IDENTIFYING TOP TALENT: A SCIENTIFIC AND STRATEGIC METHODOLOGY
There is little doubt that most, if not all, companies in South Africa are being impacted by fierce competition, tough macro-economic conditions, squeezed margins and concomitantly, lower profitability. The economy shrank in the first quarter of 2019 by 3.2%, and one of the consequences of these dire economic conditions, is that pay-outs from short-term incentive schemes will not be stellar and most long-term incentive schemes are underwater.
A question we are constantly asked by our clients is given the lower incentive pay-outs, how do I attract and retain top talent (“TT”) – purposefully denoted in capital letters given the importance of these employees to your company’s future success. While there are several TT schemes that can be implemented, we have found that clients struggle to identify their TT.
All too often, the decision is a subjective one or worse still, the selection is made with little or no reference to the strategy of the company. We have therefore developed some expertise in assisting companies with such exercises and our initial advice would be to “think strategically” while adopting a 3-phased scientific approach as follows:
The departure point should be a strategic evaluation of the positions (not people) in the company to identify those roles which are crucial to the success of the company’s strategy. Obviously, an in-depth knowledge of the strategy is required and if this is not well defined, extensive discussions with the CEO may be required.
For example, if the primary strategic objective is to increase revenue by 30% annually over the next 3 years, HR must identify the sales roles which are crucial to achieve this objective. This is often where the analysis stops i.e. the sales force is crucial. However, this is only the beginning of the “deep-dive” analysis. Once the sale has been secured, a Key Account Manager will be responsible to ensure repeat orders. The Account Receivables Clerk will play a significant role in ensuring debtors are kept under control and ensuring positive cash flow. This level of granular investigation of the roles (not people) is crucial to the exercise.
As can be appreciated from the above example, numerous positions are identified, each with their own part to play in ensuring the success of the strategy; as such, it is important that the analysis follows the entire process chain to identify and include all essential roles. This is a challenging and onerous task but is far better than simply using the hierarchy or gut feeling to identify these critical positions.
Upon completion, this exercise would have identified positions which we term, “Strategy Enhancers” and “Strategy Contributors”.
At this point, only strategically important positions have been identified. Based on our experience, and provided the strategic “deep-dive” has been completed correctly, Strategy Enhancers normally constitute between 10% to 15% of the current staff compliment. The number of Strategy Contributors differ from industry to industry and depend to a large extent on the degree of vertical integration within the company – where the company controls more than one stage of the supply chain.
Once the Strategy Enhancers and Strategy Contributors have been identified, a further “deep-dive” is required to critically evaluate the incumbents. The salient objective of this assessment is to establish the capability and effectiveness of the incumbents. This assessment must be done in a fair and objective manner where subjectivity does not influence the integrity of the exercise.
What is important, is that one needs to evaluate the employees in terms of the strategic objective(s) of the company, whilst applying lateral strategic thinking throughout the process. We recently experienced the value of lateral strategic thinking when working with a IT company – the strategy was to increase sales of a “widget” product. On evaluating the current salesmen, it became evident that they did not have the technical acumen to sell such a complex product. However, a thorough examination of the process chain, highlighted some employees from R&D which were far better equipped to explain the technical nature of the “widget” to the client’s customers; provided they underwent some sales training.
The R&D employees were identified as TT. The result: a staggering increase in sales and the achievement of the insanely ambitious revenue targets. As Edward de Bono stated, “Lateral thinking is concerned not with playing with the existing pieces but with seeking to change these very pieces. It is concerned with the perception part of thinking”.
Another consideration- if for example, the strategy is to significantly increase revenue, HR needs to examine whether the large department of Cost Accountants is not a hangover from the previous strategy where cost containment was the primary focus – if so, they cannot be TT given that they are not Strategy Enhancers.
When evaluating employees, HR practitioners often tend to overcomplicate the process by attempting to use a 9-box matrix or other similar obtuse and complicated measurement tools. In our experience, simplicity is the key and we have used an adaptation of the Boston Box model, as illustrated below, in several similar exercises with great success. The model is self-evident and easy to use – recently a HR Director stated – “When using this, the result jumps out and bites you”.
This is the stage where HR steps up to the plate and demonstrates their strategic value.
TT should only come from Rock Stars and perhaps Question Marks. To include a Question Mark into the TT pool, HR needs to establish the reasons for the low performance and introduce training to elevate them to Rock Star status.
In our experience, this type of “deep dive” analysis identifies that approximately 10% to 20% of employees as TT.
The “rule of thumb” we adopt is that TT cannot be more than 10% of the total employees and the identified group must now be culled to no more than 10%.
Identify TT is a daunting task however if this exhaustive but necessary process is followed, HR will demonstrate their strategic insight into the business and their ability to identify TT.