Winning the War For Talent

2. Research We Are Drawing On Today
1.War For Talent
2.War For Technical Talent
3.Client Work
Focused on Top 200 Managers in large companies (How to attract, develop, and retain executives)
Survey of over 5,000 Executives in 77 companies (44 top-quintile companies and 33 mid-quintile companies)
Gold Standard case research at 20 top-quintile companies with terrific talent reputations
Focused on CS/EE talent in new economy (Applying hard product/market tools to talent market)
Survey of over 5,000 alumni of 8 top-20 universities
Best practice research (with professors, anthropologists, and journalists)
Service to over 50 clients on talent management issues
3

4. Our Observations

Talent matters

5. There is an escalating war for managerial talent

6. Most companies are ill-prepared

7. Past winning approaches not enough for the future

5

8. Winners Know That Talent Matters
The scarce resource is talent.
Keven Sharer of Amgen
Its what allowed us to double our growth rate.
Phil Humann of SunTrust
Winners make commitments; losers make excuses.
John Schuerholz of Atlanta Braves
6

9. Economics of Talent are Compelling
Modest improvement in talent doubles market cap
Profits 94% higher at plants managed by As
Profits 67% higher at plants managed by As
More talented Associates over twice as productive
Software services
Paper plants
Linen plants
Investment banking
7

10. Talent Matters a lot!
Compared to competition, our talent pool is much or somewhat strongerPercentage of top 200 executives
Return to shareholders 1986-95
Average annual percent
Top-quintile companies
Mid-quintile companies
8

11. Supply of Future Executives Will Actually Decline
35- to 44-year-olds in the U.S.
Index, 1970 = 100
Today
X
15% drop
0
2000
Source:United Nations
9

12. Companies Ill-prepared
Percentage of top 200 executives who strongly agree it reflects their company
Knows who the high and low performers are
Develops people quickly and effectively
Removes low performers relatively quickly
Retains almost all high performers
Brings in highly talented people
Source:Top 200
10

13. What Worked in the Past Not Enough for the Future
Average American corporation(vast majority)
Talentmagnets(Most of our 20 case companies)
Talent beehives(a few)
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14. 12

15. 13

16. What Managers Are Looking for
Percentage of top 200 managers rating factor absolutely essential
Values and culture
Well managed
Company has exciting challenges
Strong performance
Industry leader
Many talented people
58
50
38
29
21
20
Freedom and autonomy
Job has exciting challenges
Career advancement and growth
56
51
39
Great company (brand)
Great jobs (products)
Competitive compensation (price)
Differentiated compensation
High total compensation
28
23
14

17. Development and Compensation Are Biggest Gaps
Percentage of Top 200 executives
Value/culture
Freedom/ autonomy
Well managed
Company effectiveness
Meets/exceeds expectations
High total compensation
Career advancement
Differentiated compensation
Development
0
0
Importance to executives
Absolutely essential or very important
15

18. Better Companies Pay More
Percentage of companies positioned above median compensation levels
Base salary
Salary plus annual incentive
Long-term incentive
16

19. Better Companies Differentiate More
Percentage of HR executives
Top performers make significantly more than average performers (strongly agree)
We send strong messages about individual performance with our pay programs (strongly/somewhat agree)
17

20. Another Research Effort Quantified the Large Pay Differentials
Total pay 33% higher
At-risk pay 50% higher
Hold over twice as much equity
Total pay 69% higher
At-risk pay 175% higher
Outside directors hold over 3 times more equity*
Executive team
Board
*McKinsey-sponsored paired comparison research conducted by Dr. Don Hambrick of Columbia Business School
Source:McKinsey-sponsored paired comparison research conducted by Dr. Rakesh Khurana of MIT and Dr. Brian Hall of HBS
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21. Executives Group Into 4 Clusters
Go with a winner
Emphasis on growth and advancement in a strongly performing company
Company mission and geographic location less important29% of respondents
Big risk, big reward
Emphasis on compensation and career advancement/ growth
Company mission and success not very important, nor is development
24% of respondents
Save the world
Looking for a company with an inspiring mission and exciting challenges
Compensation relatively less important
23% of respondents
Lifestyle
Put personal issues at the forefront respect for lifestyle, geographic location, fit with boss
Company growth and excitement less important
19% of respondents
19

