Linking Talent to Value December 5, 2017
Organizations must evolve to meet the demands of an exponentially changing environment The speed, pace and depth of today s changes are unlike anything we ve experienced before. Change is no longer linear It is exponential Talent is the only sustainable source of competitive advantage CEOs consistently rank it as a top 3 concern Does your company have the talent to capture value in this changing world?
Challenges abound Challenges we see in talent management Recruiting at scale effectively and efficiently for diverse talent profiles is increasingly competitive and resource-intensive, still largely relying on individual instinct and judgement Significant investments in training and leadership development with lack of clarity on impact on performance and return on investment High levels of attrition with emphasis on compensation as key lever, costing organizations productivity and feeding cycle of recruiting and training expense Limited insight into who top performers are and what makes them that way, clouding ability to differentiate and monitor performance Managers struggle to motivate and manage effectively given uneven people leadership skills and operating pressure Ability to drive change at scale limited by multiple layers of management and overwhelming number of priorities Employees rely on training recall and instinct to make judgements on how they engage clients and make decisions Management by we ve always done it this way and individual beliefs, preferences versus evidence of what makes a difference Trying to do too much in the interest of finding what works Too little behavioral science used to inform who you hire and how you manage them
The role of HR is evolving G3 CEO, CFO & CHRO Strategy How you create value Culture How you run the place Organization Design How you set up who does what CHRO Three jobs Talent Management How you embed digital and analytics from hire to exit Linking Talent to Value How you connect talent and organization decisions to business outcomes HR 3.0 / HR team How you set up HR for success
What s changed: The state of play in People Analytics is shifting Innovation Conceptual understanding that advanced analytics and digital tools can be applied to HR, people and organizational data Early adoption Experimentation with use cases across HR challenges; companies building preliminary functions, experimenting with tools Crossing the chasm Focusing people and organizational analytics on explicit value creation, leveraging digital solutions and embedding analytics into core processes and decisions
What s changed: Data and machine learning create opportunities to get underneath and measure how employees drive outcomes in organizations EMPLOYEES TRAITS People and business outcomes EMPLOYEES ENVIRONMENTS ADVANCED ANALYTICS EMPLOYEES PERCEPTIONS EMPLOYEES BEHAVIORS Retention Promotion New client growth Cross-selling NPS/ OSAT Profit growth Others
There is potential to drive value with new capabilities Create value by New capabilities Today s focus Talent management Linking Talent to Value / Driving Performance 1 Planning and acquiring critical capabilities at scale to deliver the business strategy 2 Attracting and hiring the best talent and accessing new talent pools 3 Identifying what makes exceptional managers/ leaders/ performers to inform placement, development, etc. 4 Unlocking unconscious blockers of diversity and identifying tactical actions 5 Keeping the best players, reduce cost of turnover, and better plan for future talent needs 6 Placing the best talent into the most important roles ( matching talent to value ) 7 Pinpointing predictors of business outcomes across talent value chain to double down where it matters Diversity goals informed by fair share assessment of labor market and diversity blockers identified and unlocked Talent to Value deconstructs the value agenda to identify most critical roles and capabilities, using evidence to match individuals to roles
Contents Driving diversity with Analytics Talent- Linking Talent to Value Case example
Case example: Pharma company focused on driving diversity with data Focus of this doc From To Limited data to support HR decision making Wanting to improve diversity but maintaining BAU Questioning whether attrition is an issue to worry about Sourcing through traditional target schools & institutions Hearing anecdotal stories on the lack of promotion amongst certain segments of the organization Wondering about the ROI of learning programs Data-driven analysis to support HR decisions Creating tangible & customized diversity goals for each business leader based on industry benchmarks and BU input Uncovering the key profiles of employees who leave the organization Developing new strategic partnerships through enhanced understanding of graduates market & external labor market Identifying actual clusters of individuals who are promotion-worthy but haven t been promoted Understanding basic outcomes of training programs & strategically pursuing further analysis
Promotion Analytics statistics 100+ 19.9k 80 records studied 1 Employee Hypotheses Variables generated and tested sourced, engineered, and analyzed 2 Models built 2 1 Records classified in the 4 levels (professional, manager, E4, and E5+) in the Jan 2015 & Jan 2016 employee detail snapshots 2 One model for the US population and one model for the non-us population
We started by identifying the relationship of individual drivers to promotion status Interesting patterns No noticeable relationship Theme Variable patterns Model variables Individuals features Lower levels are more likely to be promoted until a certain point Experience matters Level 1 Level 2 Level 3 Level 4 Level 5 Level 6 Level 7 Salary Less than 1 year in position Positive relationship US PRELIMINARY Negative relationship Non-US Individuals environments Individuals behaviors Opportunity is available within org/region Global perspective, performance help Job family Engineering Country A, Country B, Country C International rotations Rating The models helped identified both promotions and individuals who should have been promoted
We isolated the top promotion-worthy individuals to understand their characteristics Did not receive a promotion Promotion model Distribution of promotion probabilities Probability (0-1) 7661 Received a promotion 1568 Individuals behaviors Individuals features 1051 720 Individuals environments 0-10% 331 10-20% 20% + We clustered on the 720 promotion-worthy individuals who the model identified had a 20%+ probability of earning a promotion (2.5x over the average promotion rate of X%) but who didn t get promoted
