The Economic Times

Kick-start your talent machine

India will increasingly face a talent crunch, especially for future business leaders. Mid-management churn and the inability of the education system to produce enough managers and specialists will intensify the challenge.

Par Karan Singh

First published on novembre 10, 2009
min


As the Indian economy recovers from the slowdown, corporate India is looking to boost growth. But as it gears up for the upturn, India Inc will increasingly face a talent crunch, especially for future business leaders. This challenge is intensified by mid-management churn and the inability of the education system to produce enough managers and specialists. A study by the CII and Aspire, a human capital management firm, showed that 39.5% of Indian graduates needed further training to meet job requirements, forcing companies like Infosys to spend millions of dollars annually to train them. Our work in India and across the world shows that three specific steps not only have an immediate impact on talent supply, but also lay the foundation for a sustainable, longer-term supply of leaders. The first is to quantify the leadership gap. Many companies don't have a detailed picture of their talent challenge. A rigorous analytic picture of the talent gap makes the challenge visible. The second step is to deploy existing talent more effectively. Many companies don't know who their top performers are. Nor have they placed them in jobs where they can have the most impact. A third step, often overlooked, is to reduce the demand for talent. Organisations that simplify their processes and spell out accountabilities clearly can simultaneously control costs and make the most of existing talent. Taken together, these steps help leaders address their talent challenges quickly. They also build a longer-term commitment throughout the organisation, which is required to sustain investment in leadership supply. Quantify the leadership gap: Understanding the leadership gap—namely the difference between demand for talent and likely supply—is best accomplished through meticulous analysis of the current situation and careful forecasting of future changes. On the supply side, start with the basics. How many leaders do you have? What are your promotion rates? What are your attrition levels? What will affect these factors in the future? You can do this analysis by region, business unit or key capability area. The resulting data will allow you to build or validate a talent-supply forecast and identify choke points. In India, Cisco realised that its strategy to build networking talent needed to include the broader ecosystem of professionals using Cisco technology, like employees of customers, as well as students studying information technology. To address these external gaps, it developed programs such as collaborating with universities and building relationships with training centres for networking courses. Through these steps, Cisco reduced its demand for internal talent. The demand side begins with a similarly fundamental analysis. What will the business look like in a year, in three or five? How many leaders will you need in each unit or geography, and what skills will they need? During a recovery, some business units and regions will grow. But others will still be flat, and may export talent to talent-starved parts of the business. Matching the supply forecast to the demand forecast shows where the talent needs are likely to be most acute. Make the most of available talent: Many CEOs admit that most mission-critical roles are filled by average or poor performers instead of top performers. A 2008 Bain & Company global survey of 760 companies found less than 25% of respondents strongly agree that "our best people are in the jobs where they add most value." Matching top performers with key roles typically involves three steps. The first is to identify the positions themselves. What jobs make the biggest difference to business performance, depending on the calibre of the person occupying them? In which roles will a top performer have more impact than an average performer? The next step is implementing a rigorous and realistic system for evaluating employees. Companies need to know who has what skills. The key to answering all these questions is an effective performance-management process with real consequences related to career opportunities, mentoring and compensation. The third move involves placing the right people in the right jobs. The thorniest issues range from releasing people from their current roles where they may be star performers to matching opportunities with a talented manager's desired location. For this, one must consider who "owns" the talent supply and makes deployment decisions. Many companies say that their top talent must be a global resource: the corporate centre has the authority. This is not always so. For example, a US-based software company relied on its headquarters to hire for its Indian R&D operation. But recruiters did not fully understand the Indian education system and its talent yardsticks, leading to the hiring of over-qualified, mid-level engineers for work that could have been done by entry-level engineers. The mismatch was corrected when the Indian unit took over the hiring. Reduce demand for talent: The most common response to a leadership supply gap is to upgrade recruitment efforts, creating stronger ties with universities and other talent sources. Such measures are essential for closing the gap over the long haul. In the meantime, companies can take actions that lower their demand for talent. By redesigning their organisation and operations to reduce the need for highly skilled leaders and technical experts, managers can narrow the leadership supply gap, sometimes quickly. The two most effective methods of reducing demand are to strip out organisational complexity and to redesign jobs so that they use the skills of managers more effectively. Such measures also help increase productivity. We found that companies that take the steps described above usually see an impact on their leadership supply gap in the first six to eighteen months. And with a business plan that matches its talent plan, a company has a far greater chance of success. With inputs from Alan Bird and Amit Sinha. Singh and Sinha are partners with Bain & Company in the New Delhi office and members of the firm's Organization practice. Bird is a partner in the London office and Bain's global expert on leadership supply.

