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THE TALENT IMPERATIVETHE ESSENTIAL — AND OVERLOOKED —INGREDIENT FOR CORPORATE GROWTH

IN ASSOCIATION WITH:

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CONTENTS

Foreword .................................................................................................................... 2

Key Findings.............................................................................................................. 3

Talent Begets Growth............................................................................................4

Pursuing Greater Focus ........................................................................................ 6

Skilled Workers, Not Robots ............................................................................... 8

Private Can Be Good or Bad .............................................................................. 9

Essential Talent Strategies ...................................................................................11

Key Development Challenges ...........................................................................15

A Look at Retention .............................................................................................. 17

Recruiting the Right Head of HR ....................................................................20

Conclusion: Better Now Than Later ................................................................21

Methodology and Acknowledgments ..........................................................22

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2 | THE TALENT IMPERATIVE

Is your business reaching a point where shortfalls in the talent processes of today could conspire to prevent the achievement

of future business objectives? In growth mode, chasing so many business opportunities, talent is almost an afterthought.

Human resources, HR, is viewed as a compliance activity, more focused on getting Social Security and unemployment

boxes ticked than on ensuring a good fi t with strategy as well as setting the stage for strong employee engagement, devel-

opment and performance. The end result? Still, the company performs well. But over time that performance diminishes.

And the question becomes, at what point is company performance being hampered by a less than optimal alignment of

business needs and talent strategies?

There are two types of high-growth, private companies: those whose growth is so far masking their shortcomings in

talent management, and those who have come to the realization that shortcomings in talent management are a drain on

growth. The key question: just how much growth has to be sacrifi ced before the organization responds?

Is high growth—or the expectation of high growth—blinding your private enterprise to its core human resources

challenges? Could your organization benefi t from adopting just one or more of a handful of what others are fi nding to

be highly eff ective HR management practices? Have a look at the report that follows and ask yourself: should my private

enterprise be doing more to optimize the linkage between business and its talent management strategies?

— Bruce Rogers, Chief Insights Offi cer, Forbes Insights

FOREWORD

An entrepreneurial outlook? Check.

Great products and services? Check.

Intimate customer relationships? Check.

Able to invest over longer horizons owing to the absence of quarterly reporting? Check.

Relatively smaller size than the typical publicly traded company but experiencing high growth—

even in a generally anemic economy? Check.

A comprehensive talent management program addressing all key issues inherent in recruitment,

development, retention and succession planning—all fully integrated within a growth-oriented

strategic plan? Come again?


COPYRIGHT © 2013 FORBES INSIGHTS | 3

KEY FINDINGS

Our sample of private companies is decidedly growth-oriented. More than three out of four of the companies in the survey are either actively executing growth strategies (47%) or preparing for growth (31%).

Executives at these companies recognize the linkage between talent and performance. The vast majority acknowl-edge that it is their people who enable their organizations to achieve business objectives. They also overwhelmingly agree that having the right talent has a direct impact on revenue and profi tability.

But too few are at present making strenuous eff orts to align talent management with strategic planning. Fewer than one in 10 say that the two disciplines are closely aligned. Meanwhile, nearly half are neutral on the issue or say they see weak or non-existent alignment.

Talent mapping, the process of comparing existing talent with future needs, is, today, a rare occurrence. Mature, pub-licly traded businesses consider talent mapping an essential component of strategy. But only a tiny minority of smaller, fast-growing private fi rms pays signifi cant attention to the practice.

Executives say their fi rm’s status as a private company can harm both recruitment and retention eff orts. Smaller size and less press coverage relative to publicly traded companies can dampen interest. So can the perception of being a family-run business, which both current and prospective employees suspect can limit upward mobility.

But overall, being private, executives believe, gives their companies a leg up over public businesses. The avoidance of quarterly reporting and other compliance burdens is merely the tip of the iceberg. Private companies also insist they can deliver clearer strategic objectives, closer customer relationships and greater entrepreneurial freedom and inspiration.

In terms of talent management processes, improvement is forthcoming. Today, just under three out of 10 private com-pany executives describe their talent management processes as formalized. Within three years, the fi gure increases to nearly half. Improvement is evident in everything from development and training to succession planning.



■ 3% Not at all aligned ■ 8% Not aligned ■ 37% Neutral (neither aligned

is misaligned) alignment■ 43% Somewhat aligned

■ 9% Closely aligned

Figure 1. How closely is your talent manage-ment aligned to your strategic planning?

TALENT BEGETS GROWTH Midsize, private companies are one of the economy’s strongest growth engines. Typically smaller

than a publicly traded enterprise, laser-focused on serving their customers and freed from the

grip of quarterly reporting, executives at fast-growing private companies are able to zero in on

growth opportunities.

