Is HR Passing the Talent Management Test?

A recent survey finds boards giving their companies poor grades in various aspects of talent management. Experts say the low scores aren't necessarily indicative of how HR is really doing, but urge HR leaders to partner with their CEOs in keeping the board abreast of key talent-management initiatives.

Thursday, June 20, 2013
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A recent survey asked more than 1,000 board members in 59 countries to rate their companies' performance in nine facets of talent management.

The results weren't good.

The poll, conducted in partnership with WomenCorporateDirectors and Heidrick & Struggles, sought to gauge how companies are doing in the following areas: attracting top talent, hiring top talent, assessing talent, developing talent, rewarding talent, retaining talent, firing, leveraging diversity and aligning talent strategy with business strategy.

While organizations in North America -- along with those in Australia and New Zealand -- received the highest marks in talent management, their scores still left plenty of room for improvement.

For example, only 20 percent of respondents said they "strongly agree" their organization is effective at attracting top talent. Nineteen percent said the same with regard to hiring top talent; 16 percent strongly agreed their company is effective at developing talent; and 12 percent agreed their organization effectively assesses talent.

North American companies scored the lowest in regard to firing and leveraging diversity, with 8 percent and 7 percent of directors strongly agreeing their companies are effective in these respective areas.

The findings don't necessarily paint an accurate picture of how HR is really doing in terms of managing talent, but should remind HR leaders that they need to communicate talent-management initiatives with their boards, experts say.

Kim Ruyle, president of Coral Gables, Fla.-based talent management and organization-development firm Inventive Talent Consulting, is "not convinced that most directors have a lot of sophistication about talent management practices."

Nevertheless, "they do understand results," he says. "And they typically understand that talent is the single-most powerful lever for driving organizational results.

"[A company's] talent gives the organization a competitive advantage, because it's difficult for competitors to copy," continues Ruyle. "Employees introduce a certain contextual ambiguity - call it organizational culture, if you like. But whatever you call it, the fact is that humans are complex and can provide a significant competitive advantage. Most board members intuitively understand that, and their assessment of talent management is, to a large extent, a function of their assessment of organizational performance."

Development Dimensions International regularly works with boards of directors, and "frequently encounters their perceptions of organizational talent," says Matt Paese, vice president of succession management with Pittsburgh-based DDI.

In DDI's experience, "we don't see boards as being any more or less accurate in their perceptions of how HR is doing [at talent management]," he says.

"Boards do, however, evaluate HR with the loftiest expectations in mind," says Paese. "That is, boards are concerned with overall enterprise readiness to take on emerging challenges, and given their broad strategic vantage point, may be more inclined to emphasize growth needs and talent gaps, and therefore view HR as having more work to do to equip the organization for the future."

As boards become more concerned with talent management, "CEOs and HR leaders are increasingly working together to understand and respond to boards' expectations," says Paese.

At most large organizations, HR leaders work very closely with the CEO to facilitate an ongoing dialogue with the board about talent, and how the organization is responding to immediate and anticipated needs, he adds.

"Some of the most pressing issues have to do with CEO, C-suite, and executive succession and development, which boards concern themselves with very intimately," he says.

"Talent initiatives and objectives applied to lower-level audiences are of less direct concern to most boards. However, the general understanding of the overall agenda for talent and how it plays into the organization's ability to execute its strategy are typically part of periodic updates to the board. Ultimately, this ongoing conversation about talent typically results in HR having a very good understanding of the board's perceptions."

CEOs are "becoming acutely aware" of issues such as a looming shortage of top talent, for instance, and are communicating these concerns to their boards -- either directly or in partnership with the CHRO," says Lauren Doliva, managing partner of the CHRO practice with Chicago-based Heidrick & Struggles.

"As HR leaders are working even more closely with board committees in reviewing successors and evaluating high-potential individuals, their boards recognize the importance of funding development programs to strategically deepen their talent bench."

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Heidrick & Struggles has also seen board committees focus on talent risk to the degree that, in some cases, separate committees are developed to "intensely focus on acquiring, developing and retaining talent at all levels," adds Bonnie Gwin, managing partner of the North American board of directors practice at Heidrick & Struggles.

"While the board has the fiduciary obligation to focus on succession at the top, the best boards understand that overall employee engagement, culture and branding have a big impact on productivity and retention," says Doliva.

"The best CHROs work in lock step with CEOs and boards to ensure that the business and talent strategies are aligned, anticipating future goals and objectives and remain focused on overall organizational effectiveness and executing robust talent-management programs," says Gwin.

"If a talent concern arises, they present it to the board as a business issue," she says. "More and more, we see the CEO and CHRO engaging directly with their boards on talent."

Indeed, the CEO can be a tremendous ally for HR in informing and educating the board on talent issues, says Ruyle.

"It all comes down to influence," he says, "and for the HR leader, the gateway to the board is typically through the CEO."

The CHRO can gain this influence by being credible on multiple levels, says Ruyle.

For instance, the HR leader must show "general business acumen, including plenty of financial sophistication," he says. "If you can't fluently explain all financial statements, including cash flow, you won't have credibility with the CEO or the board."

The HR leader must also have -- and be able to articulate to the board -- a clear-cut strategy for all facets of talent management, says Ruyle.

"You should have a well-developed personal viewpoint on talent differentiation, cross-boundary movement of talent, transparency of talent management practices, career development and branding, employee value proposition, talent management metrics, performance management practices, etc.

"If you don't have something unique to say," he says, "there's no reason for anyone -- especially the board -- to listen to you."



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