People exit the organisational pipeline at different times and at different levels of their professional growth. Some only stay for a few weeks.
One of the causes of high turnover of short term employees is the failure of line managers and human resource people to work together to clearly define recruit, transfer or promote people who have either the specific capabilities demanded by each position - the particular experience, knowledge and skills - or the potential to rapidly acquire these.
Another common problem is the lack of practical induction to the organisation, to the workplace and to the actual position. Attitudes and expectations formed in the early days are very difficult to change.
This leads to what is by far the most damaging problem in many organisations. That is the competency of front line management and the support they receive from more senior managers and executives. A regular evaluation of the effectiveness of the total recruitment and employment function can be valuable. Some organisations record and chart the base metrics - number of vacancies, time to hire, retention and separation rates, cost per hire, number of applicants per position - but fail to take action to improve the process. Active participation by line managers is a critical requirement if the recruitment and engagement process is to be optimised.
The calculation of total replacement costs for specific positions by participants in supervisory and management training courses can be a powerful way to establish an awareness of the overall cost to the organisation of not taking time to adequately define the role and of making the wrong engagement decisions. Some managers still operate on the assumption that there are plenty more people out there if the new person does not work out. In today's climate it is very difficult to undo poor selection action.
High levels of short term turnover soon become known, organisational reputation is damaged and a long term barrier to attracting the best people is created. Setting staff turnover targets may help focus on the more critical areas but care should be taken to ensure that the targets are appropriate for specific levels of general staff, professionals and managerial personnel.
The most critical competencies, positions and occupation groups need to be identified and future needs projected against the projected internal supply to ensure that external recruitment is properly focused.
A policy decision also needs to be made regarding filling future vacancies. Grow our own, buy in talent as and when it is required or use a combination of the two approaches will impact on recruitment and development programmes.
Because of the highly competitive market place for talent, considerable sums of money are being invested in creating a positive, recognisable enterprise branding that will attract good people. Unless the branding promotion is supported by appropriate behaviour within the organisation the money is wasted.
Many organisations spend considerable sums of money, and a lot of managerial time and cause internal dissatisfaction by regularly recruiting middle to senior level management from external sources but fail to integrate them into the organisation.
Failure to assimilate people post organisational restructure, merger or acquisition is another problem area that can be anticipated to grow in the years ahead. It is frequently the top talent that is most marketable and they leave. These people have a record of achievement and are a priority target for the corporate headhunters.
Too many resignations are just a silent protest against the performance and behaviour of frontline management. People want to feel that they belong. They want interesting and challenging work with opportunities for personal growth and development. They want open two way communication and they want to be treated with courtesy and respect.
Some work roles are quite complex and the relationships required, challenging. It can take around a year or so for people to really master their responsibilities. They want to know and clearly understand what it is they are required to do and to know what is expected of them.
They want help and support from their manager to ensure they have the knowledge and skills required to do their job. They want to know how their performance will be measured and to have the opportunity to discuss their performance and personal aspirations.
Where these conditions do not exist the likelihood of staff turnover is significantly increased.
The organisational climate for effective talent retention is dramatically impacted by the selection and initial induction and on-job training processes. The frontline manager is a critical contributor to success or failure.
We need to look very hard at the incredible demands being made on our managers in our organisations. I am not at all convinced that many of these hard working people are adequately equipped for their highly complex roles. The preparation for transition from operational or specialist activities to a managerial role is generally not well done.
We are talking about effective people management... leadership, communication, motivation, talent management, utilisation of individual and combined skills, knowledge, experience ... effective work teams, total capability utilisation. We want people to want to come to work, to enjoy what they do and to feel that their contribution is recognised and rewarded.
We talk about this. We know it is a high priority current problem. It was a problem fifty years ago. It will probably still be a problem in fifty years time. The cold reality is that there is still a gap in the corporate strategic management process. The translation of the wonderfully developed and produced vision, mission statement, objectives and strategies into operational people management processes, remains a chasm in far too many organisations.
Effective leadership and people management is the key to current and future success and the payoff is improved retention of talent and superior financial success.
For some people the organisational human resource pipeline is long. They stay for many years. Some remain until they retire from the workforce. Many participate in both professional and management development programmes. They grow in the organisation and are transferred and promoted.
Some retire on the job and block the development pipeline for others. This is a very serious ongoing issue for management and must be addressed if high potential people are to be retained.
There is a growing international shortage of competent skilled people. This situation will get worse and many of Australia's best people will increasingly be attracted to overseas positions. The average duration of employment in Australian organisations today is around 3.5 years.
There is a high level of awareness of the ageing workforce and the many implications this will have for public sector management.