As the Indian economy recovers from the slowdown, corporate India is looking to boost growth. But as it gears up for the upturn, India Inc will increasingly face a talent crunch, especially for future business leaders. This challenge is intensified by mid-management churn and the inability of the education system to produce enough managers and specialists. A study by the CII and Aspire, a human capital management firm, showed that 39.5% of Indian graduates needed further training to meet job requirements, forcing companies like Infosys to spend millions of dollars annually to train them.

Our work in India and across the world shows that three specific steps not only have an immediate impact on talent supply, but also lay the foundation for a sustainable, longer-term supply of leaders. The first is to quantify the leadership gap. Many companies don't have a detailed picture of their talent challenge. A rigorous analytic picture of the talent gap makes the challenge visible. The second step is to deploy existing talent more effectively. Many companies don't know who their top performers are. Nor have they placed them in jobs where they can have the most impact. A third step, often overlooked, is to reduce the demand for talent. Organisations that simplify their processes and spell out accountabilities clearly can simultaneously control costs and make the most of existing talent. Taken together, these steps help leaders address their talent challenges quickly. They also build a longer-term commitment throughout the organisation, which is required to sustain investment in leadership supply.

Quantify the leadership gap: Understanding the leadership gap—namely the difference between demand for talent and likely supply—is best accomplished through meticulous analysis of the current situation and careful forecasting of future changes. On the supply side, start with the basics. How many leaders do you have? What are your promotion rates? What are your attrition levels? What will affect these factors in the future? You can do this analysis by region, business unit or key capability area. The resulting data will allow you to build or validate a talent-supply forecast and identify choke points.

In India, Cisco realised that its strategy to build networking talent needed to include the broader ecosystem of professionals using Cisco technology, like employees of customers, as well as students studying information technology. To address these external gaps, it developed programs such as collaborating with universities and building relationships with training centres for networking courses. Through these steps, Cisco reduced its demand for internal talent.

The demand side begins with a similarly fundamental analysis. What will the business look like in a year, in three or five? How many leaders will you need in each unit or geography, and what skills will they need? During a recovery, some business units and regions will grow. But others will still be flat, and may export talent to talent-starved parts of the business. Matching the supply forecast to the demand forecast shows where the talent needs are likely to be most acute.

Make the most of available talent: Many CEOs admit that most mission-critical roles are filled by average or poor performers instead of top performers. A 2008 Bain & Company global survey of 760 companies found less than 25% of respondents strongly agree that "our best people are in the jobs where they add most value."

Matching top performers with key roles typically involves three steps. The first is to identify the positions themselves. What jobs make the biggest difference to business performance, depending on the calibre of the person occupying them? In which roles will a top performer have more impact than an average performer?

The next step is implementing a rigorous and realistic system for evaluating employees. Companies need to know who has what skills. The key to answering all these questions is an effective performance-management process with real consequences related to career opportunities, mentoring and compensation.

The third move involves placing the right people in the right jobs. The thorniest issues range from releasing people from their current roles where they may be star performers to matching opportunities with a talented manager's desired location.

For this, one must consider who "owns" the talent supply and makes deployment decisions. Many companies say that their top talent must be a global resource: the corporate centre has the authority. This is not always so. For example, a US-based software company relied on its headquarters to hire for its Indian R&D operation. But recruiters did not fully understand the Indian education system and its talent yardsticks, leading to the hiring of over-qualified, mid-level engineers for work that could have been done by entry-level engineers. The mismatch was corrected when the Indian unit took over the hiring.

Reduce demand for talent: The most common response to a leadership supply gap is to upgrade recruitment efforts, creating stronger ties with universities and other talent sources. Such measures are essential for closing the gap over the long haul. In the meantime, companies can take actions that lower their demand for talent. By redesigning their organisation and operations to reduce the need for highly skilled leaders and technical experts, managers can narrow the leadership supply gap, sometimes quickly. The two most effective methods of reducing demand are to strip out organisational complexity and to redesign jobs so that they use the skills of managers more effectively. Such measures also help increase productivity.

We found that companies that take the steps described above usually see an impact on their leadership supply gap in the first six to eighteen months. And with a business plan that matches its talent plan, a company has a far greater chance of success.

With inputs from Alan Bird and Amit Sinha. Singh and Sinha are partners with Bain & Company in the New Delhi office and members of the firm's Organization practice. Bird is a partner in the London office and Bain's global expert on leadership supply.