Achieving Integration

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High unemployment rates have done nothing to subdue executives’ anxiety about talent. If anything, the recession has brought to light many problems inside companies’ talent management processes.

“During the recession, most executives were churning their business and talent strategies into survival mode, not success mode. This has to change or corporate growth and innovation will be severely challenged,” says Jeff Schwartz, a principal in the human capital practice of Deloitte Consulting in New York City.

“We need to reinvent talent management,” says William Schiemann, chief executive officer of Metrus Group, a consulting company based in Somerville, N.J.

All the pieces of the talent management process should be connected and fully integrated into the business, he explains, but they often aren’t. Many companies “have missed the boat on the employment life cycle. Staffing has one model, and the compensation folks have their own model. The models may be sophisticated, but if they aren’t all connected—integrated—then they won’t support the business strategy,” says Schiemann, author of Reinventing Talent Management (Wiley, 2009).

As the economy starts to improve, HR professionals are recognizing the need for a new direction when it comes to managing their talent, according to Managing Today’s Global Workforce: Elevating Talent Management to Improve Business, a report released in May 2010 by Ernst & Young. The report, which is based on a survey of more than 340 global vice presidents of human resources and other executives from Fortune 1000 companies, found that 63 percent of respondents said they continue to modify their current talent management programs to reflect changes in their businesses.

Organizations with integrated talent management systems can shift to accommodate changing business strategies more seamlessly. These organizations experience a return on equity that is, on average, 38 percent higher per year during a five-year period than those without an integrated system, according to the researchers.

“Imagine an organization where the pieces of the talent management system are marching in one direction but are segregated,” says Andy Rice, a practice manager at The Newman Group, a Los Angeles-based consulting company. “If a change in business strategy requires a 45-degree turn to the right, then each piece turns at different speeds. What happens? All the pieces bump into one another.” But in an integrated organization, they turn in lock step, he notes.

Only 32 percent of respondents to the Ernst & Young survey said the components of their talent management programs are integrated on a global, enterprisewide scale.

Forward-thinking corporate leaders have talent management programs aligned to their business strategies, integrated globally, and tailored to address the needs, issues and demographics of their workforces, the researchers found. “Integrated talent management programs will position these organizations for significant future growth,” they added.

Integration of What?

Talent management refers to the entire employment life cycle and includes talent acquisition, learning and development, leadership, performance management, succession planning, and compensation. In an integrated system, HR managers produce the processes, tools and expertise that allow the organization to build and deploy talent to meet business goals. All the steps in the cycle are connected and aligned with business needs.

It may sound easy, but integration remains a moving target. You will always tweak and change, Rice says: “It’s like building your dream house and realizing that you will never be done.”

An honest appraisal of your talent management system helps determine if it is closer to a dream house or a money pit:

• Does most of your turnover occur within the first year of employment?
• Do all employees get the same merit increase?
• When you have a job opening, do you always have to go outside the organization to fill it?
• Does your list of high-potential employees represent more than 5 percent of your total workforce?
• Have you identified people for positions in your succession plan who aren’t selected when those jobs open up?

• Are you making decisions based on metrics specific only to your function? Are your HR metrics inward-facing, such as time-to-fill, rather than outward-facing, such as performance against your workforce plan?

An affirmative answer to these questions signals a break in the process. Step back and look at the whole rather than try to fix the piece that’s most broken, Schiemann says. Often, the part that’s “on fire” gets the most attention, even though another piece may have more impact on the business.

Start by discussing with senior leaders what makes your company different, he advises. If you get people to agree on those attributes, you can take that all the way from recruiting and onboarding to developing, rewarding and engaging talent.

Integrate with Business Goals

Workers with special skills are resources the HR professionals at Universal Weather and Aviation know they need but can’t buy straight from the labor market, so they develop their employees over time. The Houston-based mid-size company provides services and support for private jet owners, and no candidates have all the skills required to work there, says Steve Ginsburgh, senior vice president of HR and workforce development.

“It’s a long learning curve,” Ginsburgh says, that requires a focus on hiring to align with culture and then training to build capability. “It takes us three years to train someone before they can take a position in customer service operations and trip support. If you’re from the military, you may have flight and security experience, but you won’t have hotel, catering and customer support experience. And if you come to us from a hospitality industry, you may have the customer service experience but not the weather and flight knowledge.”

The company’s mission is to be the global leader in facilitating private jet trips. The HR department’s mission, then, is to create a workforce equipped to succeed, according to Ginsburgh. The company’s talent management pieces fall into three categories called “ACE”:

• Alignment of culture and goals.
• Capabilities such as training, equipment and resources.

• Engagement through compensation, benefits and recognition.

HR managers measure performance in those categories three times a year.

“Too many companies measure and focus on the engagement piece, which is the traditional HR stuff, but they omit the other two components of totally integrated talent management,” Ginsburgh says. “If I’m highly engaged but not very capable, I’m not successful. Or, I could be highly capable but not aligned to the business goals.”

Ginsburgh displays what he calls the “great wall of metrics” in his office. Fifteen-foot-wide magnetic strips show all business measures of performance. “Metrics need to be visible to HR but also to operations and the other functions,” he says. “Someone will come in and say, ‘Wow, so that’s how many trips we had yesterday, and that’s how well we did managing them.’ Or, ‘I see that trip didn’t go so well. Here’s where it broke down. Let’s work on that piece.’ ”

Metrics on the executive committee dashboard include the retention of top employees, the cost-sharing ratio of the medical plan and the number of key jobs covered by at least two levels of ready-now successors. Bonuses are paid biannually, and 20 percent of the amount is based on retention of employees who have had “successful” and “extraordinarily successful” years.

