Sophisticated talent management programs drive business results
New York, 24 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 report, Managing today's global workforce: elevating talent management to improve business, leading companies have developed a strategically aligned and integrated way of managing talent on a global level, using these programs to successfully execute their overall business strategy and ultimately drive revenue.
“An organization's commitment to executing its strategy effectively is directly related to its ability to attract, retain and develop talent,” says Bill Leisy, a Principal with Ernst & Young LLP’s Performance & Reward practice and an 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.”
The report, entitled Managing today's global workforce: elevating talent management to improve business 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.
As the economy starts to improve, organizations are taking new directions when it comes to managing their talent. Strategic HR initiatives are focused on increasing employee engagement levels by building in flexibility to address the needs of today’s diverse pool of talent. According to the survey, the top three talent management initiatives respondents plan to implement include:
- 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%)
This issue becomes even more challenging when factoring in talent shortages around the world. Further review of the survey data shows that 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.
The dollars and sense of 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. A separate analysis of the data shows that 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.
“Your people 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 nonfinancial 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, a Partner with Ernst & Young’s Human Capital practice and an author of the report. “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. Forward-thinking companies have talent management programs that are aligned to the business strategies, integrated globally and customized to address the needs, issues and demographics of their workforce. If executed well, such programs will position these organizations for significant future growth.
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