Bridging the Gap

With baby boomers filling most companies' executive ranks and with qualified replacements increasingly scarce, an aggressive focus on talent management may be the only solution to an impending talent crisis.

Friday, May 16, 2008
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If you believe the consultants at Dallas-based Stanton Chase International, a lot of companies are about to realize they have way too many eggs in way too few baskets.

"A storm is gathering," says Dean Bare, managing director of Stanton Chase's Atlanta office, echoing a much ballyhooed and growing sentiment in the business community. "We're going to see the effects of current conditions within the next 12 to 36 months as more baby boomers begin to retire. One of the things those people take with them is a huge knowledge and experience base that most companies have not replaced."

Corporate North America, he says, is top-heavy. A disproportionate amount of knowledge and leadership talent is vested with older employees who may not be with their companies for much longer. Executives will continue to retire and younger employees are insufficiently prepared to fill those vacancies.

Stanton Chase, in a 2008 report entitled Business Implications of the New Reality 2008, makes it very clear that the war for talent isn't just a catch phrase; it's real.

Of 37,000 surveyed executives and managers, 94 percent said they believe there is a talent shortage today or that there will be one soon, and 79 percent perceive a moderate or significant gap between retiring boomers and younger generations when it comes to qualified leadership talent.

Yet only 18 percent of respondents indicated their companies had a plan in place for talent acquisition, and 67 percent felt their organizations needed to do a better job identifying and developing potential leaders.

Overall, 71 percent cited employee retention as a major challenge.

"Those companies that begin to fill their pipeline with talent now -- to replace the talent that's going away -- are the companies that are going to succeed and have real advantages," says Bare.

The best way to weather the storm? Put a new, more urgent priority on talent management and promote HR from a back-office to front-line strategy.

To successfully fill the talent pipeline, experts and HR leaders say, companies need to proactively address three key points: Retain the best people currently in the company; develop and train those people now so they're prepared to step into executive positions when the need arises; and, where a gap remains, create an organized plan to recruit the best people from outside.

"Talent management has to be an integral part of a company's strategic plan. It's a 'must have,' not a 'nice to have,' " says Ed Wolff, chief administrative officer of Seattle-based Pinnacle Realty and past president of the Atlanta Chapter of the Society for Human Resource Management.

Wolff has watched the executive talent crunch unfold both while serving on SHRM Atlanta's board from 2000 to 2002 and while working in senior HR positions for several large companies.

He insists that it's real, that it is, in his estimation, an issue that will trouble businesses for the next 20 years, and that it's no longer good enough to be passive and allow talent to come to you. Companies that thrive during the shortage will be those that move recruiting, retention, succession planning and employee development to the top of their priority list.

Wolff notes it's not enough to plan for today. It's more important than ever to predict the organization's needs and potential shortcomings in advance, before they become evident.

HR leaders need to work closely with the executive team to identify where those shortfalls will occur and then forecast the timing, Wolff says. One way to fill talent gaps, he adds, is to form "operating committees" -- groups of hand-picked rising stars who are ambitious, capable and willing to embark on an educational fast-track.

"Each department head identifies high potentials and determines whether they are clearly promotable now or promotable within 12 to 18 months," he says. "Then, the company works with and educates those people, with the required training and development, to focus on competencies as defined for leadership in that organization."

By empowering HR to conduct a comprehensive corporate review to forecast future needs -- and by proactively funneling high-potentials into educational programs now -- employers will be in a better position to minimize the harmful effects of an executive-talent shortage.

Aflac's Solution

Columbus, Ga.-based insurer Aflac has been actively combating the executive talent shortage for the past two years using this "develop the best among your current people" model, says Executive Vice President of Corporate Services Audrey Tillman.

The best way to fill executive talent needs in the future, according to Tillman, is to optimize the recruiting of non-executives today, conscientiously develop those people and then move them up the corporate ladder. Recognizing that a shortage was on the horizon, Aflac revamped its talent-acquisition process and assembled a formal, dedicated college-recruiting group whose sole purpose is to cull college graduates for the best new prospects.

Executive talent needs are then filled in large part by grooming the best of these internal people to take on larger roles.

"As important as it is to bring in new talent, it's just as important to keep and develop the people that you do have," says Tillman. "Our executives have 'read the memo.' They've bought in to the fact that retention helps our bottom line, so they are very active in keeping those people we want to keep."

To minimize executive-talent shortages tomorrow, Aflac does its best to retain all levels of employees today.

Much of this retention strategy is focused around such soft ideas as "recognition" and "making current employees feel needed" -- concepts that may sound almost wishy-washy, says Tillman, but which nonetheless make a huge difference.

The company hosts an "employee-appreciation week" each year that's attended by the CEO, who shakes hands, poses for photos and presents recognition awards. For employees with significant tenure, the company dedicates a day to recognizing their time with the company, including tenure lunches recognizing their 5, 10, 15 or up to 30 years with Aflac.

Thanks to these efforts and others, turnover at Aflac has remained under 10 percent -- leaving a larger pool of internal talent to mold into future Aflac executives.

Of course, having good people to develop is only part of the solution. The remainder is an acute awareness of current and future talent needs. A company needs to know what executive talent it will need, when it will need it and what skills those executives will need to have.

