Talent Management in Asia

So, I’m finally trying to catch up on my previous two weeks away (then I’ll have to catch up on what I’m doing now!). Singapore first.

I love doing workshops like this – I love talking about talent management, I love the different experiences and perspectives you get in a group created from people from six countries, and I particularly love putting all of this together in South East Asia.

I’ve already posted on the war for talent in China, and the Chinese case studies we were using for the workshop, but this war is critical throughout the rest of Asia as well.

It faces the same challenges we do in the rest of the world - for example an ageing workforce (see slide), but does so in spades.

This was highlighted recently in StepStone's 2008 Total Talent survey, researched and prepared by the Economist Intelligence Unit.

The report of the survey finds that:

• 44% of business leaders believed the Asia-Pacific region offered their business the best opportunities for revenue growth;
• 52% of companies said that Asian candidates’ pay expectations were too high, compared with just 42% in North America, and;
• 55% of companies stated that candidates in Asia lacked appropriate skills, compared with 47% who claimed the same for Europe.
  

The report highlights four major recruitment and retention obstacles cited by executives in Asia:

• Rising wage and pay demands among potential candidates
• A lack of suitable candidates to recruit and a lack of appropriate skills among potential candidates
• A perceived lack of career opportunities among current employees
• Employee perceptions that pay and benefits could be better elsewhere.
  
  

Like China, this is a market in which the demand for talented individuals far outweighs the supply.

Stepstone conclude:

“Many companies will have to prepare themselves for a huge battle for talent, one that is even tougher than in Europe and North America. Asia is seen as the engine for growth but without the right people, businesses will see their engine splutter and may not get out of first gear.

Without a clear, formal talent management strategy in place, companies will find it difficult to get – and more importantly, keep – the people they need and may
struggle to realise the growth they are promising their shareholders.”

Given the extent of this challenge, companies in China and Asia may need to look at how they create as well as add value for their businesses through talent management.

For example, at the workshop, we considered one company operating in a traditional sector and one suggestion was that they needed to focus more on more innovative business areas, possibly through partnerships with western organizations, in order to attract the sort of talent they required to grow the more mature part of their business.

More coming soon

Sorry I've been out of touch for a while - apart from the recent link to the HR Carnival, it's been almost a week since I posted last.

As you may know, I've been busy chairing, presenting and facilitating, out in Singapore, and now Dubai, and have had lots of business meetings too. It's been busy, busy, busy!

(And I will admit that after the British Winter, the spare time that I've had has seemed a lot better taken up down at the pool than in my room on my laptop.)

Actually I knew blogging would be a problem, and this was one reason I've recently started Twittering (I've got a post on this to come). Those of you who view my blog rather than get my feed, can see my tweating there (or please follow me). But I've not been able to tweat as Twitter is banned here (and I've not yet fixed up to tweat from my phone). It's odd as Facebook and all the other common suspects seem to be thought OK.

But I can get into Blogger, and will begin to catch up soon - I've got loads of great stuff to come.

To those of you I've met on my trip (hello!), the additional information I promised is coming too.

Best wishes, Jon.

HR Carnival 30

Another Carnival, this time hosted by Rowan Manahan at Fortify Your Oasis.

Go on, you know you want to look...

Talent Management in China

Rather than India, I'm using a case study of some Chinese companies for part of my talent management workshop tomorrow.

I'm hoping doing this will emphasise and reinforce some of the points I've been making today, because my understanding is that the talent challenges there are actually fairly similar to those experienced elsewhere, just even more so.

In fact, the Talent in China blog has just quoted some research by Dr Jos Gamble of Royal Holloway, University of London:

"He essentially says that China is much like any other market, and that adjustments should really only be made for institutional features, like the labor market. Other than that it is business as usual. You operate as you do overseas, except when there is a specific reason why you can’t, like a law or a deeply ingrained practice."

These 'institutional features' are of course fairly significant for HR though.

This is why, at the CIPD's conference last year, Geraldine Hayley at Standard Chartered explained that "China is different from everywhere else" and therefore that they "do quite different things there".

She explained that the bank are growing their 3000 employee workforce by 50% this year. No mean feat given that they have 30% turnover with over 50% of employees having been with the bank for less than a year and 20% departing within their first year of employment for more money and better prospects.

