Research bares this out. Development Dimensions International reports that one-fifth of this country's large, established companies will be losing 40 percent or more of their top-level talent in the next five years. The Bureau of Labor Statistics confirms that “by 2008 the number of young adult workers, from 25 to 40 year olds, will decline by 1.7 million” overturning a historic growth rate from 54 percent to 3 percent in the next 20 years. By 2010, the U.S. will face a 10 million workforce shortage and an unemployment rate of just 2 percent.
The Conference Board CEO Challenge of 2007 points out that “Cracking the U.S. Top 10 this year is finding qualified managerial talent and top management succession.” Simply put, the looming war for talent is very real and, left unaddressed, stands to dramatically alter the economic performance of companies and countries. That’s why informed CEOs around the globe are challenging their HR leadership to develop winning strategies for recruiting and retaining the top talent that will continue to drive growth and performance. These combined strategies, technologies, and processes are now encompassed in talent management.
A brief history of talent
Before 1997, the word talent was primarily used to describe people in the entertainment industry. Managing talent was a profession for agents, casting directors, and publicists. Then The War for Talent was coined that year by three McKinsey consultants who compiled their research into a bestseller published four years later. Management tended to ignore the implications because the authors mainly explored macroeconomic workforce issues that were perceived to be too academic for the frenzied landscape of the dotcom gold rush. Had the book been published today, it would be required reading for all managers.
Shifting workforce dynamics
Welcome to the new millennium. Your company’s brainpower is now more valuable than your bricks. Outsourcing to emerging talent markets has delivered mixed results. And the top college graduates you recruit are entering your workforce with new attitudes. We no longer enjoy a climate where employers can handily recruit top talent. Workforce dynamics have fundamentally shifted in three major ways now giving preferential treatment to the employee and challenging employers to adapt.
Intellect vs. hard assets
As the major industrialized nations moved from a producing economy to a service economy, so has the value of our companies. While it is still easier to understand the value of a truck or an airplane compared to an employee, the world is moving in this direction of placing a premium value on talent. In fact, The Economist reported that intangible assets have shot up from 20 percent of the value of companies in the S&P 500 in 1980 to around 70 percent today. A fundamental shift has occurred where the executive team’s primary responsibility has changed from access and management of capital to access and management of talent.
Not convinced? Then think about the rise in both power and valuation of companies that have very little hard assets. Think about the economic power of companies like Google, Microsoft, Apple, Goldman Saks, Bank of America, Citigroup, and JPMorganChase. All of these companies have little to no hard assets other than office equipment and buildings. Their true value is measured by the strength of their intellectual property and people.
The Employment Policy Foundation reports that by 2030 the U.S. will experience a labor deficit of 35 million workers. Many Western economies believe that the large populations of India and China will solve all their talent problems. While outsourcing may help to mitigate some of the talent management shortfalls it is likely to be only a partial solution. Talent shortfalls will not be solved by leaning on other countries but by relying on our own innovation and execution to acquire and retain top talent to drive company performance.
One of John F. Kennedy’s most famous quotes is: "Ask not what your country can do for you, ask what you can do for your country." The mantra of today’s workforce has changed the beneficiary 180 degrees to: “Ask not what I can do for your company, but what can your company do for me.”
Today’s workforce is in control. Employees want to understand how they are connected to the company. They want to know how they can progress. They want to work at a place that fits their lifestyle choices. As employers, we have been placed in the unenviable position of needing to market our companies to our employees each and every day. If we neglect to engage our own employees, those who are frustrated can surf hundreds of job boards to see what other opportunities await.
Talent buyer to company marketer
Company recruiters used to approach the talent marketplace as talent buyers. But HR has evolved from personnel management to understanding that all managers, starting with the CEO, are accountable for strengthening their talent pool. Now company recruiters and CEO’s alike recognize that they must rely on a myriad of marketing techniques to target top talent. There are three major actions every company can take to address the mounting labor shortages: foster viral user adoption, embrace innovation, and establish a talent management system of record.
Foster viral user adoption
Why have Google, Yahoo, Amazon, and Facebook have experienced rapid viral adoption? Because their user interfaces are easy to use, easy to navigate, and replicate familiar consumer web experiences. The best consumer website designs have it right. Business applications for recruiting and performance management systems should be no different. In order for talent management philosophies to become ubiquitous, they need to be adopted not only by candidates who are adept at searching and applying for jobs online but by managers and employees as well. A user-friendly talent management system enables managers to oversee employee goals and performance, career development, and succession planning as part of everyday business with seamless integration to standard business applications including email. Usability makes this kind of viral adoption inevitable.
A cumbersome and complex ERP system will not suit the masses of young talent joining today’s workforce. Embracing innovation means an application must be always available 24X&, anytime, anywhere. Here, the on demand model for innovation adoption can be a secret weapon. On demand provides software vendors with the ability to quickly, easily, and cost effectively deliver a business process over the Internet without the resource-intensive software deployment cycles. Customers benefit as well by getting these features rapidly and without the hassles of protracted software installation cycles and maintenance. On demand reduces both the upfront costs and time to value from software and provides a compelling TCO and economic savings over in-house deployment.
Create a talent management system of record
It is very hard to mine knowledge from information that is not centrally located. Talent data affects every facet of the business, but it tends to be stored across various repositories. These silos are constructed in multiple spreadsheets and word processing documents, locked in antiquated ERP systems, or stored in various point solutions. This strategy is plagued with unnecessary expense and inaccuracy. A talent management system of record on an open technology platform is more than just an option. It’s now a requirement for HR and business success. Companies that embrace the technology get a truly unified view of recruiting, hiring, onboarding, succession planning, performance reviews, career planning, goals, and analytics.
The talent platform: From option to necessity
Economics and demographics have combined to fuel our new war for talent. Insightful business leaders have acknowledged the challenge and offered HR a seat at the executive table. Managers at all levels are recognizing the importance of talent acquisition and retention. Employees are taking control with self-service attitudes. And HR leaders at leading companies are developing and executing innovative strategies for recruiting and retaining the top talent they need to succeed. But they all need a common basis for intuitively using and measuring these new processes. When you recognize that people are the difference and talent is the strategy, you realize that an on demand, always available, easy-to-use, and easy-to-deploy talent management system of record is the key for aligning talent with business objectives while significantly reducing process costs, improving quality of hire, reducing risk, and achieving higher levels of performance. The war for talent is real. But so are the solutions.
Michael Gregoire is president and chief executive officer of the Taleo Corporation.