PEOPLE AND CHANGE

Hidden talents
Optimising investments in talent management

ADVISORY

In our view, current talent management approaches often leave organisations struggling to identify the value of talent management. To help organisations get the most from their talent spend, we propose a new approach which involves identifying those roles within an organisation that deliver disproportionate value.
Organisations currently face a false dichotomy when thinking about how to manage and develop talented people. They either choose to focus exclusively on their high potential employees, however defined, or take the option of treating everyone as talent.
These two most common approaches to talent management have a number of flaws. High potential populations (or HiPos) are most frequently defined as graduate recruits, those with the potential to progress quickly to senior roles, and/or incumbent senior cadres of leadership. But focussing on these groups often creates problems such as how to identify and select people with potential. Organisations often have difficulty defining high potential, in many cases selecting high performing individuals instead. This approach does not necessarily guarantee investment in those roles that deliver most value. Without gathering evidence of the value that these populations deliver to the organisation, it is difficult to prove if the talent initiatives aimed at them are providing tangible benefits to the organisation. In addition, if organisations assume that these definitions of talent will stand the test of time, there is potential danger that talent initiatives will become irrelevant over time, losing touch with the changing needs and priorities of the organisation. The alternative treat everyone as talent approach also has inherent drawbacks. The reality is that some roles will need more targeted, specific support than others. Our view is that whilst Learning and Development opportunities should be available for all to enable maximum productivity across the organisation, talent spend should be more carefully targeted if it is to deliver real value for money. In a recent KPMG survey1 of HR and Talent Directors, many reported that they did not find it easy to justify their desired levels of talent spending in terms of business benefits, and were also hard pressed to capture the real costs of existing talent activities across their organisations.

1 KPMG Survey of HR and Talent Directors May 2009

Hidden talents Optimising the efficiency and effectiveness of talent management 

The KPMG Approach to Talent Management

Our view is that there is in fact a third approach. We believe that companies need to challenge these conventional definitions of talent and focus on a more rigorous, evidenced-based approach to identifying and investing in talent. We believe that carefully targeted spending on critical roles will significantly boost returns. We have developed an approach to help HR and Talent professionals identify the best ways to invest in talent for their organisation. It requires companies to:

Understand and optimise talent spend Ensuring that talent spend guarantees the best return on investment. Benchmarking data is useful but HR professionals need to ensure that they are distributing talent funds according to a rigorous, evidenced-based approach, fine tuned for their own organisation.

Identify and target spend on critical roles Talent activities should be geared to specific, clearly identified, critical roles. Ideally Learning and Development activities should support all roles in an organisation. But companies must realise that heavy talent investment on individuals whose roles do not add disproportionate value to the organisation is likely to be money, time and effort wasted.

Translate these critical roles into high value career paths to ensure the strategic goals of the organisation are met Talent processes and programmes need to be highly flexible, readily adaptable to changing market conditions and business needs. Definitions of talent pools and skill-sets should be regularly challenged. Organisations should identify specific trigger and transition points for changing their focus and the processes put in place to develop and support talent should be flexible enough to accommodate changes quickly.

 Hidden talents Optimising the efficiency and effectiveness of talent management

Talent is not a fixed commodity that thrives in any environment; organisations need to build the right talent support infrastructure so that individuals have the back up to grow into and thrive in critical roles.

Hidden talents Optimising the efficiency and effectiveness of talent management 

1.  Understand and optimise your talent spend

The Chartered Institute of Personnel Development has published research showing that nearly a quarter (24 percent) of companies had cut talent spending in the current economic downturn by the end of 2008 2. More recent research shows that organisations are looking to talent management processes to find efficiencies, with an average decrease in budgets of 11 percent in 2009 3. We suggest that these cuts are being made across the board in a piecemeal way, because HR functions are struggling to identify the talent activities that are adding the most value. This in turn is undermining the ability of organisations to retain and develop the talent they need to weather unpredictable times ahead.

In recent conversations with clients, many attest that it is often hard to keep track of talent initiatives across the whole organisation, let alone identify and understand the real cost of investment in talent. Our experience shows that savings can be made that will not significantly

impact the level or effectiveness of talent initiatives. Recent work we have conducted with two large, multi-national telecommunications companies has, for example, shown us that savings can be made through understanding all the talent and learning development activities that are going on across the organisation, and taking

a few steps to minimise duplicated spend and inefficient use of suppliers. Once an organisation has a clear understanding of the costs and benefits of its investment in talent, it is then in a position to identify ways to achieve the same outcomes for less.

