M E M O

From: David E. Edell, President

Date: May 16, 2002

Re: Managing Talent: We May Have to "Grow Our Own"

As executive recruiters for nonprofit organizations, we constantly hear the frustrations of nonprofit boards and executives as they seek professional talent. There is a "personnel crisis" affecting many areas of nonprofit service and professional disciplines in significant ways.

You have a "personnel crisis" when you do not think that the quality of professional you want to hire is out there. This "crisis" exists because the way nonprofits do business and the needs and opportunities to serve have changed dramatically during the last decade. The recruitment and training of professionals have not been able to keep up with the sector's need for staff with new skills and talent to meet new challenges. The sector looks to nonprofit management graduate programs and career changers from the private sector as new resources for enriching the pool of potential candidates to chose from. In our experience, neither provides adequate solutions to today's recruitment pressures.

I believe that to meet the short -term human resource needs of the sector, especially at the management level, organizations will have to "grow their own." Each has the responsibility to their organizations and their fields of practice, to develop the next generation of professional leaders. Today, too few of our organizations recruit talent with the idea of "growing them" for future leadership. Too few have the kind of supervisory and support structures that build future talent. Too few have resources or volunteer leadership support to focus on these issues. To be successful in recruitment and retention, these factors must change.

Studies about retaining top performers often begin by looking at what employees identify as the "value added" of working for a particular organization. Organizations that are known as great places to work think carefully about their culture and work environment in addition to competitive compensation programs. These organizations reach out to and invest in the professionals that they want to keep. Top performers know they are valued and are treated accordingly.

In 2000, Dr. David Finegold of the Center for Effective Organizations at the USC Marshall School of Business was commissioned to conduct a study that was presented at the 2001 World Economic Forum. The study entitled "What Do Employees Really Want? The Perception vs. The Reality" provides interesting data to begin a discussion about recruitment and retention. An article about the study and its findings is printed below.

I look forward to your comments.

DRG is a national Executive Recruitment Firm working exclusively within the nonprofit Sector. Since 1987, DRG has worked to help organizations recruit for CEOs, CFOs, Chief Development Officers and other senior executives. To learn more about DRG and our search success visit us at www.DRGNYC.com

WHAT DO EMPLOYEES REALLY WANT?

By David Finegold

Reprinted here with permission of Learning in the New Economy Magazine (www.linezine.com). All rights reserved.

I never expected to find myself here—sitting on stage in a packed room at the World Economics Forum 2001 in Davos, Switzerland—kicking off a panel on “Talent Strategies for the New Economy,” to be followed by the top executives from many of the world’s leading corporations: Goran Lindahl (ABB), Nobuyuki Idei (Sony), Leslie Vadasz (Intel), Edward Tian (China Netcom), NR Murthy (Infosys). Thankfully for me, the research I was presenting told an interesting story that challenged some of the conventional wisdom.

Our study, which I conducted with Susan Mohrman, my colleague at USC’s Center for Effective Organizations, Gretchen Spreitzer (USC) and Jan Klein (MIT), found a large discrepancy between what employees say they want and the actual drivers of their behavior. This discrepancy creates competitive challenges for companies struggling to retain and motivate an increasingly diverse workforce. With the ever increasing demands on firms and their employees, as many as 86% of employees rate work/life balance as ‘very important’ or ‘extremely important’ in their careers. Yet, employers face the reality that greater employee satisfaction with work/life balance has no impact on retention.

Our study identifies the key drivers of retention and commitment across a broad spectrum of employees from 10 leading technology-intensive companies operating across a range of sectors in North America, Europe, Asia, and Israel. The research includes analysis of a survey completed by more than 4,500 knowledge workers and managers; interviews and focus groups with more than 500 business and technology leaders; and written documentation of the knowledge management, human resource practices and performance of these 10 companies.

The results, presented in the report, “What Do Employees Really Want? The Perception vs. The Reality,” published by Korn/Ferry International, show that what employees want depends very much on the stage where each one is in their career, as well as generational factors, gender, old versus new economy preferences, cultural dynamics and managerial versus implementation roles. We contend that companies need to personalize their retention efforts, cater to individual needs and tailor the employment package. Despite the potential of the Intranet to help with this individualization, our research shows that most companies are failing to mine their employee data, and falling into the trap of using the Intranet to standardize, rather than customize, their human resource policies.

All the main groups in the study say that their priorities are first work/life balance, and then job security, followed by financial rewards. In analyzing behavior patterns, however, these priorities provide a misleading indication of how retention and commitment may be achieved. Instead, common to retention in all employee subgroups is a focus on strategic clarity—with employees identifying more closely with the company if they believe it has a viable and well-communicated strategy for success. In terms of financial reward, pay-for-organizational performance has a positive impact on commitment for all groups except Europeans. Rewards such as stock options or profit-sharing do increase how much individuals identify with the company. In contrast, pay-for-individual performance does not affect the commitment of any employee group, except for men under 30. The only group for whom job security drives retention is the late career group—those over 50.

For early career employees (30 and under) job security does not have a positive effect on either retention or commitment, whereas career advancement is very significant to the retention of this group. Their ability to influence the organization and their satisfaction with their professional work environment also help build their commitment to the company. Being part of an innovative organization is important both for retention and commitment.

For mid career employees (31 to 50) commitment to the company increases if they are able to manage their own careers, and professional satisfaction results in greater retention for this age group than for either their younger or older colleagues.

