Article

Quickly kick-start a "perfect team"

Building a talent-rich organization is by nature a multiyear challenge. However, many companies need to fill the talent gap in 6-18 months with a lower cost in this competitive market.

Par James Root and Vikki Tam

First published on mars 01, 2010
min


We often ask CEOs to tell us how many of their mission-critical positions are occupied by executives they regard as top talent. It's surprising how many have difficulty answering the question. Those who can answer it often reveal an alarming mismatch: most of their mission-critical roles are filled by average performers and some by poor performers, while many top performers are deployed in humdrum positions. At one global tech company a few years ago, more than 40 percent of identified high performers were in positions deemed non-critical, and fewer than 40 percent of the company's mission-critical roles were occupied by top performers. That kind of disparity is not unusual. In our 2008 survey of 760 companies across six geographies, less than 25 percent of respondents strongly agreed that "our best people are in the jobs where they add most value." Building a talent-rich organization is by nature a multiyear challenge. However, many companies need to fill the talent gap in 6-18 months with a lower cost in this competitive market. And it is not a mission impossible. Deploying existing talent is a more effective way which might bring unexpected value to company. Develop "Talent Map" Any supply-versus-demand analysis of leadership talent needs to be grounded in a clear understanding of the company's strategy. Trying to assess your talent needs without a well-defined strategy—and an organization aligned with that strategy—is like putting a band together without first figuring out what music you want to play. Matching top performers with key roles typically involves three steps. The first step is to identify the positions themselves. What jobs make the biggest difference to business performance depending on the caliber of the person occupying them? In which roles will a top performer have more impact compared with an average performer? These roles are often on the front line, and they might be anywhere in the organization—finance, sales, operations, wherever-depending on a company's strategic priorities. When the shipping company Maersk was ramping up its business in China, a critical market, the firm used four broad criteria to identify mission-critical roles: the position's financial impact, its degree of complexity, its influence on key customer relationships, and its effect on the development of future talent. The company also looked at where it planned to expand in detail and the skills that would be required to execute that strategy. For example, several critical roles related to the emerging Chinese market in internal logistics-transporting goods from growing economic centers in central and western China to seaports in the south and east. Some of these roles involved running river terminals; others involved building partnerships with Chinese transport companies. Strategies don't stand still, and companies in rapidly evolving markets often find they need to hire individuals with skills the organization currently lacks. Wireless telecom companies, for example, are seeing their business shift rapidly from voice communications to video and data, and so are beginning to scoop up people with media experience. Telecom infrastructure companies are more dependent than ever on proprietary software, and so need more and more software engineers with experience in developing intellectual property. The nature of an organization's critical roles can shift when the economy changes or new competitive threats emerge. In 2007, most companies' key positions still revolved around implementing growth strategies. By late 2008, a strong focus on sustaining the core business became the priority, and the most important roles at many companies were those with responsibility for managing costs, reducing complexity, and adapting the business to a turbulent environment. Effectiveness of Performance Management Is it that difficult to know exactly what the talent level is and where they are within an organization? A South Africa-based mining company, for instance, was under pressure to improve both its operating performance and its safety record, and it badly needed mine managers, engineers, and technical experts to help with that turnaround. When checking the performance record, they found that fully 80 percent of individuals were rated above average, even though the company had been underperforming. Senior managers didn't know who the strongest people were or what skills and capabilities they possessed. Even with that grade inflation, only 20 percent of mission-critical positions were filled with people considered to be top performers. Most companies have the elements of performance management in place, and some parts of the process may be top notch. But no performance-management system works well unless it carries real consequences. If differences in evaluation actually lead to differences in outcomes—career opportunities, mentoring and coaching, compensation, retention efforts, and the like—then line managers (and everyone else) will take the evaluations seriously. Managers will be far more likely to conduct performance reviews face to face, on time, and according to high standards. They will be more likely to comply with requirements for using the whole rating scale, giving average performers a three out of five, not a four or a five. It's a virtuous cycle: consequences lead to high-quality results, and high-quality results reinforce the perception that the consequences are fair. Without adopting a forced curve, the company's senior executives made it clear that grade inflation would not be tolerated. High performers received not only big increases in pay but also better career development and training opportunities and better retention packages. Those with lower ratings received coaching and eventual outplacement if necessary. Placing the Right People in the Right Jobs After identifying critical positions and realistically assessing employees, is deployment: placing the right people in the right jobs. The thorniest issues include how companies can release people from their current roles where they may be performing like stars, how to match opportunities with a talented manager's desired location, and how to harmonize compensation for home-based and expatriate leaders. Plenty of management practice and thought has focused on these issues, and we won't dwell on them here except to note that some companies that excel at leadership supply have come up with particularly imaginative ways of addressing the issues. Consider, for instance, the issue of who "owns" the supply of talent and thus makes deployment decisions. Many companies say that their top talent must be a global resource: the corporate center has the responsibility and authority for managing these individuals' careers. SAB Miller, the