Talent management framework

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1 McDonald s McDonald s has a talent management framework that covers its 300 most senior managers. As part of its talent process, the company identifies two employees with the potential to fill each of its roles at director and executive level. To increase the proportion of women employed at director level and above, McDonald s has launched a Women's leadership development programme. This initiative was a finalist in the talent management category of the CIPD People Management Awards McDonald s believes that talent management is an effective means of assessing and developing its people resources and business capability. Talent management aims to deliver on our business objectives today and tomorrow. It s about making sure that we ve got the right people in the right place at the right time to do what McDonald s needs to do. But, equally, it s about ensuring that in three or five years time we re in an even stronger position, says Head of Talent and Education Jez Langhorn. The company s current talent management process is now in its fifth year. McDonald s has always been good at talent management, although it never called it by that name. We have a great track record of developing people, giving them opportunity and bringing them through the system, explains Langhorn. However, we are now more scientific about how we do it. We ve brought more academic rigour to the talent management process. McDonald s has established a talent management framework to identify and develop talent in its most senior roles. But Langhorn maintains the company also has depth to its talent processes. Pointing to the company s education and training initiatives, such as its apprenticeship programme, he says: For the longterm future of our business, we re trying to attract more of the right people and retain them through the system. Clearly our apprenticeship programme is not aimed at directors but in ten years time we could have McDonald s directors who started at the company as apprentices. Talent management framework Each year, McDonald s reviews the potential and performance of its top talent the 300 or so most senior managers using its talent framework (see the box on page 18). The framework comprises the following processes: organisation development succession planning performance management recruitment team and individual development talent solutions talent challenge and matrix review retention. Organisation development The first part of the framework, organisation development, seeks to ensure that, strategically, McDonald s departments are structured in the most effective way, with the right people working in the right areas. We need to be agile and able to respond to the needs of our customers, franchisees and employees. We don t want our people to work in silos so when we kick off a new project now we set up crossfunctional teams to work on them, explains Langhorn. He continues: For example, we introduced a new uniform to our business two and a half years ago. I led a cross-functional team that had members from the people, supply chain, finance and operations teams, and a franchisee. It had representation from the large parts of the business. We do more and more projects like that, and the key is getting the organisational design right. Succession planning McDonald s sets itself a target of having two people who are talent rated in line to succeed to each of its leadership positions at executive and director level. To identify suitable successors, the company rates all managers on the basis of their potential to progress using the following scale: ready now : employees who are ready for a promotion within six months ready future : those who are ready for a promotion within six months to two years McDonald s Profile McDonald s employs 80,000 people in the UK, the vast majority of whom work in the company s 1,200 restaurants. It spends 30 million a year on training and development. Currently, some 6,000 employees are taking apprenticeships and by the end of ,000 employees had passed the Management Development Programme, which is equivalent to an A-level qualification. 16 IDS HR Study 918 May 2010

