Remuneration and Talent Management: Strategic compensation approaches for attracting, retaining and engaging talent [1 ed.] 9781869224745, 9781869224455

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Remuneration and Talent Management

Endorsements Mark once again accomplishes what few authors do – writing in an accessible way. A must-read for HR practitioners, consultants, students and academics in understanding the mechanics of remuneration and talent management in the South African context.

—Professor Anita Bosch, Lead researcher: Women in the Workplace Research Programme Department of Industrial Psychology and People Management, Faculty of Management, University of Johannesburg

In an ever-changing and highly competitive world driven by incentives, the remuneration and management of key skills and talent is an absolute imperative. This imperative is exacerbated by the dramatic shortage of quality human capital and key skills, as well as the social desirables and economic objectives that organisations have set out for themselves. Dr Bussin’s Remuneration and Talent Management provides a thorough and practical perspective on the subject. It outlines how best to manage the acute tension between attracting and retaining talent, and how best to pay for it, given the financial pressures faced by an organisation. This book will prove to be an essential and indispensable tool for any manager of human capital! —Constantinos Economou, CEO, Colourfield Liability Solutions (Pty) Ltd

Remuneration and talent management is a crucial factor in the wellbeing and success of any business. Retention and satisfaction of key personnel and in fact the whole of a business team are the foundation of a sustainable enterprise. —Dougy Kevan, General Manager Southern Africa, Norgine Pty Ltd

The war for talented employees is raging on fiercely. What is required of competitive employers is to understand the needs of the talent pool and to package a value proposition that not only attracts talent but also retains that talent. Understanding the interdependency between remuneration and talent management is crucial in this ongoing war. This book provides valuable insights into a significant battle facing all stakeholders.

—Krishnee Kissoonduth, Director – Remuneration and Administration Department, Human Resources, UNISA

This book navigates the reader practically through the labyrinth of reward and talent. It unpacks the crucial elements of reward and talent and exposes alignment considerations that will enable the practitioner to establish an employee value proposition with strategic significance.

– Michelle Pirie, Group CHRO, Econet Wireless

This book truly explores and explains the very critical and often-asked question about how to manage remuneration and talent within an organisation. It answers that question and more! —Willem Verwey, Head: Remuneration and Benefits, Anglo American Platinum

Remuneration and Talent Management Strategic Compensation Approaches for Attracting, Retaining and Engaging Talent

A practical and informative textbook for managing the tension between talent and remuneration in organisations

by

Dr Mark Bussin

2014

Copyright © Knowres Publishing and Dr Mark Bussin

All reasonable steps have been taken to ensure that the contents of this work do not, directly or indirectly, infringe any existing copyright of any third person and, further, that all quotations

or extracts taken from any other publication or work have been appropriately acknowledged and referenced. The publisher, editors and printers take no responsibility for any copyright infringement committed by an author of this work.

Copyright subsists in this work. No part of this work may be reproduced in any form or by any means without the written consent of the publisher or the author.

While the publisher, editors and printers have taken all reasonable steps to ensure the accuracy of the contents of this work, they take no responsibility for any loss or damage suffered by any person as a result of that person relying on the information contained in this work. First published in 2014

ISBN: 978-1-86922-445-5

Published by Knowres Publishing (Pty) Ltd P O Box 3954 Randburg 2125

Republic of South Africa Tel: (011) 706-6009

Fax: (011) 706 1127

E-mail: [email protected] Website: www.kr.co.za

Printed and bound: Shumani Printers (Pty) Ltd, Parow Industria, Cape Town Typesetting, layout and design: Cia Joubert, [email protected]

Cover design: Nadia du Plessis, Design Figment, [email protected] Editing and proofreading: Adrienne Pretorius, [email protected] Project management: Cia Joubert, [email protected] Index created with: TExtract, www.Texyz.com

Acknowledgements This book would not have been published without the extensive contributions from many very dedicated people. It is a huge team effort, and thank you so much. A number of people were instrumental mentors in setting the base right. Thank you to all my colleagues for teaching and sharing your knowledge so willingly. Thank you to the authors of and contributors to the relevant chapters who peer reviewed the entire book. A special thank you to the deep technical specialists in this area for their peer review and guidance – Frans Moloa and Dr Louis Carstens. A special thank you to Dr Ronél Nienaber for your insight and extensive comments – I really appreciate it. Knowledge Resources, thank you for co-ordinating the production and marketing of this book. A special thank you to Chris Blair for your insight. A giant thank you to my wife Marina and children Daniel, Kate, Genna, and James, for your inspiration and patience. To you, the reader, I look forward to receiving your inputs; to building on the experiences that you have had with talent management and remuneration; and to hearing how we can improve our knowledge and practice in this relatively poorly practised field of management. Professor Mark Bussin Johannesburg February 2014

Please feel free to contact me with suggestions that can build on this version. [email protected] www.drbussin.com Mobile: +27-82-901-0055

Foreword In today’s aggressive business environment, organisations that seek competitive advantage will need to attract, leverage and retain the best talent. With the advent of globalisation and the diffusion of technology, differentiation is becoming more and more difficult. What makes the difference between organisations that thrive and those that dive is undoubtedly the people. The global pool of highly skilled employees is in great demand, and those with both critical skills and experience come at a hefty price. The million dollar question is whether money alone is enough to secure the best talent in the market. Research indicates that although money is a highly significant variable, it is, in fact, not enough. Talent management involves a lot more than just remuneration. The decision to work for an organisation and then remain with the same organisation over time is dependent on the entire employee value proposition. This involves remuneration, learning and development, work environment, company ethics and values, inspirational leadership, and many other factors. Much has been written on integrated talent management and the necessity to focus on more than just remuneration. However, there is a gap in the literature on specific remuneration strategies for talent. There are many crucial questions that must be answered in this area. For example, should employees with high potential be remunerated differently from employees with high performance? Are variable remuneration strategies more successful in retaining talent? And so on. This informative and practical handbook looks at the areas of talent management and remuneration, and their points of intersection. It is essential reading for human resource practitioners as well as line managers in all business sectors. As the war for talent becomes even fiercer, organisations will need to harness all weapons in their arsenal to be successful. Remuneration is one of most critical weapons, but it relies on both art and science to have maximum effect and impact. Handbooks such as this one will enable organisations to use remuneration successfully as part of an integrated management strategy. Andrew Mthembu Executive Chairman Imphandze Investment Holdings

Contents Sourcing of figures and diagrams___________________________________________________________ v About the author_____________________________________________________________________________ vi List of contributors__________________________________________________________________________ vii Prologue and preamble___________________________________________________________________ viii 1

The Context to Remuneration: Strategy, Organisation Design, Leadership and Talent Management______________________________________________________________________ 1 1.1 1.2 1.3 1.4 1.5 1.6 1.7 1.8

BACKGROUND______________________________________________________________________ 1 STRATEGY AND INNOVATION____________________________________________________ 4 ORGANISATION AND WORK DESIGN____________________________________________ 5 STRUCTURE AND WORKING RELATIONSHIPS__________________________________ 7 LEADERSHIP CAPACITY___________________________________________________________ 9 TALENT MANAGEMENT_________________________________________________________ 17 CONCLUSION_____________________________________________________________________ 23 REFERENCES_____________________________________________________________________ 23

2.1 2.2 2.3 2.4 2.5 2.6 2.7 2.8 2.9 2.10

INTRODUCTION__________________________________________________________________ THE CASE FOR PROACTIVE RETENTION STRATEGIES_______________________ CREATING THE NEED: THE REALITY, THE VISION, THE PLAN______________ DIAGNOSTICS: UNDERSTANDING THE REAL ISSUES_________________________ REFINING THE TALENT SEGMENTS___________________________________________ PRIORITISING INITIATIVES_____________________________________________________ KEY RETENTION INTERVENTIONS – GUIDING PRINCIPLES_________________ LESSONS LEARNT________________________________________________________________ CONCLUSION_____________________________________________________________________ REFERENCES_____________________________________________________________________

25 26 27 31 34 36 38 42 44 44

3.1 3.2 3.3 3.4 3.5

INTRODUCTION__________________________________________________________________ DEFINING TALENT_______________________________________________________________ DEFINING TALENT MANAGEMENT____________________________________________ THE EVOLUTION OF TALENT MANAGEMENT_________________________________ THE CONTEXT OF GLOBAL TALENT MANAGEMENT – THE IBM CASE STUDY______________________________________________________________________ THE BUSINESS CASE FOR TALENT MANAGEMENT___________________________ CONCLUSION_____________________________________________________________________ REFERENCES_____________________________________________________________________

45 46 47 48

2 Talent Retention – Customising Retention Strategies: A Case Study___________ 25

3

Introduction to Talent Management________________________________________________ 45

3.6 3.7 3.8

49 54 55 55

i

4 How to Identify Talent_________________________________________________________________ 57 4.1 4.2 4.3 4.4 4.5 4.6 4.7 4.8 4.9 4.10

INTRODUCTION__________________________________________________________________ THE TALENT IDENTIFICATION PROCESS______________________________________ DETERMINING TALENT CRITERIA_____________________________________________ TYPICAL CHARACTERISTICS OF STAR TALENT_______________________________ MEASURING POTENTIAL________________________________________________________ COMMUNICATING TALENT IDENTIFICATION CRITERIA TO EMPLOYEES__ TALENT IDENTIFICATION TOOLS______________________________________________ INTEGRATION WITH OTHER TALENT MANAGEMENT ACTIVITIES_________ CONCLUSION_____________________________________________________________________ REFERENCES_____________________________________________________________________

57 57 58 61 62 63 65 68 69 70

5.1 5.2 5.3 5.4

INTRODUCTION__________________________________________________________________ INTEGRATED TALENT MANAGEMENT________________________________________ CONCLUSION_____________________________________________________________________ REFERENCES_____________________________________________________________________

71 71 84 84

6.1 6.2 6.3 6.4 6.5 6.6 6.7 6.8

INTRODUCTION__________________________________________________________________ 85 A STRATEGIC APPROACH TO TALENT MANAGEMENT_______________________ 87 BUILDING A TALENT CULTURE_________________________________________________ 89 A FRAMEWORK FOR TALENT MANAGEMENT________________________________ 90 A PROCESS FOR IMPLEMENTING TALENT MANAGEMENT_________________ 107 IMPLEMENTING TALENT MANAGEMENT – LESSONS LEARNT____________ 110 CONCLUSION____________________________________________________________________ 112 REFERENCES____________________________________________________________________ 113

7.1 7.2 7.3 7.4 7.5 7.6 7.7

INTRODUCTION_________________________________________________________________ 115 DEFINING EMPLOYEE ENGAGEMENT________________________________________ 115 THE BUSINESS CASE FOR EMPLOYEE ENGAGEMENT_______________________ 116 EMPLOYEE ENGAGEMENT STRATEGIES FOR TALENT______________________ 117 THE ROLE OF RECOGNITION IN PROMOTING AND RETAINING TALENT__ 119 CONCLUSION____________________________________________________________________ 122 REFERENCES____________________________________________________________________ 123

8.1 8.2 8.3 8.4 8.5

INTRODUCTION_________________________________________________________________ 125 DEFINING THE EVP_____________________________________________________________ 125 EXPECTATIONS OF TALENT____________________________________________________ 129 THE EMPLOYEE VALUE PROPOSITION AND THE WAR FOR TALENT______ 130 CONCLUSION____________________________________________________________________ 131

5 Components of an Integrated Talent Management Strategy____________________ 71

6 Integrated Talent Management – Practical Ideas, Tools and Tips______________ 85

7 Engaging Talent_______________________________________________________________________115

8 The Employee Value Proposition (EVP) and Talent______________________________125

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Remuneration and Talent Management

9 Rewarding Talent_____________________________________________________________________133 9.1 9.2 9.3 9.4 9.5 9.6

INTRODUCTION_________________________________________________________________ 133 CUSTOMISING THE REWARD OFFERING_____________________________________ 133 WHO SHOULD QUALIFY FOR UNIQUE REMUNERATION MODELS?________ 134 “HOT SKILLS” AND APPROPRIATE REMUNERATION APPROACHES_______ 135 MOST COMMON REMUNERATION RETENTION OPTIONS__________________ 142 CONCLUSION____________________________________________________________________ 147

10.1 10.2 10.3 10.4 10.5 10.6

INTRODUCTION_________________________________________________________________ 149 VARIABLE PAY___________________________________________________________________ 149 WHY IMPLEMENT VARIABLE PAY?____________________________________________ 151 PAYING VARIABLE PAY FOR PERFORMANCE_________________________________ 152 CONCLUSION____________________________________________________________________ 156 REFERENCES____________________________________________________________________ 156

10 Talent Management and Variable Pay_____________________________________________149

11 Long-term Incentives_________________________________________________________________157

11.1 INTRODUCTION_________________________________________________________________ 157 11.2 AWARD QUANTA FOR LONG-TERM INCENTIVES (LTIs)_____________________ 157 11.3 LINKING EXECUTIVE TALENT MANAGEMENT THROUGH INDIVIDUAL PERFORMANCE AND POTENTIAL RATINGS WITH LTI AWARDS___________ 160 11.4 LINKING COMPANY-SPECIFIC PERFORMANCE CONDITIONS WITH EXECUTIVE LTI AWARDS_______________________________________________________ 162 11.5 NURTURING TALENT THROUGH HISTORICALLY DISADVANTAGED EMPOWERMENT USING LONG-TERM INCENTIVE SCHEMES_______________ 164 11.6 CONCLUSION____________________________________________________________________ 166 11.7 REFERENCES____________________________________________________________________ 167

12 Attracting, Retaining and Leveraging Generation Y Talent_____________________169 12.1 12.2 12.3 12.4 12.5 12.6

INTRODUCTION_________________________________________________________________ 169 GENERATION THEORY AND YOUTH (GENERATION Y)______________________ 169 THE IMPACT OF GENERATIONAL THEORY ON REWARD___________________ 173 CREATING MEANING AND PURPOSE FOR YOUNG TALENT_________________ 175 CONCLUSION____________________________________________________________________ 177 REFERENCES____________________________________________________________________ 178

13.1 13.2 13.3 13.4 13.5

INTRODUCTION_________________________________________________________________ 179 THEORETICAL PERSPECTIVE_________________________________________________ 180 CURRENT TRENDS IN REMUNERATION FOR EXECUTIVES_________________ 183 PRACTICAL APPLICATION OF CURRENT TRENDS___________________________ 186 FUTURE TRENDS IN REMUNERATION FOR EXECUTIVES___________________ 189

13 Rewarding the Talent at the Top____________________________________________________179

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13.6 CONCLUSION____________________________________________________________________ 191 13.7 REFERENCES____________________________________________________________________ 191

14 I am Talent – Empowering the Individual to Manage His/Her Own Career__193

14.1 INTRODUCTION_________________________________________________________________ 193 14.2 WHAT IS SUCCESS?_____________________________________________________________ 193 14.3 THE SKILLS SUPPLY – THE WORLD OF EDUCATION________________________ 195 14.4 THE TALENT WAVE_____________________________________________________________ 196 14.5 MANAGING AND COPING WITH CHANGE____________________________________ 197 14.6 DRIVERS OF SUCCESS – THE “X-FACTOR OF TALENT”______________________ 198 14.7 THE WORLD OF ME_____________________________________________________________ 200 14.8 HOW DO WE DIFFERENTIATE OURSELVES?_________________________________ 203 14.9 MANAGING MY PERFORMANCE AND LEARNING____________________________ 204 14.10 CORE ABILITIES FOR SUCCESS________________________________________________ 207 14.11 CONCLUSION____________________________________________________________________ 208 14.12 REFERENCES____________________________________________________________________ 209

15 Securing Talent – The Role of the Contract of Employment and Restraints of Trade____________________________________________________________________________________211 15.1 15.2 15.3 15.4 15.5 15.6

INTRODUCTION_________________________________________________________________ 211 CONTRACTS OF EMPLOYMENT_______________________________________________ 211 RESTRAINTS OF TRADE________________________________________________________ 212 BREACH OF CONTRACT________________________________________________________ 218 CLAIMING DAMAGES___________________________________________________________ 220 CONCLUSION____________________________________________________________________ 220

16 Remuneration as a Talent Investment Strategy – Increasing the Value of your Talent Portfolio________________________________________________________________________223

INTRODUCTION_________________________________________________________________ 223 REMUNERATION AS A TALENT INVESTMENT STRATEGY__________________ 223 CREATING AN INVESTMENT MINDSET_______________________________________ 227 AN EVOLUTION FROM TOTAL REWARD TO TOTAL COMMITTED INVESTMENT (TCI)_____________________________________________________________ 229 16.5 CONCLUSION____________________________________________________________________ 231 16.6 REFERENCES____________________________________________________________________ 232 16.1 16.2 16.3 16.4

17 Critical Success Factors and Epilogue______________________________________________233 Index__________________________________________________________________________________________235

iv

Remuneration and Talent Management

Sourcing of Figures and Diagrams Many of the figures and diagrams used in this publication have been accumulated over a long consulting and development history by several executive and developmental practitioners. The following are among the key sources used in this handbook: 21st Century Pay Solutions Group: files and archives of 21st Century Pay Solutions Group (Pty) Ltd. Other sources are individually acknowledged.

Sourcing of Figures and Diagrams

v

About the Author Mark is the Chairperson of 21st Century Pay Solutions Group, a specialist remuneration and human resource consultancy. He has remuneration and performance management experience across all industry sectors, and is viewed as a thought leader in the remuneration arena. He serves on and advises numerous boards and Remuneration Committees on Executive Remuneration. Mark holds a Doctorate in Commerce. He has published or presented over 300 articles and papers, and has received awards for his outstanding articles in this field. He has appeared on television and radio, and in the press, giving expert views on remuneration. Mark is an associate Professor at the University of Johannesburg, Professor Extraordinaire at North West University, and guest lecturer at several universities. He supervises Masters and Doctoral theses in the Reward and Performance area. He is an EXCO member of SARA (South African Reward Association) and a Commissioner for the Remuneration of Public Office Bearers in the Presidency. In his spare time, Mark likes flying Cessnas and spending time with his family.

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Remuneration and Talent Management

List of Contributors The following contributors are true experts, who have developed world-class methodologies. They are thought leaders who are highly regarded by peers and clients alike. Dr Anton Verwey, Engage Leadership [email protected]

Billy de Beer CA (SA), Executive Consultant, 21st Century Pay Solutions Group [email protected]

Chris Blair, Chief Executive Officer, 21st Century Pay Solutions Group [email protected]

Claire Höck, Associate Director, Ernst and Young Advisory Services (Pty) Ltd [email protected]

Craig France CA (SA), Executive Consultant, 21st Century Pay Solutions Group [email protected] Craig Raath, Executive Director, 21st Century Pay Solutions Group [email protected]

Debbie Craig, Managing Director, Catalyst Organisation Development Consultancy [email protected] John Gatherer, Catalyst Organisation Development Consultancy [email protected] Lomé Koekemoer, MAC Group [email protected]

Martin Sutherland, Global Director, People Tree Group [email protected]

Michelle Moonsammy, Associate Director, Ernst and Young Advisory Services (Pty) Ltd [email protected]

Morag Phillips, Executive Director, 21st Century Pay Solutions Group [email protected] Paul Whysall, MAC Group [email protected]

Tim Anderson, Executive Consultant, 21st Century Pay Solutions Group [email protected]

Table of Contents

vii

Prologue and Preamble I have been talking at conferences and lecturing to thousands of people for several years. Whenever the opportunity presents itself, I can’t resist asking the audience just one question: “Who here can say that they find it easy to attract top talent, and once they are in the organisation, pay them fairly, and are able to retain them relatively easily?”

This book is inspired by the 99% of people who did not put their hands up. I started wondering why there were so many unanswered questions on the relationship between Talent Management and Reward. There are thousands of books and gurus on the subject. Yet there are so few examples of where it is practised well. Why, I asked myself? What is missing? Everyone knows what Talent Management and Reward is, has read the books, has heard the gurus, yet there are so few outstanding success stories. This book is different for the following reasons: 1

It is based on years of personal experience. In board rooms I am often asked the questions: • • •

“Who should we consider as top talent?” “Should they get more money?”

“What about those who have a lot of potential – what should we do with them?”

2

Contributors to the book have actually done and experienced what they are writing about.

4

It is practical and, for once, tells you how to do it, with no missing steps or information.

3 5 6

It is underpinned by empirical research.

It is written in plain English with no bamboozling jargon.

If you feel that clarification is required, my contact details are supplied. I am not some sort of black hole that no one knows how to approach.

The first part of the book (Chapters 1 to 5) sets the scene by explaining the art and science of talent management and focuses on the attraction and identification of talent. Chapters 1 to 3 provide an overview of talent management in the global market place and define talent management. They also introduce the business case. Chapter 3 expands on the business case for talent management, which forms an invaluable component of any pitch to senior leadership where the value of talent management must be justified. viii

Remuneration and Talent Management

Just as there are varying understandings of what constitutes talent, there are a multitude of functions and disciplines that could be included under the talent management umbrella. Chapter 4 goes into detail on how talent can be identified. This is an area which has garnered a lot of attention. There are a multitude of tools and methods which you can use to identify talent. This chapter simplifies and demystifies these tools and processes and provides you with the information you need to determine talent criteria, measure potential and integrate the identification of talent with other talent management activities. Chapter 5 presents an Integrated Talent Management Strategy which you can use to assist you in the selection of talent management functions and processes, and also to simplify, cluster, and integrate these components meaningfully. The second part of the book (Chapters 6 and 7) addresses the challenge of how to retain and motivate talent. Chapter 6 looks at practical ideas, tools and tips for how to bring talent management to life. There are many factors which impact on the attraction and retention of talent. The sum of these is equal to far more than the parts. The helicopter view and how the elements all fit together are encompassed in the Employee Value Proposition (EVP). The total employee experience will outweigh the value of, for example, high levels of remuneration alone. Chapter 7 delves into the fascinating area of employee engagement and relates engagement specifically to talent. The role of recognition in promoting and retaining talent is an area of significant importance to engagement, and this is explained further in the chapter. The third part of the book (Chapters 8 to 13) turns to rewarding talent. The question we debate in Chapter 8 examines the EVP and its link to talent. Chapter 9 discusses whether different pay models are appropriate for different kinds of employees, and explores the question of whether we should wait and see what mix of people we have before we craft the pay model, or whether we should craft the pay model to attract the people we want and need. Long-term incentives are introduced in Chapter 10, which takes a deep dive into talent management and variable pay. This chapter looks at the value of implementing variable pay and incentives schemes, as well as rewarding performance with variable pay. Chapter 11 discusses linking executive talent management through individual performance and potential ratings with LTI awards. Linking company-specific performance conditions with executive LTI awards is also deliberated. Attracting and retaining young talent is a strategic issue for most organisations. The sheer number of youths in the market place today is reason enough to cause organisations to question whether tried and tested models of both talent management and remuneration are appropriate for young workers. Chapter 12 looks at generational theory and how to attract, retain and reward Generation Y. There is no more contentious topic these days than that of executive remuneration. The spotlight on executive pay and incentives has increased post the global economic Table of Contents

ix

crisis. Together with this increased focus, has come increased legislation and regulation. In Chapter 13, we look at rewarding those at the top and how times and strategies have changed executive pay over the last few years. This chapter also provides a trend analysis and predictions of what is to come in the executive remuneration future. Chapters 14 to 16 deal with the management of talent and the safeguarding of business interests in this regard. Chapter 14 is entitled: “I am Talent – Empowering the Individual to Manage His/Her Own Career”. Someone once said “What’s money? A man is a success if he gets up in the morning and goes to bed at night and in between does what he wants to do.” That someone was Bob Dylan, singer, song-writer and poet, who has been a major and profoundly influential figure in popular music, literature and culture for five decades. The simple insight embodied in this quotation is that we, personally, hold the key to success in our hands – but it sometimes takes an endless journey of highs and lows through life to find our niche and the work and interests that we love doing – and not only enjoy doing, but excel at. This chapter focuses on the twin strategies of self-empowerment and self-management as foundations for the way in which individuals energise and motivate themselves. To manage and reward talent successfully in others, it is essential that you start by understanding and managing your own talent and in so doing, create a blueprint for your success, as written by Claire Höck. Chapter 15 provides an insightful overview of the contracts and restraints that often go hand in hand with securing, retaining and locking in talent. The final chapter in the book, Chapter 16, discusses the value of creating a proactive engagement and retention framework. A case study is presented where the company, despite its size and stature, had retention challenges and wanted to be proactive in addressing them. The case study methodology demonstrates a detailed process you can use to diagnose and address problems relating to the retention of talent and provides an interesting and thought-provoking model of using remuneration as a talent investment strategy, and explains how this leads to increasing the value of your talent portfolio. Chapter 17 sums up the critical success factors, and serves as an epilogue to the book. I am confident that you will be able to design and implement an integrated Talent and Reward management system that is perceived as fair by all stakeholders and which stimulates better performance. I look forward to hearing from you or reading about your successes!

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The Context to Remuneration: Strategy, Organisation Design, Leadership and Talent Management 1.1 BACKGROUND

Dr Anton Verwey

A focus on individual and collective responsibilities and accountabilities is a key variable in the degree to which an organisation is able to articulate and implement strategies that will lead to sustainable competitive advantage. With clarity on strategy and the appropriate organisation and work design, there is also a much-improved ability to clearly define and develop the leadership behaviours that will ensure the successful execution of strategy. Finally, it is the role of leadership also to ensure that the organisation has the appropriate talent to meet strategic needs now and in the future. These four issues, namely strategy, organisation design, leadership and talent management, are, in our view, the cornerstones of ensuring that you have a fit-for-purpose organisation. Of course, these four dimensions are fully interdependent, as is shown in the diagram. Strategy and Innovation

Talent Management

Fit for Purpose

Organisation Design

Leadership

Figure 1.1  Cornerstones for fit-for-purpose organisations

Chapter 1: The Context to Remuneration: Strategy, Organisation Design, Leadership and Talent Management

1

These four interrelated aspects form the context in which decisions can be made regarding all aspects of remuneration, and in our view should therefore form the point of departure.

1.1.1 Strategy and innovation

In the first section of this chapter, we will specifically focus on strategy and innovation, a topic that is seen by organisations and leaders throughout the world as the key business challenge for the future.

1.1.2 Levels of work theory

As the common thread running through the four sections of this chapter is levels of work theory (the practical outflow of the work of the requisite organisation by Elliot Jaques), a high-level summary will be useful to those who have not been exposed to it before. It should be stated up front that the work associated with requisite organisation design is known by a number of terms, such as stratified systems theory, matrix of working relationships, and levels-of-work theory. While there may indeed be some philosophical and academically sound reasons for the different terms, we will use them interchangeably. Essentially, types of levels of work suggests general model of organisational functioning such that there are increasingly complex critical tasks or requirements at each successive organisational level, and that effective leaders address these tasks. The increasing task complexity is a function of the uncertainties created by the necessity to deal with a more encompassing and turbulent environment as a leader moves up the hierarchy. Higher-level leaders themselves must possess higher levels of cognitive complexity to deal with the increasingly more demanding critical tasks as they move up the organisational hierarchy. All organisations show this stratification into levels of management associated with some form of accountability between individuals or groups working at these levels. Research has frequently revealed the existence of too many, or less often too few, levels of management. Confusion about the work expected at each level in the organisation is common. Such mistakes present as intractable day-to-day problems and complaints such as “too much red- tape”, “‘failure to implement policies”, “understaffing and overwork”, “role confusion”, “line and staff conflict”, “insufficient delegation”, “duplication of decisions”, and so on (Kinston & Rowbottom, 1989). The time spans (for jobs) break naturally, according to Dr Jaques, into different levels, which he calls “strata”. The fit between time-horizon levels and strata determines how comfortable we will feel at various positions in a hierarchy. In a requisite organisation, the job or role of each leader/manager is assumed to be one level of complexity higher than the direct-reporting roles or jobs at the stratum below (Kleiner, 2001). 2

Remuneration and Talent Management

The theory arose from the discovery, through widespread testing over a long period, of a systematic structure of successive levels within organisations, each level creating a new and more extensive context within which work must be done. One dimension of this context, which can readily be measured, is the time-span of the longest task in each level. At the lower levels, the longest task will be completed in a year or even in a day; at the higher “strategic” levels, the longest tasks may not be completed for twenty years or more. These levels of work complexity for the first five levels can also be described according to themes of work complexity (Olivier, 2003:32), as per the table below.

Table 1.1  Organisational work themes as related to level of competency and time span Organisational work

Level of competency

Time span

themes Quality (type I)

Competent “hands-on skills” to

1 day to 3 months

Service (Type III)

Competent in supporting and co-

3 months to 1 year

Competent in constructing,

1 year to 2 years

Practice (Type III)

Strategic development (Type IV)

Strategic intent (Type V) Source: Olivier, 2003:32

complete a task or activity

ordinating workers to achieve set standards

connecting and fine-tuning

systems to optimal utilisation of resources

Competent in integrating new futures, new services and

products including positioning

2 years to 5 years

the organisation within the market context

Competent in a unified work

system by understanding the organisation’s purpose

5 years to 10 years

Mastering what each type entails and the challenges involved in making each transition will enable organisations to respond to changes and threats in the business environment through appropriate strategy and innovation. This high-level summary does no justice to the depth of the theory and research associated with levels of work, and readers of this article are encouraged to visit Chapter 1: The Context to Remuneration: Strategy, Organisation Design, Leadership and Talent Management

3

www.globalro.org, the website of the Global Organisation Design Society, for more information on requisite organisation and levels of work. For our purposes, however, the high-level insight that work inherently has different levels of complexity should suffice.

1.2 STRATEGY AND INNOVATION

Given the preceding background, we can now focus on the main topic of this section, namely strategy and innovation. Strategy and innovation are both required to achieve sustainable competitive advantage. Strategy starts with a conscious decision to pursue a specific competitive business strategy. Business engages in strategic thinking, strategy formulation and innovation to ensure sustainable competitive advantage by making the appropriate decisions based on environmental conditions and opportunities. Innovation, which will always form part of such competitive strategy, has to do with commercialising opportunities, improving, and doing things in different ways (Goldman & Nieuwenhuizen, 2006:4). Henry Mintzberg, author of the classic management text The Rise and Fall of Strategic Planning, has studied what really happens under the guise of strategic planning. His findings are eye catching, where at least 90% of the results projected in the formal strategic planning processes never come to fruition. Instead, they fall by the wayside, vanishing into the limbo of “unrealized strategy”. At this point it is important to ask what the role of leadership is in successfully strategising and innovating in order to unlock current and future value. Based on the levels of work theory, the assumption is made that leaders at different levels all are involved with strategy and innovation within the organisation, but each contributes differently depending on his or her role and focus within the organisation. Because how you innovate will affect what you innovate, it is vital for organisations to understand which leader roles and capabilities are required to enable different types of innovation, such as radical, incremental or efficiency innovation. Different types of innovation will also require different types of management, investment, resources and funding (Davila, Epstein & Shelton, 2006:40). Some examples will illustrate this principle. From a strategic intent and development perspective, strategy and innovation is about positioning the organisation in its competitive landscape through innovation focusing on new products or services. Leaders who function at these levels of work will shape the strategic intent and purpose of the organisation and be competent in integrating new futures, services and the overall positioning of the organisation within the market. They will translate new trends into business opportunities to leverage changes in technology and new business models. They will radically redefine their value proposition and develop new business models to leverage growth in achieving their strategic intent. These innovations could be described as revolutionary and radical. A classic example is the refrigeration industry. During the 19th century, ice was harvested from lakes, stored in caves to limit melting, and transported as perishable goods. In the early part of the 20th century, revolutionary technology – refrigeration – radically changed the industry. 4

Remuneration and Talent Management

Leaders who function at best practice level will be more concerned about driving semi-radical innovation through implementation of the business strategy. The growth in technological developments, for example, has forced businesses to change the way in which they do things. Leaders at this level will be required to implement new business models, systems and practices for effective operational execution. When, for example, steam technology radically transformed transport in general, semi-radical innovation was required to develop new systems, processes and practices in order to enable safe means of using steam technology for sea transportation. Semi-radical and incremental innovation may therefore be a sustainable strategy for long periods of time before a radical revolution redefines the industry. Team leaders or supervisors focusing on service and customer satisfaction will be concerned about incremental and efficiency innovation in implementing the strategy. These forms of innovation are the most prevalent forms of innovation in companies, often receiving more than 80 percent of the company’s total innovation investment (Davila et al, 2006:40). This type of innovation is a way to extract as much value as possible from existing products and services without making significant changes or major investments. For example, for automotive components and systems supplier, Magna International, innovation is built into the “organisational culture” that outlines the company’s core principles – one of which is to foster innovative thinking on the part of employees in order to improve customer satisfaction and service delivery.

Concluding remarks

As can be seen from the preceding section, strategy and innovation mean different things at different levels of work. Strategy is therefore both an innovation and leadership issue, because how you strategise will affect what you need to innovate. It is vital that the right leadership roles and capabilities are in place to support the strategy and innovation mandate.

1.3 ORGANISATION AND WORK DESIGN

In this section of this chapter we will specifically focus on organisation and work design, a topic that in our experience with client systems is increasingly becoming an issue of concern. The key driver of this would appear to be the fact that many organisations are only now beginning to realise the enormous effort required in overcoming the impact of worldwide economic trends, and that issues of sustainability, efficiency, effectiveness, service and quality are inherently linked.

1.3.1 Organisation design

Organisational design can be described as a systematic process to unlock the “logic” required within an organisation to optimise and deliver value-add through the clarification of an organisation’s strategic intent (that is vision, mission, core competencies, competitive advantage and key business result areas) and the careful planning and Chapter 1: The Context to Remuneration: Strategy, Organisation Design, Leadership and Talent Management

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execution of interventions which focus on the logical alignment of business processes, the grouping of responsibilities, allocation of authority, the levels of work, job profiling and binding units together structurally. Many executives acknowledge the importance of organisational design and how it can significantly contribute to overall organisational success. Our experience has, however, shown that in most cases organisational design is very rarely viewed in a holistic, integrated and interconnected way. Various myths still exist with regard to organisational design, such as: • • • • • •

It should be based on common sense, since no or little knowledge exists on how to design the optimal organisation. It can be done on the back of a cigarette box at the speed of lightning. It involves only rearranging boxes, titles and reporting lines. It is all about drafting organograms.

It does not require shifting of mind-sets, frames of reference and behaviour, and It must design for (or around) the people and expertise we have.

The essence of this section is taken from Dutrisac, Koplowitz and Shepard (2009), who suggest that the process of organisation design follows a number of steps, as outlined in the table below.

Table 1.2  The steps of organisation design Step Build the senior team

Description It may be stating the obvious, but organisations are led and

managed from the top. It is therefore of critical importance to have a leadership team that has the individual and collective capability to position the organisation appropriately in its Design corporate strategy

competitive landscape.

From a level-of-work perspective, a key issue is to determine the required level of complexity of the organisation.

Positioning the organisation at an inappropriate level of

complexity can spell disaster over the short term (too high a level) or long term (too low a level). An acute awareness of Determine the structure required to implement strategy, and design the working relationship between functions

6

what is required to compete successfully is a prerequisite. These are the steps which often become arbitrary rather

than requisite in organisations. There is an entire science

behind these two phases, which we will expand on in the next section.

Remuneration and Talent Management

Step Ensure that you have the right people in the right roles, now and in the future

Description With a clear understanding of the levels of complexity of various roles, their grouping into functions and an

articulation of interdependencies, the organisation is now in a position to commence on detailed work design. The purpose is to define clearly the required contribution

(outputs) of each role, as well as the human capabilities and competencies required to perform the role to expectations.

We will expand on this topic in section 1.6, which deals with Manage performance and ensure managerial leadership Strengthen the role of managers of managers

talent management.

Organisations, in our experience, tend to forget that

the purpose of performance management is to improve

performance and not to justify increases, promotions and

the like. In this sense, performance management needs to

be distinguished from consequence management. Similarly,

the emphasis on leadership has led to some disregard for the simple reality that organisations (and therefore work and Build the compensation system

people) also need to be managed.

In the context of organisation design, the compensation

system is significantly more than job grading, evaluation

and competitive benchmarking. Although these elements

are, of course, also important, the key issue is to determine a compensation system that will in terms of the intended (and non-intended) consequences drive the desired behaviours.

Source: Adapted from Dutrisac, Koplowitz & Shepard, 2009

1.4 STRUCTURE AND WORKING RELATIONSHIPS Determining the appropriate structure to support the business strategy should cover the following areas.

1.4.1 Design parameters

Design parameters pertain to those “givens” imposed on the design which must be complied with as constraints to the design. Typically the “givens” relate, among others, to: • • •

Geography and demographics

Legislation, policies and procedures, and Operating and supporting technology.

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1.4.2 Business processes The starting point of any organisation design is the business processes, contained in its value chain, through which wealth to stakeholders need to be unlocked and delivered. The processes reflect the types of work to be done in the organisation, and how work and information needs to flow through the organisation.

1.4.3 Design criteria

Typically, these criteria should allow for the consideration of organisational, work design and people aspects. Organisation design criteria are typically the result of an analysis of what works or does not work with the current design, specifically within the context of organisational strategy and goals. Some examples of design criteria are provided in the table below. Table 1.3  Examples of design criteria Organisation

•

Determine the overall organisational level of complexity

•

Eliminate redundancy or duplication

• • Levels of work

• • • •

People

• • • •

Grouping of functions (product, process, market, matrix) Ensure clear boundaries as well as sufficient interfaces Move decision-making closer to customer interface

Reporting roles must be at different levels of complexity Levels may not be skipped

Role must indicate manage one level down and contribute one level up Clarity of roles/line of sight Match to complexity

Appropriate allocation of resources Performance feedback loops

1.4.4 Finalising the design

With the organisation and work design criteria defined, the next step is to consider carefully the interfaces between various elements of the structure and the roles within it. Aspects to consider include among others information flow requirements and how these will be facilitated. One of the key issues here is not only to define the relationship between various functions clearly, but also to ensure that interactions between different levels of work within the value chain are adequately considered. We often see high-level structure 8

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design decisions that have a negative impact on workflow at lower levels simply because the detail implications have not been sufficiently thought through. Various options can be defined for organisation structure. These options then need to be carefully considered against the design criteria, as well as aspects such as leadership capacity, power relationships, work environment and talent profile. With careful consideration of these issues, the organisation can then: •

Do the operational work necessary to implement the organisation design

•

Determine the best way to manage the transition from the old organisation to the new one.

• •

Design role descriptions, reporting relationships, information flows, and so on Develop a strategy for implementing the new design, and

Of course, in any organisation design, people should also be considered as a design building block. The specific aspects to be considered include, among others:

•

What leadership capacity is required to make the chosen design achieve our strategic goals?

•

How many people are required to staff up the design?

•

What is the desired people profile for the proposed designs, with reference to aspects such as beliefs and values, personality, temperament, competencies and behaviours?

Some of these considerations will be addressed in the next two sections of this chapter.

Concluding remarks

We have shown that organisation and work design should be a thoughtful and deliberate process aimed at ensuring that the organisation has the capability to effectively and efficiently drive towards strategy execution and goal achievement. In this sense, organisation design is perhaps a little like building a house. Of course you can do so without a blueprint and plan, but the chances of having a final product that meets all of your requirements are definitely low. Organisation design is therefore a strategic (and often complex) process, but one deserving of the full attention of the senior and executive leadership of the organisation. In the next section of this chapter, we will share with you some of our thoughts on leadership strategy and development based on principles of levels of work.

1.5 LEADERSHIP CAPACITY

If one accepts the concept of levels of work in an organisation, the implications for leadership are the following: •

Leadership exists at various levels, not only at the top.

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•

The work of leaders at various levels is different.

•

Leaders who are not aligned to the complexity of the work they are required to do will pose an organisational decision-making risk that will also impact on the effectiveness of other levels of work.

• •

Leaders at different levels may therefore require different skills.

Development of leaders and leadership across these levels requires planning, and

In this third section of this chapter, we will specifically focus on leadership strategy and development, a topic that in our experience with client systems is increasingly becoming an issue of concern. The key driver of this would appear to be the fact that many organisations have to confront the reality that senior and executive talent is a scarce commodity.

1.5.1 Leadership landscape

Many organisations find themselves experiencing significant leadership competency gaps, relying on an ever-narrowing base of managers who find themselves sufficiently skilled to enact new managerial roles” (Verwey & Du Plooy-Cilliers, 2003:76). Verwey and Du Plooy-Cilliers (2003:76) also argue that a wide range of social and business influences determine the leadership behaviour within an organisation. The challenges faced by leaders and organisations today are increasingly complex. The words volatile, multidimensional, and unprecedented are just a few of the descriptors leaders use when discussing these challenges.

1.5.2 Leadership complexity

Palus and Horth (2004) argue that the critical factors causing increasing complexity are often not measurable or quantifiable in the current organisational operations due to traditional analysis methods used. These outdated methods tend to slow down the decision making process as a result of definite specifications to information gathering standards. Chemers (1997:5) argues that the ability to operate in less predictable environments places an emphasis on external organisational adaptability. This position also forces leadership to focus on functions such as problem solving and innovation management. The leader’s challenge then lies in creating an environment that encourages the creativity, sensitivity and flexibility of the group as well as the individual’s ability to deal with the uncertainty of new or complex demands.

1.5.3 The work of leadership

In the first instance, the work of leadership in organisations is to ensure that the organisation is successful in terms of the defined measures of success. With the possible exception of self-owned businesses, leaders and managers are also employees, and in this capacity they are expected to make a contribution to the purpose/vision/objectives 10

Remuneration and Talent Management

of the owners of the organisation. Leadership is the task of building collaborative teams, of teaching a common vision and organisation principles, and instilling and encouraging trust. Viewed from this perspective, leaders will want to display the behaviours that will lead to the achievement of these expectations. Table 1.4 Leadership styles associated with organisational work themes Organisational work

Required leadership

themes

Key perspectives on work that followers appreciate

Quality (type I)

Formational

Accuracy

Practice (Type III)

Transactional

Excellence

Service (Type III)

Strategic development (Type IV)

Strategic intent (Type V)

Transmissional Transformational Transcendental

Consistency Integrity

Tolerance

As mentioned above, one of the important roles of managers is to manage and lead employees (followers) working directly in positions subordinate to them. The question arises as to what the important contributions are that followers on each level of work would most likely appreciate and which would enhance their commitment to their work and managers. The section below provides an overview of perspectives on work that followers may be attracted to so that they offer their discretionary energy to their leader (the reader may also want to read briefly through the previous section of this chapter on organisation design in order to refresh the context relating to levels of work).

1.5.4 Values and levels of work (Adapted from Fallow, 2009:147)

Quality (Type I): Formational leadership Employees performing quality type of work are attracted to it because of the degree of accuracy required in work of this type. An employee waiting for an instruction or advice regarding his or her activity responds to instructions. Employees on this level tend to respect and value accuracy because it provides certainty and structure.

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Service (Type II): Transmissional leadership On the service level, people are attracted to the degree of consistency and procedural order required. Effectively, leaders on this level communicate messages about their expectations and their performance; on what constitutes the acceptable limits of performance and behaviour and what does not. This ensures that behaviour is within policy and procedural frameworks and creates order within the boundaries of the organisational system.

Practice (Type III) Transactional leadership

At the third level, people are attracted to, or value, a focus on operational excellence. In the transactional leadership role, the key emphasis is on excellence and effectiveness. The level 3 managers focus on optimising business processes so that everyone’s energy losses are minimised and best practice is established. This has a direct impact on profitability.

Strategic development (Type IV) Transformational leadership

At this level people are attracted to integrity. The challenge on this level is to manage the future. It is the challenge of the Transformational Leader to provide guidance in a complex unpredictable and ever changing environment. The work of Transformational Leaders is to navigate between current certainty and the best of the preferred futures in which there is no certainty and guarantees. The only thing that employees can rely on is their leaders’ integrity in leading them to the future.

Strategic intent (Type V) Transcendental leadership

At this level people tend to value tolerance. The focus of the work is beyond the boundaries of the industry and the known. The focus is global and is on shaping the organisation to ensure long-term sustainability in a rapidly changing environment. It is a long-term journey, often characterised by chaos and uncertainty. Tolerance in accommodating different views and navigating the organisation through turbulence is required and appreciated by employees.

1.5.5 Leadership capability and competence

The ability of a leader to display the behaviours outlined above is to some degree at least a function of the capabilities and competencies of that leader. In this section we will define what the concepts “capability” and “competence” mean, as they have particular importance with regard to the way we think about leadership and talent management issues. Capability is defined as the ability to generate, prefer and demonstrate appropriate work-type-specific complexity, values, activities, perception, judgement, interpersonal qualities, problem solving, and so on. Capability refers to those aspects of a person that 12

Remuneration and Talent Management

are inherently part of him or her and which cannot be changed or developed (trained) easily. This includes the abilities listed above. The key issue at play is that capabilities form the foundation upon which people build competencies. Without the required capabilities for a role at a specific level or of a particular type, we will simply not be able to build the required competencies. Stamp (1989:23) reports that capability has two components namely: (1) the person’s view of the world related back to the level of work where the individual is most efficient and comfortable in working; and (2) the way the individual prefers to act within that field of work. Competence, on the other hand, is defined as the ability to demonstrate work-typespecific functional business and leadership competencies. Competence is comprised of knowledge, skills and attitudes. Hamel & Prahalad (1994:202–203) suggest that competence can be described as a bundle of skills representing the sum of learning across individual skill sets and organisational business units. These skills or leadership competencies can be listed as follows: •

•

•

•

•

Personal traits and qualities: These leadership competencies include selfconfidence, integrity and ability to take initiative. Morden (1997:3) argues that leaders need to demonstrate social skills which can also be referred to as interpersonal style (Jaques, 1998:77), and personal wisdom about and experience with people. Morden (1997:3) also states that this leadership competence deals with the leaders’ ability to handle detail and being able to position the situation within a broader context. Time span of discretion: Jaques and Clement (1994:22) report that the concept of competence can be linked to an individual’s cognitive processing. This cognitive processing capacity and willingness form part of the individual’s potential to process and perform complex tasks. They also report that each category of task complexity may be defined in terms of the number of variables that have to be dealt with in a given time in a situation, the clarity and precision with which they can be identified, and their rate of change. The human cognitive processing should therefore match the organisational level in which the task occurs. Maintaining best fit: Morden (1997:4) says that basic leadership competence is being able to maintain the best fit. Maintaining the best fit consists of combining the leaders’ requirements, the task, and the team, as well as individuals, together appropriately within the context of the environment.

Identifying and developing potential: Morden (1997:5) states that this competence focuses on leaders’ ability to accomplish and evaluate performance standards. Performance standards are based on a leader’s potential to set and share a personal vision, but also link it back to the leader’s ability to empower other individuals. Murphy (1996:4) argues that the leader’s ability includes identifying and developing individual potential influencing also group development and potential. Motivating and providing inspiration: Murphy (1996:5) further suggests that leaders should function as a synergising force by combining energies and capabilities

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•

of those they lead. The required ability of the leader is to create for individuals, teams and organisations a dream (or vision) and to inspire other members in the organisation.

Paying attention to detail: Leaders must have the ability to be comfortable with broad issues as well as with the details of these issues. However, the ability to show in-depth understanding and reasoning but also to respect the routines of subordinates performing these tasks (Morden 1997:5) remains important.

1.5.6 Three-D leadership

ilit ab ust ain acy

an

dS

Transcendental

tim egi

ip nsh i ze Cit te ora orp dC an nce na ver Go od Go ve Dri

y

In the dynamic world in which leaders find themselves, Transactional, Transformational and Transcendental leadership (referred to under section 1.5.3, “The work of leadership”) is appropriate at all levels of work. This “3-dimensional” approach incorporates the managerial, leadership and spiritual elements of leadership. With this in mind, the following diagram illustrates an alternative view on leadership, which we shall refer to as 3-Dimensional Leadership.

Dri

ve L

3-D Leadership

Transformational

Transactional

Drive Efficiency and Effectiveness

Figure 1.2  Three-dimensional leadership

A good theory is a simple one that can work in practice. To move from an Integrated theory of leadership towards an approach which can be applied in practice to enhance individual and organisational performance, it is suggested that each of the three leadership constructs be operationalised through a leadership competency approach.

14

Remuneration and Talent Management

1.5.7 Building leadership capacity Leadership effectiveness is determined by the status of the business context, the leadership landscape, and the level of leadership competence that supports the business value chain. A leadership review can be used to determine the current status of the leadership landscape and leadership competence that supports the value chain of your business. Such a review will assess the dominant leadership style and leadership dynamics within your organisation, and determine the leadership capacity which your business has to deal with these. The combination of these three factors will determine whether or not your business has the leadership foundation that is required to drive and support strategy, innovation and transformation. By assessing the leadership foundation of your business, you can support the integration and effective management of your entire business value chain. However, the leadership foundation can contribute to effective management of the entire business value chain only if leaders at all levels are highly skilled in leading individuals and teams toward high performance. A holistic development approach, focusing on the right competencies on the right level, should be followed. This involves a variety of leadership development exposure ranging from activities that encourage self-development, exposure to formal and informal training, and development programmes to support systems such as coaching and mentoring. Leadership development requires a company-specific leadership strategy, architecture, and effective management in implementing this strategy and architecture.

1.5.8 Leadership assessment

Clearly an approach to leadership assessment should meet at least the following criteria: •

It should be appropriate to the level of complexity of the leadership role.

•

It should lead to personal insight so that individuals can take ownership over their own development, and

• •

•

It should assess both capability and competence.

It should assess the leadership behaviours that are most important to the organisation. It should provide the organisation with a clear and actionable perspective of what to do so that they can build the leadership capacity required to support the business strategy now and in the future.

In our experience, insufficient thought is applied to this aspect of building leadership capacity. With a clear articulation of the required leadership requirements (capability, competence and behaviour), it becomes a fairly simple, but slightly technical, process to identify the most appropriate leadership identification (assessment) processes. More important than selecting the right assessment “tools” is being very clear and specific about

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the way in which these will be introduced and used in the organisation. Irrespective of the tools chosen, the process itself can cause great anxiety and even harm, and therefore careful thought about the purpose and process of leadership assessment is required. Understand Business Context

Leadership Development

Assess Leadership Landscape

Assessment of Leadership

Define Leadership Requirements Figure 1.3  Leadership development

1.5.9 Leadership development Based on the leadership assessment results, development needs to be carefully planned and crafted to cover at the very least the following aspects: •

It should be appropriate to the level of complexity of the leadership role.

•

It needs to form part of the overall talent management strategy (see the next section of this chapter).

• •

It should develop the leadership behaviours that are important to the organisation. Both development content and process need to be considered, and

Concluding remarks

In this section, we have shown that an integrated perspective on leadership assessment and development should be taken. Such an approach should also take cognisance of the specific leadership requirements at different levels of work. Furthermore, appropriate assessment and development, again linked to the principles of work complexity, and should form the basis of deliberate leadership capacity building. To build effective leadership at all levels, organisations need to identify leadership candidates early, provide 16

Remuneration and Talent Management

them with the appropriate development opportunities to develop the competencies to make the required transitions and function competently on the next level of complexity.

1.6 TALENT MANAGEMENT

Perhaps it is appropriate to start with the question: “Why is talent management an imperative to business success?” The reason lies in the fact that the world is changing faster than ever and dramatic economic, demographic, social and business shifts take place on a daily basis. These rapid changes are creating an enormous talent gap that is so deep and so wide that no organisation can rely solely on recruitment to supply the talent necessary to remain competitive. Research shows that labour and skills shortages will further increase over the next seven years as a result of factors such as: •

Retirement

•

High staff turnover, because the world is now a global village.

•

Pace of change (in 2010 the amount of new technical information was predicted to double every 72 hours), and

In other words, in today’s rapidly changing business environment companies are faced with having to do more with less resources and business growth is largely dependent on creative and technological advancements. The need for a deliberate talent management strategy is clear from the aforementioned and there is no doubt that organisations will gain a competitive edge if they create a platform for talent management. In fact, for many organisations it is the only option in order to gain a competitive advantage (Lawler III, 2008). It is important to note at this stage that successful talent management does not depend only on the quality, quantity and effectiveness of the human capital but also depends on the effectiveness of the organisation’s processes, policies, practices and design in support of the talent management strategy. The implementation of a talent management strategy and process may therefore pose a challenge to organisations which do not take an integrated viewpoint on talent management.

1.6.1 Talent management defined

Talent management is the process that ensures that an organisation at all times has access to the human capital capacity (competence, capability and numbers), including leadership, to execute its business strategy and operations effectively and efficiently, now and in the future. Simply put, talent management is: •

The process of attracting, developing, engaging, retaining and utilising talent to the mutual benefit of the business and employees

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About being the employer of choice of employees of choice, and

•

A partnership between line management, human resources and the employee.

•

Talent management from this perspective includes the following processes or activities:

1. Human capital planning: What do we need now and in the future from a human capital perspective through detailed interrogation of the business strategy and plan? 2. People management action planning: Based on the preceding step, what needs to be done in terms of people sourcing (talent attraction) and development (training), particularly in terms of critical positions and/or people? 3. People leadership: What needs to be done in terms of employee retention, engagement and performance management to optimise our use of the talent that we have?