brewer, takes a different approach. At SAB Miller, the business units own the company's talent. In keeping with the company's business model, these units are typically organized by country, and a country's managing director has the final say over whether an individual can be released to a new role. As a counterbalance, the corporate center evaluates these managing directors carefully on the basis of what it calls the People Balance Sheet. Do the country managing directors nurture talent and feed strong performers into roles that support corporate goals, or are they net consumers of talent? How talented leaders can balance their own interests with those of the organization is another potential issue. The oilfield services company Schlumberger has developed a unique approach to this potentially divisive question, in an industry where talent is scarce. Schlumberger maintains a custom-built database of detailed "career networking profiles" that allows it to match the interests and skills of rising leaders with the company's needs. It encourages engineers and strong performers from other disciplines to rotate through the human-resources department to get a feel for the importance of talent and how the company addresses it. A stint in HR is "seen as a gold star on a Schlumberger résumé," according to one report. Schlumberger engineers and managers know when they sign on that they will be spending time in remote and sometimes disagreeable locations. But they know that the company respect their own career plans. Thanks to this policy, the company has substantially expanded its pool of engineers, notably women. Moreover, when those three or four years are up, the company knows it can count on that individual to take a new and possibly distant job. It has a ready pool of available people when an assignment does come up. One interesting result of a focus on deployment of Schlumberger is that it often encourages the CEO and the senior management team to take greater risks on rising stars through earlier promotion and stretch assignments. Focusing on deployment also tends to provide better mentoring and coaching by more-senior executives. Wherever analysis reveals a dearth of short-term successors, senior leaders can put together accelerated development plans and transfer proven "people developers" into key roles to ensure that the business doesn't stall for lack of leaders. "Save" the Talent Managers often overlook another solution: taking actions that lower its demand for talent. The most common response to a leadership supply gap is to upgrade recruitment efforts, creating stronger ties with universities and other sources of talent. A company may also mount an immediate drive to fill gaps that cannot be addressed internally, such as a longstanding open position or an underperforming manager in a critical position with no clear successor. A few highly visible recruitment efforts signal a major commitment to improving talent supply. All such measures are essential to closing the gap over the long haul. But expanding the supply pipeline may take two or three years to have a noticeable effect. In the meantime, companies do have another lever to pull: by redesigning their organization and operations in ways that 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 organizational complexity and to redesign jobs so that they use the skills of managers more effectively. Such measures not only reduce the demand for talent, they also help a company increase its productivity. Complexity inevitably creeps into every nook and cranny of an organization over time. In many cases it's a natural consequence of success in the marketplace. Products and services multiply. Customers are offered a seemingly impossible array of choices. But complexity often has unintended consequences. The number of managers edges upward, spawning new layers between the CEO and the front line and reducing each manager's number of direct reports. Decision roles and accountabilities grow murky. Paperwork proliferates. The company's organizational metabolism slows down, and people get demoralized. Companies can reduce complexity on all these fronts. Organizationally, they can conduct a spans-and-layers analysis, benchmarking against industry standards and reducing the number of managers accordingly. They can streamline decision making—for instance, by eliminating regional structures where possible. They can redesign and simplify back-office procedures. If a company is willing to absorb a modest amount of additional risk, it can eliminate complexity and free up talent simply by raising the threshold for rigorous review of investment opportunities. Say a company requires detailed analysis and review of every project costing more than $20 million. Many expensive managers and analysts must spend a lot of time reviewing those proposals. If the threshold were raised to $50 million, the number of proposals would drop, and the company would need far fewer people doing the reviews. Reducing complexity reduces costs and improves productivity. It also increases retention, because people feel they can get more done. Companies often redesign and expand job responsibilities in part because they believe the people holding those jobs will find them more challenging and thus more satisfying. But this view is oversimplified; what matters is whether people feel they are spending time on things that matter. A few years ago, we studied two consumer-electronics retail chains. In one chain, each store manager was king of his or her domain. Managers could determine or influence the choice of merchandise, the selection of infrastructure tools such as IT systems, the use of point-of-sale displays, and many other elements of the business. In the other chain, managers operated with far tighter guidelines. The company said, in effect, here is your business model, here is your store layout, here are your tools and products—now go out and deliver the best possible customer service and the highest possible profits. Surprisingly, store managers in the latter chain were more satisfied and felt more empowered than in the chain where the manager was king. They were able to focus on what was most important—their customers and employees. Managers in the first chain were pulled in a dozen different directions and found themselves frustrated. In order to address the leadership supply, management teams should identify a long-term plan such as developing a new talent pool to make the company become a place where talents are attracted and devoted. However, the short-term "digging internal talents" should not be neglected. This method requires less resource commitment and probably delivers results shortly. During the process of diagnosing, the problems that are supposed to be solved in the long term will also be reflected. James Root is a partner and director of Bain & Company in Hong Kong office and leads the Organization practice for Asia Pacific. Vikki Tam is a partner of Bain & Company in Shanghai office and leads the Organization practice for Greater China.