"We hold an annual meeting with the division heads [during which they] look at workforce demographics and identify employees as 'high potential' or 'risk of flight,' " says Tillman. "If there's an area with some vulnerability, with someone we think may retire or may leave the company, we'll put a plan in place to develop a successor. If anything were to happen, we would at least have eliminated the surprise."

Tillman says Aflac has an expectation that, if things go as planned, "anyone we recruit here will retire here. ... That's our desire."

Of course, not all recruits leave Aflac at age 65 with a gold watch. With the average marketplace tenure of C-level executives hovering at around five years, Aflac reports that its own vice-president level and above executives stay 14 years on average.

Tillman points to education and employee development as two keys to keeping people on board. Two years ago, the company created a new Talent Manager division at Aflac, comprised of a team that works with business units specifically on these issues and reports to Tillman.

During the past two years, Aflac has also formalized its leadership development program for officer-level employees. The company defines the core competencies for leaders at each level of the organization and puts high-potential execs on track to meet those competencies. For senior officers, these might include skills such as "strategic agility" -- the ability to predict what positions and leadership will be needed during the next three to five years in one's business unit and plan accordingly -- and "financial acumen."

Aflac takes executives off-site several times each year to train and develop these skills -- both those required for an executive's current level and, if desired, for the next level up.

Stanton Chase's Bare says that this kind of before-it-happens thinking is the key to thriving in the midst of an executive-talent shortage.

"The best-practice companies are using third-party assessments to identify what they have against what they need, and then they're using training, executive coaching and team building as excellent strategies for bridging that gap," he says.

Family Culture

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Shared Technologies, a telecommunications company headquartered in Coppell, Texas, uses its own "familial" corporate atmosphere to attract and retain executives, says Vice President of HR Eileen Quilici.

"We're very close as an executive team," she says. "It's not unusual, when we get together as a group, to greet each other with hugs as opposed to handshakes. It's a very 'family' type of situation." It may sound like warm fuzzies and nothing else, but Quilici insists the friendly culture pays off when it becomes something that people want to be part of -- simultaneously aiding retention and enhancing the ability to recruit.

"This culture is so unique that people want to be a part of it," she says. And it may be true. Despite widespread consensus that executive talent is in short supply, Quilici says that Shared Technologies hasn't felt it. Speaking anecdotally, she reports very few executive departures and no problem finding good people to fill any occasional vacancies.

While Quilici admits that the company still has work to do in terms of developing a formal succession plan, she credits CEO Tony Parella's "single-minded" focus on building a strong executive team for helping the company successfully weather the talent shortage thus far.

As the executive-talent shortage intensifies, Quilici says, her company's strategy for retaining its best executives and attracting new ones remains largely the same: Build a culture that people want to be a part of.

Interestingly, Quilici makes a point quite common among companies that are retaining and developing executive talent unimpeded in the midst of a talent shortage: You don't necessarily need to pay higher salaries to get the best execs.

Rather, you get them by offering intangibles, such as culture and appreciation. "You can have all the benefits in the world, but if people don't feel included and that their job is important, you're going to be paying a lot of money for nothing," she says.

Quilici notes that Parella regularly engages his executive team in the decision-making process and solicits their advice, "He [asks his subordinates' opinions when meeting groups] and says, 'Tell me what works for you. Tell me what you do on a day-to-day basis that isn't working or could be done better,' " she says. "We're all very open to listening to the suggestions of our employees, and have, on many occasions, brought those suggestions into play and changed processes or added benefits where they were needed."

Parella hosts monthly conference calls that are mandatory for all executives (fittingly called "all hands" calls) to discuss the company's status, what was done well and what needs to be done better. The company's intranet contains a link called "talk to Tony," where any employee is encouraged to contact the CEO directly via e-mail with questions or ideas. A similar "talk to Ms. E" link exists to contact Quilici.

But Parella doesn't just depend on remote or electronic means of communication. In 2007, he visited all of the company's 41 locations to talk to branch leaders and local workers -- and plans to do so again in 2008.

Without paying huge bonuses -- and instead with a dedicated focus on communication and the concept of "team" -- Shared Technologies is having no problem retaining and attracting executives and employees. The company ranked No. 25 on Fortune's "100 Best Companies to Work For" list and has a turnover rate of less than 9 percent.

"This isn't magic," notes Aflac's Tillman. "It takes planning. Developing people takes hard work, and there are a lot of bright, developing people who come into companies, and they're not born leaders. It takes an investment of time and attention, and that investment has to come from the top."

Before rolling out Aflac's talent-management programs, Tillman says that she had to get the CEO, CFO and others on board. Luckily, she adds, all of Aflac's C-level managers "get it."

"Getting it" means understanding that there is a real war for executive talent and that consistent, proactive action is needed to deal with it. Unfortunately, according to the Stanton Chase survey, many respondents felt that their employers do not "get it."

Thirty-one percent believed that company leadership did not understand or only somewhat understood what needs to be done to attract, assess and retain the employees who will fill the boomers' shoes. Only 28 percent felt that leadership understood completely or to a significant degree.

The task of HR, says Tillman, is to convince company leaders that a strategic focus on talent management is not only beneficial, but flat-out necessary as more boomers retire and the talent gap widens. 

"It's an investment of time and money, but it's an investment that is going to pay off big time in years to come," she says. "Otherwise, what's the cost of not planning?"

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