The sections above highlight that it is critical for organisations to focus their efforts on creating, implementing and maintaining a clear talent strategy and philosophy (Grobler & Diedericks, 2009). Such a talent strategy should document a comprehensive approach to talent management through an integrated talent management framework. The framework will give an overview of the core elements of an integrated talent management approach of this type. Conceptually, such a talent management approach can be illustrated as follows:

Supply What do we have? Strategic Talent Plan

Talent Intelligence

Talent Management Principles

Talent Value Proposition

Talent Philosophy

Talent Agenda

Talent Management Process Talent Management System Talent Scorecard

Talent Stock

Organisational and Individual Engagement Processes

Talent Management Culture

Talent Management Governance

Business Case Demand What do we need?

Figure 1.4  Talent management approach Source: Adapted from Veldsman, 2002

Following is a short description of some of the key elements of an integrated talent management approach, the value of which is all too often underestimated. 18

Remuneration and Talent Management

1.6.2 The business case In simple terms, the business case is that of having the right talent at the right time at the right place in the required numbers, i.e. the right talent capacity. The latter is key to achieving the organisation’s strategic, business and operational goals, now and in the future.

1.6.3 The talent philosophy

A number of assumptions may inform the organisation’s talent management approach. Examples are the following: •

All employees have some form of talent, but this does not mean that all employees have unlimited potential.

•

The key driver is to ensure that we optimise all of our human capital.

• •

Organisational culture and leadership style are key aspects of a successful talent management strategy.

The view of optimum human capital is informed by current as well as future strategic requirements.

1.6.4 Talent management principles

In addition to the talent philosophy, the organisation should clearly articulate specific talent management principles that will apply. Examples could include: •

Line management is in the first instance accountable for talent management.

•

Human Resources has to ensure that the talent management system is aligned to business strategy and operational requirements and conforms to best practice.

•

•

Employees are accountable for their own development and advancement in the organisation. An agreed and organisation-specific leadership competence framework will form a key part of the assessment and identification of talent.

1.6.5 Talent value proposition

A successful employee value proposition includes a consistent and common theme that employees relate about their workplace. It also includes the public image of the organisation’s culture that entices the best potential candidates to apply for positions while allowing the company to retain its top talent (Berger & Berger, 2004).

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1.6.6 Talent management governance The governance associated with talent management can be executed on a number of levels and be associated with a number of areas, and relates to those involved in talent management, associated accountabilities, the guidelines, rules, regulations, legislation pertaining to talent, proper talent execution, and talent metrics and measurement.

1.6.7 Talent scorecard

One of the key aspects of any strategy is an assessment of the impact on the business. Some of the key principles that should inform the measurement of talent management strategy processes and interventions are: •

Keep the measurement model as simple as possible.

•

The model should include both quantitative and qualitative measures.

• • •

The measurement model should include perspectives on all the key elements of talent management. The measurement should also drive personal ownership by employees.

The measurement should incorporate both current and future readiness aspects.

The key issue with the application of measurement/metrics from a talent management perspective is to revisit the purpose of talent management as well as each of the various metrics formulated (Lewis & Heckman, 2006). In addition, due consideration needs to be given to how the measurement approach will link to the talent management governance system and how it will apply to the entire system.

1.6.8 Talent management planning process steps: a practical approach

To move from the talent management strategy towards an approach that can be applied in practice to enhance individual and organisational performance, it is suggested that the talent management strategy be operationalised through a practical talent management planning process. Practically, the talent management planning process consists of the following steps:

20

Remuneration and Talent Management

Define the required status

Measure and review

Define the current status

Talent Management Planning

Develop Talent Management Plan

Document the GAPS

Figure 1.5  The talent management planning process

1. Define the required status The outcome of this step is the mapping of the required level of competencies and people. To achieve this outcome, the following activities take place:

•

Determine emerging and future business directions/activities and objectives.

•

Forecast emerging and future demands.

• •

Articulate the required organisation and work architecture.

Determine how this will impact on workforce requirements, especially critical skills, and

2. Define the current status

The outcome of this step is a talent profile that displays the level of capabilities and competencies and number of people within the organisation. The measurement of capability helps the organisation to understand how the gaps may be filled or not in the future. To achieve this outcome, the following activities take place:

• •

Conduct capability and competencies audit, and

Determine number of people available for key positions.

3. Document the GAPS

The outcome of this step is documentation of the gaps between the required status and the current status. To achieve this outcome, the following activities take place:

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• •

Match the required profile against the current profile, and Identify and prioritise the GAPS.

4. Talent Management Strategy/Plan The outcome of this step is the documentation of plans and activities to address the talent gaps identified in step 3. To achieve this outcome, the following activities take place:

•

Identify reasons for the GAPS, for example, capability, competence or performance.

•

Identify role players (such as line management and HR) and allocate roles and responsibilities for action plan items.

•

•

Define an action plan addressing the specific reasons and needs, for example, recruitment, performance management, or training and development. Give feedback on the action plan to the HR Department and to managers.

5. Measure and review

The outcome of this step is a scorecard where the progress towards the desired state can be monitored and measured. To achieve this outcome, the following activities take place:

•

Clearly articulate the outcomes to be achieved through the talent management action plan (as designed in previous step).

•

Conduct regular progress reviews and a formal review and measurement against set scorecard.

•

• •

Clearly articulate the specific targets to be reached through the implementation of the action plan. Identify areas of non-performance and possible actions to address these, and Give feedback on the results to the Talent Committees.

Concluding remarks

In this section of this chapter, we have shown that talent management is a strategic process that is an inherent part of the overall business strategy. Seen in context, it is clear that for this very important process, the following are prerequisites: •

Clearly defined business and competitive strategy

•

Appropriate leadership capability and competence at all levels of the organisation to ensure that talent is leveraged as the only real competitive advantage both now and in the future.

•

22

Leading to organisation and work design ideally based on the principles of requisite organisation, and

Remuneration and Talent Management

1.7 CONCLUSION In the introduction to this chapter, the point was made that strategy, organisation design, leadership and talent management forms the context within which smarter decisions can be made also about remuneration philosophies, principles and practices. There is little doubt that an attempt at a remuneration strategy in the absence of this context is at best a “hit and miss” – if it turns out to be right, you were probably just very lucky.

1.8 REFERENCES

Berger, LA & Berger, DR. 2004. The talent management handbook: Creating organizational excellence by identifying, developing, and promoting your best people. New York (NY): McGraw-Hill. Chemers, MM. 1997. An integrative theory of leadership. Lawrence Erlbaum Associates. Davila, T, Epstein, MJ & Shelton, R. 2006. Making innovation work. How to manage it, measure it, and profit from it. Philadelphia (PA): Wharton School Publishing. Dutrisac, M, Koplowitz, H & Shepard, K. 2009. An executive’s guide to RO-based organisational design. Organisational Design, Levels of Work & Human Capability. Executive Guide. Fallow, JF. 2009. On being heard: Insights from complexity theory and values as touchstones for effective executive communication across the levels. Organisational Design, Levels of Work & Human Capability. Executive Guide. Galbraith, JR. 1993. Organising for the future. The Jossey-Bass Management Series. San Francisco (CA): Jossey-Bass. Galbraith, JR. 2000. Designing the global corporation. The Jossey-Bass Management Series. San Francisco (CA): Jossey-Bass. Goldman, G & Nieuwenhuizen, C. 2006. Strategy. Sustaining competitive advantage in a globalised context. Juta & Co Ltd. Cape Town. Grobler, PA. & Diedericks, H. 2009. Talent management: An empirical study of selected South African hotel groups. Southern African Business Review, 13(3), November. Hamel, G & Prahalad, CK. 1994. Competing for the future. Boston. (MA): Harvard Business School Press. 202–203. Jaques, E. 1978. A general theory of bureaucracy. London: Heinemann. Jaques, E. 1998. Requisite organization.  A total system for effective managerial organization and managerial leadership for the 21st century. Jaques, E & Clement, SD. 1991. An excerpt from Executive leadership: A practical guide to managing complexity. aques. E & Clement, SD. 1994. Executive leadership: a practical guide to managing complexity. Cambridge (MA): Carson-Hall & Co. Publishers. Jaques E & Clement, SD. 1994. Executive leadership: a practical guide to managing complexity. Cambridge (MA): Carson-Hall & Co. Publishers. Kinston, W & Rowbottom, R. 1989. Levels of work: New applications to management in large organisations. Journal of Applied Systems Analysis, 16. Kleiner, A. 2001. Elliott Jaques levels with you. Strategy + Business, 1st quarter. Lawler III, EE. 2008. Talent: making people your competitive advantage. New York (NY): John Wiley & Sons. Chapter 1: The Context to Remuneration: Strategy, Organisation Design, Leadership and Talent Management

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Lewis, RE & Heckman, RJ. 2006. Talent management: a critical review. Human Resource Management Review, 16(2).. Morden, T. 1997. Leadership as competence. Management Decision, 35(7):519–526. Murphy, G.L. 1996. On metaphoric representation. Cognition, 60:173–204. Palus, C.J. & Horth, D.M. 2004. Leadership: competencies for navigating complex challenges. Management Today Yearbook. Stamp, G. 1985. A summary of stratified systems theory. BIOSS paper. Stamp, G. 1989. Management styles. Management Decision, 27(4):22–29. Veldsman, T.H. 2002. Into the people effectiveness arena – navigating between chaos and order. Johannesburg: Knowledge Resources. Verwey, S. & du Plooy-Cilliers, F. 2003. Strategic organizational communication: Paradigms and paradoxes. Heinemann Publishers.

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2 Talent Retention – Customising Retention Strategies: A Case Study Debbie Craig and John Gatherer

2.1 INTRODUCTION

The dynamic nature of global business economic uncertainty is putting increasing pressure on companies to attract, develop and retain exceptional talent in a market where demand far exceeds supply. Human capabilities determine the winners and losers on the commercial landscape as, for most organisations today; people are the major source of value. In survey after survey, including PWC’s 16th Annual CEO Survey (2013), managing talent is the top priority for CEO’s globally, with availability of key skills being one of the top risks of 82% of CEOs in Africa. The skills shortage in South Africa is a very real one, with a significant gap between the demand and supply of skills. In Grant Thornton’s 2012 International Business Report, 38% of South Africa’s privately owned businesses cited the availability of a skilled workforce as the biggest constraint to business growth, for the fifth year running. The local labour market is also characterised by a changing attitude towards work and what is deemed desirable in a career, requiring greater insight into generational differences and a customisation of retention initiatives to cater for different target segments. We also face costly compliance with complex labour laws and other legislation just to stay in the game. In many industries, there is also an ageing workforce, and legacy conditions that struggle to attract women, younger generations and critical skills to sustain performance and results (mining, agriculture, petroleum, manufacturing, and so on). In addition, many companies have to adapt to industry consolidation, changing customer requirements, more nimble global competitors, shifting technology and global change, with their associated people challenges. The ability to attract, engage and retain talent better that your competitors do becomes a key strategic competitive advantage, both in good times and particularly in tough economic times.

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2.2 THE CASE FOR PROACTIVE RETENTION STRATEGIES 2.2.1 The business impact of retention Retention can be defined as an organisation’s ability “to hold and keep in possession and to engage the services of high potentials (HIPOs) and value contributors in mission critical and scarce skills positions”. Engagement is key to effective retention as it is “the state in which individuals are emotionally and intellectually committed to the organisation or group”.

Commitment is another critical factor as it drives performance and retention. It has both an emotional component – the extent to which employees value, enjoy, and believe in their organisation – as well as a rational component – the extent to which employees believe it is in their best interests to stay with the organisation.

Research has consistently demonstrated that engagement and commitment are both vital ingredients in effective retention strategies. A Watson Wyatt study (2008–2009) found that a company with highly engaged employees achieves a financial performance four times greater than companies with poor engagement. They also found high correlations between the highly engaged and top performers, as well as with healthy staff (fewer days off for illness). Development Dimension International (DDI) (Wellins, Bernthal, & Phelps, 2005) found that turnover in low engagement teams averaged 14.5% compared with 4.8% in highly engaged teams. A comprehensive Corporate Leadership Council (CLC) (2008) study shows that every 10% improvement in commitment can increase an employee’s effort levels by 6%, which in turn can improve performance by 2%. Furthermore, improving employee commitment also supports retention, reducing the probability of departure by as much as 87%. It was found that the day-to-day impact of the people and culture have the greatest influence on decisions about how hard to work and how long employees intend to stay with the organisation. The top three drivers of commitment were found to be development opportunities, job-interests alignment and being respected. Remuneration is typically a hygiene factor and an equaliser – once the money conversation is off the table through good, benchmarked, flexible packages, it ceases to be a primary motivator. The EVP (Employee Value Proposition) also plays a significant role in attracting employees and building commitment. An effective EVP provides organisations with three quantifiable benefits: •

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Improved attractiveness: Source from a much deeper pool of talent including passive talent (those who are not actively seeking other opportunities) – up to 20% more

Remuneration and Talent Management

•

•

Greater employee commitment: Significantly higher employee commitment levels. Up to 40% of workforce displaying high levels of commitment, as opposed to less than 10% in under-performing organisations Compensation savings: Reduce the compensation premium required to attract new candidates. Spend 10% less on base pay compared to under-performing organisations.

When looking to invest in retention initiatives, it is useful to quantify the potential cost and risk of not retaining key talent. These include both monetary and non-monetary risks that can impact business performance and costs. Table 2.1  Monetary and non-monetary risks Monetary

Non-monetary

Labour turnover Average cost of loss of an employee in the talent pool = US $55 500 (international

benchmark)

This is made up of the following costs: • Recruitment and selection costs • Retraining costs

• Productivity loss during vacant period • On-boarding and cultural assimilation Other

• Reduced Return On Investment (ROI) on

• Loss of Most Critical Positions (MCPs) and scarce skills

• Reduced productivity

• Impact on morale and culture • Reduced engagement levels • Impact on team dynamics

• EE and diversity objectives impacted • Unstable organisation

• Impact on corporate reputation

compensation spend

The above examples are just a few selected from the many studies that exist. Overall, there is significant evidence to demonstrate that investing in proactive retention studies and initiatives has a significant return on investment. If you wish to be taken seriously by executives who allocate resources and budgets to Human Capital projects, then ensure that you present both best practice studies and your own internal analysis of the costs, risks and benefits of engagement, and retention strategies.

2.3 CREATING THE NEED: THE REALITY, THE VISION, THE PLAN 2.3.1 The reality

Our case study company has a longstanding history in Southern Africa as a leading company offering a critical service to the country and its citizens, and is a household Chapter 2: Talent Retention – Customising Retention Strategies: A Case Study

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name to which most South Africans relate. Despite its good name and brand, and sound HR practices, including a company-wide talent management process, the company still had retention challenges and wanted to be proactive in addressing them. The retention challenges identified in the early stages of the project included: •

Future loss of skills through an aging workforce and retirement of critical skills.

•

Future loss of critical key talent segments due to push factors (internal dissatisfaction with leadership style, culture, values not being lived and opportunities for development – results of recent surveys over last 2 years).

•

•

Future loss of critical key talent segments due to pull factors (external opportunities in more attractive industries or companies).

Rise in voluntary turnover rates over recent years, indicating an increasing risk of retention.

In addition, analysis of the reasons for leaving the company revealed a failure to meet the needs of employees with respect to professional development, compensation and quality of management. An analysis of future challenges highlighted generational differences as a significant factor. Whilst attracting and integrating younger employees would assist with bridging some of the skills gaps, it would add a layer of complexity as needs, wants and expectations for this talent segment are very different. The rationale for a retention strategy in the company was thus a proactive strategic requirement to manage the future risk as well to address current levels of dissatisfaction in certain key areas.

2.3.2 The vision

At this stage, project objectives and outcomes were agreed and the project governance was set up (with a Steering Committee (Steercom), project team and project budget) to achieve the outcomes. It was important to get the right senior executives on a Steering Committee of this nature in order to influence the Exco and the Board where key talent investment decisions needed to be made. An example of retention objectives and business outcomes is shown in Figure 2.1.

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Project Objectives

Business Outcomes

Figure 2.1  Example of retention objectives and business outcomes

The vision also included an engagement and retention framework that outlined the vision and the key elements required for engagement and retention, including the 5 Greats (5Gs), and the 3 Es – leaders that engage, enable and empower people to perform. Each of these was described in detail in order to form an Employee Value Proposition for both potential and current employees. Great Jobs

Interesting, challenging jobs, flexible options, space creation

Great Leaders Leadership style, engagement, coaching, growing

Great Rewards Rewards that motivate, recognition for value, special initiatives for at-risk people in MCPs

Engagement Enablement Empowerment

Great Culture Conductive environment for learning, growth, accountability, performance management, teamwork

Great Company Talent value proposition, brand, image reputation as employer

Figure 2.2  Example of an engagement and retention framework Chapter 2: Talent Retention – Customising Retention Strategies: A Case Study

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2.3.3 The plan To achieve the objectives above in a holistic and integrated manner, a four-phase project plan was developed by the project team and a full project charter scoped with a business case, key deliverables, timelines, critical success factors and project resources which included representatives from Human Capital as well as line managers. Line managers are very important to engage with, to get inputs, practical insights and buy-in, and to ensure relevance and user-friendliness of solutions. Phase 1 Project Planning

Phase 2 Diagnostics

Phase 3 Strategic Initiatives

Phase 4 Implementation

Project and Change Management Project plan, charge plan, presentations, communication, progress updated

Figure 2.3  Four-phase project plan

The project planning phase included the formation and building of an effective multi-functional team and developing a detailed project plan. A change plan was also developed to identify and engage with key stakeholders to get involvement and buy in during phases 2 and 3 of the project. The implementation phase had its own change plan, relevant to the implementation of the various initiatives. A lot of work was done behind the scenes to ensure alignment between the retention strategy, the business strategy, the talent management strategy, company brand initiatives, various human capital and restructuring activities, and the Group’s overall strategic initiatives. In order to establish the critical aspects of engagement and retention that required specific intervention, a diagnostics phase was planned. The aim of this phase was to ensure that the budget would be spent on the segments and activities that would make the biggest impact. Based on the information gained from the diagnostics phase, strategic initiatives were then identified and prioritised, and approval was sought from the Steercom and Exco. Lastly, the implementation of each of the strategic initiatives was planned and executed in a co-ordinated manner, taking into account all the other business projects under way.

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2.4 DIAGNOSTICS: UNDERSTANDING THE REAL ISSUES 2.4.1 The diagnostics plan The objectives of the diagnostics phase were as follows: • • • •

To test for evidence that best practice retention attributes would actually contribute to engaging and retaining people, for example, effective leaders, being empowered to make decisions, and career development options.

To test perceptions of how well current retention initiatives were being implemented, for example, staff development, performance management, study bursary scheme, and the incentive scheme. To gain inputs on preferences for future retention initiatives, for example, flexible hours, share scheme, mobility strategy, and leadership brand.

To identify if there were significantly different needs per segment and priority needs.

With these objectives in mind, it was important to reach certain segments and to get input from the general employee population to see if the needs were significantly different to warrant a differentiated strategy. Nine segments were devised for testing in the diagnostic phase.

en t

d

an s at

Mgt and Technical Specialists Value Contributors

p Re

ni or

l Ta

ts

Se

al

ob

Gl pa

Level 3 Successors

Ex

W om M en CP an sa d nd Bl Su ac k cc M es al so es HI r s PO s

GM Successor

Emerging Talent Figure 2.4  Diagnostic phase GM = General Manager, HIPO = High-performing organisation, MCPs = Mission-critical positions

In addition, the general managers were included to understand their retention needs and views. We also contacted ex-employees for their reflection on their reasons for leaving. We were also requested to include the Bargaining Unit in our focus groups to ensure that they were familiar with and part of the process. Chapter 2: Talent Retention – Customising Retention Strategies: A Case Study

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The diagnostics chosen were a combination of data analysis, a perception survey, focus interviews, focus groups, an employee engagement survey, and best practice research. The data analysis included a review of voluntary turnover statistics over the previous two years and previous related surveys. The voluntary turnover data was most useful and was broken down into age, gender, years of service, race, level, skill level, reasons for leaving, and future retirement age. The statistics revealed that the company was struggling to retain the younger generation, build long-term careers, remain attractive in a competitive skills environment, retain diversity candidates and women and was losing primarily critical managerial and technical skills. In addition, a significant number of managers in mission critical positions and technical specialists were retiring in the next few years. This indicated a need to ensure transfer of skills and retention of those with skills and those learning from the more experienced retirees. Linking the data analysis to the business case, using the average cost-of-loss benchmark of R350 000 (calculated at the time), the cost of voluntary turnover during the two year period was over R100 million. The significance of this cost made a compelling case for the implementation of a retention strategy. A perception survey was conducted early in the process with the project team and general managers to establish initial data on which to start building the content of the more in-depth methods. The perception survey consisted of a 30-question survey on the five Gs and three Es of the retention framework. The survey confirmed that the critical areas requiring attention were: EVP, internal communications, leadership style, accountability, flexible remuneration options, culture should be more actively managed, and there should be greater engagement and empowerment. This information enabled the project team to start internal and external best practice research in these areas in order to be more informed when the more detailed diagnostics were revealed. The focus interviews were conducted with general managers, expats and employees who had left the company more than six months earlier to reduce the influence of needing to maintain relationships. The focus groups were held across 11 groups in three different regions with the following segments: Value contributors, Mission Critical Positions, High potentials, Generation Y, Women and Bargaining Unit. The engagement survey was initially planned to be a bespoke survey to measure the company specific retention attributes and segments. However, just prior to launching the survey, the holding company announced its Group-wide Engagement Survey over the same period. This introduced a risk of the information not being specific to our diagnostics design, the inability to segment the results, and a delay in the finalisation of the diagnostics phase. This was managed as best possible, but did have a significant impact on timing and the depth of information required for the project. Best practice research was also undertaken to find relevant surveys or case studies impacting engagement and retention, to understand appropriate benchmarks, 32

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and to explore innovative ideas in order to build and maintain a good Employee Value Proposition. We also wanted to understand more about segmentation, leadership brand and coaching methodologies.

2.4.2 Diagnostic findings

A detailed diagnostic findings document was developed to outline and compare the findings of each of the diagnostic activities against the 5G and 3E framework. A high-level summary of diagnostics found overall that they were a company ruled by the mind, but lacking in heart. Table 2.2  Diagnostic findings What they were good at …

What they were struggling with …

• Clear vision, goals and direction

• Lack of visible and engaging leadership – invisible, unapproachable, divided, political

• Knowing how everyone can contribute

• Metrics and measures to help them plan

• Clear procedures to help them do their work • Leader in industry

• Learning as part of work • Consistent and predictable

• Not living the values – or walking the talk

• Shift in culture from trust and empowerment to fear, bureaucracy and control • People feeling rule-bound, disempowered and disengaged

• Fear of failure leading to inaction or decision by committee • Lack of agility

• Lack of teamwork, communication and collaboration – silos and cross-purposes • Lack of customer focus

• Development is often just an empty promise

2.4.3 What was needed?

It was clearly recognised that the company needed to build teamwork, collaboration and emotional connection through inspiring a values-based culture that is engaging and where people feel valued. These findings were presented to the project team, Steering Committee, Human Capital Management Team and Exco with varying degrees of shock, denial, curiosity and acknowledgement. However, once the Group-wide Survey results were revealed, together with a firm message of accountability from the Group CEO (the survey fully supported our findings), a commitment was made to invest in doing what was necessary.

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2.5 REFINING THE TALENT SEGMENTS Segmentation is the process of defining and subdividing a large group into clearly identifiable segments having similar needs, wants or demand characteristics in order to design a retention offering to address the retention drivers per segment. Criteria for segmentation from the Corporate Leadership Council (2004) are as follows: 1. Is the segment measurable, accessible and substantial?

2. Do the segment’s preferences vary enough to warrant investment in a segmented EVP? 3. Do the segment’s ways of consuming information vary enough to warrant a different competitive approach?

4. Is the segment important to the organisational strategy, and can the organisation support the need of this group?

One of the deliverables of the retention project included a comprehensive understanding of the retention drivers per segment and to ensure that differentiated retention offerings were developed per segment. Going into the diagnostics phase, the hypothesis was that certain segments are more critical to retain than others and that certain segments have different retention drivers. Although the group-wide survey results could not be segmented (which would have been ideal), the combination of best practice research, experience, interviews and focus groups revealed that certain segments are more critical to retain than others i.e. impact, cost of loss, difficulty to replace. It also confirmed that while there are many universal retention needs that all employees require regardless of the segment, certain segments have unique retention drivers that require unique intervention. It also suggested that many of the current retention initiatives that were thought to contribute to retention (performance incentives, development, company values) required improvement to meet the universal needs of employees. The diagnostics revealed three clear differentiated segments (next-generation leaders, high potentials, and experts). For strategic reasons, an additional four segments were identified for the next few years to ensure sufficient focus. These were global talent, generation Y, strategic transformation, and ex-pats/re-pats. The primary and secondary universal needs are outlined below, as well as the differentiated needs per segment.

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Table 2.3  Primary and secondary needs differences Segment

Differentiated needs

Universal needs

1

Executive talent GM + Global talent

2

Next-generation leaders Level 2 and 3 successors

• Global exposure • Empowerment to lead • Honest, constructive conversations

CORE NEEDS • Inspirational leadership • Clarity on vision, individual’s contribution, and feedback on progress • Empowerment to make decisions – less reliance on policies • Evidence of values and culture • Teamwork and collaboration • Professional development • Coaching and mentoring • Fair career progression and planning • Diversity accepted and encouraged

3

4

High potentials Successors excluding levels 2 and 3 successors Experts Technical experts/ MCPs

5

Emerging talent Gen Y >30 years

6

Expats and repats External to SA and returning to SA

7

Strategic transformation Senior PDI, all PWD, and all women

• Clear career path • Accelerated development • Be consulted – have a voice • Clear career path • Accelerated development • Consequence management

• Recognition for making a contribution • Resources and support to deliver • Continual professional development • Sense of belonging to a group • Flexible work arrangements • Openness to change and innovation

• Consulted and involved in strategic decisions • Consideration of regional differences • Market-related pay • Genuine cultural and gender diversity • Flexible work arrangements

SECONDARY NEEDS • Effective and fair reward and recognition • Strengthening professional networks • Appropriate remuneration • Work-life balance and workplace flexibility • Meaning and purpose in work • Effective and fair management • Openness to change and innovation

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From the diagnostic results, the project team recommended that the focus for year 1 was to implement or address initiatives that focus on universal needs and impact all segments (70% of the effort). In addition, individuals within critical segments (next-generation leaders, high potentials, experts and global talent) were to be identified and managed by segment owners to ensure prioritised access to improved retention initiatives. Segments with more strategic importance to the business (Gen Y and strategic transformation) would be addressed at a later stage. Lastly, there were a few quick wins identified for specific segments (high potentials, expatriates/repatriates). It was decided that other new and creative options (flexible hours, Gen Y forums and social media options, CSI initiatives, recognition schemes, and so on) to take retention to the next level and evolve into a real example of an employer of choice (30% of the effort) would be introduced once the prioritised initiatives were embedded. Strategies and plans for each segment were outlined in a separate Segmentation Strategy, including the business rationale for each segment, key needs, and suggested initiatives and segment champions.

2.6 PRIORITISING INITIATIVES 2.6.1 Choosing priorities

Out of the 25 current and 25 future possible initiatives identified across the 5Gs and 3Es, there were, of course, far too many things that needed to get done. The key to success in implementing Human Capital-related projects is to have a grand strategic plan and then to break up the plan into bite-sized chunks that line managers can understand (in their language) and digest (in their time). The project team therefore reviewed the findings and identified the top 30 initiatives required to achieve the retention objectives over the next three years. These were documented in a high-level retention roadmap. The short-term (1–2 year plan) was prioritised into an HR back-to-basics campaign, and three key categories that required the greatest focus were identified. These are visually depicted in figure 2.5. The future options were included in the roadmap to be investigated further and planned for in future years. The three key categories were as follows: • •

•

36

Leadership and culture: This included a values revitalisation programme and the introduction of a leadership brand for the company. Capability development: This included the implementation of the talent segmentation strategy, the prioritising of career paths for High Potentials and a coaching and mentoring programme for key talent segments.

Performance and reward: This included performance planning and cascading through a Balanced Scorecard (BSC) approach and a recognition programme linked to performance and values. Remuneration and Talent Management

Figure 2.5  Short-term plan *BDAL = Business-driven action learning; HIPOs = High-performing organisations; CSI = Corporate social investment; BSC = Balanced Scorecard; ROWE = Results only work environment

The HR Back-to-Basics Programme included reviewing the Human Capital (HC) Strategic Plan and focus, building the HC team (teambuilding and key business partner skills), building an integrated communication strategy and plan, refreshing the EVP based on findings, reinforcing the implementation of the talent strategy to ensure that forum actions were implemented, and ensuring that the talent management IT system was effectively tested and implemented. Lastly, a number of quick wins were identified for the HC team in order to demonstrate forward momentum on the project. These included immediate retention challenges with ex-pat talent due to increased competitive activity in Africa, refresher sessions for the current year performance management roll-out, refresher sessions on talent management, an induction and on-boarding upgrade, and finalisation of mobility plans and reward policies with the holding company. Sub-teams were formed for each of the sub-projects as listed under the key categories. They then developed detailed project plans in consultation with the project team to ensure alignment and integrated planning and communication. A consolidated high-level plan for years 1 and 2 was then outlined and approved by the HC Management Committee (Mancom), Steering Committee (Steercom) and Executive Committee (Exco).

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2.6.2 Tracking and measuring Measures were developed which were to be tracked and linked to the scorecards of each of the Human Capital sub-team owners, members and line managers in order to ensure full accountability. Some of the measures chosen included: • • • • •

Numbers of Most-critical position (MCP) successors ready now/within a year/ within two years Voluntary turnover of MCPs and HIPOs

Engagement survey results by key talent segment Leadership brand 360-degree survey results

Appointments made in line with succession plan.

Each of these measures had a base line and target for four levels of performance. In consultation with the project sponsor and Steercom, the project team pushed very hard to get more specifc talent measures into the line managers’ scorecards. After a long and complex process, the talent measures were improved and the weighting increased from 10% to 15% on the performance scorecard.

2.7 KEY RETENTION INTERVENTIONS – GUIDING PRINCIPLES

Many of the initiatives may look good on paper. There are, however, some fundamental principles and guidelines to ensure success of each of these initiatives. We outline some of our experience in many talent initiatives over the years, both locally and internationally, and offer some perspectives and recommendations when implementing typical programmes of this nature.

2.7.1 HR back to basics

Human Resources as a discipline often suffers from a reputation gap between what they are trying to do and how they are perceived. Too often HR teams are either too focused on the administrative burden of transactional HR or too removed from the business, with high-level strategic interventions that aren’t meeting the current need. While both of these are needed at different times, it is absolutely critical that the HR team is focused on getting the basics right, building their credibility, and becoming a trusted business partner. This requires the HR team to working and communicate as one united team focused on an HR strategy that is aligned to the business strategy. It requires HR roles and measures to be unambiguous and realistic (and clearly defined roles of HR versus line). It requires every HR practitioner to understand the professional performance and competency standards and how they stack up. It also requires regular engagement and consultation with line managers to ensure that priorities are being agreed and delivered upon. In addition, it requires specialist, business partner and administrative processes and people focused on the right activities. 38

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Lastly, it requires regular HR review sessions to align activities, build capacity, build the sense of purpose and team, and hold each other accountable for performance. Ensure that your HR team is effective and focused before embarking on another new initiative which may run out of steam soon after the pilot if the team is not fully engaged and enabled to perform the roles required to make it work.

2.7.2 Leadership brand

Any change involving managers behaving differently toward staff has to be led by the leaders. Many of the retention attributes in our case study that required improvement stemmed from leadership values, behaviours and mind-sets. Changing behaviour can be complex, but there are some golden rules. One of the first is to set the standard of what is expected of leaders. A leadership brand can do this. It defines an organisation’s leadership philosophy, style and standards relevant not only to employees but to all stakeholders. (Remember what happened to Apple’s share price when Steve Jobs passed away.) Typically, a leadership brand consists of a handful of key statements of intent supported by measurable attributes. An example from Microsoft is as follows: “Microsoft leaders embody high intelligence, a desire to win in every industry, as well as superior technical competence so that we can successfully transition to become a dominant Internet player while maintaining our presence in every software market.” – Ulrich, Smallwood & Zenger, 2000

It is important that the leadership brand is fully understood, bought into, and created with deep consultation throughout the organisation. Mechanisms need to be built into the fabric of the organisation that encourages, coaches, and measures the leadership brand to ensure that key talent feel engaged and part of a great company with a great culture and great leaders.

2.7.3 Revitalisation of values

While a communication campaign is often the first step in building awareness for values, it is only the tip of the iceberg in what is required for a real values shift. Everyone joins an organisation with their own set of values, beliefs and behaviours. It works better for everyone if alignment of these are checked during the recruitment phase and tested and encouraged during induction phase. The real work, however, starts when a person joins teams, communicates with a certain style, builds relationships and makes decisions. This is where the leadership role is critical, and where counter-culture behaviour is identified, feedback given, and coaching received to nip it in the bud. Where this behaviour is tolerated as a result of avoidance of conflict or lack of time and attention, the negative Chapter 2: Talent Retention – Customising Retention Strategies: A Case Study

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behaviour seems to be condoned and a culture of tolerance perpetuates, leading others to comment negatively on and criticise the culture. Values need to be in the awareness of leaders at all times, spoken about with passion, addressed with integrity, discussed in teams and opportunities created for ongoing feedback and coaching. Often the leadership brand attributes will include an aspect of driving and role modelling the values to ensure that they are held accountable for their part. Values also need to be in the awareness of employees at all times, through leaders talking about them, team review sessions to identify how effectively the values are being demonstrated, and visual aids to remind and encourage. It really helps if there is an opportunity to give feedback (upwards, sideways and downward) on the values through customised engagement surveys and the performance or competency review process.

2.7.4 Breakthrough learning for succession pools

A highly successful accelerated learning methodology combines interactive learning modules with project roles in real strategic projects to accelerate the exposure and development of high flyers and build readiness for future positions. Drawing on the concept popularised by Yury Boshyk in his book Business Driven Action Learning (BDAL) (2000), we have evolved the concept into Breakthrough Learning to describe the breakthrough nature of personal growth, team performance and real business results. A Breakthrough Learning programme is typically a 9–12 month intervention comprising a blend of the following features: •

•

•

Individualised personal growth options: This consists of coaching, assessments (psychometric and observational), workshops to deliver core modules (personal, team, change, and business mastery) and strategic and functional electives (for example, effective communication, project management), self-study/reading, interactions with thought leaders, and selected benchmark visits to organisations where best practice and ‘outside-in’ learning can take place. Team development opportunities: This entails the development of highperformance teams and associated processes of team interaction, feedback and learning. The ideal team has four to eight diverse cross-functional and cross-cultural members, who can bring a variety of perspectives and specialist skills to the tasks and learning at hand. Breakthrough learning (BL) projects: These are executive-sponsored key business projects (opportunity- and/or problem-based) specifically selected for the programme, exposing the individuals and teams to new learning, thinking, skills and behaviours; formulation of ideas and solutions and presentation of project proposals to the sponsors and executive/senior management team. An example of a typical programme is visually represented below.

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Chapter 2: Talent Retention – Customising Retention Strategies: A Case Study Session 2

• Individual coaching

• Group coaching

• Project work • Individual coaching

• Group coaching

• Project work

• Research methodology

Session 1

• Crucial conversations

• Project methodology

• Organisational awareness

• Innovation

• Strategic and systems thinking

Cognitive competencies

Session 2 (1 day)

Month 3

• Ensuring success

• Team building

• Project planning

• Intro to sponsors, mentors/ coaches

• Assessments

• Intro to projects

• Organisational context

• Intro to BL programme journey and competencies

Session 1 (3 days)

Month 1

• Group coaching • Individual coaching

• Project work

Session 3

• Risk management

• Business insight

• Commercial and financial acumen

• Drive for results

• Metacompetencies for success

• Emotional intelligence

Intra-personal competencies

Session 3 (1 day)

Month 5

• Group coaching • Individual coaching

• Project work

Session 4

• Technology management

• Process management

• Collaboration

• Effective teamwork

• Strategic relationships and networking

Inter-personal competencies

Session 4 (1 day)

Month 7

• Group coaching • Individual coaching

• Project work

Session 5

• Knowledge sharing and collaboration

• Consulting and advising

• Engaging, enabling and empowering others

• Inspirational leadership

Leadership competencies

Session 5 (1 day)

Month 9

• Individual coaching

• Group coaching

• Project work

Session 6

• Change management

• Influencing

• Presentations

Communication competencies

Session 6 (1 day)

Month 11

FINAL PRESENTATION

INTRODUCTORY SESSION

Figure 2.6  A typical breakthrough learning programme

Source: Gatherer & Craig, 2013

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Breakthrough learning programmes work best when they are customised for the organisation, level and stage of learning of the participants, and where just-in-time learning modules can be woven in when needed.

2.7.5 Building a coaching culture

Coaching and mentoring has been proved to be one of the most effective and cost efficient means of achieving fast-tracked development, improved performance and change in behaviour and attitude. With the widening gap in skills between experienced leaders and technical specialists and emerging managers and junior staff, passing on experience and skills through structured coaching becomes a necessity. Coaching is one the fastest methods for building the awareness and practice required in high flyers for a steep change in strategic thinking, problem solving, decision making, diversity management, resource management, and finding collaborative approaches to difficult challenges. In addition, day-to-day management of the performance and development of talented individuals can best be done with a coaching style of leadership – looking for joint improvement goals and working on them together. To be an effective coach (and manager) requires targeted effort in learning and practising the key skills of coaching such as building rapport, listening, engaging, understanding how people learn and change, emotional intelligence, questioning, encouraging, confronting, development planning, and so on. In organisations where this has been widely implemented, it has had a significant positive impact on the culture and on the acquisition of new competencies.

2.8 LESSONS LEARNT 2.8.1 Achievements

The achievements and lessons learnt throughout the project were numerous. One of the things the project team did well included ensuring that they had the buy-in of the full Human Capital team and worked together in an integrated and collaborative way around a common EVP. They also gained traction and credibility through ensuring that quick wins were implemented and communicated. Alignment to business priorities and measures was also a big plus, as was ensuring that an effective governance structure was set up, and that stakeholders were contacted on a regular basis. The HC team agreed that the project assisted them to crystallise what needed to be done by Human Capital.

2.8.2 Lessons

In hindsight, while there could have been more engagement with the CEO upfront and continuously by the project manager and the project sponsor to ensure the success of the project, the risks and the benefits were always top of mind. In the early stages of 42

Remuneration and Talent Management

the project there could have been greater role clarity within the core team to ensure that everyone knew what they needed to do to get the project moving. In particular, the roles needed to be clear regarding the change management and communication activities expected within each of their divisions. Although there was a full stakeholder plan, the next level communication sessions were not implemented soon enough to get greater involvement of line in order to gain buy-in. The lesson learned is to communicate early and often, and not to wait until you are ready with all the solutions. It takes time for people to change. A better-rounded Steercom would have had more impact with a good blend of key decision makers and those interested in people projects. Unplanned disruptions led to delays in the project. These included the Group-wide Engagement Survey and a few urgent operational issues that meant meetings or workshops had to be postponed. In future, contingency plans and more realistic timelines would be helpful.

2.8.3 Project and change management

One of the success factors of the project was the project management approach. Early on in the project the project team built the project charter and plan together. This was approved and then reviewed at every project and Steercom meeting to ensure that we were focused on the right activities. User-friendly one-page and visual progress updates were also presented – these included achievements, next steps and critical risks. These risks were either managed at a project level or escalated to the sponsor or Steercom, depending on who had the power to influence the decisions. Action items were captured at each meeting and reviewed at each subsequent meeting to ensure accountability. This was challenging, as there were always a few people not pulling their weight. A change management plan was developed jointly by the project team to ensure that change was managed proactively across the phases. Critical items included building the imperative for change, identifying and managing stakeholders, building capacity for the change, mobilising for change, and sustaining the change. The project would not have been as effective had we not got full buy-in to the need for a retention strategy, the need for a diagnostics phase, and access to the executives to feed the information back and build the imperative for change. We had stakeholder plans in place for each of key stakeholders who needed to be involved, including the full HC team, the company brand department, the interview and focus group participants, the general managers and business unit managers, the Steercom and Exco. Part of the journey ensured that capacity was built with all the project team members to ensure that they had enough information on talent, engagement and retention to give input and make good recommendations. When the need was identified that other levels of HC staff required additional knowledge and skills, an HR capacity-building programme was initiated to build their business partner and talent management skills. To ensure that there was good understanding and mobilisation around the project, there were presentations at HR conferences, articles in the company newsletter and intranet, and many handouts such as A3 one-pagers on the retention strategy, talent Chapter 2: Talent Retention – Customising Retention Strategies: A Case Study

43

segmentation strategy and the leadership brand. During implementation there were many communication events and supporting material including calendars, flip-files, recognition gifts, and so on. Lastly, there were many skills development processes planned and implemented on the various sub-projects to ensure that the skills and measures were there for sustainability – leadership brand, performance management training, talent management refresher training, system training, induction reviews, and so on. Sustainability was also managed through influencing the right measures and KPIs for talent.

2.9 CONCLUSION

Engagement and retention strategies and plans need to be established with large scale involvement and communication to ensure both understanding and buy-in. The various philosophies and plans need to be integrated across business functions (both Human Capital and line) and activities and standards of behaviour should be clearly defined at all levels. Engagement and retention messages need to be built into the fabric and culture of the organisation, with everyone making it their purpose to build a great place to work.

2.10 REFERENCES

Boshyk, Y. 2000. Business driven action learning. New York (NY): Palgrave Macmillan.

Corporate Leadership Council. 2004. Driving performance and retention through employee engagement – executive summary.

Corporate Leadership Council/Corporate Executive Board. 2008. Improving employee engagement in the economic downturn.

Gatherer J & Craig, D. 2013. Breakthrough Learning. Human Capital Trends: Building a sustainable organisation. Randburg: Knowres.

Grant Thornton. 2012. Grant Thornton International Business Report 2012. [Online]. Available: http://www.internationalbusinessreport.com/Reports/2012/ [Accessed 13 April 2013].

PricewaterhouseCoopers. 2013. PWC’s 16th annual global CEO survey. [Online]. Available: http:// www.pwc.com/ceosurvey [Accessed 13 April 2013].

Ulrich, D, Smallwood, N & Zenger, J. 2000. Leadership brand. Innovative Leader, 9(5).

Watson Wyatt. 2009. Continuous engagement: The key to unlocking the value of your people during tough times. Work Europe Survey 2008–2009.

Wellins, RS, Bernthal, P & Phelps, M. 2005. Employee engagement: the key to realising competitive advantage.

DDi.

[Online].

Available:

engagement_mg.pdf [Accessed 13 April 2013].

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http://www.ddiworld.com/pdf/ddi_employee

Remuneration and Talent Management

3

Introduction to Talent Management 3.1 INTRODUCTION

In 1998 management consulting firm McKinsey identified talent management as a critical business challenge and coined the phrase the ‘war for talent’ (Chambers, Foulon, Handfield-Jones, Hankin & Michaels, 1998). In this ‘war’, it is accepted that not all employees are created equal. Although there may be an excess of potential future employees in terms of quantity, the quality and suitability of these employees for leadership and niche roles is lacking. Scarce skills and senior leadership have therefore become hot commodities in all sectors and industries. One of the reasons that the demand for talent exceeds the supply is that companies are growing much faster than the education infrastructure. Another reason is that the available talent pool is much smaller than the raw numbers suggest. Although the numbers of graduates in emerging markets seem high, research indicates that the quality of their degrees is sometimes not comparable to those obtained in developed countries. For example, McKinsey believes that only 25% of engineering graduates, 15% of finance and accounting professionals and 10% of those with degrees of any kind are qualified to work for a multinational company (The Economist, 2010). The increasingly complex nature of the global economy has also resulted in increased demand for “more sophisticated talent with global acumen, multi-cultural fluency, technological literacy, entrepreneurial skills, and the ability to manage increasingly delayered, disaggregated organizations” (Chambers et al, 1998). Together with the growth of enticing job opportunities in the burgeoning small and medium-sized enterprise sector, and increased job mobility; the war for talent has intensified (Chambers et al, 1998). In order to engage competitively in this war, let alone win it, organisations need to find innovative ways to recruit, reward, and retain high value staff. They also need to find ways of maximising the quality and quantity of their employees’ performance in the midst of turbulent economic conditions. Skills gaps need to be bridged, and continuous development is essential. This handbook explores the concept of talent in the workplace and focuses on the role of remuneration in talent management. There is a plethora of assumptions surrounding remuneration and talent which have not previously been fully interrogated. Does talent require a specialised remuneration approach? Is remuneration sufficiently Chapter 3: Introduction to Talent Management

45

powerful to attract and retain talent? Are talented employees of all ages equally driven by remuneration? Do you reward the same for potential as you would for performance? The answers to these types of questions should fundamentally influence and drive talent management strategies. Before the specifics of talent and remuneration are examined, it is important to understand what we mean when we refer to ‘talent’. This chapter focuses on the concepts of talent and talent management. The business case for talent management is also described.

3.2 DEFINING TALENT

There is no universally accepted definition of what constitutes talent. Different organisations and different sectors define talent in a wide range of ways. Some regard those employees that are the current top performers as talent, while others also classify those with high potential (HIPO) as talent. In some sectors the definition of talent is closely associated with scarce or niche skills. For the purposes of this book, the CIPD’s (2012) definition of talent has been adopted: “Talent consists of those individuals who can make a difference to organisational performance either through their immediate contribution or, in the longer-term, by demonstrating the highest levels of potential.”

This definition of ‘talent’ takes into account both current and potential high performers. In most organisations, one of the core dimensions of talent management is the mapping of employees with the aim of identifying those with future high potential. It may be that all employees are considered as candidates for classification as talent; while in other cases individuals may need to reach a certain hierarchical level in the organisation to be considered high potential. Although it is useful to have a basic understanding of what constitutes talent, each organisation should apply the definition in a way that is fit for purpose (CIPD, 2012). In the quest for sustainable organisational performance, the mapping of talent necessitates a review of not only the people in the organisation, but their specific skill sets as well. Where critical skill sets are in short supply, employees with these skills, or with the capacity to be trained in these skills, are more easily identified as talent. In these instances, the definition of talent is expanded to incorporate specific or niche areas of performance that are critical to success. It is therefore necessary not to use the definition of talent rigidly, but rather to view performance, potential performance and skills on a dynamic continuum that is integrally linked to external and internal context.

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3.3 DEFINING TALENT MANAGEMENT Once you have decided what constitutes talent for your organisation, the next step is to create a talent management strategy. “Talent management is the systematic attraction, identification, development, engagement, retention and deployment of those individuals who are of particular value to an organisation, either in view of their ‘high potential’ for the future or because they are fulfilling business/operation-critical roles.” – CIPD, 2012

Talent management systems vary as a result of their strategic intent and there are a number of perspectives which can characterise a talent management system. Some of the most common perspectives are summarised in Table 3.1 below. Table 3.1  Perspectives which can characterise talent management systems Perspective

Core belief

Recruitment and selection

Retention

Succession planning

Development approach

Process

Include all processes to optimise people

Competencebased, consistent approach

Routine review process based on performance review cycle

Cultural

Belief that talent is needed for success

Look for raw talent. Allow introductions from in-house

Good-on processes such as worklife balance and intrinsic factors that make people feel they belong

PDPs and development reviews as part of performance management. Possibly some individual interventions

Competitive

Keep talent away from the competition

Pay the best so you attract the best. Poach the best from the competition

Good people like to work with good people. Aim to be the employer of choice

Geared towards retention – letting people know what their target jobs are

Chapter 3: Introduction to Talent Management

Allow people the freedom to demonstrate their talent, and to succeed and fail

Develop inhouse if possible; if not, look outside

Individuals negotiate their own development paths. Coaching and mentoring are standard

Both planned and opportunistic approaches adopted. Mentors used to build loyalty

47

Perspective

Core belief

Recruitment and selection

Retention

Succession planning

Development approach

Developmental

Accelerate the development of high potentials

Ideally recruit only at entry point and then develop

Identified groups will be developed for each level of the organisation

Both planned and opportunistic approaches

HR planning

Right people in the right jobs at the right time

Turnover expected, monitored and accounted for in plans

Detailed in-house mappings for individuals

Planned in cycles according to business needs

Change management

Use talent management to instigate change in the organisation

Target areas of shortage across the company. Numbers and quotas approach

Clear development paths and schemes to lock high potentials into career paths

Projects and assignments keep change agents, but turnover of mainstay staff can occur

Can be a bit opportunistic initially until change is embedded

Change agents develop others who align with them and become the next generation of talent

Source: Blass, 2007

Seek out mavericks and change agent to join the organisation

The perspective adopted may change over time in response to both internal/external contextual factors and also to organisational growth and maturity. The implementation and evolution of the talent management strategy itself will also contribute to changing perspectives adopted. Talent management is therefore a proactive, “forward-looking” function providing information and tools to plan for growth, change, acquisitions, and critical new product and service initiatives. In order to remain relevant, talent management strategies need to be constantly evaluated and assessed for contextual application. The strategic intent and perspectives adopted could and should change over time. As a result, it is important to note that talent management is a natural evolution of HR. It is not a “product” or “solution” you can buy off the shelf.

3.4 THE EVOLUTION OF TALENT MANAGEMENT

In order to demonstrate the facts that talent management is both dynamic and contextually dependent, it is useful to have a brief look at the evolution of talent management as a discipline. 48

Remuneration and Talent Management

In the 1970s and 1980s the management of people within organisations was dealt with by “the Personnel Department”. This department was a well-accepted business function and its role was largely limited to recruitment, payroll and benefits (Bersin, 2006). In the late 1980s and 1990s there was a growing realisation that people management had a more significant role to play in organisational success, and the concept of “Strategic Human Resources” emerged. The Personnel Department became known as “the Human Resources (HR) Department”, and its role was expanded to include learning and development, organisational design, the development of “total remuneration” packages which included benefits, share options and bonuses, and serving as a central point of communication for employee health and engagement. Heads of HR were recognised as critical contributors to business strategy and execution, and HR became seen as more than a business function. It was considered a “business partner” – there to support and enable the business (Bersin, 2006). While strategic HR remains a focus today, the concept of talent management has evolved as a means to tackle a new set of strategic issues. Some of these issues include:

•

How to make recruitment processes more efficient and effective by using “competency-based” recruiting instead of sorting through resumés one at a time.

•

How to identify competency gaps quickly to enable the delivery of training, e-learning, or development programmes to fill these gaps.

•

• • •

How to develop managers and leaders better to reinforce culture, instil values, and create a sustainable “leadership pipeline”.

How to manage people in a consistent and measurable way so that everyone is aligned, held accountable, and paid fairly.

How to identify high performers and successors to key positions throughout the organisation to make sure that the organisation is highly flexible and responsive, and

How to provide learning that is relevant, flexible, convenient and timely (Bersin, 2006).

Talent management provides a more integrated and direct approach to the collaboration between HR, performance enhancement and business management in real-time. One of the most significant drivers of change in the evolution toward a talent management paradigm is the impact of globalisation.

3.5 THE CONTEXT OF GLOBAL TALENT MANAGEMENT – THE IBM CASE STUDY The best way to demonstrate the enormous impact of globalisation on talent management is by means of a case study. The evolution of talent management at IBM illustrates how HR has dynamically enabled a shift in organisational design, business operations and overall organisational success. In 2003 Sam Palmisano, the CEO of IBM, started to describe the way in which he predicted multinational corporations would have to change to thrive in an increasingly globalised world. Chapter 3: Introduction to Talent Management

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In an article published in Foreign Affairs magazine (2006:1–2), Palmisano stated: “Together, new perceptions of the permissible and the possible have deepened the process of corporate globalisation by shifting its focus from products to production – from what things companies choose to make to how they choose to make them, from what services they offer to how they choose to deliver them. Simply put, the emerging globally integrated enterprise [emphasis author’s own] is a company that fashions its strategy, its management and its operations in pursuit of a new goal: the integration of production and value delivery worldwide. State borders define less and less the boundaries of corporate thinking or practice.”