We often ask CEOs to tell us how many of their mission-critical positions are occupied by executives they regard as top talent. It's surprising how many have difficulty answering the question. Those who can answer it often reveal an alarming mismatch: most of their mission-critical roles are filled by average performers and some by poor performers, while many top performers are deployed in humdrum positions.

At one global tech company a few years ago, more than 40 percent of identified high performers were in positions deemed non-critical, and fewer than 40 percent of the company's mission-critical roles were occupied by top performers. That kind of disparity is not unusual. In our 2008 survey of 760 companies across six geographies, less than 25 percent of respondents strongly agreed that "our best people are in the jobs where they add most value."

Building a talent-rich organization is by nature a multiyear challenge. However, many companies need to fill the talent gap in 6-18 months with a lower cost in this competitive market. And it is not a mission impossible. Deploying existing talent is a more effective way which might bring unexpected value to company.

Develop "Talent Map"

Any supply-versus-demand analysis of leadership talent needs to be grounded in a clear understanding of the company's strategy. Trying to assess your talent needs without a well-defined strategy—and an organization aligned with that strategy—is like putting a band together without first figuring out what music you want to play. Matching top performers with key roles typically involves three steps. The first step is to identify the positions themselves. What jobs make the biggest difference to business performance depending on the caliber of the person occupying them? In which roles will a top performer have more impact compared with an average performer? These roles are often on the front line, and they might be anywhere in the organization—finance, sales, operations, wherever-depending on a company's strategic priorities.

When the shipping company Maersk was ramping up its business in China, a critical market, the firm used four broad criteria to identify mission-critical roles: the position's financial impact, its degree of complexity, its influence on key customer relationships, and its effect on the development of future talent. The company also looked at where it planned to expand in detail and the skills that would be required to execute that strategy. For example, several critical roles related to the emerging Chinese market in internal logistics-transporting goods from growing economic centers in central and western China to seaports in the south and east. Some of these roles involved running river terminals; others involved building partnerships with Chinese transport companies.

