talent management: transforming forces for the next decade · talent management: transforming...

Talent management: transforming forces for the next decade

May 12, 2010

McKinsey & Company 1

MON-ZXT102-20100512-Talent management-EG

|

Talent matters!

Battlefield is expanding globally

Staying on top of a changing talent landscape



|

100

150

100

185

100

225

Relative productivity of average and top performers

Low complexity jobs1

Percent

Medium complexity jobs2 High complexity jobs3

Average performers

Top performers

Average performers

Top performers

Average performers

Top performers

2x!

Top performing talent provides substantial productivity advantages

1 Fast-food restaurant front-line workers2 Production workers in a high-tech factory3 Investment Banking Associates

SOURCE: Harvard Business Review, Journal of Applied Psychology



|

Talent matters!





|

Talent challenges

Forces in western countries


▪ Productivity gap

▪ Challenging demographics



|

Contribution for every $1 of US GDP growth

1970s 2010s

20

80

Labourproductivity growth 1

Employment growth

70

30

Labourproductivity growth 1

Employment growth

A step-change in productivity is required

1 As measured by GDP per worker

SOURCE: Global Insight; Bureau of Labor Statistics; Bureau of Economic Analysis; McKinsey Analysis



|

32

8

7

TotalManufacturing & production

Repetitive transactions

Complex judgment, interactions &problem solving

For every 8 jobs gained in the last decade, we created 10 and lost 2

New kinds of jobs

SOURCE: McKinsey Global Institute



|

Aging population

0 10 20 30 40 50 60 70 80 90 100

United Kingdom

France

Finland

Norway

Hungary

United States

Switzerland

Canada

Sweden

Belgium

Government’s older workforce% of employees aged 50 years and above, 2005

SOURCE: Organisation for Economic Co-operation and Development (OECD); Statistics Canada

Total labor force

National/federal government



|

Gen Y has significantly different preferences than the generations that came before

War generation▪ Born < 1945▪ Shaped by:

World War II, Great Depression, etc.

Baby boomers▪ Born 1945 - 64▪ Shaped by:

Cold and Vietnam wars, declining trust in government

Generation X▪ Born 1965 - 80▪ Shaped by:

Internet, diversity, unemployment, and parental divorce rates

� Approaches career in chapters of 2 - 3 years each – demands employability, not employment

� Expects quick individual development and early rewards

� Extremely low barriers to separation combined with high confidence

� Sees flexibility as a prerequisite, will make trade-offs for better lifestyle

� Demands freedom and control, particularly regarding own career

� Wants job to be meaningful and to have positive effect on society

Generation Y▪ Born 1980 - 95▪ Shaped by: information

overflow, overzealous parents, globalization

SOURCE: "Managing Generation Y," Carolyn Martin; SHRM; "Millenials Rising," Neil Howe; "Managing Generation Y," Advanced Management Journal," Susan Eisner; "Next Generation Talent Management," Hewitt Associates; "Preparing for the Workforce of Tomorrow," Hewitt Associates; Project team



|

The next generation is expecting a different offering from employers

27

42

53

55

73

79

80

81

81

82

86

93

Development opportunities for own personality

Compatibility of career and family

High regard/prestige of profession or position

Independent work

Opportunities for further education

Responsibility/management position

High income

Job security

International contacts

Work/life balance

Recognition of own performance

Interesting work content

1 Survey “Young Elite” of 1,072 students about to finish their degrees2 Persons surveyed who regarded the respective aspect as being “very important” or “important”

SOURCE: Psephos; Manager Magazine; McKinsey

Graduate expectations of future place of work1

Percent of those surveyed2



|

Talent challenges



▪ Productivity gap

▪ Challenging demographics

Forces in developing countries

Forces in developing countries

▪ Need for top quartile talent

▪ Will demand for talent be

greater than on commodities?



|Source: skylander.net

Old Shanghai (c. 1990)



|Source: photos4travel.com

Shanghai today



|

Old Shenzhen (c. 1980)



|

Shenzhen today



|

China alone will build “one Canada” in the next 10 years

1 Does not include parallel trackage

2 Canada's National Airport System (NAS) consists of 26 airports. In total, the country has 322 certified airports

3 Physical extent of Canada's National Highway System (NHS)

4 Twenty-foot container equivalent unit

Source : “China Infrastructure Opportunities”, McKinsey, 2009; Transport Canada 2008 Report, American Association of Port Authority; McKinsey analysis

