18396710 War for Talent

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CONFIDENTIAL

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Date

This report is solely for the use of client personnel. No part of it may be

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organisation without prior written approval f rom McKinsey & Company.This material was used by McKinsey & Company during an oral

presentation; it is not a complete record of the discussion.

Estonian Leadership

ConferenceSeptember 9, 2004

War for TalentHow to find, keep and

manage talents?

War for TalentHow to find, keep and

manage talents?

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2

Unit of measure

* Footnote

Source: Source

HEL-ZYN093-20040909-War-for-Talent-Estonian-Leadership-Conference

Long-term forces fuel the war for managerial/executive talent in large

corporations

Talent is

more

mobile

Demographic

constraints

on supply

Demand for

talentedmanagers

Demand for

knowledge

workers

War

for

talent

War

for

talent

Viewpoint: Focus on

managerial/Top200executive talent in large

corporations Survey data and cases

from the USA

However, most principlescan be applicable to otherknowledge professions as

well

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3

Unit of measure

* Footnote

Source: Source


Companies are generally poor at managing talent

Percent of top 200 executives who strongly agree it reflects their company

Source: McKinsey War for Talent top 200 executive survey - 5,679 respondents

77

23

Brings in highly talentedpeople

84

16

Knows who the highand low performers are

90

10

Retains almost all high

performers

Develops people quickly

and effectively

Removes low performers

relatively quickly

97

3 3

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Unit of measure

* Footnote

Source: Source


Favorable

outcome

Marginally

acceptable

performance

Unmitigated

failure

Success in people decisions

COMPANY EXAMPLE

Percent

Companies acknowledge that they often fail when making key people

decisions

In no other area of

corporatemanagement would

we accept such

deplorable results

CEO

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Unit of measure

* Footnote

Source: Source


Building a globally competitive workforce

Strengthenrecruiting

Instilltalent nurturing

mindset

Create agreat EVP

Developoutstandingleaders

Reward andrecognizeperformance

Globally competitiveworkforce andimproved company

performance

HEL ZYN093 20040909 W f T l t E t i L d hi C f

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Unit of measure

* Footnote

Source: Source



Create a great employee value proposition

Develop outstanding leaders by developing people

to their full potential

Strengthen recruiting by making it a top team priority

Evaluate performance and differentiate actions

accordingly

Instilla talent nurturing mindset at all levels of

the organization

HEL ZYN093 20040909 War for Talent Estonian Leadership Conference

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7/397

Unit of measure

* Footnote

Source: Source


What is a talent mindset?

Belief in the importance oftalent

1

Link between business strategyand talent requirements2

Accountability for talent bysenior managers

3

Leadership by the CEO4

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Unit of measure

* Footnote

Source: Source


Believe line managers

should be held

accountable for the

quality of their people

Percent of corporate officers

39 32

6

3

54

Think their

companies

actually do this

99

35

Critical

Very important

Somewhat important

Strongly agree

Somewhat agree

Managers are not held accountable for talent


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Unit of measure

* Footnote

Source: Source


I will change

my behaviour if . . .

I have the skillsto behave in the

new way

Developing talent

and skills

Have training and

developmentprogrammes been

altered to reflect

the new desired

skill set?

. . . the systemreinforces the

desired culture

Reinforcing with

formal mechanisms

Have the formal and

informal policies andprocedures (including

compensation and

appraisal) been

changed to reinforce

the new desired

behaviours?

. . . I see my leaders

behaving differently

Role-modelling

Have the formalleaders and the

informal opinion

leaders embraced

the change by

role-modelling?

. . . I know what is

expected of me

Communicating

Has the who, what,why, when, and how

been communicated

throughout the

organisation?

Four levers need to be addressed to change mindsets


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Unit of measure

* Footnote

Source: Source

p



Develop outstanding leaders by developing peopleto their full potential


Instill a talent nurturing mindset at all levels of theorganization

Evaluate performance and differentiate actionsaccordingly


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Unit of measure

* Footnote

Source: Source

What is an EVP?

1. The experience employees have every day at work1. The experience employees have every day at work

2. The sum of the gives and gets that makes up therelationship an employee has with a company

2. The sum of the gives and gets that makes up therelationship an employee has with a company

3. A special blend of challenge, connection, professionalgrowth, respect, satisfaction, opportunity, and reward

3. A special blend of challenge, connection, professionalgrowth, respect, satisfaction, opportunity, and reward

4. The companys fingerprint that uniquely reflects the culture,

business model, leaders, management style, compensationstructure, and career paths

4. The companys fingerprint that uniquely reflects the culture,

business model, leaders, management style, compensationstructure, and career paths

Delivery is crucial!Delivery is crucial!