Strategies don't stand still, and companies in rapidly evolving markets often find they need to hire individuals with skills the organization currently lacks. Wireless telecom companies, for example, are seeing their business shift rapidly from voice communications to video and data, and so are beginning to scoop up people with media experience. Telecom infrastructure companies are more dependent than ever on proprietary software, and so need more and more software engineers with experience in developing intellectual property.

The nature of an organization's critical roles can shift when the economy changes or new competitive threats emerge. In 2007, most companies' key positions still revolved around implementing growth strategies. By late 2008, a strong focus on sustaining the core business became the priority, and the most important roles at many companies were those with responsibility for managing costs, reducing complexity, and adapting the business to a turbulent environment.

Effectiveness of Performance Management

Is it that difficult to know exactly what the talent level is and where they are within an organization?

A South Africa-based mining company, for instance, was under pressure to improve both its operating performance and its safety record, and it badly needed mine managers, engineers, and technical experts to help with that turnaround. When checking the performance record, they found that fully 80 percent of individuals were rated above average, even though the company had been underperforming. Senior managers didn't know who the strongest people were or what skills and capabilities they possessed. Even with that grade inflation, only 20 percent of mission-critical positions were filled with people considered to be top performers.

Most companies have the elements of performance management in place, and some parts of the process may be top notch. But no performance-management system works well unless it carries real consequences. If differences in evaluation actually lead to differences in outcomes—career opportunities, mentoring and coaching, compensation, retention efforts, and the like—then line managers (and everyone else) will take the evaluations seriously. Managers will be far more likely to conduct performance reviews face to face, on time, and according to high standards. They will be more likely to comply with requirements for using the whole rating scale, giving average performers a three out of five, not a four or a five. It's a virtuous cycle: consequences lead to high-quality results, and high-quality results reinforce the perception that the consequences are fair.

Without adopting a forced curve, the company's senior executives made it clear that grade inflation would not be tolerated. High performers received not only big increases in pay but also better career development and training opportunities and better retention packages. Those with lower ratings received coaching and eventual outplacement if necessary.

Placing the Right People in the Right Jobs

After identifying critical positions and realistically assessing employees, is deployment: placing the right people in the right jobs.

The thorniest issues include how companies can release people from their current roles where they may be performing like stars, how to match opportunities with a talented manager's desired location, and how to harmonize compensation for home-based and expatriate leaders.

Plenty of management practice and thought has focused on these issues, and we won't dwell on them here except to note that some companies that excel at leadership supply have come up with particularly imaginative ways of addressing the issues. Consider, for instance, the issue of who "owns" the supply of talent and thus makes deployment decisions. Many companies say that their top talent must be a global resource: the corporate center has the responsibility and authority for managing these individuals' careers.

SAB Miller, the brewer, takes a different approach. At SAB Miller, the business units own the company's talent. In keeping with the company's business model, these units are typically organized by country, and a country's managing director has the final say over whether an individual can be released to a new role. As a counterbalance, the corporate center evaluates these managing directors carefully on the basis of what it calls the People Balance Sheet. Do the country managing directors nurture talent and feed strong performers into roles that support corporate goals, or are they net consumers of talent?

How talented leaders can balance their own interests with those of the organization is another potential issue. The oilfield services company Schlumberger has developed a unique approach to this potentially divisive question, in an industry where talent is scarce. Schlumberger maintains a custom-built database of detailed "career networking profiles" that allows it to match the interests and skills of rising leaders with the company's needs. It encourages engineers and strong performers from other disciplines to rotate through the human-resources department to get a feel for the importance of talent and how the company addresses it. A stint in HR is "seen as a gold star on a Schlumberger résumé," according to one report. Schlumberger engineers and managers know when they sign on that they will be spending time in remote and sometimes disagreeable locations. But they know that the company respect their own career plans. Thanks to this policy, the company has substantially expanded its pool of engineers, notably women. Moreover, when those three or four years are up, the company knows it can count on that individual to take a new and possibly distant job. It has a ready pool of available people when an assignment does come up.