The term “globally integrated enterprise” (GIE) was to become critical to IBM’s human capital strategy and was a significant precursor to a world-class talent management strategy. There had already been a shift from running IBM as an international company (where all operations and employees were based in one central location) to a multinational company (where operations and employees were based in numerous global positions). The problem with this shift was that it led to the duplication of roles and infrastructure, and impacted negatively on cost and process efficiencies. Palmisano suggested that a new paradigm shift was necessary – from the multinational organisation to the globally integrated organisation. International

Multinational

Globally Integrated

“We no longer have to replicate IBM from floor to ceiling in every country. We are optimising key operations in the right places in the world – eliminating redundancies and excess overhead – and integrating those operations horisontally and globally. ... This is about doing the right tasks, with the right skills, in the right places.” – Sam Palmisano, 20 May 2005 Analyst meeting

Figure 3.1  The evolution of organisations from being international in nature to being globally integrated Source: Boudreau, 2010a

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Remuneration and Talent Management

In 2003 IBM had approximately 350 000 employees, 90 thousand contractors and tens of thousands of job applicants. Although IBM employees were highly qualified and motivated, they could not provide the global flexibility that was necessary to serve the needs of IBM’s evolving clients. IBM’s workforce systems and decisions tended to be focused on accurately projecting demand and creating a sufficient supply of talent against a multinational model that often operated separately within countries or regions. The movement of talent, physically and virtually, was necessary to address customer demands and compete effectively (Boudreau, 2010a). The IBM HR team concluded that a new approach to human capital was essential. They believed that unless IBM could develop a globally integrated approach to its human resources, the full potential of global approaches in other business areas would never be realised. The bottom line was that skills and expertise needed to be flexible enough to be moved to where business opportunities presented themselves, or more simply, getting the right person, with the right skills, at the right time, place and cost (Boudreau, 2010a). The conclusion that the globalisation of human capital was critical was demonstrated most powerfully by the utilisation rates in the services population. At all times, IBM had slots or vacancies that needed to be filled to complete projects. However, they simultaneously had large numbers of employees awaiting work assignments with essentially nothing to do. There did not seem to be an easy way to determine who was available and suitably skilled to be assigned to projects. Even if the individuals could be identified, there were no global mobility systems in place to ensure that the skills could be assigned and utilised timeously (Boudreau, 2010a). Employees were increasingly frustrated by the lack of global mobility opportunities. IBM had a global footprint but few global development opportunities. In addition, business opportunities in developing markets were becoming more common, but local skills to service these opportunities were scarce. IBM needed to find a way to deploy its more experienced and expensive workforce, located largely in developed countries, to projects in developing countries, while at the same time systematically up-skilling the developingcountry workforce to offer IBM a long-term cost and effectiveness advantage (Boudreau, 2010a).

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IBM’s seven keys to succeed in a globally integrated world of business 1. Understanding the demographics and capabilities of the workforce. 2. Predicting future labour supply and demand.

3. Utilising social networks to increase visibility and application of knowledge across the organisation.

4. Enabling individuals to perform work regardless of location.

5. Facilitating collaboration across traditional organisational boundaries.

6. Driving the rapid development of skills and capabilities to meet changing business conditions.

7. Evaluating employee performance and providing appropriate feedback.

(Lesser, Ringo & Blumberg, 2007)

The solutions to the creation of an IBM globally integrated workforce were proposed and then implemented as part of the IBM Workforce Management Initiative (WMI). Today, WMI allows IBM to manage resources effectively and seamlessly across business units and geographic borders.

3.5.1 The IBM Workforce Management Initiative (WMI)

The WMI is essentially an integrated set of processes and supporting tools designed and deployed to make IBM’s workforce management effective, efficient and competitive. The WMI is based on four key assumptions: 1.

Resource management requires accurate inventory of skills and talent, demand forecast, capacity planning and workforce rebalancing.

3.

Learning requires tight alignment to business objectives, accurate skill assessments, skills gap management and alignment with skills development systems and programmes.

2.

4.

52

Talent and mobility requires a common taxonomy, common profiles for all sources of labour, and decision support.

Supplier or vendor management requires a supplier strategy that is aligned with a resource management strategy (Boudreau, 2010b).

Remuneration and Talent Management

WMI is a series of strategies, policies, processes and tools which enable optimal labor deployment built on a foundation of learning.

Figure 3.2  Challenges and solutions dealt with in IBM’s WMI Source: Boudreau, 2010b

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Between 2002 and 2009, IBM successfully implemented its WMI and created a transparent and comprehensive view of their talent supply, requirements and implications for business strategy. The system was being used by more than 80% of all IBM employees as a natural way for individuals to track and plan their development and performance, for managers to estimate talent requirements and availability, and for IBM’s strategic planners to gather data from this “living market” to estimate future opportunities and challenges. The underlying logic of the WMI was not only to enhance employee utilisation rates and responsiveness, but also to support a stronger “decision science” for talent management by seamlessly integrating demand, supply and development (Boudreau, 2010c). The IBM case study shows how talent management has had to evolve to suit the needs that were associated with globalisation. The investment to implement the WMI was significant (approximately USD100 million over 8 years), but the results have shown this to be a sound investment with excellent returns.

3.6 THE BUSINESS CASE FOR TALENT MANAGEMENT

The business case for talent management is both strong and persuasive. Research by the Corporate Leadership Council (2012) shows that effective execution of talent development directly contributes to increased organisational effectiveness and profitability, resulting in up to as much as 15% improvement in total shareholder return. This finding is corroborated by research conducted by Bersin and Associates (Bersin, 2012), which found that companies with strategic Talent Management programmes are generating more than twice the revenue per employee, have 40% lower turnover rates, and 38% higher levels of employee engagement. It is true that these companies also spend almost twice as much per employee on HR in general; but while talent management costs money, it pays for itself in the long term. In an increasingly challenging and global market, organisations are under intense pressure to differentiate their offerings and achieve a competitive advantage. There is an acknowledgement that the most significant source of competitive advantage now resides in an organisation’s employees. With changing demographic trends, skills shortages, and economic challenges it is critical for organisations to ensure they attract and retain the best human capital. An organisation-wide talent management strategy provides a focus for investment in human capital and places the subject high on the corporate agenda. It can also contribute to other strategic objectives, including: •

Building a high-performance workplace

•

Contributing to diversity management (CIPD, 2012).

• •

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Encouraging a learning organisation

Adding value to the ‘employer of choice’ and branding agenda, and

Remuneration and Talent Management

3.7 CONCLUSION Organisations are increasingly focusing on talent management as the war for talent intensifies. The evolution of strategic HR and the impact of globalisation have made talent management a critical imperative for future organisational success. Current attention on skill shortages and changing demographic trends are also forcing organisations to focus on the talent management issue. It may not be possible simply to go out and recruit new people to meet operational needs. Many leading companies have decided to develop their own people, rather than trying to hire fully skilled workers. This places development at the heart of talent management. It is not sufficient simply to attract individuals with high potential to bridge skills gaps. Developing, managing and retaining those individuals as part of a planned strategy for talent is equally important, as well as adopting systems to measure the return on this investment.

3.8 REFERENCES

Bersin, J. 2006. Talent Management: What is it? Why now? Bersin and Associates. [Online]. Available: http://www.bf.umich.edu/docs/KeyReferenceArticles.pdf [Accessed 6 January 2013].

Bersin, J. 2012. The business case for talent management: Steve Ballmer agrees. Josh Bersin’s Blog –

The Business of Talent. Bersin by Deloitte. [Online]. Available: http://www.bersin.com/blog/ post.aspx?id=7dfcd39a-f3ca-4dcc-ab4c-532a29bcaea7 [Accessed 6 January 2013].

Blass, E. 2007. Talent management – maximising talent for business performance. Chartered Management Institute and Ashridge Consulting. London: Ashridge Business School.

Boudreau, JW 2010a. IBM’s global talent management strategy: The vision of the globally integrated enterprise. Case Study Part A. Society for Human Resource Management. Virginia: SHRM Academic Initiatives.

Boudreau, JW 2010b. IBM’s global talent management strategy: The vision of the globally integrated enterprise. Case Study Part B. Society for Human Resource Management. Virginia: SHRM Academic Initiatives.

Boudreau, JW 2010c. IBM’s global talent management strategy: The vision of the globally integrated

enterprise. Case Study Part C. Society for Human Resource Management. Virginia: SHRM Academic Initiatives.

Chambers, EG, Foulon, M, Handfield-Jones, H, Hankin, S.M and Michaels, EG 1998. The war for talent.

McKinsey Quarterly. [Online]. Available: https://www.mckinseyquarterly.com/Organisation/ Talent/The_war_for_talent_305 [Accessed 25 December 2012].

CIPD. August 2012. Talent management: an overview – Resource summary. Fact Sheet. [Online]. Available:

http://www.cipd.co.uk/hr-resources/factsheets/talent-management-overview.

aspx [Accessed 25 December 2012].

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Corporate Leadership Council Human Resources. 2012. Improving talent management outcomes:

10 talent management insights for the chief human resources officer. The Corporate Executive Board Company.

The Economist. 15b April 2010. Grow, grow, grow. What makes emerging-market companies run.

[Online]. Available: http://www.economist.com/node/15879405/print [Accessed 31 January 2012].

Lesser, E, Ringo, T & Blumberg, A. 2007. Transforming the workforce: Seven keys to succeeding in a globally integrated world. Armonk, NY: IBM Institute for Business Value Executive Brief. 3.

Palmisano, SJ 2005. Analyst meeting. In IBM’s Global Talent Management Strategy. 2010. Virginia: USA. SHRM Academic Initiatives.

Palmisano, S. J. 2006. The globally integrated enterprise. Foreign Affairs, 85(3):127–136.

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4 How to Identify Talent Lomé Koekemoer and Paul Whysall

4.1 INTRODUCTION

Shifts in demographics, differing expectations of generations, increased job mobility, changing job requirements, freedom of choice about where and when to work and globalisation, are just some of the issues forcing organisations to reconsider how they identify and develop their talent. As ‘Baby Boomers’ leave the workforce, key knowledge and skills leave with them. Companies need to outperform their competitors and because of the link between calibre of talent and business success, companies are constantly on the lookout for exceptional talent to drive their competitive advantage. Research has shown that an organisation’s top talent contributes disproportionate value to the organisation’s success: • •

Top performers produce as much as ten times more than the average worker, while they often require less than twice the pay (Sullivan, 2012).

The top performer differential is 2.5 to 10 times that of an average employee (Sullivan, 2008).

It is therefore clear that to survive and thrive, organisations need to focus on the way that they identify and develop their talent. Identification and development are two separate concepts, where one informs the other. Development activities will show little value if the identification process is not facilitated successfully to begin with. An organisation should be able to classify or categorise employees based on their potential to succeed at higher levels or in critical roles within the organisation. This process of classification is essential to fully grasp the range of development needs for each employee.

4.2 THE TALENT IDENTIFICATION PROCESS

Most companies have some kind of talent identification process in place. However, the maturity and usefulness of these processes varies across different companies, in that they are not always applied consistently and are not always communicated effectively to employees. Lack of a common language or standards when it comes to talent identification results in inconsistency, as decision-makers tend to base their judgements on subjective Chapter 4: How to Identify Talent

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perceptions of what is important – and these vary from manager to manager. Another common mistake made by organisations is the inability to measure the criteria developed to identify talent. There should be a clear understanding of what is being measured, and how. There is, then, a grave need for alignment, consistency and measurability with regard to the identification of talent. Following the process depicted below will help the organisation to attain success (see Figure 4.1).

Determine talent criteria

Ensure talent criteria are measurable

Create tools to measure talent criteria

Communicate criteria and ensure consistent application thereof

Figure 4.1  Talent identification process

4.3 DETERMINING TALENT CRITERIA Talented employees are individuals with the ability to contribute substantially to the current and future performance of the company. They are the employees who have the ability to take the organisation to the next level and can therefore be deemed the future leaders of the organisation. Identifying talent within the organisation can be quite a daunting task. Best practice suggests that talent criteria should focus on the following: •

Alignment with the short- and long-term strategy of the business

•

Use of a transparent set of indicators defining the organisation’s star talent qualities.

•

Use of competencies to define the typical behavioural traits of talent within the business, and

4.3.1 Alignment with the business strategy

The characteristics that make an employee a top performer could differ per organisation, and often even per business unit or department. In certain organisations, creativity and innovation will help an employee to outperform his or her peers, whereas in another organisation, it may be resilience and adaptability. Criteria refer to qualities, characteristics, skills, and abilities that individuals need to exhibit in order to outperform their peers successfully. To begin the process of determining the talent criteria for a given organisation, it is best to start with the organisation’s business strategy. Listed below are a few questions that could be asked during this process. It is best to utilise focus group discussions with groups involving human resources, executives, and line managers, as 58

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this should enhance commitment from these important stakeholders when the criteria are applied and utilised. The following questions need to be answered: •

What does the company look like now?

•

What will it take to execute the strategy from a talent perspective?

• • • • • • • • •

What will it look like in the short-term future? What is the company’s strategy?

What are the critical positions for the company’s future? What will it take to operate in these positions?

What type of people do we want for these positions?

What experience, skills and knowledge will they need? How will they behave and perform?

What competencies will they need to exhibit?

What does the business need to enable the future strategy?

4.3.2 Use of competencies

Competencies are employee characteristics that lead to behaviours that are associated with high performance. These competencies are clustered together into an integrated framework to form a competency framework. Competencies are usually identified through a process of competency modelling, in which strategic role-players are asked to identify and articulate the leadership and management competencies that are needed to attain the business strategy going forward. Competencies are usually described in terms of observable behavioural indicators, and are therefore very useful in the identification of high potential employees. In the course of their talent management work over almost 20 years, MAC Consulting, one of South Africa’s leading consulting firms, has identified the following generic competency framework that can be applied in many organisations for employees at managerial level (see Table 4.1). Typically, a generic competency framework such as the one below will need to be adapted to the specific organisation and managerial level targeted, but it represents a useful base from which to start. Table 4.1  Example of competency framework

Functional competencies (demonstrated knowledge, skills and abilities) Strategic orientation

Takes a broad and future perspective in order to anticipate

local and global trends and to ensure the company’s sustainable Business insight

profitability and growth.

Understands key business drivers and the company’s value chain, business context and dynamics.

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Functional competencies (demonstrated knowledge, skills and abilities) Entrepreneurship and innovative thinking Delegation and empowerment Negotiating

Generates creative and imaginative solutions to problems, sees

new opportunities, and shows good judgment about which will work.

Strives to facilitate others’ contributions, share responsibility

and leadership, nurture capability and long-term development of others, and displays a willingness to trust.

Negotiates skillfully in situations with both internal and external stakeholders, by displaying the ability to balance both assertive

Implementation and follow-through Effective business communication Decision-making

and diplomatic behaviour.

The ability to execute set objectives and plans and to utilise all resources on one’s own, and/or through others, efficiently.

Effectively expresses oneself verbally and in writing with a view to ensuring that a common understanding of the message is established in the context of business interaction.

Passes sound judgment by using knowledge and experience and

by considering opportunities, risks, relevant data and alternative Customer orientation

solutions.

Meets customers’ needs by providing a world-class service,

optimal product performance and efficient support systems.

Behavioural competencies (describe how people with the appropriate skills and knowledge should behave) Talent optimisation

The ability to assess the skills, performance and potential of

subordinates, to encourage staff development with a view to Motivating others

optimising their talent and setting them up for success.

Encourages and energises or inspires others to perform their role effectively, and helps maintain an inspirational work climate even

Action orientation

in the face of adversity.

Focuses on getting the job done and is energised by challenge and hard work. Not fearful of making decisions, seizing opportunities

Managing transformation and change Transformational leadership

or taking calculated risks.

Demonstrates the ability to champion new initiatives while setting an example in order to drive and manage change.

The ability to lead people by offering individualised attention,

stimulating creativity, and inspiring them to maximise their full potential.

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Behavioural competencies (describe how people with the appropriate skills and knowledge should behave) Collaboration

Actively builds relationships between teams, business entities, suppliers and markets, leveraging relationship to enhance

collaboration, ensure internal alignment and build strategic Resilience

alliances.

Pursues everything with energy, drive and a need to finish. Seldom gives up before finishing, especially in the face of resistance or

Self-management

setbacks.

Diversity management

others.

The ability to recognise own emotions and its effect on self and Extensive insight, knowledge, experience and support for diversity management aligned to transformation framework.

4.4 TYPICAL CHARACTERISTICS OF STAR TALENT

Even though “talent” or “potential” is often defined specifically for each organisation, High Potential employees often display universal traits within any organisation. High potential employees are individuals who have been assessed as having the ability, organisational commitment and personal motivation to rise to and succeed in more senior positions in the organisation. These traits are often hints to the talent decision-makers that they have what is required to be future leaders of the organisation. Some of these universal characteristics have been listed below. •

Has well-developed self-awareness.

•

Has the ability to develop and communicate a vision and inspire others to follow it.

• • • • • • • • • • •

Possesses emotional intelligence.

Lives by example and is values driven. Has good interpersonal skills.

Encourages creativity in others.

Makes good decisions and is able to obtain the buy-in on these decisions from others. Has a strong drive towards results. Is adaptable and agile.

Has a proved track record for accomplishing impressive results. Has the ability to take charge and make things happen. Others trust this individual to lead projects.

Is able to consider the strategic perspective of a situation.

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4.5 MEASURING POTENTIAL 4.5.1 Performance versus potential Organisations cannot assume that top performers are the “top talent” for the future. High potential is very different from high performance. High performers may very well be at the top of their game now, but it may be uncertain as to how they will perform in the future if given another challenge. In an analysis of talent management outcomes, the Corporate Leadership Council (CLC, 2000) found evidence that substantiated the notion that employee performance does not predict future potential. In their research, the CLC found that only 29% of an organisation’s current high performers have the potential to rise to and succeed in more senior, critical positions. Potential is about future performance, not past performance. It is about an individual’s ability to quickly adapt to changing circumstances, and their ability to learn and master a new job. Employees with high potential often demonstrate that they are eagerly and rapidly learning, growing and taking on new challenges. They tend to outperform their peers because of their ability to take on new assignments successfully; to learn quickly; to act in an emotionally mature way when dealing with others; and because they display high levels of motivation and engagement. Although performance is very different from potential, performance can often be used as an indicator of potential. An individual’s demonstrated capacity to learn and adapt to new challenges can be observed through his/her performance in the current job. Performance could be used as an initial screen to narrow the field of highpotential candidates. Potential is often best demonstrated through performance in different assignments, and in different situations with different managers, as consistent performance in this instance is easily translated into an individual’s ability to adapt to different situations and succeed in various settings. It is therefore not a prediction of competence, but a current assessment of resilience and adaptability. According to the CLC (2000), most high performers fall short of being high potentials because they lack sufficient levels of aspiration, engagement or ability. A deficiency in any of these three categories increases the likelihood of failure at the next level: •

•

•

62

Engaged dreamers: Five percent of high performers who are not high potential are employees with a great deal of engagement and aspiration, but only average ability. Their probability of success at the next level is virtually zero. Unengaged stars: Forty-eight percent of high performers who are not high potential are employees with a great deal of aspiration and ability, but do not fully believe in their work or organisation. They have only a 13 percent probability of success at the next level. Misaligned stars: Forty-seven percent of high performers who are not high potential employees are employees with a high level of engagement and ability, but lack the drive and ambition for success at the next level. They have only a 44 percent probability of success at the next level.

Remuneration and Talent Management

4.5.2 The use of assessments to measure potential While a series of good performance appraisals should play a role in high potential nominations, too often organisations rely on this as their primary source of information when identifying talent. Organisations need to carefully assess factors other than just performance, including behavioural preferences, aptitude, emotional intelligence, engagement and career aspirations. Organisations with successful talent identification processes typically supplement the analysis of performance information with reliable and validated measurement tools such as multi-rater assessments, psychometric tests and talent review meetings. Multi-rater assessments are used to gather information on a variety of observable behaviours from a variety of sources and are very useful in measuring high potential criteria, especially if focused on the identified competencies and their relevant behavioural indicators. Psychometric assessments could also be used to measure behavioural predispositions, thought agility, intellectual capacity, strategic orientation, motivation and emotional intelligence, all of which are useful pieces of information when identifying high potential. There are various psychometric assessments available that have been classified as valid and reliable and utilise South African norm groups.

4.5.3 Talent review meetings

The most important tool for identifying potential employees is the talent review meeting. Talent review meetings are structured to review employees, their performance and their potential. During these meetings decision-makers utilise the defined talent criteria to review, discuss and make decisions about the talent status of employees and what development steps are to be taken with each employee going forward. Given the emotional connection that decision-makers often have towards their employees, it is wise to have these meetings facilitated by a neutral party, who can challenge the thinking of the decision-makers and verbalise things that might otherwise have gone unsaid.

4.6 COMMUNICATING TALENT IDENTIFICATION CRITERIA TO EMPLOYEES

There is an ongoing debate about whether or not employees should be told of their talent status. Some believe that transparency regarding employees’ talent status can create resentment among those left off the high potential list and can cause a sense of entitlement among the select few who did make it onto the list. Others, believe that keeping the status confidential allows for more flexibility in terms of making changes to the high potential list. It is, however, naïve to think that talent status information can be kept a secret, since high potentials are easily identified as a result of the development opportunities Chapter 4: How to Identify Talent

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that are often afforded to these individuals. Also, failing to tell talented people that they are valued by the organisation as top talent may cause them to seek opportunities with other organisations. Evidence has also shown that the level of transparency and formality in identifying high-potential talent has a direct impact on retention numbers and organisational commitment. It seems that formal or transparent identification processes enhance a feeling of self-worth and enhance the employee’s commitment to the organisation. The Center for Creative Leadership (Smith & Campbell, 2010) surveyed 199 leaders attending leadership development programmes regarding the talent management activities of their organisations. They found significant evidence proving the value of formal identification of high potentials (see Figure 4.2 for detail on how it feels to be formally identified as a high-potential employee). How does it feel to be formally identified as a high potential?

This “word cloud” counts the frequency of words used by survey participants to describe their feelings and alters the word colour based on most frequently used to the least frequently used. From this visual display, it is clear that high potentials feel “good” about being formally identified.

Figure 4.2  How does it feel to be formally identified as a high potential? Source: Smith & Campbell, 2010:15

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The benefits of openly communicating high potential status are (Sullivan, 2011): • • • •

Development becomes the shared responsibility of all involved, not just Human Resources. Transparency can boost motivation in terms of visible opportunities.

A perception of fairness regarding the talent management process is enhanced, and Quality assurance processes are placed under great scrutiny by all involved.

Perhaps the more important question to ask is not whether or not talent status should be kept confidential, but what information should be shared and how this should be communicated. Managers should be encouraged to have meaningful development and career conversations with all their employees, and should therefore communicate to employees their growth potential without using unnecessary labels. A candidate may therefore be informed that he/she has potential without clarifying the specific level of potential. Once an organisation has decided on the level of transparency of talent information, a clear communication strategy should be developed. Here are some reflections that could be considered: • •

• •

All employees should clearly understand the criteria for high-potential status. Criteria should be consistently communicated (and applied) throughout all business units, so that perceptions of fairness across all business units are encouraged. It is advisable that the message that high potential status does not guarantee promotion and also is not permanent is reinforced regularly, and Any new requirements for high potentials (for example, new software training) should be timeously communicated to all employees.

4.7 TALENT IDENTIFICATION TOOLS 4.7.1 The nine-box matrix

The nine-box grid or matrix was developed and used by General Electric in the late 1960s to enable the organisation to assess the potential of employees in its business and to prioritise their investment and overall talent strategy. It is claimed that it is based on the Boston Consulting Group’s “Boston Box” of business or product potential, applied to employees. This technique is a simple tool that can be used to define talent in that it allows leaders to categorise both performance and potential levels for a group of employees. The nine-box matrix has three horizontal boxes that assess performance and three vertical boxes that assess potential. A combination of these make up the box that the employee is placed in within the grid (see Figure 4.3 below). Chapter 4: How to Identify Talent

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High

POTENTIAL

Wasted Potential

Growth Employee

Star Talent

Problem Performer

Essential Performer

High Impact Performer

Poor Performer

Dependable Performer

Seasoned Pro

w Lo

High

PERFORMANCE Figure 4.3  Nine-box matrix (MAC Consulting ©)

Putting the nine-box matrix to use MAC Consulting utilises the following process when facilitating the nine-box matrix process for clients: 1.

Identify a group of employees for which the matrix will be used.

3.

Ask each manager to fill in a nine-box grid for his or her own employees.

2. 4. 5. 6. 7. 8.

Present the tool and process to the relevant managers before the nine-box tool is completed to ensure they all understand the tool and buy in to the process. Consolidate the grids received from all the managers.

Facilitate a group discussion with the management team (and other important role players) focusing on the nine-box grids of each manager’s department. Ask the sponsor manager to explain the rationale for the listings in the box.

Once the group is satisfied with the nine-box grid for the current department, facilitate a discussion regarding development needs and potential next steps.

Integrate the information contained in the nine-box grids, specifically pertaining to talent classifications, into other talent management processes (succession planning, development planning, career management etcetera).

Every individual has unique capabilities and something to offer. This is translated into performance when the talent that the individual has to offer equals the skills that are required for a job to be completed. From a talent management point of view, employees 66

Remuneration and Talent Management

are evaluated according to their performance and their potential. Based on the rating of the individual’s performance and potential, the individual can be placed into one of the nine matrix blocks. Each of these blocks will be discussed below:

Figure 4.4  Nine matrix blocks

4.7.2 The Drotter talent pipeline According to Stephen Drotter (2011), the operating definition of leadership is to make performance happen. True leaders take accountability for the success of other people, and not just for themselves. It is critical to test leaders on their ability to manage additional challenges while sustaining their own performance and that of others. Drotter Chapter 4: How to Identify Talent

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developed the leadership pipeline as a succession blueprint for moving leaders through a well-planned pipeline that intrinsically tests them in their current levels and prepares them for success in levels above. Included in the model are six transitions or passage points. At each of them, a promoted leader has to shift to a new layer of responsibility and performance. The Drotter Talent Pipeline model is displayed in Figure 4.5 below. Manage Enterprise

#7

Manage Group #6 Manage Enterprise Function Manage Enterprise Sub-function #4

Manage Business Manage Multifunction Manage Function Manage Managers

#2

Manage Others

Manage Self Operational/Technical Professional Manage Self

#5

Manage Self Leading Expert/ Consultant

#3

Manage Self Principal Expert/ Consultant Manage Self Expert/Consultant #1

Figure 4.5  The Drotter talent pipeline Source: Adapted from MAC Consulting, 2012

The model is based on differentiation of required outputs in that all levels have to deliver, but each has to deliver something different. As one can see, the Drotter talent pipeline follows a systematic process in order to prepare leaders for the next position.

4.8 INTEGRATION WITH OTHER TALENT MANAGEMENT ACTIVITIES Finding, placing and developing talent are all critical challenges for today’s businesses. Organisations must work to integrate their talent initiatives, spanning the lifecycle of the employee from recruitment, hiring, on boarding, development and career growth. Organisations cannot function in silos and hope to build an agile, productive workforce. The need for integrated talent management is greater than ever. In the same way that a successful business strategy is underpinned by an effective HR strategy to be successful, the talent strategy must be aligned to the business, and both drive and deliver business directives. Strategic talent management ensures that effective and timely people strategies are in place to reduce the business risk of being under human-capitalised. 68

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PageUp People (2008) believe that whilst each of the functions of HR has value in its own right, it is their integration that multiplies value to the organisation. Integrated talent management shifts HR from an incongruent set of specialised functions to an interdependent series of connected activities that provide leverage at each stage. Integrated talent management is a holistic process that connects all components of talent management. Why is it important to have a system of HR functions that are closely and clearly integrated and supported by a well-designed technology platform? Listed below are some benefits for each of the important stakeholders (PageUp People, 2008).

Managers • • •

Access to information is direct, current and relevant.

Less time is spent per manager per review period, and

Individual, team, departmental and organisational goals are closely aligned.

Human resources • • •

HR can proactively develop workforce skills to meet current and future needs. Administration time is considerably reduced, and

Allows HR to focus on strategic priorities and harness executive attention.

Employees • • •

A clear understanding of performance expectations and support needed to achieve these. Less time spent per employee per review period, and

Provision of opportunities to learn, grow, and remain engaged.

4.9 CONCLUSION

Talented employees are a commodity that is much too valuable for companies to lose. Being able to retain the organisation’s talented employees, assumes that the organisation knows who these talented individuals are. This chapter focused on the tools, methodologies and activities that could be used to enhance the process of identifying core talent within the organisation. It is not an easy task and often builds the foundation for all other talent management activities. The key things to remember when identifying talent are to establish clear talent criteria that are aligned to the business strategy; to implement these criteria in a consistent way across the business; and to communicate the criteria in a transparent and effective way. Chapter 4: How to Identify Talent

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4.10 REFERENCES Corporate Leadership Council. 2000. Toward effective management of high-potential employees: Identifying and developing early- and mid-career talent. Washington (DC): Corporate Leadership Council.

Drotter, S. 2011. The performance pipeline: Getting the right performance at every level of leadership. San Francisco (CA): Jossey-Bass.

MAC Consulting. 2012. Consulting reports. Rosebank: MAC Consulting.

PageUp People. 2008. Integrated talent management. Melbourne: PageUp People.

Smith, R & Campbell, M. 2010. High-potential talent. Greensboro (NC): Centre for Creative Leadership.

Sullivan, J. 2008. HR in the year 2015 – A walk through the future of HR technology. IHRIM Journal, 6–13.

Sullivan, J. 2011. Succession planning: Why releasing the names of high potentials is a smart move. 14 November. [Online]. Available: http://www.ere.net; http://www.ere.net/2011/11/14/ succession-planning-why-releasing-the-names-of-high-potentials-is-a-smart-move/ [Accessed 29 January 2013].

Sullivan, J. 2012. 10 predictions for 2012: The top trends in talent management and recruiting. Guild HR.

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5 Components of an Integrated Talent Management Strategy 5.1 INTRODUCTION Just as there are varying understandings of what constitutes talent, there is a multitude of functions and disciplines that could be included under the talent management umbrella. The selection of which components to include in your talent management programme is essential to achieving your strategic intent, but an area which is commonly overlooked is how these components are integrated. A set of disparate functions and tasks that are loosely grouped together with no cohesive and integrated framework has a limited chance of success. This chapter is based on recent research published by the Corporate Leadership Council (CLC, 2012a) and describes the components and integration of a best practice Talent Management Strategy.

5.2 INTEGRATED TALENT MANAGEMENT

The selection of components for inclusion in a talent management strategy can be confusing. To assist organisations in this selection process and also to meaningfully simplify, cluster, and integrate these components, the Corporate Leadership Council (CLC 2012a) has designed an Integrated Talent Management Suite. This suite includes components that address the five core talent management challenges. Attract Critical Talent

Manage Performance

Establish Functional Success

Develop and Engage Talent Overcome Succession Risks

Figure 5.1  The five core talent management challenges Source: CLC, 2012a

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Figure 5.2  The core components of the CLC’s integrated talent management suite .

Source: CLC, 2012a

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The core components of the CLC’s integrated talent management suite are illustrated in Figure 5.2 above and each component is briefly described.

5.2.1 Establishing a functional foundation for success Building strategic advisor capabilities

For HR to fulfil its function as a business partner and earn a seat at the strategy table, all HR Business Partner (HR BP) employees must have the business acumen, functional expertise, and advisory capabilities necessary to act as true strategic partners to the line. Internal and external development programmes should be considered to ensure that HR BPs are adequately knowledgeable in the specific industry/sector within which the organisation operates. Without this functional knowledge, it is hard for the HR BPs to be seen as partners instead of transactional personnel managers. It is also fundamentally important for all HR BPs to understand the full integrated talent management programme and be able to help contextualise and implement the programme within their business units.

Workforce and talent planning

Workforce and talent planning must be integrally linked to organisational strategy. It is only possible to plan for human capital requirements once you have a good idea of the business goals and strategic intent of the organisation. The aim is to understand and close the gap between current and projected talent needs and ensure that the right objectives are translated into strategic HR priorities.

Integrated talent management strategy

It is important to have a well-articulated and documented integrated talent management strategy. This strategy should be transparent and should be socialised and implemented by HR and line. The design of the strategy and management of the overall talent programme should be the responsibility of HR, but it is essential that talent management itself is owned by business and not HR. All talent management processes and activities should be co-ordinated and integrated globally.

5.2.2 Recruiting critical talent segments Employment Value Proposition (EVP)

The EVP is a description of the relationship and expectations between employees and the organisation. It expresses what the employee can expect to receive from the organisation in return for performance in the workplace. There are concrete components to all EVPs which communicate the rewards and benefits employees can expect; and there are also softer, more intangible components that deal with the employee experience. The EVP Chapter 5: Components of an Integrated Talent Management Strategy

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should act as a reference point for people management processes and behaviours; and should reflect the same ‘brand values’ that every employee needs to support to deliver on the organisation’s customer promise (brand integrity). The EVP is critical to attracting and retaining talent. It must resonate with the lived reality of the workplace if it is to be believable and have integrity. You may attract talent with an EVP which sounds fantastic, but if it is not a valid reflection of the workplace, talent will soon become disillusioned and will become disengaged or leave. The EVP must be effectively communicated and delivered to both current employees and critical talent segments in the external labour market.

Talent sourcing

On-line recruitment tools and sites have led to huge pools of candidates, but whilst job application volumes have increased, the quality of applicants has decreased. Research demonstrates richer yields from passive candidates (some of the best candidates are already employed, too busy to job hunt, or just not aware of other opportunities) and internal sourcing capability. Building talent pipelines has become a deliberate and principled approach to talent sourcing which requires a very different perspective from the transactional recruitment paradigm of the past. Effective talent sourcing uses data to select sources that yield quality hires for a given position and actively seeks to influence strategy. The next talent sourcing case study shows how essential talent sourcing is. Talent Sourcing Case Study McAfee – Community Prequalification

McAfee is the world’s largest dedicated security technology company. It has implemented an innovative and highly successful system to build talent pipelines and source talent: • Recruiters individually select high-quality prospects to join an exclusive online talent community. •

All prospects must meet a high quality bar, which maintains the caliber of this talent pool.

•

All members receive access to general news and updates.

• • • 74

McAfee identifies key talent segments for whom to prioritise communication and creates groups within the community for these segments.

McAfee uses simple criteria to identify the most relevant content for newsletters sent to specific groups.

Senior executives drive industry-focused discussions, which encourage prospects to return to the community and remain interested in opportunities at McAfee. Remuneration and Talent Management

• • •

Interaction within the community allows McAfee to gain insight into prospects’ backgrounds and experiences and build rapport with them, which recruiters can use to create compelling offers. Simple guidelines help senior executives to maximise the quality of their prospect interactions with minimal time investment. Results: Increased candidate shortlist information quality, decreased time to fill vacancies, and displaced agency spend.

On-boarding

The problems with the success and integration of new hires are commonly known. Although the statistics vary, the themes are common, namely: •

Half of all senior outside hires fail within 18 months in a new position.

•

It takes an average of 18–22 weeks to reach full productivity for professional staff.

Done correctly, on-boarding benefits include improved productivity, faster acculturation, greater employee retention, increased visibility of new hires, improved company brand, and increased pride in the organisation. Traditional on-boarding is similar to orientation – it has a short duration (average one month), and is geared toward administrative tasks associated with new hires. It is necessary to move from traditional on-boarding to strategic on-boarding, which is fundamentally about creating a feeling of connectedness between the new hire, relevant stakeholders, and the organisation as a whole. One of the defining characteristics of strategic onboarding is that it engages talent before the first day and throughout the first year of employment. It also builds the right mix of relationships early on to facilitate new hire performance, engagement, and retention. On-boarding Case Study Oracle–Sun Microsystems – Innovation Pre-Day 1

Sun Microsystems, Inc. was a company that sold computers, computer components, computer software, and information technology services. Oracle acquired Sun Microsystems in 2010 and adopted many of its HR best practices. One area in which Sun Microsystems was particularly effective was on-boarding:

• •

The on-boarding process started as soon as new hires accepted their job offers.

They could log on to the company’s new-hire web site, where they learnt about Sun by playing one of two video games: “This started with the need to target college graduates who grew up with computers, and the missing generation we have from not hiring as much during the dot-com bust”.

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•

New hires could watch a welcome video from the CEO and connect with other employees via social networks by posting profiles and having conversations.

•

New hires received notes thanking them for joining Sun with a packet of flower seeds attached, symbolising growth at the company, and a backpack with the Sun logo.

•

New hires filled out their paperwork and forms online and checked off what they had completed on a task list.

5.2.3 Identifying, developing and engaging talent High-potential identification

Segmenting the workforce to enable the identification of employees with high potential is a key component of building a talent pipeline. The organisation needs a definition of future high potential that is differentiated from current high performance and consistently applied. Bothe HR and line need to be involved in the identification of employees with high potential and to discover rising talent and leaders.

Talent development

Learning and development of talent is one of the most important components of an integrated talent management strategy. The development needs to be customised and experiential in nature. In the globally competitive workplace, leaders with global experience are highly sought after and the use of international assignments as a development tool is seen as a great attraction and retention strategy. International assignments, however, are very costly and research shows that after two assignments, the marginal returns begin to diminish. Organisations are increasingly making use of ‘Crucible Experiences’ as alternatives to international assignments. ‘Crucible’ refers to an intense, meaningful and often transformational experience which shakes and shapes your life. These experiences can be used to develop leadership by providing leaders with development experiences that push them outside of their comfort zones and into unfamiliar environments. Crucible experiences do not necessarily imply global mobility. They could include: •

Experiences outside of your area of expertise.

•

Turning around an underperforming project.

• • • • 76

Experiences in a new market.

Experiences in a new business.

Managing an underperforming team.

Managing a critical project on a fast cycle.

Remuneration and Talent Management

Talent Development Case Study Schlumberger Limited – Non-Obvious Development Moves Schlumberger Limited operates in the oil and gas services sector. It employs approximately 110 000 employees and uses non-obvious development moves as part of its talent development strategy: •

Schlumberger places its leaders in unfamiliar situations by incorporating nonobvious moves into their mobility plans.

•

Its leadership strategy includes the following assumptions:

•

• • •

Schlumberger’s CEO emphasises the importance of early development moves and holds business unit leaders accountable for offering non-obvious move opportunities in each high potential employee’s annual performance review.

◦ Short-term risks in developing leaders should be systematically encouraged. ◦ A culture of risk-taking has to be driven from the top of the organisation. ◦ Risk-taking early in careers minimises the risk of development moves later in careers. As part of business unit succession plans, managers nominate at least three successor candidates for each leadership position. These “ready in the future” candidates are then considered for non-obvious move opportunities as vacancies appear in other business units.

Non-obvious moves include cross-business or cross-geography moves, and developmental stretch moves.

Talent engagement and retention

Low levels of employee engagement lead to decreased discretionary effort and performance, and decreased retention and intent to stay. In addition, disengaged employees have low resilience to organisational change. Engagement and retention strategies are thus crucial components of the integrated talent management strategy. In terms of best practice, research suggests focusing engagement strategies away from just driving engagement in the present to building engagement over the long term. This can be achieved by building “engagement capital”. According to the Corporate Leadership Council (2011), engagement capital refers to the amount of commitment, discretionary effort, and intent to stay that employees exhibit given the combination of their past experiences, present events, and expectations about the future. Seven areas of focus are identified to build engagement capital: • • •

Role clarity

Career management

Performance management

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•

Networking

•

Values (CLC, 2011).

•

Recognition and noncash rewards

•

Work environment

Talent Engagement and Retention Case Study The MITRE Corporation – Networking

The MITRE Corporation is a non-profit organisation that specialises in systems engineering, information technology, operational concepts, and enterprise modernisation. Its use of networking as an employee engagement strategy has been exceptionally successful: •

Employee-led networking

◦ MITRE provides a platform to support informal networks, but allows employees the freedom to facilitate their own networks rather than micromanaging them. MITRE trusts that employees know the information required for success in their jobs and encourages them to freely join helpful networks. ◦

•

Evidence-based filters for networking

◦ MITRE’s Information Infrastructure (MII) houses all the knowledge residing in the organisation; there is a page for every employee, project and business unit. ◦

◦

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For example, MITRE’s technical exchange meetings (TEMs) are knowledgesharing sessions managed entirely by employees wishing to up-skill on a certain topic. The role of the knowledge management team is to facilitate the meetings by advertising them and to help capture the knowledge shared in those meetings.

Employee pages auto-populate with information such as contact details, communities they participate in, and every project on which they have worked.

To help employees source quality networks, the search engine’s Expertise Finder returns experts associated with a search term based on the amount they have published on the topic or the number of connections their name has to that topic.

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•

Extending networks externally ◦

◦

MITRE’s online social networking platform, “Handshake”, extends outside organisational boundaries so that employees can easily establish highvalue connections within and beyond the company.

In a similar way to LinkedIn, employees create profiles indicating their work and expertise. The profiles allow employees to connect with relevant internal and external contacts quickly. Groups can also create pages to collaborate on specific topics or projects.

◦ Handshake also supports ongoing relationships with relevant external experts such as clients, industry professionals, vendors, academia, or former employees.

The result is high engagement, with employees recognising MITRE’s commitment to their success and feeling connected to the organisation. MITRE outperforms the benchmark on its engagement survey results, and has been on Fortune’s “Best Places to Work For” list for nine consecutive years. Talent Engagement and Retention Case Study Wal-Mart – Recognition Wal-Mart operates more than 10 000 retail units in 27 countries. Their employees are known as associates, and employee recognition is a key driver of their employee engagement strategy: •

Wal-Mart’s annual shareholder meeting is held in its home state of Arkansas, USA.

•

The meeting itself is a culmination of four days of events arranged strictly for Wal-Mart associates.

•

• • • • • •

The company hosts roughly 16 000 attendees including associates, retirees, shareholders, executives, analysts and the media. There are tours and parties and pep rallies.

It serves as a paid trip for the store associates selected to attend.

Each year, the company allows half of its USA. store base to send several attendees. All expenses are paid including airfare and housing at the University.

Meals are taken care of and all associates are paid for their time away as though they were at work, including overtime.

Being selected to attend the annual shareholders’ meeting serves as a powerful source of employee engagement and creates a sense of brand pride and loyalty which is world renowned.

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Talent Engagement and Retention Case Study JetBlue Airways – Values-based Behaviour JetBlue Airways is a low-cost airline with its headquarters in New York, which employs 12 000 staff. At JetBlue all employees are expected to act as brand ambassadors by sharing responsibility for representing and contributing to the JetBlue brand, as well as demonstrating values-based behaviour. •

Three primary principles have helped the brand ambassador approach generate sustainable employee engagement: ◦

◦

◦

• •

• • • •

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Open, dynamic communications reinforce the brand message and inform employees about the organisation, enabling them to represent the brand accurately. This is achieved by regular communication of brand messages through diverse channels, and providing extra, targeted information based on employee interests. Role modelling leadership builds credibility for the brand, convincing employees of the brand’s authenticity and value. This is achieved by providing transferable leadership training, defining expectations, and aligning policies to values

Opportunities for brand involvement facilitate employee action and a sense of shared ownership for the brand, fostering a long-term employeeorganisation connection.

JetBlue provides employees with opportunities to contribute to the tangible, recognisable aspects of the brand (for example, naming planes), creating a sense of organisational pride and identification. JetBlue also formally enlists employees’ help in maintaining organisational values through frontline Values Committees, which demonstrate the impact employees have on the organisation. These Values Committees are peer-elected groups of frontline employees within each of JetBlue’s major departments. They are tasked with maintaining JetBlue values and culture and work directly with senior leadership. Leaders receive clear input, information and feedback.

Frontline employees see their impact on broader organisational success.

As a result of its brand ambassador approach, JetBlue has seen exceptionally high engagement among its employees.

In turn, highly engaged employee brand ambassadors have helped to produce impressive business results and external recognition for excellent customer service. Remuneration and Talent Management

5.2.4 Overcoming leadership succession risks Succession management Actively managing succession unlocks the potential for business direction, continuity, retention of high-value talent and institutional knowledge. It is not enough to focus merely on replacement planning. Succession needs to be recognised as a systemised business imperative; critical for long-term planning, capability development and execution of business strategy. Over time, it should become a continuous process integrated with an organisation’s business planning (Schroeder-Saulnier, 2010). As part of an integrated talent management strategy, succession planning should address the most urgent talent management challenges impacting leadership team quality.

Leadership transitions

Leadership transitions are a common fact of organisational life. It is imperative that leaders receive support during these transitions and that they determine how they need to adjust their leadership behaviours and style to navigate their new environment/role. Research conducted by the Corporate Leadership Council (CLC, 2012b) shows that 46 percent of all leaders in transition under-perform. It is extremely expensive and disruptive for an organisation to see leaders fail or to have leaders who are ill equipped for their positions. As a result, companies are beginning to recognise how critical it is to help their leaders make a transition through the more difficult situations. It is essential that a structured and purposeful approach to leadership transitions is included in your organisation’s integrated talent management strategy. The approach will vary depending on the level of the leader and the nature of the organisation. Coaching, mentoring, education and upskilling are just some of the interventions that can be considered to promote successful leadership transitions.

Leader-led development

Research shows that roughly 70 percent of all learning and development is acquired through on-the-job activities like taking on a new task, solving a difficult problem, trying a new approach, applying new skills or competencies. Twenty percent comes from working with one’s own leader, an executive coach, peer advisors, or role models. The residual 10 percent includes classroom sessions, reading materials, on-line training, and self-study workbooks (Kayser, 2011). Many organisations rely far too heavily on classroom based learning activities such as executive leadership courses. Leader-led development (LLD) should be recognised as an important component of integrated talent management. LLD is defined as “an ongoing and dynamic series of job related interactions between a more senior-leader and a leadership development teammate designed to improve the Chapter 5: Components of an Integrated Talent Management Strategy

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teammate’s performance and increase his/her readiness for future leadership roles” (Kayser, 2011). Senior leaders should be expected to act as coaches to their teams and champion the development of high potential employees.

5.2.5 Managing employee performance Identifying business-critical competencies

Core competencies should not be seen as fixed or rigid. They should change in response to changes in the company’s internal and external environment and should be flexible over time. As a business evolves and adapts to new circumstances and opportunities, so its core competencies will have to adapt and change. The competencies of the workforce must evolve and keep pace with business changes to ensure future and sustainable success. Regular and critical reviews of competencies are therefore integral to the attraction and development of talent.

Performance management

Performance management is a process that measures individual employee performance against set performance standards. The objectives of performance management are defined as follows: •

To align organisational and individual goals.

•

To identify and address performance inefficiencies.

• • • •

To foster organisation-wide commitment to a performance-orientated culture.

To develop and manage the human resources needed to achieve organisational results. To create a culture of accountability and a focus on customer service, and To link rewards to performance (Armstrong, 1996).

Improving performance is a never-ending process, and organisations should strive to achieve the optimum level of cost and profit, as well as gain customer satisfaction and goodwill, and gain potential future business. The ultimate purpose of talent management is to drive high performance. All organisations should ask whether their talent is fully productive and focused on the things that matter and drive the business. In order to answer these questions, there must be a system which is used to measure and manage performance. The nature of the system will depend on the size of the organisation and its maturity. Large organisations require performance management systems which can be used consistently across geographies and large staff complements. Not only do organisations need to measure and manage performance, they also need to drive a culture of high performance. All employees should be aware of what is expected of them in terms of performance and should be inspired and driven to 82

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perform at consistently high levels. Many people are threatened by both the process and surrounding activity of performance management. This is mainly because managers use the process to wield “the big stick” of punishment in a negative rather than a positive way. The reality is that with sound use, performance management can actually become a positive, daily conversation that leads to better results and performance throughout the organisation. The key to this is the understanding that the overall philosophy of performance management is development. In essence, the performance management process is a cascade of the strategic and operational requirements of the organisation down to an individual level. Each individual needs to understand fully exactly what and where they contribute to the final result in the total picture for the organisation. Performance Management Case Study Atlassian Atlassian is an Australian company that makes project management tools for software designers. One of Atlassian’s primary challenges is attracting and retaining talent in a highly competitive labour market. Performance reviews within the company were poor, and employees said that the standard bi-annual performance reviews increased anxiety, demotivated staff, and did not help top performers to achieve. The head of human resources, Mr Luijke, decided to try a new approach. He blogged about the problems his company was experiencing and challenged the social media community to come up with a new performance management solution, which his company would then try out. A start-up software company was then tasked with creating an app to run the new system. Essentially, Atlassian replaced individual performance bonuses with salary increases, share options and an organisational bonus. They got rid of the ratings system and replaced it with graphical plot on which one axis measures how often staff achieved outstanding performance; while the other measures how much they have stretched themselves by the same gauge. It also moved to short monthly checkins, each focused on a different aspect of performance, rather than one big session every six months. Atlassian’s staff engagement ratings increased to 87 percent, and staff turnover is far below industry average. The lesson to be learnt is not only that performance management systems play a large role in employee engagement and talent retention; but also that allowing staff participation and crowd-sourcing in the design of management processes is an innovative and successful approach. – Birkinshaw, 2012

Organisational review

Talent cannot achieve high performance standards if they are constrained by structures and processes in the workplace that hinder their ability to perform. Just as the external Chapter 5: Components of an Integrated Talent Management Strategy

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competitive environment must be consistently reviewed to identify and capitalise on new developments, so, too, should the internal design, structure and processes of the organisation. Organisational barriers to successful performance must be removed. These barriers could include lack of role clarity, poor goal alignment, poor job and work design, and weak knowledge transfer systems.

5.3 CONCLUSION

Companies that deliberately develop and implement an integrated talent management strategy have far greater success in sourcing, attracting, selecting, training, developing, retaining, promoting, and moving employees through the organisation. Research describes significant benefit as a result of intentional talent management in these critical economic areas: revenue, customer satisfaction, quality, productivity, cost, cycle time, and market capitalisation. The mind-set of this more personal human resources approach seeks not only to hire the most qualified and valuable employees but also to put a strong emphasis on retention and driving a high performance culture (21st Century, 2012).

5.4 REFERENCES 21st

Century

Pay

Solutions

Group.

2012.

Talent

management.

[Online].

Available:

http://21century.co.za/index.php?option=com_content&view=article&id=20:talentmanagement&catid=1&Itemid=17 [Accessed 11 January 2013].

Armstrong, M. 1996. A handbook of personnel management practice. London: Kogan Page. Birkinshaw, J. 2012. Atlassian. Financial Times, 17 December.

Corporate Leadership Council (CLC). 2011. Building engagement capital – creating and leveraging sustainable employee engagement. Corporate Executive Board Company.

Corporate Leadership Council (CLC). 2012a. CLC Integrated talent management suite. Corporate Executive Board Company.

Corporate Leadership Council (CLC). 2012b. Improving organisational IQ ensuring a high-impact

leadership transition through adapting to organisational culture. Corporate Executive Board Company.

Kayser, AT. 2011. Leader-led development: A workplace reality. Coaching Tip: The Leadership Blog. [Online]. Available: http://www.coachingtip.com/2011/01/leader-led-development-aworkplace-reality.html [Accessed 9 January 2012].

Schroeder-Saulnier, D. 2010. Succession management: Positioning your organisation’s leadership for business success. Right Management. Milwaukee (WI): Manpower Group.

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6 Integrated Talent Management – Practical Ideas, Tools and Tips Debbie Craig and John Gatherer

6.1 INTRODUCTION

The new wave of interest around the need for organisations to implement a holistic and integrated Talent management strategy commenced after the definitive research study called “War for Talent”, first published in 1998 by McKinsey. Many organisations responded to this “wake-up call” by building methodologies, processes, and talent review mechanisms aiming to attract and retain critical talent and skills required to compete and “win the war.” Many years later, organisations are still struggling with ensuring they have “the right people, with the right skills, doing the right things, at the right time to achieve business results”. Attracting and retaining talent and addressing succession risk are consistently recognised as one of the top three strategic drivers … and are here to stay! Ten years later, in the wake of the September 2008 tipping point, with the Lehman Brothers’ sensational collapse and meltdown, global markets, international banking and businesses around the world went into free fall. Few people were able to predict the colossal effects of the global credit crunch that swept through global markets, business communities and financial institutions – creating the biggest and most serious financial crisis in living memory. Since then, there has been a slow recovery reported in some global sectors, but generally, confidence across the markets and economies as well as government credibility has been lost, as is evidenced by soaring job losses, unemployment, demonstrations, street battles and protest action. The world has changed dramatically from what we remember five years ago – and in some respects is even different since last year. It is a staggeringly complex, fast-paced and highly volatile global environment without clear boundaries – characterised by multiple demands, challenges, expectations and pressures that impact on our daily lives. These tough economic conditions demand innovative and pragmatic approaches to finding, developing and retaining talent. Apart from the enduring challenge of limited availability of critical technical skills worldwide, it is the spectre of the new social phenomenon – the exponential rise of unemployment as a result of large-scale downsizing and “overhead costs” – which has Chapter 6: Integrated Talent Management – Practical Ideas, Tools and Tips

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impacted the nature of employment as we knew it. This has resulted in a crucible of competitive pressures, supply limitations, workforce reductions, and a clamour to find high-calibre people and skills to navigate a way through these uncertain times. So how does this impact on the management of critical leadership and technical skills? In spite of this backdrop associated with this dynamic global change, the old adage still rings true – “People are the key differentiator in today’s knowledge-based economy”. It is people who are going to drive the strategies to respond to these challenges. It is people who are either going to react in fear and paralysis or respond in creative and innovative ways. It is people who need to collaborate and work together, share ideas, build new systems and ultimately provide what customers and stakeholders are willing to buy. This requires an ongoing process of attracting, developing and retaining the best and the brightest people – and releasing those who don’t add value. “The best executive is the one who has sense enough to pick good men to do what he wants done, and self-restraint to keep from meddling with them when they do it.” – Theodore Roosevelt

As a result of global economic realities, there is a greater necessity for organisations to become more attractive to critical skills and key talent and to build a culture of high performance, engagement and growth. Organisations can compete for the best only if they genuinely support the “Employer of Choice” goals and create an environment in which people really want to work and interact. Over the last 20 years, there has been a gradual shift in power from employer to employee from being the highest cost, to being the greatest asset, to being the most important investors in the business world, who can afford to be more discerning and demanding and shop around for the best value proposition (see Figure 6.1). Most Important Investors

Greatest Asset

Highest Cost

What is the organisation worth to the employee.

