Even with COVID-19 reshaping the talent marketplace, companies are still challenged to make sure the right talent is in place for long-term objectives. Talent strategy is just as crucial as financial, marketing, or operational strategies in driving future success. The ability to develop, recruit and retain the right people—at high velocity—to fill talent gaps created by the evolving business strategy is a aDEFCON 1-level priority.
When the Harvard Business Review recently asked 24 high-profile CEOs to name their biggest challenges, “talent management” topped that list. Having the right talent, fully engaged, in the right position with the right compensation, so their businesses can stave off competitors, has become a paramount concern for CEOs—an issue as likely to give them cold sweats at night as the prospect of missing their quarterly numbers. These leaders understand that their future success likely will be determined by an ability to transform their organizations not just once but continuously, and that rapidly recruiting or developing the right talent to drive those changes will be crucial.
A Five-Step Approach to Creating Talent Strategies
Companies that implement the following five-step approach to creating talent strategy are more likely to build effective plans and execute their business strategies with distinction.
1. Create Alignment with Business Strategy.
The origin of any effective talent strategy lies in an agreement between the CEO and CHRO on a differentiated business strategy. Will it be based on digitization? Operational excellence? Customer intimacy? Innovation? Organic growth or growth through acquisition? Clarifying the strategy lays the groundwork for the critical decisions that CHROs and executive teams must make around closing talent gaps and strengthening organizational capabilities to support the strategic direction.
Taking a research-based approach to identifying the specific talent needs and organizational capabilities required to execute business strategy creates talent investments with the greatest payoff. If digitization is the strategy, for example, does the company have the right organizational design, talent and incentives in place to foster that approach?
As business strategies evolve, CHROs also need to recalibrate talent strategies to keep pace with the changes. If a company’s strategy shifts to emphasize digitization, for example, HR leaders must ensure they have the right quality and quantity of talent in place to support the change. Rapidly hiring those tech-savvy workers—or retraining existing staff for a skills pivot—can mean the difference between a business strategy thriving or failing.
2. Identify the Role of Organizational Structure.
CHROs and talent leaders also need to work with the executive team to assess the organizational moorings that allow business and talent strategies to thrive. That includes devising the best structure for the organization to operate within and building a culture that supports the execution of a differentiated business strategy.
As organizations become more digital, they face a growing need to redesign themselves to move faster, adapt more quickly, facilitate rapid learning and embrace the new career demands of their workforces.
Poorly conceived organizational design can neutralize expensive efforts to hire or develop top talent. For example, a hierarchy-oriented structure characterized by management control and stability won’t support a talent strategy designed to hire large numbers of millennials or generation Z workers who thrive on fast-moving environments, collaboration and open communication with executives. Similarly, if the goal of a business strategy is to bring new products to the market faster, but the organization is designed in functional silos that inhibit cross-functional collaboration, organizational structure will put a brake on strategy execution.
3. Identify Pivotal Roles.
Pivotal job roles are those in which enhancing the quality and/or quantity of talent has a disproportionate impact on business success. The term conjures thoughts of top executives, sales leaders, marketing heads or other key managers. While those jobs are clearly important, pivotal talent can come in many sizes and shapes. Depending on the industry, organization and business strategy, critical roles might also include software developers, artificial intelligence specialists, street sweepers, gate crews for airlines, real estate analysts, front-desk service staff or maintenance mechanics.
Pivotal roles also can be geography dependent. If a growth strategy involves expanding into Mexico, China or India, for example, certain commercial or leadership roles in those countries might be deemed more pivotal than the same role in other countries.
HR leaders are often surprised when they find—following a workforce analysis that determines which job roles have the biggest impact on key operating metrics—which positions qualify as pivotal and which do not.
Favoring some job roles over others also runs counter to the time-honored belief in human resources about the equitable treatment of all employees. But courageous CHROs don’t shy away from the reality that some roles are far more important than others in driving competitive advantage. Rather than trying to spread limited recruiting, development or compensation resources equally across all employees, these CHROs allocate resources in ways that favor the attraction, development and retention of incumbents in pivotal positions.
4. Define Success Profiles with Precision.
With talent pools segmented based on the business impact they deliver, CHROs should work with business-line leaders to decide exactly what results are expected and which specific competencies, experiences, traits, and drivers are required for success in pivotal roles. Any one or two of these dimensions are typically not sufficient in precisely defining the right stuff required for these jobs. Taking a “whole-person” approach when recruiting or developing individuals for these positions creates the basis for improved talent management decisions.
That process improves when line leaders can separate the mission-critical from the “nice-to-have” results and expectations required of each position. This allows HR to convert those desired behaviors and outcomes into job-specific success profiles. For example, the success profile for an information technology executive might assign higher priority to competencies like the use of best-practice data security protocols or experiences like defending IT infrastructure investments to a board.
It’s also important that HR leaders align with specificity the success profile and the employee value proposition (EVP) for pivotal roles. A good EVP incorporates pay and benefits and provides learning and growth opportunities as well as assures work-life balance, an attraction of particular interest to millennials. A next-level EVP also emphasizes how employees will experience a sense of purpose in their work and that their organization’s brand and culture will be sources of pride.
5. Make the Buy-Versus-Build Decision.
Using data-driven approaches to identify gaps in pivotal talent pools creates choice points for CHROs and other talent leaders. This high-stakes buy-versus-build decision rests on a number of variables. HR and talent leaders should consider recruiting outside the organization when skills are difficult to develop internally, when there is urgency to fill skill gaps, or when there is no history of needed competencies within a company or department.
Conversely, developing new skills in incumbent employees to fill talent gaps—the “build” option—may be a better choice when infusing outside talent is deemed risky to the culture, when there are known talent shortages in external candidate pools, or when it can be challenging to recruit to certain geographies or industries.
Six Obstacles to Creating Effective Talent Strategies
As with any effort to overcome entrenched thinking or time-honored practices, there will be obstacles that stand in the way of HR leaders creating the kind of next-generation talent strategies needed to thrive in today’s turbulent markets. Here are some of the biggest pitfalls to which CHROs and talent leaders can fall prey:
1. Lack of courage to abandon business-as-usual.
2. Absence of capabilities within HR to deliver on talent strategy.
3. Inadequate attention to external influences.
4. Unoriginal talent strategies.
5. No horizontal alignment of talent processes.
6. Failure to consider the impact of culture.
Adapted from The Talent Manifesto: How Disrupting People Strategies Maximizes Business Results (McGraw-Hill Education, 2018).