Driving Acquisition and Retention of Top Talent
In a study of the top risks for 2017, over 700 participating C-level executives and directors rated succession challenges and the inability to attract and retain top talent as the sixth-highest risk. Holding its position as a near top-five issue consistent with surveys conducted by Protiviti in prior years, this risk was accompanied by another risk related to cultural issues in the organization around resistance to change. As the ninth-highest risk, this concern is closely related to employee engagement. Because human capital is inextricably linked with successful execution of business strategy, human resources strategy merits attention by senior management and the board’s oversight.
The “war for talent” may be a trite phrase to some, but it’s no surprise that the conflict rages on. An organization’s talent is a precious enterprise asset. Accordingly, human resources strategy is an aspect of the overall corporate strategy that management cannot afford to miss. With changing demographics in the workplace due to an aging population and the increasing influence of millennials, the challenges of slower economic growth, increasingly demanding customers and growing complexity in the global marketplace, organizations must up their game to acquire, develop and retain the right talent. The multiple trends of globalization, advances in digital technology, increased mobility, advanced analytics and emerging markets, together with the growth opportunities they present, are not only transforming the global talent landscape, but also creating the need for altering talent management strategies. For example, companies in some industries (e.g., technology) must now access talent pools globally to obtain the specialized knowledge and technical know-how they need to compete on a global scale.
Simply stated, talented people with the requisite knowledge, skills and core values are needed to execute challenging growth strategies in a rapidly changing world. As boundaryless organizations expand their global reach, they must “think global” as they build the culturally aware, diverse and collaborative teams needed to be agile and resilient so they can face the future with confidence. As they do so, the board of directors and executive management need to set clear expectations regarding the organization’s human resources strategy and make time on their agenda to discuss it.
To that end, the following are 10 questions directors and executives should consider when engaged with management on human capital matters:
1. How does our overall business strategy shape our human resources strategy?
Does the business strategy articulate the performance expectations required to execute it and the core competences needed to meet those expectations? Is that context used to drive the definition of the leadership capabilities, functional/operational expertise and specialized knowledge targeted by the human resources strategy? Are the significant human capital risks related to planned key initiatives and investments reduced to an acceptable level by the human resources strategy?
2. Is there a comprehensive human resources strategy with a longer-term horizon on sustaining our leadership and talent pipeline?
With changes expected in the workforce and available talent pool in the forseeable future, what’s the long-term plan for growing the company? Do the company’s talent pipelines represent viable sources, and is there an effective plan for accessing them, including millennials? Are retention policies and practices sufficient to achieve the established attrition targets? How does the company’s overall retention compare to others in the industry (e.g., employee satisfaction, reasons for leaving and average tenure)? How well is the organization developing and mentoring its talent internally?
3. How strong is our executive depth two to three levels below the C-suite?
What is the health of the company’s bench of top performers and rising stars? How has it changed, and why? How is the available talent being developed to produce strong candidates for succession to executive positions? Is the bench strength sufficient to enable a robust succession plan that will provide assurance to the executive team and the board that the future is in good hands?
4. How will global market forces impact the talent pools available to us and the steps we must take to secure future talent?
What are the largest demographic risks in terms of executing the human resources strategy, and how are these risks being managed, particularly with respect to millennials? What information can be reported to the executive team and the board over time regarding the organization’s response to these trends?
5. How effective is our retention of “A players”?
How well is the company identifying, developing and mentoring its top performers and rising stars? Does the executive team know who they are? How is the company capturing their “hearts and minds?” Why do they leave, and does the organization use the lessons learned from their departure to improve its retention processes? Are there efforts to avoid leaving top-performing, high-potential talent on the shelf for too long (e.g., does management place them on a “must watch” list, keep them challenged and make them visible to the organization’s leaders)? Are they engaged in activities that will facilitate their development?
6. What are the critical capabilities that will drive our organization’s growth, and are we systematically building those capabilities?
Does the CEO provide a candid assessment of the contribution of each senior leader in demonstrating core values and advancing the strategy? Does management conduct high-quality assessments of current leadership competencies linked back to the performance expectations underlying the strategy? Is responsibility assigned to an appropriate executive to close any gaps that are identified?
7. How effective is our onboarding process in integrating talent and preparing them to contribute?
When a leadership position is filled through an external hire, how does management ensure a smooth transition? Is the success of our onboarding strategy for experienced hires measured? For example:
- What is the 90-day experienced hire failure rate for key positions? How successful is the company at finding the right fit for a particular position?
- What is the first-year voluntary termination rate for experienced hires? How welcoming is the organization?
8. Does board and executive team reporting focus sufficient attention on human resources strategy?
What key performance indicators (KPIs) should executives and directors be monitoring? Do human capital KPIs connect to the business strategy? For example, according to a report by the National Association of Corporate Directors, the following are examples of possible metrics at the board level:
- Number of designated successors for key positions considered to be “ready now” and “ready in two to three years”;
- Number and percentage of employees in high-growth-potential and high-performance categories, along with their rates of retention;
- Changes in employee turnover (including regretted and nonregretted departures), vacancy rates and median recruitment time for key positions;
- Changes in demographic profile of current workforce and candidate pool; and
- Changes in results of employee engagement surveys (particularly during periods of transition (g., following major strategy changes and acquisitions/divestitures)).
9. Is our organization agile and resilient in the face of significant change?
How effectively do the company’s personnel adapt to changing markets? What is the readiness of employees in helping the organization transform to stay ahead in the face of innovative and disruptive change? Are unexpected challenges handled well? To what extent is the value of mergers and acquisitions realized given the integration challenges and cultural differences among the acquiring and acquired entities? Is management paying sufficient attention to the generational imperative as millennials fill out key roles in the workplace? Is the organization sensitive to cultural diversity and inclusion and their impact on behavior? Conversely, is there a “think global, act local” perspective, regardless of the geography, to ensure sensitivity to the company’s core values?
10. Is our compensation structure competitive and effective in delivering appropriate rewards?
Is the reward system (base pay, incentive compensation and benefits) fair when performance goals are achieved and adjusted for the risks undertaken in achieving those goals? How does management know?
Through the above and other relevant topics, directors and senior executives need to send a clear message to operational and functional management as to what they are looking for in terms of a comprehensive human resources strategy and periodic progress reports on strategic execution.
Considerations for Senior Executives and Directors
Executive management and boards of directors may want to consider, based on the risks inherent in the entity’s operations, the questions posed above in discussions with management regarding human resources strategy. To this end, they should:
- Allocate sufficient agenda time to discuss human resources strategy and review the talent pipeline on a periodic basis;
- Periodically assess the quality of executive team and board presentations and discussions on human resources strategy to identify opportunities for improvement; and
- Consider how executives and directors can contribute to the effectiveness of the human resources strategy; for example, directors might interact informally with members of the C-suite (e.g., breakfasts or dinners scheduled in conjunction with board meetings), as well as with leaders at lower levels through town halls and smaller-scale meetings.
In addition, at the board level, the full board should be kept informed if a separate board committee provides primary oversight for human resources strategy, policies and practices.
 Executives Perspectives on Top Risks for 2017, Protiviti and North Carolina State University’s ERM Initiative, available at www.protiviti.com.
 The NACD Blue Ribbon Commission Report on the Board and Long-Term Value Creation, National Association of Corporate Directors, 2015, pp. 28–29.