But one thing most are not doing—at least not as well

as they should—is developing sophisticated talent manage-

ment processes. “They may believe they’re doing all that’s

called for,” says Zur Shapira, William Berkeley Professor of

Entrepreneurship at NYU’s Stern School of Management,

“but in chasing growth, it’s easy to overlook the people

issues. The truth is, too many are not likely paying the

amount of attention that’s called for.”

That view is strongly echoed by Ana Dutra, CEO of

Korn/Ferry Leadership and Talent Consulting. As Dutra

explains, “Executives at these fast-growth private compa-

nies are very confi dent leaders, and they’re very good at

seeing what needs to be done and getting it done.” But tal-

ent issues, says Dutra, “are often not clearly visible until

you start to have business consequences. These are chal-

lenges you need to get in front of early on, rather than

fi nding out too late and having to play catch-up.”

INACTION DESPITE AWARENESS Private company executives overwhelmingly say they “get

it.” That is, they realize that it is their people that enable

their organizations to achieve business objectives. For

example, 83% agree that having the right talent in place is

critical to their growth strategy. In addition, 81% say that

having the right talent has a direct impact on revenue. And

more than half of private companies, 52%, say that they

believe their talent management strategies and their strate-

gic planning are aligned.

■ 47% Executing growth strategies

■ 31% Preparing for growth

■ 19% Growth plans on hold

■ 3% Under duress / other

Figure 2. How are you performing?

■ Severe talent risk ■ At risk ■ Low risk

TOTAL 48%

3%

8%

37%



But here’s the rub. Of this 52%, only a nominal 9%

describe the relationship between strategic planning and

talent management as “closely aligned”—a fi gure that

should be closer to 100% (Figure 1). Forty-three percent

of this 52% say they are merely “somewhat” aligned. Even

more alarming, 37% are neutral in their assessments (a 3 on

a 5-point scale), and 11% say they see either little (8%) or

no alignment whatsoever (3%). So that’s

43% at risk of talent eff orts not ade-

quately advancing core strategy—and

48% facing severe talent risks.

Talent mapping is the process of rig-

orously comparing existing talent with

future needs—the latter as implied

by growth initiatives within strategic

planning. The diff erence between the

existing talent pool and future, growth-

driven needs is the talent gap. Once

such a gap is identifi ed, a company can

better focus its recruiting, development

and retention eff orts.

But here, only 1%—four companies

out of 311 in the survey—describe their

talent mapping eff orts as rigorous. The

vast majority are instead either neutral

(40%), say their talent mapping eff orts

are not rigorous (23%) or even worse,

not at all rigorous (18%). With 78% of the companies in

the sample either actively executing growth strategies

(47%) or preparing for growth (31%), the lack of a focus on

talent mapping is cause for concern.

■ 18% Not at all rigorous■ 23% Not rigorous■ 40% Neutral■ 17% Somewhat rigorous

■ 1% Rigorous

Figure 4. How would you describe your efforts at talent mapping?

Only a minority know their “talent gaps”

Talent mapping is the process of rigorously

comparing existing talent

with future needs — the latter as

implied by growth initiatives within

strategic planning.

Having the right talent in place is critical to growth strategy

Having the right talent has a direct impact on revenue

Losing talent to competitors has a direct impact on near-term growth

Losing talent to competitors has a direct impact on long-term growth

Figure 3. Talent is essential to performance

*83%

81%

58%

55%

18%

23%

40%

*Figures are the percentages of executives agreeing with each statement.

■ Severe talent risk ■ At risk ■ Low risk



Interviews help to illustrate this phenomenon. Paul

C. Darley is CEO of W.S. Darley, an Illinois-based, fam-

ily-owned company best known since 1908 for its fi re and

emergency services equipment businesses. However, as

the downturn of 2008 started hitting state and local gov-

ernment budgets, Darley recalls, sales of core fi refi ghting

apparatus and related products “began

drying up pretty fast.”

So the pursuit was to focus more

intently on other segments of the

business, including defense and water

purifi cation. Apparently, the strategy is

working, says Darley, as the company

has since grown nearly threefold to $140

million in revenue. In fact, “we just on-

boarded 30 new hires,” says Darley, “and

20 of those were brand-new positions.”

But amid such high growth, says

Darley, “if you’re looking for a pol-

ished model of how to handle talent,

we may not be your case.” So far, says

Darley, “talent hasn’t proven to be an

issue—as voluntary turnover is under

2%.” Meanwhile, says Darley, “we’re so

focused on growing new markets and

taking care of our customers that we

can’t really spend too much time plan-

ning our talent needs or training. Our model is to fi nd the

best people, spend half a day trying to get them oriented—

assign a buddy to help them along. And from there, we

point them at the battle and throw them into action: go

take care of those customers and grow that market.”