Between 2010 and 2020, China plans to build…

As a comparison, Canada has…

46,688 km of rail track130,000 km of new rail track

26 commercial airports297 new airports

38,047 km of expressway335,000 km of new expressway

Canada handled 4.6 m TEU4

in 2008100 m TEU4 of container capacity



|

French and USrevolutions

Discovery of America

Fall of Roman Empire

Oilcrisis

Marco Polo'strips to Asia

Asia returning to its natural “half share” of the world economy

80

60

40

20

100

0India

China

Japan

Rest of Asia

Europe

Rest of world

1 20091000500 1500

Industrial revolution

Share of total world GDP (1 AD–2009 AD)GDP share, percentage



|

Finding talent

Greater competitiveintensity

Increasing size of company

Increasing number of markets served

Growing number of regulations

Finding talent is a key management challenge globally…

Most significant managerial challenge over next 5 years

5

11

19

22

31

Europe 28

North America 31

Other Asia 35

India 38

China 40

Talent management is an important global challenge

SOURCE: McKinsey Global Forces Executive Opinion survey; Next Generation Talent research



|

Number of young academic professionals Thousands

15,052

Developed2Developing1

33,110

50% of talent from devel-oping countries is

from India and China

Emerging markets provide access to large skilled talent pools

1 Argentina, Brazil, Bulgaria, Chile, China, Croatia, Colombia, Czech Republic, Estonia, Hungary, India, Indonesia, Latvia, Lithuania, Malaysia, Mexico, Philippines, Poland, Russia, Romania, Slovakia, Slovenia, South Africa, Thailand, Turkey, Ukraine, Venezuela, Vietnam

2 Australia, Canada, Germany, Ireland, Japan, South Korea, UK, US

SOURCE: Global Forces work; McKinsey Global Institute



|

However, not all graduates are created equal

1 Suitability rates empirically based on 83 interviews with human-resources (HR) professionals working in countries shown2 Mexico is the only country where interview results were adjusted – to 20% (from 42%) for engineers and to 25% (from 35%) for finance/accounting employees – since

interview base was thinner and risk of misunderstandings high

SOURCE: Interviews with HR managers, HR agencies, and heads of global-resourcing centers; McKinsey Global Institute analysis

Percent of candidates considered suitable for hire1

Of 100 graduates with the correct degree, how many could you employ if you had demand for all?

13

20

10

20

25

35

10

50

50

50Hungary

Czech Republic

Poland

Russia

Malaysia

India

Philippines

China

Mexico2

Brazil 13

25

15

30

15

25

20

30

40

50

8

11

3

25

10

20

10

15

20

30Central and Eastern Europe

Asia

Latin America

Finance/accountingEngineer Generalist



|

Professional supply in China is fragmented

SOURCE: McKinsey Global Institute labor supply database

1 All university courses except doctors2 Enterprises with revenue over $604,000 in 2002 and employment of >1,000 FTEs; excluding employment in Hongkong-/Macao-/Taiwan- owned enterprises3 Assuming strong growth of accessibility from currently 51% to 83% in 2008 (India’s current level)

Suitable supply of university graduates will be barely enough to meet demand of large MNCs in ChinaThousands; 2003-08

65Oversupply of suitable and accessible graduates

Not accessible graduates due to fragmentation/immobility3 385

Oversupply of suitable graduates 450

Demand for additional university graduates from large MNCs in China2 750

Total suitable supply of Chineseuniversity graduates

1,200

University graduates not suitable to work in MNCs

14,530

Total supply of Chineseuniversity graduates1 15,730

Fragmentations reduces remaining suitable graduates by 86%

Less than 0.5% of total graduates are suitable and acces-sible to MNCs



|

In which country is this located?

1. U.S.

2. India

3. China

4. Mexico

5. Germany



|

Question no. 2: aircraft engine?

In which country was this engine designed?

1. U.S.

2. India

3. China

4. Mexico

5. Germany



|

Talent matters!





|

An integrated approach to talent management

Improving the talent management system

Creating a

talent culture

Strengthening

HR capabilities

Attracting and

deploying the

right people

Evaluating

and

recognizing

performance

Engaging

and

connecting

employees

Growing and

developing leaders

6 2

3

4

57

1



|

Leading companies tailor talent strategy to their context

Recruit and integrate

Design component

Deploy, review and develop

Engage and connect

How are the requisite capabilities obtained?

How are job candidates selected?

Central questions

How does talent get deployed?

What level of career guidance should be provided?

What types of behaviors get rewarded?