And the challenge isn't helped by the fact that there are not experienced bankers in China. So they are having to create a new 'talent infrastructure': finding people who have never thought about doing banking, selecting them for their talents, training them up and hoping that they will hit the ground running.

They do a lot more development in China than anywhere else - partly to engage them and partly to provide the required capabilities.

And they're engaging people from all around the world to go to China - it doesn't matter about language skills - they just need "bodies on the ground".

China Business also did a good podcast on some of these challenges.

And in my HR.com VIEW webinar last year, I referred to some of McKinsey's research on global talent management challenges in China and elsewhere.

In an earlier 2005 article, the firm looked at the example of engineers:

"China has 1.6 million young ones, more than any other country we examined. Indeed, 33 percent of the university students in China study engineering, compared with 20 percent in Germany and just 4 percent in India. But the main drawback of Chinese applicants for engineering jobs, our interviewees said, is the educational system's bias towards theory. Compared with engineering graduates in Europe and North America, who works in teams to achieve practical solutions, Chinese students get little practical experience in projects or teamwork. The result of these differences is that China's pool of young engineers considered suitable for work in multinationals is just 160,000 - no larger than the United Kingdom's. Hence the paradox of shortages amid plenty."

The Economist comes to a slightly different conclusion:

"China's biggest problem is a culture of deference - a culture that was refined by the mandarin tradition and then reinforced by the Communist party. For many Chinese it is bad form to question superiors. So far, China has been much more adept at borrowing other people's ideas than producing its own, particularly when it comes to high-level innovation. But there are plenty of other problems, ranging from poor English-language skills to week intellectual-property rights. Many Western companies are rightly nervous about developing new products in a country where ideas are routinely stolen."

Whether it's skills or culture that are behind the talent challenge, this does mean companies need to think about talent management a little bit differently.

In a Sloan Management Review article, Making People Decisions in the New Global Environment, Claudio Fernandez-Araoz, author of Great People Decisions suggests companies (particularly those in China and India) need to:

• Adopt a new mind-set, responding to the dramatic challenges of hiring in one year the number of knowledge workers they used to hire in a decade


• Cut the red tape to attract the best candidates who are in very low supply and in high demand


• Implement best practices such as over-hiring talent.

It's this new mind set that I think is key to coping with the talent challenge in China (and elsewhere).

I'm looking forward to have a good conversation about this tomorrow - and learning more about the issues from some of the delegates based in, and with business operations in China (as well as similar challenges from those based in Singapore, Malaysia, Indonesia, Thailand, Sri Lanka...)

More on the language of people

I've previously encouraged HR functions not just to learn the language of business, but to help the business learn the language of HR, or the language of people.

Well, I'm in Singapore to deliver a workshop on talent management and I've been looking at a couple of Asian case studies I might use.

One of the best is a Stanford case study on Indian outsourcing firm, Infosys: 'Building a Talent Engine to Sustan Growth'.

This outlines Infosys' sophisticated approach to human capital management and describes the role of Mohan Pai as head of HR. Pai was previously CFO and describes the quick shift in mindset he made in moving to HR:

"As CFO, he had regarded employees as economic assets. In his new role, he also had to view them as emotional humans. He noted the difference in perspective, saying, "For me, the big shift happened because every time a person walked into my room, I looked at the person's net present value. Now, I'm head of HR, and the next person who walked into the room, I see that person as a bundle of emotions, as a person with aspirations, as a person whom I hired and who has to deliver value.' "

Now Infosys is a hugely successful and well led organisation which Pai likens to a human capital supply chain company. But wouldn't it be even more successful if its CFO and line managers had Pai's approach to people (a willingness to engage with their emotions and aspirations), not just the folks in HR?

Just a thought.

HCM Room 101

I hope you've found my posts on measurement interesting. Before I move on, I want to refer to what I think are the two main myths concerning measurement in HCM.

As regular readers of this blog know, I think measurement has an important role in HCM, and that's why I devote so much attention to it. But it's only ONE important area, not THE important area. And you don't need to do much or I guess any measurement to achieve great improvements in human capital from better management of people.

So these three statements really annoy me:

1. What you measure is what you'll get.

Actually, you'll get (or are more likely to get) what you pay attention to. Measuring something helps you pay attention to it, but you don't need to measure it. Just talking about it, putting it as a regular agenda item in meetings, and taking action about it when necessary will work just fine.