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Unit of measure

* Footnote

Source: Source

Culture and values

Company industry reputation Meritocracy Advancement Lifestyle

Great company

Work content Development opportunities Job security

Freedom and autonomy Coaching, feedback and monitoring

Great job

Employees opinion of seniormanagement

Employees relationship with bossGreat leaders

Total compensation package Base pay Short term incentives Long term wealth creation

Attractive

compensation

Why would atalented personwant to work for

your company?

Most critical

What is an EVP?


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14

Unit of measure

* Footnote

Source: Source

There is significant freedomand autonomy to do my job

The position has exciting

challenges

Company is well managed

I like the companys valuesand culture

Future career advancement and

growth opportunities are strong

Company has many highlytalented people

Compensation is structured to

differentiate significantly betweenhigh, average, and low performers

Total compensation is high

Company is very good at developing

people

Company mission inspires me

Strong respect for lifestyle issues

and willingness to help me manage

my work/family balance

Job security is high

The company tells people wherethey stand relative to their peers

Reasonable pace and low stress level

% of top 200 executives rating statement essential or very important

Why executives join, stay with, or leave a company


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15

Unit of measure

* Footnote

Source: Source

% of Level 3 and Level 4 respondents

Company

effectiveness

Meets/exceeds

expectations

Importance

Absolutely essential or very important

Training

Mentoring

Careeradvance-ment

Politics

Annualcomp.

Differential

compensation Processes/red tape

Wealth creation

Promotion ofhighperformers

Seniormanagementcommitmentto growth

Opencommu-nication

Reward/recognition

Trust in sr. mgt.

AutonomyCompanyperformance

Culture/valuesWellmanaged

Ambitious goals

Interestof work

Problem areas

Strengths

0

0

20

40

60

80

100

50 60 70 80 90 100

Overview of company Xs current employee value propositionCOMPANY EXAMPLE

McKinsey clusters: What matters in a job


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16

Unit of measure

* Footnote

Source: Source



Develop outstanding leaders by developing peopleto their full potential

Strengthen recruiting by making it a top teampriority




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17

Unit of measure

* Footnote

Source: Source

From To

Grow your own talent Pump talent in at all levels

Recruit for vacant positions Hunt for talent all the time

Go to a few traditional sources Tap many diverse pools of talent

Advertise to job hunters Use creative channels to reach passivecandidates

Specify a compensation range and staywith it

Pay what it takes to get the candidatesyou want

Recruiting is screening Recruiting is also selling

Levers to consider when rebuilding the recruiting strategy


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18

Unit of measure

* Footnote

Source: Source

Rich flow of

candidates

Rich flow of

candidates

Use many creative channels to find people

Personal networks

Executive search firms

Company Web site

Searching resums on the Internet

Advertising on job boards, other media

Long-term relationship databases

Direct mail campaigns

Experiential or educational events


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19

Unit of measure

* Footnote

Source: Source

Hewlett-Packard provides summer internships and part-time

jobs for hundreds of high school and college students

Amgen hires entrepreneurial refugees from the R&D

departments of big pharma companies

General Electric hired 650 military officers in the past 2 years

One company hired 50 of 300 graduating students from an

elite Indian high school and brought them to the U.S.

Earlier

Later

Different

Global

Be creative about talent sources


R t ti t ti

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20

Unit of measure

* FootnoteSource: Source

% corporate officers who say company is very effective

Tell them they are

our best people

Mid-quintilecompanies

Top-quintilecompanies

Gold standardcompanies

Create a sense of

belonging

Give them exciting

jobs

Pay them more than

average performers

Retention tactics


B ildi l b ll titi kf

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21

Unit of measure




Develop outstanding leaders by developingpeople to their full potential





J b d f db k d i d l t

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22

Unit of measure


Informalcoaching/

feedback

Special projects

Being

mentored

Development

plans

Job

rotation

360-degreefeedback

Non-traditionallearning programs

Traditional training inside

Traditional training

outside

Outside testing

0

10

20

30

40

50

60

70

80

0 10 20 30 40 50 60 70 80

Feedback/mentoring

Percentage of top 200 executives

Formal training

Stretch/

developmental jobs

Company

effecti

veness

Excellento

rvery

good

Importance to my development

Absolutely essential or very important

Jobs and feedback drive development

Individuallearning

Formal

performance

evaluation

Speedof job moves

Way jobs

structured

Role models

Told strengths/

weaknesses


Promote your best people early often

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23

Unit of measure


% corporate officers who say this very much reflects their company

We give high-potential

individuals more/better

development opportunities

Mid-quintile Top-quintile Gold standard

We put high-potential

people in jobs before

they are ready

Promote your best people early, often


Use staffing decisions to drive development

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24

Unit of measure


Use staffing decisions to drive development

Five most developmental jobs

1

2

34

5

New position with larger scope

Turning around a business

Starting a new business

Large, high-profile special projects

Working outside your home country

Most of these jobs arescarce, so give them

your best people!