What is the employee worth to the organisation.

What does the employee cost the organisation. 1980s

1990s

2000s

Figure 6.1  Shift in power

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The explosive growth in access to information through the Internet, job search sites, social networking and blogging sites, allows for employees to search and compare jobs and salary packages on a daily basis. Organisations are therefore being forced to become more competitive with their range of employment offerings, flexible remuneration, and benefits packages, as well as the less tangible, softer factors such as the quality of leadership, communication, reputation, development opportunities, culture, and environment philosophies. Although some executives still believe that while they are still paying the salaries and have the power to buy and sell talent, the reality is that more and more employees are calculating the “cost” of working for one company over another. There is a price to pay for longer hours, more stress, dealing with leadership dynamics, internal conflicts and being compromised in work-life balance. The future workforce, the millennial generation, has significantly different perceptions and expectations of their working life and priorities.

6.2 A STRATEGIC APPROACH TO TALENT MANAGEMENT 6.2.1 What is talent management?

Talent management is the proactive management and balancing of the demand for critical skills with the supply of critical skills in both the short term and the long term in order to ensure the operational continuity and sustainability of the business. The demand side of talent

The supply side of

management focuses on

talent management

mission critical positions

development and retention

positions and includes the

focuses on people and

and scarce skills that are

of key individuals who are

identification and filling of critical to the ongoing

operations of the business, the lack of which would

lead to major productivity or profit losses for the

company or customers.

Figure 6.2  Illustration of talent management

includes the identification, considered to be of such

critical importance to an

organisation that the risk of turnover warrants targeted activities to engage and retain them.

In short, talent management includes targeted strategies, processes and tools to: • • •

Attract talent from outside the business. Spot talent inside the business. Plan for future talent needs.

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• • •

Find talent in the market to fill gaps now and in the future. Grow talent from within to fill these future roles. Keep talent that is critical to your business.

Implementing and sustaining an integrated talent management system brings many benefits to organisations and employees, and contributes to the broader skills development of our continent.

6.2.2 Benefits of integrated talent management

What is the rationale for implementing a talent management strategy within your organisation? Apart from the obvious fact that “successful leaders surround themselves with great people”, the following benefits are pertinent: • • • • • • • • •

Talented individuals find innovative solutions to business challenges, develop improved processes and services, build strategic customer relationships and optimise efficiencies to manage costs. Pools of targeted successors ready to compete for high-level appointments as talent managemers. Lower attrition levels, and higher retention rate of talent.

Decrease in recruit investment costs, on-boarding, and new hire training spend. Higher morale of those working in a high-performance culture.

Motivated and inspired employees following a progressive career path.

Opportunities for skills development and increased competence of employees.

Fairness and consistency (less subjectivity) for reviewing talent (talent forums), and Clearer career development options and understanding of what it takes to advance.

6.2.3 Talent on the strategic agenda

It is only in recent years that organisations have appreciated the need to manage talent in a strategic, integrated and holistic way. A growing number of organisations are doing the right things, but there are still a large number of organisations that manage people through, working in silos and in a subjective, ad hoc manner. Talent management needs to be seen, through an annual strategic talent review process, by senior executives and all line managers as part of the foundation and fabric of the business – as important as strategic planning, business planning, budget reviews and performance review processes.

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5. Talent Reviews

1. Strategic Management

4. Performance Reviews

3. Budget Review

2. Business Plan

Figure 6.3  Talent management process

6.3 BUILDING A TALENT CULTURE It is important to document and communicate your organisation’s vision for talent management (including culture and mind-sets to support it), key principles, outcomes and measures required. This will enable you to build progressively a talent culture and track the progress and return on the talent management investment. There are many decisions that need to be made in the approach to managing talent. We have found a set of questions useful to debate with executives, the answers to which are then converted into a set of principles to guide talent-related processes, investment and decisions going forward. Talent management will work sustainably only when every executive understands, buys into and is committed to building a talent culture to support high-performance goals. An example of some key questions is featured below: Table 6.1  Talent principles: useful questions Talent principles Are strategic talent reviews going to be part of our strategic annual executive activities – requiring a number of days annually to have career discussions, participate in talent forums, develop succession plans and be actively engaged in talent development? How will we hold line managers and HR accountable for managing talent? Are executives and line managers going to be measured on how they manage, grow and retain talent?

Are we prepared to build supporting structures and processes to support a talent culture headed up by a talent manager with authority, and train leaders and employees in their roles?

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Talent principles Will we adopt a talent segmentation strategy that identifies different groups of talent requiring different approaches and level of attention and investment? Will we identify Mission Critical Positions and Scarce Skills, and plan for them?

Will we categorise more- and less-talented people, and how will we label them: high flyers, key players, under-performers?

What processes and tools will we use to categorise and segment our talent (9-box matrix, talent pipeline, levels of work, assessments, and so on)? How will we objectively assess levels of competence and performance (that is, performance or competence standards, evaluation via evidence, or assessment)? Who will be involved in evaluating individuals and participating in forums?

How will we allocate budgets differently for different talent categories or segments?

Will we do annual succession planning? Is it for everyone or only for critical positions or senior levels? Will succession plans be fixed, or will there be a flexible pool of potentials for each level?

How will we advertise vacancies? Does everyone get a chance to apply for positions advertised? How much will we focus on internal development versus external recruitment for skills?

Will we have differentiated retention initiatives for highly skilled and valuable employees?

To what extent will we tolerate poor performance? For how long? Is there a high-performance culture?

6.4 A FRAMEWORK FOR TALENT MANAGEMENT

For each of the aspects of talent management as outlined in our framework below, strategic decisions need to be made on the processes, tools and resources required to achieve the results. Each of the aspects is explored below in Figure 6.4.

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ag Man ing Reviewing Talent

Ta l e n t

Figure 6.4  Talent management framework

6.4.1 Attracting talent To attract extraordinary talent to your organisation in the competitive and dynamic world of work, you have to build a reputation and an employee brand as a Great Place to Work, and then deliver on it. This is often articulated as an Employee Value Proposition (EVP). An Employee Value Proposition is a concise description of what you as an organisation have to offer potential employees. It needs to be inspirational, motivational, attractive and seductive and express your core identity. It is the ultimate company pitch to persuade and entice highly sought-after professional and technical skills to join your company.

The value proposition can be used in a variety of marketing and communication activities including company speeches, external advertising, career days at schools or universities as well as internal communication and training events. It is often encapsulated in a byline such as Standard Bank’s “inspired, motivated, involved” or Nedbank’s “Great things begin with great people”. When you are building the value proposition, ensure you address and communicate your intent and ability to deliver on the components of a “great place to work,” relating to company, culture, leaders, careers and rewards. Potential employees will automatically Chapter 6: Integrated Talent Management – Practical Ideas, Tools and Tips

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compare and rate their experience of your brand with the brand experience of other companies along a variety of criteria. Table 6.2  Examples of company offerings Greats

Offerings

Great company

Reputation as a great place to work Trusted and attractive corporate brand and image Reliable and financially sound Growing and expanding with national and international exposure Commitment to community and environment Lifestyle facilities – modern offices, dress codes, coffee shop, gyms, canteens, meeting rooms, social events, sports facilities and events, etcetera

Great culture

Great careers

Great leaders

Great rewards

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Talent management culture and mindset Conducive environment for interacting, learning and having fun Values that are lived, measured and encouraged Great place to work values – pride, camaraderie, respect, fairness, credibility High-performance team ethic and team spirit Interesting, challenging and flexible jobs – depth and breadth Structured learning, development and deployment plans Qualifications, in-house bursary schemes, graduate programmes, apprenticeships, learnerships On-the-job learning through job rotation, stretch assignments, project work, secondments Coaching, mentoring, assessments and feedback Variety of career paths, career development discussions and plans Talent mobility through shadow roles, unique roles or space creation Talent migration through national and international opportunities Defined leadership style and competencies which are trained and measured Variety of leadership development programmes Assessment and feedback to leaders with coaching Leaders who engage, coach and develop others Leaders who inspire and transform Leaders who balance professional will and drive for results Poor leadership style and behaviour are addressed Equitable reward and recognition system Motivational incentive schemes for stretch results Differentiated rewards for superior performance and value Team-based rewards and incentives to encourage teamwork Creative non-financial aspects such as flexible work arrangements, family support, time off, and perks

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Internal communication continually affirms a new employee’s decision to join and helps remind longer serving employees why it’s good to stay engaged. Internal communications include the intranet, screensavers, newsletters, briefs, posters, and corporate and social events. External communication informs and attracts potential talent. This starts with corporate advertising, articles, magazines, conferences, corporate documents and the corporate Internet profile and careers section. Specific career marketing activities are also used such as career fairs, graduate days, scholarship and bursary schemes, and relationship marketing with recruitment agencies, schools, colleges and universities. Communication continues through the recruitment process with job adverts, responsiveness, communication, assessments, interviews and selection. A critical part of attracting and retaining talent is an engaging and efficient on-boarding process during the first 100 days including orientation, broad company induction, exposure, and a support system through a buddy or mentor.

• Developing the EVP

There are a number of ways to understand what your employees feel constitutes a great place to work.

A good starting point is to tap into information you already have including employee opinion survey data. This will tell you what employees think is working and what isn’t. Typically, although such surveys don’t tell you what is important to your people, it is obviously crucial to understand this in order to create an attractive EVP. The process of developing an EVP elicits what is important to the different types of people whom you want to attract and engage.

To be successful, the EVP must be credible, which is why it must always be tested. The purpose of testing is to ensure that all categories of employees and potential employees find it appealing. The testing also tells you which elements of the EVP need to be turned up or turned down, to appeal to different groups. Testing should take place with internal employees and external potential employees. The testing will reveal changes that need to be made to the EVP to appeal to the different audiences on whom it was tested. Assuming that valid and rigorous data is used to create the EVP, we expect it to work for 90% of the target population. It should always be tested, though, as the 10% for which it needs to be adjusted could be a crucial part of your workforce.

• Planning for talent

One of the key focuses of talent management is to ensure that the right people are available for the right positions at the right time. This involves proactive planning for future talent needs. The process starts with strategic workforce planning, to understand the roles and skills required in the future, and how many people may

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be leaving the organisation at the current rate of attrition and through retirement. This requires some scenario planning, linked to strategic forecasts on industry and company growth rates and availability of current and future skills. In highly dynamic industries such as technology, skills forecasting is a difficult job, but possibilities still need to be imagined. To prioritise future planning activities, it is best to focus on Mission Critical Positions (positions that at critical for the ongoing success of the business) and Scarce Skills (skills that are difficult to find in the market or which take significant time to develop internally). Managers can be trained to identify the Mission Critical Positions and Scarce Skills in their units, followed by a facilitated workshop to validate the list. Typically, a four box matrix is used to identify the positions to focus on, with additional criteria, as necessary. High

 Senior Engineer Criticality of Workforce Impact on the potential • Cost • Time • Risk • People • Relationships • Knowledge/ideas

 Works Manager  Process Controller  Buyer

Low Easy

Figure 6.5  A four box matrix

Difficulty to Replace or Replenish Difficult • Time to proficiency • Deep knowledge/experience • Availability in the external labour pool

Once the critical positions have been defined, potential successors for those positions can be identified through the talent-spotting exercise described above. The key to succession planning is to identify the potential of a talented individual to fulfil a future position in a certain timeframe. Potential successors are typically taken from the nine box matrix (high performance, high potential, with the readiness to take on the next level role in the next 3–5 years). Readiness is assessed using the portfolio of evidence as a guide to understanding the current level of competence against the competencies required at the next level role. The potential successors are then matched up with Mission Critical Positions in a succession plan, which will outline a pool of people and their readiness levels (less than a year, 1–2 years, and more than 2 years). Individual development plans are then aligned to succession plans to ensure that readiness is built into the estimated 94

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timeframes. Accelerated development may therefore be required in some instances, where the availability of people and skills (internally and externally) is significantly lower than the demand for them. This will require additional investment in time, money and resources and needs to be justified through a good cost/risk versus benefits business case. A typical succession plan is shown below. Table 6.3  Example of a succession plan Position and incumbent # of years in position

Potential successors

CEO John Davies (3 years)

Bongani Matolo Max Dreyer

HR manager Stephanie Brown (18 months)

Jenny Redman Cecile Radebe

Production manager Joe Dlamini (5 years)

Peter Wessels Ahmed Naidoo

Readiness

 





Table 6.4  Readiness indicators

  

Comments

John Davies retiring in May 20XX

Ongoing coaching and development underway Consolidation on the role No successors internally

Successor(s) identified – ready to be placed within one year

Successor(s) identified – ready to be placed within one to two years No successor(s) identified yet, or ready only after two years.

At a glance, an organisation can assess its risk areas and gaps, and make strategic decisions to find or grow more talent to fill those gaps. It is highly recommended that at least two potential successors be identified at any given time for these positions, so as to have more options open if sudden resignations are announced. More attention and development opportunities are made available to those in the talent pool, to ensure their readiness when they are needed. It is an ongoing challenge to get the timing right. Talented individuals tend to get impatient easily, and want promotion ‘now’, whereas organisations have their own timeframe and point of being ready for change. Chapter 6: Integrated Talent Management – Practical Ideas, Tools and Tips

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Succession plans typically include a pool of potential contenders who will compete for more

than one position when one of them becomes available and not only one person to one position. People in the talent pool can be earmarked for one or more roles. However, there is no

guarantee offered for specific individuals for specific roles. Using the analogy of a marathon race, being in the talent pool means being given the opportunity to get fit for the race, but

when the day of the race comes (vacancy announced), anyone may enter the race, and the

fittest, strongest person on the day wins the race. The talent pool is not a fixed concept and changes on an annual basis in accordance with the annual talent forum process. People can

move in and out of the talent pool as additional evidence is discovered through great results or

someone may experience a significant drop in performance, or develop behavioural problems. Market conditions may also impact on scarce skills, requiring people exhibiting this skill to

be included in the talent pool. Employment equity considerations can also impact on entry criteria to the talent pool, although it is always best to have your talent pool selected on merit

rather than on legislated classification, and rather focus efforts on building readiness across all levels.

Beware of the unintended consequences of creating a talent pool – primarily, the risk of

alienating those employees who do not ‘make the grade’. Schisms may develop between those who are ‘in’ and those who are ‘out’, resulting in resentment and damaged team relations. People may feel demotivated and performance may drop off for those not categorised as talent.

Placement in the nine box or talent pools is considered confidential information, relevant only to the incumbent and management teams.

6.4.2 Spotting talent

How do organisations identify or ‘spot’ talent? What are they looking for? What do they find valuable? What do they notice? What are the criteria for success?

Performance and competency standards

To achieve success in each role at each level in an organisation, each person needs to understand the required performance and competency standards (see Table 6.5 below). Being able to assess both performance and competence (a big factor in readiness for future roles) will assist with categorising talent into high, medium and low potential and give guidelines as to how much development is required for future roles.

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Table 6.5  Performance and competency standards How do I know I am successful in the role? PERFORMANCE STANDARDS What level of performance is required to be successful in the role (Outputs): • • • •

Tasks Activity Results Outputs

COMPETENCY STANDARDS What capabilities are required to achieve the required standard of performance (Inputs): • • • •

Knowledge Skills Behaviours Values

Differentiating standards by level People need to know where they fit within the organisational structure or “family tree”. One of the key factors of talent retention is having a clear career development path mapped out and the support and opportunities to build the skills and experience to move through the matrix at a pace appropriate to the individual. A simple way of building a leadership and technical career matrix is shown in Figure 6.6. Leadership Level

Criteria

Technical Level Criteria

L4 Executive Manage business (business leadership

Heads up an operation or a business comprising multiple operations

T4 Deep specialist Functional advice

L3 Strategic Manage function (functional leadership)

Heads up a function comprising multiple departments

T3 Knowledge worker Technical/ professional advice

L2 Operational Manage managers (results leadership)

L1 Team Manage others (Team leadership)

Heads up a department; more than one layer of direct reports

Heads up a team; only one layer of direct reports

T2 Skilled worker Technical application

T1 Operator/ Administrator Task delivery

No direct reports, experienced graduate and registered professional, deep specialist, many years’ industry experience

No direct reports, graduate, and registered in terms of codes of practice No direct reports; some technical training required No direct reports; no formal training required

Figure 6.6  Building a leadership and technical career matrix

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Each of these levels has performance and competency standards against which we can assess and develop people. Transparency of the standards empowers individuals to develop their readiness to move along either technical or management career paths by understanding what is required at each level and which roles are potential options for career development. People can move across technical/managerial career paths, as long as they have the required level of performance and competence. Each level in the organisation requires a different level of leadership or technical contribution, as summarised below. Leadership Level

Key outputs/ Performance standards

Technical Level

Key outputs/ Performance standards

L4 Executive Manage business (business leadership

• Develops organisational strategy • External stakeholder management • Building effective executive team • 5 year-plus plan

T4 Deep specialist Functional advice

• Further qualifications and/or in-depth experience within area of speciality • Application for functional improvement • Applies best practice

L2 Operational Manage managers (results leadership)

• Managing more than one team and more than one level • Securing people and financial resources • Coaching managers and technical specialists • Quarterly/ annual plans

T2 Skilled worker Technical application

L3 Strategic Manage function (functional leadership)

L1 Team Manage others (team leadership)

• Developing functional strategy through multiple layers • Contribution to general management decisions • 3–5-year functional plans translated into annual plans

T3 Knowledge worker Technical/ professional advice

• Managing a team • Coaching • Managing labour relations • Weekly/ monthly planning

T1 Operator/ Administrator Task delivery

Figure 6.7  Level of leadership or technical contribution

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• Professional or technical qualification • Application for operational improvement • Organisational representative in field • Technical training to develop skills • Application for team improvement • Keeps abreast of technical and technological developments

• Entry-level skills required • Tasks completion • Team player • Compliance with policies and procedures

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The performance and potential matrix Another widely used diagnostic tool to identify talent is known as the nine box matrix, which simply categorises people according to their performance and potential as measured against specified criteria. Criteria for performance

The criteria for performance are very simple, if an effective performance management system is in place. Performance targets and measures are set and reviewed annually, the result of which will be to meet, exceed or fall short of the targets. Table 6.6  Performance targets

Exceeds performance standard

Performance consistently exceeds requirements

Falls short of performance standard

Performance falls short of agreed requirements

Meets performance standard

Criteria for potential

All performance requirements fully met, and occasionally exceeded

The criteria for potential follow the levels of the leadership pipeline. At any one moment in time, a person has the potential to remain in his or her current job, develop, or move up. Table 6.7  The criteria for potential Retain and move

Develop and apply

Consolidate and contribute

Ready to move to a higher level on the pipeline – move when a position becomes available and retain through interesting and challenging projects

Take on greater responsibility and complexity at the same level – develop and test ability and skills Stay where they are and continue to improve performance in the current role – consolidate, and find ways in which to contribute meaningfully

Building evidence for performance and potential

How do you know whether someone is ready to stay, develop or move? The key measure of assessment is evidence based, which means that there are tangible examples of results and behaviours which demonstrate the ability to perform or operate at the same or Chapter 6: Integrated Talent Management – Practical Ideas, Tools and Tips

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higher levels of complexity or leadership in the organisation. Remember to look for the full house of ability, attributes, track record, behaviour, engagement and aspiration. A tool that can be used by managers and employees to collect evidence is show below – the portfolio of evidence. Evidence collected in each of these categories supports the positioning in the nine-box matrix and helps to differentiate between contenders for similar positions. Manager’s input can be discussed and validated by talent forums to ensure a more objective view. Cognitive and psychometric assessments can be used as part of the evidence, but should not be used as the primary means of assessing and making decisions regarding an individual’s career potential. Table 6.8  Cognitive and psychometric assessments examples outcomes Evidence of performance

Total

Evidence of potential

RESULTS Quantity, quality, cost, service, surveys, deadlines, project delivery, efficiencies, financial results (KPIs)

ABILITY Cognitive processing profile (CPP), emotional intelligence (EQi), technical competence

RELATIONSHIPS Relationship built and maintained, networks, conflict resolution, teamwork

LEADERSHIP COMPETENCIES Self-leadership, leadership of others, team player, relationship builder, influencer, communicator, innovator, problem solver

ACCOMPLISHMENTS Awards, special achievements, going the extra mile, customer feedback, management recognition, special assignments

ATTRIBUTES Energy drive, positive attitude, passion, curiosity, fast learner, openness to change, resilience, willing to go the extra mile

PROJECT/TEAM CONTRIBUTION Ideas, commitment, delivery, support, accountability, ownership

ASPIRATION Desire for advancement and financial rewards, ambition, sense of purpose

CULTURE Leadership brand, RMB principles

Total

ENGAGEMENT Intent to stay, discretionary effort, enthusiasm, loyalty, responsive to change

The nine-box matrix is not used in isolation or with the subjective view of one manager, but rather as a tool in a talent review process or talent forum, where constructive discussion and debate between peers at a similar level result in a more objective view of any one 100

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individual. Each manager presents his or her portfolio of evidence and nine-box matrices of their direct reports, and gains inputs and feedback. Different views are heard until consensus is reached on both the position in the nine-box matrix and on development actions required for optimising the potential, performance and retention of key talent. Once you have positioned people according to their performance and potential, you can assess the number and percentages of high flyers, key talent and under-performers you have at each level, per department, or in the organisation as a whole. The typical distribution of talent is 15 to 20% high flyers, 70% key players, and 10 to 15% underperformers. Table 6.9  Distribution of talent High flyers (15–20%)

Key players (70%)

Under-performers (10– 15%)

High flyers are talented individuals who demonstrate high performance and high potential

Key players are good to high performers who meet their role requirements and are the backbone of the organisation

Under-performers are those people who are not yet fully performing in their current role

6.4.5 Finding talent

Being able to find the right talent at the right time is critical to ensure sufficient supply of talent and skills in the short and the long term to meet the strategic goals. Organisations are continuously looking for talent. Senior executives entice people they know and respect to come and work for or with them. Satisfied individuals refer people to the organisation. HR departments form strategic relationships with suppliers of talent, including learning institutions, recruitment agencies and search companies, and even enter into joint ventures with government, industry or other organisations. Finding talent involves both strategic (long-term) and operational (short-term) approaches.

Strategic sourcing

Strategic sourcing includes building alliances and partnerships with schools, learning institutions (colleges, universities), specialist companies involved with bursary and scholarship management, recruitment agencies, head-hunters, and consulting firms. It also involves sponsorships of career marketing initiatives such as career exhibitions, university career days, advertising in career publications, sponsoring technical facilities and Chairs at universities, as well as academic awards for excellence. It can also include entering into joint ventures with government, industry or other organisations. Because of the scarcity of certain skills in the market, many organisations are building proactive Chapter 6: Integrated Talent Management – Practical Ideas, Tools and Tips

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relationships with schools to identify high potential learners from as young as grade 10, and offer them opportunities and bursaries to keep them within a future talent pool. Strategic sourcing also involves the decision to build skills internally versus outsourcing, sub-contracting, using part-timers, or importing skills from abroad. It is important to weigh up the pros and cons of “growing your own timber” versus “bringing in new blood”.

Operational sourcing (recruitment)

When using this form of sourcing, you need to ensure that recruitment processes are optimised for fast turn-around on vacancies to minimise cost and productivity losses and ensure best-fit selection for performance and delivery. This includes the management of vacancies, updating of job descriptions and competency profiles, grading of posts, internal and external advertisement and the interviewing and selection process for potential candidates. It is recommended that everyone involved in the recruitment process must be trained in evaluating performance and competence standards (and understanding the value and place of psychometric assessments) to ensure people are recruited at the appropriate leadership or technical level of the organisation and can get up to speed rapidly once they arrive. Induction and orientation processes are critical for effective engagement and integration into the organisation or new roles. This includes understanding the business, their role, their customers, building relationships with their direct manager, integrating effectively into their teams and understanding their performance measures and developmental competency requirements to be successful.

6.4.6 Growing talent

“All of the top achievers I know are life-long learners...looking for new skills, insights and ideas. If they are not learning, they are not growing ... not moving towards excellence.” – Dennis Waitley Development of talent has always been a challenging endeavour. It takes time, costs money, pulls people out of production, and the investment in talent is not always harvested as people move or leave, taking their new skills and experience with them. Everyone has talent and potential, and everyone requires development. However, it is crucial to differentiate the effort, creativity and investment in the talent that is going to make a significant difference to the business. Growing talent must include both development and deployment activities (experiential, on-the-job learning) to ensure broad-based acquisition of knowledge, skills, experience and behaviours. Development includes the various development actions for the talent pool to address the talent gap, including development of talent to enhance performance in 102

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current roles and career development to build competencies for future roles. Managers need to understand how people learn, and should be able to craft a development plan that includes elements of self-study, formal programmes, group learning, coaching and action learning to give talent the highest probability of being able to apply learning for real, sustainable results. See some examples of learning interventions in Table 6.10 below. Table 6.10  Examples of learning interventions Self-study

Formal programmes

Group learning

Coaching

Action learning

• Reading • Reflection • Internet • Discovery • Trial and error • Assessment • Soliciting feedback

• Business School programmes • Public courses • Seminars • Conferences • Company training programmes • External supplier programmes

• Strategy sessions • Team development • Leadership Programmes with peers • Networking forums • Just-in-time learning

• External coach • Mentor • Coach • Manager • Peers • Setting goals, creating learning opportunities, sharing information, experience and tools, feedback

• Special projects (full time or part time) • Secondment • Job rotation • Acting role • Graduate development programmes • Talent programmes • Leadership assignments

Behaviour change = lowest

Behaviour change = low

Behaviour change = medium

Behaviour change = high

Behaviour change = highest

The skills and education crisis has resulted in organisations needing to bring new, more effective, holistic and blended learning techniques into their talent development programmes, which take into account modern research into whole brain learning, neuroscience or Neuro-Linguistic Programming(NLP), as well as individual and group learning styles and preferences. Research studies continue to show that the long-term impact from learning through formal interventions is only about 10%, while coaching makes a 20% impact and on-the-job application combined with coaching has up to a 70% impact on real behavioural change (Paul Taffinder, 1997). Development also needs to focus on an individual’s inherent potential and natural strengths to optimise results and not focus unnecessarily on areas of weaknesses or gaps. There are a number of studies into a strengths-based approach to learning (see Buckingham & Clifton, 2001). The most effective method of learning seems to be new information or techniques gained through self-study or training programmes, combined with on-the-job or action Chapter 6: Integrated Talent Management – Practical Ideas, Tools and Tips

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learning to apply and practise the new techniques, and working with a coach to set realistic goals and provide regular feedback and reflection opportunities. Action learning has become very popular by creating real-life business opportunities for learning by combining learning sessions with project work. This results in mutual benefits to the organisation (problem solving) and the learners (new skills and knowledge). This technique, popularised by Yury Boshyk, is called Business Driven Action Learning and is extremely effective in developing technical and leadership skill in high potentials, usually over 6–12 months. When putting a learning plan together, it is important to align individual learning and career aspirations with organisational needs where possible. However, many organisations are going beyond mere alignment to supporting employees in their learning journeys, even in areas that have no direct benefit to the organisation (alternative studies or courses), believing that engaged and appreciative employees fulfilling their dreams are more valuable to the organisation and more likely to stay. It is important to have at least an annual career development discussion where managers and employees can explore career aspirations, competency gaps, learning preferences, and so on, and develop a draft plan for validation at a talent forum. Managers must build competencies in coaching skills, managing expectations and having crucial conversations to ensure effective career discussions and development plans that are realistic, motivational and have full buy-in from all parties. The plan must be focused (not too many activities) and balanced across learning methodologies best suited to building the skills required within the budget and time available. The plan is, of course, just the beginning. Learning is a continuous process of assessment, planning, experience, reflection and further improvement. It is important that leaders make the time for regular one-on-ones with their direct reports for feedback on performance, competence and behaviours. Having someone to talk to, to reflect with and to assist with feedback, insight and action is critical for accelerated development. A system of coaches and mentors who are held accountable and rewarded for development of talent is essential. Mentors who have experience in the industry and the organisation can smooth the way for high flyers during on-boarding, with new role integration, and with career choices. Coaches with specific technical skills or strengths in coaching personal and leadership effectiveness can assist high flyers or key players to develop the required competencies for success much faster than if left to their own devices. The real high flyers are naturally inquisitive and continuously push the boundaries to broaden their experience and knowledge, but may not have the insight or emotional intelligence to seek feedback and test their view of reality. Coaching can help to provide the balance. In addition to development plans, creative deployment options must be created for high flyers and critical key players, such as stretch assignments that enable learning of new skills, functional rotations, role exchanges, talent exposure programmes, action learning project teams, or internships. Outside experiences are also important, including consortium learning programmes, international travel to key organisations for reviewing best practices, and exposure to new perspectives. 104

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While development is key to building foundation skills, deployment is essential for application and experience, which cannot be gained in the classroom or from one-on-one discussions. The nature of the high flyer is to be actively engaged and stimulated in new challenges. Deployment activities increase talent mobility and opportunities and help to evaluate accurately individual performance and readiness for key positions. Deployment is also cost effective, combining learning and value adding work. The commonly-used deployment approaches include: •

•

•

•

Acting experience: High potential talent is exposed to the realities of managing at a higher level position, while the current incumbent has a leave of absence or is busy with a time-consuming project.

Secondments and exchanges: Placing people in temporary roles, often in a new division, region, or even country, where the individual has to adapt to a different function, culture, team, or business challenges, thereby having the opportunity to learn or demonstrate both management and technical competencies.

Project roles: In a matrix structure, there are many opportunities for learning and applying leadership skills through project management, where results need to be obtained through cross-functional, multi-level teams and the effective use of stakeholder and change management. Learnerships, internships and graduate programmes: Programmes of this type allow inexperienced people to learn new skills on the job while contributing in some way. They offer young talent the opportunity to be noticed and tested in a work environment, and can lead the way to full-time employment and entry into talent pools.

6.4.7 Keeping and releasing talent

In a world of scarce skills, it is critical that organisations do whatever they can to retain key skills and talent. A critical issue with today’s talented individuals is choosing what kind of organisation or manager they want to work for. Steve Drotter, who co-authored The Leadership Pipeline with Charan and Noel, says that “every employee is entitled to a good boss and a good job”. There are many factors influencing employee performance and satisfaction in an organisation: the environment, organisational culture, leadership, team dynamics, and the individual’s own skills and attitudes. It is a challenging mix of factors with which to cope. Individuals will have a far better chance of success truly to optimise their potential and compete effectively with skills and talent from around the world if they are working in an organisation that promotes the “great place to work” mindset. There are many research studies that show evidence that investing in talent engagement and retention initiatives lead to greater profitability, growth, and shareholder return. The Gallup Research Group found in a large international, cross-industry study across 22 million employees, that for people to be engaged in a company (and therefore Chapter 6: Integrated Talent Management – Practical Ideas, Tools and Tips

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more likely to stay), they want to be involved, feel that they are contributing to the team goals, function in an efficient work environment, receive positive support and encouragement, find personal meaning and motivation in their work, and feel valued for it. Unfortunately, the study revealed an alarming percentage either not engaged (76%) or actively disengaged (13%) (talking or acting negatively toward the company), and only 11% of employees felt fully engaged in their organisations and jobs. These statistics were later confirmed by independent international studies through leading talent management consultancies including the Corporate Executive Board, Dimension Data International, and Towers Perrin. Talent retention is not just ensuring that those employees are “happy” and have the right skills to perform their jobs. It is about aligning values of individuals and companies for a long-term match. The issue of retention and how to make a retention strategy come alive is explored in some depth in a later chapter. Some high level guidelines for ensuring an environment that maximises the possibility of retention are the follows: •

•

•

•

•

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Great company: Build an attractive employee value proposition that reflects a “great company, great roles, great leaders, great rewards and a great culture”. This can be used in internal and external communication to the job market to build the reputation as a great employer. Treat people who leave the organisation well as they may be future employees or could be useful ‘ambassadors’ for the company brand out in the market place. If exits are poorly managed, the threat of reputational risk increases.

Great culture: Develop a conducive environment for learning and growth. Ensure that the culture is crafted, managed and encouraged through effective accountability, performance management and teamwork Great jobs: Ensure that roles are interesting, challenging, flexible with sufficient depth and breadth of experience. Where required, create space by creating new roles or offering voluntary separation packages to ensure young talent is not stifled with lack of movement and opportunity

Great leaders: Develop and encourage a leadership style that is appropriate to the organisation and the culture and ensure sufficient engagement, coaching and growing people. Ensure a talent mindset at all levels.

Great rewards: Ensure an equitable reward system that motivates and recognises and differentiates rewards for superior performance and value. Money is not the dominant motivator, but can be a factor in the decision to stay. Ensure a well-designed recognition scheme that combines senior level exposure with creative non-financial rewards such as access to coaching or mentoring, career mobility, development programmes and assignments, career path discussions, job rotation, stretch assignments, 360-degree assessments and feedback, flexible work arrangements, family support, and perks such as travel, for example. Remuneration and Talent Management

There are some noticeable differences in what makes people join as opposed to what make people stay. While there is some truth to the old adage that “people join organisations and leave managers”, the reality of today’s market is that employees join for the rewards and opportunities and stay for the people and the organisation. Once employees are in the organisation, the day-to-day impact of the people and culture carry a lot more weight as they make decisions about how hard to work and how long they intend to stay with the organisation (CLC, 2007). They have identified the top drivers of commitment (and thus intent to stay) as shown below.

Top three drivers of commitment (potentially impacting commitment by 45%) • • •

Development opportunities Job-interests alignment Respect for employees.

Just as you would make an effort to retain good people, high-performance organisations make an effort to manage or release poor performers. As the saying goes, you need to manage people ‘up’ to a satisfactory performance level, or ‘out’ of the organisation. Carefully assess the reasons for poor performance (not willing, not able or not allowed) and take appropriate action, ranging from re-skilling, to demoting, to a sideways move, to a more appropriate role, to setting short-term goals, or to taking disciplinary action. This may ultimately result in dismissal if performance does not improve. If there is an organisational reason for underperformance, such as a personality clash with a boss, reward systems motivating the wrong behaviour, or insufficient information to make decisions, then a wider organisational development intervention is required. Confronting mediocre or poor performance is a common challenge across our international clients and remains one of the biggest common weaknesses of management around the world. It is a vital part of talent management. Organisations and leadership need to take a more proactive approach to managing under-performers through holding a series of crucial conversations with these incumbents to address and deal with consistent below-standard performance results or unacceptable behaviour. As with any difficult performance issue, it is always necessary to have the appropriate HR support/advice and comprehensive evidence and work within the structures of company policy and labour legislation.

6.5 A PROCESS FOR IMPLEMENTING TALENT MANAGEMENT

The integrated talent management framework outlined above reminds us what is important. However, to make talent management live in the organisation and be part of the business rhythm and culture, it needs to be knitted into the fabric of organisational life. To help line managers understand the process of talent management, it is useful to Chapter 6: Integrated Talent Management – Practical Ideas, Tools and Tips

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have a clearly articulated process with a series of activities leading up to and flowing from the annual talent forum (the main event). These activities include preparation, career discussions, talent forum, outputs and actions, and feedback and monitoring, which are described briefly below. Preparation • Collective portfolio of evidence for:

◦ Performance (review plus criteria)

◦ Competence (gap analysis) ◦ Potential criteria

Career Discussion

• Career discussion template:

◦ Realistic aspirations

◦ Development priorities and plans

◦ Engagement and retention

Talent Review

• Present direct reports: ◦ 9-Box placement

◦ Portfolio of evidence ◦ Succession Plans

◦ Talent action plans

Figure 6.8  Process for implementation of talent management

Outputs and Actions

Feedback and Monitoring

• Succession • Feedback to plans and pools individuals per MCP • Quarterly reporting and • Talent monitoring of development talent action and action plans and plans measures • Collation of all outputs into master plan (HC)

6.5.1 Preparation Throughout the year, managers collect evidence of performance, competence, and potential of their direct reports culminating in a formal performance review. There is also a competence profiling exercise to identify development needs, to improve performance, or to build readiness for next level positions. Tools can include performance and competence standards (as per the career matrix), performance contract and individual development plan and guideline.

6.5.2 Career discussions Before the talent forum, it is important that there is a career discussion between managers and direct reports to assess realistic career aspirations and options, development needs and retention issues. Prior to the discussion, both the employee and the manager prepare using a career discussion template. The aim is to reach consensus on the information and actions to be presented to the talent forum. After the career discussion, the manager finalises the career discussion templates for all direct reports and forwards them to the talent forum co-ordinator at least a week before the talent forum. Tools can include the career discussion template and guidelines.

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6.5.3 Talent forum All of the key aspects of talent – talent spotting, planning, finding, growing and keeping talent – are managed strategically through the annual talent forum and operationally through ongoing coaching and discussions between a manager and his team. The talent forum is an annual meeting to discuss strategic talent issues and challenges to the organisation, including attracting, developing, deploying and retaining key talent, and ensuring that succession plans are in place for mission-critical positions. Before the talent forum, managers prepare their input. This includes strategic talent issues, 9-box placement, a succession plan and talent development, and action plans for their business unit (BU). They will then present these to the talent forum members for input, discussion, challenge and validation. The aim is to improve objectivity and reach consensus on the talent outputs. Talent forums are held at different levels of the business, ensuring that talent pools and issues are identified at each level and communicated upward, ultimately to the group talent forum. For example, a functional talent forum will feed into a divisional talent forum, which will feed into the group talent forum. Tools may include strategic talent issue template, the nine-box matrix, a succession plan, and talent development and action plans.

For example, a functional talent forum will feed into a divisional talent forum, which will feed into the group talent forum. This is illustrated in the next figure. Tier 1: Group Talent Forum Exco reviews all BU heads and consolidated BU talent

Tier 2: BU Talent Forum BU Excos review next levels and key talent in each BU

Tier 3: Functional Talent Forums

Critical functions may convene to review talent throughout the function across business units or regions

Figure 6.9  Talent forums Chapter 6: Integrated Talent Management – Practical Ideas, Tools and Tips

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The figure above shows how to cascade talent management from group talent forums to BU talent forums and lastly to functional talent forums.

6.5.4 Outputs and actions

The talent outputs and actions will be documented by the talent forum administrator and circulated to all members and captured electronically. Responsible individuals will be expected to report back on progress at quarterly talent reviews. Individual development plans are to be updated after the talent forum to reflect any changes. Talent managers collate the outputs of different level forums to build a strategic succession plan, succession pools for development, and an integrated talent action plan that requires group-wide interventions to address high risk issues. Tools may include the individual development plan (IDP), the strategic talent plan, organisation-wide succession plans and pools, and the talent action plan progress report.

6.5.5 Feedback and monitoring It is important that managers give feedback to individuals regarding any changes to the career discussion proposals or any other pertinent information emanating from the talent forums. Face-to-face feedback sessions are important to build engagement and thereby reduce mismatched expectations and retention risk. Progress against talent actions agreed to at the forums are reviewed at management team talent sessions at least quarterly to ensure that managers are held accountable for their role in managing talent. They will also be held accountable individually through talent key performance indicators (KPIs) in their performance contract.

6.6 IMPLEMENTING TALENT MANAGEMENT – LESSONS LEARNT

We have been fortunate to be involved in more than 15 implementations of talent management. Many of these have been in South Africa, and the rest in the USA, Canada, Mexico, South America, Europe, SE Asia and China. Each implementation has been different in terms of the organisational culture and skills levels, but there are some key themes and lessons learnt which are outlined below.

6.6.1 Integrated process

In many organisations, we still find a variety of talent management practices in different business units, at different times of the year, using a variety of methods and templates. One team may be asking the business frequently for information for strategic resource planning, while another team may be trying to identify mission critical positions for 110

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succession planning. The training department is trying to do a skills needs analysis and planning for upcoming interventions. The result is a lot of frustration for line, who tend to see all people-related activities in one “box” and prefer to do all that is necessary in a structured and co-ordinated way. HR departments also have pieces of the puzzle, which impacts on their ability to have strategic discussions with executives around talent. There are many advantages of creating, communicating and co-ordinating an annual process (supported with a userfriendly toolkit.) It focuses HR and managers’ time and attention on strategic talent issues. It optimises time to do all the people planning in a co-ordinated way. All information is captured in one place so that managers know exactly what their roles, responsibilities and actions are for the year ahead, and is reviewed quarterly for updates and urgent decisions.

6.6.2 Executive commitment and measurement

Prior to embarking on a talent management implementation, it is critical for the whole Executive team to understand what it means to drive and support the process. Not only do the executives need to be role models of talent champions, but they need to commit time, money and resources to the process. They need to be absolutely clear on the business impact and risks in managing talent strategically. Key messages need to be built into presentations, meetings, communications and induction processes. The annual talent review process needs to be seen as a key strategic business process and needs to be an embedded event within the corporate calendar. Strategies, business plans, and individual scorecards need to be updated with talent-related measures, and leaders at all levels must be held accountable for them. Consequences for non-adherence to the principles, policies and processes need to be discussed and followed through. One of our clients decided that if a manager came unprepared to a talent forum, that person would not be allowed to participate or present their staff, and no development would be approved for them. It took only one forum for the managers to get the message and start taking it seriously. The key is for the Executive to set the tone regarding the importance and commitment to the talent management process.

6.6.3 Leaders as champions

Talent management is a lot less effective if it is not partnered with a process of developing leaders in the key mind-sets and skills required to be talent champions. Each of the talent management process steps requires leadership skills such as communication, coaching, engagement, relationship building, crucial conversations, and development planning skills. Effective talent management combined with leadership development can have a significant positive impact on the culture of the organisation. In one of our large parastatal clients, external auditors concluded that our Talent Management implementation had the largest impact on culture and behaviour change out of seven people management initiatives Chapter 6: Integrated Talent Management – Practical Ideas, Tools and Tips

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including performance management, leadership development, culture transformation, HR systems, and change management. In another successful implementation, the CEO committed to training all leaders on leadership and talent management and all staff on self-leadership and career development. He also incorporated leadership renewal sessions into strategic review sessions at least twice per annum. This kept the leaders’ role as talent champions top of mind. Where implementation has been less successful, leaders are not held accountable for managing poor performance and inappropriate behaviour, thereby allowing a tolerance for mediocrity.

6.6.4 HR as true business partners

We found significant success in business units with strong HR business partnering skills. To implement talent management effectively, HR need a number of critical skills. They need to be able to plan ahead and co-ordinate projects and annual processes, and they need to build relationships in which they can influence, coach and advise line managers on how to manage talent. They also need to be effective facilitators of talent forums to ensure a balance of inputs, managing dominant players for objective decisions and influencing development or succession options with specialist skills. In many of our implementations, we built capacity through an internal consulting skills programme with the first layer of HR managers who planned and co-facilitated beside us to learn the skills. We also ran HR business partnering programmes for manager and practitioner levels. What can happen over a period of time, particularly where HR attrition is high, is that many of the original knowledge and skills are lost when people leave and not transferred deeper into the organisation. It is therefore critical that talent management becomes a key competency at all levels of HR with clear role clarity and early exposure to talent forum management and facilitation.

6.6.5 Talent technology

The sooner you can put in place a technology-enabled system to capture and manage the data, the better. If the process is too manual, it takes time, is repetitive, and is very frustrating for managers and collators of summary reports. There are many reasonably priced systems in the market that can be used as an interim measure to pilot and test the process before implementing expensive enterprise wide systems.

6.7 CONCLUSION

We hope that by working through the overview above, you will be able to see that talent management is a multi-faceted discipline that requires a sound understanding of the research, the processes, the tools and the commitment required to make a significant difference to the ability to attract and retain talented individuals who deliver results. Although many of our talent engagement and training workshops were initially tough 112

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going, with the usual resistance to doing something unfamiliar that requires effort and uncomfortable conversations, managers always left with a new awareness and a sense of confidence that the process could fundamentally shift their business. The greatest mechanism to gain buy-in, however, was participation in the first talent forum. We can remember overhearing countless post-forum discussions with comments such as: “Why didn’t we start this process years ago? It makes so much sense.” We wish you all the best in your endeavours to engage with, enable and empower individuals and managers through your talent management interventions.

6.8 REFERENCES

Axelrod, EL, Handfield-Jones, H & Welsh, TA, 2001. The war for talent. Part 2. The Mckinsey Quarterly No 2. McKinsey & Company.

Boshyk, Y. 2000. Business-driven action learning: Global best practices. London- New York: MacMillan Business and St Martin’s.

Buckingham M & Clifton, DO. 2001. Now discover your strengths. New York (NY): Free Press.

Charan, R, Drotter, S & Noel, J. 2001. Leadership pipeline: How to build the leadership-powered company. New York (NY): John Wiley & Sons.

Codrington, G and Grant-Marshall, S. 2004. Mind the gap! Johannesburg: The Penguin Group (Pty) Ltd.

Collins, J. 2001. Good to great. New York (NY): Harper Collins.

Corporate Leadership Council. 2004. Driving performance and retention through employee engagement. Executive summary. Corporate Executive Board Company.

Corporate Leadership Council. 2007. New roadmap to engagement. Business Wire. Corporate Executive Board Company.

Gallup Organisation. [Online]. Available: http://www.gallup.com.

Goleman, D. 1996. Emotional intelligence. Reading (UK): Cox & Wyman Ltd. Hamel, G. 2007. The future of management. Boston: HBS Press.

Hamel, G & Prahalad, CK. 1994. Competing for the future. Boston: HBS Press.

Jacques, E. 1998. Requisite organisation: A total system for effective managerial organisation and managerial leadership for the 21st century. Arlington (VA): Cason Hall and Co.

Taffinder, P.1997. The new leaders. London: Kogan Page Ltd.

Tichy, N. 1997. Leadership engine – how winning companies build leaders at every level. New York: Harper Business Books.

Uren, L, King, V, Fawcett, R & Huestis, G. 2003. Look closer: Managing today’s talent to create tomorrow’s leaders. Towers Perrin HR Services

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7 Engaging Talent 7.1 INTRODUCTION

Craig Raath

All organisations face the challenge of attracting and engaging people with the skills, knowledge, experience, competencies and values that match the roles within the organisation. There is much research suggesting that engaged employees are more productive, customer-focused and profit-generating, and that employers are more likely to retain them. It is thought that the reason that engaged employees are more committed and productive is because their current employer represents, on balance, their best opportunity and they are thus less likely to leave. Employee engagement is therefore considered a critical component of talent management and a necessary strategy for successful organisations. This chapter explores the concept of employee engagement and engagement strategies for talent.

7.2 DEFINING EMPLOYEE ENGAGEMENT

There have been a number of employee engagement studies conducted over the last few years, and this has led to the development of numerous definitions of the concept. The first published mention of the term “employee engagement” occurred in the early 1990s. Since then, the topic has been extensively debated, researched and written about, including its definition, components and drivers, and its value in the business world. Defining employee engagement has not been easy. Over the years, the terms “employee satisfaction”, “commitment” and “motivation” have been used interchangeably with the term engagement, leading to confusion and debate. Some researchers have defined it as a positive attitude, while others defined it as how employees connect with customers and colleagues, and still others as employee confidence, integrity, pride and passion. Many independent organisations have attempted to find a blended definition of employee engagement that incorporates the recurring themes identified in the literature. In order to arrive at a consolidated definition of employee engagement, it is important to break the research down into the most common, recurring outward behaviours that occur as a result of highly engaged work environments. These themes are thought to be: • •

A tangible emotional connection to the organisation and its values. An increase in discretionary effort.

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A definition of employee engagement could therefore be:

“A state in which employees are motivated, excited and comprehensively absorbed in their work and contribution, thereby enthusiastically offering their discretionary energy to accomplish work goals”.

Employee engagement can thus be viewed as the level of commitment and involvement employees have towards their organisation and its values. An engaged employee is aware of business context, and works with colleagues to improve performance within the job for the benefit of the organisation. For this reason, organisations are working to develop and nurture engagement, which requires a two-way relationship between employer and employee. Employee engagement is therefore a good barometer with which to determine the association of a person with the organisation.

7.3 THE BUSINESS CASE FOR EMPLOYEE ENGAGEMENT

As with many human capital interventions, executive management may view the phrase “employee engagement” as simply a buzzword that has little or no effect on productivity or organisational success. In order to obtain executive buy-in, and more importantly, budget to drive employee engagement initiatives, a sound business case for employee engagement should be developed and presented. This business case must provide a clear and concrete definition of the concept and demonstrate the connection between employee engagement and the organisation’s bottom line. There is clear and mounting evidence that high levels of employee engagement have a direct correlation to individual, group and corporate performance in areas such as retention, turnover, productivity, customer service, loyalty and performance. While performance differences vary from study to study, highly engaged employees are thought to outperform their disengaged counterparts by 20 to 30 percentage points. It is generally felt that companies with high levels of employee engagement do better financially by reducing costs and increasing profits compared to companies with low levels of engagement. This can be seen in net income growth percentages of engaged versus disengaged organisations using the same engagement index. According to the Gallup Consulting organisation (Hartner, Schmidt, KIllham & Agrawal, 2009) there are different types of employees relative to engagement: •

•

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Engaged: Engaged employees are builders. They want to know the desired expectations for their role so that they can meet and exceed them. They are naturally curious about their company and their place in it. They perform at consistently high levels. They want to use their talents and strengths at work every day. They work with passion, and they drive innovation and move their organisation forward.

Not engaged: Not-engaged employees tend to concentrate on tasks rather than the goals and outcomes they are expected to accomplish. They want to be told what to

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•

do just so that they can do it and say they have finished. They focus on accomplishing tasks as opposed to achieving an outcome. Employees who are not-engaged tend to feel that their contributions are being overlooked, and their potential is not being tapped. They often feel this way because they don’t have productive relationships with their managers or with their co-workers. Actively disengaged: Actively disengaged employees are the “cave dwellers”. They are “consistently against virtually everything”. They are not just unhappy at work; they’re busy acting out their unhappiness .They sow seeds of negativity at every opportunity. Every day, actively disengaged workers undermine what their engaged co-workers accomplish. As workers increasingly rely on each other to generate products and services, the problems and tensions that are fostered by actively disengaged workers can cause great damage to an organisation’s functioning.

Considering the extensive business benefits of engaged employees, and the significant harm actively disengaged employees can cause, employee engagement has become a prominent agenda item for executive teams in leading organisations. Employee engagement should not be viewed as a Human Resources initiative that managers are reminded to do once a year. It is a key strategic initiative that drives employee performance and continuous improvement all year long.

7.4 EMPLOYEE ENGAGEMENT STRATEGIES FOR TALENT

Much has been written about attraction, retention and motivation of talent. Research consistently reveals that pay alone is not the answer to ensuring that all three categories are adequately addressed. What this research does tell us, though, is that getting the balance right between these factors is key to creating an environment that engages employees, an outcome that most experts view as the zenith in retaining key talent. This is not to say that successful organisations are taking their eye off the ball when it comes to financial rewards. Recent research has shown that in terms of attraction, pay is still the number one consideration. However, pay is less significant when it comes to retaining and motivating employees, as shown in Table 7.1. Table 7.1  Variables that influence the attraction, retention and motivation of employees Attract Monthly salary/guaranteed remuneration Variable pay Benefits

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Retain

Motivate

73.5%

19.7%

9.8%

5.4%

22.1%

29.7%

3.1%

7.0%

1.8%

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Attract

Retain

Motivate

Performance and career management

8.9%

27.0%

34.3%

Quality of work environment

1.8%

3.3%

6.2%

Work-home integration

Source: Nienaber & Bussin, 2009

7.3%

100%

20.9% 100%

18.1% 100%

The conclusion that we can draw from this is that as long as pay is not a source of dissatisfaction, organisations should look at other reward elements to ensure that they are competitively placed in the war for talent – the entire employee value proposition is key. Traditionally, engagement strategies have revolved around retaining employees by putting measures in place with the aim of “holding onto” employees. These interventions have focused on making the decision to leave a difficult one for employees to make. An example would be the paying of a “retention bonus” which gets paid at an agreed future date, on condition that the employee stays. It is now understood that there are certain key drivers of employee engagement and that they are far broader than just pay. These drivers help managers and organisations identify areas on which to focus employee engagement development activities. The shift in thinking from using targeted remuneration strategies to combat employee turnover to utilising the entire total reward spectrum has given the human resource professional a far more comprehensive range of interventions at their disposal in creating an environment that will attract, motivate, engage and ultimately retain top talent. A few of the top engagement drivers that often require human capital interventions are listed below: •

Autonomy and independence

•

Flexibility and work-life balance

• • • • • • • •

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Management’s recognition of employee performance Remuneration

Career advancement opportunities Job security

Benefits (especially health care), with the importance of retirement benefits rising with the age of the employee Opportunities to use skills and abilities Trust and integrity Type of work

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• • •

Line of sight between employee performance and company performance Employee development

Relationship with one’s manager.

