talent management: transforming forces for the next decade · talent management: transforming...
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Talent management: transforming forces for the next decade
May 12, 2010
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Talent matters!
Battlefield is expanding globally
Staying on top of a changing talent landscape
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100
150
100
185
100
225
Relative productivity of average and top performers
Low complexity jobs1
Percent
Medium complexity jobs2 High complexity jobs3
Average performers
Top performers
Average performers
Top performers
Average performers
Top performers
2x!
Top performing talent provides substantial productivity advantages
1 Fast-food restaurant front-line workers2 Production workers in a high-tech factory3 Investment Banking Associates
SOURCE: Harvard Business Review, Journal of Applied Psychology
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Talent matters!
Battlefield is expanding globally
Staying on top of a changing talent landscape
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Talent challenges
Forces in western countries
Forces in western countries
▪ Productivity gap
▪ Challenging demographics
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Contribution for every $1 of US GDP growth
1970s 2010s
20
80
Labourproductivity growth 1
Employment growth
70
30
Labourproductivity growth 1
Employment growth
A step-change in productivity is required
1 As measured by GDP per worker
SOURCE: Global Insight; Bureau of Labor Statistics; Bureau of Economic Analysis; McKinsey Analysis
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32
8
7
TotalManufacturing & production
Repetitive transactions
Complex judgment, interactions &problem solving
For every 8 jobs gained in the last decade, we created 10 and lost 2
New kinds of jobs
SOURCE: McKinsey Global Institute
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Aging population
0 10 20 30 40 50 60 70 80 90 100
United Kingdom
France
Finland
Norway
Hungary
United States
Switzerland
Canada
Sweden
Belgium
Government’s older workforce% of employees aged 50 years and above, 2005
SOURCE: Organisation for Economic Co-operation and Development (OECD); Statistics Canada
Total labor force
National/federal government
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Gen Y has significantly different preferences than the generations that came before
War generation▪ Born < 1945▪ Shaped by:
World War II, Great Depression, etc.
Baby boomers▪ Born 1945 - 64▪ Shaped by:
Cold and Vietnam wars, declining trust in government
Generation X▪ Born 1965 - 80▪ Shaped by:
Internet, diversity, unemployment, and parental divorce rates
� Approaches career in chapters of 2 - 3 years each – demands employability, not employment
� Expects quick individual development and early rewards
� Extremely low barriers to separation combined with high confidence
� Sees flexibility as a prerequisite, will make trade-offs for better lifestyle
� Demands freedom and control, particularly regarding own career
� Wants job to be meaningful and to have positive effect on society
Generation Y▪ Born 1980 - 95▪ Shaped by: information
overflow, overzealous parents, globalization
SOURCE: "Managing Generation Y," Carolyn Martin; SHRM; "Millenials Rising," Neil Howe; "Managing Generation Y," Advanced Management Journal," Susan Eisner; "Next Generation Talent Management," Hewitt Associates; "Preparing for the Workforce of Tomorrow," Hewitt Associates; Project team
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The next generation is expecting a different offering from employers
27
42
53
55
73
79
80
81
81
82
86
93
Development opportunities for own personality
Compatibility of career and family
High regard/prestige of profession or position
Independent work
Opportunities for further education
Responsibility/management position
High income
Job security
International contacts
Work/life balance
Recognition of own performance
Interesting work content
1 Survey “Young Elite” of 1,072 students about to finish their degrees2 Persons surveyed who regarded the respective aspect as being “very important” or “important”
SOURCE: Psephos; Manager Magazine; McKinsey
Graduate expectations of future place of work1
Percent of those surveyed2
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Talent challenges
Forces in western countries
Forces in western countries
▪ Productivity gap
▪ Challenging demographics
Forces in developing countries
Forces in developing countries
▪ Need for top quartile talent
▪ Will demand for talent be
greater than on commodities?