“We don’t measure employees on ‘meets expectations’ or ‘exceeds expectations,’ ” Ginsburgh explains. “We measure them the way a business is measured: unsuccessful year, successful year or extraordinarily successful year. With simple language—business language—you get clarity. If an employee hasn’t been meeting his goals, his manager will have a harder time explaining why he is a ‘successful’ employee than why he got a ‘4’ rating.”

Universal wins many HR awards. For Ginsburgh, the best compliment was indirect: The vice president of trip services called him for data to include in a request for proposal. “I noticed it listed our goal-setting process, our competency models, our performance management system and our training programs. If operations is marketing HR processes, I think talent management is integrated.”

Train to Integrate

The culture at WD-40 Co. permits employees to control their own destinies, says Nancy Ely, vice president of HR at the global organization with 320 employees working in sales, marketing, and research and development. The 58-year-old San Diego-based consumer products company outsources manufacturing.

“Our mission is people, passion and products,” Ely says. “Because people take charge of the process, talent management is integrated organically.”

At WD-40, anyone who wants to be a leader can be one. For instance, any employee can participate in the employee-operated Leadership Academy. “A requirement of completing the program is teaching classes and coaching other employees for two years,” Ely says. “People retain information better if they teach it to others. Our employees appreciate that the trainers are employees who come with the credibility of understanding the business and the culture. And employees see this as something they can aspire to.”

Employees don’t have to go through the academy to participate in its Leaders Coaching Leaders program. “If someone contacts HR to learn more about the supply chain because a project will have them working more closely with that division, then we match them with someone from the supply chain willing to coach them,” Ely says.

WD-40’s Food 4 Thought training series engages managers in bimonthly topic-driven discussions of workplace issues. An HR manager drafts a scenario and identifies a session leader coached on the subject and its legal implications. Participants discuss the hypothetical scenario, evaluate it as a group and together agree on how best to handle the situation.

“By hashing out the problem among each other, the solution is accepted more easily than if HR had dictated,” Ely says. “Managers learn from each other how they have solved a problem.”

In addition, “All employees have access to the same coach that the CEO uses, and that sends a strong message about respect,” she notes. “Because the coach knows our culture and knows the people, he can offer concrete suggestions.”

When the coach notices people coming to him for the same reasons, he passes that information on to HR managers so they can create a class or share a helpful tip. “For instance, the coach’s advice for people who want to maximize a meeting with the CEO is ‘be brief, be bright and be gone,’ ” Ely says.

Organically integrated talent management seems to be working for WD-40: In 2010, the company recorded its best financial performance. In its latest global employee engagement survey, 99 percent of employees agreed with the statement “I am treated with dignity and respect at WD-40.” All engagement scores are in the 90th percentile around the world, according to Ely.

Starting Over for Integration

Spending nearly two years preparing for a merger that ultimately failed is not how most HR leaders would choose to restart a talent management process. But Margaret Pego, chief human resources officer at Public Service Enterprise Group, a utility in Newark, N.J., says that, in hindsight, it was the best way.

From December 2004 to September 2006, while a merger with Exelon Corp. advanced through regulatory approvals, Pego says all elements of talent management shut down. When the merger failed to clear the last regulatory hurdle, she saw an opportunity. One week after the announcement, she took the new president and CEO and his top managers off-site to discuss how to rebuild through talent management.

“This was necessary given everything our employees had been through,” Pego says. “I wouldn’t wish this on anyone, but it was a tremendous learning experience and it jump-started all the new things we put in place.”

The biggest challenge was talent. “We had lost a significant amount of talent, especially senior management,” she recalls. “We needed to determine if we had people in-house to fill those positions, and how to get them ready.”

Leaders could then focus on the future: growing the natural gas, nuclear power and renewable energy businesses.

“The merger failure gave us the impetus to reorient our mind-set from a regulated utility into a competitive business,” explains Vincent Labbate, director of talent management. “The nature of the business had changed, and therefore the talent management process had to change with it. It was an unintended but beneficial consequence.”

Leaders crafted a vision for the company’s direction: People providing safe, reliable, economic and green energy. “We launched our values and then articulated our leadership competencies,” Pego says. That set the stage for rolling out an integrated talent management process tied to vision, values and competencies.

HR disciplines once siloed by the pieces of talent management now operate together. Processes such as performance management and succession planning have been upgraded and linked to business needs.

Each leader’s balanced scorecard is developed in conjunction with other functions. For example, “My HR scorecard is developed from talking with my peers about what people metrics are most important to them,” Pego explains.

The percentage of openings filled from the leadership pipeline has become one metric on every leader’s scorecard.

It’s a lesson learned from the failed merger: Never be in a position with multiple vacancies in critical positions and no one in-house ready to fill them. In 2006, Pego explains, the list of high-potential employees numbered nearly 500 out of a possible 3,500 employees tabbed for succession planning purposes. “That’s a good indication that a talent management process is not integrated,” she notes. Another problem: She didn’t have enough resources to devote to so many people.

Pego whittled the list down to about 90 and dedicated resources to compensate, develop and recognize them.

As a result, 86 percent of critical positions were filled with people in the pipeline last year, up from 67 percent in 2009. It’s an impressive outcome of integration. But Labbate warns that not all measures make quantum leaps forward. “Make steady progress,” he advises. “What works, you sustain; what doesn’t work, you replace.”

For Pego, the best indicator of success came from Ralph Izzo, her chairman, president and CEO, during a succession planning meeting: “After hearing about the same high-potential employee from an executive year after year, he said, ‘If that person is identified as a high-potential for the same job next year, we’re going to start talking about your position and whether you should keep it.’

“It’s great when other executives lead the talent conversation,” Pego reflects.

The author is a contributing editor and former managing editor of HR Magazine.