Talent management sea change needed for global growth, says survey
- Global companies with decentralized operations are better financial performers
- Lack of investment in talent means companies struggling to develop future global leaders
- Only half of companies have a strong pipeline of leadership talent
London, 13 November 2012 – High performing organizations1 are much more likely to decentralize their operations to compete in a global business environment, says new EY report. It reveals, in a survey of 600 senior executives2 throughout the world, that these organizations are granting greater decision-making freedom to direct reports (49% compared to 35% of low performing organizations surveyed) and redefining roles in a more open-ended and flexible way (46% compared to 34%).
Paradigm shift: building a new talent management model to boost growth finds there is also a general lack of investment in talent management in most companies. While high performing companies are reaping the financial rewards by investing more in building talented teams and decentralizing operations across the globe, less than half (45%) say they are effective at investing in talent management to meet financial targets. This falls to 36% in low performing companies.
Even though 9% of respondents to the survey work for a company based entirely in the country of their global headquarters, only half (51%) are creating opportunities for employees to work in different countries. Companies across the board are struggling to prepare their managers for future leadership positions by giving them exposure to different businesses and cultural environments.
Peter Matthews, Chair, Global Learning, EY, says: “Few companies have done enough to adapt their approach to meet the complexities of the current global economic and market environment. Companies looking for global growth will need to invest in developing an effective talent management strategy that successfully spans multiple geographies. They will need to change and flatten traditional organizational structures; encourage decentralized decision making; allow for a vast diversity of cultures, ages, backgrounds and geographical locations; and adopt new and more inclusive leadership styles.
“The old hub-and-spoke model of a strong headquarters and a weak subsidiary that must look to the center for all key decisions is no longer suitable. The talent model then was built for a time when demand was predictable, workloads stable, markets and management competencies well-understood, and the upheavals caused by shifting demographics and technological advances still far in the future.”
Only half of the high performing companies surveyed (54%) say their company has a strong pipeline of future leadership talent compared with 43% of the low-performing companies. Respondents are even less optimistic that they will be able to find leaders with sufficiently diverse experience and backgrounds, with just 45% of the high performers and 36% of the low performers agreeing that their organization has addressed these aspects of leadership development. Just 43% of high performers and 38% of low performers agree that their organization has a clear set of qualification metrics for leadership candidates.
On top of this, few companies are focusing on skills gaps. Among the high performers, just 26% think the extent of skills gaps is an important determinant of effective talent management, and among the low performers, this drops to 18%. The high performers are far more likely to consider “softer” attributes for C-level leaders, placing greater emphasis on leading effectively in an international business environment (47% compared to 37%) along with the ability to articulate and embody the values and culture of the organization (44% compared to 37%).
Peter Matthews continues: “The scarcity of talent is fast turning out to be the single biggest obstacle to growth. Globally, companies are having trouble filling critical positions – roles in which they need people with the advanced skills essential to move the business forward. Businesses are on the brink of a leadership crisis and nothing less than a “paradigm shift” – a fundamental change in thinking – is required to tackle the talent shortfall.”
To help companies strengthen their talent strategies the report recommends a set of solutions to talent management problems exposed by the survey. These are:
- Align and integrate talent management across the business
- Rethink approaches to international mobility and re-integration
- Create the right blend between global and local talent management
- Use analytics to identify talent gaps and gain a better understanding of workforce behavior
- Take a long-term approach to developing the next generation of leaders
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1 The high and low performers referred to in the report represent the top and bottom quartiles – by sector – of the respondents based on a combination of revenue growth and earnings before interest, taxes, depreciation and amortization (EBITDA), weighted equally.
2 Fifty-three percent of the respondents were C-level executives; the rest were senior managers and directors.