The reason many organisations are not seeing a shift in their bottom line is an inability to attract, engage and retain top talent. Many talent management professionals are still scratching their heads as to how they measure the effectiveness of talent they bring into the organisation and, most importantly, how they ensure that talent is fully mobilised to achieve business results.
Leadership is at the centre of it all. As value enablers, leaders need to get the best out of their talent – value activators (employees) – and ensure they are fully enabled and supported to add value to the business.
Their biggest challenge is that they are unable to mobilise talent effectively due to a lack of certain skills and behaviours. Whether the department or unit is performing or not performing, the leader is the one who is steering the ship. Until organisations and their HR departments invest in leadership development to close these gaps, talent management will be perceived as inefficient.
Conventional Performance Management systems alone will not be able to measure organisational performance. Current Performance Management systems including reward structures may be rewarding dysfunctional behaviours that do not necessarily contribute to the bottom line. It is about time we reinvented how we manage organisational performance, including management of talent so that we can see the value of the talent we bring into the organisation.
Talent management costs versus revenue
Other departments are viewed as efficient, strategic and having a positive impact on the organisation’s bottom line. However, talent management professionals are unable to demonstrate this to the organisation. Talent management professionals need to demonstrate to business that they are not only managing processes.
They need to start focusing on economic, scientific and statistical approaches to prove the revenue impact based on talent management initiatives. Talent management professionals, in conjunction with leaders, need to mobilise talent with the aim of achieving Economic Value Add, which includes shareholder returns, and cash-flow-return-on-investment – this s what organisational performance management is about. Shareholders expect the organisation to generate shareholder value over and above the cost of resources used (cost of capital) or even capital investment.
Value-based management is one of the tools that focuses on maximising shareholder value and, ultimately, increasing shareholder value. It is simple, and it is all about economic value add – net operating profits after taxes, minus a charge of the opportunity cost of capital invested by an organisation.
The question is: how well can talent management professionals assist organisations to translate financial objectives into behaviours required in the organisation to see positive bottom line results? Solid organisational performance management is something HR professionals have not done well. For them to master organisational performance management, they need to possess strong business acumen and good financial skills – this combination of skills is rare among HR or talent management professionals.
The challenge of managing organisational performance is underpinned by a number of fundamental talent management activities, rewards management, leadership development and processes that need to be developed, executed and managed internally by HR professionals, including talent management professionals.
It is important for talent management professionals to study the external environment to see how it impacts on the talent management agenda internally. The external environment is becoming increasingly competitive, and also requires a great shift in talent management, leadership, rewards management and solid organisational performance management.
Overcome the business challenge
There are a number of essentials within organisational performance management to overcome this business challenge. See figure 1
Transparent business strategy
Every organisation is identified by its vision, mission, business strategy, values, leadership and its corporate brand – this is where the story is told, and the organisation differentiates itself from its competitors.
Without these five key elements (vision, mission, business strategy, values, corporate brand and leadership) the organisation will have no meaning to its employees and the public in general.
Leadership sits in the centre. Leaders are the value enablers, enabling employees (value activators) to achieve business results. The role of talent management professionals is to understand how business strategy can be mapped with existing talent in the organisation, and most importantly if there are gaps, this is where talent mapping takes place. Talent management professionals must demonstrate to business whether the organisation or department can achieve its business strategy or not, by looking at their existing talent.
Objectives and alignment
Any executive is concerned about direct revenue, which entails economic value add, that is, cash-flow-return-on-investment, cost of capital, and increase in sales or market share, brand equity, profit margins and shareholder value. On the other side, there are a number of business impact factors talking to revenue impact that executives are also concerned about.
We need to unpack factors that will impact positively on revenue, such as product or service innovation, new product development, customer satisfaction and retention rates, quality of product, customer experience programmes and customer relationship management, which aim at customer retention to avoid a loss in market share. These performance indicators or revenue impact factors will be different depending on the nature of the organisation.
All of this could be a language that some talent management professionals do not understand. It is very important that talent management professionals understand the broad categories of business impacts (revenue impact and direct revenue factors).
If you do not have the right talent in the right positions, you will not be able to achieve the required business results. Talent management professionals, together with leadership, should be able to assess whether they have the right talent in place to meet these business objectives. Strategy and talent mapping play a huge role in this exercise. Talent management professionals are responsible for process and leadership is responsible for content. Strong strategic partnerships with leaders are critical to assess and map current talent with the strategy or business objectives of the organisation.