It is important to know what is important to your employees, and this cannot be done behind closed boardroom doors. There is often an alarming mismatch in what human resources and line management think is important to employees and what employees actually view as important. The solution is to ask your employees. Employee opinions regarding several factors in their work life can help to indicate their level of engagement. Gathering employee opinions is a crucial element in the process of crafting an inclusive employee value proposition with enough choice to cater for different needs. It is not possible, or necessary, to satisfy each individual need in an organisation. The key in getting it right is to involve employees when deciding what engagement drivers are important in your organisation. The most common method of doing this is to run an employee perception survey followed by focus groups to ensure that the correct drivers are focused on through testing the natural linkage between drivers.

7.5 THE ROLE OF RECOGNITION IN PROMOTING AND RETAINING TALENT Giving and receiving feedback is a skill. Often leaders find it difficult to show their appreciation to employees. Saying thank you costs you nothing except a few seconds of your time, yet the payoff is enormous. Employees who feel appreciated and valued are likely to work harder and are more likely to stay at a company than those who don’t feel appreciated. If finding a few minutes to recognise employees is a problem, just think how much time you would have to spend replacing them! While money is an important motivator, what tends to motivate employees to perform – and to keep performing at higher levels – is thoughtful, personal recognition that signifies true appreciation of a job well done. Recognition is an ongoing process of acknowledging and reinforcing desired behaviour. It is about shaping an environment in which contributions are noticed and appreciated. The process of regular and consistent feedback is also critical in building a high performing organisation. When you recognise employees effectively, you reinforce, with your chosen means of recognition, the actions and behaviours you most want to see people repeat. An effective employee recognition system is simple, immediate, and powerfully reinforcing. Organisations define a recognition programme as a plan that rewards employee contributions after the fact, for example, the decision to acknowledge the contribution is made retrospectively (backward-looking). Although the rewards may often have a monetary value, the emphasis is generally on the psychological and emotional value provided to the recipient versus the financial value of the award. Chapter 7: Engaging Talent

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The following elements are typically present in recognition schemes: •

The plan is aligned with the desired culture.

•

Criteria are more objective than subjective.

• • • • • • • •

High level of commitment by executives.

Participants can have an impact on criteria (good line of sight). Both individuals and teams are recognised.

Recipients are recognised in public before their peers. Both behaviours and achievements are recognised. Goals are clear and the plan is well communicated. Management understand and use the plan.

The plan design and operation involve employees.

There are usually different recognition categories in an organisation: •

•

Formal recognition is characterised by a department-wide or organisation-wide event that occurs on a regularly scheduled basis which acknowledges significant outstanding performance, or significant achievements/contributions by individual employees and/or teams. An example of a formal recognition event is an annual recognition awards event held at the end of each year. Examples of non-cash rewards received for formal recognition are trophies, plaques or certificates.

Informal recognition is characterised by spontaneous or planned ongoing acknowledgment of significant performance/contributions during any time in a given year. Examples of informal recognition could be “employee of the month” or “full attendance [for a specific period]”. Examples of non-cash rewards received for informal recognition could be written letter(s) of commendation from the organisation, movie tickets, gift/appreciation certificates, recognition leave, and meal vouchers.

The importance of recognition in retaining talent cannot be overlooked. As there is an agreement between the organisation and the employee about the performance and behavioural standards and measurement necessary to receive structured recognition, an organisation’s talent pool will naturally benefit from such a scheme. Recognition or reward for a job well done generates a feeling of adding value, one of the key drivers of engagement. These positive feelings must remain connected to the performance and behavioural standards that have been rewarded and that can be repeated over time. In this way an organisation’s talent pool constantly have their behaviours reinforced.

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Recognition Case Study 1 – Scotia Bank • Scotia Bank’s Applause programme directly supports the One Team, One Goal corporate mantra • Completely online and automated recognition programme

• Four-tiered programme that addresses daily, monthly, quarterly, and annual recognition

• Daily peer recognition – No rewards are provided, only peer recognition via daily issuance of certificates. Leads to Monthly Sweepstakes with small rewards (points or selected merchandise) •

Senior Management Awards – Local/ work group leaders are encouraged to catch associates “in the act”, and are provided with a pool of Applause points for rewards

• Quarterly/Semi-Annual Team Awards – A combination of hard and soft measures is used to recognise teams that have accomplished significant business results. Rewards are provided to all team members • Annual Best of the Best – Team Awards – Top teams are identified and can earn a special celebration for their whole business unit

• Annual Best of the Best – Individual Awards – 175 Best of the Best nominees and their spouses are randomly selected to win a trip for two to a five-star resort on the Mayan Riviera

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Recognition Case Study 2 – HSBC • HSBC uses the Shine recognition programme to recognise colleagues who ‘have gone the extra mile’ for customers in the UK

• A prepaid card allows recognition awards to be purchased locally in a way that promotes economies of scale, flexibility, spontaneity and employee engagement

• The Shine Prepaid MasterCard has been issued to over 1 700 HSBC managers in its UK bank • Funds are loaded automatically to cards every three months. However, a ‘use it or lose it’ rule applies each quarter, to encourage frequent and consistent colleague recognition activity throughout the year • Cardholders are free to use their Shine Card wherever the MasterCard symbol is displayed, although ATM cash withdrawals and other forms of usage are restricted, for example, merchants in specified categories, such as gambling

• According to HSBC, the prepaid programme maximises value and simplicity, and minimises administration for cardholders and HSBC internally. As a result, the Shine Programme is highly cost-effective, user-friendly, and seen by cardholders as a contemporary and attractive proposition • HSBC is also better able to identify best practice in employee recognition, and to link award activity to other business and performance metrics at business unit level

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7.6 CONCLUSION Financial performance Profit/ Employee

Market capitalisation/ Employee

Growth in market share / Employee Revenue from new products / services/ Employee

Stakeholder satisfaction Employer Image

Acceptance rate of offers, especially within core competencies and designated groups Representivity across business levels and functions

Degree of employee engagement Retention rates

Resignation rates

Successors available as ratio of key talent group

Percentage of employees fulfilling performance contracts

Percentage vacancies filled from internal applications

Talent coverage of core organisational competency areas

Training and development days/ Employee Percentage of people fulfilling development contracts

Growth and innovation

Percentage of outstanding performers

Percentage of key positions filled

Percentage of line management meeting talent management KPIs

Internal process efficiencies

Figure 7.1  The talent scorecard Source: Anton Verwey 2013

Recent research by the CLC (2011) states that employees are increasingly facing significant change in the workplace, which is compounded by continuing uncertainty around global economic performance. The economic downturn continues to impact employee engagement trends, particularly levels of discretionary effort. Across the globe, highperformance organisations are grappling with how to extract maximum performance from employees in a sustainable manner. There is a growing realisation that a focus on performance management by achieving short term targets at the expense of employees’ health and wellness is actually a high risk strategy. Evidence suggests that long term this may stifle ambition, and even incapacitate organisations, leaving them unable to achieve more than specific deadlines or targets. The use of employee engagement strategies and tactics to drive performance has grown in popularity and acceptance. This is primarily because organisations believe they can leverage employee engagement for positive organisational outcomes, such as higher employee retention, greater customer satisfaction, and improved financial performance. 122

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The link between the retention and motivation of talent and employee engagement is clear – the more engaged an employee, the greater the likelihood they will want to work hard and stay with the organisation. The use of employee engagement in integrated talent management is thus apparent and important.

7.7 REFERENCES

Corporate Leadership Council (CLC). 2011. Driving a high-performance culture: Ten key insights from corporate leadership council research. Corporate Executive Board Company.

Hartner, JK, Schmidt, FL, Killham, EA & Agrawal, S. 2009. Q12 meta-analysis: The relationship between engagement at work and organisational outcomes. August. Washington DC: Gallup Consulting University Press.

Nienaber, N & Bussin, M. 2009. The relationship between personality types and reward preferences. Published Doctoral thesis. Johannesburg: University of Johannesburg.

Nienaber, R, Bussin, M & Henn, C. 2011. The relationship between personality types and reward preferences. Acta Commercii, Special 1:1– 21.

Verwey, A. 2012. Talent management workshop: SAICA. 27 September. South African Institute of Chartered Accountants. Verwey, S & du Plooy-Cilliers, F. 2003. Strategic organizational communication: Paradigms and paradoxes. Cape Town: Heinemann Publishers.

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8 The Employee Value Proposition (EVP) and Talent 8.1 INTRODUCTION

Craig Raath

There are many factors which impact on the attraction and retention of talent. The sum of these is equal to far more than the parts. The helicopter view and how the elements all fit together are encompassed in the Employee Value Proposition (EVP). The total employee experience will outweigh the value of, for example, high remuneration alone. This chapter examines the EVP and its link to talent.

8.2 DEFINING THE EVP

A company’s EVP can be defined as “the unique set of attributes and benefits that will motivate targeted candidates to join a company and current ones to stay”. In other words, the EVP is a description of the relationship and expectations between employees and the organisation. It expresses what the employee can expect to receive from the organisation in return for performance in the workplace. The measureable benefits for a company of a well-designed and -executed EVP include: 1. 2. 3.

Being able to source candidates from a deeper pool in the labour market. Having committed employees who perform better and don’t leave.

Attracting new employees without having to pay remuneration premiums.

In other words, you can develop a statement of why the total work experience in your organisation is superior to that elsewhere. The value proposition identifies the unique people policies, processes and programmes that demonstrate your organisation’s commitment to employee growth, leadership development, ongoing employee recognition, performance management and remuneration. Contained within the value proposition are the central reasons why people choose to commit themselves to an organisation. So while pay is definitely part of the mix, it is the effectiveness of all the following processes that impacts on a company’s EVP and its ability to attract and retain talent: •

Remuneration: Market-related salaries, benefits, short- and long-term incentives, structure, flexibility, and the link between pay and performance.

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•

Performance management: Alignment between individual goals and company strategy, ongoing management of individual performance, the performance appraisal process, making development the core of performance management, and inclusion of values and competencies into the performance management process.

•

Talent management: Linking talent planning to business strategy, leadership and manager development, succession planning, competency assessment, and gap analysis.

•

Rewards and recognition: Use of financial and non-financial rewards to recognise and motivate employees.

•

Recruitment: Processes for identifying targeted candidates, communicating the EVP to current and potential employees, turning employees into advocates, and managing the recruitment process in terms of cost and speed.

The pillars that make up a compelling employee value proposition may vary from organisation to organisation and sector to sector. What differentiates the top companies from the rest is the extent to which organisations live their propositions – and more importantly, drive them from executive level down. There is abundant research in the market linking Return on Investment (ROI) to employee engagement, and the drivers of that engagement to business processes (pillars). This makes up a value proposition that clearly benefits the organisation. The illustration below (Figure 8.1) is an example of what an employee value proposition could look like in an organisation. Organisation Strategy HR Strategy

Employee Value Proposition (EVP)

This is what makes our organisation the preferred employer 5 Important Pillars (adapted specifically for you)

Remuneration

Performance Feedback

Career and Development

Attract

Motivate

Retain

Work Environment

Inspirational Leadership

Enjoy

Enthuse Inspire

Engagement Index (EI) – how do we compare to the National Index?

Figure 8.1  An illustration of an employee value proposition

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On a macro level (with the inception of the King III corporate governance guidelines), organisations are being urged not only to reflect financial and business specific strategies in their corporate goal setting processes but also to include sustainability measures. This ensures that profitability and business growth are not being seen in isolation – organisations are being urged to achieve these measures in conjunction with broader environmental and social responsibility goals.

8.2.1 Examples of organisations’ Employee Value Propositions

Organisations clearly differentiate themselves in terms of their EVPs. Some examples of how organisations define their EVP are listed below. Starbucks

Working at Starbucks is a lot like working with your friends. We understand, respect, appreciate and include different people. And we believe in keeping each other informed, so our senior leaders regularly hold Open Forum events to answer your questions. Starbucks refers to their EVP as “Your Special Blend”, which includes a wide range of perquisites if one works for the organisation, such as: •

Competitive pay

•

Paid time off

• • • • • • • • •

Insurance: medical, prescription drug, dental, vision, life, disability Bonuses

Retirement savings plan

Equity in the form of Starbucks share and discounted share purchase plan Adoption assistance

Domestic partner benefits Emergency financial aid

Referral and support resources for child care and care of the elderly A free pound of coffee each week.

Google

At Google, the EVP includes a culture that drives a fun place to work, subsidised broadband for all employees, pool tables in the tea room, on-site dental care, free T-shirts twice a week, free meals, and the opportunity to bring your dog to work.

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Nedbank Nedbank’s employer brand of “great things begin with great people” is supported by the nine elements of the Nedbank EVP, namely: • Performance is recognised and rewarded. •

An organisation that truly cares.

•

A values-based organisation with a high performance culture.

• • • • • •

A place where you can thrive.

We have a community of leaders with a clear vision. An organisation that is proudly South African.

People who are bright and amazing to work with.

A role with a sense of purpose and true value add. People’s individual needs are respected.

Allstate

Allstate include in their EVP three components:

•

A company that is innovative, successful and community minded.

•

An environment where employees feel valued and rewarded.

•

Leaders who inspire, build trust and empower employees to achieve optimal performance, and

Sasol

The Sasol EVP consists of the following five themes:

•

Flexible work practices.

•

Organisational reputation and leadership.

• • •

Reward and benefits.

Learning and development and career opportunities. Relationship with line managers.

Sodexo

The Sodexo EVP themes are summarised as follows: •

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We care about our employees in the same way that we care about our clients, and we strive to provide each and every employee with a wide range of professional and personal opportunities to improve the quality of their daily life. Remuneration and Talent Management

• •

Our employees are able to develop their careers both locally and globally across all of our service areas. They have the flexibility to align the pace of their career with their various life stages. By living the Sodexo values and ethical principles, and actively fostering diversity and inclusion, our people make Sodexo a company of the future.

The EVP is the unique and proprietary way in which organisations attract, retain and motivate employees. Increasingly more organisations are citing “culture” as a challenge to attract and retain talent and therefore forward-thinking organisations, are revisiting their employee value propositions to ensure that the components that make up their EVPs remain relevant and in step with what employees require when they search for an organisation to work for. Organisations have also started to differentiate their EVPs on the basis of the different needs that employees have in the generational segments. For example, career opportunities are much more important for younger employees than older employees, and therefore a stronger emphasis is placed on career opportunities when organisations recruit for younger employees. The CLC (2007) has also found that engineering and research employees place a premium on innovative work, IT employees place a premium on organisational technology and marketing employees value product brand awareness – these areas of interests can be very effectively integrated into the organisation EVP, with minor adjustments for different areas of the workforce. The integration of total rewards and the EVP is the key to obtaining optimal effectiveness of both systems. By using an EVP effectively, organisations distinguish themselves in the marketplace to both attract and retain critically skilled employees. In order to do this, organisations should communicate to both potential and current employees a compelling and unique EVP, of which total rewards form a critical part. For a long time guaranteed pay was considered king. Recent studies, however, have shown that once an employee has chosen an employer, reward practices such as variable pay, career development and talent management have overtaken guaranteed pay. Thereafter, it is critical to ensure that the employee forms a strong psychological connection to organisational culture, values and strategic direction. This is achieved by getting the balance right between all of the reward practices underpinning the employee value proposition. If organisations get this right, it will result in an increase in discretionary effort and ultimately in workforces who act as advocates for the organisation. Many experts consider this to be the holy grail of employee engagement.

8.3 EXPECTATIONS OF TALENT

All organisations have an employee value proposition but the challenge is in matching employee expectations and promises set at the recruitment stage with the actual employee value proposition. As the cost of sourcing talent increases and finding the right candidates becomes more challenging, it is critical that new and existing employees feel that their organisation’s employment promise matches reality. Disillusioned employees Chapter 8: The Employee Value Proposition (EVP) and Talent

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will look for alternative employment – and before they leave, they will often be disengaged and this can have a negative effect on team and even organisational culture. During the interview process, a new employee will have developed certain employment expectations about ‘the deal’. Once on-board, the employee will experience the reality of that deal, comparing it to the initial promise and expectations created. Therefore, ensuring that there isn’t a gap between expectation and reality is of paramount importance. In most employee value proposition documents, organisations will detail what reward elements the employee can expect to receive for their time and effort. It is, however, critical that these are clearly communicated, consistently applied and understood by the new employee’s colleagues, line manager and HR business partners. Expectations vary from person to person, and often line managers don’t know what new employees’ individual expectations are when they join. This means that they may focus on the elements of the employee value proposition that are important to them, and not necessarily those important to the candidate. Most employers will get candidates to complete psychometric, language or mathematical ability tests, but fail to ask about an employee’s personal work preferences. In addition, not all elements of the value proposition will be equally important to all employees. For example, “career advancement opportunities” and “autonomy and independence” may be more valuable for some than “taking advantage of the corporate gym”. It is impossible to cater for every employee’s preference but it is nonetheless critical to realise that there are diverse needs in an organisation and to ensure that your organisation’s employee value proposition contains enough choice to satisfy these needs. It is good practice to review your EVP regularly and ensure it is consistently delivered and closely aligned to the corporate strategy and company values. This regular review should not only test what employee value elements are important to employees but also how the organisation is living up to those expectations. Analysing these gaps will allow your organisation to identify the employee value proposition elements that require the most focus. It is also not uncommon for these preferences to change over time depending on the employees’ life stages, so it is a good idea to check in on a regular basis on what elements of the EVP are important to employees. Many organisations do “stay interviews” with all their employees. The main questions asked in a stay interview are: “What makes you stay at our company?” and “What can we do better to retain you?” In some way, one is “re-recruiting” one’s own staff again. By doing this, the organisation demonstrates its desire to make the employment deal a fair and rewarding one, with the obvious benefit to the organisation of being able to attract, retain and motivate talent, thereby improving business success.

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8.4 THE EMPLOYEE VALUE PROPOSITION AND THE WAR FOR TALENT Employers have difficulty in attracting and retaining top talent, not employees in general. High unemployment rates and the surge in the sheer numbers of youth make the potential pool of employees very wide. The problem facing most organisations is not the width of the talent pool, but rather the depth. There is growing demand, especially in certain markets, for people with critical skills and experience. As competition for top talent increases, there is a shift in the balance of power from employers toward employees. This means that employers, if they want to attract and keep the best and the brightest, have to have an attractive value proposition for employees. There is a move to see talent in the same light as customers. Just as consistent effort is required to maintain customer satisfaction, top talent requires an overall work environment that maintains the interest, commitment and loyalty of talent. Talent can instantly search the web to discover their value and other job opportunities. Global mobility and job switching are at an all-time high, and the competition for talent is fierce. Remuneration may act as a powerful incentive when attracting talent, but getting the employee value proposition right is the key to winning the war for talent.

8.5 CONCLUSION

The power of an effective employment value proposition cannot be underestimated. The EVP is not only essential in recruiting talent, it also helps to motivate and retain the current talent within the organisation. The most valuable asset of a company is most often its employees. It is essential to invest in your employees, and this is best achieved through a comprehensive EVP. Organisations need to figure out exactly what their company stands for and what makes it attractive to employees. Both intent to stay and discretionary effort are positively influenced by a strong EVP, and with increasing trends in global mobility, organisations will need powerful EVPs to convince talent to choose to work, stay and perform.

8.6 RENEFERENCES

Corporate Leadership Council. 2007. New roadmap to engagement. Business Wire. Corporate Executive Board Company.

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9 Rewarding Talent 9.1 INTRODUCTION

Morag Phillips

Much literature exists about motivation, and a dominant impression is a message that pay is not a primary motivator, but it can be an exponentially huge de-motivator. The theory goes that pay is ONE of the elements that motivates, but is not the main influencer of typical behaviour, and in particular is not the driver that influences a “stay decision” for an individual in the long term. The question we are debating in this chapter is whether different pay models are appropriate for different kinds of employees … and do we wait and see what mix of people we have before we craft the pay model, or do we craft the pay model to attract the people we want and need?

9.2 CUSTOMISING THE REWARD OFFERING

Let’s take a mix of individuals who are high performers and have high potential – they are the future potential rainmakers and/or leaders in our business. These are people we would want to retain in the long run. They are individuals in whom we want to invest. Does this mean that we need to give away shareholding to retain the incumbent and give them a sense of future in the organisation? Perhaps there are other ways in which we can retain them. We have frequently heard the term “one size does not fit all”, and it is true in the case of reward. Let’s ask our employees what excites them – there may be broad patterns of preferences which are linked to particular generations or groupings of people with specific priorities. However, this is not a rule – we all have our own priorities and wishes. Those individual conversations are critical in crafting an offer that speaks the language of those we wish to retain and engage. If we were to devise a model of pay, what would we instinctively think has most importance for each mix of potential and performance? The reasoning here links to what we see as the primary intentions of each element of pay. The table below sets out the ideal remuneration mix for each block of the nine-box matrix.

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Table 9.1  Proposed remuneration mix versus potential/performance Potential

High

GP on Median

Medium

GP on Median

Low

GP on LQ Under

GP plus Median / UQ STI

GP plus UQ STI plus LTI

GP on Median

GP plus UQ STI

GP plus median STI Average

GP plus UQ STI

Superior

Performance • • • •

Guaranteed package (GP) = pay for complexity of work Short term incentive (STI) = pay for performance Long term incentive (LTI) = encourage a sense of ownership, a vision of the future and retention LQ = Lower Quartile and UQ = Upper Quartile

Whatever the remuneration mix, we need to translate this into the language of what motivates high fliers and high performers, so that it influences their behaviour. An additional consideration is that if a short-term incentive is designed correctly, it will be paid only to those who have earned it. There is therefore little risk to an organisation in offering a short-term incentive to all employees, if designed carefully, where payout happens when both the employer and employee are in a better financial position. An additional consideration for high-potential employees is the offering of training and career development opportunities. This can turn potential into performance, and is an investment in potential future performers. Market indicators suggest that the cost to an organisation of losing a valued staff member is probably between 50–100% of the person’s annual package, usually the result of both direct and indirect costs of unplanned employee turnover. Direct costs include recruitment, training new people, and the cost of mistakes they make before settling in. Indirect costs include reduced performance, the effect of increased stress, and reduced job satisfaction. Thus, the loss of a key employee is costly, but more importantly, it can result in lost opportunity in the future.

9.3 WHO SHOULD QUALIFY FOR UNIQUE REMUNERATION MODELS? When tailoring remuneration options to certain categories of employees, it is crucial that the selection process is robust enough to differentiate levels of pay defensibly. Getting this wrong will negatively impact on the morale of employees whom the organisation is trying to influence positively. It is important that these initiatives are not viewed as a method of identifying A and B players (important versus not important). 134

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There are numerous models or tools to aid in selecting key employees to target as part of an attraction-and-retention strategy. One of these frameworks is illustrated in Figure 9.1. High

RISK Low Low

High

VALUE Figure 9.1  Attraction and retention framework – consideration of both risk and value • • •

High Value / High Risk – Unequivocal inclusion Qualifies for inclusion, but motivate

Not included in attraction and retention scheme

A shortage of staff with “hot skills” is unlikely to be quickly alleviated. An organisation’s success may increasingly depend on these employees and its ability to attract and retain this key talent. The following questions could serve as a start for defining hot skills, where after you could define the appropriate remuneration strategy: 1.

What are the hot skills critical to the organisation?

4.

What is needed to develop and transfer these skills continuously?

2. 3.

Who possesses these skills?

What is important to the people who have these skills?

In the following section we look at different types of hot skills, and the remuneration approach we could consider for each.

9.4 “HOT SKILLS” APPROACHES

AND

APPROPRIATE

REMUNERATION

9.4.1 Critical skills These are the skills categorised as essential for the sustainability and effective delivery of an organisation’s mandates, and they are based on core business requirements. Should these skilled positions leave the organisation, and should the positions remain vacant for any period of time, sustainability and delivery would be significantly affected as a result of the considerable impact on the operations of the organisation. Chapter 9: Rewarding Talent

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9.4.2 Scarce skills These skills are based on market demand and supply factors. In many instances, scarce skills are also critical to the organisation and may receive the remuneration treatment for both categories. This is particularly apparent in highly technical areas. These skills may be both critical to the organisation and scarce in the market. It is therefore important to determine whether the scarce skills as determined by the market are also critical enough within your organisation to warrant special remuneration treatment.

9.4.3 High fliers

These skills reflect a very high level of consistent competence and performance over a long period of time and tend to attract the attention of an organisation’s executive management.

9.4.4 Employment Equity (EE) candidates

With the introduction of legislated employment equity plans as per the Employment Equity Act 55 of 1998, EE candidates started to attract premiums in the market place. More recently, this premium has shifted so that it is no longer the only measure for award– it is increasingly being coupled with measures of critical and scarce skills. Having defined the various categories of “hot skills,” let’s explore if there are different strategies for reward. For each category, we will explore options for fixed pay and variable pay, and whether a premium is applicable.

Critical skills

Since this category of skills is critical for organisations to sustain their business objectives, the most appropriate strategy must be sought and applied to suit specific objectives. These interventions will ensure that the organisation is able to retain skills essential for business continuity. Attraction and retention options include the following: Fixed pay (guaranteed pay)

To stay competitive, pay for employees in critical skill categories will usually focus on the 75th market percentile (the upper quartile). This will enable managers of these staff members to ensure that the guaranteed portion of their packages meets requirements for both attraction and retention of these critical skills. To this end, it is crucial that the organisation subscribes to a robust remuneration survey so that accurate market percentiles can be determined. Furthermore, it is critical for an organisation to define clearly which skills are critical, where “critical” is truly about business survival rather than importance. 136

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Variable pay This part of the employee’s total remuneration includes variable pay components such as a performance incentive scheme or a reward and recognition scheme. Measurable targets should be in place, and the payouts of these schemes should be targeted at a competitive market percentile. If a variable pay scheme is well designed, payments would occur only when tangible outputs are achieved, and therefore any performer in any hot skills category would deservedly earn an incentive. Market premiums/allowances

As per the fixed pay description above, critical skills are usually catered for within the organisation’s pay scales and don’t attract premiums or allowances based on external market comparisons. There are, however, cases where job family-specific pay scales are created to reflect the market should the current scales (by grade) not sufficiently cater for these skills. This method is often, however, an administrative burden, and is driven by scarcity in the market. In these cases, both the critical skills and scarce skills remuneration treatment are applied to the position, thereby not increasing the organisation’s fixed costs. This is explained diagrammatically in Figure 9.2.

Scarce skills

These skills reflect the demand and supply of a particular skill at a particular time. The skill requirement might not necessarily mean that it is complex, but could imply that, owing to circumstances, only a few people in the market have these specific skills. The situation changes over time when skill pipelining or the completion of large national projects facilitates more people acquiring this level of skills, negating their “hot skill” status. An example is the completion of the 2010 World Cup stadiums and the Gautrain project and their effect on the scarcity of engineers. It is not only demand and supply that define a skill as scarce, but the length of time it takes to source skills in the market before an organisation can secure a specific skill. Fixed pay (guaranteed pay)

In order not to distort the salary scales within an organisation, these employees would be paid within the applicable grade range/salary scale. It should be ensured that the guaranteed portion is in line with the appropriate levels of employees within the same grade. This will ensure that future internal inequities are not created when the scarcity changes in the market.

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Variable pay This part of the employee’s total remuneration includes variable pay components such as a performance incentive scheme or a reward and recognition scheme. Measurable targets should be in place and the pay-outs of these schemes should be in line with the rest of the organisation’s remuneration policy. As for the critical skills, if a variable pay scheme is well designed, payments would only occur when tangible outputs are achieved, and thus any performer in any hot skill category would deservedly earn an incentive. Market premiums/allowances

A scarce skills premium may be offered over and above guaranteed pay (GP). By keeping GP constant, the incumbent can be brought back to the appropriate fixed pay should demand and supply factors change. The scarce skills premium is a market premium over and above the fixed pay. The premium will be on top of guaranteed pay as a ‘bonus premium’ and can be removed once the demand and supply situation has changed. This premium is not guaranteed and the quantum should be in line with the market rate to complement a guaranteed fixed pay. This premium is not regarded as part of the employees’ guaranteed portion of pay, but should be taken into account when comparisons are done on Total Guaranteed Package per employee. It is important to note that not all scarce skills are equal and therefore suggesting a standard market premium would be not achieve the desired effect. Each position should be interrogated and the size of the premium determined by the gap to the market. The premium is usually expressed as a percentage of the midpoint of the organisation’s pay scale and the same level of premium is paid to individuals irrespective of their position within that scale. This concept is illustrated in Figure 9.2.

High fliers (consistent high performance)

Employees in this category consistently display improvement in performance and skills level over a long period. They may be innovative, have wisdom, command the authority of superior knowledge over their areas of influence, and so on. They also command respect among peers in the field. Their market value increases over time, and they will command relatively higher pay. Fixed pay (guaranteed pay)

Pay should be gradually moved towards the market upper quartile. Pay scales will adjust according to the market and consequently, employees can be maintained on the upper quartile level or higher, depending on the consistency and level of outperformance. If an organisation’s annual increase process is tied to performance, these individuals will likely move up the pay scale at a faster rate than non-performers. 138

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Variable pay These employees would generally earn larger performance incentives than their peers, based on the attainment of robust performance measures. Previous principles on variable pay apply here. Market premiums/allowances

Once these employees are paid on the upper quartile, a premium above this level may be considered to retain their services. This is, however, not common practice, and any variable pay is usually catered for in the bonus scheme where the employee, as a result of being a top performer, usually achieves his or her stretch targets and resultant relatively high level of bonus. Critical skills

Core

Scarce skills

Train control officer Flagman Train driver Signal technician

Train driver

Support

Engineer

Engineer Remuneration specialist

Market pay development

Professional career path and pay

Scarcity allowance*

High fliers

High performers within key areas in company

Rolling incentive

* The scarce skill needs to be important enough to the company to warrant a scarcity allowance. Figure 9.2  Examples of market premiums/allowances in a railway company

Employment Equity candidates Since 1994 the number of black employees in the workforce has increased year on year at senior management, middle management, supervisory and skilled staff levels. There are, however, still organisations that pay premiums for skilled black employees. As described earlier, these premiums are increasingly becoming more about a combination of factors, rather than race alone. Fixed pay (guaranteed pay)

In order not to distort the salary scales within an organisation, these employees would be paid within the applicable grade range/salary scale. It should be ensured that the Chapter 9: Rewarding Talent

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guaranteed portion is in line with the appropriate levels of employees within the same grade and/or for similar roles within the market. Variable pay

This part of the employee’s total remuneration includes variable pay components such as a performance incentive scheme or a reward and recognition scheme. Measurable targets should be in place, and the payouts of these schemes should be in line with the rest of the organisation’s remuneration policy. Previous principles on variable pay are applicable here. Market premiums/allowances

Employment equity premiums are still prevalent in the South African market. These are more common at executive and senior management levels and also for professional skills. Middle management positions can attract higher premiums where organisations are desperate to retain these skills for succession reasons. It is therefore critical to retain these skills, and these positions should receive multiple engagement treatments which could include remuneration, career pathing and talent management, coaching, knowledge management, and mentoring initiatives. The level of premium varies in the market and is usually between 10 and 20%, but there are cases where premiums of up to 40% are being paid for specific skilled staff categories. As with scarce skills (which in essence these are), it is recommended that these premiums should be informed by the market and be of a circumstantial nature, and that the quantum should be in line with the market rate to complement a guaranteed fixed pay. Figure 9.3 illustrates these scenarios. Scarce Skill Premium

Informed by

EE Premium

Scarce Skill cost as per the Market

Maximum Employee A Upper Guide

Employee B Employee C

Midpoint

Market Median

Lower Guide

Minimum = Individual salary points

Pay Scale Design and how to accommodate various skill categories Figure 9.3  Positioning of “hot skills” remuneration treatments

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In the above example, the organisation’s pay scales have been aligned to the market median and the midpoint of the above scale has been anchored at this market quartile. A spread has then been applied to either side of this midpoint to create the minimum and maximum salary levels for the scale. This would be done for every grade level within the organisation and employees would be paid within this range.

9.4.5 Remuneration options

Employee A could be a critical skill or a high-flier. This is evident by the employee’s position in the pay scale in relation to his or her peers. By paying Employee A above the upper guide of the pay scale, he or she is effectively being paid at a higher market point than Employee C. As salary scales move in line with the market, the only way that employees should be able to get to that point would be through consistently good performance where they would move through the scales faster than their peers (high fliers) as a result of higher increases or if the skill was deemed critical and paid around the upper guide or maximum of the pay scale to reflect a different market quartile (upper quartile if the pay scale is wide enough). Let us assume that Employee B and Employee C are both scarce skills. Their scarce skill premium would be determined by the cost of that scarce skill in the market, or an agreed premium would be applied. In the first scenario, the difference between the midpoint of their salary scale and the “market cost” of the scarce skill is what would determine the level of premium payable. This premium would then apply to both Employee B and Employee C, even though their salary levels are different. In other words it applies to the skill category and not the employee. The same would hold true for Employment Equity employees as per the example above. Another approach that is often used is to apply an agreed premium to certain levels of skill. An example of how this could work can be seen in Table 9.2 below. Let us assume that in your organisation all skill categories are not equal. It is possible to pay different premiums to the Technical, Engineering and IT skill categories if these are businesscritical.

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Table 9.2  Remuneration options for hot skills Percentage premium

Description of skill shortage Most extreme shortage of skills: At least 25% or more of these posts have been vacant in the past year, where offers have been made, but the pay scales alone cannot attract the required skills to join the organisation as a result of scarcity premiums, or evidence exists of high turnover in the order of 25% or more. Recruitment time taken can be between 9 and 12 months.

10% of the applicable pay scale midpoint

Shortage of skills: At least 5–10% of these posts have been vacant in the past year, where offers have been made but the pay scales alone cannot attract the required skills to join the organisation as a result of scarcity premiums, or evidence exists of high turnover in the order of 5–10%. Recruitment time taken can be between 3 and 6 months.

5% of the applicable pay scale midpoint

Extreme shortage of skills: At least 10–25% of these posts have been vacant in the past year, where offers have been made but the pay scales alone cannot attract the required skills to join the organisation as a result of scarcity premiums, or evidence exists of high turnover in the order of 10–25%. Recruitment time taken can be between 6 and 9 months.

7.5% of the applicable pay scale midpoint

9.5 MOST COMMON REMUNERATION RETENTION OPTIONS As can be seen from the description of proposed remuneration approaches, there are various ways to build a remuneration model. However, let’s take a different view and consider the range of remuneration options, each with its own advantages and disadvantages. They need to be considered on a case-by-case basis, as detailed below.

9.5.1 Market stance

Organisations using this strategy pitch their guaranteed package at the upper quartile (75th percentile) of the market for key resources / critical skills. Sometimes a different pay scale is created for specific job families, for example, a job family that is a businesscritical skill. It is important to ensure that the internal selection criteria used to identify these hot skills categories is robust enough to base remuneration decisions upon. A potential problem can arise when a “specialist” is not clearly defined, and one soon sees more specialists in the business than one knew existed!

9.5.2 Scarcity allowances

By far the most prevalent trend in dealing with the current shortage of skills in South Africa is the payment of a scarcity allowance. This allows employers to manage employees 142

Remuneration and Talent Management

who fall into these scarce skills categories using the same pay scale rules as their peers, while still remaining competitive on guaranteed pay. This allowance is negotiated every year and is paid only while the skill is scarce in the market, thereby not increasing an organisation’s fixed costs into the future.

9.5.3 Long-term incentives (LTIs)

With changes to section 8C of the Income Tax Act 58 of 1962 and AC 139/IFRS 2, organisations have been re-designing their share and long-term incentive schemes. This vehicle is critical, and the benchmarks for quanta are not expected to change radically. Under section 8C, where it used to be possible to tax gains on shares at Capital Gains Tax (CGT) rates (10%), these gains are now taxed at marginal tax rates (usually 40%). The AC 139/IFRS 2 charge to the income statement is not deductible where equity is issued to settle benefits, with a few exceptions. A trend globally is to move away from share options (because of high accounting and cash costs as well as the gearing effect that options present, and the risk of having options under-water) towards cash- or equity-settled share appreciation rights or full value share equivalent units, reduced participation and lower grants, as well as performance hurdles, with these being highly geared. However, this can result in high cash costs (for example, if share price movements over the retention period are hedged). Some unlisted organisations have implemented phantom (shadow) share schemes, but these tend to have high cash cost and can place the employer at significant risk should the scheme’s quanta not be carefully designed. A more popular approach is a combination of various approaches, for example, restraint and rolling incentives. From a retention perspective, we also see organisations offering a combination of a performance-based award as well as the award of a full value share.

9.5.4 Short-term incentives (STIs)

The global trend for the past ten years has been to ratchet up the variable pay portion in the remuneration mix. This ties the onerous salary and wage bill to the fortunes of the business and drives awareness of the strategy. Well-designed schemes motivate and retain, and organisations need to be aware that the life spans of STIs is no more than three to five years, and should be reviewed regularly, as strategy changes. STI awards are generally taxable in the employee’s hands and deductible by the employer.

9.5.5 Rolling or banking of bonus incentives earned

This is a popular approach for non-listed organisations because of its ease and efficacy. It drives a retention outcome and can ensure the maintenance of performance over a longer period if the hurdles are designed appropriately. The reason of the driver of retention is because there would be forfeiture of incentives deferred/banked. As a caution, rolling Chapter 9: Rewarding Talent

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schemes can easily deflate morale. Typically, organisations would target a Guaranteed Pay (GP) to Variable Pay (VP) ratio based on salary surveys and niche benchmarking. For example, the market data for guaranteed pay, short-term incentives and long-term incentives for a CEO in a business of similar size and complexity may be as shown in Table 9.3. This market data will guide the quantums required when designing the rolling incentive scheme. Table 9.3  Example of rolling incentive scheme

Position CEO

Median GP

Median shortterm incentive

1 000 000

Median long-term incentive

500 000

750 000

An incentive bonus scheme is designed where the bonus pay-out for achievement is 1 250 000 (500 000 STI and 750 000 LTI quanta). This is then paid out over, say, three years, typically in the following ratios: • • •

50% in year 1, 30% in year 2 and 20% in year 3 (provided still in employ) 20% in year 1, 30% in year 2 and 50% in year 3 (provided still in employ)

34% in year 1, 33% in year 2, and 33% in year 3 (provided still in employ)

Upon payment, this is fully taxable in the employee’s hands and deductible for the organisation.

9.5.6 Flexibility

The employment contract is driven by mass customisation of remuneration, benefits, employment conditions, working hours, leave, and supplementary business-related expenditure. Work-life balance and catering for the specific needs of the generations (veterans, boomers, and generations X and Y) is growing in importance. High-performing organisations have grasped this opportunity to introduce flexibility, which results in greater work enjoyment, often at little or no cost to the organisation.

9.5.7 Restraint of trade payments

These payments can amount to one to five times the annual total guaranteed package. Conditions are attached to the payment. The payment is fully taxable in the employee’s hands, and is deductible by the employer over the period of restraint. When enforcing the restraint, the courts look at how severe the restraint is in terms of area, time, and damage. Restraints that are unreasonable or too onerous can often not be enforced. There have been a number of cases in recent years where restraint of trade agreements were found to be untenable and for this reason they have seemed to be on the wane. 144

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A few very recent rulings in favour of the employer, coupled with the war for talent in certain specialist market sectors, such as high level BBBEE appointments, have seen this method of financial retention increasing in popularity once again. The most common formula for calculating restraints of trade is based on this guideline: Total remuneration × relevant period ___________________________________________ 3

Of course, this is just a guideline, albeit a fairly commonly used one.

9.5.8 Sign-on payment/Retention payment

A payment is promised when an employee joins a company (“signs on”). This is typically in partial compensation for monies forfeited upon termination from the previous employer. Practices differ somewhat, but these are the two most common approaches: • •

Make the payment with the first month’s salary, and the employee has to pay it back if he or she leaves within a period of time, often 1 to 3 years. (The 3-year limit has become more common in line with King III recommendations of a minimum vesting period of 3 years.) Promise the bonus in, say 2 to 3 years, on condition that the employee stays and accomplishes certain performance targets.

Once again, these are fully taxable in the employee’s hands when received and fully deductible in the company’s hands when paid. The market quanta range from 1 to 3 times the annual guaranteed package. A complication arises where the employee leaves and is required to repay the signon amount in full, that is, the before-tax amount. he or she can reclaim the tax from SARS; however, in order to avoid this, the sign-on payment can take the form of a loan, as described below.

9.5.9 Sign-on loans

In this instance, the employee is guaranteed a loan, and the debt is written off if the employee is still in employ after a period of time, say three years. The only tax implications up front are that it is not taxable and not deductible. There is fringe benefit tax if the interest on the loan is less than the South African Revenue Services (SARS) official interest rate. It is taxable in the employee’s hands when the debt is written off. Deductibility of the write-off to the employer would hinge on whether the expense is in the production of income. This can also be used as a retention mechanism for existing employees. Chapter 9: Rewarding Talent

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9.5.10 Deferred compensation This approach was popular 15 years ago then, fell out of favour, but it appears to have come back into favour again. Typically, the company buys an endowment policy for a minimum of five years, and cedes this to the employee at the end of this period. Alternatively, employees elect not to take their bonus and the employer invests this in a policy. The employer may match the contribution rand for rand.

9.5.11 Project Incentives

Project incentives refer to when the individual or team is contracted to do a specific task or project and would be paid portions of a completion or project bonus for the duration of the project. For example, 50% of the amount would be paid on successful completion of the project, and after 6 months, if no defects or problems occur, the other 50% would be paid. The three main criteria for payout of project incentives are within time, within cost, and to the appropriate quality standard or user acceptance.

Summary table

It is clear that many of these interventions drive retention, but ideally, from an employer perspective, we would want to see both performance and retention embedded in the design, and the measures for payment are therefore important. The table below sets out a primary pro and con of each approach to retention from a remuneration point of view. We believe that remuneration is just 25% of the “stay” decision, but that it has to be right. The other 75%, we believe, is inspirational leadership. Tax treatment of the various approaches changes from time to time, and this angle has been excluded from this summary table. This limitation is acknowledged in the hope of keeping the table as evergreen as possible. Table 9.4  Pros and cons of common remuneration retention options Item Market stance Scarcity allowance LTI STI Rolling incentives

146

Pro Remuneration attracts

Can be flexed as market changes

Can be structured to drive the behaviour you want

Focuses the mind on the goal and staying until the bonus is paid

Good for unlisted organisations and often simpler than shares

Con Adds to salary bill permanently

Can become an entitlement

Line of sight diminishes the lower down the organisation you take it

Staff leave as soon as the bonus is paid

Locks in the wrong skill for too long

Remuneration and Talent Management

Item Flexibility

Restraint of trade

Sign-on payment

Sign-on loan Deferred compensation Project incentives

Pro It is relatively inexpensive and serves a growing need

The amounts are often not counted when calculating pay gap ratios

Employee enjoys upfront gain of money

Assists employees immediately if they have a cash crunch

An easy-to-understand concept that has a strong retention aspect

Line of sight normally good

9.6 CONCLUSION

Con It often requires a robust performance management system to be in place

More difficult to justify

Getting the money back if employee leaves before the minimum period

Getting the money back if the person defaults because of debt

Indirect link to performance

Clawing back incentives if poor quality picked up too late

As much as we wish for retention of outstanding performers in our organisation, we also need to be aware that healthy employee turnover can be good for an organisation. New people bring new ideas and fresh perspectives. Retention has a purpose and can run alongside reward for performance and other talent management initiatives, but ideally we also want our employees to choose us as an employer … what are we doing to make that choice an immediate “Yes!”?

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10

Talent Management and Variable Pay

10.1 INTRODUCTION

Craig France CA (SA)

The need for the remuneration policy, strategy, and systems to underpin business strategy has never been greater. Our organisations have been downsized, right-sized, subjected to business process re-engineering (BPR) and transformed to enable them to compete in the twenty-first century. Unfortunately, our pay systems have not always responded and often lag behind in organisation transformation. Well-designed remuneration systems play a strategic role by promoting organisational success and attracting and retaining talent in highly competitive markets.

10.2 VARIABLE PAY

The most common forms of variable rewards are normally described under the headings of short-term incentives (STIs) and long-term incentives (LTIs). There are many different definitions for these, but broadly speaking, they can be grouped as follows.

10.2.1 Short-term Incentive Schemes (STIs)

These are incentive schemes that reward superior performance over a period of usually one year. Typically, they reward what has happened the previous year. The main examples of STIs are: •

Profit sharing (PS)

•

Commission schemes (CS).

• •

Gain-sharing (GS)

Bonus schemes (BS)

10.2.2 Long-term Incentive Schemes (LTIs) These are incentive schemes that look into the future and reward superior performance, typically over more than one year. Typical examples are: Chapter 10: Talent Management and Variable Pay

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• • •

Rolling incentives (RI)

Value-add schemes (VAS)

Share-based schemes (SS).

The tables below show annual market-related LTI payments as a multiple of the Total Annual Guaranteed Package, and annual allocation multiples as a percentage of the package. Use these tables to guide your thinking around the remuneration portion of talent acquisition, motivation, and retention. You will find examples in other chapters of the most appropriate strategy on how to award these.

Table 10.1  STI percentages as a percentage of Total Annual Guaranteed Package Annual Percentages Paterson Grade

P10

P25

P50

P75

P90

F Upper

6%

16%

49%

108%

186%

E Upper

3%

11%

26%

60%

112%

2%

7%

16%

27%

69%

F Lower

3%

E Lower

2%

C

1%

D

B, A

1%

14% 9%

4%

4%

35% 21% 8% 7%

76%

46% 16% 13%

Table 10.2  Appreciation share multiples of Total Annual Guaranteed Package

129% 95%

35% 29%

Appreciation Share Multiples Paterson Grade

P10

P25

P50

P75

P90

F Upper

0.9

2.7

8.1

17.9

30.9

E Upper

0.4

1.8

4.4

9.9

18.6

F Lower E Lower D C

B, A

150

0.6

0.3

0.3 0.1

0.1

2.4

1.4

1.2 0.6

0.6

5.8

3.5

2.6 1.4

1.2

12.6 7.7

4.4 2.6

2.2

21.4

15.8

11.4 5.7

4.8

Remuneration and Talent Management

Table 10.3  Full share multiples of Total Annual Guaranteed Package Full share Multiples Paterson Grade

P10

P25

P50

P75

P90

F Upper

0.3

0.8

2.5

5.4

9.3

F Lower

0.2

0.7

1.7

3.8

6.5

E Lower

0.1

0.4

1.1

2.3

4.8

E Upper D C

B, A

0.1

0.1 0.0

0.0

Source: 21st Century Pay Solutions Group, 2013

0.5

0.4 0.2

0.2

1.3

0.8 0.4

0.4

3.0

1.3

0.8

0.7

5.6

3.5 1.7

1.5

Organisations should use both STIs and LTIs in their remuneration mix. The primary purpose of this is that it supports the long-term value of the organisation because the longer-term consequences of short-term decisions are taken into account. A welldesigned total earnings scheme reduces the risks of short-term-focused decision-making.

10.3 WHY IMPLEMENT VARIABLE PAY?

More and more companies are implementing incentive schemes. Set out below are some guidelines on selecting an incentive scheme and some of the critical success factors for implementation. Most organisations implement incentive schemes in order to: •

Encourage superior individual, team and organisation performance.

•

Align the onerous salary bill to the fortunes of the organisation.

• • • • •

Align with shareholder value thought (the agency theory). Share the wealth created in the organisation. Reward participants for a job well done. Drive organisation strategy.

Create more shareholder wealth.

The type of scheme implemented depends largely on what the reason is for wanting to implement the scheme. The rationale, in context of the total reward strategy, also affects the scheme design, principles, measures used, and targets set. There is a widely-held view that there is no single best type of scheme – the scheme has to be designed to drive the behaviour needed to achieve the HR and business objectives. There are, however, vast

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bodies of research which show that organisations which have incentive schemes that reward participants financially outperform those which do not.

10.4 PAYING VARIABLE PAY FOR PERFORMANCE

A “pay-for-performance” philosophy appears to be sound practice. But at what level of performance should variable pay kick in? This is ultimately determined by the employer’s performance culture. In a high performance organisation, Variable pay would be paid only further along the performance curve than in other organisations. A practice to guard against is awarding variable pay for performance that does not at least “meet requirements”. The reasons for this include: •

•

From a behavioural point of view, this can serve only to upset the high performers, because why should they “bust their gut” to achieve great results when those who have under-achieved are also awarded incentives? This can easily lead to a “passenger” culture creeping into the organisation, where all performance gravitates towards mediocrity.

From a legal perspective, an employer could find itself in the Labour Court after it has dismissed an employee for under-performance, and the employee argues that he or she had received a performance incentive, tacitly implying that they had performed.

If an organisation avoids this trap and awards, an awarded only variable pay for performance that at least “meets requirements,” what can be wrong with that? The answer is simple – the more to the left of the performance curve variable pay is awarded, the less there is left in the pot to award at the right-hand side of the performance curve. The latter represents those who have really performed compared to the former who have performed, but have merely “met requirements”. Isn’t that the role of guaranteed pay – the quid pro quo for performing a specified/required job? There is no right or wrong answer or a one-size-fits-all solution – only what is appropriate for the particular organisation. Consider the range of what may be appropriate for the organisation in the following three figures:

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Remuneration and Talent Management

Figure 10.1  Typical very high-performance culture – the pot is reserved for those who have really out-performed

Figure 10.2  Typical less high-performance culture

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Figure 10.3   “Middle-of-the-road” performance

In summary: • • •

Choose the performance level at which variable pay is awarded in line with the organisation’s performance culture. Ensure that talent is rewarded for performance .

Ensure that substantive incentives for performance are available for talent, to encourage them to stay and perform at their best.

The above applies the “pay-for-performance” principles at a macro level. When they are applied at a micro level, together with the scoring rules in the incentive scheme, they can further enhance the linkage between performance, line-of-sight and the earning of incentives. As an example of the application of this principle and the scoring rules, assume that an incentive scheme measures performance at the following levels, with associated weightings:

• • •

Company – 50% Division – 25%

Individual – 25%.

If a threshold performance score is set at each level, then the following matrix could be used to determine the scoring rules:

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Remuneration and Talent Management

Table 10.4  Incentive scoring rule matrix Performance level

Company (50%)

Division (25%)

Individual (25%)

Incentive payment?

Yes

Yes

Yes

Note 1

Yes

No

Yes

No

Yes

Yes

Threshold achieved?

No

Yes

No

No

No

Notes: 1.

A resounding “yes”.

3.

The scoring rules can vary here:

2.

a.

Note 2

Yes

Note 4

No

Note 3 Note 5 Note 6

From a “performance purist” perspective, the argument could be that the division has not met its performance threshold and has therefore not contributed to the company achieving its performance threshold (in fact, the company has achieved its threshold despite the division’s performance), and therefore no individual in that division should receive an incentive. From a “line-of-sight” perspective, the argument could be that the individual has met the performance threshold, and had it not been for that, the division, and indeed the company, would have been worse off. The individual should receive an incentive based upon the company weighting of 50% and individual weighting of 25% – they participated in only 75% of their incentive potential.

In many incentive schemes, from perspectives of aligning with both shareholder interests as well as affordability, incentives would not be paid. However, from a motivational and line-of-sight perspective, incentives could either be paid on: a.

5.

No

In most schemes, a resounding “no”, unless it is a totally team-based incentive scheme, in which case Individual performance would probably not carry a performance weighting in any event.

b.

4.

Yes

b.

The weightings of divisional (25%) and individual (25%) performance (they participated in only 75% of their incentive potential or Some discretional basis.

In many incentive schemes, incentives would not be paid, unless on some form of discretional basis.

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6.

In all incentives, this should be a resounding “no”, since threshold performance has not been achieved at any level.

10.5 CONCLUSION

Incentives are a powerful driver of behaviour, and careful consideration is required when designing incentive schemes. It is important to use variable pay as a part of talent management, but careful consideration should be given to rewarding potential and/ or performance. Variable pay can certainly be used as an incentive to promote high performance in talent, but should not be used to reward this with high potential that are not currently performing.

10.6 REFERENCES

21st Century Pay Solutions Group. 2013. RewardOnline – 750 organisations in South Africa Rosebank: 21st Century Pay Solutions Group.

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11 Long-term Incentives 11.1 INTRODUCTION

Billy de Beer and Chris Blair

The link between talent management, performance management and long-term incentives has become a subject for increased consideration and debate. We have seen a number of developments to date and no doubt will see more in future.

11.2 AWARD QUANTA FOR LONG-TERM INCENTIVES (LTIs)

Historically, share-based long-term incentives (LTIs) have been granted based on quanta determined as a multiple of guaranteed remuneration levels with a dependency on their job grades. This is based on the fundamental premise that top executives are able through their employment to conduct the company’s affairs in such a manner as to influence the company’ share price favourably, and would do so if: • •

Sufficient LTIs (that is, quanta) were awarded to them, and

The LTIs vested over a sufficient period in order to ensure sustained positive share price performance, and thereby also ensured the retention of the executives.

