The HR function has been under increasing pressure to do more with less. However, as Craig Donaldson writes, effective talent management is critical to developing a lean but productive and talented workforce
Doing more with less is a common challenge faced by HR departments and professionals. from increased reliance on technology and outsourcing and commercial pressure to cut operational costs, through to ongoing workforce rationalisation and consolidation as well as mass redundancy programs since the global financial crisis, there are a number of reasons why HR is under increased pressure to do more with less.
For example, a survey of 300 Australian CFOs and finance directors found that 45 per cent said their companies have increased productivity by boosting output from teams without providing additional resources. Andrew Brushfield, a director at Robert Half Australia, which conducted the survey, said that the economic climate has forced Australian companies to focus on productivity improvements, however, this exercise should be approached with care. “In the current financial climate, driving existing employees to be more productive is a cost-effective solution,” he said. “However, companies should be mindful that expecting employees to do more with the same resources may not be a viable long-term solution.”
The pitfalls of doing more with less
“Doing more with less” is a common mantra in HR departments across the country. The function is under more pressure to deliver real business value, and budgets and access to resources are tighter than ever before.
Another survey of 280 Australian internal recruiters and HR managers found that while 41 per cent will increase the number of people they recruit this year, only 26 per cent of budgets will correspondingly rise (down from 27 per cent last year and 46 per cent in 2011). “You’re being asked to do more with less,” said Josh Coulson, a senior insights analyst with LinkedIn, which conducted the survey. “You’re being asked to find people with less budget. That really means that we need to find greater efficiencies … If companies can improve their efficiency and the way they’re attracting top talent, that’s obviously going to be a competitive advantage for them.”
The process of doing more with less is typically a finance-driven process, which involves cost-cutting imperatives that are typically driven by business leaders and deliver in a siloed approach, according to Garry Adams, leader of Mercer’s talent business for the Pacific market. Most companies are forced to act in a reactive way for two reasons, he says. “Firstly, the business is required to act at short notice, and secondly, the proactive workforce planning is not sufficient to cover the business need. This generally results in a reduction in workforce and redistribution of work across fewer people and/or the elimination of productive or unproductive work.”
One of the biggest issues for companies seeking to do more with less is that they focus on this from a FTE/headcount perspective, rather than a return on investment (ROI) view, according to Tess Walton, strategic workforce planning expert and founder of boutique consulting firm Talent Risk Management. “So they tend to reduce the FTE, and ask for greater productivity,” she says. “This often leads to reducing the FTE while increasing the costs of the FTE, because they often appoint a more experienced or skilled person to do the work, sometimes at a higher grade than the initial FTE that has been taken out. This rarely yields an ROI for the organisation.”
The war to develop talent
A global study conducted by the Economist Intelligence Unit for KPMG found that over the past five years there has been an overriding preoccupation with cost management and reduction, with a corresponding need for HR functions to create more business value. The study, which took in 418 executives across the world (a third of which were from the Asia Pacific) found that in a tighter business environment, 81 per cent believe an effective talent management strategy is crucial to competitive success.
In KPMG’s Rethinking Human Resources in a Changing World report, based on the aforementioned study, Tim Payne, a partner in KPMG’s HR Transformation Center of Excellence, observed that the “war for talent” has not let up despite global economic conditions. “In addition, it is a more sophisticated and complex war – the increasing global nature of the workforce, virtualisation, and disaffection of the workforce – are all making it harder to secure the talent a business needs to succeed,” he says.
In addition, Payne observed that there is often a gap between the ambition and rhetoric of talent management and the practice on the ground. “Many talent processes have unfortunately become annual form-filling exercises where business managers comply and HR departments are disappointed with the outcomes,” he says. “HR can redefine talent management by thinking ‘outside-in’, or put another way, beginning with the talent they need rather than their current talent.”
Talent management is becoming an increasingly important focus for HR in its drive to add more business value. Deloitte’s Resetting Horizons: Human Capital Trends 2013 report found that close to 90 per cent of global business leaders and HR executives are building new ways to develop talent. Based on a global survey of more than 1300 organisations in 59 countries, including Australia, it found that the “war for talent” is shifting to the “war to develop talent” – which is defined by the fact that businesses are struggling to fill critical positions at many levels, build new capabilities and change their culture to help enable individuals to succeed at a number of tasks, challenges and roles – many of which are not even apparent today.
The report found that the war to develop talent is a top focus area for almost three-quarters of organisations in Australia. Nicky Wakefield, formerly Deloitte Australia’s human capital leader, observed that as organisations struggle to fill talent gaps, they have also raised the bar on talent development. “Employees are seeking demanding, engaging and meaningful work, and employers are looking for ways to fill positions internally – including leadership and executive roles – as well as manage escalating turnover costs,” she said.