It seems that there is comparatively little recognition of the impact of the projected low level of younger entrants to the workforce and the comparatively small number of people who will be in the age group from which senior executive and professional appointments are made by the end of this decade.
These realities have significant implications for HR practices and policies. It is not unrealistic to anticipate the need to develop and implement practices that will retain the knowledge and experience of the people who would normally retire from the workforce.
At the same time there is a need to really fast-track young people to increase their knowledge and their real world experience so they will be able to cope with higher level responsibilities at a much earlier age than has been the general practice in the past.
A major global challenge for senior executive management and their human resource team is to attract the people who have the capabilities and potential that reflect both the current and future requirements of the organisation. This challenge ranges through from top executive positions, professionals to people with trade and specialist skills.
An effective people development programme is a key factor in staff retention. It is one of the main reasons people remain in organisations. This means that there must be alternative routes to higher levels of responsibility.
Opportunities for promotion and regular performance feedback are two of the most critical activities for organisations that want to retain their best people.
Performance management
In its broadest context, performance management is a managerial process that links strategic planning, performance standards, individual objectives, performance evaluation, training and individual development. An integrated performance management programme provides a guide to help HR and senior corporate executives plan to develop various activities so that they will eventually come together to provide a practical link between the enterprise mission and objectives and a number of what have been regarded as human resource activities.
Far too often these activities are introduced to an enterprise in a stand alone format. They subsequently die a slow lingering and harmful death bringing disrepute to the HR function - just more activity designed to distract the line manager from getting on with the job they are paid to do!
In common usage the term performance management is frequently substituted for performance review or performance appraisal. Some of the most common objectives of staff performance reviews are to:
- Determine the competence of each person in the performance of their current duties.
- Identify specific areas in need of improvement.
- Ensure that people are placed in the most suitable position.
- Identify employee's ambitions regarding personal career development.
- Provide a basis for planning the future development of individual employees, in accordance with their capabilities and aspirations.
While the number of organisations that utilise their performance review programmes is increasing, a virtually useless version of form filling-in and filing that has become the annual fiasco of so-called performance review, continues in many organisations.
This is despite evidence that this process, particularly when it forms part of an integrated performance management programme, has the potential to be one of the most effective management tools in the entire executive toolkit. It is a critical component of successful talent management and retention programmes.
Senior executives in many countries indicate that they regard the performance review (particularly the part where they are required to have open and honest dialogue with the people who report to them) as one of the most difficult things they are required to do. Perhaps that's why so many do not do it at all!
A sobering picture is presented by the outcomes of information obtained from an international study covering around ten thousand people I have surveyed. Nearly half of the participants said that their manager was not clear, frank or complete in telling them what they thought of their work performance.
Seventeen percent of the people did not know or were unsure of what their manager thought of their work while twenty-two people in every hundred did not know or were unsure of the objectives they were expected to achieve.
A third of the participants reported that their manager provided little or no assistance in improving their performance and that they had never had a formal discussion with their manager regarding their overall performance.
Forty-eight people in every hundred said that they did not believe that their manager was sufficiently frank and complete in telling them what they thought of their work performance.
Over ninety percent of the ten thousand people surveyed said that they would welcome the opportunity to have a real dialogue about their performance and discuss their potential for progress.
The findings support what we all really know deep down! People want to know what to do and how to do it.
They want to know what is expected of them, how they are progressing, where they fit in and what their manager thinks of their performance.
They want to understand what competencies they need to enable them perform more effectively and to grow.
They want to discuss the learning and development activities that will increase their value to their employer and to help them achieve their own career aspirations.
They want to feel that the work they are doing is valued and that they are making a contribution.
How many high potential people leave organisations in silent protest about poor management?
We know that people leave organisations at different times ... but how many good people leave only because their skills are not utilised, because they feel that their contributions are not recognised and that their manager does not value or respect them as individuals or as a member of the organisational unit team?
The message is clear....
People make the difference and the successful enterprises of the current decade will have an integrated performance management programme that effectively links corporate strategy and individual performance.
Failure to do so will be marked by under-optimised organisational performance and an increasing level of turnover of current talent and high potential people.
Optimising human capital
Although we live and work in the knowledge era we still have industrial era accounting and reporting systems resulting in many firms playing a knowledge era game by industrial era rules. One of the more serious long term implications of this historic focus is a chronic pressure to under-invest in the development and management of people.
Stockmarket and shareholder pressure for short term corporate profits frequently penalises firms that invest in the development of their people. The market tends to regard investment in people as a diversion of profit and does not reward forward thinking executive teams which invest resources in the development of people to ensure that the organisation has the ongoing capabilities for future growth and success.
Sustainable profitability, particularly in high cost developed nations, requires a strong focus on human capital as people provide the only enduring source of wealth creation in the knowledge era.
