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«Cambridge University: Philip Stiles and Jonathan Trevor Erasmus / Tilburg University: Jaap Paauwe and Elaine Farndale Cornell University: Patrick Wright ...»

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If there is one thing the excellent companies that we studied have in common, it is their strong commitment to leadership development. While all companies in the sample commit significant resources to training and development, some do more than others. IBM, for example, currently invests more than $700 million annually to develop the knowledge and expertise of its workforce. Employees spend an estimated 16 million hours each year (about 50 hours per employee) in formal training – either through online learning activities or in a traditional classroom setting.

The heavy emphasis on, and investment in, training and development is consistent with a groom-from-within philosophy that many companies have adopted (see Table 1).

–  –  –

5.00 4.50 4.00 3.50 3.00 2.50 2.00 1.50 1.00 0.50

–  –  –

Table 1. Global staffing practices: Use and effectiveness Procter & Gamble, the world’s largest consumer products company, is a case in point.

Consistent with its promote-from-within policy and the belief that the P&G’s leadership development system is a major source of competitive advantage that is hard to replicate, leadership development is all-pervasive and permeates the culture.

All employees receive 360-degree reviews starting within a year after they start, and can take advantage of numerous leadership development programs over their careers.

Line managers are evaluated and compensated partly on the basis of how well they develop their people. The managers who are best at developing others create a flowthrough of people in their department, which encourages high performers to come to the department because they realize they will receive good development opportunities and progress through the company.

The culture of the development of people as everyone’s responsibility emerged as a best practice in our study. Line managers are heavily involved in the recruitment of talent and are made responsible for developing the skills and knowledge of their employees, often by including people development as an explicit objective in their annual performance evaluations. It is considered a manager’s responsibility to ensure they have people developed who can take over their position so that the individual is able to progress themselves. Managers are also expected to act as coaches or mentors and to encourage people to move around within the organisation for career development purposes rather than holding on to the best talents. However, “silo thinking” (i.e., the tendency of managers to focus on the interests of their units rather than the whole organization) can hinder the mobility of talent within the company and undermine the effectiveness of leadership development efforts and the sharing of knowledge across the organization. Based on our findings, challenging assignments and job rotations across functions or business units are highly effective, but underutilized, leadership development tools (see Table 2).

Open job posting systems are considered an effective way to identify talent within the company and can help to break down internal ‘silos’. P&G two years ago started a 14 / 52 system of open job posting on the intranet. Employees are able to put their own profile in the system and managers can search for who is available and interested in new posts. The system is also used as a top talent identification and succession planning tool. Mobility is thus supported by both a work and a personal development plan to aid staff planning, along with the use of the open job-posting system and the database. If there is a job vacancy, first of all candidates will be sought locally, but if no one is available, candidates will be sought across a region or across the world.

There are therefore very high numbers of expatriates across the company.

Open job posting systems work best in a culture that encourages managers to move talent around to accelerate their development through rotations and international assignments. Managers in these companies understand that it is critical to create an awareness that departments that openly move people around not only give good people away, but also attract the best people because individuals realize that their career will not be blocked if they move through this business area.

–  –  –

4.50 4.00 3.50 3.00 2.50 2.00 1.50 1.00 0.50

–  –  –

Table 2. Global training and development practices: Use and effectiveness Multi-level approaches to talent retention Most companies regularly monitor attrition rates, but the common practice of tracking voluntary against involuntary turnover is insufficient.

Attrition must also be tracked by performance level. Infosys, for example, compares attrition rates against the growth of high performers over a period of time in order to diagnose specific problems (e.g., deficiencies in their recruitment process) and fix them.

Retention of talent is a major challenge that requires a multi-level approach. The companies we studied understand that financial incentives, while important, are only a first element for success in retaining talent. High performing companies generally offer competitive compensation and benefits packages (see section on Compensation and Benefits). In some companies, salaries can be determined by an employee’s immediate manager through both the size of increase and the frequency of increase in order to keep people on target, deliver an appropriate performance message and retain 15 / 52 top performers. However, there seems to be agreement that financial incentives cannot substitute for an exciting job, long-term career planning, and attention by senior managers. Creating and delivering a compelling employee value proposition, developing personalized career plans, and assigning senior-level managers as mentors are considered effective ways to retain high potential employees. For example, P&G, consistent with the company’s build-from-within policy and the significant investments they make in the quality of their leadership development system, has made retention a top priority. P&G emphasizes learning and growth opportunities, internal mobility, and appropriate rewards in order to retain valued talent, with schemes in place for: job rotation (within the same function but in different business units/locations); broadening assignments (temporarily moving to a different function);





and career moves (permanently moving to a different function).

With the emergence of new attitudes about work and many employees expecting a healthy balance between their personal and professional lives, an increasing number of companies are offering flexible working arrangements in order to compete for the best talent and to retain high potential employees. Accenture is a case in point.

Accenture’s work-life balance program, which was initially designed to address the specific career challenges facing women but is now also open to men, includes options such as flextime, job sharing, telecommuting, maternity/paternity leaves, sabbaticals, and other arrangements to help employees achieve a better work-life balance. Accenture significantly reduced the turnover rate among women through this program and increased the number of female partners from less than 6% in 1999 to over 10% in 2002.