Making more/better feedback happen

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25

Unit of measure


Making more/better feedback happen

1. Value it

Kevin Sharer, CEO of Amgen

2. Sharpen insights about people

GE: Session C notes

3. Formal, written feedback once a year

McKinsey & Company

4. Support in various ways

Train managers

Assess managers on coaching 360-degree feedback

Arrow Electronics

Howwell

youperfor

medthisy

ear

________

________

________

____

________

________

________

____

Yourgrea

teststrengths

1.____

________

____________

2.____

________

________

____

3.____

________

________

____

Yourdevelopm

entneeds

1.____

_____________

_______

2.____

________

____________

3.____

________

________

__


Use of talent building levers in European companies (1/2)

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26

Unit of measure


Percent

31

27

25

24

22

21

18

17

17

15

10

9

Systematic career planning Systematic job-rotation

Spain

Switzerland

Netherlands

Great Britain

Average

Ireland

Sweden

Norway

Denmark

Germany

Finland

France

36

31

29

24

24

23

21

20

19

19

16

10

Finland

Switzerland

Norway

Spain

Sweden

Netherlands

Average

Ireland

Great Britain

Denmark

Germany

France




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27

Unit of measure


Succession planning High-potential programs

58

48

44

34

33

29

27

26

25

22

19

13

64

54

44

41

31

31

30

25

23

23

12

8

Germany

Switzerland

Great Britain

Norway

Average

Ireland

Spain

Finland

Sweden

Netherlands

France

Denmark

Norway

Sweden

Spain

Switzerland

Average

France

Germany

Denmark

Great Britain

Netherlands

Ireland

Finland


Percent



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28

Unit of measure




Develop outstanding leaders by developing people totheir full potential





Managers/executives perform develop differently a performance evaluation and

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29

Unit of measure


management system is needed for an organization to develop to its full potential

An honest and ethical evaluation system neededas the backbone of performance management

Reasonable distribution along performance levelsis practical

Evaluation

Differentiated

actions

Reward and provide development opportunitiesfor best performers

Affirm and grow the solid performers (majority) Have a consequence management system for

non-performing executives/managers


Having a consistent consequence management system for non-performance

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30

Unit of measure


is important

high performers

leave the company

development/advancement

opportunities are blocked

fewer A players

are attracted to join

the company

Complacency on underperformance is damaging

subordinates are not

developed

productivity and morale

of group is low

performance in job is low

By having low

performers in critical

executive/management

positions without any

consequence

management Large variety of options

exist for consequence

management, fromhard to soft

In every case, thesystem needs to be

consistent and aligned

with the culture and

values of the

organization


Consequence management should reflect the culture and values of an

i ti l f th US

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31

Unit of measure


organization some examples for the US

Immediate dismissal

for missing targets

Dismissal for repeatedly

missing targets

Demotion or

sideways move

for missing targets

Gillette

Un-

successful

executives

usually

given

second

chancesand are not

dismissed

Merck

Underperformers

given

second

chance

through

retraining or

transfer

Nucor

We rarelyterminate

anyone for under

performance,they figure it out

from their pay

checks

Emerson

Electric

Underperformers

movedsideways

but not

usually

dismissed

AIG

Continu-ous low

performers

dismissed

Hewlett

Packard Under

performers

moved toalternate

position

Johnson

& Johnson

Non per-formance

frequentlyleads to

dismissal

Barrick Gold

(CEO) willnot settle

for lower

quality andthis attitude

carries

through to

the people

he hires

and fires

GE

Peoplewho miss

the numbers

but have thevalues get a

second

chance.