A lean, talented workforce
Building an effective talent management strategy requires a holistic and business-focused approach, and there are a number of steps companies can take to get this right in their efforts to “do more with less”. Adams affirms that it is important to take a system view. This involves not only thinking about headcount cost management, but looking at the way in which work is done and possible options for changing service delivery models, changing the resourcing model or redesigning jobs to align the right level of capability with the right work. Balancing short-term immediate gains with the long-term sustainability of the organisation is also a critical consideration.
“You don’t want to repeat the mistakes of large restructures, where top talent is displaced for short-term gain, only to realise the need to bring in that same capability again in six to 12 months’ time,” says Adams, who adds that talent management is like a balance of science and art. “It’s about using workforce analytics to inform the cost/benefit analysis of a leaner workforce/resourcing approach, with innovative approaches to acquiring, developing and motivating talent,” he says.
“For example, what innovative sourcing strategies can provide you with required capability and capacity, which will still give you the flexibility to respond to market demands. So how can you better mobilise your internal labour market to ensure the right people are in the right place, at the right time and at the right cost?”
Walton says the first absolutely critical step in the process is workforce measurement based on ROI, not on FTE. “ROI for workforce is all about productivity, and there are multiple ways to influence productivity and only a few to deal with FTE (add people/hours or take them away),” she says.
Second, she recommends segmenting the workforce by grouping like with like. This is about recognising the roles you have in the organisation are not homogenous and that some are more critical to your competitive advantage than others. “This is different from high potential development, which is more about the individual,” says Walton, who also recommends keeping an eye on the future business horizon to help enable a proactive rather than reactive approach to events and issues that could potentially impact the workforce.
Overall, Walton believes that “doing more with less” should be approached with greater creativity, and she gave the example of a hospital which found that there was less organisational impact in being “overstaffed” by one nurse at all times. When the hospital had vacancies, the extra work was taken on by existing staff, which incurred overtime and also affected patient care and satisfaction. “For me this is a ‘reframing’ of the ‘doing more with less’. The ‘doing more’ is reframing and looking at things differently by creating value, and the less is ‘dollars’ costs to the organisation. This version of the ‘doing more with less’ definitely has more of a business case than the FTE trap many organisations fall for,” says Walton.
Talent management shortcomings
The key focus of most companies is to build talent with so-called “permanent staff”, however, many organisations today have many part-time staff, contingent workers as well as many other non-traditional workers. “They are often not considered in talent programs,” according to William Rothwell, co-author of The Strategic Development of Talent and a professor of workforce education and development at Penn State University.
“The real goal of a talent program is to get the work done well and with high quality,” he says. “But few organisations have a systematic approach to do such comprehensive talent and workforce planning for all workers – not just so-called ‘permanent staff’ and not just ‘top of the house’ (C-level) and top 10 per cent of workers.” Another big problem with talent programs is that their goals can change over time. As such, Rothwell says there is need to recalibrate them on an annual basis.
“Management often launch a talent program to meet a specific business problem, such as pending retirements and/or needs for more talented people to fuel business growth,” he says. “But a successful talent program that achieves these goals, leads to management that loses interest in a year or two. Hence, short-term talent program success leads to long-term failure. The goals need to be revisited every year to ensure that the program is aligned with organisational needs. It sounds simple but is often forgotten in the shuffle.”
Neil McCormick, principal adviser of HRM Advisory and co-author of Lean but Agile: Rethink Workforce Planning and Gain a True Competitive Edge, says that in most cases the mechanics of the talent management process are fine, however, there is often too much emphasis placed on historic requirements and trends when determining future need.
In reviewing talent management programs, McCormick says he is constantly surprised by the weighting of individual preference/want in lieu of organisational need. “This is typically due to a lack of understanding of what the organisation actually does need. Poor talent assessment practices and limited review of program outcomes is also a constant,” says McCormick.
As such, more emphasis needs to be placed on understanding objectives and work required to achieve objectives across the organisation – while he says assessment of the quality of the available resources to deliver the work is often questionable. “Few organisations create the foundational linkage from the objective of the organisation through the human capital lifecycle and /or measure the outcomes each achieve,” he says.
Doing more with less requires more resourcefulness than resources. However, the benefits of getting a talent management strategy right and putting it into action are considerable. McCormick says the key benefit of getting it right is an outcome where the focus of all HR energy and investment is clearly and inextricably linked to the objectives of the organisation.
