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However, there were often significant differences beneath this `architectural’ level of practice. In collectivist cultures, the targeting of individuals through pay or recognition initiatives is not pursued, rather group-based approaches are used, though there are signs, particularly in our Japanese companies, that this is beginning to weaken.
Employment legislation within particular countries, especially with regard to union representation, remains a significant differentiator in terms of HR approach. Though there is a trend towards the decentralisation of collective bargaining, the presence of unions in countries such as the Netherlands, Germany and Japan remains strong and determines to a large extent the nature of the employment relationship within organizations.
A central issue for all companies in our sample is how to control the organization, both in terms of HR function structure and also in terms of HR practice determination.
There is variation in terms of approach, with, for example, Oracle representing high degree of centralisation with little local discretion, and SANYO allowing highly autonomous local operations. A mid-way is represented by firms such as Rolls Royce and BAE Systems, who actively promote HR process excellence, the design and delivery of common processes, but with local ability to tailor these processes. IKEA stands out in the sample with its culture-driven philosophy, with actual practices not monitored or controlled from the centre overtly, but through the inculcation of strong cultural and behavioural norms.’ Areas of global focus for most of the companies include senior management development, high potential identification and development, and competency frameworks to ensure consistency of staffing approaches, and common performance management criteria. A key area is also the global brand and values of the company, and how these drive the HR philosophy and delivery. We saw a number of examples where companies have moved beyond the traditional rhetoric of values and culture to put real substance and meaning into the employment contract. The integration of values and cultural imperatives into the employment relationship is a major factor in developing employee commitment, which in turn drives the recruitment and retention of best talent.
8 / 52 The ways in which multinationals configure their human resource management and transfer HR practice across businesses and overseas is a key element in the efficiency and effectiveness of organizations. A number of issues are raised: what is the relationship between corporate HQ and the region/country? What is required to deliver a coherent and acceptable HR approach across a multinational? And how is knowledge and learning transferred?
In this report, we examine these issues in more detail, giving highlights from the major areas of the research. Running beneath this is the recognition that for HRM to be effective, it is not enough to have strong practices and systems in place. There must also be the commitment of key constituencies to engage with HR and make it live. Senior managers and line managers must adopt and implement HR practice and embed it within the organization. Such commitment will influence how aligned HR can become both with strategy and with the links between individual HR practices.
The report first examines the major practice areas of talent and performance management before broadening out to assess the key elements of employee relations, organisational culture, HR functional excellence and knowledge management.
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2. TALENT MANAGEMENTIncreasingly, companies view the ability to manage talent effectively as a strategic priority, and there was a high degree of sophistication about this activity among the companies in our sample. In all companies there are systems in place which identify high potential individuals using clear sets of leadership competencies and validated assessment instruments. These individuals are given a variety of developmental activities, from training, coaching, mentoring, projects, and international assignments, and they are placed on a talent inventory that matches prospective jobs to high potential individuals. Companies have adopted multiple approaches to retain valued talent, including financial incentives, personalized career plans, mentorship programs, and flexible work arrangements, and they place great emphasis on diversity and worklife balance in order to compete for the best talent and retain high potential employees. In the following sections, we discuss a range of issues related to the management of talent: recruitment and selection; global branding; training and development; retention; and talent management in emerging markets.
Recruitment, selection, and succession planning
Recruitment practices in most companies follow a talent pool strategy where the company first recruits the best people and then places them into positions rather than trying to recruit specific people for specific positions. The companies in our sample recruit talent through a variety of channels, including external job posting and direct application through the internet, on-campus recruitment fairs, summer internship programs, and so on. Companies are generally very selective in hiring, which requires a large applicant pool from which to select and highly efficient and standardized selection processes. For example, the fast-growing Indian information technology and software giant Infosys, now the world’s leading IT outsourcing company, has developed a robust rolling recruitment process that allowed the company to grow in the last five years from about 10,000 to 66,000 people. In 2005, despite the increasing competition for software engineers in India, Infosys received almost one and half million job applications, tested about 160,000 candidates, and hired 15,000 – the top 1% of applicants. Given their keenness to recruit only the very best people and their selectivity in hiring, Infosys and most other companies in the sample place great emphasis on global branding to improve their attraction and position themselves as employer of choice.
Most companies try to identify leadership talent early and have put systems in place which identify high potential individuals using clear sets of leadership competencies and validated assessment instruments. Potential is generally assessed using multiple inputs, including performance evaluations, 360 degree feedback systems, and assessment centre results. A smaller number of companies use standardized aptitude tests or try to assess individuals’ personal values to determine the fit with the company culture. Assessment of leadership potential usually entails grading employees against a competency profile of successful leaders. IBM, for example, conducted a comprehensive research effort to identify the characteristics that distinguish outstanding business leaders inside the company. As a result, 11 leadership competencies unique to IBM were identified along with the behaviors that demonstrate the competencies for all levels of management, including senior executives. Some companies use externally benchmarked competency profiles. At 10 / 52 ABB, for example, the leadership development process begins with building a competency profile of an individual manager, using a leadership competency profile developed by a global executive search firm, and comparing this with the job profile for that person. An individual development plan is then created to fill any gaps identified. This is a separate process to that of performance appraisal and reward discussions.
The continuous process of developing a ‘talent pool’ and the use of talent inventories were best practice, used for both selection and succession purposes. For example, Procter & Gamble’s Talent Development System holds names of 3,000 executives along with details of their backgrounds so as to help identify the right person for the right job. At ABB, the information gathered through the talent management program is stored on a global IS tool which provides real-time management reporting facilities based on the data stored. This enables both within country and between country comparative data analysis. The tool is also used for storing appraisal, career plan and development plan information and to record international assignments. The same tool is used for succession planning, providing a global overview of the key management positions, who holds them and who the potential successors are. Potential successors are assessed both by their line manager and against an externally benchmarked leadership competency profile. The profiles of the top 50 managers have been compiled to construct a talent management portfolio of the top level of the company.