Overall, says Darley, “we’re getting the job done—

we’re growing, and we’re taking care of customers.” Still,

he agrees, “there’s no doubt we need to introduce some

greater planning and discipline. Right now though, we

fall into a sort of no man’s land: not big enough to have

formal programs, but growing so fast that we’ve had other

priorities.” Darley adds that “we plan to professionalize the

process in the future.”

A MORE FORMAL APPROACH Jennifer Pugh is the CHRO of Idaho-based Scentsy, a

fast-growing, aptly named direct seller of home fragrance

products. And on the day she was brought into the com-

pany some seven years ago, she thought her fi rst assignment

would be a breeze. “What I ‘heard’ was that they needed

me to recruit and on-board 17 new hires in the next three

months, and I was like, ‘No problem.’” Then, reality set

in: the goal was not 17, but 70. Says Pugh, “It was a gruel-

ing three months.”

The company has since grown from 65 employees to

over 1,000 today. And one of the keys to making the most

of the talent on hand, says Pugh, “is to add structure to your

human resources planning and processes.” And—do it all

“in a way that really gets the best blend of what’s important

to the organization and to the individual. To the extent you

can get those two objectives aligned, you’re going to help

your people become the best they can be within the organi-

zation, and that’s good for them and the company.”

Indeed, the survey results show that executives under-

stand the need for greater formality. Today, only 29%

of private companies have formalized talent processes.

However, within two to three years, the fi gure increases

to nearly half, 49%. Unquestionably, the balance is shifting

away from an informal, ad hoc orientation to signifi -

cantly greater rigor and formality in talent management.

Executives are recognizing the linkage between sound tal-

ent processes and the achievement of business objectives.

PURSUING GREATER FOCUSPeople are what enable businesses to achieve objectives. But ironically, the continuing attain-

ment of business objectives can lead a company to ignore its talent risks and opportunities.

Thus, high-growth companies are particularly vulnerable to such oversights.

“We’re growing and taking care

of customers, but there’s no doubt

we need to introduce greater HR planning and

discipline.”

— PAUL DARLEY

CEO,W.S. Darley



AVOIDING THE “PETER PRINCIPLE”

Jennifer Pugh, CHRO of Scentsy, says that talent managers cannot shy away from being frank with key staff —even in uncom-fortable circumstances. “People always want to move up. But how do we give people more without setting them up for failure? Someone can be the best shipping clerk imaginable, but lousy when it comes to managing others.”

The Peter Principle is the idea that organizations often have a tendency to promote individuals to their level of peak incompe-tence. This was a tough lesson for Pugh and her company. “We made a few mistakes.” But today, says Pugh, “we look at strengths and weaknesses, and we don’t shy away from the really tough discussions. ‘You’re great at what you’re doing now; you have a good deal to change before we could move you to the next level, and that’s why we have to bring in someone else rather than give you the promotion you want.’”

Figure 5. Type of talent management (ad hoc vs. formal)

AD HOC FORMAL

Today

Within 2-3 years

6%

9%

35%

38%

11%

12%

18%

42%

21%

8%



SKILLED WORKERS, NOT ROBOTS

Q&A: Zur Shapira, William Berkeley Professor of Entrepreneurship at NYU’s Stern School of Management

What do you see as the most critical talent management challenges for fast-growing private companies?

One of the most prevalent issues is a shift in the orientation of workers. Through the 1950s and 1960s, there was this view that you start at a company and you spend your life there. That’s not so today.

Today, the most valued employees, the ones with the strong sets of skills, they are professionals. They no longer see their careers in terms of being in a company, but rather in expanding and improving their capabilities and reputations within their professions. They are project-focused. They are functionally focused. They will work on a project or work at a company until their role is no longer critical, and they will look for another opportunity. So business executives need to form a strategy on how they can relate to these highly skilled executives.

Do you see other megatrends?

Another is the emergence of teams. There was a time when you could link performance to an individual fairly clearly and objec-tively. And in some instances that still is the case. But today, with greater complexity in products, services, customer relation-ships—it takes a team to achieve results. So a key challenge is learning how to measure the results of a team as well as its individ-ual components. That is extremely complex. And when you couple this with the earlier observation, that individuals are becoming more sophisticated, skilled and valuable, there are no sure-fi re answers. So how do we evaluate, develop and retain a team?

Do you have any other talent-related advice?

If I were to suggest one more thing to consider it would be to look at automation. There’s something taking place in the U.S. economy today—and that’s robots. If you can defi ne a task simply, a robot can do it at a much lower cost than even if you could off shore the work to China or India. Manufacturing is turning around in the U.S., but it’s not factory workers, it’s robots.