11.2.1 Quanta awarded in South Africa

In most cases LTIs are awarded to executives based on market comparisons of the issue value of unvested LTIs that employees at different job grades hold at any point in time as a multiple of guaranteed packages. The data is no reflection of the growth in the value of equity allocated. The market median ranges from an allocation multiple of 4x to 8x of guaranteed packages for share appreciation schemes for top executive positions, as reflected in more detail in Tables 11.2 to 11.4. This practice provides no reflection of growth in the value of the benefit to participants over the vesting period as this is influenced materially by: •

Growth in the value of each company’s share price

•

Top-up practice.

• •

Tax structuring of schemes

Vesting terms and conditions, and

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Best governance principles suggest that allocations be made annually in even quanta to reach the target multiples rather than in one large quantum. This is to guard against overcompensation from awarding shares or options in large quanta when share prices are at a low. It is normal practice for allocations to be spread evenly over three years to reach the target multiples for each participant.

11.2.2 Quanta of LTIs awarded in the USA

According to Equilar Inc’s 2011 Report for Fortune 100 Companies: “Executive ownership guidelines and holding requirements continue to be an important tool in aligning shareholder and executive interests”. Although different in structure, both ownership guidelines and holding requirements encourage executives to develop a sizeable equity stake in the companies they help manage: • •

Ownership guidelines generally establish share-acquisition goals which executives must achieve within a specified period, typically several years.

Holding requirements call upon executives to retain a certain percentage of shares acquired through the exercise or vesting of share options, restricted shares, and other equity awards.

With disclosure of these policies on the rise, Equilar reviewed trends in the prevalence and design of executive ownership guidelines and holding requirements among Fortune 100 companies for the fiscal years 2008, 2009 and 2010 (Equilar Inc, 2011). The key findings included:

•

•

•

•

• •

158

“Ownership policy prevalence: The prevalence of Fortune 100 companies with publicly disclosed executive share policies increased from 87.4% to 88.4% from 2009 to 2010.

Ownership guideline prevalence: Boosted by an overall increase in ownership policies, the prevalence of ownership guidelines at Fortune 100 companies increased from 81.1% to 82.1% from 2009 to 2010.

Holding requirement prevalence: As was the case with ownership guidelines, the prevalence of holding requirements at Fortune 100 companies increased from 47.4% to 50.5%. Ownership guideline design: Executive share ownership guidelines defining share ownership targets as a multiple of base salary are still the most commonly used design model by far, making up 80.8% of all ownership guidelines. Allocation values: The median value of base salary allocation multiples for top executive positions ranged from 4x to 5x. Accumulation periods: 69.2% of companies specified accumulation period requirements. Of these, 75.9% specified an accumulation period of five years.”

Remuneration and Talent Management

There is some evidence of ownership or holding minimum requirements for listed companies in South Africa at present. Some examples of this are shown as follows: Table 11.1  Ownership or holding minimum requirements for listed South Africa companies Percentage of annual salary Company

CEO

Executive Directors

SAB Miller Shell

300%

200%

200%

200%

300%

AngloGold Ashanti Chevron

200%

500%

ConocoPhillips Anglo American

400%

500%

Not disclosed

300%

200%

300%

BHP Billiton Standard Bank

150%

300%

Nedbank

Not disclosed

200%

150%

Over the past 15 years, the vesting period trend has become shorter. The latest research conducted by 21st Century Pay Solutions Group (2010) suggests the following periods.

11.2.3 Vesting periods

The specific vesting periods in SA range as shown in Table 11.1. Table 11.2  Market practice – vesting periods for LTIs in South Africa Number of organisations

Prevalence

18

35%

5

10%

10

5

19%

10%

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Year 1

33%

20%

Year 2

33%

20%

Year 3

Year 4

Year 5

20%

20%

100% 33%

20% 33%

33%

33%

159

Number of organisations

Prevalence

Year 1

Year 2

2

4%

40%

60%

2

4%

2

4%

1

2%

2 1

1

4% 2%

2%

1

2%

1

2%

1

2%

30%

25%

20%

20%

20%

Year 3

Year 4

Year 5

25%

25%

25%

50%

25%

25%

40% 20%

20%

30% 50%

Source: SARA survey 2010, conducted through 21st Century Pay Solutions Group

30% 20%

20%

30% 10%

40%

20%

30%

50%

50%

20%

30% 100%

Corporate governance requirements from the recent King III Report on Corporate Governance require that share options or other conditional share awards normally be granted for the year in question and in expectation of service over a performance measurement period of not less than three years. Accordingly, full shares and appreciation equity should not vest or be exercisable within three years from the date of grant. In addition, appreciation equity options or rights should not be exercisable more than 10 years from the date of grant. This is an attempt to limit the economic expense to shareholders. However, prudence dictates that companies should consider hedging share scheme expenses in all cases to limit the cost exposure to companies taking the cost of hedging into account.

11.3 LINKING EXECUTIVE TALENT MANAGEMENT THROUGH INDIVIDUAL PERFORMANCE AND POTENTIAL RATINGS WITH LTI AWARDS

Target allocation multiples for share-based long-term incentives have most often been determined primarily with reference to the job grades and guaranteed remuneration levels of executives. Typically as described, the LTI allocation multiples of annual fixed remuneration packages increase for higher job grades according to market criteria. These tend to be weighted in terms of the size of the employer company and are typically 160

Remuneration and Talent Management

represented in quartiles. This implicitly forms a reference framework for the participants’ level of participation. A sound job grading system would reflect the size of the job as well as its complexity and relevance of the required outputs to the organisation’s overall success. This coupled to a performance management system would typically provide the most common basis for current LTI allocations. The job grading and performance management systems would typically not necessarily reflect the performance of the company or part thereof in shareholder terms, nor an individual’s present value, future value, or future potential to the organisation. Consequently, a prudent employer would determine LTI allocation multiples by combining references to the following: •

The job grading system as described above.

•

The future value or potential of the participant, given his or her role per the company’s management succession structure and planning for execution of the company’s strategy and evidence of the individual’s competency in this regard.

•

The participant’s current performance levels per the performance management system to assess the participant’s current value to the company, and

In this regard, the talent grid referred to in previous chapters and included below for ease of reference could be of invaluable use. The table below reflects a typical LTI award matrix based on the talent grid (performance and potential), where higher scores would reflect larger LTI allocations and scores of 1 or less would receive zero allocations.

Table 11.3  Example of talent ratings within a scoring range from 0 to 10, using the talent grid HIGH FUTURE VALUE/ POTENTIAL

MED LOW

4

8

10

0

1

2

2

LOW

5

MED

7

HIGH

CURRENT PERFORMANCE

We would suggest the following allocation matrices for larger SA corporates based on current SA market allocation quanta, using the talent grid combined with market factors for different job grades. The allocation multiples represent the full value of unvested scheme equity at allocation values for appreciation share schemes (share options or share appreciation rights (SARs)) as applied to current annual guaranteed remuneration and assuming the scoring on the talent grid as per Table 11.3 above. Chapter 11: Long-term Incentives

161

Table 11.4  Suggested allocation multiples representing the full value of unvested scheme equity at allocation values for appreciation schemes (share options and SARs) as applied to current annual guaranteed remuneration for Top Management HIGH FUTURE VALUE/ POTENTIAL

MED LOW

3–4

7–8

9 – 10

0

0–1

2–3

0–2 LOW

4–6 MED

6–7

HIGH

CURRENT PERFORMANCE Table 11.5  Suggested allocation multiples representing the full value of unvested scheme equity at allocation values for appreciation schemes (share options and SARS) as applied to current annual guaranteed remuneration for Senior Management HIGH FUTURE VALUE/ POTENTIAL

MED LOW

1

2–3

4–5

0

0

2

0 LOW

1–2 MED

2–3 HIGH

CURRENT PERFORMANCE

11.4 LINKING COMPANY-SPECIFIC PERFORMANCE CONDITIONS WITH EXECUTIVE LTI AWARDS Most long-term incentive schemes in South Africa are designed in line with the premise that aligning executive interests with those of shareholders is a paramount consideration. This is commonly interpreted to mean that the same benefits conferring on shareholders (in terms of growth in the share price) should accrue to participants. The definition of performance is simple, as viewed by shareholders. It is the increase in the value of the company’s shares together with dividends received over time. However, the main concern in this regard is that executives should not benefit from growth in the share price where external factors (such as a weakening Rand for companies who export their product or increased demand as a result of international factors beyond management control) have influenced the share price, especially in cases where the intrinsic performance of such companies might have weakened (for example, in terms of cost management or decreased market share). The argument is exacerbated when executives contrive to issue shares at points where a high probability of favourable external circumstances and higher share prices can readily be foreseen. 162

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In the United Kingdom (UK), institutional investors from the Association of British Insurers (ABI) have brought their influence to bear on UK-listed companies by issuing guidelines that deal with the above concerns as follows:

• •

Equity should be issued on a regular basis (annually) to counter the effect of external factors on benefits, also covered in King III. This would mean that if an issue multiple of 5x guaranteed package is agreed, then equity to the value of, say, 1× guaranteed package should be issued annually over a period of 5 years. Performance hurdles should be tied either to the awarding or to the vesting conditions. These should be designed so that benefits accrue according to the successful implementation of factors within management control. Typically, the measures could be return on equity in excess of a hurdle rate or returns in excess of those achieved by a peer group of companies.

In South Africa, the King III Report on Corporate Governance highlights the need for company based performance conditions, different to those in the short term incentive, to be included in the LTI design. This is an attempt to align LTI reward quanta with share price growth emanating more directly from executive efforts that have led to improved company performance and eliminating windfall benefits. Typical traditional share option schemes had automatic vesting, provided the individual was in the employ of the company. Companies have been re-looking at their share schemes in order to introduce performance conditions and to ensure compliance with the King III principles. We agree with the notion that incentive plan design can influence the effectiveness of LTIs to achieve the following goals:

• •

Align executive compensation with shareholder interests and the long-term success of a company by attempting to exclude windfall benefits from executive compensation, and Attract and retain executive talent by offering competitive compensation.

Internationally, many global organisations commonly use total shareholding return (TSR) as a performance metric for executive share scheme compensation together with other performance metrics. The usage of multiple metrics allows companies to target multiple performance goals, clearly linking incentives to business strategy. Some companies have linked vesting of shares to individual performance as well, but more commonly, a disqualifier is in place to disqualify participants whose performance is below a certain level. Most LTI schemes have introduced performance hurdles in recent years that apply at vesting. Unfortunately in a number of cases where LTI schemes have delivered little or no value to participating executives this has proven to be counter-productive and consequently reduced retention as well as performance motivation. This has been true, especially in the case of schemes where vesting occurs over longer periods. Experience has shown that relevant targets are much more difficult to foresee over longer periods.

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Examples include many appreciation schemes where the share price at vesting since 2008 has been lower than at allocation date (the LTIs are under water), and consequently the schemes have not delivered any value to participating executives. Another example would be cases where the pre-defined targets applicable for future vesting have been set too high and have proved to be unattainable by the company even though excellent TSR has actually been achieved. For listed companies in South Africa, resetting targets would be a complicated matter requiring shareholder approval in terms of Schedule 14 of the JSE Rules. A strong case exists for performance conditions to apply at the award date (rather than the vesting date – most probably with the addition of certain maintenance provisions). The thinking for schemes designed in this manner would be that target setting is always much more relevant and applicable to the prevailing circumstances than targets set well into the future. This problem is exacerbated in the case of South Africa where the King III Report requires minimum vesting terms of three years. Consequently, schemes where performance conditions apply at award date would arguably function more optimally from a performance measurement perspective. In these schemes, vesting terms would serve primarily as a retention vehicle. PwC’s study entitled ‘Psychology of incentives’, carried out among 1 106 executives in 43 countries across a broad spectrum of sectors, found that the longer executives have to wait for bonuses, the less the bonuses are worth – a deferred bonus is typically discounted by around 50% over three years. Many companies in South Africa have come to this conclusion of late.

11.5 NURTURING TALENT THROUGH HISTORICALLY DISADVANTAGED EMPOWERMENT USING LONG-TERM INCENTIVE SCHEMES

In South Africa, talent management has another reference point other than with regard to the executive pool, as has been dealt with above, and that is talent management in the broader sense as it relates to the historically disenfranchised South African (HDSA) population at large. The case has become entrenched for Broad-Based Black Economic Empowerment (BBBEE) in South Africa as a ‘positive form of discrimination’, and a number of initiatives have been driven primarily through the Department of Trade and Industry in an attempt to normalise South Africa society through BBBEE. The process started in 1994 under President Nelson Mandela and was termed the Reconstruction and Development Programme (RDP) . This programme focused on initiatives for the HDSA masses to speed up the provision of: •

Housing

•

Job creation.

• • 164

Health services Education, and

Remuneration and Talent Management

This initial process has been driven further through the dti (formerly the Department of Trade and Industry) culminating in many initiatives, most notably the Broad-Based Black Economic Empowerment Act 53 of 2003, as revised in 2012. The scoring process is divided into subsections: •

Ownership (maximum 25 points)

•

Enterprise and supplier development (maximum 40 points, plus a potential of 4 bonus points)

• • •

Management (maximum 19 points)

Skills development (maximum 20 points, plus a potential of 5 bonus points) Socio-economic development (maximum of 5 points).

The total maximum is 109 points (plus maximum bonus points of 9), making a grand total of 118 points possible. BBBEE level 1 status requires points totalling above 100, level 2 requires points between 95 and 100, level 3 requires points between 90 and 95, level 4 requires points between 80 and 90. There are 8 levels, and scores below 40 are regarded as noncompliant. Government is attempting to have its own departments operating as level 1 entities, while most large organisations will set their targets around level 4 and smaller ones at level 8. There are certain exemptions for smaller organisations. The purpose of this chapter is to explore how LTIs can be used to build talent management in the sense of BBBEE. In this regard we need to differentiate between:

• •

Black talent at executive and ownership level, and

BBBEE, which is aimed at a broader level in terms of the applicable codes above.

At executive level, companies and businesses are required in general to transfer share ownership of 25% plus 1 to HDSA in the form of black ownership. This process has begun slowly. In smaller businesses, it has typically at its best seen selective black owners and executives taking up shares in private companies, usually on beneficial terms, with low or no interest loans being extended to purchase the shares at market values or at a discount after a period, with maximum shareholdings around 25%. Use has also been made of call options to be exercised upfront with shares to be delivered after a considerable period and paid for at current prices. This has a similar effect to the former scheme. In a limited number of cases, BBBEE shares have been granted at a discount or free of charge. The ownership points scoring method has a new provision that up to 8 points (of the potential 25) relate to relative net value growth to the BBBEE owners, measured on a year-to-year basis. If a minimum net growth of 40% annually is not achieved, the total BBBEE level is reduced by 1. Speaking at the start of the inaugural two-day BBBEE Summit, President Jacob Zuma made the following points:

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•

The black middle class had grown from 1.7 million in 2004 to 4.2 million in 2012.

•

The National Treasury recorded that BEE transactions had reached a value of over R600 billion since 1995.

•

• •

The appointment of black people and women in senior management positions in the private sector had increased from less than 10% in the 1990s to over 40% currently.

Government remained concerned that black participation in the economy continued to involve mostly share ownership schemes. Broad-based black ownership of South African assets on the JSE had continued to register poor growth.

One of the perplexing issues regarding BBBEE is that once a black shareholder sells shares to someone other than a black person, the company’s BBEEE score can be compromised unless the shares have been held for five years and the sale relates to a maximum of 40% of the ownership points. Debates around a solution to this dilemma are set to continue. A further complexity is that although BBEEE LTI schemes have delivered considerable wealth in some cases, there is little evidence of meaningful broad-based economic empowerment amongst the respective HDSA recipients. This could be due to the respective LTI schemes mostly conferring cash benefits on individuals, who often use the cash to service accumulated unsecured debt or for other non-empowerment and/or non-sustained purposes (for example, the state-encouraged schemes per section 8B of the Income Tax Act 58 of 1962). Many esteemed scholars are of the view that education and development of appropriate skills is the root of economic development and needs to be addressed as a first priority, and that no meaningful economic empowerment can be sustained without it. This view seems to be borne out by experience to date. The evidence suggests that no definitive solution has been found yet. The revised BBBEE Act has taken this into account by significantly elevating the scores for skills development and enterprise and supplier development. It remains an imperative that South Africa pursue the question of how BBBEE LTI schemes can be used to benefit previously disadvantaged individuals and advance broad-based black economic empowerment meaningfully in South Africa.

11.6 CONCLUSION

The latest trend is for more companies to use past performance against agreed targets as part of the process in determining the quanta of LTIs at award date (as opposed to applying them as a hurdle at the vesting date in the more traditional approach). This new approach to performance management is combined with a determination of awards using potential or the need to retain on the talent grid. This serves to mitigate against the difficulty of maintaining reasonable performance targets during a prolonged recession and guarding against equity awards remaining under water during vesting, which negates their value both as motivational and retention tools. The performance mechanism referred to needs to be contracted at inception of the measurement period. 166

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A variety of measures have been incorporated into these schemes, including a selection from among peer group, company and individual measures. In many cases, a portion of short-term bonus scheme awards has been used to fund LTI awards. These companies argue that short-term bonus awards measure performance criteria best within management’s ambit of influence. In some cases the LTI awards can be increased during the vesting period for sustaining performance or reaching set vesting performance criteria. Under these types of arrangements the LTI awards are never lost or reduced other than for early service termination.

11.7 REFERENCES

21st Century Pay Solutions Group. 2010. SARA survey. Randburg: 21st Century Pay Solutions Group. BBBEE Inaugural Summit. 3–5 October 2013. President Jacob Zuma, Gallagher Estate, Midrand.

Equilar Inc. 2011. Executive share ownership guidelines report for fortune 100 companies in the USA. California: Equilar Inc.

King M 2009. King III Report on Corporate Governance. King Committee on Corporate Governance. Institute of Directors in Southern Africa.

PricewaterhouseCooper. 2012. Making executive pay work: Psychology of incentives. London: PricewaterhouseCooper.

Spencer, LM. 1993. Competence at work: Models for superior performance. New York (NY): John Wiley & Sons.

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12 Attracting, Retaining and Leveraging Generation Y Talent 12.1 INTRODUCTION There is a revolution in how youth operate and want to be treated. From a young age, the youth of today have been told, through both the media and at home, that they can have it all. This generation has a strong sense of entitlement. Striving for a quality of life known only by the rich and famous, wanting the best and thinking they deserve it, makes today’s youth driven and ambitious, with high expectations. “Generation Y” is a popular rather than a scientific term, but generally it is used to designate that demographic of youth whose birth falls somewhere from between the 1980s to about 2000. Global demographic trends are showing that the number of young people, especially in developing markets, is massive. Organisations need to understand this demographic segment and ensure that their talent management and remuneration strategies cater for the unique characteristics of the youth.

12.2 GENERATION THEORY AND YOUTH (GENERATION Y)

Generation theory refers to the categorisation of people based on certain events which had a major impact on their lives, such as World War ll, or 9/11 in New York, or the first democratic election in South Africa in 1994. Table 12.1 illustrates the differences among the generations and how views and attitudes have changed between the Veterans and Generation Y in most aspects of life. Technology, for example, enabled the generations to communicate globally at the push of a button, whereas in the 1920s it took weeks to get a letter to another country.

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169

Table 12.1  Differences among generations Veterans (1920– 1940)

Boomers (1941–1960)

Generation X (1961–1980)

Generation Y (1981–2000)

Defining values and characteristics

Reserved, clean-living, gentlemanly

Balance, self-reliance, pragmatism, individualistic, arrogant, risktaking

Attitude

Pay your due, work hard

Personal gratification, wellness, successful, bossy, stylish, inquisitive, competitive, talkative

Respect, independent, loyal, humorous, tolerant, caring, honest, balanced, optimistic, clean-cut

Visionary, idealistic, workaholics, energetic, bossy, loud, reward-driven, consensus

Cautious, creative, realistic, low key, innovative, flexible, independent, adaptable, competent

Leadership

Communication

Formal, hierarchical, loyal, hardworking, low key, detailorientated Burgeoning airmail, telephone

Likes

Security, stability

Dislikes

Debt, borrowing, upstart young people

170

If you have it, flash it

Whatever …  (enigmatic)

Post, courier, services, telex, typewriters

Personal computers, Internet, email, web, cellular phones

Shopping, ostentation, wining, leading, vision

Paying off debt, ageing

Sharing, chilling, being individualistic, being with friends, change Bossiness, corporate culture

Let’s make the world a better place Civil-minded, visionary, confident, optimistic, moralistic, principled, values-driven

Email, Internet, web, SMS, PC with voice recognition, digital voice Shopping, labels, family, friends, the environment, technology

Dishonesty. Unbalanced life, ostentation

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Veterans (1920– 1940)

Boomers (1941–1960)

Generation X (1961–1980)

Generation Y (1981–2000)

Defining events

Discovery of penicillin, Great Depression, World War II, Pearl Harbour, Hiroshima

Launched microchip, Watergate, right to abortion, test-tube baby, Margaret Thatcher – first female Prime Minister, working moms, Challenger, latchkey kids, Berlin Wall comes down, divorced parents, HIV/AIDS

Internet, virtual communities, 24/7 lifestyle, baggage fee, Mandela released, Princess Diana dies, Dolly the cloned sheep, Viagra, SMS, 9/11, Iraq war, e-mail spam increases

Outlook

Victorious

Mau Marvels, Russia launched Sputnik, contraceptive pill, Nelson Mandela sentenced to life imprisonment, cold war, assassination, feminists movement, Soweto riots Optimistic

Drive, selffulfilling, makes me feel important, job security and career

Sceptical

Balanced, fun lifestyle, career rather than security

Opportunity

Political savvy, networking skills

Holding two jobs

High energy, fast thinking, quick learning

A birth right

I’ll listen, but I can teach myself

Work ethic

Work hard because it is my duty, lifetime career

Success is a result of …

Hard work

Money is for …

Security; save for a rainy day

Education is …

Health

Feedback

Lucky to have one – we’ll do our very best Grinned and bore the pain No news is good news

Enjoyment, over the bank money

Survival, means to an end

Doctor must cure me immediately

Alternative therapy

Regular feedback

Immediate feedback

Enjoy change, entrepreneurial spirit will help to change the world Parallel career

Immediate gratification, and to save the world There is more to school than memorising

Obsessed with keeping healthy

Feedback whenever I need

Source: Adapted from Shelton & Shelton, 2005; Lammiman & Syrett, 2004; and Codrington & Grant-Marshall, 2004 Chapter 12: Attracting, Retaining and Leveraging Generation Y Talent

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The current-day youth is one of the smartest, tech-savvy and idealistic generations of our time. They grew up in the age of technology that put a computer (and/or cell phone) in the hands of a large number of children. They have understanding and knowledge of technology and keep up quite well with its advances. They know what they want, but they may not always know how to get there. Unlike past generations, the technological advances in the past decades have put a multitude of choices at the fingertips of the youth. The wealth of information available in seconds from the Internet, hundreds of television stations to choose from, and different shopping centres very close to one another have basically given the youth the notion that if they do not get what they want from one source, they can immediately go to another. There are a number of specific characteristics of Generation Y that have been identified. These are described below:

Generation Y attributes • •

• • •

• •

•

• •

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Impatient: They were raised in a world dominated by technology and instant gratification and therefore can tend to be quite impatient.

Sceptical: In recent years there has been more scamming, cheating, lying and exploiting than ever before from major figures and companies. Generation Y have grown up seeing scandals.

Blunt and expressive: Self-expression is favoured over self-control. Making their point is most important, as is evident in their online communities. Image-driven: Making personal statements with their image is very important and they are willing to pay for this.

Still young: Although they have a “seen it all, done it all” air about them, lack of life experience means that they do not know everything yet. They are aware of this and are not afraid to ask questions. For this generation, it is better and more time-saving to ask questions, than to waste time trying to figure it out. Adaptable: Generation Y is used to adapting and being comfortable in various situations. Technologically savvy: This group of youth grew up in the age of technology and is taking advantage of it in ways which many of the older generation may not even have thought of. Ability to grasp new concepts: This is a learning-orientated generation. Just as they are able to use technology in unimaginable ways, they are also able to grasp new concepts quickly. Efficient multi-taskers: They will do it faster and better than their peers.

Tolerant: Generation Y will make the increasingly diverse workforce feel at home and comfortable. Remuneration and Talent Management

12.3 THE IMPACT OF GENERATIONAL THEORY ON REWARD Generic reward schemes are typically implemented in companies according to job grading systems to pay employees in the workplace (Bussin, 2002). Reward preferences in line with specific generation requirements have not been widely considered. According to Karp, Fuller and Sirias (2002), policies are often created by Baby Boomers, and the needs of Generation X and Generation Y are not always catered for. There was a Harvard study which concluded that there is no such a thing as generational theory and that it is just different needs at different age groups that drive behaviour and preferences. This is a counter view to generation theory, which we believe resonates more strongly with reward choices. Nienaber and Bussin (2009) found that structuring total rewards models according to individual preferences positively influences efforts to attract, retain and motivate key employees. Yet this is seldom done, especially in large organisations where the HR burden of individualising reward packages is prohibitively time consuming and complex. Structuring total rewards models according to the preferences of employee segments is a viable alternative to accommodating individual preferences. If reward preference is based on some combination of values, motivations and preferences (Chiang & Birtch, 2005), and generational theory states that generations differ in their attitudes, then it may be the case that generational differences will affect reward preferences. Research has shown conflicting results when exploring the relationship between generation theory and reward preference. Giancola (2008) found that there is a greater importance of life stage over generation profiles in understanding employee needs. He also emphasised that all people are primarily concerned about their job, career and compensation, no matter what the generation, and therefore concludes that reward preferences are determined by lifecycle rather than by generations. In earlier research, Giancola (2006) expressed his concern that the generation gap has been overstated by theorists and that generation theory has major gaps. His research found that in terms of rewards, Baby Boomers are more interested in retirement planning, and Generation Y prefers career development. He contends that these differences are linked to life stage rather than to generation preferences. However, research by Bussin and Fletcher (2008) found that there were preferences for certain rewards among different generations. These preferences are summarised in Table 12.2.

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Table 12.2  Preferences in reward based on generation Generation

Preferred reward

Veteran/Traditionalist

The job is the reward

Generation X

Freedom in the form of work-life balance

Baby Boomers Generation Y

Require public recognition

Practical and immediate rewards

Van Rooy (2010) also found significant differences for reward preference across generations. The type of compensation preferred, for example, differed with specific regard to variable pay (bonuses, cash incentives). Variable pay was shown to be more strongly preferred in Generation Y than in Baby Boomers. This could be ascribed to the risk-taking levels people have at different ages, with older people being more risk averse. Generation X was most concerned with the work environment, and had a preference for flexible working hours and having a pleasant work environment. Baby Boomers showed a clear preference for long-service awards and public recognition of their achievements. Generation Y has been most focused on personal and professional development, which is probably linked to their life stage and early careers (Van Rooy, 2010). The results of Van Rooy’s research on reward preferences and generations are summarised in Table 12.3. Table 12.3  Summary of Van Rooy’s (2010) research results on reward preference and generation Generation

Preferred reward

Baby Boomers

• Fixed and long-term compensation rather than variable compensation • Long-service recognition • Development and career opportunities in the form of informal training

Generation X

Generation Y

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• More of a balance between fixed and variable compensation • Balanced work-life environment especially flexible working hours • Development and career opportunities with no inclination to a specific type if training • A balanced view on compensation, but leaning more towards variable pay rather than fixed • Non-financial recognition is very important • Development and career opportunities were the highest among all generations in all the different types of training listed

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With conflicting evidence, it seems that the only way to determine staff members’ aspirations is to talk to the individuals on a regular basis and to build solid and credible relationships. This does not mean, however, that the needs of Generation Y cannot be proactively addressed and attempts made to assist them in finding meaning in the workplace.

12.4 CREATING MEANING AND PURPOSE FOR YOUNG TALENT

Generation Y employees aim to have different career and lifestyle goals from those their predecessors, including wanting a tech-savvy work environment, flexible working conditions, and long-term development programmes. The traditional route of attending college so one can get a “secure” job for the next forty years just does not appeal as much to the current youth as it did to previous generations. Especially with the rise of the Internet, the youth of today have seen many people start up successful businesses on their own, avoid the traditional corporate route, and wind up financially free and in control of their destiny. It is hard not to find this opportunity appealing, especially when that is what they have to come to regard as the norm. The youth want to be in control of their destiny and build something they are passionate about. At their places of work, they want to be financially rewarded for their performance, and have compensation linked to achievement. They do not want to have to wait until they are 30, 40, or 50 to serve in leadership roles. They are hungry for success and expect to achieve in the very short term. Young employees need the chance to take up leadership roles, pursue business opportunities that are of interest to them, and be financially rewarded for their successes. Case Study – Aprimo Aprimo is an Indianapolis-based software maker. It all but guarantees recent college graduates a promotion within one year, assuming performance is up to par. Its OnTrack programme was launched in 2005 to lure young talent to the Midwest in America. So far, 100% of participants have received a promotion and salary bump. The initiative, which rotates new hires among three business units, has helped double the share of Generation Y employees at the 1 200-person company to roughly 20%. The retention rate for graduates of the programme at the five-year mark is 85% (Kwoh, 2012).

Generation Y is an intelligent group – they have been accustomed to learning online and finding vast amounts of information quickly. They have seen success stories and want to star in their own. They are also passionate about “making a difference” and affecting the world for the better. Social relevance and issues of sustainability (human and environmental) are of great importance to them, and these serve as key differentiators in attracting and retaining talent. Chapter 12: Attracting, Retaining and Leveraging Generation Y Talent

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Unlike boomers, who tend to put a high priority on career, today’s youngest workers are more interested in making their jobs accommodate their family and personal lives. They do not like to stay too long on any one assignment. For the youth of today, staying in one position for two years without a promotion will simply lead them to move on. Some of the key attributes of today’s youth include the following:

1. Socially fluid and highly networked: Having gone through high school, university, or even a first job, many of today’s youth are breaking away from their families and forging their own paths and networks. There are three primary characteristics that define the youth socially. They (a) are continually connected, (b) speak their own language, and (c) are influenced by peers.

2. Emotionally searching for their identities: In just the same way as in past generations, the youth today are at a period of self-discovery but are rapidly shaped by their vastly changed environment, education, and activities and social culture. That is why they seek recognition and fame, enjoy absurdity, and embrace a variety of subcultures. 3. Mentally fickle and creative: Few youths of the Generation Y era can remember a time when technology – from DVDs to PCs – did not play an important part in their lives. Having grown up with deep exposure to media and devices, they skim text and information quickly, are easily bored, and are expressive and creative. Based on these rather unique characteristics of the youth, it is suggested that the following four design approaches could be a starting point in attracting and retaining young talent: •

•

• •

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Immediacy: To overcome the youth’s fickle attention and broad use of media, you need to hook them in by quickly exposing value and then keeping them interested over time. The youth want to perform jobs that have an immediate impact, and they are not interested in spending their early years “learning” on the job.

Generation Y literacy: Because today’s youth are so influenced by peers and their own communication style, you need to speak to them authentically and on their level. This could be done through some form of management forum where the top executives interact with youth regularly. Individualism: Since they are diverse and expressive, the youth respond to experiences that allow them to personalise and customise their interactions.

Social interactivity: Since the youth as consumers are very social, this will not change as they come to work. You should therefore consider enabling them to communicate and express themselves using mediums that they favour, such as Facebook. There are very few companies that allow the youth access to this kind of medium at work. Bandwidth problems are cited as the major concern, but it needs to be understood that this is their primary form of keeping in touch within their own “communities”, a key component of their social interactivity. Remuneration and Talent Management

Generation Y wants to start at the top, or at least be climbing the corporate ladder by their sixth month on the job. They expect to have been promoted by their second year on the job. They believe that they deserve the position they want, whether experienced or not. The members of Generation Y are not against hard work by any means. This is not a lazy generation, just one that expects immediate gratification. Steps to Retaining the Youth as Employees

1. 2. 3. 4. 5. 6. 7.

Encourage their values: Any way in which you show appreciation for their individuality and let them be expressive will keep them around. Allow them to have input into the decision-making processes. They want to be heard.

Train them: This is the most education-orientated generation in history. If you want a job well done, tell them how to do it. Complete training and availability of answers provide the key. Mentor them: They want to receive feedback, positive or negative. They do not just want to receive orders; they want to be given the reasoning behind them. If you need them to do something, tell them why, in a way that lets them know the importance of the task to the organisation. Show them how their work will contribute to the bottom line: They need to know they are making an impact. Provide full disclosure: They value fairness and ethical behaviour, while also being sceptical. If they feel the organisation is not truthful, they will not be satisfied.

Create customised career paths: This will create a sense of control that Generation Y desires and will provide them with a realistic account of their progress and their future with the organisation.

Provide access to technology: Having the newest and the best technology at their fingertips will attract and retain Generation Y employees. This should also include access to social networking sites such as Facebook, where their communities reside.

12.5 CONCLUSION

Attracting and retaining young talent is a strategic issue for most organisations. Failure to act will result in many missed opportunities and will also leave organisations vulnerable to the risk of increasing talent and skills shortages. This is an area in which you will need to consider being bold. The youth are radical and their sheer numbers should be cause for concern for all business. They want action and they are tired of empty promises with diluted responses. Talent management for the youth requires a fresh approach – one that includes a balance of idealism, pragmatism, flexibility, respect and accessibility. You will need to consider demands for opportunities for long-term career development with a variety of experiences, offering a sense of purpose and meaning, fostering open social networks, and instilling a good work-life balance. These strategies must be embedded in your corporate culture. Focusing on youth will not only offer a competitive advantage, but will become a necessity in the next few years. Chapter 12: Attracting, Retaining and Leveraging Generation Y Talent

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12.6 REFERENCES Bussin, M. 2002. Retention strategies. Randburg: Knowledge Resources Publishing.

Bussin, M & Fletcher, S. 2008. Managing the generation mix. 21st Century Pay Solutions Group. [Online].

Available:

http://21century.co.za/images/stories/managing_generation.pdf

[Accessed 14 January 2013].

Chiang, FFT & Birtch, TA. 2005. A taxonomy of reward preference: examining country differences. Journal of International Management, 11:357–375.

Codrington, G & Grant-Marshall, S. 2004. Mind the gap! Johannesburg: Penguin Books (Pty) Ltd.

Giancola, F. 2006. The generation gap: More myth than reality. HR. Human Resource Planning, 29(4):32–37.

Giancola, F. 2008. Should generation profiles influence rewards strategy? Employee Relations Law Journal, 34(1):56–68.

Karp, H, Fuller, C & Sirias, D. 2002. Bridging the boomer x-er gap: Creating authentic teams for high performance work. Palo Alto: California: Davis-Black Publishing.

Kwoh, L. 2012. More firms bow to generation Y’s demands. Wall Street Journal. [Online]. Available: http://online.wsj.com/article/SB10000872396390443713704577603302382190374.html [Accessed 17 January 2012].

Lammiman, J & Syrett, M. 2004. Cool search. Padstow: Cornwall: TJ International Ltd.

Nienaber, N & Bussin, M. 2009. The relationship between personality types and reward preferences. Published Doctoral thesis. Johannesburg: University of Johannesburg.

Shelton, C & Shelton, L. 2005. The neXt revolution. California: Davis-Black Publishing.

Van Rooy, D. 2010. Total rewards strategy for a multi-generational workforce. Unpublished MBA thesis. Johannesburg: Gordon Institute of Business Science.

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13 Rewarding the Talent at the Top 13.1 INTRODUCTION The spotlight on executive pay and incentives has increased post the global economic crisis. Together with this increased focus, has come increased legislation and regulation. The Dodd-Frank Wall Street Reform and Consumer Protection Act [of the USA] and Basel III [the Third Basel Accord] are only two examples of new regulation designed to bolster disclosure requirements and increase the transparency of the executive pay decisionmaking process. Multinational companies are increasingly opting to adhere to the most stringent standards to avoid penalties and stakeholder activism from across the globe. As a result, many public companies are redesigning or have redesigned their incentive programmes to ensure a link between performance achievement for the company and executive and performance achievement for shareholders (Reda, 2012). One of the most significant outcomes of Dodd-Frank is that publicly traded companies in the United States must now “submit their proxy filings’ executive compensation disclosures to a nonbinding shareholder advisory vote, which is known as Say on Pay” (Heim, 2011).   Other countries have implemented tighter legislation with regard to executive remuneration. In Switzerland, for example, shareholders now have a binding vote on the aggregate pay of the board of directors and senior management. In the UK, shareholders now have a binding vote on a company’s forward-looking remuneration policy and an annual advisory vote on how this policy has been implemented during the year. In explaining these new rules, the Business Secretary stated: “Over the past decade, directors’ pay has quadrupled, with no clear link to company performance.” In Australia, shareholders have a binding vote on the remuneration report. If 25% or more of shareholders vote against the report at two consecutive annual general meetings, then a separate general meeting must be called at which all non-executive directors must stand for re-election. Countries such as the Netherlands, Sweden, Norway, Denmark and Belgium also have binding shareholder votes. In Germany, the shareholder vote is nonbinding, and in France, the government is considering capping CEOs’ salaries at twenty times those of the lowest-paid employees working in companies in which the government has a majority share. The bottom line is that shareholders want to ensure that the link between executive remuneration and company performance is transparent, demonstrable, fair, ethical and sustainable. Chapter 13: Rewarding the Talent at the Top

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This chapter explores the link between remuneration and performance for talent at the top (executives). A theoretical perspective is provided as well as current and future trends.

13.2 THEORETICAL PERSPECTIVE

There are two dominant paradigms that are used to explain the link between performance and remuneration in senior management teams: 1. 2.

Agency theory; and

Institutional theory.

Agency theory maintains that owners/shareholders are able to drive the performance of management in line with the best interests of the organisation by adjusting the reward mix. The balance between fixed and variable rewards is used to create incentives for management to act in the owners’/shareholders’ interest. The use of variable reward mechanisms, such as long-term incentives, is seen as key to driving “good” behaviour. Agency theory has been criticised as it does not incorporate benefits and relational returns. In addition, it has also been suggested that the approach over-emphasises efficiency and rational drivers of reward mix determination and underestimates the institutional pressures that may also be relevant (Chapman & Kelliher, 2011). Institutional theory proposes that structural and normative forces result in organisations following similar remuneration patterns and mix. The elements of choice and design are rendered increasingly meaningless depending on the extent to which these constraints/forces operate for each organisation. The structural and normative forces can take a number of forms. The most prominent pressure is that exerted by regulation and legislation. When operating in tough regulatory environments, the role of the remuneration specialist is predominantly about achieving tax efficiency, especially around the balance between benefits and cash wage payments (Chapman and Kelliher, 2011). Normative pressures are those that result from institutional norms and the pressure to conform to such norms to achieve legitimacy. In the past (before the economic crisis) the rationale for pay-for-performance was seen to be predominantly driven by agency theory, where agents (managers, CEOs) saw it in their own self-interest to advance the welfare of the principals (shareholders), because they were amply rewarded for doing so (O’Higgins, 2012). The financial crisis proved that the interests of agents often over-rode the interests of shareholders as well as the public good. The spate of resulting regulation is essentially driving an institutional model of reward where the options for ‘clever’/complex incentives are dramatically reduced. The 2012 Say-on-Pay recommendations, for example, combine new quantitative and qualitative methods of reward determination. The quantitative portion will involve comparing CEO pay rank versus total shareholder return (TSR) rank among a small group of peer companies, expected to be 20 or fewer. This peer group analysis will also 180

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include a review of the CEO’s total pay multiple, relative to median total pay of all other employees. A five-year trend analysis of CEO pay as compared to TSR performance is also being considered. The qualitative review would consider the following: •

The ratio of performance-based to time-based equity awards.

•

The company’s peer group benchmarking practices.

• • • • •

The overall ratio of performance-based compensation to fixed compensation. The robustness of disclosure and rigour of performance goals.

Actual results of financial/operational metrics (for example, growth in revenue, profit, cash flow, and so on) on both an absolute basis and relative to peers.

Special circumstances related to such things as a new CEO in the prior fiscal year or equity grant practices (for example, biannual awards), and Any other factors deemed relevant (Reda, 2012).

Table 13.1  Summary of the differences between agency and institutional theories

Purpose of reward mix decisions Main assumptions

Agency theory

Institutional theory

• Alignment of employee objectives to those of the organisational owners

• Conformity with other organisations and market practice to gain legitimacy

• Rational decisions

• People are self-interested, risk averse

Organisational reaction Implications for reward mix

• Goal conflict and information asymmetry exists between owners and employees

• Rational active management

• Relative weight of incentives versus fixed reward will be managed to optimise the alignment of agent and owners’ interest

Source: Chapman & Kelliher, 2011

• Organisations seek legitimacy

• Organisations conform to norms

• Passive conformity or rational legitimacy seeking • Reward mix will be influenced by institutional norms and the extent to which operating within these norms confers legitimacy

While there is ample literature on reward mix, most previous research has focused on level (what individuals are paid) and structure (the relationship between different levels of reward). Less emphasis has been given to reward mix decisions, that is, the relative proportions of each element making up overall reward (Chapman and Kelliher, 2011). Chapter 13: Rewarding the Talent at the Top

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The model of how organisations determine reward mix, depicted in Figure 13.1 below, demonstrates how both the agency and institutional model of reward are combined to determine reward mix. In the model, coercive forces can be seen as regulatory/legislative pressure; mimetic and normative factors can be seen as pressure to conform to industry norms.

Figure 13.1  Model of how organisations determine reward mix Source: Chapman & Kelliher, 2011

An additional pressure when dealing with senior executives is the scarcity of qualified incumbents. At this organisational level there is not a wide talent pool and dependency on talent can, and does, drive up the cost of rewards. Figure 13.2 below shows resource dependency as a significant variable in determining reward mix.

Figure 13.2  Model of reward mix based on resource dependency and institutional theory Source: Chapman & Kelliher, 2011

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With a combined theoretical underpinning of institutional theory and resource dependency, the focus of this chapter now turns to current trends in remuneration for talent at the top.

13.3 CURRENT TRENDS IN REMUNERATION FOR EXECUTIVES

13.3.1 Current Trend 1 – Increased scrutiny of performance metrics selection Compensation committees are more rigorously reviewing their oversight of executive incentive practices (Heim, 2011). The SEC rules and ISS voting guidelines (Say-onPay) require that all performance measures and goals be released and compared with actual results for both short- and long-term incentive plans (Reda, 2012). Performance metrics selection and goal-setting can be one of the most difficult aspects of designing an incentive compensation programme. Goals need to be reasonable, attainable and aligned with the business strategy and investor communications. In addition, the minimum threshold payout for an incentive plan should be adjusted to be fair to both executives and shareholders (Reda, 2012; King, 2009).

13.3.2 Current Trend 2 – Introduction of more long-term incentives to encourage ethical behaviour and increase retention

Executive pay does not have a consistent relationship with tenure; however, incentives increase strongly with tenure. The reason for this is that the median, or typical, CEO holds onto most of the equity value generated both through new equity grants and through appreciation in current holdings. Most CEOs’ incentives usually stem largely from holdings of shares and options as opposed to performance- related variation in annual pay (Core and Guay, 2010). Long-term incentives are increasingly being used to encourage ethical behaviour and increase retention. The efficacy of these incentives to drive behaviour, however, is dependent on their magnitude, nature and proportion to individual executives’ frame of relativity. While it is true that an executive should have “skin in the game”, what constitutes significant “skin” for one executive may be relatively trivial for another executive. The more personal wealth an executive has, the greater the incentive needs to be to drive desirable behaviours (Core & Guay, 2010). This is not an argument to pay executives more; rather, it is a warning that long-term incentives are not a panacea or insurance policy against unethical or high-risk behaviour.

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13.3.3 Current Trend 3 – Fewer “vanilla” share options, more performance-based instruments There is a clear move away from “plain vanilla” share options or share appreciation rights (SARs) awards. Instead, performance-based awards that vest or pay out only if the executive meets specific performance objectives are being introduced. Performancebased awards include incentives such as performance shares, performance-contingent RSUs or restricted shares and share options with performance conditions. Performancebased awards in the United States were expected to account for 47% of total executive long-term incentive value in 2011, up from 37% in 2009 (Heim, 2011). Heim (2011:61) explains this shift to performance-based rewards by saying: “While share options have unlimited upside opportunity, critics believe that the lack of downside exposure can tempt executives to ‘swing for the fences’ in their decision-making, potentially creating excessive risk to the organization. At the same time, the memory of how the market downturn wiped out option values is still fresh in any executives’ minds, whetting their appetites for alternative equity vehicles. The alternative of tying long-term incentives directly to company performance provides an opportunity to reduce compensation risk and strengthen pay-for-performance alignment.”

13.3.4 Current Trend 4 – Complex, opaque pay plans are on the decline Executive remuneration is not a simple variable. The composition of total compensation can consist of many different elements in diverse combinations and proportions, with different temporal outcomes. These combinations encompass varying risk implications, the measurement of which is also problematic. A PricewaterhouseCoopers survey (nd, cited in O’Higgins, 2012) found that executives’ value-deferred pay is significantly below its economic value. Deferred rewards, especially when woven into complex, opaque pay plans, deflate motivation and reduce the perceived value of the entire package (O’Higgins, 2012). There is therefore a move to demystify and simplify remuneration packages, making them easy to understand not only for shareholders and investors, but for executives themselves.

13.3.5 Current Trend 5 – The rise of indexed share remuneration

The prelude to the global economic crisis led to harmful incentives, asymmetrical payoffs, and windfall compensation levels. There is now a move toward analysing the relative value of performance and correlating incentives with market factors. In other words, managers and investors should be rewarded only for success beyond what would normally 184

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be generated. When a market is booming, it is almost impossible not to make money. In such times, it is argued, compensation should be only for “excess returns” (Desai, 2012). In order to determine what can be considered excess, it is first necessary to establish what a “normal” return for an activity is. This is achieved by evaluating an activity of comparable risk. Indexed share compensation allows executives to receive company shares as compensation, but any returns associated with the broader market or with their industry are subtracted. Share compensation is thus indexed to remove price appreciation arising from market returns. Proponents of indexed share compensation believe that such a mechanism provides an appropriate incentive for high performance and also measures the true incremental value the executive provided (Desai, 2012).

13.3.6 Current Trend 6 – Limits on share-based compensation

A growing body of empirical evidence shows that share based remuneration can lead to earnings management, misreporting, and outright fraudulent behaviour. The primary reason for this is that share-based remuneration may lead executives to invest suboptimally and destroy value to conceal bad news about future growth (Benmelech, Kandel & Veronesi, 2010). In their 2010 publication, Benmelech, Kandel and Veronesi (p.1771) state that: “The trade-off is made apparent by the fact that for most reasonable parameter values, and especially for medium- to high-growth companies, share-based compensation indeed induces equilibrium with high effort but also leads to a suboptimal investment strategy. That is, the cost of inducing high managerial effort ex ante comes from the suboptimal investment policy after the slowdown in investment opportunities, which eventually leads to undercapitalization and a share price crash … Different types of firms need to put different levels of shares in place in the compensation package. Specifically, we find that the CEOs’ compensation packages of growth firms, that is, those with high investment opportunities growth and high return on capital, should have little share-price sensitivity. Indeed, a calibration of the model shows that for most firms the share-based compensation component should never be above 40% of the total CEO compensation in order to induce truth revelation and optimal investments. Similarly, for most firms with medium-high return on investment, the sharebased compensation component should be strictly positive, to induce high effort.”

A combined compensation package that uses both share-based performance and a cash flow-based bonus is seen to be superior as it induces executives to exert costly effort and reveal any worsening of the investment opportunities. Organisation value is maximised Chapter 13: Rewarding the Talent at the Top

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in this case. Each component (share and bonus) in the combined compensation package serves a different purpose and therefore they are both necessary “ingredients”: the sharebased remuneration increases the manager’s effort to expand the growth options of the firm, whereas compensating managers with bonuses when they reveal bad news about long-term growth significantly reduces their incentives to engage in value-destroying activities to support the inflated expectations (Benmelech, Kandel & Veronesi, 2010).

13.4 PRACTICAL APPLICATION OF CURRENT TRENDS

The most commonly applied current trends are the linking of incentives to performancerelated metrics and increased scrutiny of reward decision making. In order to apply these trends, it is important to select the most appropriate performance measures and set reasonable, yet attainable, goals.

13.4.1 Ideal number of performance measures

The number of performance measures varies greatly. In some instances, only one or two measures are used, such as accounting profits and revenue growth. Other plans use a management-by-objectives (MBO) framework, including several more measures. Other plans are much more complex (Merchant, 2010). For example, one could consider the complex set of measures used to determine the 2008 bonus for General Electric CEO, Jeff Immelt. Immelt’s bonus plan was based on performance and measured in terms of the following: revenues, organic revenue growth, earnings, earnings per share, cash flow from operating activities, return on total capital, and margins (%); sustaining operating excellence and financial discipline; retaining an excellent team with a strong culture; managing the company’s risk and reputation; building an excellent investor base; leading the board’s activities; and growing share price. The weighting of these factors is not a matter of public record and is determined by GE’s Compensation Committee (Merchant, 2010). How many performance measures are ideal? Research shows that the relationship between the number of measures and incentive system effectiveness is, in general, probably non-linear. Merchant (2010) postulates that as knowledge accumulates, we will find that the optimum number of measures in any given situation is a positive function of: • •

The effectiveness of the measure(s) in reflecting value creation, and

The extent to which the measures reflect what the manager can control,

and a negative function of:

• •

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The diffusion of focus that can result from having too many measures, and Cost.

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The determination of the appropriate number of measures is thus a combination of art and science. Unfortunately, there is no simple or straightforward answer. In an attempt to identify the most commonly used performance measures in 2010, James Reda and Associates conducted an in-depth analysis of short- and long-term incentive design criteria for the top 200 public companies in the S&P 500 (Reda, 2012). Their results are summarised below.

Performance measures used in incentive plans

Short-Term Incentive Plan (STIP) findings included the following: •

Earnings per share (EPS) and income were the two most common measures used by the companies in the study that disclosed their performance measures.

•

Other common measures used in 2010 included revenue/revenue growth (28 percent), capital efficiency ratios (24 percent), and cash flow (22 percent).

•

• •

Seventy-three percent of all companies used at least one income measure in 2010, similar to the 72 percent prevalence in 2009, both representing a decline from 86 percent in 2008. Use of non-financial measures (such as customer satisfaction and new business market share) was evident at 15 percent of companies, compared with 16 percent in 2009 and 11 percent in 2008. Twenty-four percent of companies with STIPs and Long-Term Incentive Plans (LTIPs) used one or more of the same measures in both incentive programmes. This is much lower than in 2009, when 41 percent of companies used the same measure or measures.

A Review of Long-Term Incentive Plans revealed the following:

•

• • • •

In similar fashion to Short-term incentive plans (STIPs), the most commonly used type of measure in LTIPs was income/ EPS. Fifty-five percent of companies with LTIPs used at least one measure of income in 2010, up slightly from 54 percent in 2009. EPS is still the most common income-based measure used, with 62 percent usage in 2010. Total Shareholder Return (TSR) was the next most frequently used measure, with 45  percent prevalence for those companies with LTIPs in 2010, matching the previous year’s prevalence. TSR is usually used as a relative measure that compares company performance to a peer group or industry index. Forty-one percent of the companies used a capital efficiency measure in 2010, a significant increase from just 31 percent in 2009.

The use of revenue measures increased in LTIPs to 18 percent in 2010 from 14 percent in 2009. This increase was similar to the increase found in STIPs (from 23 percent to 28 percent). Cash flow measures in 2010 matched 2009 prevalence at 13 percent (Reda, 2012).

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13.4.2 Setting of goals and alignment to appropriate types of rewards Goal-setting is critical to the validity and acceptability of all incentives. The integrity of the organisation will be judged on whether the chosen goals are perceived as fair and sufficiently challenging. A Suggested Approach to Goal-setting Ideally, incentive plan goal setting incorporates multiple perspectives on performance expectations. For example:

The “look back” perspective: The historic performance of the company and its peers provides useful context for determining the likelihood and degree of difficulty of achieving particular performance hurdles. Too often, this is the only perspective considered in setting performance goals.

The “look around” perspective: Examining the payout curves of peers is imperative to understanding whether your own incentive programmes have a more or a less aggressive pay-to-performance relationship versus the competition. Outside advisors who are familiar with the competitive landscape can offer perspectives of the level of pay-out associated with threshold or maximum performance (expressed as a percentage of target payout) among your peers. The “look forward” perspective: Sell-side analyst estimates for future growth enable testing plan pay-outs in the context of shareholders’ expectations or ability to pay. While this perspective is most valuable to a company that does not provide regular earnings guidance to the Street [Wall Street], it is generally useful as a tool to test whether goals are consistent with Street expectations for companies that do provide guidance.