This provides a platform for comparing talent pools both internally and externally against the benchmarks. Combined with an open job-posting system and external scanning, the availability of a pool of high-potential candidates known by members of the senior management team greatly facilitates succession planning.
In most companies, employees identified as ‘high potentials’ are included in mentoring programs lead by senior managers and job rotation schemes to ensure the opinion of more than one manager is gained on a person’s potential. How many of the talented individuals identified through this process eventually make it on the high potentials list, however, differs across companies. Most of the companies that we studied seemed to have followed McKinsey’s suggestion that the group of ‘A players’ – the most talented individuals in whose recruitment, development and retention companies should heavily invest – should be comprised of no more than 10-15 percent of managers or employees identified as having leadership potential. For example, Unilever, the British-Dutch consumer products group, puts up to 15 percent per management level on to the high potentials list each year, which means that these people should move on to the next management level within five years. There is also a separate list which recognizes people for sustained high performance, but who are not appropriate to move to the next management level. This list can contain a maximum of 10 percent of the population of staff. Some companies are even more selective.
Infosys, for example, tries to keep the number of high potentials small to avoid inflated expectations that may lead to frustration, lack of productivity and ultimately loss of talent. Only 500 (less than 1 percent) of the Indian information technology firm’s 66,000 employees are designated as ‘high potentials’ and further grouped into three tiers based on the expected time needed to transition to top management roles.
The creation of different talent pools (e.g., senior executive high potential pool;
specialist high potential pool; early career high potential pool), with different career paths and leadership development strategies in place, was another best practice identified in our study.
11 / 52 Emphasis on global branding to attract top talent As competition for talent is heating up in many industries, companies are trying to create a compelling “employee value proposition” and sharpen the way they market themselves to recruits in order to attract the best talent. A strong focus on global branding and the development of close ties with leading universities through recruitment fairs, internships, and so on, to position the company as an employer of choice emerged as a best HR practice in our study. For example, one of the reasons why Infosys, the world’s leading IT outsourcing company, has grown so rapidly while upholding the quality of the talent recruited is because of their excellent corporate image and a culture based on principles highly valued by knowledge workers, such as professional freedom, innovativeness and opportunities to learn.
Selectivity in recruiting and a strong emphasis on attitudes and cultural fit require not only efficient and validated selection processes, but also a large applicant pool from which to hire. Infosys is a case in point. In 2005, despite the increasing competition for software engineers in India and worldwide, Infosys received almost one and half million job applications, tested about 160,000 candidates, made offers to 21,000, and hired 15,000 – the top 1% of applicants, not only in terms of ability and qualification but also in terms of cultural fit. The way that Infosys has managed to increase hiring so rapidly while upholding the quality of the talent recruited is through their their excellent corporate image and a culture based on principles highly valued by knowledge workers, such as professional freedom, openness, innovativeness and opportunities to learn. Infosys has been taking several steps to improve its brand attraction and to develop and sustain an appropriate talent pipeline. As a community development effort, Infosys has initiated a program named “Catch them young”, where school students are selected and trained for a month by Infosys and then offered a project for 2 months within Infosys under the guidance of an Infoscion. In rural areas the “Catch them young” program has conducted computer awareness program in local language to build awareness on computer use and remove any fears of high tech equipment amongst school children. Though not initially directed at recruitment, the “Catch them young” program is considered an effective strategy for enlarging the pool of IT-literate and Infosys-devoted students in India, which on the long term may reduce the pressure for finding talented software engineers. As another example, Infosys’s global internship program, InStep, attracts students from the best universities across the globe and has branding as a primary intent. In 2005, it handled over 8500 applications to select 69 interns of 22 nationalities to stay between 2-3 months. The branding is intended at increasing Infosys’s attractiveness to potential candidates in other parts of the world besides India. Despite all these efforts, the Infosys top management believes that the recruiting efforts are just sufficient for now and that additional branding efforts and new initiatives are needed to expand and tap into the worldwide talent pool.
A strong focus on global branding and the development of close ties with leading universities through recruitment fairs, internships, etc., to position the company as an employer of choice in order to attract the best talent emerged as a best HR practice in our study. At Shell, for example, there exists one global branding for HR excellence and two to three global practices or processes for all businesses. The brand consists of pushing forward the notion of talent being Shell’s number one priority. The brands 12 / 52 and global practices are transmitted through the company’s IT systems. Each business is to take the global brand and practice and apply them locally. In order to attract and develop diverse talent, local Shell businesses work closely with governments and universities in countries in which they operate to ensure that the countries’ engineers, scientists, and managers are trained proficiently for possible recruitment.
Some companies see improved brand attraction as a welcome “side effect” of their philanthropic activities. For example, GlaxoSmithKline, the pharmaceuticals giant that has led the way in discount pricing for the poor, seeks to capitalise upon its ‘employment brand’ and excellent reputation with regular promotions within the press and at key recruitment locations. Jean-Pierre Garnier, the CEO, stresses the importance of GSK’s philanthropic activities in increasing the attractiveness of the company among potential recruits and providing an inspiring mission to the employees: “GSK is big in philanthropic undertakings; we spend a lot of money with a very specific goal in mind, such as eradicating a disease. … [O]ur scientists, who are often very idealistic, follow this like an adventure. It can make the difference when they have to choose companies – they might pick us because of the effort we make to provide drugs to the greatest number of people regardless of their economic status”. Companies like GSK, IBM, Infosys or Rolls Royce consider their ‘employment brand’ to be a key asset in the recruitment of talent.
Strong commitment to training and development