To what extent do we differentiate performance?

What are the boundaries for under-achievement?

How do we keep talent connected to one another?

How do we energize our talent?

Possible strategic design choices

Grow your own Hire in

Potential Job fit

Structured moves Open market

Self-managedGuided

development

Individual Team/group

Perform or go Grow or go

Egalitarian Meritocratic

Formal Informal

Meaning Tangible benefits

KKR

11



|

Four categories of benefits determine whether the best talent joins and stays

Great company▪Culture and values▪Reputation▪ Advancement▪ Lifestyle▪ Impact on society

Great leaders▪ Employees’ opinion of

senior management▪ Employees’ relationship

with boss

Attractive compensation▪Compensation

–Base pay–Short-term incentive–Long-term wealth

creation

Great job▪Work content▪Development

opportunities▪ Job security▪ Freedom and autonomy▪Coaching and feedback

Employee satisfaction

and retention

SOURCE: McKinsey War for Talent survey

11



|

BMW – targeting older workers to make more productive

SOURCE: Harvard Business Review; March 2010

1 Total cost €40,000 including worker time

22

� 7% y-o-y prod improvements

� Lower absenteism

� Follow-up projects in Germany, Austria, and US with similar results

70 small changes to the line implemented at a cost of €20,0001

Wood flooring

Weight-adapted footwear

Weight-adapted footwear

Flexible magnifying lens

Flexible magnifying lens

Specially designed chairs

Specially designed chairs

Vertically adjustable tables

Vertically adjustable tables

Stretching exercises

Stretching exercises



|

What gen-Y is looking for and how employers are responding

37

50

55

56

61

74To be paid more

More flexible schedules

To be promoted within a year

To have difficulty taking direction

More vacation and personal time

Access to state-of-the art technology 18

11

20

24

26

26

33

57More flexi-time options

More recognition programs

Access to state-of-the art technology

Increased compensation

Access to educational programs

Pay for cell phones, bberries

Telecommuting options

More vacation time

What employers perceive Gen-Y expects…

… and what the 15% who report they have accommodated Gen-Y have done

% of employers responding to surveys

ALTERNATE

SOURCE: McKinsey

22



|

Multinationals tailor their value propositions to compete against local business in China

SOURCE: McKinsey quarterly, 2008 Volume 1

Criteria that have enabled multinationals to differentiate themselves versus local companies

� Autonomous work environments

� Real decision making

� Additional learning opportunities

� Career development

� Housing incentives

� Educational benefits

Multinationals that have adapted their value proposition

22



|

The key to a successful discussion is the thorough preparation by the meeting participants (i.e., senior executives, not HR)The key to a successful discussion is the thorough preparation by the meeting participants (i.e., senior executives, not HR)

FrequencyAverage time per candidateDescriptionCompany

▪Once annually▪ ~ 5 -10 mins▪Session C review of Top 200 per BU over 1-3 days

▪ Twice annually▪ ~ 5 -10 mins▪Discussion of Top 350 officers in a 3- to 5-day offsite of the Board

▪Once annually▪ ~ 15 mins▪Discussion of Top 30 in one day

▪Once annually▪Similar ~quarterly

reviews in functions and BUs going deeper into organization

▪ ~ 15 mins▪Discussion of top global talent subject of dedicated Top Team meeting (~2-3 days)

Leading companies spend significant time in top talent reviews33



|

Companies are aggressively investing in building their capabilities, but is it money well spent?

SOURCE: McKinsey survey, January 2010

Examples of big spenders include …

Spends $2.3 billion annually training and on-boarding new employees

Spends approximately $600 millionannually on employee learning

Spends $500 -$700 millionannually on employee training programs

Spends $1 billionannually on employee learning

Other

Management

FunctionalKnowledge

IndustryKnowledge

Leadership

Focus of capability building initiatives

100

14

15

40

15

16

Contribution to corporate performance

100

11

15

19

26

29

Under invested

Over-invested

Training is like advertising – you spend a lot on it knowing that only half is effective because you don’t know which half!

““““

44



|

Talent management challenges

SOURCE: McKinsey

To what extent are you accelerating the development of high

performers and how are you retaining them?

Is talent management strategy as embedded as business and

financial strategy?

Are you tapping into non traditional talent pools and who are

you competing against?

Is your employee value proposition as tailored as possible to

key segments (age, gender, diversity) and do you have 5

“compelling” stories?

vs.

talent management: transforming forces for the next decade · talent management: transforming...

Documents