Erik Berggren (Part 1) - 4 strategies for successful talent management

Speaker

As the economic downturn bites, it's easy to forget that good talent management remains a key strategic objective. In this podcast, Erik Berggren, Head of Global Research for SuccessFactors, reveals some of his company's own research into this area.

Erik

So, we know that there are a lot of uncertainty, and a lot of turmoil around the world, and really people are sometimes putting really hard words in their mouth in terms of recession, and we know that it's hitting people and organisations worldwide very very hard.

We have recently done some very specific research in the UK and Ireland market with more than 160 companies to really learn how is the situation in the UK market, in terms of their attitude and aptitude to deal with people and change in these very uncertain times. Two specific key facts that came out is, one was that actually more than half, it takes more than three months to change direction and course, if they decide and have to go with a new strategic direction, to make sure that people get aligned around that thing, and another thing that was very fascinating and a very very bad thing to find from this research was that actually 92% of companies, when they're doing a pay cut or a pay freeze, they do it across the board, which is something that is of course horrendous, if you want to win in this super-competitive market.

One very interesting thing is that people tend to mix and confuse employee commitment levels or engagement, as it's often coined, with attrition rates, with the real attrition rate of their people, and typically in good times it's almost a linear relationship between those two terms, but what happens, and what we also saw from this research here in this study, is that this is a confused term, and we see that a lot of low performers, a lot of people that have a harder time actually finding another job, tend to stick around, so if companies aren't really taking action on this, they're actually getting stuck with more and more of the low performers and those companies going on the offence, it's there, snapping the best talent and the critical skills, and take it to their advantage, so what we clearly see is that it's getting stale, people are staying on the job, and some companies are going to take advantage of this, and come out and win; some are not, and they definitely are going to lose, because someone's going to be below average too.

We did a little history lesson as well, and looked at what really happened last time around when we had such a quick shift in the economy, and if you remember how, I remember still that NASDAQ peaked in March 2000, and it was all very happy ship, '98, '99, 2000, everything was just going so well, and then I'd say in 2001, 2002, it was almost like a nuclear winter in the business climate globally, and if you remember how that was, and what we have learned from that, we did some research and study into this as well, is that a lot of this was based on, people in companies were actually inclined not to really make decisions, but not to make a decision is actually also a decision, so people were just staying, they cut costs across the board, they were just literally paralysed with what was going on, really refused to see it, very few had strategic data around their people, so if they needed to let go of people, in many cases it was not a pretty way of doing it, first of all it was very costly for a shareholder in the companies, then it was very unfair to people in the organisation, because it was, in many organisations, done with really a lack of integrity and a lack of data for making these calls, so based on subjectivity and managers liking/not liking some people and their relative power the organisations— that was really typically what was happening in that, and I clearly see, from our vantage point, that we still have a lot of organisations that are not learning from that lesson and are still doing that, and we clearly see that some winners are start doing this with much more integrity and real data around their people, their real sustainable competitive advantage, and take advantage of it, and really look at, who are the strongest performers? Who's not? Who do we actually really need to keep, to win, or maybe just to survive the coming 12 months, if the balance sheet is a little bit weak, and you don't have the means to do it? But also to come out, long after this, when you see the light in the tunnel, and make sure that you keep the strategic assets and skills, so that you actually can really become a winner and take advantage of this uncertain time, because again, right now, is really the time for those companies that are going on the offence, because the competition is hurt, those companies that are taking advantage and learn from those lessons and move forward will definitely win here.

So another thing that we definitely see, and we know that some companies are actually trying to make some shortcuts to, is to implement a pay-for-performance culture. It's a wonderful thing to do, and it really works— we have done research where we have seen a very very strong correlation with those organisations that are increasing the spread of their pay— bonuses, merits, incentives - with performance. They are doing better, they are producing more profit, more shareholder return, and that's kind of a no-brainer, but what many organisations that are moving in this direction, getting very anxious to start doing this, is they're failing to understand the poor performance meaning of the pay-for-performance, just make no mistake about, that it's a good concept, but make sure that you have a performance management system loaded with integrity, consistency, so that you know that you have assessed the real performance of people before you actually start amplifying the incentives which start distributing pay more unevenly. It's a wonderful thing to do, but make sure you have your act together when it comes to real performance, so this is not just amplifying bad managerial behaviour, protecting some people, letting other people actually come out short of this.