Consistently effective organisations are those that:
- Have superior strategies for managing and developing people
- Focus on both individual capability and organisational capability
- Have learned to measure people as assets as well as costs
- Are able to resist the short-run pressures that cause chronic under-investment in people
The payoff is superior financial performance
A national study carried out in the United States in 2005 for the American Bankers Association by McBassi & Company explored the relationship between an organisation's investment in human capital and its overall business performance.
A number of America's leading banks participated and the study concluded that "those institutions that demonstrate the greatest commitment to human capital enjoy the greatest financial returns".
"The results of our initial study show that a bank's increased focus on, and commitment to, human capital factors should be expected to improve future financial performance", according to Laurie Bassi, Chief Executive Officer of McBassi & Company.
A further study of 750 large publicly-traded forms found that organisations with the best human capital practices provide returns to shareholders that are three times greater than those companies with weak human capital practices. (Pfau & Kay 2002).
A common cause of corporate mal-function when reviewing current enterprise performance and developing a roadmap for the future is the failure to properly integrate the many diverse activities that combine to enable the organisation to function,
Many serious problems are caused by busy executives looking at critical factors (including future plans) in isolation rather than reviewing them in the overall context of business effectiveness.
The integration of corporate strategies and human capital programmes and initiatives is frequently canvassed in the boardrooms and executive suites but not very often implemented.
The human capital capability framework (Figure One) provides an integrated approach that has three complementary tiers covering organisational results (both financial and non-financial), human capital outcomes and human capital foundations - enablers, resources, operations and systems.
Figure One: Human Capital Capability Framework
Extensive research has shown that the following categories of human capital management factors (the middle tier in Figure One) provides a core set of measures that senior management can use to increase the effectiveness of their investment in people and improve overall corporate performance:
- Leadership practices: Managers and leaders communication, performance feedback, supervisory skills, demonstration of key organisational values, efforts and ability to instill confidence.
- Employee engagement: The organisation's capacity to engage, retain, and optimise the value of its employees hinges on how well jobs are designed, how employees' time is used, and the commitment and support that is shown to employees.
- Knowledge accessibility: The extent of the organisation's "collaborativeness" and its capacity for making knowledge and ideas widely available to employees.
- Workforce optimisation: The organisation's success in optimising the performance of its workforce by establishing essential processes for getting work done, providing good working conditions, establishing accountability and making good hiring choices.
- Learning capacity: The organisation's overall ability to learn, change, innovate and continually improve.
By focusing on and measuring these key attributes organisations are able to:
- Link "human capital" to their business results
- Pin point with considerable precision the specific aspects of the work and learning environment that drive business results-both for good and bad
- Create road maps for the human agenda - the development and management of people - that will have the biggest impact on their business
- Shift their focus from cost cutting to value creation
- Become stronger organisations and better places to work
Australia's HR Management Issues
A study of the ASX100 companies carried out by Human Resources magazine (March 2006) ranked leadership, talent management and succession planning as the top three issues currently facing Australian human resource practitioners.
- Leadership - development and capability
- Talent management - attraction and development
- Succession planning and management
- Recruitment and retention
- Remuneration, reward and recognition
- Culture - change and development
- Performance - management and improvement
- Skills, flexibility and diversity
- Employee engagement
- Restructuring and integration
IBM Global Human Capital Study
The 2005 IBM Global Human Capital Study identified three major human resource challenges:
- Improving performance management
- Increasing adaptability/flexibility
- Improving competencies/skills
The study also listed the following initiatives planned by HR to meet their CEO's expectations:
- Organisational transformation
- People development
- Talent management
- HR transformation
- Leadership development
- Recruitment initiatives
Taking action
Hanging corporate policy statements, employee charters and guides to managerial practices on office walls and including them in employee booklets, staff videos and annual reports is not enough.
Unless these are given real life in terms of day to day managerial leadership they are a complete waste of time and can have the most negative outcomes.
The following is a short list of achievable basic requirements for organisational effectiveness and talent retention:
- Clarity of expectation and accountabilities
- A clear focus on objectives and priorities
- An effective recruitment, selection and induction process
- A well trained management team - from the top to the frontline
- An effective performance management programme
- Regular dialogue between manager and staff about performance and career aspirations
- Recognition of the need for reasonable work/family/lifestyle balance
- An HR function that is embedded in the business - and works closely with line management
- An organisational culture that encourages team work, trust and recognition - courtesy and good manners
- Recognition of critical organisational and individual competencies and capabilities
- Learning and development programmes that reflect the needs of the organisation and its people
- Communication - with consistency and clarity in communication
So how long will you keep people in the organisational pipeline... and how effective will they be?
What role HR people will play will depend on their competence and effectiveness!