Engage and enable talent
Economic value-add starts with creating a good employee experience. When this is in place, employees will become brand ambassadors, and brand ambassadors will create customer experience; this will lead to economic value add and shareholder value. Many organisations are not getting the order right, and this is why they will not see the return on investment based on capital investment. Start by creating employee experience programmes.
Again, leadership effectiveness is at the centre. A good investment in leadership programmes is important. Leaders create the inspiring climate for value activators (talent). They need to listen to the voice of talent, recognise, develop and, most importantly, reward.
A serious partnership with talent management professionals is critical. We often find a person is promoted to a leadership position because she is technically sound. Because a person is strong technically this does not mean that he or she will be able to lead a team or department. People who are promoted because of their technical expertise tend to be autocratic and apply a less participative leadership style, which may kill team morale. Employees become disengaged because they feel unvalued and disempowered.
A leadership gap analysis, leadership effectiveness analysis and 360-degree assessment will assist talent management professionals to see where the gaps are. These will need to be closed through a number of leadership development methodologies.
Listen to the voice of talent
Leadership style plays a crucial role. Leaders must start to listen to the voice of talent through a number of platforms, such as one-on-one meetings, team meetings, workplace forums and departmental business review meetings.
These platforms help the leader to continuously engage with talent and measure where individuals and teams are in terms of their performance. What is more important is that these platforms help leaders to solve workplace issues and roadblocks to performance of the individual or business. Gone are those days when departmental meetings are turned into “feeding schemes” or “tea parties”. Leaders are at the centre of it all. They need to structure every meeting, talk about business or department performance, key performance indicators, roadblocks and provide the support the team requires.
Talent management professionals need to play the role of a process owner measuring the effectiveness of OP4 (Listen to the voice of talent). Talent reviews are often executed in conjunction with performance reviews in many organisations. This type of talent management activity (talent reviews) is important when it comes to talent retention, and also determining where each employee appears on the talent grid. Leaders are again in the middle of talent retention. If leaders are not well equipped to retain talent, and they do not listen to the voice of talent, they will be in trouble. Top talent drives business performance; leaders must start to listen to the voice of talent to minimise talent turnover and disengaged employees. The HR or talent team are not responsible for this. Leaders are responsible for the content that drives the process for which talent management professionals are responsible.
Manage organisational performance
We need to see whether we achieved what we set out to do at the beginning of the financial year. Often organisations have balanced scorecard and performance dashboards which include direct revenue that the executives and the CEO are interested in at an organisational, divisional or departmental level. At a departmental level, this is done through a number of platforms such as the performance appraisal system in a form of one-on-one meetings between the line manager and employee.
Talent management professionals overlook how talent is brought into the organisation; talent acquisition makes a positive contribution to the business. For example, if someone is hired as a sales rep and one of his or her objectives is to increase market share, did he or she deliver what was expected? Did talent management professionals indirectly impact on the bottom line of the business?
This is an area where some talent management professionals are lacking and they are unable to demonstrate this to the business. Talent acquisition is not the only way to measure this. Talent management professionals can also establish how well the talent mobilising programmes they introduced to the business have impacted the bottom line.
Talent management professionals enjoy a low corporate status and recognition because they lack an understanding of the effective ways to prove impact on revenue to executives and leaders based on talent management initiatives introduced, or on talent brought into the organisation. For talent management professionals to master organisational performance management and gain corporate status and recognition, they need to have strong talent management expertise, accompanied by strong business and financial acumen – a combination of skills we do not find very often.
Implementing solid value based management in the organisation requires a culture change, organisational re-engineering and leadership effectiveness programmes. A project team is required, which not only consists of HR professionals but other professionals within the organisation. A commitment from the seniors and CEO is also required. Few CEOs will say, “No,” to the inception of value based management. The value based management team (VBM team) should focus on all the components of organisational performance management.
A well-seasoned Organisational Performance Manager is critical for the success of value-based management; this individual will be accountable for building the foundation, processes, framework and programmes, implementation and monitoring to drive the organisational performance management agenda. She should report to the HR Executive with a dotted line to the Finance Director. A very close relationship with the talent management team and CEO is important.