The “look in the mirror” perspective: A consideration of relative performance at the end of the performance cycle offers insight into how to best respond to economic conditions that were not anticipated when goals were set at the beginning of the performance period. Such a perspective requires that companies establish protocols for exercising discretion to toggle payouts up or down in scenarios where an incentive plan results are clearly out of line with shareholder expectations. – Heim (2011)

Different types of awards are used to accomplish specific corporate goals. For example, restricted share with service-based vesting is used when retention is the priority. The reward type is also used to recognise different constraints, for example, offering full-value awards such as restricted share or performance shares will burn through a company’s equity pool more slowly than an exclusively options approach (Heim, 2011). Clawbacks of incentive payouts are also destined to become common practice where financial statements have been restated, causing the performance goals not to be met. This is included in Dodd-Frank, but regulations have yet to be issued (Reda, 2012). 188

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13.5 FUTURE TRENDS IN REMUNERATION FOR EXECUTIVES 13.5.1 Future Trend 1 – Increased regulation There is little doubt that regulation in the area of executive remuneration will increase. The advent of Dodd-Frank has resulted in the implementation of “say on pay” and “say when on pay”. On 18 September 2013, the Securities and Exchange Commission (SEC) proposed a new rule on the controversial pay ratio disclosure requirement. This proposal would require companies to disclose (a) the median of the annual total compensation of all company employees (excluding the company’s principal executive officer), (b) the annual total compensation of the company’s principal executive officer, and (c) the ratio between the two. The proposal includes a methodology for identifying the “median” employee and rules for determining “total compensation”. The SEC allowed 60 days for comments.

13.5.2 Future Trend 2 – Greater emphasis on pay-for-performance

There will be a continued shift towards performance-based compensation, with an increased emphasis on performance plans and balancing the portfolio of vehicles. This will accompany a reduction and elimination of “entitlements” and perquisite-orientated elements. Performance metrics and long-term incentive mix will continue to be the most frequently noted actions taken by organisations (Aon Hewitt, 2012). The Talent and Rewards consulting arm of Aon Hewitt conducted a 2012 survey of 174 companies representing a cross-section of industries. The Hot Topics in Executive Compensation Survey showed that vehicles such as share options and restricted share remain prevalent, and that performance-based share/unit arrangements continue to grow in popularity.

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Exec Comp Hot Topic Survey Companies – CEO Only Consistent Year-Over-Year Sample

Exec Comp Hot Topic Survey Companies – All Other Execs Consistent Year-Over-Year Sample

Figure 13.3  Increase in popularity of performance-based share/unit arrangements Source: Aon Hewitt, 2012

The shift in LTI pay mix is in response to increased company focus on aligning pay and performance (Aon Hewitt, 2012).

13.5.3 Future Trend 3 – Increased quantity and quality of communication with shareholders Boards of Directors and management will continue to focus strongly on: • • •

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Formalising, documenting, and refining their total pay philosophy. Enhancing corporate governance practices.

Actively communicating with shareholders by simplifying reporting and communications as well as presenting a narrative/story instead of tables of figures and opaque summaries in remuneration reports (Aon Hewitt, 2012).

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13.6 CONCLUSION Executive remuneration is likely to remain a hotly contested topic in all industries/ sectors for some time to come. The financial sector is currently bearing the brunt of negative public sentiment and is being characterised as the embodiment of monopoly capital and greed. As regulation in the financial sector increases, it is spilling over into other industries/sectors. The attraction and retention of top talent is inextricably linked to remuneration. The ability of organisations to construct ‘creative’ compensation packages for executives is declining with increasing legislation and regulation, and this is an area where specialist skill and expertise is necessary.

13.7 REFERENCES

Aon Hewitt. July 2012. Hot topics. Executive Compensation Trends 2012. Aon Hewitt Consulting: Talent and Rewards, EC Trends & Topics. PPT/WDL-03788.

Benmelech, E, Kandel, E & Veronesi, P. 2010. Share-based compensation and CEO (dis) incentives. The Quarterly Journal of Economics, 1769–1820, November.

Chapman, J & Kelliher, C. 2011. Influences on reward mix determination: Reward consultants’ perspectives. Employee Relations, 33(2):121–139.

Core, JE & Guay, WR. 2010. Is CEO pay too high and are incentives too low? A wealth-based contracting framework. Academy of Management Perspectives, 5–19, February.

Desai, M. 2012. The incentive bubble. Harvard Business Review, 124–133, March.

Heim, J. 2011. Executive pay circa 2011. Financial Executive, 58–61, January/February.

King, M. 2009. King III code of corporate governance. Johannesburg: Institute of Directors.

Merchant, K.A. 2010. Performance-dependent incentives: Some puzzles to ponder. Journal of Accounting, Auditing & Finance, 25(4):559–567.

O’Higgins, E. 2012. Executive remuneration: The myth of pay-for performance. Accountancy Ireland, 44(4):26–28, August.

Reda, J.F. 2012. Pay for performance – the real story. Financial Executive, 44–47, January/February.

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14 I am Talent – Empowering the Individual to Manage His/Her Own Career Debbie Craig and John Gatherer

14.1 INTRODUCTION Someone once said:

“What’s money? A man is a success if he gets up in the morning and goes to bed at night and in between does what he wants to do.”

That someone was Bob Dylan, singer, song-writer and poet, who has been a major and profoundly influential figure in popular music, literature and culture for five decades. The simple insight with regard to this quotation is that we, personally, hold the key to success in our hands – but it sometimes takes an endless journey of highs and lows through life in finding our niche and the work and interests that we love doing – and not only enjoy doing but excel at! That is what the goal of self-empowerment is all about – getting what you want from life. It does not come to us – we need to search for and find what it is. We need to identify our real passion for doing things and find what provides us with the greatest stimulation and meaning for our everyday needs, abilities and motivation, so that we can hone this interest, business pursuit or career calling and take it to even higher standards.

14.2 WHAT IS SUCCESS?

We all have something special to offer to make a difference. Regardless of our upbringing, family and community environment, and education, we all have specific and unique qualities, strengths and learning that we have developed during our life’s journey. We accept that not everyone can be a multimillionaire, a sporting superstar or a company director, but the catalyst to unleashing potential is having an insatiable appetite to explore, learn, and discover what suitable type of work can be matched to your strengths, interests and abilities. This pursuit often takes many years and can involve experiences based on tough demands and high expectations, with many frustrations and setbacks. But when you eventually find the type of job or work that stimulates your enthusiasm and imagination – then you have met Bob Dylan’s definition of success..! Chapter 14: I am Talent – Empowering the Individual to Manage His/Her Own Career

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This chapter focuses on the importance of having a future strategy and plan for yourself – and the use of critical questions that continuously shape both your thinking and actions around your personal improvement and self-management goals. One of life’s important journeys is to build on the DNA that we have been born with, channel our accomplishments and failures, mould our experiences and influences, and reach our potential. We want to explore our horizons, challenge our boundaries and create a unique identity that we feel good about. From time to time we wonder what it’s like to live like others. And yyes, for sure, we would love to live the life of the fishermen in Mauritius …! But we all have ambitions, we want to achieve more, redefine our lives and make a difference. For us to pursue our ambitions, we need to stand out from the crowd and excel at being the best we can be. Our experience is that only a small proportion of talent gets “spotted” and developed into successful performers, like the “good news” stories we occasionally read about. Today, for most people trying to compete with the charging pack that surrounds us within the world of work, the key to a successful result is simply about keeping focused, being proactive and giving your best. It is about seizing opportunities, sitting in the saddle of your horse, controlling the reins and riding into your future, chosen direction. By being “in charge” through taking ownership of your talent and any supportive learning plan, you will soon be recognised and find success through the goals that you have been shooting at. We have a special interest in strategic change management, leadership development and talent management. Over the last 13 years we have worked with diverse management teams across the world from China to Mexico, South America to South East Asia and Europe to the United States, as well as in Africa. Apart from obvious differences associated with regional and industry challenges, nationalities, cultures and language, it is no surprise that the issues regarding people management are pretty much the same. We have identified a number of common themes and lessons learnt that we would like to share with you relating to performance effectiveness, potential development, selfempowerment and career management. In our recent publication “I am Talent”, we asked some provocative questions that hopefully will act as a guide and structure in evaluating your own personal qualities, talent and personal mastery. Our challenge to you is not only to think about this from your own leadership perspective, but also to consider what takeaways and insights you can apply to the people you lead, interact with and influence. The questions we posed were as follows:

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The world of work: What are the drivers of success in the work that you do?

The world of me: How can you find out who you are, what you want, and how to optimise your personal effectiveness?

Managing yourself within organisations: What are organisations looking for when they search for talent?

How do I differentiate myself: What are your strengths and how can you build your distinctive value and personal brand?

Leveraging my performance: How can you raise the bar in your personal performance and results?

Fast-tracking my development: How can you fast-track your development and personal growth?

Exploiting my meta-competencies: What competencies or attributes is core to becoming the best you can be?

Managing change and transitions: How do you cope with the constant transitions in your

journey through life?

For the purposes of this chapter, we would like to focus on the twin strategies of selfempowerment and self-management, which are fundamental to the way in which you energise and motivate yourself in creating your blueprint for success. You need to respond actively to the awareness and insights you have regarding your strengths and true potential and be willing to explore and apply appropriate actions in securing your performance results.

14.3 THE SKILLS SUPPLY – THE WORLD OF EDUCATION

So where does all this focus on me, myself and I really start? Our formative years are packed with self-discovery and learning as we experience life through the relationships (good and bad) with our parents, elders, siblings and friends. We assimilate values, principles, beliefs, and an identity of who we are and how we belong. Over the twelve years of school, we continue this learning process through schoolwork, teacher/learner dynamics, exam pressure, competitiveness, sporting and extra-mural events. There is no doubt about the collective value and contribution that teachers and principals provide in preparing learners and students for life after school. Millions of learners are being taught, coached, developed and influenced on a daily basis to benefit societies and improve individuals’ lives. The world of education is the supply pipeline of the future skills and talent that the job market requires across private, public and informal sectors. But education is significantly more than teaching, learning and instruction. The word “education” originates from a Latin term, “educere”, which means “to lead forth” or Chapter 14: I am Talent – Empowering the Individual to Manage His/Her Own Career

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“to come out”. Both these meanings indicate that education should aim at nurturing the good qualities in individuals and drawing out the best in them. Success in education is not just the retention of facts and information tested in exams. Education has a deeper and broader purpose, aptly brought to life in many of Hollywood’s blockbuster films, including “The Karate Kid”, “Dangerous Minds” and “Dead Poets’ Society”, which portray the positive influence of inspirational teachers. The real value of education is empowering and enabling individuals through connecting with them, shaping values, encouraging critical thinking, and developing inquisitive, independent minds that continuously search for excellence. Never before has the need for REAL education been felt as deeply as in these challenging times. There is a significant skills gap that is not being addressed fast enough through educational institutions. The wake of global recession, downsizing and resizing has led to reduced employment opportunities. We need people to make wise choices of what to learn so that their skills are in demand and relevant to business needs. We need people with an appetite for continuous learning and adapting skills to the changes in the world. In today’s brave new world, the people who will succeed will be resilient, adaptable individuals with a “can do” attitude and entrepreneurial flair who will be able to cope and compete in the face of relentless change in their daily lives and future work.

14.4 THE TALENT WAVE

One of the biggest strategic imperatives facing the business world is how to find innovative and pragmatic approaches to attracting, developing, engaging and retaining talent. The famous report from McKinsey in 1998 on the War for Talent (Chambers, Foulen, Handfield-Jones, Hankin & Michaels) rocked the corporate world, and it is our view that all the actions over the past 15 years have still not been enough to win the war. Talent management covers a broad array of topics such as retention, skills development and succession planning, and it has certainly gained a huge amount of exposure over the last decade. Companies are investing huge amounts of time and money in this area, but from our exposure to numerous engagement surveys across our international travels, it is evident that there is some significant work still outstanding. Young individuals are increasingly demanding to be treated as whole persons with needs, values, aspirations and a life beyond work, and are a great deal more challenging of their career status. More and more often, we hear them questioning their purpose, meaning and the relative achievements of their work: “I spend 12 hours of my life at this job. What am I doing with this if it doesn’t mean something to me?” Or:

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The workplace has become frenetic and highly competitive, and it takes a lot of skill and political savvy to cope and survive within it, let alone progress up the next rung of the career ladder.

14.5 MANAGING AND COPING WITH CHANGE

One of the biggest challenges facing people from all walks of life is how well they handle CHANGE. The world of work is in a constant state of flux in which business demands, stakeholder expectations, operational requirements, product competition, technological changes and legal compliance all inter-connect, creating the backdrop of both turbulent yet exciting times. Vast challenges as well as opportunities abound. It is not surprising that employees often find the pressures and strains of work life overwhelming, in that traditional work practices, corporate uncertainties, employer demands and even the nature and complexity of work itself are changing at an increasingly fast rate. Let’s refer to the context of change by reflecting on a quotation from Alvin Toffler, the world-renowned futurist: “Change is avalanching on us and we are grotesquely unprepared for it!”

The reason for our choice of this quote, as a symbol of change, is not so much for the dramatic words and imagery expressed, but for the fact that this quote came from his best-selling book Future Shock, which was published in 1970! The rate of change that the futurist Alvin Toffler anticipated in the early 1970s has accelerated exponentially beyond all our imagination and expectations. There is a plethora of massive change scenarios and predictions published by progressive organisations and futurists that require step changes in thinking and behaviour just to keep up. Some of these changes include the following: The energy crisis and the critical role that energy will play in our lives in the 21st century

The innovation economy: The transformation of the global economy based on the convergence of free trade, technology, new markets, talent migration, competition, peace and security

The new workforce: More multicultural, diverse, globally competitive, marketable, mobile, knowledgeable, flexible and team orientated

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The energy crisis and the critical role that energy will play in our lives in the 21st century (continued) Future science and technology: Will transform every aspect of our lives, culture and the economy (examples are artificial intelligence, virtual reality, teleportation, nanobiology, genetic engineering, and so on)

Climate change: How the environment is changing and how we need to prepare for increased global warming, pollution and threats to health and the environment

International security and instability: Increased conflict, terrorism, natural disasters, religious and ideological protests and expression of emotions and attitudes

Globalisation: The new realities of global trade and competition, the rise of China and India, the clash of culture and values, and the ideological battle for the future

The generation conflict: The “geeks and the geezers”, work ethic, quality of work-life balance, personal aspiration differences, high mobility of Generation Y, employability

Access to information: The power of the information super-highway, instant knowledge access, and interactive communication through electronic media such as Google, Facebook, YouTube, Twitter, iPads, iPhone, and so on

Ageing population: Greater healthcare options, longer lives, lower birth rates result in large numbers of ageing baby boomers with specific lifestyle, travel and healthcare needs

The business environment, workplace and job market are in constant flux, changing at a staggering pace and being impacted by global and national events. In this information age, the workplace has been characterised by leaner and flatter structures, the advent of the knowledge worker, and work teams that form and re-form to meet organisational needs, multiple roles and technological innovation. The changing nature of work also demands greater flexibility and mobility from workers, in a greater variety of workplaces, with greater use of contract labour, the emergence of small businesses, and a greater reliance on social networks. The employee’s social environment has changed significantly, with more system support for virtual work, more integration of learning into everyday work experiences, and an increased focus on connectedness, delivery and high performance. For individuals to succeed within this dynamic environment, they need a variety of coping and survival skills to advance in their careers.

14.6 DRIVERS OF SUCCESS – THE “X-FACTOR” OF TALENT

What is that special “mojo” that seems to characterise the high flyers and high performers in all walks of life? From our perspectives in working with talent, we would like to outline a number of critical drivers which top talent have intuitively built into their own recipes for success. We believe they are important for delivering results, unleashing talent and 198

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potential and making successful choices and decisions – in any career pursuit or future endeavour. We have all been witness to the successes of young superstars and their heroic achievements in their respective fields of endeavour – ranging from sport, business, music, theatre to science and technology. They don’t just perform well by accident! So the question is: “What are the qualities or characteristics that contribute to any successful person’s success?”

We believe that the successful player or top achiever has a natural ability in combining a number of key attributes and significant skillsets into a winning formula, which we refer to as the “X Factor” of talent in business: Purpose: You need to push yourself relentlessly as to what you want in life, what specific goals you set, what milestones you have identified on the path to getting there, and the end goal which you envisage or picture for yourself.

Self-mastery: In the end it is all about self: the insights you need in order to take action, the

accountability you require to keep to the plan you have chosen, the discipline necessary to execute your skills, and the confidence to build on the belief that you will succeed.

Mindset: Attitude is the glue that holds all this together: the difference between impossible and possible is a state of mind. If you cultivate the correct positive thoughts, possibility thinking

and appropriate inner conversations, you will be surprised at what a difference this makes in your approach to any challenge or threat.

Action: You need to commit and be proactive to ideas and possibilities, and should be persistent and determined in your quest for change.

Change: You need to understand the changes occurring in the world, organisations, and the

workplace and at a local level. Stay informed, so that you are positioned to respond and cope

with change. In particular, be willing and able to move out of your comfort zone and personal

“view” of the world, by making that shift towards what really works in the current and new context.

Creative thinking and initiative: Change is about difference, and difference comes from

different thinking. The solution to today’s challenges comes from bold, innovative thinking

and an unwavering belief to try new ideas, approaches and experiment with different options from what was applied before.

Continuous learning: Cultivate an attitude of curiosity and openness to new information,

ideas, opportunities, and especially feedback from others on how you can hone your skills and knowledge and achieve better results.

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To be more effective in your job and your career, you also need the ability to reframe – to understand the broader context within which you are working by asking what is happening in the world, your country, your industry, your organisation, your team. This will help you gain perspective and meaning and give you a better conceptual understanding of where you fit into the bigger picture. When you have a greater awareness and insight of the broader context of an issue, activity or role, the choices you make and the decisions you take will be more effective. Like a photographer, it is vital that you have the tendency to “zoom in and out” and align the way in which you think and act with the bigger picture in your world of work – and to have the awareness and understanding of external influences continuously shaping your world.

14.7 THE WORLD OF ME

When planning and shaping your future and how you define yourself through what you do, it is important to know as much as possible about yourself. How easily do the answers to the following questions come to you? •

Who are you?

•

What gets you up in the morning?

• • • •

What do you really want? What do you value? What is success?

What do you have to offer?

These sound like simple questions, but do we ever stop and really work through these questions about ourselves … and have the discipline to address and resolve some of the answers that we are not satisfied with? We engage actively in all sorts of questions about colleagues, bosses, direct reports, family and friends – but how often do we really apply this same critique to ourselves?

14.7.1 The Four Intelligences

Do you know how to maximise your personal effectiveness through understanding and practising a “whole person” and balanced approach to life, working with all those aspects which make you unique: your mind and emotions, your physical and spiritual aspects. For years many psychologists, researchers and commentators have written about the components or quadrants relating to personality, thinking and learning, but it was only recently that Steven Covey referred to the four intelligences in his classic work The 8th Habit. In essence, this is how they were described:

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Table 14.1  Four intelligences defined

Source: Covey, 2004

Knowing and working with these unique traits will help you balance your personal growth and build your personal power to achieve the results in life that you really strive for – and get from who and where you are, to who and where you want to be! It is no surprise that Covey rates spiritual intelligence as the most important as “it becomes the source of guidance of the other three”.

14.7.2 The power of purpose

In the last few years, there has been a huge amount of interest in the field of Spiritual Intelligence – a radical new exploration of the human need for meaning and values. At the beginning of the 20th century, as psychologists discovered ways and means to measure intelligence, Aristotle’s definition of man as “a rational animal” developed into an obsession with IQ. In the mid-1990s, Daniel Goleman popularised research into emotional intelligence, EQ. Now, in the twenty-first century, there is growing movement in SQ or Spiritual Intelligence, led by the husband and wife team of Ian Marshall and Danah Zohar, whose backgrounds are in quantum physics and quantum thinking. SQ is our most fundamental intelligence. It is what we use to develop our capacity for meaning, vision and value. It typifies fundamental questioning and critical thinking and allows us to dream and to strive. It underlies the things we believe in and the role our beliefs and values play in the actions that we take. Spiritual Intelligence explores how to live up to our potential for better, more satisfying lives (Zohar, 2012). We have always expressed the view that to be successful in life, you need to have a sense of purpose in your life. Ask yourself a series of questions to establish more about your purpose: • •

What is important to you? What are your goals?

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• • •

What are your values?

What difference do you want to make? How balanced is your life?

Take ownership of your future and be proactive in investing in and exploring the wide array of self-rating tools and books that can provide valuable insights into your personality preferences, thinking and learning styles, emotional intelligence, team role preferences, assertiveness and tolerance for stress. Perform a regular SWOT analysis on yourself, validate the factors with significant others, and develop a plan of action to address any shortcomings or weaknesses systematically. In short, you need a plan for yourself. The crazy thing is that we’re involved in planning sessions all the time – strategic plans, curriculum design, financial budgets, project plans and even family holidays. Yet we seldom take time out to create personal action plans for ourselves – we just do what we’ve always done and wonder why that’s not good enough. A plan is also only a plan until you commit to making it happen. To be a really effective leader (of yourself, your family, or in the workplace), you need to be effective as an individual. You need to master the art of self-leadership or personal mastery, and to be able to choose the most appropriate response and behaviour in any situation – to get what you want. People are often faced with defining moments or turning points in their lives, where they step up and face their fears, make big decisions or hesitate and miss important opportunities. It is these moments that can shape the future, and it is at these times that people need awareness and mental and emotional intelligence to make wise choices.

14.7.3 Victim or victor – it’s all about attitude

The difference between effective and ineffective people is their awareness of their choices in any given situation, and then being able to choose the BEST option. You are either in VICTIM mode, where you defend, blame and complain, or in VICTOR mode, where you realise that you have options and choices on how to respond and tackle a problem positively. You cannot always choose what happens to you in life, but you can choose how to respond to what happens to you.

A significant influence in your armoury of self-management skills is attitude: “There is little difference in people, but that little difference makes a big difference. The little difference is attitude. The big difference is whether it is positive or negative.”

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We certainly prefer to work with people or teams who have a positive outlook on life, are enthusiastic in the tasks that they perform, and have a can-do mindset towards any challenge or difficulty.

14.8 HOW DO WE DIFFERENTIATE OURSELVES?

Today’s work environment has become extremely demanding and competitive and can be broadly characterised as driven by performance and results. Organisations have implemented comprehensive strategies, frameworks, processes and tools that seek to identify, resource, develop, retain and review their talent across the structures. We will be describing this in more detail in a later chapter. The people who are noticed and considered for future investment are those who consistently meet their performance requirements, display initiative and potential, and demonstrate a high degree of engagement. It is also important to handle the dynamics of working in different teams and projects and being able to manage the complexities of team roles, diversity, leadership, collaboration and group interactions. Teamwork and its relationship to results are best displayed in the world of sport, where competitors compete for what are sometimes very large rewards. There will always be others ahead of you, beside you and behind you, focusing on finishing the race before you. This is mirrored in the workplace as employees compete for key positions and are continuously being assessed and compared by the decision makers in the hierarchy. Again, the “whole person” concept is paramount as you work your way up to critical leadership appointments – and remember, as you go higher up the organisational structures, “the neck of the bottle is only so wide”. You are accountable for how you compete and the results that you achieve are totally in your control. So if you are not satisfied with where you are in life, or want to change your outcomes or shift your status – it has to start with you. We spend a great deal of time interacting with others and noticing their expressions, behaviours, quirks and personality traits. Do we spend the same amount of time and effort observing ourselves and notice how we are perceived by the people around us? We need to develop a clear profile of our strengths, positive attributes, preferences, competencies and interests so that we can leverage them and stand out and be different. This distinctiveness and unique flair is called your personal brand. Think about the following quotation from Tom Peters (1997): “Regardless of age, regardless of position, regardless of the business we happen to be in, all of us need to understand the importance of branding. We are CEOs of our own companies: Me Inc. To be in business today, our most important job is to be head marketer for the brand called You.”

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The majority of us actually promote ourselves extremely poorly as we believe it’s uncool or self-centred. We also do not really have a plan and are typically modest and selfconscious about marketing ourselves to others.

14.8.1 Building a personal brand

Personal brand building is critically important in career management. If you are not doing it, your competitors are! In order to build your personal brand, you need to be regularly exploring the following questions: •

How can I sell myself?

•

How do others judge my character?

• • • • •

Do people see me as authentic? What is it that I have to sell?

What real promise do I have?

How visible am I in the eyes of people that matter?

How do I adapt to change and re-invent myself over time?

But you also definitely need to be noticed. You need to build a track record of consistently delivering the goods – but also impress others by demonstrating your passion, enthusiasm, drive, integrity, values and ideas. One of the international gurus in this area is best-selling author, Marcus Buckingham (1999; 2001) He promotes the idea that people will get the best results by making the most of their STRENGTHS rather than by putting too much emphasis on weaknesses or perceived deficiencies. He has published several bestsellers such as First, Break All the Rules and Now, Discover Your Strengths. His latest book is called Standout: The Groundbreaking New Strengths Assessment from the Leader of the Strengths Revolution. Find out what your strengths are and make it your mission to find roles that optimise them allowing you to stand out from the crowd.

14.9 MANAGING MY PERFORMANCE AND LEARNING

14.9.1 It’s all about performance, results and feedback Managing your performance is probably the most important aspect of your career development. In the world of business – it is your results that will define you. Everyone is watching and evaluating you – your manager, your direct reports and your colleagues. Your performance must include the following features to build your image, credibility and talent proposition:

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•

Quality of work, contribution, knowledge and expertise.

•

Relationships within and across teams, structures and stakeholders.

• •

Responsiveness and consistency of your performance.

Actions, execution and delivery of commitments, outputs and accountable areas of your work.

Managing your performance can be likened to an acrobat on a tightrope. The sheer cliff face of performance standards and high expectations can be a daunting “balancing act”. To make things worse, performance feedback is rarely forthcoming from managers and remains the Achilles heel of leadership. So how do you match what is required from you to what you provide? We always encourage individuals to take ownership of their performance and obtain a specific understanding of what management expects from you, against the standards, quality of work and timeframes associated with your job. The next important hurdle is to ask your boss how you’re doing with your assignment. So many people keep waiting for cues and signals from higher authority and in the absence of any feedback or direction, they blaze away at their work with all guns firing – often shooting at the wrong target. The onus is on you for being proactive in getting feedback and acknowledgement, and knowing which development areas need to be addressed. Whether your organisation has established performance management processes or not, we encourage you to pin your boss down a number of times a year to discuss your work performance and development needs. This prevents any shocks and surprises down the line at a formal review, where rewards are at stake. This practice comes naturally to high-performance people who understand the importance of continuously seeking out relevant feedback about how they’re doing and push themselves for improvements to stretch targets and superior results – like an athlete’s personal best.

14.9.2 Accelerating your learning path

If performance is all about delivering results, learning is your “engine room” that gives you the fuel to close the gap of knowledge, skills and behaviour to get you to your goals. For learning to occur, you need four elements of change to work together. You need to have the awareness of the need to improve (through feedback), the insight that only you can effect this change (through reflection), the willingness to make the effort to develop yourself (through commitment) and you need to take daily action to build new habits and make it happen. This is depicted visually below.

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I become aware that something needs to change 100% need I have clear action plans to make the change happen 100% discipline

I am 100% willing to make the effort to change 100% commitment

Figure 14.1  Learning path

Awarene ss Action

Insight Willingne ss

I realise I need to change my mindsets/beliefs/ behaviours to effect the change 100% accountability

Source: Gatherer, 2011

Just as we have business strategies, we need learning strategies and plans. Once you understand what is required, it is important to prioritise learning into a few focus areas at a time, and to choose the best learning methods for your style and the time available to you. Choices in learning also require balancing specialist skills with leadership competencies to be effective in your role. As with any journey, it helps to have a plan and a coach, and to receive regular feedback, to ensure that learning is ongoing and effective. The real high-flyers are naturally inquisitive and continuously push the boundaries to broaden their experience and knowledge. Learning never really stops. In striving for excellence in what you do, you need to go through the process of taking what works into the future, being open to learning new things … and, importantly, letting go of what is not working. Explore both traditional and pioneering approaches for skills development and personal growth. These can include the familiar classroom-based learning, workshops, seminars and formal programmes as well as e-learning, online links, project immersion, action learning and coaching. People who stand out from the crowd – whether in school, college, business or on the sports field – demonstrate very specific attitudes to learning. They have the willingness to:

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•

Do what it takes to get where they want to go.

•

Learn from all types of people, and to acknowledge that everyone has something to offer them on their learning journey – people of all ages, cultures, genders, qualification levels.

•

•

• • •

Ask for and accept any kind of feedback about their performance and behaviour on a regular basis.

Try new things, take risks, and make fools of themselves if they don’t succeed straight away. Continuously expand their knowledge and experience through reading, networking, researching and experimenting.

Critique their own performance and behaviour against successful role models whom they admire and aspire to emulate, and Have the discipline to follow through with their plans and achieve something.

14.10 CORE ABILITIES FOR SUCCESS

In Chinese philosophy, the concept of “yin and yang” is used to describe how polar opposites or contrary forces are interconnected and interdependent in the natural world, and how they impact on each other. One of the greatest challenges to individuals navigating the rapidly changing, uncertain, white waters of life is to become adept at “riding the waves”, staying on top and finding a balance between the many paradoxes and conflicts that we face in day-to-day life. Jim Collins, the author of Good to Great (2001), came up with an interesting phrase called the “genius of AND versus the tyranny of OR”. It is often not about making a choice between two opposing paths of action, but about finding a balance between two different ends of the same continuum. We have seen this in many of the highly effective people with whom we have worked who have a good understanding of yin and yang – they can be shy and fearless, be highly conceptual as well as attending to detail, display empathy, and be tough, strategic and operational.

14.10.1 Meta-competencies

Successful individuals also have a strong set of core or meta-competencies in their personality that characterise their effectiveness in all that they do. They have a unique understanding of their impact on others and are able to adapt their behaviour to people and situations without compromising their principles and who they are. From our experience in training, coaching and developing thousands of leaders and talented individuals over the past 20 years, the following have emerged as our top eight differentiating metacompetencies:

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• • • • • • • •

Awareness is the insight of both internal and external stimuli, events and behaviours impacting you – what we pay attention to. Authenticity is being true to yourself, feeling and expressing your emotions, acting on your intuitions and following your dreams. Courage is not the absence of fear, but feeling the fear and taking action anyway.

Decisiveness is the willingness to act on your intuition and accept the risk and consequences. Resilience is the internal strength and determination necessary to persevere with setbacks and obstacles. Humility is being unpretentious – not believing you are better or more important than others. Drive is the relentless pursuit of goals, the courage of your convictions and the belief in succeeding. Energy is the amount of internal resources you have to initiate, create, and perform work and to go the extra mile.

14.10.2 Derailing behaviours

As important as developing and honing core competencies such as the selected list, is the ability to cope with and address those dysfunctional qualities known as derailing behaviours – the dark side of our character. Derailing behaviours are often entrenched in personality traits and display themselves as lack of awareness, “blind spots”, lack of emotional intelligence or stressful workplace triggers. Derailers are those abrasive mannerisms, toxic reactions and fatal flaws that devalue contributions and drain energy and team spirit AND impact results, relationships and trust. People are often competent at what they do but keep letting themselves down with their negative attitudes and inappropriate or insensitive behaviour. Some examples of derailing behaviours are passive – aggression, arrogance, volatility, cynicism, distrust, cautiousness, hypocrisy, perfectionism, and so on. We all have them to varying degrees, but the trick is to be aware of the consequences of these behaviours and how to manage them. Remember the yin and the yang of life – derailers can be the shadow side of our bright personality!

14.11 CONCLUSION

We trust that these perspectives and practical ideas have been useful for your journey of self-empowerment and self-mastery. The true survivors and achievers in the world of work within our relentlessly changing environments are those individuals who differentiate themselves from others by offering a consistent, high-quality, valueadding contribution. There is a saying: “If you’re good, you’re good”, that can ensure your climb up the ladder of success – but under the pressures of economic pressures, competitive skills, stakeholder expectations and challenging realities, there is no room 208

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for complacency. There is a continuous requirement to deliver the goods and build and manage your credibility, personal brand and reputation. Our final quotation is offered as food for thought and a prompt for action: “People hear what we say, but see what we do – and seeing is believing….!”

14.12 REFERENCES Buckingham M. & Clifton DO. 2001. Now discover your strengths. New York, NY: Free Press.

Buckingham, M & Coffman, C. 1999. First break all the rules. USA: Simon & Schuster Business Books/The Gallup Organisation.

Chambers, EG, Foulon, M, Handfield-Jones, H, Hankin, SM & Michaels, E. 1998. The war for talent: Organisation and leadership practice. Mckinsey Quarterly 3. McKinsey & Company.

Collins, J. 2001. Good to great. New York: Harper Collins.

Covey, SR. 2004. The 8th habit. New York: Simon & Schuster.

Gatherer, J & Craig, D. 2010. I am talen. Randburg (RSA): Knowres Publishing.

Gatherer, J. 2011. I am talent – unleashing potential, differentiating oneself and making a difference. Paper presented to 17th South African Principals’ Association, 23 September, ICC, Durban.

Gallup Organisation. http://www.gallup.com.

Peters, T. 1997. The brand called you. Fast Company newsletter, 31 August.

Stone, WC & Napoleon, H. 1987. Success through a positive mental attitude: The world-famous book that could be worth millions to you. New York (NY): Prentice-Hall, Inc.

Toffler, A. 1970. Future shock. New York (NY): Bantam Books/HBS Press.

Zohar, D & Marshal, I. 2001. Spiritual intelligence: The ultimate intelligence. London: Bloomsbury Publishing Plc.

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15 Securing Talent – The Role of the Contract of Employment and Restraints of Trade Claire Höck and Michelle Moonsammy

15.1 INTRODUCTION

In the war for talent, employers need to use every instrument at their disposal to attract and retain high quality employees. The contract of employment is one such instrument. In careful hands, the contract of employment can protect the interests of the organisation while at the same time establishing terms and conditions of employment which entice and retain key employees. Although by no means the only instrument, and in some respects only a blunt instrument, the contract of employment remains a key component of any talent management strategy. In this chapter we will explore the ways in which the legal mechanism of the contract can protect the proprietary interests of the employer through a restraint of trade, while at the same time setting attractive terms and conditions of employment for the employee. We will also look at remedies for both parties when the relationship goes sour.

15.2 CONTRACTS OF EMPLOYMENT

A contract of employment is difficult to define in precise terms. Put simply, it is a legally binding agreement between two legal persons, in terms of which, the one legal person who is the employee agrees to provide his/her services for a period of time (either indefinite or fixed) to the second legal person, the employer, who agrees to pay to the employee a determinable remuneration. The legal relationship, by its nature, also entitles the employer to control the manner in which the employee delivers the services. The South African Basic Conditions of Employment Act 75 of 1997 (BCEA) requires that specific details of the contract of employment between employee and employer be written down in what the Act refers to as “written particulars of employment” (section 29). While this is not the same as a contract of employment, many employers give effect to these provisions by including the details specified in section 29 in a written contract of employment. In addition, section 4 of the BCEA states that basic conditions contained in the Act automatically form part of the contract of employment unless another law provides a term that is more favourable to the employee; the basic condition of employment has been replaced, varied, or excluded in accordance with the provisions Chapter 15: Securing Talent: the Role of the Contract of Employment and Restraints of Trade

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of the Act; or a term of the contract of employment is more favourable to the employee than the basic condition of employment. The contract of employment, through defining the terms and conditions of employment that govern the employment relationship, is a key instrument that employers may utilise as part of their talent management strategy. As an instrument, the contract of employment may be utilised to define very favourable benefits for employees and terms for employers that seek to do the following.

Attract employees to employment

These mechanisms may include sign-on bonuses; employment flexibility, including flexibility in working hours and place of work; and contractual clauses detailing reward and remuneration benefits and schemes.

Retain employees within the organisation

The contract may include clauses governing discretionary bonuses, retention bonuses, performance-based incentives, time-delayed payments paid on the attainment of defined performance objectives, and share schemes.

Protect the interests of both parties on termination of the contract

Terms of the contract may seek to protect both the employee and the employer on termination of the contract. These mechanisms may include clauses detailing, dispute resolution mechanisms, protection of copyright and intellectual property, severance payments, notice periods, restraints of trade, non-solicitation of staff and the return of company assets. The inclusion of these types of clauses in any contract of employment may be seen to be, on the one hand, a key weapon of choice to support the talent management war; but they may also prove to be a blunt instrument for both parties in the event of a breach of contract. Enforcing legal rights as defined by the contract may be difficult and ultimately expensive from a monetary and time perspective. Before considering remedies in the event of a breach of contract, we will consider in more detail one of the primary mechanisms in a contract used to protect the employer’s interests, namely, the restraint of trade.

15.3 RESTRAINTS OF TRADE1

The purpose of a restraint of trade is to protect the proprietary interests of the employer against unfair competition from an employee during and after employment. It is therefore likely that the type of employee, subject to a restraint of trade, will be one whose knowledge, skill, experience and network would pose a threat to the employer’s business 1 Parts of this chapter first appeared in the Industrial Law Journal (2003) 24 ILJ 123 in an article by Claire Höck entitled “Covenants in Restraint of Trade: Do They Survive the Unlawful and Unfair Termination of Employment by the Employer?”.

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were that employee to leave and be employed by a competitor. In other words, talented employees are likely to be subject to restraint clauses. Such clauses are typically entered into when the employee joins the employer and form part of the contract of employment. The courts have held that while restraint of trade clauses may be signed when an employee joins an employer, an existing employee may not be compelled to sign such a clause2. Employment circumstances do change, however, and sometimes an existing employee will be asked to sign a restraint of trade agreement after having been in employment for some time. In these circumstances, agreement is often reached between employer and employee only when the employer agrees to pay a sum for the restraint3. In Jordaan v Commission for Conciliation, Mediation & Arbitration & Others (2010) 31 ILJ 2331 (LAC), the applicant was employed by an estate agency, as was her husband. When relations between the agency owner and her husband (a minority shareholder in the business) soured, she and other employees were asked to sign a restraint of trade agreement. She questioned what would happen if she refused, and her employer indicated that she would not be dismissed but might be retrenched. The employee then resigned and claimed constructive dismissal but was unsuccessful as the court found that she could not prove that continued employment would be intolerable. Restraint clauses typically prohibit the employee from carrying on or conducting the same or similar business within a particular geographical area for a period of time after leaving the employer. In addition, they may include prohibitions on “poaching” employees or customers of the employer for a period of time. Such clauses are designed to ensure that ex-employees will not take product and business knowledge, skills and contacts with them when they leave, and set up in competition with their erstwhile employer. It should be noted that not all clauses which limit the employee’s freedom to trade are necessarily called “restraints of trade”4 and conversely, not all restraints of trade actually limit an employee’s freedom to trade. A general test evolved in Esso Petroleum Co Ltd v Harper’s Garage (Stourport) Ltd (1967) 1 All ER 699 at 727, in which Lord Pearce differentiated between absorption of a party’s services (not a restraint) and their sterilisation (restraint), and restriction on trading activities during a contract (not a restraint), and restriction after the termination of a contract (restraint). This test has been subsequently accepted in our courts5. The purposes of a restraint of trade agreement are generally to protect the employer’s trade secrets and business connections6, although it is conceivable that a restraint could protect less tangible interests, such as an actor’s stage name.7 2

Marshall v Vistech Communications (1994) 15 ILJ 1365 (IC)

4

See Coetzee v Comitis & others (2001) 22 ILJ 331 (C) at 29, in which the rules regulating the transfer of a football player from one club to another were deemed to be akin to a restraint of trade.

6

“The legitimate object of a restraint is to protect the employer’s goodwill and customer connections (or trade secrets)”: Reeves & another v Marfield Insurance Brokers CC & another 1996 (3) SA 766 (A) at 772.

3 5

7

See, for example, Vigne v Afgri Trading (Pty) Ltd & Another (2010) 31 ILJ 347 (GNP).

Ackermann-Goggingen AG v Marshing 1973 (4) SA 62 (C) at 72A, Nel v Drilec (Pty) Ltd 1976 (3) SA 79 (D), Shacklock Phillips-Page (Pvt) Ltd v Johnson 1978 (1) SA 321 (RA) at 324–5.

Hepworth Co v Ryott (1920) 1 Ch 1 cited in R Yorke Hedges (note 1 above) at 39.

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A distinction should be drawn between the general duty on an existing employee to further the employer’s interests and not to compete with the employer, and the specific duty on an ex-employee not to compete with the former employer. The former are common-law duties implied in the contract of employment; the latter exist only if specifically agreed to in a restraint of trade clause. In National Union of Metal Workers of SA on behalf of Adams and Peter Bresler & Associates t/a Magnador (2011) 32 ILJ 514 (BCA), an existing employee was dismissed for assisting a former manager who had left the company and set up in competition with his previous employer. The arbitrator drew a distinction between the common law duty of an existing employee to further the interests of the employer’s business, and the duty of an ex-employee not to compete against the former employer if the ex-employee is bound by a restraint of trade. In the circumstances, the arbitrator found that the employee had violated his common law duty to his employer and dismissal was justified. Because restraint clauses seek to balance two competing interests – the employee’s freedom to earn a living and the employer’s right to protect his proprietary interests by contractual means – they have been subject to constitutional challenge8. The court has, however, held that the common law limitations already placed on engaging in free economic activity by restraints of trade comply with the limitations of section 36(1) of the Constitution (that is, they are reasonable and justifiable in an open and democratic society). The need to enforce a restraint of trade clause typically occurs when an employee leaves or plans to leave employment. At this point, if the employer believes that the employee is or will violate the terms of the restraint, a challenge is normally made in court. Initially, South African courts adopted the English law approach that restraints of trade were automatically unenforceable unless it could be shown that not to enforce them would be against public policy. This trend was reversed in South Africa in the landmark Magna Alloys case9, which established that restraints of trade were enforceable unless they were against public policy. In a recent decision (Continuous Oxygen Suppliers (Pty) Ltd t/a Vital Aire v Meintjes & Another (2012) 33 ILJ 629 (LC)), the Labour Court neatly summarised the position: 1.

Covenants in restraint of trade are valid. Like all other contractual stipulations, however, they are unenforceable when, and to the extent that, their enforcement would be contrary to public policy. It is against public policy to enforce a covenant which is unreasonable, one which unreasonably restricts the covenanter’s freedom to trade or to work.

2.

Insofar as it has that effect, the covenant will not be enforced. Whether it is indeed unreasonable must be determined with reference to the circumstances of the case.

8

Waltons Stationery Co (Edms) Bpk v Fourie 1994 (4) SA 507 (O) at 510D–511E, Kotze & Genis (Edms) Bpk v Potgieter 1995 (3) BCLR 349 (C) at 352E-F and Knox D’Arcy Ltd v Shaw 1995 (12) BCLR 1702 (W) at 1708F–1712E, Fidelity Guards Holdings (Pty) Ltd t/a Fidelity Guards v Pearmain 2001 (2) SA 853 (SE).

9

Magna Alloys & Research (SA) (Pty) Ltd v Ellis 1984 (4) SA 874 (A).

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3. 4. 5. 6.

Such circumstances are not limited to those that existed when the parties entered into the covenant. Account must also be taken of what has happened since then and, in particular, of the situation prevailing at the time the enforcement is sought.

Where the onus lies in a particular case is a consequence of substantive law on the issue. What that calls for is a value judgment, rather than a determination of what facts have been proved, and the incidence of the onus accordingly plays no role. A court must make a value judgment with two principal policy considerations in mind in determining the reasonableness of a restraint:

6.1 The first is that the public interest requires that parties should comply with their contractual obligations, a notion expressed by the maxim pacta servanda sunt (agreements must be kept). 6.2 The second is that all persons should in the interests of society be productive and be permitted to engage in trade and commerce or the professions.

Both considerations reflect not only common-law but also constitutional values. Contractual autonomy is part of freedom informing the constitutional value of dignity, and it is by entering into contracts that an individual takes part in economic life. In this sense, freedom to contract is an integral part of the fundamental right referred to in s 22.”

In determining whether to enforce a restraint of trade or not, the court will consider what is reasonable in the circumstances. All relevant circumstances will be taken into account and, as indicated in the Continuous Oxygen Suppliers case referred to above; this includes both those circumstances at the time that the contract was concluded, as well as circumstances since then and at the time that one party seeks to enforce the restraint. In Esquire System Technology (Pty) Ltd t/a Esquire Technologies v Cronjé & Another (2011) 32 ILJ 601 (LC) the court set out the five main considerations which are brought to bear in deciding whether a restraint is against public policy: •

The duration of the restraint

•

Whether the restrained former employee still has the ability to earn a living

• • •

The area in which the restraint applies Whether a restraint payment was paid

The “proprietary interest” or capital asset that the former employer seeks to protect10.

10 Page 608 at 3.

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15.3.1 The duration of the restraint The longer the duration of the restraint, the more unreasonable it is likely to be, as the former employee will potentially be deprived of economic support opportunities for a longer period. The court may, however, choose to enforce a restraint for a shorter period than the contract provided for. In the Continuous Oxygen Suppliers case (referred to above), the court found that the only unreasonable aspect of the restraint was its duration of two years. The court therefore ordered that the restraint be applied, but for a shorter period of one year.

15.3.2 The area in which the restraint applies

The wider the area of the restraint, the greater the potential for unreasonableness as an employee will either have no area or very little area in which to ply his/her trade. The court will also not allow an applicant to extend the geographical area beyond that contained in the original restraint clause. In Esquire System Technology (above), the restraint clause referred to four provinces, but in papers before the court, the applicant referred to a fifth province which was not referred to in the clause. The court made it clear that the applicant could not extend its claim in court papers beyond what was contained in the clause which it sought to enforce (page 607 at 11).

15.3.3 Whether a restraint payment was paid

In Vigne v Afgri Trading (Pty) Ltd & Another (2010) 31 ILJ 347 (GNP) an employee sought to enforce a restraint of trade agreement which entitled him to a payment from his employer. Both parties had signed a restraint of trade agreement in terms of which the employee was entitled to a payment of one year’s remuneration on termination of employment for any reason. It is relevant that the employee had worked for the employer for some eleven years without a restraint of trade agreement. His employer was then acquired by another company and his employment was transferred to the new employer in terms of s197 of the Labour Relations Act (transfer of a business as a going concern). The new employer required him to sign a restraint of trade agreement. He refused unless he was paid a lump sum. Negotiations between the parties ultimately resulted in a restraint of trade agreement in terms of which he was restrained from working in a competing field of work for one year throughout South Africa. In exchange, he would be paid the equivalent of one year’s remuneration whenever he left employment for any reason. When the employee gave notice of resignation, he reminded the employer of the lump sum payment due to him. The employer declined to pay it and waived the terms of the restraint on the grounds that his job had changed since he had signed the agreement and his resignation therefore no longer posed a threat to its proprietary interest. The employee took the matter to court and the court found in his favour that the employer had a duty to honour its obligation to pay him the lump sum. 216

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Although this case is rare in that the employee (as opposed to the employer) sought to enforce the restraint, payment is relevant in that it eases the burden for an employee encumbered by a restraint. As in this contract, the period of the restraint (one year), was balanced by the lump sum payment of one year’s remuneration. Had the facts been reversed and had the employer sought to enforce the restraint having paid a lump sum when the employee resigned and went to work for a competitor, it is likely that the court would have enforced the restraint in the employer’s favour.

15.3.4 Whether the restrained employee still has the ability to earn a living

Where the wording of the restraint is so wide as effectively to preclude the former employee from earning a living at all, the courts are likely to find the restraint contrary to public policy and therefore unenforceable. This was the case in Forwarding African Transport Service cc t/a Fats v Manica Africa (Pty) Ltd & Others (2005) 26 ILJ 734 (D). In this case, the court found that the wording of the clause effectively precluded the employee from earning a living anywhere in the world, even in a business unrelated from the business of his former employer. For these reasons the court declined to enforce the restraint.

15.3.5 The proprietary interest which the former employer seeks to protect

Examples of proprietary interest include: trade secrets, know-how, pricing and customer contacts. Proprietary interest usually takes the form of confidential information and relationships between the erstwhile employee and customers of the employer. When assessing the enforceability of a restraint clause, the court will interrogate whether a genuine proprietary interest exists, and will not take the clause at face value alone. In Henred Freuhauf (Pty) Ltd v Davel & Another (2011) 32 ILJ 618 (LC), the employee had signed a restraint of trade clause preventing him from working in the same business anywhere in South Africa for a period of three years from resignation. The nature of the employer’s business was the sale of spare parts for trailers. The employer argued that the industry was specialised, fiercely competitive, and that the employee had an intimate knowledge of the employer’s customers and needs, as well as the pricing and margins of its products. The court rejected these arguments on the facts and found that knowledge of the spare parts components of the employer’s business was something that could be gained in a relatively short time, that the employee had no knowledge of the applicant’s margins, that information about the employer’s prices was freely available, and that not much value could be attached to the employee’s relationship with customers. For these reasons the court declined to enforce the restraint. In Global Network Systems (Pty) Ltd v Mack (2010) 31 ILJ 2602 (LC), the court also declined to enforce a restraint where the former employee had taken up employment Chapter 15: Securing Talent: the Role of the Contract of Employment and Restraints of Trade

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with a customer and provided services to his new employer in-house which he had previously performed as an external service provider.

15.4 BREACH OF CONTRACT

Breach of contract may arise as a result of the conduct of either the employer or employee or both parties. The remedies which are available to the aggrieved party, as a result of a breach, are founded in contract law. The remedies discussed in section 15.4.1, 15.4.2 and 15.4.3 are available.

15.4.1 Seeking an order for specific performance

In this event, the aggrieved party approaches the court to seek an order compelling the defaulting party (the party that has breached the contract) to perform the obligations as defined by the contract. A claim for specific performance may be for the payment of a sum of money, a claim for the performance of some act other than payment of money. The remedy of specific performance is not absolute and does not provide any guarantee that this will remedy the breach. Even where it is shown that there has been a breach, the court will not grant an order for specific performance unless the non-defaulting party is ready to perform its own obligations in terms of the contract and it is shown that performance is subjectively and objectively possible for the defaulting party. Our courts have exercised discretion to refuse a claim for specific performance where: •

It is not possible for performance to be made in terms of the contract.

•

Performance would be contrary to the public good or public policy.

•

Performance of the contractual obligations would result in undue hardship for the defaulting party.

In the employment context, the courts are less likely to grant an order for specific performance, given the personal nature of the relationship. Significant reasons would have to exist to show that such a remedy would be the most appropriate in the circumstances. Compelling reasons not to enforce specific performance on the part of an employee include the court’s reluctance to enforce a form of forced labour, where it is illustrated that damages appear to be a sufficient remedy for an employer rather than specific performance; and a reluctance to interfere with an employee’s right to exercise his/her skills or profession freely. This remedy may also not be the most appropriate remedy from a practical perspective, for example, where an employee resigns from employment but refuses to work out his/her notice period. The refusal to abide by the terms of the contract may well amount to a repudiation of the contract on the part of the employee and may therefore result in a breach of contract. The employer may then have the option of seeking an order for specific performance, in essence, compelling the employee to return to work and work out his/her notice period. The question which arises is whether this 218

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remedy would be in the best interests of the employer, particularly where the employee would cause more harm in the workplace and may expose the employer to further risk. Where the employer has committed a material breach of contract, like dismissing an employee without due cause, the courts may consider reinstatement of that employee. The reinstatement would be considered to be a form of specific performance and may only be granted in circumstances where it may be shown that the employment relationship has not irretrievably broken down between the parties.

15.4.2 Cancellation of the contract

In this instance, the non-defaulting party takes the relevant contractual steps to legally cancel the contract. This is an extraordinary measure and all procedural requirements will need to be met to ensure that it is legally enforceable. In the employment context, the employer may be in a position to cancel the contract and dismiss the employee from employment should a valid and fair substantive reason exist for the dismissal AND if the employer follows a fair procedure to effect the dismissal. The employer may seek to summarily dismiss an employee who has committed a material breach of contract. Summary dismissal means the termination of the employee’s services without giving notice, that is, the cancellation of the contract. The employer is entitled to terminate/ cancel the contract (dismiss the employee) when the employee has committed a material breach of contract. In the same vein, an employee will be in a position to cancel a contract by resigning from employment and meeting all the required contractual obligations related to the termination of employment, including working out the contractual notice period, returning all employer assets, and so on.

15.4.3 Seeking an interdict

The non-defaulting party may seek an interdict against the defaulting party, in terms of which a court order is sought that either prohibits the defaulting party from carrying out a specific act or it may be mandatory where it requires a party to perform a particular act. It may therefore also be used as a form of specific performance. This remedy may also be used to prevent a threatened breach of contract, protect ancillary rights, and to prevent third-party intervention. The court will exercise its discretion to determine whether or not an interdict will be granted. The following requirements will have to be present for a court to grant an interdict successfully: •

There must be a clear right.

•

There must be no other effective remedy available.

•

There must have been an injury/damage suffered or there must be a clear case making out a well-founded fear of potential injury.

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In the employment context, such a remedy may be appropriate for an employer where an interdict is sought to prevent an employee from using a confidential customer list for the benefit for a new employer.