Within the promotion worthy group that didn t receive a promotion we identified 4 clusters of individuals Women without sponsors Junior employees losing momentum Diverse and dissatisfied Content highperformers Highly rated women with high tenure who are generally active in committees, etc. High proportion have inconsistent managers Lower band employees who are not capitalizing on their opportunity Ratings are slightly below the average of those who received a promotion Diverse talent with highest average time in grade Ratings are slightly below folks who do get promoted Have incredibly low survey score on particular question Largely white, male population who have ratings in line with those who receive promotions and feel satisfied with their manager Average a nearperfect score on particular question Client developed actions specific to each cluster to help with promotion bottleneck, e.g., helping new managers of women without sponsors prepare and syndicate case ahead of reviews
Contents Driving diversity with Analytics Talent- Linking Talent to Value Case example
After looking at 180 investments, a PE fund determined that those that were most successful strategically linked talent to value 2.2 44% 15x 2.5x Average number of years to replace CEO Success rate of CEO from start to finish Cost of failure results in 10 15x annual CEO compensation Return from 80% of investments that hit first year targets Linking Talent to Value is based on actions of leaders of the 22 most successful investments
Key insight: Value driving and enabling roles can be found across Critical roles the organization Traditional approach Talent to value approach New roles Most important roles are typically defined by hierarchy Within a level, all roles in the hierarchy given equal importance No way to ensure that the best talent is in the most value contributing roles SOURCE: Illustrative- Based on previous client engagements on T2V Most important roles are defined as those that contribute most to value creation, for example based on our previous work 10% are CEO-1 60% are CEO-2 20% are CEO-3 10% are new roles Not all roles in the same level are given in the same importance (40-50% of CEO-1 and CEO-2 made the list)
The Talent to Value approach provides leverage by linking business value to the most critical roles and managing these roles actively Critical actions Understand the 1 Value agenda Identify most 2 important roles Get the right 3 talent in roles Operationalize 4 and mobilize Align on organization s ambition target Deconstruct value drivers across BU s and Functions to achieve the ambition Create a rankordered list of 25-50 critical roles that have disproportionate impact on the value agenda Articulate their specific Jobs To Be Done Assess fit and match talent based on the requirements (KSAEs) for each role Mitigate gaps for each role and ensure capability to support roles Diagnose and close the gaps in talent system in service of the most important roles Prioritize real-time development and rigorous performance management of talent in critical roles How it provides leverage Strategic clarity Role clarity Personal ownership Sustainability Linking talent to value should occur as frequently as strategic imperatives change strategy is only theoretical without the talent to execute
Mapping the HR transformation journey- Evolution of HR Nature of business support 1.0 2.0 3.0 Generalist Personnel Business Partner HR Value Coach Talent + Value Expertise Training Comp & Benefits Center of Expertise Business Solutions Local Duplicated Learning Talent Management Demand Change Management OE / OD Talent to Value Org Shaping (Cost, Growth, Agility) Mobilization Transactions By Hand Excel Local Duplicated Employee Self- Service Applications Systems Data Quality Analytics Actionable Insights
Contents Driving diversity with Analytics Talent- Linking Talent to Value Case example
Tool Manufacturing Co Value Agenda Bold Growth Ambitions Will Require a Significant Increase in Leadership Capacity BU 1 BU 2 BU 3 $1.8B 17% 2016 $2.1B 18% 4-6% Organic Growth 9-12% Total Revenue CAGR ~$5-6B 25% 2022 Vision ~$3-4B 16% $7.5B 65% $11.4B Revenue $5-9B Acquired Revenue $22B Revenue $12-14B 59%
Tool Manufacturing Co Talent Demand $11.4B Growth Ambition $22B Dramatic growth expected to come from 3 primary drivers International Growth Acquisitions Digital Capacity Today s value driven through a tight group of ~15 leaders Capabilities Additional Leadership Capabilities Required to deliver on the ambition Tomorrow s value will be driven by a broader group of ~50 leaders - a 3X increase in leadership capacity Global DNA Cutting- Edge Commerci al Innovation & Disruption Mindset Acquisition Value Capture Digital DNA Tri-Athlete GMs Cultural Diversity Short & Long-Term Focus
Tool Manufacturing Co Talent Supply 2022 Vision for the Leadership Factory To meet the talent demands required in the next 5-10 years, the company is building a world-class supply system that directly links talent to value Leadership Model with clear expectations tied to future value Source diverse talent strategically and rapidly Onboarding with 12-month Sprint to Value; Lead Industry Top Talent Retention Proprietary and class leading university Hyper-Personal Development Approach Dynamically match talent to drive value Rigorous performance tracking to ensure talent systems drive value
Tool Manufacturing Co Key Insights Across five BUs and five corporate functions, 169 roles identified Leaders identified 34 new roles or roles with greatly expanded scope 54% of roles with identified org levels are CEO-3 or below 20 roles (12%) focused on digital, IoT, advanced analytics, and agile manufacturing Emphasis across BUs and functions on importance of BD and integration roles, with 10 such roles identified Recognition that many roles will require leaders to have new skills or experiences to meet needs of growth (e.g., global experience) Across BUs, several roles could benefit from global scale (e.g., efficiencies from shared services, global engineering/product roles) Particular functions are seen as leadership factories that develop and export leaders to other parts of the business Most BUs highlighted breakthrough innovation roles, and there was discussion on when and where to broaden beyond product to include business model innovation and disruption