22. 20

23. Leaders Instill a Talent Mindset
Leaders passionately believe

Talent wins

24. Building the talent pool is a crucial part of their job

25. A talent gold standard must be established

Instill a talent mindset
Leaders

Own the top 200-500

26. Hold line managers accountable

27. Drive a simple but rigorous talent review process

Leaders infuse

Candor

28. Differentiation

29. Consequences management

Hold line managers accountable
Infuse the right behavior
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30. Instill a pervasive talent mindset
Percentage of corporate officers who strongly agree, unless otherwise noted
Gold standard companies
Improving the talent pool is a top-three priority
Time spent on people management by senior-line officers (percentage)
Number of positions on which corporate officers exert significant influence
31
24
139
34
26
179
59
35
393
Source:Corporate Officers survey and/or Human Resource department
22

31. Instill a Talent Mindset
Talent wins
Talent is superordinate to strategy . . . A great strategy can go up in flames quickly . . . But talented people know how to respond.
Dick Vague, CEO First USA (BancOne)
I focus on talent management. We have systems and reports for everything else.
Bill George, CEO Medtronic
Its my job
In our manufacturing managers, we want leaders, not micromanagers; empowerers, not administrators; real expertise and judgment, not technicians. Against this standard, we changed 50% of our 400 manufacturing managers.
AlliedSignal, senior executive
Need a gold standard
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32. Infuse the Right Behaviors
Percentage of HR executives who strongly agree
Discussions in our people meetings are frank and open
Real consequences result from assessments in people reviews
Top performers make significantly more than average performers
24

33. Formality of the Process Not Important
Of those companies that conduct a review, the percentage that do these things
Identify backups
Assign responsibility for taking action
Articulate action plans for each individual
Formally review follow-up actions at next review meeting
Source:McKinsey War for Talent HR executive survey
25

34. Accountability for People
Percentage of corporate officers who strongly agree
Should line managers be accountable for the quality of their people?
Believe this philosophy
Think their companies actually do this
26

35. 27

36. Know Who You Are Looking for
Profile of high and low performers at Company X
High performers
Low performers
Percent with honors or top 10% of class
40
14
Personal attributes*

Drive for results

70
60

Encourage innovation and risk taking

60
13

Attract talent and build strong organization

53
25

Manage companys resources carefully

53
75

Like to know what is going on in my department

27
75
*Percentage of respondents who say they demonstrate attribute essentially all the time
28

37. Choose a Primary Talent-sourcing Strategy
Cherry pick the best talent from acquisitions program
Acquire
Bring in at all levels with intense development focus to augment/shape
Multiple channels
Let others provide the basics, you reap the dividends
Outsource
Home grow superior talent from entry level onward
Insource
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38. Be Creative About Talent Sources
Earlier
Technology company that provides summer internships and part-time jobs for hundreds of high school and college students
Biotech company that hires entrepreneurial refugees from the R&D departments of big pharma companies
Later
Global industrial company that hired 650 military officers in 2 years
Different
One company hired 50 of 300 graduating students from an elite Indian high school and brought them to the U.S.
Outside U.S.
30

39. Better companies reach outside more
Percentage of respondents
7
13
16
Level at which executives join the company (position)
Top 20
21-100
101-300
6
12
16
15
24
25
Source:Corporate Officers survey and/or Human Resource department
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40. 32

41. Jobs and Feedback Drive Development
Percentage of top 200 executives
Stretch/ developmental jobs
Formal training
Company effectiveness
Excellent or very good
Feedback/mentoring
Importance to my development
Absolutely essential or very important
33

42. Informal on-the-job
coaching and feedback to
30
perform a task better
Being told my strengths
and weaknesses by my
32
superior(s)
Being mentored
25
Flood the Joint With Feedback
Percentage of top 200 executives
Company is very good or excellent at providing
Essential or very important to my development
73
71
60
34

43. Retention: the Silent Battlefield
Todays high performers are like frogs in a wheelbarrow. They can jump out at any time
Only 25% of companies said theirtop 300 attrition data are accurate
Retention of 3-8 year group becoming a black hole
35

44.

Early-tenure turnover now double pre-1990 levels

45. Over 2/3 with under 10 years job experience expect to change jobs again within next 3 years

46. Average employee offered over 20 new employers annually

Example of the Silent Statistics of Turnover
Technology graduates
Source:1999 survey of over 5,000 CS and EE alumni of eight U.S. universities
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47. C Players Create a Vicious Cycle
Keep Cs in critical jobs
Performance in job is low
Productivity and morale of group is low
Subordinates not developed
Development/ advancement opportunities blocked
Fewer A players attracted to join the company
High performers leave the company
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48. Move C Players Out or Aside
Percentage of HR executives who strongly/somewhat agree
We regularly identify the 10-20% least effective people with the intention of taking action to upgrade the talent pool
The company regularly dismisses its least effective people
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49. 39

50. This talent stuff may be common sense, but it isnt common
Yogi Berra
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Winning the War For Talent

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