As the top challenge for 2015, a report put out by the Conference Board notes CEOs view human capital in all its forms—from dynamic leadership to a skilled workforce cadre—as the primary fuel that will drive the engines of growth within their organizations. Rebecca Ray, co-author of Creating Opportunity Out of Adversity: Building Initiative has found that over the years people have done a variety of things to address different aspects of business.
“For example, they’ve probably invested in infrastructure, upgraded equipment, upgraded software, moved to the cloud, and done a great many things to help drive efficiency. They’ve streamlined processes and taken a look at how they can leverage technology. They have also done a good job in thinking about marketing strategies. However, a company can’t develop leaders overnight and it takes a longer time to address its people issues. Relying on continual improvement in human capital will continue to be at the forefront,” Ray notes.
She continues, “CEOs, who were interviewed, say a strong and aligned leadership cadre, a highly engaged workforce, improved organizational agility, a focus on customers, and building an entrepreneurial spirit around innovation capabilities are the tools they need to make headway against the buffer of slowing economic growth.”
Furthermore, the numbers of people coming into the workplace aren’t equal to the numbers exiting. The recent financial crisis postponed the inevitable as many people delayed retirement, and now those folks are leaving.
According to Ray, “It’s clear that institutional expertise and memory is retiring. Many organizations haven’t done an adequate job in transferring that knowledge, or in finding creative ways to help those people stay tied to the organization if they want to. A lot of organizations have a retirement plan that is constricted by law, and many retirees are unable to return as part-time employees. There are some companies doing creative things like having these folks remain as coaches, project managers, or mentors to capture their knowledge of the past decades.”
Organizations are reluctant to change until they absolutely have to. There are so many things and different challenges vying for attention, organizations may look at this employee drain as a triage situation.
“They had to fix Y2K, and then they had to fix global expansion, while having to fix product enhancement—or fix fill-in-the-blank. Now they have to address the lack of employees with adequate knowledge, because those people are leaving. Businesses need to understand their business strategy and what the implications are for people. They need to match that up against what is the organizational capacity to execute that strategy. They also have to show the linkage between—you’d like us to go here, but we don’t have the capacity to do that—therefore, we have to start ringing the alarm bells. CLOs are closest to organizational capacity, and they are the ones who are able to say, we can’t make it across that bridge,” Ray says.
Additionally, Ray found the grow-your-own strategy business leaders are devising also includes a significant talent component. However, it does not extend to investing in the education system to improve overall workforce readiness. Education is among the lowest-ranked strategies to meet the human capital challenge.
“As long as we have a system where publically traded companies are judged by their quarterly performance, there is tremendous pressure to perform and deliver against long-term strategies. We have an increasing number of shareholders who are vocal and active, we have boards of directors who are less and less patient. When we look at education and what businesses might do in partnership with community colleges, these folks aren’t predisposed to looking for the longer termed play,” she notes.
For example, Ray explains that not many companies have the foresight to go into middle schools to entice students with a career in engineering, because the mining (or some other) industry is going to be the way of the future. Companies would then have to continue their engagement by giving these students internships during their high school years, then perhaps a small scholarship to get them off to college, and then internships when they’re in college.
“That strategy is both long-term and long-sighted, but those middle school children are eight years away from being an employee. Furthermore, there’s no guarantee they would become an employee. There is a disparity between needs of now and the things we all hope as a society we do to help people have the kind of education that leads to paying jobs, solid citizens, and a stable tax base; all of which leads to a strong and vibrant economy,” says Ray.
There are a couple of other things at play, according to Ray. In the old days, you’d have a company that assured you a long-term job, and you’d retired 30 years later with a pension. Today, organizations can no longer guarantee that scenario.
She says the new norm is most of us have a variety of roles and often a variety of careers. “What we have is a group of independent players, kind of like NFL players; they may start with one team, but are traded to another. Workers are a little like that: they come in, they might get laid off, they might get a different job, and they may be hopping all over. From an organizational perspective, the CEO might ask ‘Why should we invest in training if this individual is not likely to stay with us? Are we likely to see the pay-off from our efforts to make them better at a skill we need?’”
The flip side of that question, though, is what happens if you don’t train them and they stay. Ray explains, “Now you have an organization whose skills are atrophying and your employees are unable to execute against the company’s strategy, so it becomes a self-fulfilling prophecy. Smart companies are still investing in their folks, knowing full well they may leave, but also recognizing they may come back. Some organizations have figured out ways to keep their folks close even if they’re not employees, so if and when they come back, there’s not that much of a gap in skills sets and understanding the culture. Many of the professional services firms have alumni networks.”
The report acknowledges, from the view of CEOs success in meeting their most urgent business growth challenges is inextricably linked to the strength of their human capital base. Turning to the open market to fill critical positions is clearly a less-favored option than a grow-your-own strategy. While skilled individuals are available on the open market (at a price, and CEOs are concerned about wage inflation), finding a person who also fits well within a specific corporate culture is often harder than it sounds.
“If you have great people and you can retain them, that’s half the battle. The challenge is to understand the company’s business strategy well enough to know what’s going to be expected of your organization and its people, and then figuring out to build within the existing talent pool. Do you buy some, or do you borrow some? CLOs need to know how to have the requisite organizational capacity; exactly what’s needed at the time it is needed. That’s the big challenge. It’s exacerbated by the fact most things that are required are in short supply in many instances. For example, in the mining industry where the demand for engineering talent is so tight, they’re all going after the same engineering grads and the same mid-level career engineers, so it becomes a revolving door,” says Ray.
Another issue is recognizing that workforce needs are changing. “People want flexibility, and I don’t mean just the generation coming into the workplace now. Today there are people taking care of elderly parents, or those who just want a portfolio career, or want the flexibility to pack up and go hiking for two months. If a company can think about how to do job sharing or how to craft the job to make it remote, that company gets tremendous loyalty and productivity by offering more flexibility. Thinking about what you can do, given the tools you have, gives you some options. If, as a result of more flexibility, you had 10 percent more productivity from your workforce, it would be huge.”
Currently, we see a proliferation of organizations that help businesses become better. They want to connect people, and there is a great deal of power in collective learning. “People get together with others who have a similar role, and we’ve found people are very willing to share challenges and successes, if they feel others are doing the same thing and it’s a safe place to share things. You also see it with innovative companies who are looking to build the kind of partnerships that extend well beyond walls.”
Finally, Ray adds, “There are organizations where companies are partnering on training programs. They may have partners all along the supply chain with whom they are learning about supply chain management and certifying people together, knowing full well they might belong to different organizations. However, they’re ultimately going to be working together for the mutual success of both companies.”