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|Source: skylander.net
Old Shanghai (c. 1990)
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|Source: photos4travel.com
Shanghai today
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Old Shenzhen (c. 1980)
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Shenzhen today
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China alone will build “one Canada” in the next 10 years
1 Does not include parallel trackage
2 Canada's National Airport System (NAS) consists of 26 airports. In total, the country has 322 certified airports
3 Physical extent of Canada's National Highway System (NHS)
4 Twenty-foot container equivalent unit
Source : “China Infrastructure Opportunities”, McKinsey, 2009; Transport Canada 2008 Report, American Association of Port Authority; McKinsey analysis
Between 2010 and 2020, China plans to build…
As a comparison, Canada has…
46,688 km of rail track130,000 km of new rail track
26 commercial airports297 new airports
38,047 km of expressway335,000 km of new expressway
Canada handled 4.6 m TEU4
in 2008100 m TEU4 of container capacity
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French and USrevolutions
Discovery of America
Fall of Roman Empire
Oilcrisis
Marco Polo'strips to Asia
Asia returning to its natural “half share” of the world economy
80
60
40
20
100
0India
China
Japan
Rest of Asia
Europe
Rest of world
1 20091000500 1500
Industrial revolution
Share of total world GDP (1 AD–2009 AD)GDP share, percentage
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Finding talent
Greater competitiveintensity
Increasing size of company
Increasing number of markets served
Growing number of regulations
Finding talent is a key management challenge globally…
Most significant managerial challenge over next 5 years
5
11
19
22
31
Europe 28
North America 31
Other Asia 35
India 38
China 40
Talent management is an important global challenge
SOURCE: McKinsey Global Forces Executive Opinion survey; Next Generation Talent research
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Number of young academic professionals Thousands
15,052
Developed2Developing1
33,110
50% of talent from devel-oping countries is
from India and China
Emerging markets provide access to large skilled talent pools
1 Argentina, Brazil, Bulgaria, Chile, China, Croatia, Colombia, Czech Republic, Estonia, Hungary, India, Indonesia, Latvia, Lithuania, Malaysia, Mexico, Philippines, Poland, Russia, Romania, Slovakia, Slovenia, South Africa, Thailand, Turkey, Ukraine, Venezuela, Vietnam
2 Australia, Canada, Germany, Ireland, Japan, South Korea, UK, US
SOURCE: Global Forces work; McKinsey Global Institute
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However, not all graduates are created equal
1 Suitability rates empirically based on 83 interviews with human-resources (HR) professionals working in countries shown2 Mexico is the only country where interview results were adjusted – to 20% (from 42%) for engineers and to 25% (from 35%) for finance/accounting employees – since
interview base was thinner and risk of misunderstandings high
SOURCE: Interviews with HR managers, HR agencies, and heads of global-resourcing centers; McKinsey Global Institute analysis
Percent of candidates considered suitable for hire1
Of 100 graduates with the correct degree, how many could you employ if you had demand for all?
13
20
10
20
25
35
10
50
50
50Hungary
Czech Republic
Poland
Russia
Malaysia
India
Philippines
China
Mexico2
Brazil 13
25
15
30
15
25
20
30
40
50
8
11
3
25
10
20
10
15
20
30Central and Eastern Europe
Asia
Latin America
Finance/accountingEngineer Generalist
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Professional supply in China is fragmented
SOURCE: McKinsey Global Institute labor supply database
1 All university courses except doctors2 Enterprises with revenue over $604,000 in 2002 and employment of >1,000 FTEs; excluding employment in Hongkong-/Macao-/Taiwan- owned enterprises3 Assuming strong growth of accessibility from currently 51% to 83% in 2008 (India’s current level)
Suitable supply of university graduates will be barely enough to meet demand of large MNCs in ChinaThousands; 2003-08
65Oversupply of suitable and accessible graduates
Not accessible graduates due to fragmentation/immobility3 385
Oversupply of suitable graduates 450
Demand for additional university graduates from large MNCs in China2 750
Total suitable supply of Chineseuniversity graduates
1,200
University graduates not suitable to work in MNCs
14,530
Total supply of Chineseuniversity graduates1 15,730
Fragmentations reduces remaining suitable graduates by 86%
Less than 0.5% of total graduates are suitable and acces-sible to MNCs
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In which country is this located?
1. U.S.
2. India
3. China
4. Mexico
5. Germany
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Question no. 2: aircraft engine?
In which country was this engine designed?
1. U.S.
2. India
3. China
4. Mexico
5. Germany
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Talent matters!
Battlefield is expanding globally
Staying on top of a changing talent landscape
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An integrated approach to talent management
Improving the talent management system
Creating a
talent culture
Strengthening
HR capabilities
Attracting and
deploying the
right people
Evaluating
and
recognizing
performance
Engaging
and
connecting
employees
Growing and
developing leaders
6 2
3
4
57
1
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Leading companies tailor talent strategy to their context
Recruit and integrate
Design component
Deploy, review and develop
Engage and connect
How are the requisite capabilities obtained?
How are job candidates selected?