Key Sources of Inefficient Spend

Inconsistent use of suppliers. Different functions using the same suppliers, for the same services, under different agreements Poor adherence to the Preferred Supplier List No demand management role Inconsistent use of Learning Management Systems where not used to its full extent Poor use of centralised Talent/ Training administration function

2. CIPD Hot Topic Report The war on talent? Talent management under threat in uncertain times. 13th February 2009 3. Ignites Downturn Squeezes HR, Putting Pressure on Talent Management. 24th August 2009

 Hidden talents Optimising the efficiency and effectiveness of talent management

One important step companies can take is to assess talent as a critical investment issue, subject to the same rigorous analysis as other key items of business spending. HR and procurement professionals work closely together to ensure investment is both cost effective and strategically beneficial. As well as considering cost optimisation approaches, rethinking how talent initiatives are delivered is another way to achieve significant cost savings, without compromising outcomes.

We have seen a recent decline in numbers of talent populations being supported through formal academic qualifications traditionally, MBAs or technically focused Masters qualifications. This approach is increasingly being replaced by internally developed accreditation schemes, such as Hewlett Packards HP Masters (in Business Change). Such schemes enable the organisation to deliver learning objectives in-house and have their work based learning programmes accredited as externally recognised academic qualifications.

The underlying principle behind such schemes is that organisations get a clear line of sight on the return on their investment. They are dictating the learning objectives and outcomes and can link this directly to organisational strategy. They see this as preferable to the traditional approach, where HiPos are sent at great cost to prestigious institutions to study postgraduate qualifications, which are geared towards the employee rather than offering significant value to the organisation.

Hidden talents Optimising the efficiency and effectiveness of talent management 

2.  Identifying and targeting spend on critical roles

From our experience of working with both private and public sector clients, we know that organisations want to be sure they are spending their money in the most effective and efficient way. Our recent experience demonstrated that organisations can, for instance, waste money when different departments operate talent initiatives in silos, rather than working to a joined-up organisational strategy based on a clear understanding of which roles and skills are required to support the business.

The accurate identification of critical roles within an organisation those that add disproportionate value to the organisation is paramount in executing an effective talent management strategy. Only by understanding which roles tangibly and directly affect the performance of a business can an organisation really target talent initiatives properly and achieve real value for money. Organisations often misuse money, resources and time in developing roles in an ad hoc way, or by assuming that senior roles are the most critical and therefore have most impact on the business.

Whilst the development of leadership talent is important, there may be other, less obvious roles which provide a much greater return on talent investment. Closer examination with clients has revealed that the critical roles delivering real value in an organisation repeat custom, for example can lie in very different parts of the business and often much further down the managerial chain. Our critical roles approach to defining and identifying talent pools starts with understanding the organisations strategy, key drivers and value chain. This methodology takes a top down approach. It starts with a decomposition

of the organisations operating model and strategic focus to understand how the organisation is made up and arranged in order to achieve that focus. Next, the analysis focuses on identifying roles which perform a critical brokerage role in the organisation those roles that ultimately provide the cohesion and linkage between the most important aspects of the business. A further activity-based analysis can be undertaken on these roles if necessary, in order to identify accurately critical roles that truly help the business to achieve its strategic focus.

 Hidden talents Optimising the efficiency and effectiveness of talent management

Lastly, the methodology involves comparing current talent development investment against identified critical roles to determine whether the organisation is developing the right talent. We recently had experience with a global drinks company where we carried out a detailed review of their value chain. It was apparent from this analysis, that the critical role in adding value was the commodity purchaser, but their talent proposition focussed on the top 100 only. People management policies were therefore changed to focus investment in this key role.

Value Chain Decomposition

Strategic focus analysis

Role focus

Activity focus

Hidden talents Optimising the efficiency and effectiveness of talent management 

3. Create high value career paths

Once an organisation has made its spend more efficient and identified critical roles to ensure its spend is more effective, the focus should move to developing talent to ensure the successful delivery of the business strategy. By this we mean translating critical roles into high value careers within the organisation to enable delivery of the strategic goals.
Once organisations understand what makes a critical role critical i.e. how it brings that additional value to the organisation., they can use this information in two ways. Firstly, to develop strategies that ensure the organisation has the right skills and infrastructure to fill critical roles. Secondly, to identify how the value and skills gained whilst in critical roles can be transferred to other parts of the organisation to create benefits. This involves making high value career paths to provide talented people with a trajectory through a number of critical roles, both in the immediate and longer term, ensuring that all parts of the organisation benefit from key activities as careers progress. We can help organisations to build these high value career paths by examining the organisations strategic focus and goals and then determining what sort of roles and which sort of people will be needed to meet those strategic outcomes. This approach involves finding answers to difficult questions: At what point in the career process do we need to start development? Should we start with new graduates who we can develop and mould or should we buy in skills at a senior level from other organisations? How should we try to develop the careers of people we have identified as talented?

