to succeed. A way to start is by looking into the following questions:
These questions can help uncover any weak spots amongst the leaders, which can feed into the respective teams and thereby create unsatisfied employees. When the strategy changes, the leader must be on top of it and have clear and direct communication with both new and existing employees in order to ensure alignment and satisfaction. This can also uncover existing skills amongst the team members that may meet the emerging needs of the organisation. In other words, when the strategy changes, the leaders must look into their existing human capital to uncover whether there is a need for new talent, or if internal mobility is a better and more fruitful option.
These questions stem from our service called Clarify. Clarify is about researching whether the behaviours of the company’s leaders support the company’s strategy and whether they have the best conditions for pursuing it. A misalignment often has little to do with abilities or talent. Often, it is a question of misalignment somewhere else in the organisation – often in the management or the strategy. So how can you secure the company’s human capital to reach your goals and how do you know when your leaders and strategy are not aligned?
One way is to look for behavioural signs such as:
Once alignment is secured, it is much easier for both leaders and employees to navigate in the organisation’s direction and the risk of misalignment or misunderstandings is kept to a minimum. Through interviews, cross-referencing and commercial analytics, People Integrated is able to secure an objective organisational chart indicating the biggest weak spots based on strategic impact. This chart serves as a focus tool to pursue alignment and ensures consensus about the strategy on an executive level.
The organisational chart will touch upon the following aspects:
The process of clarifying will often lead to the launch of new initiatives or changes in the executive team. For example, the process could identify the need for new communication channels or levels to ensure clear communication about the strategy. This could be specifically beneficial for the executive team to look into for their respective teams, as this can facilitate a larger degree of understanding and alignment.
Once you have clarified the organisational weak spots, you can start investigating the human capital and assessing the competencies of each leader. This is step 2 in our Human Capital Consulting, called Assess.
Assess and maximise competencies
McKinsey’s research suggests that executive talent has been the most undermanaged corporate asset for the past two decades (The McKinsey Quarterly, 1998). Companies that manage their physical and financial assets with rigor and sophistication have not made their people a priority in the same way. Only 23% of 6,000 executives surveyed strongly agree that their companies attract highly talented people, and just 10% that they retain almost all their high performers. Furthermore, many companies had not managed talent particularly consciously until they began to see problems emerging on that front. By the time the problems come to their attention, it is usually too late – the employee has quit or is at least unhappy and therefore underperforms, which is unsatisfactory for both employee and organisation.
You can have an absolutely brilliant Marketing Director, who leads his team perfectly today, but are these results aligned with the company’s reality and strategy long term? This is difficult to answer without a detailed assessment of which type of behaviour and results match the company’s strategy over time. Therefore, the first part of our service Assess is to investigate the following questions:
It is important to remember that strategy is very difficult to turn into concrete behaviour, as people are not robots. So how do behaviour and results align with the company’s reality and strategy in 1, 2, or 5 years? This is very difficult to answer without a detailed assessment of which type of behaviour and results match the company’s strategy over time. The McKinsey Quarterly from 2008 also shines light on this matter, i.e. how companies should use their performance management processes to help identify strong employees. The message from McKinsey is clear:
Companies that conduct disciplined, meritocratic assessments of performance and potential are well placed to make good personnel decisions. These companies should also bring additional strategic considerations to the decisions. They should assess which types of talent drive business value today and which will drive it three years from now. Performance management well informed by key strategic questions can minimize the negative cultural impact of downsizing, improving the bottom line, and help identify talented people the company should try to retain. (The McKinsey Quarterly, 2008).
At People Integrated we back this up by implementing a Human Capital Scoreboard. Utilising empirical data from the marketplace People Integrated creates a unique Human Capital Scoreboard to mimic the business situation throughout your strategic journey. We can create concrete behavioural guidelines in alignment with your specific strategy by looking at the market and finding relevant reference points in leaders who already succeeded in similar situations. The Scoreboard is a helpful tool for planning and dealing with the future as well as current events. The scoreboard helps you achieve:
Fitz-enz describes that keeping talent is always an important activity and is critical at all stages of the organisational life cycle (Fitz-enz, 2000). He states that often it is a case of letting the wrong people go and bringing in people who are ill suited to the task. Through his studies he had found, that quite often technical expertise is assigned to the task when the real skill needed is organisational and people management. This leads to potential failure of over 50% (Fitz-enz, 2000). Implementing this scoreboard enables the organisation to get thorough insights into the existing human capital, and thereby ensuring that internal mobilisation and talent development becomes part of your strategy. This will help the problem stated earlier in this article about internal versus external hiring and will thereby facilitate larger retention and employee satisfaction.
In conclusion, organisations must think ahead in terms of strategy and human capital management. It is risky to only hire people who meet the current requirements, as these may not be able to grow in the same direction as the company over time. Recruitment is an expensive process – not only in terms of money, but also in terms of time and resources. It takes approximately 2 months to successfully accomplish an executive search. The candidate can have 3-6 months' notice period. A successful onboarding takes 6-8 months before the candidate is up to speed and the company can capitalise on the recruitment. This means that timing is key in the new talent hiring decisions and the process is costly no matter the situation.
Recruitment is an unavoidable aspect of organisational development – the question is how to handle the process and how to enable the organisation’s strategy to get the right starting point.
As we mentioned at the beginning of this article, trends are pushing companies to manage their assets as effectively as possible, which includes human assets. People Integrated can facilitate an effective recruitment and search strategy, in order to ensure your organisation gets the right talent that matches your strategy both short- and long-term.
Cappelli, P. (2019) 'Your Approach to Hiring Is All Wrong', HBR May-June. Available at: https://hbr.org/2019/05/your-approach-to-hiring-is-all-wrong (Accessed: 16 Nov 2022).
Chambers, EG, Foulon, M, Handfield-Jones, H, Hankin, SM & Michaels III, EG 1998, 'The war for talent', The McKinsey Quarterly, no. 3, pp.66.
Fitz-enz, J. (2020) 'The Human Capital Scorecard', The ROI of Human Capital. Available at: https://www.amanet.org/articles/the-human-capital-scorecard/ (Accessed: 16 Nov 2022).
Guthride, M, McPherson, JR & Wolf, WJ. (2008) 'Upgrading Talent', The McKinsey Quarterly. Available at: www.veruspartners.net/wp-content/uploads/old_articles/upta08.pdf (Accessed: 16 Nov 2022).
Wright, PM. (2008) 'Adapting to the age of globalisation', SHRM. Available at: www.shrm.org/hr-today/trends-and-forecasting/special-reports-and-expert-views/Documents/HR-Strategy-Globalization.pdf (Accessed: 16 Nov 2022).