And the fl ipside of this relates to your skilled workers. You cannot turn them into robots. They need autonomy; they need to be creative. And they need to be able to progress in their fi elds. So if, for example, you work in biotechnology, they might, for exam-ple, be allowed to publish their work, so long as it does not compromise the company’s genuine intellectual property rights. They are career-oriented, not necessarily company-oriented. So allowing them some recognition in their fi eld is something to consider.



THE CHALLENGES Executives at private companies believe their organizations

face a range of added challenges in recruitment and reten-

tion relative to publicly traded companies. For example,

47% say the perception of limited upward mobility—e.g.,

“you will not become the CEO of this private, family-

owned enterprise”—can harm recruitment/retention. The

fi gure rises to 55% among self-described family businesses.

The perception of a “glass ceiling” stemming from

family ownership can be very real. As Korn/Ferry’s Dutra

explains, “we recently were able to recruit an executive

from a private, family-owned business—a real rock star of

an executive. That was possible because when he looked

above him in the organization chart, all he saw were fam-

ily members. His view was that he had gone about as far as

he could within the family-held structure.” So, says Dutra,

there will always be cases “where a private, family-owned

company could lose talent because of the perception that

promotion decisions are made based on family name as

opposed to merit, performance and potential.”

But this can be mitigated. As Darley explains, “we strive

to be very transparent in our reporting to our employees.

And we go to no end to let our employees know where they

fi t in.” In particular, says Darley, “we present our strategic

direction and talk specifi cally about their role and how it

could develop.” But if that’s not enough, says Darley, “our

senior management team has signifi cantly more non-family

members than family members.”

In some instances, however, the continued involve-

ment of family members in senior positions is a conscious

objective. Here, says Dutra, “the fi rst step is to perform an

objective assessment of the individual (the entrepreneur’s

chosen descendant), focusing on their ability, prepared-

ness, experience, potential and leadership competences to

take the top job. Do they match the leadership, experience

and competences required to execute on the strategy and

lead the business moving forward?”

If the answer is yes, says Dutra, the current CEO should

objectively and clearly demonstrate to the organization, the

board and other key stakeholders why the family member

is the most qualifi ed candidate for the position. Here, says

Darley, a case can often be made, for example, that having a

family member in charge “is vital to the company’s image,

culture and perhaps customer” as well as private investor and

other fi nancing relationships. Overall,

says Dutra, if the company hopes to

minimize the degree to which con-

tinuing family leadership discourages

recruitment and retention, it must do

what it can to maintain the image of a

“meritocracy.”

If the answer is no, at least at pres-

ent, it will be important, says Dutra,

“to immediately implement a devel-

opment plan to bring the CEO-to-be’s

skills, experience and preparedness to

needed levels.” Such a developmental

plan should be part of the succession-

planning process. Other executives are watching, and if

a less-than-qualifi ed family member advances, this could

drive defections. Says Dutra, “If the CEO was counting

on these same executives to surround and support the next

CEO, the business is now at greater risk.”

Other potential disadvantages for private companies

include the relatively smaller size of many private com-

panies—cited by 39% of survey respondents—which

can limit vertical as well as horizontal career develop-

ment. Twenty-two percent of respondents feel that private

companies, having no publicly traded securities, receive

comparatively less coverage in the business press—which

can harm recruitment. Finally, 17% see potential confl ict

with family members as harming their talent eff orts—a fi g-

ure rising to 31% among self-described family businesses.

PRIVATE CAN BE GOOD OR BADIn terms of talent, being private can be a double-edged sword. That is, certain aspects of being

a private company can hurt recruitment, retention or even development eff orts. But on the

other hand, say interviewees and survey takers, being private can provide powerful advan-

tages. Private companies need to address such perceptions: countering shortcomings and

leveraging advantages.

The perception of a “glass ceiling” stemming from family ownership can be very real.



ACCENTUATING THE POSITIVE Interviewees say—and the survey supports—that the benefi ts

of working in a private company far outweigh any potential

or merely perceived shortcomings. Advantages include not

only the perception of greater commitment to employees

but also a longer-term investment focus and closer customer

relationships (Figure 6). While all of this may be clear in the

minds of existing employees, such advantages are less vis-

ible to prospective candidates. As a result, private companies

should do more to promote such attributes.

The value of such advantages can be profound. At

Scentsy, says Pugh, “if we were public, we would never

have grown the way we have or achieved this much suc-

cess.” As a private, family-owned company, there’s a

shared culture. “Everyone here takes pride that we’ve

come from humble beginnings and had to bootstrap and

hire friends and relatives early on.” Once people are hired,

“they become family. And there’s tremendous loyalty to

the owners and each other.”

