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Human Resources
How to finally win the war on talent
Only a new approach to talent management and a commitment to nurturing human capital will enable CHROs to bridge the talent gap, argues IMD’s Tania Lennon.
It is now more than a quarter of a century since Steven Hankin at McKinsey coined the phrase “the war for talent.” Hankin’s portrayal of the increasingly fierce competition to attract and retain skilled employees was accurate. Yet despite widespread adoption of succession planning, the war continues to escalate.
In the context of constantly shifting economic conditions and evolving employee expectations, CHROs are recognizing the need for a new talent mindset. To ensure rich talent pipelines that provide the capabilities needed to sustain success in a turbulent world, employers need talent practices that are more person-centric, dynamic, and adaptive.
Employers will need to change the way they define, identify, and engage talent, and plan more thoughtful and personalized approaches to retain their best people. Talent practices today need to create mutual value, fueling ongoing company success by supporting employees to unlock their full latent potential.
Why the old approach to talent is out-of-date
Traditional talent strategies are typically based on a role-fit mentality, where roles and people are neatly defined, performance requirements are stable and past performance is the best predictor of future performance. This approach is no longer fit for purpose. Rather, CHROs should be cultivating the potential for accelerated adaptation to support organizations to achieve an enduring competitive advantage.
Equally, organizations should have a more open mind about identifying their “top talent.” The current crop of high-fliers may have the qualifications and experiences that were necessary to climb the corporate ladder in recent decades – but do they have the agility and strikingly different skill sets necessary to thrive in the digital, hybrid workplace?
CHROs can strengthen their pipelines by moving away from the dominant ‘myopic’ view of talent management, which focuses on a few chosen candidates and defined roles, to a more inclusive and holistic perspective that actively identifies and fosters the qualities that support accelerated adaptation across the whole workforce, enabling significant talent pipeline amplification.
Assessing a candidate’s ability to succeed on the basis of their current skills and experience has always been fraught with difficulties. Even with sophisticated analytics, this method of future performance prediction has only limited effectiveness given the volatile business environment.
One key weakness of working in this way is that it fails to provide for filling new roles. For example, around 30% of organizations created the Chief Digital Officer (CDO) role to drive digital transformation and facilitate the adoption of new technologies. This is a C-Suite role in 65% of organizations, yet 80% of CDOs are the first role incumbent. A few years ago, organizations who were looking only at those already primed for top positions, without considering changes to the business environment, would not have prepared anyone to fill such a role.
Change as a positive
Focusing on the dynamism inherent in their organizations will lead CHROs to place greater emphasis on the ability to adapt, the capacity to acquire and deploy new skills, and ability to encourage colleagues and team members to do the same.
The advent of new technologies is accentuating the need for such a shift. Advanced data analytics, automation and artificial intelligence (AI) are taking on the analytical tasks that, in the past, would have provided the basis for strategic direction. In contrast, leaders add greater value by driving strategy through collaboration, innovation, and continuous business transformation.
CHROs will be able to measure these new talent markers, provided that they are prepared to accept different tests and metrics that look beyond demonstrated skills and experience. To what extent, for instance, do individuals possess cognitive and behavioral flexibility? How do they adapt their strategic perspective to tackle different challenges? What is their capacity to acquire and deploy new knowledge and promote creativity?
“By identifying talent based on ability to grow and adapt to the changing demands of the business environment, firms can win the war for talent.”
Organizations are increasingly aware of the problems of talent identification based on documented knowledge and skills. Instead, they often default to “hiring for fit.” In other words, they seek out candidates whom they regard as fitting in with their culture and whose values are aligned with those of the organization, relying on the learning capacity of these workers to develop new skills and work cohesively with the existing workforce.
There is a trap for CHROs to avoid here. Hiring for fit often results in a homogeneous organization, creating an “echo chamber” that reinforces existing mentalities and habits, rather than bringing in different perspectives. Without diversity of thought and a willingness to challenge the prevailing culture, organizations find it difficult to break free of the status quo, even when this is exactly what the external environment demands. An emphasis on an innovative approach and a willingness to question accepted attitudes, then, will prove just as important as alignment with organizational culture.
Data comes to the fore
The good news is that tools are emerging to help with this shift, particularly in data science, which is becoming more adept at managing for talent models that encompass contradictory and dynamic requirements for success. Advanced data science provides a way to navigate this new approach to talent and supports the use of innovative technologies that generate richer data and deeper insights, such as context-rich game-based assessments
CHROs, talent teams and line managers will need to be open-minded about adopting such tools, including becoming more data-literate themselves. This means relying more on data-driven insights – and less on instinct about what ‘good’ looks like than they may have done in the past.
If making such a sea change in mindset seems challenging, it is only what colleagues in other areas of the business have already been through. Senior leaders in functions such as Finance, for example, have had to rapidly adopt a more analytics-driven technology-enabled approach to managing company financial resources. In turn, this has created greater value through both efficiency gains and increased sophistication in financial strategy to address complex connected environments.
Similarly, CHROs might want to look at what their peers in Sales and Marketing have achieved. Their use of data and analytics has enabled them to secure a far deeper understanding of their customers – not just their behaviors, but also their outlook and values. In an omnichannel environment that requires companies to develop increasingly personalized customer relationships to secure and retain competitive advantage, this is proving invaluable in deepening customer engagement and supporting long-term customer retention
CHROs can capitalize on lessons learned from other functions. In addition, more adept use of data on the part of HR leaders could have the additional benefit of removing the factors that currently prevent individuals in the organization from achieving their full potential – including those outside the exclusive group labelled top talent. Individuals and organizations will benefit from harnessing the latent potential of their full workforce.
An end to the war?
The challenge for CHROs, therefore, is to move away from the practice of using traditional metrics to identify a small elite of high-potential talent in which to invest the bulk of developmental resources. Instead, they should consider how a personalized approach to talent, built on sophisticated data and analytics tools, could capitalize upon the unique contribution of every member of the workforce.
For organizations prepared to shift their mindset and commit to this approach, there is an opportunity to end the war for talent, heralding a victory that will revolutionize the labor market, for organizations and employees.
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