Of course, in some organisations (particularly those with a strong financial focus), it is difficult to get things attended to unless they are measured. But then so many things in HCM can never be measured that well, that at some point, further improvements can only be made by educating the business to be more comfortable with ambiguity (this is part of encouraging the growth of language of people).


2. If you can't measure it (human capital), you can't manage it.

Why? Of course you can. Yes, the more intangible an element of human capital is (and probably the more important), the harder it is to both measure and manage. But measuring it (remembering that it is inherently unmeasurable) isn't necessarily going to help you manage it. And in fact, an increased focus on measurement in recent years doesn't seem to have resulted n many improvements in the way that people are being managed.

Much more than measurement, the strategic management of human capital depends on a strong people focus (around a clear organisational capability), best fit people management practices, competent and motivated managers etc. If you don't provide these, then you can't manage human capital.


3. ROI is the holy grail.

No, most often it's not, it's a distraction from what's important. Why?

• Because more often return on expectations is a more appropriate measure


• Because when the business asks for a ROI it mostly indicates they don't think there is one. HR would do much better to improve the strategic impact of their work, than bother calculating a ROI which will probably be dismissed anyway.
  

What are your pet hates you would like to put in HCM's room 101? (suggestions will be condemned to room 101 at your host's discretion).

ROI on coaching

One of the main ongoing debates in measurement / business benefits / ROI is in connection to coaching.

The CIPD's 2008 Learning and Development survey finds that 71% of organisations use coaching in their organisation (up from 63% in the 2007 survey).

There are so many different levels and approaches to coaching (for example, between line managers using coaching as one approach to supporting employees, internal coaches working with those identified as talent, and executive coaches working with senior leaders) that it is hard to comment on these findings.

But perhaps the most important difference between these approaches is between transactional and transformational levels of coaching.

At a transactional approach, providing coaching to achieve a certain objective, measurement and ROI may be relatively easy to calculate (the difficulty may be identifying investment cost if this is provided internally, but the benefit is likely to be expressed in fairly definite and financial terms).

I think ROI is a lot harder to calculate for transformational coaching - helping someone achieve their potential. Yes, the business' objectives provide an important context for the coaching, but this is provided to deliver a certain improvement in human capital, not to achieve a certain financial result.

Businesses can use a value chain to predict the financial impact of particular human capital outputs, but there are likely to be so many estimates and assumptions involved in doing this, that these numbers cannot be used with any level of confidence.

In particular, coaching is unlikely to be the single source of any improvements in business results, so organisations are often encouraged to calculate a "percentage impact of coaching".

"Calculate the likely impact of coaching, taking into consideration other organisational variables. For example, if other initiatives for increasing profit are to introduce better IT systems, recruit more sales staff and improve distribution, then look at the likely impact that coaching could have on these. Is it 33% for each one or is it 20% for one, 30% for another and 50% for the other? Use this data to define an overall 'percentage impact' of coaching. (It is important to point out that this is an art and not an exact science, so it is best to get all parties involved in a discussion to decide on this figure.) Generally, the percentage impact of coaching can be anywhere between 20% and 100%. The fewer organisational variables involved, the bigger impact the
coaching will have."

Some organisations also try to identify a degree of confidence in this estimate, and work this into their ROI calculations, but people are generally so poor at estimating either of these figures, that it doesn't really make much sense to try to do so.

In a Training Zone article earlier this year, coaching is a fast way to loose money than burning it, Gary Platt suggested that organisations need significant evidence of coaching if they are going to ensure that investment is effective:

"Would you be happy going to the garage and asking for an oil change, pay for it and then discover the oil hasn't been changed? No. Then why pay for a coaching initiative that doesn't deliver? The coaching fraternity is awash with grandiose claims for the benefits of its product so this challenge shouldn't be a problem, provided of course clear goals and targets are agreed up front and a clear and equitable system for tracking progress is installed.

Corporate coaching is not the bad boy of the developmental world but it is an expensive and fairly new approach. It would be highly beneficial to organisations and coaches if there was more clarity about what its purpose and contribution will be within the business, and in that way prove it is a financially viable and responsible approach."

The problem with this is that the analogy doesn't actually work that well. Coaching people isn't the same as giving a car an oil change. You can put oil in a car and nothing much is going to happen other than the car continuing to go. If you coach your employees, you can gain many different, often unexpected and intangible results.

Given these issues, return on expectations (using the output - human capital, rather than the impact - business results) is often going to be a better measure than ROI.