In addition, says Pugh, “being private, we’re able not

only to make longer-term business decisions, but we can

take steps to benefi t our people that public companies

can’t.” And “it’s little things,” says Pugh, “that integrate

life and work—like having a company store so people

don’t have to stress out about grabbing a gallon of milk on

the way home. If we had shareholders, they’d be asking

‘Where’s the ROI in that?’”

Darley is similarly emphatic. “We look at the fact that

we’re privately held as a real strong point—a selling point.”

Specifi cally, “we’re not answering to Wall Street every 90

days, so we can chase a longer-term return strategy,” says

Darley. And, “we’re not bound by Sarbanes-Oxley, which

can add millions [of dollars] to compliance costs.”

Darley continues by explaining that “we’re very close to

our customers and our markets. We don’t have layer upon

layer of bureaucracy, so we can respond quickly. In fact, we

tell our employees to always err on the side of the customer.

Customers like that, and our employees like that.” So, says

Darley, “we view being private as an enormous advan-

tage—and as a selling point to customers and employees.”

Surprisingly, only 15% of survey respondents cite the

potential for an IPO as an advantage of being a private

company. One possible reason, posits Dutra, is the “stage

of the business cycle” at the time of the survey. February

2013 “may not have been good timing for many.”

Greater commitment to employees

An opportunity to play a larger role in the company’s future

Closer customer relationships

A more compelling business vision

A longer-term orientation

IPO potential

*Figures are the percentages of executives citing each characteristic as an advantage.

Figure 6. The benefits of being private

*59%

55%

42%

33%

15%

43%



ESSENTIAL TALENT STRATEGIESThe research shows that private companies need to address talent management in a more for-

mal manner. However, these businesses cannot address all phases of talent management at

once. Rather, each company will need to assess and address its most pressing talent issues

fi rst—and then build on each success over time, progressing toward a more mature, comprehen-

sive model. The three key and closely interrelated areas of focus include recruitment, retention

and development.

KEY RECRUITMENT CHALLENGES Private companies face some of their toughest chal-

lenges in recruiting. This can be especially true in fi elds

like engineering or information technology, where tal-

ent shortages are already rampant. Tony Damon is CEO of

Ohio-based SSOE Group, a fast-growing professional ser-

vices fi rm focusing on engineering and

architecture. According to Damon,

“I’d say our biggest talent challenge is

competing for the technical talent we

need.” Competition for engineers and

architects “is fi erce” says Damon, “and

so talent management—recruitment,

development, retention—is becoming

a critical focus.”

Brad Meacham, an executive at

fast-growing Washington state-based

insurance software maker Vertafore,

agrees wholeheartedly. “We’re a people

business. We don’t have factories and

widgets—we rely on technical talent.”

And without question, says Meacham,

“talent management is an absolutely

critical focus for our business.”

But no matter the industry, a growing company needs

talent. And as the private companies in our survey grow,

they indicate that certain skill sets are becoming more crit-

ical for success. As for the skills viewed as most critical to

business success, these include IT (49%), sales and market-

ing (46%), and general management and strategic planning

(both at 43%). This is closely mirrored by the list of skills

most in demand. This latter list includes technology exec-

utives (44%), operational talent (36%) and sales (33%).

In accord with their growth strategies, companies are

pursuing mid-level, experienced workers (41%), entry-

level workers (40%) and salespeople (25%). Finally, as for

the most challenging experience levels to recruit, cho-

sen by frequency of citation among the top three most

challenging, these include experienced mid-level per-

sonnel (60%), experienced senior personnel (40%) and

entry-level workers (22%). Note that fewer than one in

fi ve private companies, 18%, considers executive leader-

ship to be challenging.

In terms of meeting talent needs, 52% of executives say

internal employee development is the most critical step.

But once the decision is made to look outside the business,

the most eff ective means for recruitment include employee

referral (45%), agencies (25%), business-oriented social

media (24%) and word of mouth (20%).

“I’d say our biggest talent

challenge is competing for

the technical talent we need.”

—TONY DAMON

CEO, SSOE Group



IT

Sales / marketing

General management

Strategic planning

General operations

Technical / operational skills

Accounting / finance

*Figures are the percentage of executives citing each role as critical to success.

Figure 7. Skills most critical

*49%

46%

43%

43%

38%

31%

30%

Technology executives

Operational talent, e.g., manufacturing, logistics

Sales

International experience

R&D

M&A

Figure 8. The types of talent in greatest demand

44%

36%

33%

20%

19%

19%



Mid-level, experienced workers

Entry-level workers

Salespeople

Senior executives

Freelancers / consultants

Figure 9. Private companies are hiring

41%

40%

25%

23%

17%

Experienced mid-level personnel (e.g., business unit heads)

Experienced senior personnel (e.g., SVP, Director)

Entry level

Executive leadership

Service level

Figure 10. The most challenging experience levels to recruit

60%

40%

22%

18%

17%



TAKE THAT HILL!