“The quantum depends on the organisation and the complexity of the requirements; our experience has shown the effort to reward ratio is significant,” he says. Most HR services/departments are considered cost centres, and when anyone speaks about ROI and HR activity McCormick says most senior leaders get a “faraway” look in their eyes. Instead of ROI, he prefers the term “value assessment” and says it is possible to develop a repeatable, defensible, evidence-based methodology and framework to assess ROI on human capital interventions that is accepted by the senior leaders of an organisation. Walton echoes McCormick’s words and also talks of the benefit of value creation.
“The FTE view of “more with less” often focuses on value for money. The next level of maturity is value add, but the real way to actually get ‘more with less’ is value creation,” she says. “The business case has to be about productivity. Of course, productivity isn’t always easy to measure and that’s probably why we fall to FTE, as it is easy to measure the change in it. So if productivity is too hard, then at minimum at least measure the cost of employees rather than the FTE.”
Rothwell says he is often asked for ROI for talent programs, but he too asserts that ROI is actually the wrong measure. Organisations should grade a talent program based on business impact, not on ROI alone. “ROI is about financial results only,” he says. “But talent management programs are more closely aligned to the strategic balanced scorecard goals of an organisation – which include measures of financial, customer/market, business process and learning/growth goals. A talent management program should be measured using those categories.”
CEOs of companies with successful programs indicate that an important metric is the time to fill positions with qualified people, while Rothwell says other metrics might include how many well-qualified candidates exist when the need arises and whether they are ultimately successful once selected. Adams also says that establishing a sustainable approach to a leaner, more talented workforce will minimise the short-term risks of burnout, change fatigue and top talent exiting the company if the market picks up.
“The business case needs to identify the potential gains through workforce and productivity improvement solutions – and potential risks and how these can be mitigated,” he says. “Solutions will probably require a suite of actions, and not just one approach to deriving productivity gains and producing a leaner workforce.”
Managing talent at Infosys
Infosys is a global leader in consulting, technology and outsourcing solutions. With more than US$7.4 billion in annual revenues, Infosys employs 155,000 employees across 67 offices in the United States, India, China, Australia, Japan, Middle East, and Europe. As a business and technology consulting services company, Venkat Ramaseshan, HR business manager for Infosys Australia & New Zealand, says the company’s people are its product, so talent management is critical to the business’ success.
“It all starts with understanding our business strategy,” says Ramaseshan, who explains that the strategy is mapped against three internal programs: workforce planning, employee development, as well as engagement and performance management. Workforce planning involves long-term initiatives such as campus recruitment programs, which are mapped against strategic business plans 18–24 months ahead of when new recruits (called “freshers”) are expected to be placed.
Freshers then undergo an additional 23 weeks of training at Infosys’ corporate university before they’re ready to work on client projects. For shorter-term initiatives, Ramaseshan says the business aims to plan for more senior lateral hires about six months ahead of projected business requirements.
The second internal program, employee development, involves a range of initiatives. In addition to basic training and reskilling, Ramaseshan says it is critical for the business to look ahead to see what new technologies are emerging, and ensure employees understand them and potential applications for clients.
The third program revolves around engagement and performance management. “Obviously our people need to be motivated, measured, rewarded and coached to achieve the outcomes that we need to deliver on the business strategy,” he explains.
Underscoring these three internal programs is Infosys’ overall approach to talent management. “We don’t see talent management as the job of HR,” he says. “It is very much a shared partnership between the business and the executives, with HR as the facilitator. All people leaders in our business have a significant component of their KPIs based on talent management.”
Driving results through talent management
Infosys has met with a number of benefits as a result of its approach to talent management. In particular, Ramaseshan observes that it has been able to create new service offerings quickly because people capability is mapped so closely to business needs. “We also see great results in talent acquisition. For example, here in Australia, our success rate in accepted offers is well above 90 per cent,” he says.
However, this is not without its challenges, and Ramaseshan says one ongoing issue that potentially impacts other areas of the business is that a large percentage of employees work
on client sites, rather than in Infosys offices. “That’s great in that they’re very connected to the client, but can leave them feeling less connected to us,” he says.
Employee engagement surveys found that many employees weren’t even sure who the senior leaders in the business were – let alone feel as if they could approach them about a problem or idea. As a result, Infosys launched regular “lunch with leaders” sessions in which a small group of people come into the office for a nice catered lunch and a couple of Infosys’ leadership team join them to talk about the business and whatever else is the topic of the day.
“Simple, but very well received,” says Ramaseshan, who adds that the company is also looking at alternative ways to keep in closer touch, through the likes of social media or “learning anchors” who maintain close ties with staff working on client sites.