Steps for high value career paths

1 2 3 4 5

1.  Form a group of Subject Matter Experts (SMEs those with experience of working in critical roles) and discuss their career aspirations and career history to distil key themes of how individuals currently move through critical roles in the organisation 2.  Design and hold a talent-focussed scenario planning Accelerated Solution Design event, identifying the future strategic targets of the organisation as well as the drivers and trends that the organisation may face and determine the potential impact that this may have on the organisations critical roles

3.  Identify the critical roles that are enduring in the organisation as well as those that may eventually be redundant and determine the trigger points that may result in this shift in focus and talent investment 4.  Develop the critical role development proposition from an employee and employer perspective so that individuals can understand what the organisation will provide them with and what their role is in developing their career

5.  Outline example top-down and bottom-up career pathways with a focus on how critical roles can and should progress across the organisation. If possible, illustrate the generic guidance with real-life examples of different career paths in the organisation.

 Hidden talents Optimising the efficiency and effectiveness of talent management

 Are cross-functional, multi-national or even external moves outside the organisation necessary? This approach can be used to help organisations make difficult decisions regarding their talent in a variety of situations. For example, we have supported a nuclear provider through the transition to decommissioning. Working with them we helped identify the critical roles, as a result of this change in focus, as well as how to migrate existing members of the workforce into these new roles to deliver the revised strategy.

Armed with realistic data on the cost involved in different talent activities, and a detailed understanding of the requirements of critical roles, these decisions become simpler to make and to justify. A case in point, we helped develop career pathways for the roles within two functions of a global pharmaceuticals organisation, to provide the infrastructure for a more agile and flexible workforce. Using a highly collaborative approach, we held a number of interviews with representatives from across the

organisation and conducted extensive research on leading practice to develop the output. We enabled professionals to take ownership of their career development through a combination of planned career moves and developmental activities and prevented silos being created by supporting movement through and between different functions in the organisation.

Conclusion
In conclusion, we believe that if talent management initiatives are properly designed to support the strategic goals of the organisation by focusing on critical roles and on delivering tangible returns to the business they can deliver a real competitive advantage in the short and longer-term. KPMG has developed a three phase methodology to enable organisations to implement this new approach to talent management by understanding and optimising spend, identifying and targeting spend on critical roles and creating long term high value career paths. The purpose of this methodology is to enable organisations to gather the evidence and data needed to make informed, robust decisions about talent management practices rather than relying on conventional wisdom or generic approaches. It is our view that talent management in the current environment requires a more selective approach to talent management. This approach needs to be based on clear evidence of which roles will add most value to the organisation and which are most likely to help the organisation achieve its strategic goals.

Hidden talents Optimising the efficiency and effectiveness of talent management 10

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Key Contacts KPMG in the UK Mark Spears Head of People & Change Europe +44 (0) 7789 634 600 mark.spears@kpmg.co.uk Mark Williamson Head of People and Change UK and Corporates +44 (0) 7767 345 602 mark.williamson@kpmg.co.uk Rosemary Scully Infrastructure, Government and Healthcare +44 (0) 207 311 1516 rosemary.scully@kpmg.co.uk Tim Clayton-Ball Financial Services +44 (0) 207 694 2013 tim.clayton-ball@kpmg.co.uk KPMG in the Netherlands Henk Berg +31 (0) 653 867 600 berg.henk@kpmg.nl KPMG in Germany Andreas Reimann +49 (0) 1732 864 041 areimann@kpmg.com KPMG in Belgium Emmanuel De Moyer +32 (0) 2708 44 86 emmanuel.demoyer@kpmg.be KPMG in Spain Pilar Nieto +34 (0) 619 960 316 marianieto@kpmg.es

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2009 KPMG LLP , a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. Printed in the United Kingdom. KPMG and the KPMG logo are registered trademarks of KPMG International, a Swiss cooperative. Designed and produced by KPMGs LLP (UK)s Design Services Publication name: Hidden talents Optimising investments in talent management Publication number: RRD-161020 Publication date: September 2009 Printed on recycled material.