W.S. Darley CEO Paul Darley recognizes his company off ers new hires only minimal training. But one of the reasons the model seems to be working, so far, is the types of hires the company tends to make. “One of the reasons we do so well, I’m convinced, is that over 20% of our new hires are military veterans. So when they get here, they’re already mature and disciplined, with focus and drive. We might have to teach them how to sell—but these people are adaptable and really, I would tell you, just formidable. We just give them a bit of direction—there’s the hill—and they just run with it.”

Employee referral

Agencies

Business-oriented social media

Word of mouth

Online ads

Competitor recruitment

Campus recruitment; job fairs; ads in trade press; ads in newspapers 10% or less

Figure 11. The most frequent means of meeting recruitment needs

45%

25%

24%

20%

14%

19%

10%



KEY DEVELOPMENT CHALLENGES Seventy percent of executives say talent development is either important (43%) or extremely

important (26%) to future growth. At the same time, over half of survey respondents, 54%, view

talent development as a signifi cant (41%) or very signifi cant (13%) challenge. Meanwhile, only

34% today have formal processes for identifying and developing essential/exceptional talent.

However, in evidence of the growing importance of talent development, that fi gure increases to

44% in the next 18 months.

There is no question that companies are focusing

more intently on employee development. The interviews

conducted for this study are replete with examples of

fast-growing companies moving quickly to implement

more formal means of training—and tracking progress.

For example, at SSOE, Brad Rowe, HR Business Leader,

Talent Acquisition and Staffi ng, says, “A few years back

we recognized that an important part of retention would

be development—people need a clearer idea of their role

today and tomorrow in the company.” Consequently, the

company developed “a career progression model—posi-

tion, titles, competencies—so that engineers and project

managers could see what they needed to do to advance

where they wanted to go.”

A similar platform has been introduced at Scentsy. As

Pugh explains, “Developing people—showing them how

to progress in the organization—is one of our biggest chal-

lenges.” And one of the ways the group has responded is by

developing clearer job descriptions as well as training and

development objectives.

“What we’ve done is industrialize the business. Any

time there’s a position in the company with 10 or more

people in the role, we’ve asked ourselves, what are the lev-

els—the gradations? It might be in shipping, it might be

in sales—but whatever track they’re on, what is a level 1,

what is a level 2 and so on.” And when someone achieves

the pinnacle in any one area, a level 3, “that’s when they

become eligible for stretch assignments—something that

can take them somewhere new [far afi eld] from where they

are now—if that’s what they want.”

Greater career-path clarity, Pugh fi nds, leads to greater

satisfaction and fulfi llment. And one of the remarkable

things is “the movement isn’t always up. Sometimes, when

people can see what paths are available, they want to move

sideways—or even down—to get on the path they want.”

It’s no longer a career ladder, says Pugh, but more “like

rock climbing, and people like it.”

Clearly, as companies grow, the need to focus more

intently on employee development increases. In addition

to the strategies described above, the survey says that com-

panies are also introducing programs such as mentoring,

formal training and rotational assignments (Figure 12).

But note, companies also need to do more in terms of

talent gap analysis—comparing current talent with talent

needs as defi ned within future strategic plans. No mat-

ter the business strategy—a greater focus on customer

relationships; more R&D-infused products and services;

operational or logistical excellence—recruitment and

development programs need to be recalibrated to ensure

the right talent will be in place. This is one area where

work is sorely needed, as fewer than one in fi ve private

companies are today actively mapping and gapping their

future talent needs (noted earlier in report).



Figure 12. What development tools are you implementing?

Mentoring

Formal training

(internal courses)

Tuition reimbursement

Formal training (external)

Stretch assignments

Rotational assignments

88%59%

73%49%

75%43%

70%36%

61%33%

■ TODAY ■ IN 18 MONTHS

80%50%



A LOOK AT RETENTION It’s one thing to on-board or perhaps develop essential talent. It can be quite another to make

sure the talent that’s needed can be retained. Here, 44% of survey respondents view talent

retention as a signifi cant (32%) or very signifi cant (13%) challenge. And over the next 18 months,

nearly half, 49%, expect talent retention challenges to increase

INTERRELATIONSHIPSEmployees, present and prospective, look at career oppor-

tunities as an integrated whole. In accord, the elements

most frequently cited to attract and retain talent include

company reputation, performance incentives/bonuses and

work/life balance. As for company reputation, Darley

maintains “this is something you cannot undervalue or

take for granted.” Thus, his company makes it a point “to

continually discuss our core values—and make sure every-

one in the company is absolutely clear these are not to be

compromised, ever.”