Central questions
How does talent get deployed?
What level of career guidance should be provided?
What types of behaviors get rewarded?
To what extent do we differentiate performance?
What are the boundaries for under-achievement?
How do we keep talent connected to one another?
How do we energize our talent?
Possible strategic design choices
Grow your own Hire in
Potential Job fit
Structured moves Open market
Self-managedGuided
development
Individual Team/group
Perform or go Grow or go
Egalitarian Meritocratic
Formal Informal
Meaning Tangible benefits
KKR
11
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Four categories of benefits determine whether the best talent joins and stays
Great company▪Culture and values▪Reputation▪ Advancement▪ Lifestyle▪ Impact on society
Great leaders▪ Employees’ opinion of
senior management▪ Employees’ relationship
with boss
Attractive compensation▪Compensation
–Base pay–Short-term incentive–Long-term wealth
creation
Great job▪Work content▪Development
opportunities▪ Job security▪ Freedom and autonomy▪Coaching and feedback
Employee satisfaction
and retention
SOURCE: McKinsey War for Talent survey
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BMW – targeting older workers to make more productive
SOURCE: Harvard Business Review; March 2010
1 Total cost €40,000 including worker time
22
� 7% y-o-y prod improvements
� Lower absenteism
� Follow-up projects in Germany, Austria, and US with similar results
70 small changes to the line implemented at a cost of €20,0001
Wood flooring
Weight-adapted footwear
Weight-adapted footwear
Flexible magnifying lens
Flexible magnifying lens
Specially designed chairs
Specially designed chairs
Vertically adjustable tables
Vertically adjustable tables
Stretching exercises
Stretching exercises
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What gen-Y is looking for and how employers are responding
37
50
55
56
61
74To be paid more
More flexible schedules
To be promoted within a year
To have difficulty taking direction
More vacation and personal time
Access to state-of-the art technology 18
11
20
24
26
26
33
57More flexi-time options
More recognition programs
Access to state-of-the art technology
Increased compensation
Access to educational programs
Pay for cell phones, bberries
Telecommuting options
More vacation time
What employers perceive Gen-Y expects…
… and what the 15% who report they have accommodated Gen-Y have done
% of employers responding to surveys
ALTERNATE
SOURCE: McKinsey
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Multinationals tailor their value propositions to compete against local business in China
SOURCE: McKinsey quarterly, 2008 Volume 1
Criteria that have enabled multinationals to differentiate themselves versus local companies
� Autonomous work environments
� Real decision making
� Additional learning opportunities
� Career development
� Housing incentives
� Educational benefits
Multinationals that have adapted their value proposition
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The key to a successful discussion is the thorough preparation by the meeting participants (i.e., senior executives, not HR)The key to a successful discussion is the thorough preparation by the meeting participants (i.e., senior executives, not HR)
FrequencyAverage time per candidateDescriptionCompany
▪Once annually▪ ~ 5 -10 mins▪Session C review of Top 200 per BU over 1-3 days
▪ Twice annually▪ ~ 5 -10 mins▪Discussion of Top 350 officers in a 3- to 5-day offsite of the Board
▪Once annually▪ ~ 15 mins▪Discussion of Top 30 in one day
▪Once annually▪Similar ~quarterly
reviews in functions and BUs going deeper into organization
▪ ~ 15 mins▪Discussion of top global talent subject of dedicated Top Team meeting (~2-3 days)
Leading companies spend significant time in top talent reviews33
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Companies are aggressively investing in building their capabilities, but is it money well spent?
SOURCE: McKinsey survey, January 2010
Examples of big spenders include …
Spends $2.3 billion annually training and on-boarding new employees
Spends approximately $600 millionannually on employee learning
Spends $500 -$700 millionannually on employee training programs
Spends $1 billionannually on employee learning
Other
Management
FunctionalKnowledge
IndustryKnowledge
Leadership
Focus of capability building initiatives
100
14
15
40
15
16
Contribution to corporate performance
100
11
15
19
26
29
Under invested
Over-invested
Training is like advertising – you spend a lot on it knowing that only half is effective because you don’t know which half!
““““
44
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Talent management challenges
SOURCE: McKinsey
To what extent are you accelerating the development of high
performers and how are you retaining them?
Is talent management strategy as embedded as business and
financial strategy?
Are you tapping into non traditional talent pools and who are
you competing against?
Is your employee value proposition as tailored as possible to
key segments (age, gender, diversity) and do you have 5
“compelling” stories?
vs.