People with no

values and no

numbers getfired; those

who make the

numbers butdont have the

values are now

also fired

Microsoft

3 strikesand

youre

out

Frito Lay

Unaccep-table

performers

given 90-120 days to

improve orface

dismissal

SAP

Those whodont fit or dont

meet targets

are laterally

transferred. Its

the only way to

encourage

innovation



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Unit of measure


g g y p

Strengthenrecruiting

Instilltalent nurturing

mindset

Create agreat EVP

Developoutstandingleaders

Reward andrecognizeperformance

Globally competitive

workforce andimproved company

performance


APPENDIX

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33

Unit of measure



Employee value proposition example (1/3)

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34

Unit of measure


Distinctive Common practice

Inspired to learn,

required to develop,

recognized for

contributing,

supported by ourglobal network

Company

supports individuals

needs

Effective knowledge

sharing

Active career

development

Personalised

performance

recognition

Connected,effective

communication

Inspiring leaders

Flexible to suit

individual

Tools to do the job

Personalized and

incentivized

knowledge networks

Knowing what we know

Tailored career

development

Transparent

job opportunities

Individual feedback, pay

for performance and

choice of benefits

Clear goals for all

bonus for meeting them

Visible leaders givingtimely updates

Business directionshared

High potentials identified

early; actively managedand developed through

their careers

Leaders who walk the

talk and develop theirpeople

COMPANY EXAMPLE

Flexible to suitindividual

Tailored careerdevelopment


Employee value proposition example (2/3) Tailored

career development COMPANY EXAMPLE

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Unit of measure


career development COMPANY EXAMPLE

Established a project matching system Projects posted in same manner as jobs with employees showcasingtheir capabilities

Project leaders select from bids Central co-ordination balances needs of employee, project, and

company

Employees create their own CVs by bidding for projects aligned with

career aspirations As employees are placed on new projects, learning system informs

them of appropriate development activities

Same system also be used for role changes

Developed and publicized expertise maps

Maps detail potential career paths through company Employees follow company career paths, or create their own

On reaching the executive level, staff get a talent account to spend

on self development. What they spend it on is up to them


Employee value proposition example (3/3) Creating your own

lifestyle and work environment COMPANY EXAMPLE

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Unit of measure


Introduced flexible working package

Employees can propose own flexible working hours/location. After review with

supervisor can start flexible working on three-month review cycle Virtual offices provided to all working from home using a budget; interactive ordering

of tools via Home Workers website

Career breaks and sabbaticals actively encouraged (paid or unpaid) for: communityprojects, personal development, family care, and so on

Established points-based menu of lifestyle options

Concierge service Help with personal life 1 per hour of concierge time

Childcare

assistance

Vouchers to spend on selection

of external childcare facilities

4 per 200

Life planning Financial/legal planning 10 per hour

Vacation Purchase additional holiday 10 per week

Employee

assistance

programme

Online informational assistance

lifestyle and work environment COMPANY EXAMPLE

Description Points

U it f


Company example Recruiting process for senior-, mid-level professionals

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Unit of measure


1. Manager completes

staffing requisition

form and sends toHR

REQUISITION

Contact execu-tive search firm

Query sourcingdatabase

Post position onRLR intranet andinternet sites

Place newspaperads, etc.

3. Staffing specialist accesses avariety ofchannels to identify

qualified candidates

2. Staffing specialistand hiring managerplan

strategy for obtainingbroad slate of candidates

7. Hiring managermakes offer, closes thedeal and begins tointroduce the new emp-

loyee to the company

6. Hiring manager,with input from staffingspecialist, evaluatesand selects best

candidate

5. Hiring managerand interview team useSelecting forSuccess to interview

candidates

4. Staffing specialistdelivers a shortlist of candidatesto Hiring Manager

CANDIDATES

1.Alex Smith

2. JuileJones

3.TomHall

4.Sue Cook

5. Mary

U it f


Example performance/potential criteria for managers/executives
http://thumbpicked%2856%29/

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Unit of measure


Performance

Resolution

Attainment of objectives

Scope and complexity ofthe objectives attained

Efficiency in managing

resources

Mastery of technical skillsand/or education

Potential

Personal skills Responsibility Initiative Vision Flexibility Energy Exemplary

Interpersonal skills Leadership People development Team work

Unit of measure


Looking at the talent pool by Business Unit in a large company

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Unit of measure


33.3

71.4

23 22.2

42.9

100.0 55.6

42.9

40.033.3

22.214.2

55.640

37.5

25.033.3

20.0

62.5

38.5

33.3

50.0

28.6

25.0

33.3

38.5

11.116.7

50.0

but across Divisions, there is a broad spread of talent quality

A D GB C

100% = 9 8 10 4 13

E F

6 2

Tracking

Low Medium High

Potential

Performance

4 2 1

5 3

6

Outstanding

Issues H I J

10 3 77

K

Percentage of individuals

7

9 8

High

Medium

Low

Business units

18396710 War for Talent

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