Sophisticated talent management programs drive business results
Strong connection between investment in talent and market growth
London, 26 May 2010 – Global organizations are meeting the demands of today’s economy by taking a more sophisticated approach to their talent management programs, says a new report released today by Ernst & Young. According to the Ernst & Young Global Talent Management Report, leading companies have developed a strategically aligned and integrated way of managing talent on a global level which leads them to financially outperform their peer group.
The Ernst & Young Global Talent Management Report is based on a survey of more than 340 global CEOs, CFOs, COOs and Vice Presidents of Human Resources from Fortune 1000 companies around the world. The survey was designed to examine the numerous components that make up successful global talent management programs, and showcases how these practices differ across geographic regions, companies and industries.
“An organization's commitment to executing its strategy effectively is directly related to its ability to attract, retain and develop talent,” says Bill Leisy, co-author of the report. “Global organizations must understand the needs and motivations of their people in order to provide opportunities that not only appeal to different generations and cultures, but help the company retain the necessary skills and competencies it will need to emerge stronger down the road.”
According to the survey, the top three talent management initiatives respondents plan to implement include are:
- Building their internal talent pipeline to fill critical future needs (64%)
- Understanding and coordinating global talent resources to fill key positions (33%)
- Offering flexible work strategies such as job sharing, telecommuting, flex hours and phased-in retirement (31%)
As the economy starts to improve, organizations are taking new directions when it comes to managing their talent. Even though developed countries have a slightly older workforce than emerging countries, the one common element shared by all was the concern over future gaps in talent among both technical (28%) and middle management (26%) positions. These findings emphasize how vital it is for companies to align talent development programs with their overall business strategy.
Innovation in managing talent
According to the report, more than half (63%) of respondents say their current talent management programs are aligned to the business strategy and continue to be proactively modified to reflect changes in the direction of the company. The group with better alignment had significantly higher financial performance (a 20% higher annual return on equity (ROE) over a five-year period) than those that did not. This clearly demonstrates that today’s leading employers are not only forecasting budgetary needs, but also talent and skill requirements that will be necessary to meet future business strategies.
“Employees are the key to competitive differentiation and success when it comes to being a leader in today’s marketplace,” adds Leisy. “Leading companies use their talent management programs as a critical part of their overall growth strategy. Now more than ever, these programs are designed to help execute companies’ business strategies by recruiting, retaining, engaging and developing the right individuals, with the right competencies, skills and experiences. These are the activities that build market leadership.”
While alignment to strategy is important, financial returns are improved when every element of talent management programs, IT systems and processes are fully integrated across the organization and on a global scale. According to an additional analysis of the data, leading organizations with better integrated talent management programs experience return on equity (ROE) that averages 38% higher per year over a five-year period.
Unfortunately, many organizations are still not capitalizing on this opportunity when it comes to integration. Only 32% of respondents say all the components of their talent management programs are integrated on a global, enterprise-wide scale versus 20% who only integrate their programs regionally, 18% by business unit and 24% who do not integrate their programs at all.
As the marketplace improves, this alignment and integration of talent management programs will be critical to the financial and non-financial health of an organization. In today’s era of global growth, those who choose not to review their current processes are likely to fall behind.
Raising the bar on engaging and retaining global employees
As companies incorporate international assignments into their overall business strategy, the issue of career management for this employee group cannot be ignored. Results of the survey show that even many leading companies still need to address this issue. Nearly two-thirds of responding companies (60%) have internationally mobile employees, yet among those organizations over one-third has no talent management program in place for this unique employee population.
“It is vital that not only are a company’s internationally mobile employees incorporated into the organization’s overall talent management program, but that there is a system in place to capture their knowledge,” says Esther Hahm, co-author and partner in Ernst & Young’s Human Capital practice. “With many respondents indicating that repatriation or post-repatriation of these employees is not a priority, companies end up losing much of the value they bring to the organization. This could result in disenfranchised employees who will likely leave and take their international experiences with them.”
A 360 degree view to talent management
In today’s economy, it is critical for global companies to understand and meet the needs of these mobile employees, while maintaining a strong grasp of relevant labor laws, legislation, regulations and demographics unique to each jurisdiction where they conduct business.
Managing global talent effectively requires real execution from workforce analytics to succession planning.
About the survey
Ernst & Young conducted an online survey among HR, finance and risk management professionals and C-suite executives from global Fortune 1000 companies. The survey findings are based on more than 340 responses representing a cross-section of largest employers around the globe in a variety of industry sectors. Nearly one-third of respondents (32%) worked for companies headquartered in the United States; roughly one-quarter (24%) worked for organizations based in Europe, the Middle Easte and Africa; 10% were headquartered in Australia; another 8% in individual countries like Canada, Brazil and China; and 7% in Japan.
About Ernst & Young
Ernst & Young is a global leader in assurance, tax, transaction and advisory services. Worldwide, our 144,000 people are united by our shared values and an unwavering commitment to quality. We make a difference by helping our people, our clients and our wider communities achieve their potential.
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