The Talent Trap
The war for talent is a term coined by Steven Hankin of McKinsey & Company in 1997. It refers to increasing competition between recruiters in the search for 'top talent' – a term given to highly skilled, educated or otherwise desirable workers who will contribute to the future success of a company.
For some years prior to that most industrialized nations had been facing critical shortages of knowledge and skills in their labour force. Established talent pools were shrinking while new, relatively unfamiliar ones, continuously emerged. Today this remains more of a challenge for established corporations, but it can also disrupt start-ups and new enterprises that are rigid in their approach to employment and work design.
This problem is the result of a combinations of factors, most evidently caused by a shift in the global economy and the rapid uptake of digital communications technologies, but also by the recent pandemic, which caused many people to pause and take stock of their everyday lives and routines.
Initially, a rebalancing of the global economy was thought to be solely responsible for the talent shortage. Economic power, formerly concentrated among a few industrialised nations, became dispersed across multiple centres of commercial and trading activity. That led to a rapid shift away from conventional industrial powerhouses in time-honoured locations to the emerging markets of Asia particularly. In such a multi-polar world, the competition for new products, consumers, markets (and therefore skills and talent) came from everywhere.
Today it is evident that additional factors are also culpable. Arguably the most potent of these has been the advent of internet-based work. The ubiquitous use of new communications technologies allows us to connect effortlessly with anyone online, working collaboratively with them, wherever they happen to be in the world. With the physical location of knowledge workers now irrelevant, many companies allowed their employees to work from home. This became a competitive advantage during the pandemic but now leaves many companies with a conundrum of what to do with their sprawling city premises.
Another factor is distributed outsourcing. The ability to source work from wherever skilled people are available at the most competitive price has permanently altered the ways in which multinationals operate.
Yet a third factor is the changing face of the consumer population. Over the coming decade a billion or more new consumers will become active participants in the global economy. Most of these will come from emerging markets.
Globalisation of the market for talent alarmed many companies. They were just not prepared for the consequences, although it was always clear that the digitalisation of the workplace, with new technologies like machine intelligence and robotics, would inevitably transform the nature of work, the knowledge and skills required, the manner in which work was sourced, and the ways in which people were able (indeed required) to collaborate.
But the one extraordinary factor that took everyone by surprise was how power suddenly shifted from employers to employees. For example:
As intangible qualities, such as brand, culture, and innovation, assumed greater importance than tangible assets in driving a company’s competitive advantage, employees gained additional leverage.
As competitive scope shifted from 'well-known' domestic (competitors, customers, regulators, etc.) to global factors, company strategists became more important than their company's strategy.
As 'data symmetry' arising from an increase in the use of job websites like Seek.com, and social media networks like LinkedIn morphed, with information about salaries, position openings, company values, and market worth, becoming universally accessible, prospective employees were given additional ammunition to negotiate customized pay and conditions.
As the tendency to switch jobs increased, the previous strategy of linking benefits to loyalty or tenure (i.e. with higher benefits accruing the longer an employee stayed with the company) decreased, thus widening the gap between supply and demand.
Naturally these shifts increased the importance of any company being an employer of choice. But in order to do that organizations needed to change their minds about how to attract, retain and engage talent.
As talent shortages continue to impact business, a dual track strategic response is required. Firstly, new global alliances between businesses, governments and institutions of higher learning need to be forged with the intention of creating a better coordinated agenda to raise awareness, knowledge and appropriate skills levels among potential new hires. Secondly, organizations must develop the capability to address talent issues at a whole-of-enterprise level.
There are at least four essential components to strategic talent management in today’s globalized economy:
1. Defining Talent – Most organizations have poor track records when it comes to identifying the expertise they are going to need in the future. Emphasis on short-term financial results usually means that insufficient time (or no time at all) is devoted to the anticipation of human capital requirements, and even less on exploring alternative scenarios that might pre-empt significant changes in specific knowledge, skills and activities. Conjecture frequently takes precedence over conscious capacity building. The most critical consideration in a company's ability to achieve and sustain high levels of economic performance and productive excellence in an increasingly competitive environment is the ability to align culture, knowledge and skills with the execution of forward-looking business strategies. Without that alignment the future viability of the business is immediately at risk.
2. Sourcing Talent – Today’s competition for talent is global. New intermediaries, like social networks, personal advocacy websites, and boutique search firms, have emerged, disturbing the quasi-monopolistic complacency of traditional recruitment practices. It stands to reason that diversity, too, has become an issue as the workforce acquires multicultural variety. As a consequence, the ability to appreciate and source talent strategically becomes even more of an imperative. Some firms, like Lenovo the Chinese PC manufacturer for example, have even developed a label for this phenomenon. It is called worldsourcing: the ability to find and attract appropriate talent wherever it happens to be in the world.
3. Developing Talent – Development of any kind is often interpreted as being concerned with nurturing the skills of the people one employs. Focusing on staff development is vital. Yet so much hangs on the quality and readiness of people entering the workforce to learn, and the potential pathways available to them within and across the organisational ecosystem. Today, depending on educational institutions to prepare people for work is insufficient. Once more organisations are being compelled to focus on the overall capabilities and knowledge of the talent pool from which they recruit to ensure they optimize performance potential. But that alone is inadequate.
4. Liberating Talent – It's common knowledge that people cannot give of their best when smothered by an excess of rules, protocols and procedures designed purely to control their every move. We know that talented individuals are always on the lookout to contribute to grand challenges - to align their personal purpose in life with the aspirations of their friends and colleagues in any organization where they choose to work. We also know that if they are not intrinsically inspired to engage they can even sabotage plans, albeit unintentionally.
In today’s environment, creativity and innovation are vital factors in growing success. These qualities don't arise naturally in companies designed for economic efficiency. On the contrary, in order to burgeon they require an environment in which people feel free to be themselves, get real joy from their work, and are encouraged to play, learn and experiment together. This is particularly the case where uncommon skills, imagination, and creative talent are crucial in harnessing the energy demanded by new entrepreneurial endeavours.
Without a doubt talent is one of the most volatile and demanding dilemmas besetting most businesses today. Every thoughtful CEO I talk to has the subject of talent uppermost on their mind: we can no longer assume that a steady supply of skilled and talented people are ready to assume responsibility for executing the work that needs to be done - especially given the radical changes in the nature of the work brought about by digitalization.
As is so often the case today in matters ranging from the environment to the ESG agenda and customer activism, business can no longer afford the luxury of minding only its own business. It must engage in broader issues if it's to maintain the highest levels of excellence and viability with while assuring ongoing social relevance.
Consequently it's essential that ways of securing, developing, retaining and liberating talent are all understood in today’s context - but that the quest for talent is based upon a resilient future profile and strategic direction rather than on current activities.
This can best be achieved by focusing more resources on:
Developing an awareness of global talent and entering into strategic partnerships with governments, universities and schools that consciously shape, foster and deliver education of relevance to future needs.
Retaining rare talent via exclusive employee value propositions and tailored contracts that encompass all the elements being demanded by 'exceptional' individuals - such as working from home, accessing co-working spaces closer to home, adequate time for personal study and reflection, opportunities to spend part of the working week on philanthropic activities, free time for innovative collaboration, etc.
Creating conditions reflecting genuine diversity and inclusion within the enterprise so that all employees feel engaged, valued, do not need to fight in order to gain a sense of personal achievement and pride in their work, and feel part of a venture that is worthy, exhilarating, and larger than them in the grand scheme of things.
Without these three dimensions organisations will find it increasingly impossible to retain the talent that has been so hard to find and secure in the first place.