2 McDonald s Developing women leaders at McDonald s McDonald s Women's leadership development programme was a finalist in the talent management category of the CIPD People Management Awards The initiative aims to provide a stream of female middle managers with the capability to move into senior management roles as and when they become available. The company also hopes to boost the confidence of women across the business by providing strong female role models. Background The gender split among McDonald s restaurant crew is about 50/50; for its business managers, the divide is 60 per cent men, 40 per cent women. For retail store managers, this is a pretty good split, says Jez Langhorn, Head of Talent and Education. However, Langhorn admits that the percentage of women drops with seniority. Four years ago, a talent management review revealed that at director level only 23 per cent of roles were filled by women. At midmanagement level, it was still about 35 per cent female, but it tailed off at the next step up that of director level, he adds. McDonald s solution to this gender imbalance was to roll out its Women's leadership development programme. It was aimed at junior to middle managers where we had more women, with the specific aim of giving them the tools they needed to get into those senior roles, explains Langhorn. How it works Each course is able to take between ten and 12 women. Selection is dependent on an employee s talent rating: McDonald s considers women rated ready now or ready future. We are making a significant investment in terms of time and money in these women and so we re only looking at those with the most potential, says Langhorn. Before a course starts, the women s managers attend a briefing that explains the thinking behind the programme. These managers also have to complete a survey about the employee and rate her performance. They carry out the same exercise after employees have completed the programme. Each course runs over six months, in which time the women will do eight days development work. A specialist consultancy, Reporter, runs the programme at a neutral location. Having the course run by non- McDonald s people and being outside the McDonald s environment allows the women to open up much quicker and focus on the course, not work, explains Langhorn. The course content includes group work, one-to-one coaching and a session with an image consultant. Among the subjects covered are personal impact, assertiveness, and communication and presentation skills. At the end of the course there is a graduation dinner, which members of the McDonald s executive team attend. Benefits On completing the course, the participants provide feedback. So far, 74 per cent have noted an improvement in self-awareness and 75 per cent an improvement in their ability to use positive language in communication. Fifty-one per cent of managers noted an improvement in the confidence of employees who had participated once they were back at work. The Women's leadership development programme is now in its fourth year and has given a boost to women s representation in the higher levels of management: at director level, 30 per cent (compared to 23 per cent) of positions are now filled by women. Some of the women have found it a life-changing experience. One of our operations people, when she was receiving an important visit from the company hierarchy to her restaurant, would hide in the back room. Now she s hosting visits from around the world. It took the course to unlock this confidence in her and give her the skills to do this, recalls Langhorn. This year, women managers from Ireland and the Nordic countries (with the UK, these areas make up McDonald s northern Europe division) are joining the programme. longer term : those who are ready in five yearsplus current level : employees McDonald s considers to have reached their highest position in the organisation. Employees who are new to the company or have been in a role for only 12 months are not given a rating, Instead, they are termed new to position. The two managers earmarked for each executive or director role are taken from either the ready now or ready future categories. Progression cannot be guaranteed, however, even for employees rated as ready now : high-potential employees are only promoted when a position exists for them. Performance management Under McDonald s annual performance management system, employees are awarded one of four ratings on IDS HR Study 918 May

3 the basis of their performance over the course of the year: 4 exceptional 3 exceeds requirements 2 some improvement required 1 unsatisfactory. These ratings are directly linked to an employee s annual pay increase and bonus. For example, employees rated 1 receive no pay rise or bonus and those rated 2 receive only a percentage of the maximum possible rise and bonus. The company operates a forced distribution curve in each business unit, whereby 20 per cent of people receive a 4 rating; 70 per cent receive a 3 rating and 10 per cent get a 1 or a 2 rating. It then holds calibration roundtables with each member of the executive team to ensure there is consistency across the business. When the ratings are approved, line managers then inform their staff of their ratings. Performance ratings are an important part of McDonald s talent management process. The performance ratings of senior managers are used in tandem with an assessment of their potential to plot their position on the company s performance matrix (discussed below). McDonald s talent management framework Recruitment Recruitment is considered if the company is unable to develop a successor for a senior role. However, McDonald s also believes that bringing in fresh blood can boost business performance. We ve seen great benefits form recruiting external talent, says Langhorn. Matching them with people developed through the system gives us a balanced workforce. Team and individual development As part of the talent management process, McDonald s looks to develop the capability and competence of both individuals and teams. We have a very structured curriculum for people training in restaurants up to business manager level, but at more senior levels most learning is done on the job, explains Langhorn. At McDonald s, the only time people attend courses at director level and above is where there is a recognised development need for them that a course will meet. Talent solutions McDonald s formally collects talent data from line managers at performance review on its senior managers twice a year and stores it online on its new Oracle HR system. This information is collated and discussed by the 13-person UK executive team at two talent days each year. All managers from restaurant manager level and above are included in this talent review. However, line managers are encouraged to use the same process, albeit informally, for more junior managers. Langhorn s focus as Head of Talent and Education is on the executive and directors: I look at the data for the levels below but not on an individual basis. When it is setting development plans for its senior managers, McDonald s uses its talent solutions model (see the box on page 20). This comprises three development stages: prepare for future roles; enhance performance in current role; and transition to new role. Development activities are selected that will help an individual achieve one of these objectives. For example, one means of development is through mentoring: each year, every member of the executive will mentor someone in the business. A mentor is given the job of helping an individual complete one of the three parts of the talent solutions model. Talent challenge and matrix review Each year, McDonald s plots its business initiatives on a talent challenge graph according to their impact on company profitability. On the other axis of the graph, the company plots the capability of its people to carry out these initiatives. Typical initiatives may include 18 IDS HR Study 918 May 2010