Companies also need to articulate the various intan-

gible benefi ts any position at their company might have to

off er. For example, at SSOE, “we make a point to empha-

size that our people could go and work for one of our

clients,” says Damon. ”But then they’re forced to spe-

cialize.” Working instead with SSOE, “here they get an

opportunity to work for many diff erent clients on var-

ied projects.” So while compensation matters, “it’s also

important to provide a varied and challenging work expe-

rience,” says Damon.

Recruitment, retention and development, says

Vertafore’s Meacham, “are as interrelated as can be.” In

terms of initial recruitment, “compensation and company

name recognition” can be big issues. As for the former,

“we don’t have the stock options of small startups” and “we

can’t always pay what other huge companies can aff ord.”

As for the latter, “we’re not Microsoft or Google—we

don’t have the household name recognition of some tech-

nology companies.” Consequently, “we have to work a lot

harder to attract the talent we need.”

But the work by no means ends there. Once an

employee joins the company, the focus is all on devel-

opment and retention. Here, the company does its all to

emphasize other aspects of the business. Technology peo-

ple “like to work with the latest and coolest stuff ,” says

Meacham. And because the company emphasizes tailoring

capabilities to serve customer needs—as opposed to selling

discrete products—new and existing staff get to work in

“hot” new areas such as the provision of “software as a

service,” “big data” (the integration and analysis of mas-

sive and complex data sets) and the development of mobile

applications. All of which, says Meacham, “is a really big

deal for technical talent—and it improves both recruit-

ment and retention.”

Another means of retaining talent is by emphasizing

“career-pathing.” Here, says Meacham, “we’ve developed

a career model framework, which is a set of objective com-

petencies you need to achieve in order to progress. Say

you’re hired as a junior engineer, you do this, this and this,

and you advance.” Such formal programs are in evidence

in nearly all major software companies, “but it’s unique for

a company of our size [$350 million].”

A compelling feature of Vertafore’s development

approach is its mini-MBA program. Employees com-

pete for acceptance to a yearlong program that meets

for a series of three-day weekends featuring a mix of

University of Washington professors and Vertafore exec-

utives. As Meacham explains, “It gives the cohort [the

attendees] a really good view of business issues—with a

Vertafore perspective.”

Other elements of Vertafore’s increasingly formal-

ized talent management programs include management

training, “so they’ll have the tools to get more from their

teams,” says Meacham, and a corporate wellness program,

“which is part of promoting a sound approach to work/life

balance.” Finally, the company is doing more to formally

recognize accomplishments. Overall, says Meacham, “as

we’ve grown, we’ve learned how important it is to attract,

develop and retain—so our talent processes are maturing.”



And in the end, says Dutra, the best-managed

high-growth private companies are recognizing that

“recruitment, development and retention are all interre-

lated. You need to address all three in an objective and

consistent manner.” The challenge, however, “is under-

standing which talents are most critical for your business,

and then focusing on the most eff ective ways to recruit,

develop and retain that specifi c set of talents.” As com-

panies become more adept at managing their most

critical talent needs—at prioritization—“they will begin

to improve across the board. They will develop sophis-

ticated, integrated and objective processes.” And those,

Dutra insists, “are what will help companies get to the

next level.”

Company reputation

Performance incentives / bonuses

Work / life balance

Training and continuing education opportunities

Individual career development

Tuition reimbursement

Mentorship

Profit sharing

Industry-leading compensation

Range of career opportunities

Telecommuting

International opportunities

Figure 13. Key retention drivers

52%

■ Noteworthy under 20%:

50%

44%

29%

28%

27%

25%

23%

17%

19%

17%

8%



THE TOOLS OF SOUND TALENT MANAGEMENT

The shift from an ad hoc to a strategic talent management program can greatly aid a company in the achievement of its business objectives. Leaders should consider implementing elements such as:

■ Talent mapping: linking the talent on hand to the talent that will be needed to support growth in order to assess shortfalls or gaps.

■ Targeted training and development: creating programs and processes to build the talent needed to achieve the strategic plan.

■ Targeted recruitment and retention: making certain the most valuable employees stay; focusing recruitment eff orts on essential capabilities.

■ Career-pathing: providing individual workers with a clear view of what opportunities are available and how to achieve them.

■ Objective metrics: defi ning roles and responsibilities and creating clear means of evaluating competency, performance and advancement/succession.

■ Work/life balance: recognizing that all work and no play will eventually cause Jack or Jill to underperform or leave.

Start with those areas determined to be of the most critical importance, and build overall talent capabilities over time.

Experienced mid-level personnel

Experienced senior-level personnel

Entry level

Service level

Figure 14. Most difficult to retain

57%

31%

28%

22%



RECRUITING THE RIGHT HEAD OF HR

Q&A: Ana Dutra, CEO, Korn/Ferry Leadership and Talent Consulting

What, in your experience, are the most important talent issues for fast-growing private companies?