For late career employees (over 50) professional satisfaction relates to neither retention nor commitment. This is the only group for whom job security drives retention.

Creating an Employment Brand
With human capital ever more essential to sustaining growth and creating shareholder value, company leaders need to create an employment brand that attracts the best talent, just as they create a consumer brand that builds customer loyalty. This entails much more than offering competitive pay packages of stock options. We find a discernable set of common organizational features that impact the behavior of most segments of the workforce, enhancing the organization’s effectiveness and employee satisfaction and motivation:

1. A clear and compelling strategy;
2. An innovative environment low in bureaucracy;
3. Challenging work assignments that enable employees to grow their capabilities; and
4. Rewards based, in part, on how well the organization performs.

As leaders seek to build an employment brand, they can’t rely solely on fashionable perks that make the company seem attractive to work for. With career advancement high on the agenda, continuous learning is a crucial part of any retention program. Our research shows that many leading firms are pursuing innovative approaches to developing employee skills, including:

eLearning: A large new industry has been created in just the last three years to provide firms with on-line learning. While a number of issues—lack of broadband infrastructure, costs of creative course development—have so far prevented elearning from delivering its full potential, the vision it offers is to deliver just-in-time content when individuals need it for their work, rather than the typical classroom training that occurs several months before or after a person needs a certain skill set. Qualcomm has already begun to reach this vision, with most of its training, particularly in technical skills and health and safety, developed in-house and delivered either partly or completely over the Intranet. Among the benefits they have seen are: much lower cost and greater consistency of quality in course provision, greater flexibility for the user in when they take training, and greater retention of learning because of the interactive nature of the coursework.

Simulations: Pratt & Whitney has created a computer simulation of the core business decisions involved in developing new aircraft engines. The simulation not only provides hands-on instruction in some new business tools, but more importantly enables individuals from all the different functions involved in this complex process to appreciate the wider business context, to see the issues from many different perspectives (including the customer’s) and to better understand where their role fits into this system.

Project-based Learning: Ford Motor Company is attempting to reinvent its entire operations into an e-business. As part of this strategic initiative, it has designed a unique leadership program for its high potential middle managers from around the globe. They deliver all the traditional course material on-line, devoting most of each person’s effort to a project in which they use new electronic tools to fundamentally reinvent the way they work. The most innovative aspect of the program is that projects are intended not only to enhance business results, but also to enable individuals to better meet the needs of the stakeholders at home and in the community, as well as finding more time for themselves.

Corporate Universities: In order to emphasize their commitment to learning, hundreds of firms have now created corporate universities. Often formed in partnership with higher education institutions, the best of these corporate universities offer the chance to customize content to the needs of the business, while enabling individuals to receive course credits for the more general knowledge they acquire. Many corporate universities are now investing heavily in moving their content on-line and increasing the experiential learning component of their face-to-face courses.

Individualizing over the Net: Just as the leading business-to-consumer and business-to-business companies are continuously mining the data they collect from the Internet and building personalized portals to allow them to build much closer relationships with individual customers, companies can also harness their own Intranet’s capacity to develop a much more sophisticated understanding of their business-to-employee relationships. The current problems with achieving this are:

1. Many human resource departments view the Intranet as a way to reduce costs and automate the delivery of employee transactions, rather than a chance to build richer relationships with individual employees;
2. Most human resources departments lack the data mining skills needed to analyze the data effectively; and
3. Too often, the focus is on standardizing human resource policies, rather than creating options that allow for customizing to individual needs.

Building a Talent Strategy
The conclusions of our research and the practices from some of the companies that have built some of the world’s leading employment brands suggest a ten-step approach that firms can take to create a successful talent strategy:

1. Create a clear and compelling strategy and vision for the firm.
2. Identify the core capabilities required to excel at this strategy and to continuously improve performance. With that, distinguish skills available externally from those that must be developed in-house.
3. Seek out the best sources of these skills wherever they are available globally, and offer these individuals opportunities to advance and contribute, regardless of nationality.
4. Understand what factors are most important to attracting and retaining the individuals with these key capabilities and gaining their commitment to the enterprise.
5. Recognize that different individuals want different things from work and that their priorities are likely to shift as they progress through different stages of their life and career.
6. Create multiple career pathways (e.g., technical ladders, rotational assignments, opportunities to join new ventures) to replace the declining number of managerial promotion slots in today’s flatter organizations.
   
7. Craft individual development plans and opportunities to enable employees to build the capabilities that create maximum value for themselves and the firm.
   
8. Hold individuals and managers accountable for meeting development objectives and sharing the knowledge they gain with the organization.
   
9. Tie rewards and recognition to organization and team performance and enhancement of skills, rather than placing too strong an emphasis on pay for individual performance.
   
10. Seek opportunities to rapidly enhance the firm’s talent through strategic acquisitions, recognizing that these need to be managed differently than traditional mergers.

David Finegold is an Associate Research Professor at the Center for Effective Organizations. He is the author or editor of many articles and books on topics ranging from the changing employment relationship and international comparisons of skill development to corporate governance and high-skill ecosystems. These include: The German Skills Machine: Sustaining Comparative Advantage in a Global Economy (2000), Are Skills the Answer? (1999), and forthcoming books called, Net-Enabled: Designing Organizations for the Internet Economy and Corporate Boards: Adding Value at the Top, from Jossey Bass in 2001. Contact him directly at dfinegold@marshall.usc.edu.