15.5 CLAIMING DAMAGES

Damages are a primary remedy for breach of contract. Damages constitute a claim to compensate for financial loss suffered as a result of the breach. Damages may be claimed in addition to other remedies. The parties may claim: •

•

Contractual damages: These are damages claimed to place the non-defaulting party in the position he/she would have been in had the contract been fulfilled in the ordinary course. Contractual damages may also include damages to put the nondefaulting party in the position he/she would have been in had the contract not been entered into at all. The contractual damages claim is limited to financial losses that may have been suffered.

Delictual damages: These are damages claimed for financial loss that was suffered as a result of the conduct of the defaulting party. These damages will need to be quantified before they may be claimed. Delictual claims are not only limited to financial losses that may have been suffered but may also include non-financial losses (like pain and suffering) that may have been suffered as a result of the conduct of the defaulting party. However, our courts have determined that in a claim for a breach of contract, the parties may not claim for non-patrimonial (emotional) losses11.

In order to make a successful claim for damages, the claiming party must show that: •

There was a breach of the contract.

•

Reasonable steps were taken to mitigate the damages/loss suffered, where possible.

• •

Financial or patrimonial loss has been suffered.

There is a causal link between the breach and the financial loss, that is, it must be proved that the damages were suffered as a direct result of the breach.

15.6 CONCLUSION

Contracts of employment are an indispensable instrument for regulating relationships between employers and talented employees. While the BCEA does not compel employers to have written contracts of employment, it does compel them to put in writing the main components of the contract. It makes sense for these “written particulars” to be included in the written contract of employment. Statutory basic conditions of employment automatically form part of the contract unless they have been improved upon, varied, replaced or excluded in a legally compliant way. A range of financial and non-financial 11 Jockie v Meyer 1945 AD 354; Administrator, Natal v Edouard 1990 (3) SA 581 (A).

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conditions can be included in a contract to attract and retain talented employees. These include sign-on and retention bonuses, share schemes, performance bonuses, and flexible location of work and hours of work. While these types of conditions serve to attract and retain talented employees, the primary mechanism to protect the proprietary interest of the employer remains the restraint of trade. These clauses attempt to balance the employee’s freedom to make a living with the employer’s right to protect its proprietary interest and the constitutional court has accepted that they are not unconstitutional per se. When asked to enforce a restraint of trade clause, the courts will assume that the clause is enforceable (because parties should be bound by the contracts they sign), unless is it clearly or likely to be against public policy of it is too wide in respect the area, duration and activities that it seeks to circumscribe. When seeking to enforce a contract of employment, both parties essentially have four remedies: specific performance, cancellation, interdict and damages.

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16 Remuneration as a Talent Investment Strategy: Increasing the Value of your Talent Portfolio 16.1 INTRODUCTION

Martin Sutherland

To rethink and innovate significantly in any field in which you have immersed yourself for a long period of time, it helps to stop reading the literature associated with that field and look for ideas in completely unrelated disciplines. Technology looks to nature (biomimicry) and develops gloves and shoes that allow you to “walk” up the outside of a glass building by synthetically copying the microscopic hairs on the feet of a gecko. Business looks to social networks to reinvent business models that crowd source ideas and reinvigorate a product on the verge of collapse (the Lego story). Metaphor is a great way to rethink the obvious, the tired, and the established and traditional way of approaching a problem. This chapter will attempt to rethink remuneration, and its role in talent management, by looking at how approaches, models and practices can be borrowed from non-HR fields and reapplied to increase the value of your talent portfolio.

16.2 REMUNERATION AS A TALENT INVESTMENT STRATEGY The first borrowed term is “portfolio”, from the financial investment domain.

“[Portfolios are] a grouping of financial assets  such as shares, bonds, and cash equivalents, as well as their mutual, exchange-traded, and closed-fund counterparts. Portfolios are held directly by investors and/or managed by financial professionals.” – http://www.investopedia.com/

Now let’s repurpose that definition for Human Resources (HR): a  grouping of human capital assets such as organisational capabilities, individual talnt and skills and personal energy, as well as their mutual, exchange-traded and closed-fund counterparts. Portfolios are held indirectly by companies and/or managed by human resource professionals. The value of any asset is directly dependent on the difference between supply and demand. The greater the demand and the lower the supply, the higher the value of the assets, and vice versa. Talent is an asset that has variable value in a company, and how we Chapter 16: Remuneration as a Talent Investment Strategy – Increasing the Value of your Talent Portfolio

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manage (increase or decrease) the value of that talent has a lot to do with the decisions that the HR function should make, or at least significantly influence. The cliché that “people are our greatest asset” may be over-used in annual reports and on company posters, but if we explore the concept of asset management a little more there are some interesting concepts that we can borrow. The four main aspects of asset management are: (1) acquisition; (2) utilisation; (3) maintenance; and (4) renewal/ re-deployment. These four processes form the basis of “life cycle optimisation”, that is, how we get the greatest value from an asset (talented person) throughout the entire time they are with the company. In manufacturing environments, this process is critical to the profitability of a product line. If too much is paid for a piece of equipment, or it is under-utilised, or poorly maintained, or not upgraded/renewed at the right time, the competitiveness of a product can be dramatically impacted. Engineers therefore spend a lot of time and energy optimising the life cycle of that equipment to extract the maximum value from it. It’s unlikely that HR does this same level of planning for the engineer (the asset) who is doing the optimisation, and more than likely doing it on a lot more than one piece of equipment. There is a rigour applied to the life cycle optimisation process of actual assets that is missing in the related human resource processes. The key difference is obviously that the engineer can get up and leave to join another company, whereas the equipment is usually fairly limited in its ability to think autonomously and change locations. This is where remuneration plays an important role in retaining the talent asset, but it’s necessary to expand the definition of remuneration now to include more than just fixed and variable pay. Just as equipment has a Total Cost of Ownership (TCO), so the scope of remuneration needs to be expanded to include the Total Committed Investment (TCI) that a company makes in an individual. The concept of investment, specifically Return on Investment (ROI), has been a concept that HR has been trying to integrate for decades now from the statistical analysis of The ROI of Human Capital by Jac Fitz-Enz, published in 2000, to the conceptual Mobius loop of Beyond HR by John Boudreau, published in 2007. But perhaps borrowing some concepts once again from the world of financial investments would help shift the focus of ROI as a means of justifying the existence of HR to ROI as a means of highlighting the value of HR. If you were to be given $3 000 000 and told to invest it, what would you do? Buy property; put the money in a unit trust; reduce the bond on your house; buy shares in a company on the securities exchange? The first, sensible, thing to do would be to find someone whom you can trust who actually knows something about the various investment options, their risks and returns, and can match them with your needs and risk profile. The more they know, the more likely they are to help you make a smart investment, but the reality is that you will probably make your decision based on an “inside tip”, family members’ or friends’ recommendations, or a recent article you have read about the growth in the renewable energy sector. 224

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Daniel Kahneman (2013) cites example after example of how our decision-making thought processes are filled with “bugs”. We over-value irrelevant information and underestimate risk if it is not immediate. Our brains were not built to make complex, multi-variable, long-term decisions well; they evolved almost entirely in a time when fast decisions based on immediate dangers and rewards made us winners, which, when surviving on the African savannah meant, that we lived. The reason the investment amount is $3 000 000 is because that is about the annual investment (not salary) that a company has to make in a mid- to senior-level manager each year when you factor in all the costs associated with having that person in that position (2.5 to 3 times annual salary, according to the research by Lyle and Signe Spencer (1993)). Now think about how much time is taken each year to “optimise the life cycle cost” of that person: • • • •

The impact of the above market acquisition cost extrapolated over the next five years that you paid because the hiring manager “had to have them now”. The time taken to understand and assess how to best utilise the person’s talent.

The money invested in maintaining their skill set or developing new managerial competencies, and

The opportunity cost of redeploying the person into a new, untested environment that may not work out.

As an HR professional, are you a “trusted investment advisor” who has a deep knowledge of the inherent risk and returns you can expect from this one person (asset), and how well do you know your client (the company or a specific manager’s) risk profile and needs? How will you manage their “think fast slowly” tendency to ignore the data and go on a “gut” feel? Without a robust investment framework, it’s next to impossible to advise and influence individual investment decisions at the right level. As a CEO once said, “If opinions are based on facts, everyone’s opinion is equal; if not, then my opinion wins.” So with that in mind, let’s take a look at an often misunderstood and poorly implemented investment decision-making tool, the nine-cell performance and potential grid. The nine-cell performance/potential grid is, without doubt, one of the most poorly implemented tools in the history of HR and has probably done more to dis-engage 80 percent of, usually very senior, employees than any other HR practice. The Jack Welch model of 20/70/10 became superimposed on this grid, to add even more misdirection, and in some cases companies even went so far as to change one of the labels to “Dead Wood” so people had no doubt as to their future prospects.

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• • •

This is generally how managers interpret the nine-cell grid: Those who have a future (Invest).

Those who produce but have a limited future (Ignore).

Those who will be fired (or moved to “Special Projects”) (Disinvest).

HIGH

So this is not an investment strategy, this is a culling strategy, where the purpose is not to invest/dis-invest in approximately 80 percent of your employees. When your company explicitly doesn’t invest in you, why would you invest in your company?

MIDDLE

Ignore

Disinvest

LOW

Learning Agility

Invest

LOW

MIDDLE

HIGH

Learning Agility* Figure 16.1  The nine-cell talent grid *Note: We use Learning Agility in place of Potential to communicate the speed with which someone can transition to a significantly different level of complexity or challenge, rather than potential. If you use potential, Low Potential can be taken to mean “you have nowhere to go, you have reached your highest level”, which is not what it should reflect, because everyone has the potential to change. Some people just take longer or decide not to.

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There are numerous other reasons why the implementation of this tool tends to do more damage than good, but the primary one is mindset. It is not seen as a framework for guiding differentiated investment decisions in everyone. If you are not investing (time, money or opportunity), you are by default dis-investing in people.

16.3 CREATING AN INVESTMENT MINDSET

MIDDLE LOW

Learning Agility

HIGH

The easiest way to do this is to get people to imagine that they have been placed in any one of the four “zones” within the matrix, and how they would feel. Whenever managers are asked to participate in this exercise, they know that someone else is having the same conversation about them. If that conversation is disrespectful, derogatory or dismissive, about anyone in any zone, you have disengaged them.

LOW

MIDDLE

HIGH

Learning Agility Figure 16.2  How managers should see the nine-cell grid

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The mindset should be explicitly investment orientated. We suggested calling this matrix the “Investment Matrix”. Going back to the use of metaphor, it can be useful to explain the process as similar to one where you would be selecting shares from the securities exchange in which to invest. The top right zone would be companies (people) that have a “start-up” profile. A start-up company has great potential to grow quickly if: •

It has a good product that the market wants (that is, the person has obvious talent that your company needs).

•

It is sufficiently funded (that is, the person gets the support and resources he/she needs to perform)

•

It has sufficient opportunity (that is, the person is put in a position where he/she has an opportunity to demonstrate that talent).

These people ensure that an organisation has the human capital it needs to grow at an accelerated rate when the opportunity presents itself in the market. The faster the organisation wants to grow, the more important it is to have people in this zone. The top/middle left zone would be companies (people) that have a “blue-chip” profile. A blue-chip company is one that can consistently deliver good returns as longs as:

•

It has a good product (that is, the person has a deep technical competence) that is needed by the market (organisation).

•

The focus is on efficiency, doing more with less (that is, the person can focus on incremental improvements rather than significant change).

•

The context in which it operates stays relatively stable (that is, the person is expected to do more of what he/she has done in the past).

These people represent the core competence of the organisation, they create structure, predictability and efficiency. They create the stability around which growth can occur.

The bottom row would be companies (people) that require a turnaround strategy. Something has gone wrong that has decreased the value of the company (person) in the market (organisation). Typically this can happen when:

• • • •

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The product has not been kept up to date and/or the market no longer values the product (that is, the person lacks the technical competence to perform or the organisation’s needs have changed).

The brand/reputation has been damaged (that is, the person has damaged some important personal relationships, for example, with his/her manager). The company has not been well managed (that is, the person doesn’t know what to do or lacks energy and drive).

The company has grown too fast and hasn’t successfully made the transition to the next level (that is, the person was promoted but is still thinking/acting in a way that made him/her successful in the past but no longer works).

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People in this zone are often there as a result of poor decisions by the organisation. Have you ever noticed that in team sports, when the team doesn’t perform, the coach is the one who gets fired? In companies it’s often the players. If we look at why organisations accidentally reduce the value of talent so often as a result of the decisions they make, we find several reasons: 1. 2. 3. 4. 5.

Someone was seen to be a good performer and so he/she was promoted. But performance in one context doesn’t always correlate with performance in a different context. Decision makers mistake a high performer for a high potential (that is, someone who can rapidly adapt to a new context). Performance and potential are independent variables; there is no correlation between the two.

People are moved into challenging roles faster than they should be because the organisation needs to fill the position or meet a particular demographic target. People are moved with little or no preparation or understanding of the new challenges and what they can do to develop the appropriate attributes.

People are moved into positions but not provided with the resources needed to succeed, for example, information, people, money, technology, and so on.

When the following is communicated to managers using the nine-cell matrix, the concept of differential investment is a central theme. The key message should be “we will invest in everyone, differently and appropriately, in order to make them as successful as possible”. When each person is as successful as they can be, the organisation is as successful as it can be.

16.4 AN EVOLUTION FROM TOTAL REWARD TO TOTAL COMMITTED INVESTMENT (TCI)

A total reward approach combines both financial and non-financial rewards to calculate the package. But the cost of “investment” initiatives seldom forms a part of that total monetary value. The point of using the investment matrix to guide investment decisions is to ensure that: 1. 2. 3.

The right type of investment is made For the right reasons At the right time.

The investment matrix provides a differential investment strategy for each person that is based on achieving the best return at that particular point in time. So not only should it be differentiated, but it is dynamic and needs to be reviewed at least annually and monitored every six months. For example, there would be no point in identifying the

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best shares on the stock market to buy and the right investment to make, but then never actually buying the shares. Investment in people is generally made as a combination of three factors:

1. Time: The time spent assessing, discussing, organising, planning and communicating the information to all the people involved in the decision-making process, for example, the individual, senior management, various HR people, the person’s manager, and so on. 2. Money: The cost of providing a particular intervention, for example, coaching, assessments and feedback, performance discussions, training programmes, travel costs, and so on, and the cost of the time of the various people mentioned above.

3. Opportunity: The opportunity cost associated with giving someone an opportunity to develop new attributes, skills or experiences. It can take up to 26 weeks for a new person to get “up to speed” and just break even with what they are costing, according to a study by Rollag, Parise and Cross (2005). The opportunity of getting an international assignment, or getting a start-up going, or doing a business turnaround also adds significant value to a person’s resumé and what they will be worth in the market as a result of that experience. This discussion will not go into expanding each of these, but as an example of the value that can be assigned to the investment made by an organisation in an individual, let’s consider an example. This is based on a real person in an organisation with which I work, and it is not uncommon to see this type of investment made when a company is serious about talent management. The point of Table 16.1 (see the next page) is to illustrate that decisions have real cost consequences, and despite the fact that only 1,7% (11 395 / 653 715) of the costs are spent on ensuring that the decision-making process is supported by good data, it is surprising how few organisations collect the right data, and even when they do, how few actually use it to inform this type of investment decision. The flip side of this table is the cost impact of a poor decision, where not only do business results suffer, but self-esteem is crushed and the ripple effect is felt throughout the function or department. These costs can run into the 100 000s of dollars. Bringing this back to developing a Total Committed Investment approach to reward, and using the nine-cell grid to guide that investment approach, individuals may feel that this is an investment in the organisation, so why should it be seen as part of their Total Rewards package? The answer goes back to the asset management metaphor used earlier. The key difference between the metaphor and actual asset management is that the organisation doesn’t own the asset/person. That person is portable and so is the investment that the organisation has made. So yes, it is an investment the organisation should make, but it is a benefit which the individual retains and the organisation may not. Table 16.1  Investment in people management

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Action

Time cost

Direct money cost

Assessment process to establish talent profile

4 hours @ $380/hour $1 520

5 000

3 weeks @ $15 000/ week $45 000

65 000

Talent review with three senior managers Management development programme (local) Personal feedback and six coaching sessions Opportunity move to position to develop new skills and experience

3 hours @ $500 $1 500

14 hours @ $380/hour $5 320

7 x 3 500 24 500

Total

Opportunity cost

Total

6 520 Value of work not performed at 2,5 times salary $3 375

4 875

Value of work not performed at 2,5 times salary $112 500

222 500

Up-to-speed costs of 26 weeks at $15 000/week $390 000

390 000

29 820

653 715

*This is a very rough calculation, based on the assumption that the individual earns $750 000 per year.

16.5 CONCLUSION

Earlier in this chapter, I asked the questions: As an HR professional:

1. Are you a “trusted investment advisor” who has a deep knowledge of the inherent risk and returns you can expect from this one person (asset)?

2. How well do you know your client, (the company or a specific manager) risk profile and needs? 3. How well can you manage their “think fast slowly” tendency to ignore the data and go on a “gut” feel? Hopefully this framework with its investment focus, emphasis on data and analytics and link to reward can help you to arrive at positive answers to the three questions above.

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16.6 REFERENCES Boudreau, J & Ramstad, P. 2007. Beyond HR: The new science of human capital. Boston (MA): Harvard Business School Press.

Fitz-Enz, J. 2009. The ROI of human capital: Measuring the economic value of employee performance. New York (NY): AMACOM.

Investopedia. [Online]. Available: http://www.investopedia.com/ [Accessed 13 April 2013]. Kahneman, D. 2011. Thinking, fast and slow. New York (NY): Farrar, Straus & Giroux.

Rollag, K, Parise S & Cross, R. 2005. Getting new hires up to speed quickly. MIT Sloan Management Review. [Online]. Available: http://sloanreview.mit.edu/article/getting-new-hires-up-tospeed-quickly/ [Accessed 17 April 2013].

Spencer, LM & Spencer, SM. 1993. Competence at work: Models for superior performance. New York (NY): John Wiley & Sons, Inc.

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17 Critical Success Factors and Epilogue Talent management is a very dynamic and diverse topic and we have just scratched the surface. More empirical research is required to unearth this subject fully. We don’t fully understand why some organisations get it more right than others. Of course, one cannot isolate factors and pin-point them to one particular event or intervention. Other factors such as inspiriational leadership come into play. Based on what we know, there are several critical success factors that will form a solid foundation for your Talent and Reward strategy. These may not all be applicable to all organisations, but they provide a useful platform from which to start the conversation. 1. The chief executive officer (CEO) takes a personal interest in Talent and Reward management and does not think that HR owns it. She understands that HR might be the specialist adviser, but line management own it.

I have personally worked in an organisation where the general managers of the various business units had to present their People Balance Sheets to the EXCO every six months and their bonuses and share allocations hinged on it. This is a clear example of how to “walk the talk”.

2. A clear understanding of the organisation’s strategy

Everyone understands the goals and strategy of the organisation, their division and their department, and how what they do supports this.



High-value employees are known and there are clear strategies (financial and nonfinancial) on how to identify, attract, motivate and retain them.



What the New Zealanders and Australians seem to have got right is PLAIN ENGLISH that is accessible to everyone. Simple, clear, consise documentation with no jargon goes a long way to making processes more understandable, securing buy-in and ensuring that people are excited about it.

3. A clear understanding of the core business and core competencies required to drive it

4. Simple documentation

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5. A clear reward and talent strategy is in place that is robust and understandable, and stands the test of fairness

There is no doubt in my mind that we have over-complicated our systems. We need to make sure that they are crystal clear to all who read them and that there is an obvious and direct link between complexity of work, performance, scarce skills, retention, high-value employees and pay.

I would like to hear your views on Remuneration and Talent Management, especially success stories that we could include as case studies in future versions of this book. Please e-mail me on [email protected] I look forward to your contributions.

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Index 360-degree assessment, 106 360-degree survey results, 38 A

ability, 10, 12–14, 58–62, 67, 99–100, 111–112, 118, 125, 188, 191, 193, 200, 208, 215, 217 accelerated development, 35, 95, 104 accountability, 1–2, 29, 32–33, 43, 67, 82, 100, 199, 206 action learning, 37, 40, 44, 103–104, 113, 206 action plans, 22, 108–109, 202 activities, 21–22 agency theory, 151, 180–181 agents, 180–181 alignment, 30, 37, 39, 42, 52, 58, 104, 126, 181, 188 allocation values, 158, 161–162 allocations, 6, 157–158 annual plans, 98 applicant, 74, 213, 216 aspirations, 62, 100, 108, 175, 196 assessments, 15, 19–20, 40–41, 63, 90, 92–93, 99, 103–104, 230 assets, 131, 223–225, 231 assignments, international, 76, 230 associates, 54–55, 79, 121, 187, 214 attraction, 18, 82, 117, 125, 135–136, 191 availability, 25, 54, 94–95, 177 awards, performance-based, 143, 184 awareness, 40, 42, 143, 195, 200, 202, 205–206, 208 B

baby boomers, 57, 173–174 balance, 60, 104, 112, 115, 117, 129, 131, 170, 174, 177, 180, 201, 207, 214, 221 balanced scorecard (BSC), 36–37 BBBEE (broad-based black economic empowerment), 164–166 behaviour change, 103, 111 benefits, 42, 49, 65, 69, 116–118, 120, 125–126, 128, 130, 143–144, 157, 162–163, 166, 180, 212 benefits of integrated talent management, 88 BL. See breakthrough learning black employees, skilled, 139 bonus, 139, 145–146, 186 bonus schemes (BS), 139, 149 brand, 28–29, 80, 92, 203, 209 personal, 195, 203–204, 209 breakthrough learning (BL), 40–42, 44 Index

broad-based black economic empowerment. See BBBEE BS (bonus schemes), 139, 149 BSC (balanced scorecard), 36–37 BU. See business unit building, 9, 11, 30, 37–38, 42, 44, 54, 73, 76–77, 89, 91, 97–98, 101, 104, 119 building leadership capacity, 15 business, 15–17, 19–20, 40–41, 48–49, 54–55, 58– 59, 68–69, 82, 87–88, 97–98, 102, 142–144, 198–199, 203–204, 216–217 employer’s, 212, 214, 217 business case, 18, 30, 54, 116 business environment companies, changing, 17 business leadership, 97–98 business opportunities, 4, 51, 175 business outcomes, 28–29 business planning, 81 business processes, 6, 8, 126, 149 business strategy, 5, 7, 15, 17–19, 22, 30, 38, 49, 54, 58–59, 69, 81, 126, 149, 163 organisation’s, 58 business unit(s) (BU), 13, 43, 52, 58, 65, 73, 77–78, 109–110, 112, 121, 175, 233 business value chain, 15 C

cancellation, 219, 221 candidates, 46, 65, 74, 125–126, 130, 136 capabilities, 4–5, 9, 12–13, 15, 17, 21–22, 52, 97 career discussion template, 108 career opportunities, 128–129, 174 careers, 25, 77, 89, 91–92, 108, 126, 129, 171, 173, 175–176, 193, 198, 200 CEO (chief executive officer), 25, 76, 95, 112, 144, 159, 180–181, 183, 185, 190–191, 203, 225, 233 challenges, 3, 10, 25, 28, 53–54, 67, 85–86, 109, 197, 199 core talent management, 71 change, 35, 39–40, 42–43, 48–49, 60, 82, 95–96, 100, 110, 143, 170–171, 196–197, 199, 203–206, 225–226 organisational, 77 change agents, 48 change management, 30, 41, 43, 48, 105, 112 characteristics of talent management systems, 47 chief executive officer. See CEO claim, 216, 218, 220

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clauses, 212–213, 216–217, 221 coaches, 39, 41, 82, 92, 103–104, 112, 206, 229 coaching, 15, 29, 35–36, 39–40, 42, 47, 81, 92, 98, 103–104, 106, 111, 140, 206–207, 230 cognitive processing profile (CPP), 100 collaboration, 33, 35, 41, 49, 52, 61, 203 commitment, 11, 26–27, 33, 59, 77, 100, 107, 111– 112, 115–116, 120, 131, 205–206 communities, 74–75, 78, 92, 128, 176–177 companies, 25–28, 32–33, 54–55, 57–59, 75–76, 81–84, 91–92, 116, 128–131, 154–155, 157– 167, 179, 187–189, 223–226, 228–231 great, 29, 39, 106 holding, 32, 37 listed, 159, 164 multinational, 45, 50 public, 179, 187 compensation, 28, 173–175, 185 competence, 12–13, 15, 17, 22, 24, 62, 90, 94, 96, 98, 104, 108, 167, 232 competencies, 3, 7, 9, 12–13, 17, 21, 24, 41, 58–59, 81–82, 92, 94, 103–104, 195, 203 competition, 47, 131, 188, 197–198, 213–214 competitive advantage, 5, 17, 23, 54, 57, 177 complexity, 6, 8, 10, 17, 23, 28, 99–100, 134, 144, 161, 166, 197, 203, 233 level of, 2, 6, 15–16, 226 levels of, 4, 7–8 components, 13, 69, 71, 73, 91, 115, 128–129, 137– 138, 140, 186, 200, 217, 220 share-based compensation, 185 conditions, 118, 144–145, 157, 221 consultation, 37–39 contract, 211–213, 215–221 breach of, 212, 218, 220 material breach of, 219 contract of employment, 144, 211–214, 221 contractual damages, 220 core talent management, 71 cost, 27, 32, 34, 50–51, 82, 84, 87–88, 126, 129, 134, 144, 146, 185–186, 225, 229–230 highest, 86 indirect, 134 courts, 144, 213–221 covenant, 214–215 CPP (cognitive processing profile), 100 critical skills, 21, 25, 28, 86–87, 112, 131, 135–139, 141–142 crucible experiences, 76 culture, 26–28, 32–33, 35–36, 40, 42, 44, 80, 82, 86–87, 89, 91–92, 105–107, 111, 193–194, 198

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great, 29, 39, 106 current performance, 161–162 current trend, 183–186 D

damages, 144, 218, 220–221, 227 debt, 145, 147, 170 definition of employee engagement, 115 definition of talent, 46 demographic trends, changing, 54–55 design, 6–9, 17, 34, 73, 83, 146, 158, 180 design criteria, 8–9 development, 15–16, 18–19, 40, 47–49, 54, 57, 65–66, 76–77, 81–83, 95–96, 102–103, 108, 110–112, 126, 174 non-obvious, 77 development plans, 103–104 diagnostics, 30–34 diagnostics phase, 30–32, 34, 43 directors, 167, 179, 190–191 discipline, 38, 48, 71, 199–200, 206–207 dismissal, 107, 214, 219 display, 11–12, 61–62, 208 division, 43, 154–155, 233 Drotter Talent Pipeline, 67–68 duration, 146, 215–216, 221 duty, 171, 214, 216 E

earnings, 154, 186–187, 217 earnings per share (EPS), 186–187 education, 81, 164, 166, 171, 176, 193, 195–196 EE (employment equity), 23, 27, 96, 136, 139, 141 effective managerial organisation, 113 Effective talent management, 111 effort, 5, 18, 36, 42, 102, 107, 113, 130, 173, 203, 205–206 EI (Engagement Index), 116, 126 emotional intelligence, 41–42, 61, 63, 100, 104, 113, 201–202, 208 employee commitment levels, higher, 27 employee development, 119 employee engagement, 44, 54, 77, 79, 83, 115–118, 121–123, 126, 129 high levels of, 116 sustainable, 80, 84 employee engagement strategies, 78–79, 117, 122 employee performance, 62, 105, 117–119, 232 employee recognition, 79, 121 employee retention, 18, 75 Remuneration and Talent Management

employees, 10–12, 17–20, 45–46, 62–63, 65–66, 76–80, 86–90, 104–108, 116–120, 122–123, 125–131, 133–142, 145–147, 211–214, 216–220 appropriate levels of, 137, 140 categories of, 93, 134 current, 29, 74, 129 disengaged, 77, 117 engaged, 26, 115–117 existing, 129, 145, 213–214 frontline, 80 group of, 65–66 high-potential, 64, 70, 134 high-value, 233 identification of, 76 new, 125, 130 skilled, 129 talented, 46, 58, 69, 220–221 younger, 28, 129 employee value proposition (EVP), 26, 29, 91, 106, 118, 125–127, 129–131 employer, 18, 29, 36, 47, 86, 115–116, 129, 131, 134, 142–147, 152, 211–214, 216–221 former, 214–215, 217 new, 216, 220 employment, 75, 86, 130, 157, 211–214, 216–221 basic condition of, 211–212 conditions of, 144, 211–212 full-time, 105 written contract of, 211, 220 employment context, 218–220 employment equity. See EE employment relationship, 212, 219 employment value proposition. See EVP empowerment, 29, 32–33, 35, 60 enforce, 214–218, 221 engagement, 26–27, 29–30, 32, 42–44, 47, 49, 62–63, 75, 77, 100, 106, 110–111, 113, 116, 119–120 engagement capital, 77 Engagement Index (EI), 116, 126 engineers, 137, 139, 224 environment, 10, 13, 86, 92, 105–106, 117–119, 128, 170, 198 environments, changing, 12, 208 EPS (earnings per share), 186–187 equity, 127, 143, 157, 160, 163 evidence, 31, 35, 62, 64, 90, 96, 99–100, 105, 108, 122, 142, 159, 161, 166, 175 evolution, 48–50, 55, 229 EVP (Employment Value Proposition), 26, 32, 37, 73–74, 91, 93, 125–131 Index

executive, 35, 97–98, 111, 113, 183, 191 executive compensation, 163, 189 executive leadership, 9, 23 executive officer, 189 executives, 6, 27, 43, 79, 87, 89, 111, 120, 157–158, 160, 162–165, 180, 183–185, 189, 191 experience, 5–7, 10, 13, 15, 59–61, 75–77, 96–97, 102–106, 130–131, 163, 166, 176–177, 193– 194, 206–207, 230–231 experts, 34–36, 78, 129 F

feedback, 22, 35, 39–40, 92, 101, 103–104, 106, 108, 110, 119, 171, 177, 199, 204–205, 207 fliers, high, 134, 136, 138–139, 141 focus, 1–2, 4–6, 10, 12, 34, 36–37, 49–50, 54–55, 57–58, 81–82, 94, 103, 183, 195, 228 focus groups, 31–32, 34, 58, 119 former employee, 79, 216–217 four-box matrix, 94 freedom, employee’s, 213–214, 221 functional competencies, 59–60 functions, 2, 4–8, 10, 12–13, 17, 68, 71, 73, 97–98, 105–106, 109, 122, 164, 230 G

Gallup Organisation, 113, 209 gaps, 17, 21–22, 49, 73, 88, 95, 103, 108, 113, 126, 130, 138, 173, 178, 205 generation, 32, 34, 169–178, 198 generations, 57, 144, 169–170, 172–176 generation theory, 169, 173 globalisation, 49, 51, 54–55, 57 government, 101, 165–166, 179 GP (guaranteed package), 134, 138, 142, 144–145, 150–151, 157, 163 grade, 102, 137, 140 grids, nine-box, 65–66 group coaching, 41 grouping, 6–7, 133, 223 groups, 2, 10, 26, 30, 32, 34–35, 58, 63, 66, 68, 74, 79, 90, 93, 172 group talent forum, 109–110 growing talent, 102 growth, 5, 45, 48, 59, 65, 105–106, 122, 157, 162, 181, 185, 188, 195, 224, 228 guaranteed package. See GP guaranteed remuneration levels, 157, 160 guide, upper, 140–141

237

H HC. See human capital HDSA (historically disenfranchised South African), 164–165 high flyers, 40, 42, 90, 101, 104–105, 198 high levels, 27, 62, 83, 116, 139 high performers, 49, 62, 101, 133–134, 139, 152, 198, 229 high-performing organisations, 31, 37, 144 high potential employees, 59, 61–62, 77, 8291, 93, 126 historically disenfranchised South African (HDSA), 164–165 hot skills, 135–136, 142 HR (Human Resources), 18–19, 38, 48–49, 51, 54, 56, 58, 69–70, 73, 75, 82–84, 111–112, 117, 223–225, 231–233 HR BPs (business partners), 73 HR functions, 69, 224 HR team, 38–39 human capital (HC), 17–19, 27, 30, 33, 36–38, 42, 44, 50–51, 54, 108, 116, 118, 224, 228, 232 human resources, 18–19, 38, 49, 51, 58, 65, 69, 82–83, 118–119, 223 Human Resources. See HR I

information, 30, 32, 34, 43, 63, 65–66, 69, 78, 80, 108, 110–111, 175–176, 196, 198, 229–230 initiatives, 13, 27, 36, 38, 134, 164–165, 175, 199 strategic, 30, 117 innovation, 1–5, 15, 35, 41, 58, 122 instrument, 211–212 integrated enterprise, 50, 55–56 integrated talent management, 68–70, 72–73, 81, 85, 88, 123 Integrated talent management shifts HR, 69 intelligences, 200–201 interdict, 219–221 interests, 85, 129, 131, 145, 175, 180–181, 193, 201, 203, 211–215 employer’s, 212, 214 Internet, 87, 103, 170–172, 175 interventions, organisational development, 107 investment, 4–5, 54–55, 65, 89–90, 95, 102, 134, 203, 224, 228–230 investment matrix, 228–229 J

job grades, 157, 160–161 jobs, 2, 60, 74–75, 78, 81, 105–106, 116, 119–120, 171, 173–174, 176–177, 193, 196, 200, 205 journey, 41, 43, 193, 195, 206, 208 K

IBM Workforce Management Initiative, 52 identification, 47, 57, 59, 80, 87 identification process, 57 IDP (individual development plan), 94, 108, 110 implementation, 5, 17, 22, 30, 32, 36–37, 44, 48, 60, 110, 112, 151, 189, 227 Improving talent management outcomes, 56 incentives, 92, 131, 137–138, 143, 147, 154–156, 167, 179–181, 183–184, 186, 188, 191 short-term, 134, 143–144, 149 incentive schemes, 31, 149, 151–152, 154–155 rolling, 144 inclusion, 71, 126, 129, 135, 212 income, 145, 187 Individual coaching, 41 individual development plan (IDP), 94, 108, 110 Individual development plans, 94, 108, 110 individuals, 13–15, 46–48, 51–52, 54–55, 58, 96, 98, 105–106, 108, 110, 133, 138, 195–196, 198, 207–208 individual’s ability, 10, 62 industries, 4–5, 12, 25, 28, 33, 39, 45, 94, 101, 104, 164–165, 185, 189, 191, 200

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key categories, 36–37 key employees, 134, 173, 211 key players, 90, 101, 104 knowledge, 41, 43, 59–61, 78, 97, 102, 104, 112, 115, 199, 205–207, 212, 217, 225, 231 demonstrated, 59–60 KPIs, 44, 100, 110, 122 L

large organisations, 82, 173 leader-led development (LLD), 81, 84 leaders, 2, 4–5, 10–15, 39–40, 42, 58, 61, 64–65, 67–68, 76–77, 80–81, 91–92, 111–113, 128, 204 great, 29, 39, 106 next-generation, 34–36 leadership, 1, 7, 9–12, 14, 16, 23–24, 41–42, 59–60, 70, 97–98, 100, 105, 107, 126, 128 functional, 97–98 managerial, 23, 113 organisation’s, 84 Remuneration and Talent Management

leadership assessment, 15–16 leadership behaviours, 1, 10, 15–16, 81 leadership brand, 31, 33, 36, 39, 44, 100 leadership capacity, 9, 15 leadership competence, 13, 15 leadership competencies, 13, 100, 206 leadership development, 15–16, 111–112, 125, 194 leadership development programmes, 64, 92 leadership foundation, 15 leadership landscape, 10, 15 leadership level, 70, 97–98 leadership requirements, 16 leadership roles, 1, 4, 15–16, 39, 82, 175 leadership skills, 104, 111 leadership strategy, 9–10, 15, 77 leadership styles, 11, 19, 28–29, 32, 106 leadership transitions, 81 learning, 29, 32–33, 40, 42, 49, 52–53, 76, 81, 102– 106, 171, 193, 195, 198, 200, 204–206 group, 103 learning interventions, 103 learning path, 205–206 learnt, lessons, 42, 110, 194 legitimacy, 180–181 levels, 2–6, 8–16, 20–23, 31–32, 35, 42–44, 68, 90, 96–99, 101, 109, 111–113, 138–139, 165, 181 executive, 126, 165 higher, 2, 54, 57, 99–100, 119 managerial, 59 next, 17, 36, 58, 62, 109, 228 various, 9–10 levels of management, 2 LEVELS OF WORk, 23 levels of work theory, 2, 4 life, 76, 127, 143, 169, 193–203, 207–208 organisational, 81, 107 life stage, 130, 173–174 link, 13, 20, 57, 123, 125, 133, 157, 179–180, 231 LLD (leader-led development), 81, 84 long-term incentive plans (LTIPs), 183, 187 long-term incentives (LTIs), 125, 143–144, 149, 157, 180, 183–184 loss, 27–28, 34, 134, 220 low levels of employee engagement, 77 Ltd, 113, 178, 213–217 LTIPs (long-term incentive plans), 183, 187 LTIs (long-term incentives), 134, 143, 146, 149, 151, 157–158, 163–166, 190 M

management, 1–2, 4, 7, 17–20, 22–24, 35, 37, 45, 47–50, 71, 73, 86–87, 107, 119–120, 180 Index

asset, 224, 230 effective, 15, 70 executive, 116, 136 talent forum, 112 management approach, 18–19 management control, 162–163 management decision, 24 management framework, integrated talent, 107 management planning process, 20–21 management processes, 28, 74, 83 management strategy, 16–17, 19–20, 30, 46 best practice talent, 71 documented integrated talent, 73 global talent, 55–56 integrated talent, 71, 73, 76–77, 81, 84–85 organisation-wide talent, 54 world-class talent, 50 management system, integrated talent, 88 management teams, 66, 96, 194 management team talent sessions, 110 managers, 7, 10–11, 30–32, 38–39, 58, 65–66, 68–69, 88–89, 97–98, 100–101, 103–105, 107–113, 117, 130, 225–231 managing, 23, 25, 55, 76, 98, 105, 113, 126, 178, 186, 195, 204–205 market, 4, 8, 25, 85, 88, 94, 101, 107, 112, 131, 136– 143, 146, 185, 228, 230 global, 54, 85 market data, 144 market median, 140–141, 157 market percentiles, 136 market premiums/allowances, 137–140 market quartile, 141 matrix, 2, 8, 65–66, 97, 227–228 nine-box, 65–66, 100–101, 109, 133 MCPs (most critical positions), 27, 29, 31, 35, 38, 108 measurement, 20–22, 111, 120, 184 median, 134, 144, 181, 183, 189 meetings, 38, 43, 63, 78–79, 111, 179, 219 talent review, 63 merchants, 121, 186, 191 meta-competencies, 41, 195, 207 midpoint, 138, 140–141 mission-critical positions and scarce skills, 90, 94 models, 2, 20, 68, 133, 135, 167, 182, 185, 223, 232 new business, 4–5 total rewards, 173 monetary, 27, 212 money, 95, 106, 111, 119, 147, 171, 185, 193, 196, 218, 224–225, 227, 229–230 most critical positions. See MCPs

239

N networking, 41, 78, 207 new skills, 102, 104–105, 231 nine-box matrix, 65–67, 99, 100–101, 109, 133 norms, 175, 180–181 O

obligations, 216, 218 opportunity cost, 225, 230–231 organisational and individual engagement processes, 18 organisational business units, 13 organisational capabilities, 223 organisational commitment, 61, 64 organisational culture, 5, 19, 84, 105, 110, 129–130 organisational design, 1, 5–9, 11, 23, 49 organisational level, 2, 8, 13, 182 organisational performance, 14, 20, 46 organisational strategy, 8, 34, 73 organisational structures, 97, 203 organisational success, 6, 49, 55, 80, 116, 149 organisational work themes, 3, 11 organisations, 1–12, 14–19, 21–23, 44–50, 57–59, 61–65, 68–69, 75–88, 100–107, 115–120, 125–131, 133–144, 151–152, 180–182, 228–230 fit-for-purpose, 1 high-performance, 107, 122 most, 25, 46, 131, 151, 177 requisite, 2, 4, 22, 113 successful, 115, 117 under-performing, 27 unlisted, 143, 146 outputs, 7, 97, 108, 110, 137–138, 205 owners, 11, 38, 180–181 P

participants, 42, 120, 157–158, 161–162, 175 parties, 79, 104, 211–212, 215–216, 218–221 defaulting, 218–220 non-defaulting, 218–220 Paterson Grade, 150–151 payment, 137–138, 142, 144–146, 216–218 peers, 58, 62, 100, 103, 120, 138–139, 141, 143, 172, 176, 181, 188 performance conditions, 162–164, 184 performance incentive scheme, 137–138, 140 performance management, 7, 18, 22, 29, 31, 47, 77, 82–83, 106, 122, 125–126, 157, 166 performance management processes, 83, 126, 205

240

performance management systems, 82–83, 161 performance measures, 102, 183, 186–187 performance standards, 13, 97–98, 205 performers, 122, 134, 137–138, 147 period, vesting, 157, 159, 167 person, 12–13, 39, 96, 99, 111, 116, 130, 134, 196, 215, 225, 228–231 legal, 211 personality types, 123, 178 perspectives, 11, 18, 20, 38, 40, 47–48, 59, 74, 155, 188, 191, 198, 200, 208, 218 phases, 6, 30, 43 philosophy, 18–19, 83, 190 planning, strategic, 4, 88 plans, 27, 30, 33, 36–37, 43–44, 48, 90, 92, 104, 119–120, 184, 186, 202, 204, 206–207 policies, public, 214–215, 217–218, 221 portfolio, 108, 189, 223 positions, 6–7, 10–11, 13, 59, 87, 90, 94–96, 99–101, 135, 137–138, 140, 176–177, 219–220, 228–229, 231 critical, 18, 32, 59, 62, 87, 90, 94, 110 executive, 157–158 potential employees, 91, 93, 126 high, 59, 61–62, 77, 82 potentials, high, 26, 32, 34–36, 47–48, 61–65, 70, 104 power, 43, 86–87, 131, 198, 201 preferences, 31, 103, 130, 133, 173–174, 203 individual, 173 preferred reward, 174 premiums, 129, 136–142 level of, 138, 140–141 scarce skill, 140–141 scarcity, 142 pressures, 85, 180, 182, 197, 208 prevalence, 158–160, 187 priorities, 31, 36, 38, 87, 133, 188 processes, 5–6, 8–10, 15–17, 31–32, 47, 52–53, 57–59, 66, 82–85, 89–90, 93, 107–108, 111– 113, 125–127, 164–166 annual, 111–112 decision-making, 177, 179, 230 recruitment, 49, 93, 102, 126 productivity, 84, 87, 116 professional development, 28, 35, 174 profiles, 9, 21, 79 programmes, strategic Talent Management, 54 project incentives, 146–147 project management, 40, 43, 105 project plans, 30, 37, 202 four-phase, 30 Remuneration and Talent Management

projects, 28, 30, 32, 36–37, 40–43, 48, 51, 61, 78–79, 99, 146, 203 project team, 28, 30, 32–33, 36–38, 42–43 project work, 41, 92, 104 proprietary interests, 211–212, 214–217, 221 pros, 102, 146–147 protect, 211–215, 217, 219, 221 Q

quanta, 143, 157–158 quartile, upper, 134, 136, 138–139, 141–142 R

race, 32, 96, 139, 203 RDP (Reconstruction and Development Programme), 164 readiness, 20, 40, 82, 94–96, 98, 105, 108 recognition, 29, 35, 78–79, 119–120, 126, 176 recognition of employee performance, 118 recognition schemes, 36, 120, 137–138, 140 Reconstruction and Development Programme (RDP), 164 recruitment time, 142 regulation, 20, 179–180, 188–189, 191 remuneration, 1–2, 26, 45–46, 118, 125–126, 131, 140, 144, 146, 180, 183, 189, 191, 223–224 annual, 216–217 current annual guaranteed, 161–162 executive, 179, 184, 189, 191 share-based, 185–186 total, 137–138, 140, 145 remuneration mix, 134, 143, 151 remuneration options, 134, 141–142 remuneration policy 138, 140 resignation, 95, 216–217 resounding, 155–156 resource dependency, 182–183 resources, 3–4, 8, 17, 27, 35, 52, 55, 60, 90, 95, 111, 203, 228–229 restraint, 143–144, 212–217 restraint clauses, 213–214, 216–217 restraint of trade, 211–215, 221 restraint of trade agreement, 213, 216 restraint of trade clause(s), 214, 217, 221 restraints of trade, 212–214 retention, 26, 28–32, 34, 36, 43–44, 47–48, 75, 77, 106, 108, 116–117, 134, 146–147, 183, 196 retention challenges, 28, 37 retention drivers, 34 retention framework, 29, 32, 135 retention initiatives, 25, 27, 31, 105 Index

retention objectives, 28–29, 36 retention strategies, 27–28, 30, 32, 43–44, 76–77, 106, 178 return on investment. See ROI reward mix, 180–182 reward mix decisions, 181 reward participants, 151–152 reward practices, 129 reward preferences, 123, 173–174, 178 rewards, 45–46, 91–92, 106–107, 119–121, 126, 128, 133, 136–138, 140, 147, 149, 173–174, 181–182, 188–189, 230–231 great, 29, 106 non-cash, 120 RI (Rolling incentives), 143, 146, 150 risks, 27–28, 32, 42–43, 71, 77, 87, 94, 96, 134–135, 143, 151, 207–208, 219, 224–225, 231 ROI (return on investment), 27, 126, 185, 224 roles critical, 57, 197–198 current, 99, 101, 103 rolling incentive(s) (RI), 139, 143, 146, 150 S

SARs (share appreciation rights), 143, 145, 161–162, 184 scale midpoint, 142 scales, 121, 137–138, 141–142 salary, 137, 139, 141 scarce skills, 27, 45, 87, 90, 94, 96, 105, 136–141, 233 scarce skills premium, 138 scarcity allowances, 139, 142, 146 schemes, 48, 120, 137–138, 140, 144, 151, 157, 162–164, 167, 212 schools, 91, 93, 101–102, 171, 195, 206 scoring rules, 154–155 search, 87, 129, 131, 193, 195–196 sectors, 45–46, 126, 164, 191 security, 170–171, 197 segmentation, 33–34 segments, 28, 30–32, 34–36, 38, 74, 90, 173 critical talent, 73–74 selection, 47–48, 71, 93, 167 self-empowerment, 193–195, 208 services, 3–5, 11–12, 26, 32, 50–51, 88, 100, 117, 122, 139, 160, 166, 170, 211, 218 share appreciation rights. See SARs share price, 157–158, 162, 164 shareholders, 79, 160, 162, 179–180, 183–184, 188, 190

241

shares, 9, 13, 143, 146, 151, 157–158, 161, 163, 165–166, 175, 179, 183–187, 194, 223–224, 230 restricted, 158, 184, 188–189 short-term incentive plans (STIPs), 187 short-term incentives. See STIs skill categories, 136, 141 skilled worker, 55, 97–98 skills, 13, 32, 42–44, 46, 51–52, 57–60, 85–86, 93–99, 101–105, 111–112, 118–119, 135–137, 140–143, 195–197, 199 appropriate, 60–61, 166 required, 142 right, 50–51, 85, 106 skills development, 88, 165–166, 196, 206 skills levels, 110, 137–138 Society for Human Resource Management, 55 specialist, 38, 97–98, 142 spiritual intelligence, 201, 209 standards, competency, 38, 96–98 star talent qualities, 58 status, current, 15, 21 Steering Committee (Steercom), 28, 30, 37–38, 43 STIPs (short-term incentive plans), 187 STIs (short-term incentives), 134, 143–144, 146, 149, 151, 163 strategic development, 3, 11–12 strategic intent, 3–5, 11–12, 47–48, 71, 73 strategic plans, 36–37, 202 strategic sourcing, 101–102 strategic talent issues, 109, 111 strategic talent management, 68 strategic talent plan, 18, 110 strategy, 1–2, 4–6, 9, 15, 18, 20, 23, 26, 36–37, 50, 53, 59, 73, 86–87, 111 segmentation, 36, 44 strengths, 103–104, 113, 116, 193, 195, 203–204, 209 success, 57, 135 succession plans, 38, 89–90, 94–96, 108–109 successors, 31, 35, 38, 49, 88, 95, 122 potential, 94–95 supply, 17–18, 25, 45, 54, 87, 137, 223 sustainability, 5, 14, 44, 87, 135, 175 T

talent, 46–48, 51–52, 55, 57–58, 74–76, 82–83, 87–91, 93, 95–96, 101–105, 111–113, 125, 129–131, 193–196, 228–229 attracting, 91, 131 identification of, 19, 58 identifying, 58, 63, 69

242

key, 86, 101, 109, 117, 135 managing, 89, 110–111 motivation of, 117, 123 supply of, 51, 54, 101 war for, 45, 85, 196 young, 105–106, 175–177 talent action plans, 108 talent champions, 111 talent coverage of core organisational competency areas, 122 talent criteria, 58 talent culture, 89 talent development, 54, 76, 82, 89, 102, 104, 108–109 talent development strategy, 77 talented individuals, 42, 69, 88, 95, 101, 105, 112, 207 talent engagement, 77, 105, 112 talent forums, 88–89, 100, 104, 108–112 annual, 108–109 divisional, 109 functional, 109–110 talent grid, 161, 166 talent identification process, 57–58 talent management, 1, 17–18, 23–24, 45–49, 54–55, 69–70, 82, 84, 87–90, 107–108, 110–112, 156–157, 164–165, 194, 233 cascade, 110 evolution of, 48–49 intentional, 84 talent management activities, 64, 69 Talent Management and Variable Pay, 149 talent management approach, 18 talent management challenges, 81 talent management consultancies, 106 talent management costs, 54 talent management culture, 18, 92 talent management framework, 91 talent management governance, 18, 20 talent management implementation, 108, 111 talent management initiatives, 147 talent management interventions, 113 talent management investment, 89 talent management issue, 55 talent management outcomes, 62 talent management paradigm, 49 Talent Management Plan, 21 Talent Management Planning, 21 talent management practices, 110 talent management principles, 18–19 talent management processes, 18, 65–66, 73, 89, 107, 111 Remuneration and Talent Management

talent management programme, 71 fully integrated, 73 talent management strategy, 47–48, 71, 88, 211–212 talent management strategy/plan, 22 talent management systems, 18, 47 talent management umbrella, 71 talent management war, 212 talent management work, 59 talent management workshop, 123 talent manager(s), 88, 89, 110 talent mobility, 92, 105 talent outputs, 109–110 talent pipelines, 74, 76, 90 talent planning, 73 talent pool, 26, 74, 95–96, 102, 105, 109, 131, 182 talent portfolio, 223 talent principles, 89–90 talent programmes, 73, 103 talent retention, 25, 83, 97, 106, 125 talent review process, annual strategic, 88 talent reviews, 89, 108, 231 talent scorecard, 18, 20, 122 talent segmentation strategy, 90 talent sourcing, 74, 129 talent status, 63, 65 talent strategy, 65, 68, 233 talent value proposition, 18–19, 29 tasks, 2–3, 11, 13–14, 40, 58, 69, 71, 97, 116–117, 146, 177, 203 TCI (Total Committed Investment), 224, 229 TCO (Total Cost of Ownership), 224 team leadership, 97–98 teams, 13–15, 39–40, 61, 69, 97–98, 102, 105, 109– 110, 120–121, 146, 151, 197, 200, 203, 205 technical exchange meetings (TEMs), 78 technology, 4, 7, 94, 169–170, 172, 176–177, 197– 199, 223, 229 TEMs (technical exchange meetings), 78 termination, 145, 212–213, 216, 219 theory, institutional, 180–183 timeframes, 94–95, 205 tools, 15–16, 48, 52–53, 58, 65–66, 69, 85, 87, 90, 100, 103, 108–110, 112, 135, 188 top performers, 26, 57–58, 62, 139 top talent, 57, 62, 64, 118, 131, 191, 198 total committed investment (TCI), 224, 229 total cost of ownership (TCO), 224 total shareholding return (TSR), 163, 180, 187 transformation, strategic, 34–36 transformational leaders, 12 transitions, 3, 9, 39, 68, 81, 195, 226, 228 transparency, level of, 64–65 TSR (total shareholding return), 163, 180, 187 Index

U under-performers, 90, 101 unemployment, 85 universities, 91, 93, 101 unvested scheme equity, full value of, 161–162 V

vacancies, 51, 75, 77, 96, 102, 122 vacant, 135, 142 value proposition, 4, 91, 125–126, 130–131 organisation’s employee, 130 variable, 13, 117, 129, 136–140, 143, 149, 151–152, 154, 156, 174, 184, 224 variable pay (VP), 144, 149 vision, 5, 14, 27–29, 35, 55, 61, 127, 134, 170, 201 VP (variable pay), 144, 149 W

WMI (Workforce Management Initiative), 52–54 work design, 1, 5, 7–9, 22, 84 work theory, 2, 4 workforce, 27, 52, 56–57, 73, 76, 82, 87, 93–94, 129, 139, 172 Workforce Management Initiative. See WMI workplace, 19, 45, 73–74, 83, 122, 125, 173, 175, 197–199, 202–203, 219 Y

youth, 131, 169, 172, 175–177

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