Diversity programs designed to help attract, develop, retain, and promote diverse talent are widely utilized by the companies in our sample. IBM is an example of a company that has gone further than most others to leverage and enhance the skills of talent within a diverse workforce. One of the first practices implemented was to build diversity networks, which run across all employee constituencies and offer a variety of perspectives on the issues that are local or unique to particular units. Diversity task forces were also created, comprised of senior managers from various constituencies including: African-Americans; gays, lesbians, and transgender individuals; people with disabilities; and women. One result from these task forces was an initiative known as “EXITE” (Exploring Interests in Technology and Engineering), aimed to rectify a shortage in the talent pipeline of women in technology. The practice brings together middle school girls located in different parts of the world (e.g., South Africa, Scotland, Philippines, Chile, US, etc.) for a week in the summer to have fun and introduce the girls to exciting new ways to learn about technology. After the girls attend the camp they are assigned a female IBM engineer or scientist as a mentor for a year. Not only does this practice ensure the future workforce pipeline for IBM, but it also helps girls to make future contributions to their countries and the world. Another practice that has come out of these task forces as well as a response to US regulation is a company wide effort to make IBM, its products, and services accessible to people with disabilities. This initiative created opportunities for students with disabilities to get on-the-job experience and explore career options, and has helped IBM become an employer of choice for people with disabilities. Our findings show that the number of companies is growing that understand that an environment where everyone feels comfortable and confident to contribute is a major advantage in the competition for talent, and enables companies to recruit from the widest possible pool of talent.

16 / 52 Talent management in emerging markets A central issue for many global corporations is how to manage talent in emerging markets, such as India, China, and Eastern Europe. There seems to be agreement that some degree of localization is required to comply with local regulations, cultural norms, and so on, and that programs to develop a high quality local workforce and groom local leaders should form part of a broader effort within the community. One IBM executive, for instance, noted that their management development activities in China need to be quite different from the practices used in the United States. She stated, “we have really had to operate in a different mode than in a mature environment like in the U.S.”. What this means is that while companies that have adopted a global talent pool strategy need a globally standardized approach to the selection, development and evaluation of talent, there are certain aspects that must be locally adapted. The resulting tension between headquarters and the various geographic regions in which a company operates is not always easy to reconcile. For example, IBM’s performance management system, which was developed in the Anglo-Saxon cultural context and is ‘non-negotiable’ (meaning that it is used worldwide with only minor local adaptations), has created some difficulties in Asian countries because there are a myriad cultural obstacles to Anglo-Saxon style performance appraisal. However, in most other areas, there are principles upon which Asia is given the flexibility to adapt. For example, even though IBM places strong emphasis on diversity, gay and lesbian issues are not well accepted in Asia, and hence, IBM does not have gay and lesbian policies there.

Consistent with IBM’s experiences, the accumulated research evidence suggests that global corporations need a global template for performance management as well as recruitment and development of talent, while allowing local subsidiaries to adapt that template according to their circumstances, then monitoring the ways in which they do this. Contrary to what some scholars believe, the resulting tension between global strategy versus local HR imperatives is likely to remain acute as global corporations (most notably, energy and petrochemicals companies) experience increasing pressure to become local. Governments demand that they implement localization programs, and they themselves are coming to recognize the business benefits, which include a better understanding of local business environments, lower labor costs, the ability to promote diversity and a meritocratic global culture, and the ability to source talent from a wide range of geogragphic regions.

In order to attract and develop local talent, Shell, for example, works 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. In the future, Shell will likely rely less on expatriates to staff operations in foreign countries and more on local employees. This helps to reduce costs and is consistent with their goal of being in tune with the local environments in which they operate. For instance, one local training and development initiative which was successfully implemented in the Americas is a practice termed the ‘Incumbent Worker Training’. The objective is to improve skill levels of local employees to make them more attractive candidates for higher-level positions within the company. It can also give them vital job mobility in the case of downsizing. This initiative continues to be regional with certain senior officials hoping that it may become a globalized 17 / 52 practice. Similarly, in the Middle-East and Eastern Europe, company training and development is the number one appeal for local engineers and craft workers. “Our training and development is what makes us different,” said Eric Slotboom, Regional HR Director for Middle East/Russia/CIS. “It’s not just how we design the processes, but how we execute it. … the local people of our region recognize it.” Many of the participating companies have built local talent pools, either composed entirely of locals (but selected in accordance with a global leadership competency profile) or chosen with the development of locals in mind. With demand for talent outstripping supply in some parts of the world, most notably China, an increasingly large number of companies recruit talented locals working or studying abroad and bring them back to fill key positions. For example, in China the recent trend to hire ‘sea turtles’ – native Chinese who have been educated or worked in the West, and are now coming home – has helped companies to alleviate the skills shortage in China.

However, this approach is likely to be effective only when combined with overseas rotations. International assignments are important in providing locally recruited high potential employees with an international perspective, exposure to the corporate culture, and a network of contacts throughout the organization.

PriceWaterhouseCoopers, for example, recruits Chinese graduates in the US and trains them for two or three years before sending them back to China. This example illustrates that the companies that have done the best job of recruitment and development may be most at risk from poaching. Personalized career plans and assignment of senior-level executives as mentors can help promote loyalty among local employees identified as high potentials. Also, global companies such as Shell, IKEA, and GSK have come to realize that corporate programs to develop local leaders must be part of a broader effort within the community. Our findings are consistent with a recent McKinsey study that found that the companies most pleased with their local workforce are those that are most sensitive to local issues and that support the local communities, e.g., by supporting the education system or offer health assistance in local communities. The result is not only a more harmonious relationship with local stakeholders but also a more motivated and committed local work force.

The research findings show that the best companies have made talent management a strategic priority and that there is a high degree of sophistication about this activity.

Yet, few of the HR professionals, senior executives and line-managers that we have interviewed believe that their organizations have fully solved the talent-management puzzle. Our study suggests a number of highly effective, but underutilized, practices that can help companies attract, develop, and retain talent.

18 / 52

3. PERFORMANCE MANAGEMENT



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