There’s no single issue that will always stand out more than any others. But overall I would say it’s a matter of recognizing the criticality of managing and developing talent. Fast-growing private companies are arriving at the state where they are beginning to have the same needs as larger companies—but they haven’t recognized it yet.

What is the impact?

Because they don’t see the issue as something critical they need to deal with—because their focus is elsewhere—they are not allocating the right management attention and resources. Their growth is masking their talent shortcomings, which will only become more acute with time.

What do you advise?

They should recruit a really strong head of HR with a focus on talent management and leadership development. Someone who understands not only compliance, but also strategy. That way the CEO can still focus on customers and other external opportuni-ties, and the HR executive can begin to create a strong talent management base.

Who should they hire for this role?

Someone who has been there, done that. But along with that, you need to hire someone who understands how to deal with these talent issues without a huge infrastructure. A mistake is fi nding someone who has worked for a large company expecting they can go forward with the same resources they had before. In your company, unlike where they may have been, they’re going to need to make things happen with limited resources—and know how to prioritize. So this person needs to know how to roll up their sleeves and get it done. But hand in hand with that is the thrill of the freedom that comes with additional challenge and responsibility.



CONCLUSION: BETTER NOW THAN LATER High growth can mask many shortcomings. But sooner or later—and more likely than

not, sooner—any failure to address talent management will become a signifi cant drain on

performance.

There is no need to address all aspects of talent management at once. Rather, executives need to sit back and objec-

tively determine which improvements are most likely to generate the greatest returns. Is recruitment the issue? Is the

company having diffi culty retaining essential talent at critical points in the growth cycle? Do employees understand their

futures and their development paths and do they feel both challenged and appreciated? Find the pain points in the organi-

zation—and prioritize remediation.

Today, the focus is on the pursuit of growth. But high-growth companies all too often fail to recognize that point

where they need to shift from a focus on mere HR compliance (what must we do?) to a truly strategic focus (what should

we do?) that optimizes the value of the organization’s talent. What executives do—or do not do—in terms of investing the

right attention and resources can make or break their company’s future. Fortunately, as this report demonstrates, a growing

number of fast-growing private company executives are rising to the talent management challenge.



METHODOLOGY The insights and commentary found in this report are derived from both a survey instrument and

personal interviews. Partnering with BMO Harris Bank, Forbes Insights conducted a survey in

February 2013 that was completed by 311 executives.

KEY DEMOGRAPHICS INCLUDE:

■ Executive title: SVP/VP/Director (52%), CFO/Treasurer (15%), CEO/President (8%), other C-level

executive (11%)

■ Company size: $50 million revenue to $99 million (34%), $100 million to $249 million (38%), $250

million to $499 million (27%)

■ The sample features a wide spectrum of industries, albeit with several notable concentrations,

including banking/fi nance (16%), retail and wholesale trade (8%), healthcare (8%), and engineering

and construction (7%).

■ Respondents were also relatively evenly distributed throughout the U.S.: Midwest (40%),

Northeast (24%), Southwest (20%), Southeast (9%) and Northwest (6%).

ACKNOWLEDGMENTS

Interviews were conducted with 12 senior executives, including the following seven for attribution:

Tony Damon, CEO, SSOE GroupPaul C. Darley, CEO, W.S. Darley Ana Dutra, CEO, Korn/Ferry Leadership and Talent Consulting Brad Meacham, Corporate Communications Director, Vertafore Jennifer Pugh, CHRO, ScentsyBrad Rowe, HR Business Leader, Talent Acquisition and Staffi ng, SSOE Group Zur Shapira, William Berkeley Professor of Entrepreneurship at NYU’s Stern School of Management

Forbes Insights extends its gratitude to our survey respondents and interviewees.


ABOUT FORBES INSIGHTS

Forbes Insights is the strategic research practice of Forbes Media, publisher of Forbes magazine and Forbes.com. Taking advantage of a proprietary database of senior-level executives in the Forbes community, Forbes Insights’ research covers a wide range of vital business issues, including: talent management; marketing; financial benchmarking; risk and regulation; small/midsize business; and more.

Bruce RogersCHIEF INSIGHTS OFFICER

Brenna SnidermanSENIOR DIRECTOR

Christiaan RizyDIRECTOR

Kasia MorenoEDITORIAL DIRECTOR

Lawrence BowdenMANAGER, EMEA

William MillarREPORT AUTHOR

Kari PagnanoDESIGNER

60 Fifth Avenue, New York, NY 10011 | 212.366.8890 | www.forbes.com/forbesinsights

BMO Harris BankSM is a trade name used by BMO Harris Bank N.A. Member FDIC.

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