This shouldn't be taken to mean that organisations can't or shouldn't do formal evaluation of their coaching. It is a worry that the CIPD's survey suggests only 8% of organisations evaluate the results of coaching via a regular formal process at an organisation-wide level. Organisations would benefit from doing more.

But this formal evaluation should be a process of conversation, not a number.

HR Carnival 29

The latest carnival is back at Wally Bock's Three Star Leadership blog.

Do check it out.

The Impact of Reward in the NHS

We know that reward has a relatively minor effect on employee performance, and might therefore expect to see a limited impact on business performance too.

This is certainly what the Institute of Work Psychology (IWP) has found. Their study of 308 UK manufacturing companies over 22 years has shown that "empowerment, teamwork and intensive training and development at an operational level had a far more significant impact on productivity than payment systems".

Another study looking at the impact of reward has recently been conducted by the Centre for Economic Performance. It's an important study that I've only seen reviewed in The Economist and focused on the world's third largest employer, the UK's National Health Service (NHS).

The study looked at the impact of imposing virtually uniform pay rates in the NHS meaning that it competes for nurses with private sector organisations / jobs where pay rates vary widely across regions.

"Its rigid pay policy makes it easy for the NHS to recruit and keep good nurses in poorer northern regions but hard to hire and retain them in the richer south. Hospitals in the north gain from a more stable pool of nurses. Southern ones have to lean on temporary agency nurses, who can be paid more but tend to be less experienced, less familiar with the hospital and less productive. Do southern patients suffer as a result?

The economists look at the proportion of patients aged 55 or more, admitted to hospital after a heart attack, who die within 30 days. They find a strong link between this ratio and local private-sector wages. The higher the private wage, making it harder to get good nurses in the NHS, the higher the death rate: to be precise, if the private wage is 10% higher in one area than another, the death rate is 4-5% higher."

The main focus of the research is to show the problems the government faces in assuming the UK is economically uniform when it sets wage deals, but more broadly, it also indicates the consequences all organisations face if they don't sent pay levels appropriately.

And this is just reward. The IWP and other research would suggest even greater consequences await poor management of other HR practices.

This was in fact what was found in earlier research looking at the NHS.

This research found strong associations between the extent and sophistication of appraisals, training and teamworking and lower patient mortality. A hospital that appraises around 20 per cent more staff and trains around 20 per cent more appraisers is likely to have 1000 fewer deaths per 100,000 admissions or a decrease in over 12 per cent of the expected total.

Best Companies and business performance

As I move towards the end of this short series of posts on HR metrics, I want to note some of the other recent research and reports which support making a positive conclusion about people management and its link to the bottom line (a fuller review or earlier research is included in my book).

These range from 'pop research' to more thorough analysis.

In the former category, you've got things like the significant positive difference between the Sunday Times / Fortune best companies to work for and the FTSE / S&P indices. These look at employee's satisfaction with different elements of their experience at work, and so do provide evidence of a correlation between people management practices and business results.

I can't find the graph that was included in the Sunday Times best 100 companies supplement this year (the graphic here is from 2007) but the 31 of these companies which are listed in the UK have performed twice as well as their FTSE 100 rivals during the last five years.

I'd find this quite convincing if I hadn't worked for one of these companies recently, and know just how little they really value the human capital provided by their people.

Anyway. Looking at the 2008 graphic, the performance of best companies and FTSE companies don't seem to be that different during this last year.

This supports the findings of a 2008 study conducted by UBS into the share (stock) price performance of the Fortune best companies (confusingly, these are the equivalent of the the UK's FT best workplaces) which are covered by the firm. This study noted that over the medium term, employee satisfaction does seem to drive a higher company share price. But over the last two years, UBS found the best companies performed negatively relatively to the general index.

UBS think that over the last two years, share prices "were driven more by sentiment than by fundamentals".

They explain:

"Employee satisfaction is a long term driver of value. In the short run, the dominant driver of share price volatility is more likely to be increased uncertainty and risk aversion from the credit crunch, and uncertainty surrounding financial markets and economies, as well as increased political risk in some regions. In current market conditions, long term drivers of intangible value may be taking a back seat."

So employee satisfaction / human capital performance are still driving value; they're just not being recognised in companies' share prices at the moment (and therefore , now should be a good time to invest in 'best companies' combining strong human capital performance with sound financials).

Anyone up for forming an investment club?