One interesting result of a focus on deployment of Schlumberger is that it often encourages the CEO and the senior management team to take greater risks on rising stars through earlier promotion and stretch assignments. Focusing on deployment also tends to provide better mentoring and coaching by more-senior executives. Wherever analysis reveals a dearth of short-term successors, senior leaders can put together accelerated development plans and transfer proven "people developers" into key roles to ensure that the business doesn't stall for lack of leaders.

"Save" the Talent

Managers often overlook another solution: taking actions that lower its demand for talent.

The most common response to a leadership supply gap is to upgrade recruitment efforts, creating stronger ties with universities and other sources of talent. A company may also mount an immediate drive to fill gaps that cannot be addressed internally, such as a longstanding open position or an underperforming manager in a critical position with no clear successor. A few highly visible recruitment efforts signal a major commitment to improving talent supply. All such measures are essential to closing the gap over the long haul. But expanding the supply pipeline may take two or three years to have a noticeable effect.

In the meantime, companies do have another lever to pull: by redesigning their organization and operations in ways that 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 organizational complexity and to redesign jobs so that they use the skills of managers more effectively.

Such measures not only reduce the demand for talent, they also help a company increase its productivity. Complexity inevitably creeps into every nook and cranny of an organization over time. In many cases it's a natural consequence of success in the marketplace. Products and services multiply. Customers are offered a seemingly impossible array of choices. But complexity often has unintended consequences. The number of managers edges upward, spawning new layers between the CEO and the front line and reducing each manager's number of direct reports. Decision roles and accountabilities grow murky. Paperwork proliferates. The company's organizational metabolism slows down, and people get demoralized.

Companies can reduce complexity on all these fronts. Organizationally, they can conduct a spans-and-layers analysis, benchmarking against industry standards and reducing the number of managers accordingly. They can streamline decision making—for instance, by eliminating regional structures where possible. They can redesign and simplify back-office procedures.

If a company is willing to absorb a modest amount of additional risk, it can eliminate complexity and free up talent simply by raising the threshold for rigorous review of investment opportunities. Say a company requires detailed analysis and review of every project costing more than $20 million. Many expensive managers and analysts must spend a lot of time reviewing those proposals. If the threshold were raised to $50 million, the number of proposals would drop, and the company would need far fewer people doing the reviews.

Reducing complexity reduces costs and improves productivity. It also increases retention, because people feel they can get more done. Companies often redesign and expand job responsibilities in part because they believe the people holding those jobs will find them more challenging and thus more satisfying. But this view is oversimplified; what matters is whether people feel they are spending time on things that matter.

A few years ago, we studied two consumer-electronics retail chains. In one chain, each store manager was king of his or her domain. Managers could determine or influence the choice of merchandise, the selection of infrastructure tools such as IT systems, the use of point-of-sale displays, and many other elements of the business. In the other chain, managers operated with far tighter guidelines. The company said, in effect, here is your business model, here is your store layout, here are your tools and products—now go out and deliver the best possible customer service and the highest possible profits. Surprisingly, store managers in the latter chain were more satisfied and felt more empowered than in the chain where the manager was king. They were able to focus on what was most important—their customers and employees. Managers in the first chain were pulled in a dozen different directions and found themselves frustrated.

In order to address the leadership supply, management teams should identify a long-term plan such as developing a new talent pool to make the company become a place where talents are attracted and devoted. However, the short-term "digging internal talents" should not be neglected. This method requires less resource commitment and probably delivers results shortly. During the process of diagnosing, the problems that are supposed to be solved in the long term will also be reflected.

James Root is a partner and director of Bain & Company in Hong Kong office and leads the Organization practice for Asia Pacific. Vikki Tam is a partner of Bain & Company in Shanghai office and leads the Organization practice for Greater China.