4 McDonald s McDonald s UK performance matrix Potential Current level, ready future or ready now Lowest 1/ 3 Middle 1/ 3 Highest 1/ 3 Highest 1/ 3 Middle 1/ 3 4 Deep pro Highest performer, lowest potential usually this cell contains the very deep technical professionals or functional managers who do what they do extremely well but don t want to or can t do anything else. These pros are very valuable as long as that technology or unit or function is mission critical. If there is a shift in technology or emphasis, the people in this cell would be in jeopardy to move to cell 2 or even cell 1. Possible action: Help keep current in speciality and have a treatment and retention plan. 7 Utility pro Highest performer, middle potential this is a very valuable person to the organisation. Does extremely well at what she or he is doing today plus has potential to do more. Possible action: Place in mission-critical jobs and see if you can interest the person in working on a learning enhancement plan to move to a 9. Apply a treatment plan so the person has no reason to leave the organisation. 9 Consistent star Highest performer, highest potential this is the star everyone is looking for. Consistently performs well in anything the organisation puts him or her in, with room to grow more. Possible action: Apply a treatment and retention plan and continue to challenge with a succession of diverse assignments. Rated 1, 2, 3 or 4 Performance Lowest 1/ 3 2 Future pro Middle performer, lowest potential probably solid performers in current roles. Could progress higher in speciality and become a 4. Could enhance potential and become a 5. Possible action: Steep in their technology. 1 Take action Lowest performer, lowest potential, not doing well now or in the past and doing significantly better in the future is not likely. It would take a major skill building programme. Possible action: Probably need to take some action, remove from the organisation, or find a role that better suits his or her skill set. 5 Utility player Middle performer, middle potential can probably fill a number of roles at a reasonable level or performance. Could become a 7 or move to the 8 9 path. Possible action: Use in temporary and key positions until a 7, 8 or 9 becomes available. Have the person work on a learning enhancement plan to try to move over to an 8 or develop deeper skill and knowledge in his or her field to move to a 7. 3 Future utility Lowest performer, middle potential may be in a new assignment, may not be well known, may be new to company. Has some potential, possible 5 in the near-term future. Possible action: Careful next assignment to increase performance and some learning enhancement work to improve potential. 8 Future star Middle performer, highest potential this person may also be new to the organisation or new to the job. Possible action: Continue to move through diverse developmental assignments and apply a retention plan to make sure the person stays with the organisation. 6 Rough diamond Lowest performer, highest potential may be a new hire with lots of potential, new in an assignment or possibly misplaced. They may have done well in previous jobs but are really struggling with this one. Organisations sometimes report that this cell identifies minorities languishing in the wrong role or with a less than stellar boss. Possible action: Place next in a developmental job and keep there longer than usual so he or she can increase along the performance dimension and become an 8. IDS HR Study 918 May

5 McDonald s talent solutions restaurant openings or refurbishing existing restaurants. It s a fairly simple model but it shows us where we need to either improve the performance of people in particular roles or recruit new people to give us the skills we need, explains Langhorn. The talent challenge graph maps overall people capability against business aims. A separate model, the performance matrix, assesses the capability and potential of senior managers. This is the tool that McDonald s uses to identify individual talent. Mapping potential against performance On a performance matrix (see the diagram on page 19), McDonald s maps the potential and performance of its senior managers using four performance ratings and the potential ratings of current level, ready future and ready now. Each of its 300 most senior managers is placed into one of nine boxes. Each box is devoted to an employee type, such as a rough diamond, who is judged the lowest performer but with the highest potential. He or she may be new to the company, new to an assignment or possibly misplaced in a role. The boxes contain an explanation of the performance and potential for each employee type, plus possible development actions. For example, for future stars the plan is to continue to move through diverse developmental assignments and apply a retention plan to make sure the person stays with the organisation. When we do our annual talent review it is the talent challenge graph and performance matrix review that provoke the most discussion. They are the key to the talent management process, says Langhorn. Retention The talent management process is not simply about identifying and developing talent it also triggers rewards designed to help retain the top talent. Consequently, senior managers performance and potential ratings influence the rewards they can receive, including long-term incentives and stock options. Business and employee benefits From a business point of view, Langhorn says McDonald s is in the strongest position ever in terms of our talent pipeline. We ve got the right people in place and we re offering opportunities to people to develop and progress. He adds that the business has enjoyed a good few years: We ve just had our second year of double-digit sales growth. Talent management isn t the sole reason for that but part of the reason for this [success] is because we have people of high capability in the business. Employees like the fact that there is no parochialism and that there is a talent process in place that is fair. They also appreciate that there is equality of opportunity. 20 IDS HR Study 918 May 2010