There is still much to do! Strategic talent management is risk management!!

Core insights from the international benchmark study Talent Management Index?

"The real journey of discovery consists not in seeking new landscapes, but in having new eyes." (Marcel Proust)

Human Resources Management: The Critical Perspective for Success

James Malvin sat alone in the room for several minutes after the end of the board meeting, tired and deep in thought.

"How could this happen? Something is going seriously wrong with us. More than 8,000 employees, we're globally successful, but evidently incapable of finding the right CEO for my company," Malvin realises.

He continues to reflect: "Three years ago, Tim, a true production expert, was no longer viable as CEO, and we had to let him go abruptly. Due to the unexpected decision, we didn’t have a suitable internal successor. Out of necessity, I turned to my old, loyal companion and former Sales Manager Europe, Bob. He retired voluntarily four months before Tim's dismissal due to irreconcilable differences with Tim. I hoped he would come out of retirement and help me. Thankfully, Bob did step in and took the challenge.

It was clear to all of us that Bob would only be an interim CEO, buying us time to find a suitable leader for our company. So, we started the search for candidates for the CEO position in our company since we didn’t have anyone for the position internally. With Chris, we believed we had found an ideal successor for Bob from the outside. Everything was well planned, the onboarding period meticulously organised. Chris took over the helm in January of this year, and today, on 20 May, we must part ways with him. He is no longer tenable. The entire leadership team refuses to follow him.

Man, what's wrong with us that, on one hand, referring to our business we are excellent and on track and, on the other, still have no suitable internal successor for the top job in the company. Now, once again, we have to hastily choose a "replacement" which hopefully can make it work. It’s actually a disaster," said Malvin.

Situations such as this one, which indeed happened as described above, are not uncommon. Again and again, we read about “an increasing CEO turnover and hasty decisions at the highest level of an organisation [1].“

A meta-study [2] conducted by the Economist Intelligence Unit in 2018 captures the dilemma perfectly. According to CEOs' assessments, the human resources risks for sustainable business success have noticeably increased in recent years and have now taken the top spot in the risk ranking. However, the quality of effectively managing this risk currently ranks third from the bottom (see the graph below).

A status that is in fact not acceptable. Is the issue being actively addressed? Is something being done to rectify this imbalance? These are the questions we aim to address specifically in this article.

As early as 2009, we sought to comprehensively investigate, in a study, how companies attempt to identify their high-potential employees, nurture and support their development systematically, and ultimately fill critical key positions sustainably from within. Our hypothesis was that decision-makers only have reasonable options when the essential key positions are 100% secured by internal successors.

Throughout the study, we realised that these analyses and the various metrics of the study focus intently on the central personnel risk issue.

The Talent Management Index? - the Metric for Quality Measurement in HR Risk Management (Study Design)

The foundation of the Talent Management Index? is the concept of Organisational Maturity - the maturity level of organisations.

The model classifies the systematic approach in talent and succession management into 4 maturity levels:

Maturity Level 1: Situational/Ad hoc – Talent and succession management is practiced differently in the organisation depending on the situation and challenge.

Maturity Level 2: Standardized - There is a standardization in the use of tools/methods, but the implementation is not consistent.

Maturity Level 3: Process-oriented/measured – Talent and succession management is consistently managed, quality is measured, and continuous optimisation takes place.

Maturity Level 4: Strategic – Talent and succession management is consistently strategic, future-oriented, and actively involves risk management.

Since its inception in 2009, the TMI? 1.0 now encompasses more than 400 companies from Austria, Germany, and Switzerland [3]. Since 2014, the TMI? has been structured as a panel (TMI 2.0), where the development in talent and succession management in participating organisations is assessed every 5 years. This provides an even more detailed overview of the systematic and active HR risk management of companies.

In essence, all participating organisations receive the metric along with detailed explanations of the maturity level of their talent and succession management, as well as concrete suggestions and advice on how the next qualified developmental step in professionalisation should be designed. The feedback from those responsible - even on highly critical findings - consistently confirms the appropriateness and meaningfulness of the assessment concept.

Figure 2 displays all companies from the TMI? 1.0 study according to their maturity level. As the graph illustrates, only a small portion of less than 10% of participating organisations have a systematic talent and succession management at maturity level 4.

The direct comparison between the bottom and top quarters of all examined companies highlights the significance of a systematic and consistent talent and succession management:

• Companies with professional talent management exhibit a 15% higher employer attractiveness (KUNUNU scores, 2021).
• They are also more successful as businesses. The revenue per employee in the top quartile companies is 40% higher compared to the companies in the bottom quartile.
• At the top, only 25% of positions to be filled are recruited externally. In the bottom quartile, the ratio is almost reversed, with an external recruitment rate of over 60%. It can be assumed that internal appointments are significantly more cost-effective, less risky, and better fitting, and certainly come with a higher level of employee loyalty to the company.

Talent and succession management has not made any significant progress for the past ten years.

In general, we must note that despite the repeatedly highlighted importance for the development and success assurance of companies, talent and succession management in organisations are still neglected. Figure 3 illustrates this very clearly:

The quality of talent and succession management is at Maturity Level 2 both according to TMI? 1.0 and TMI? 2.0. Therefore, over the last 10 years, there is hardly any noticeable progress.

The talent management, repeatedly highlighted by most responsible individuals as a central HR topic, is, upon closer examination, not sufficiently integrated into companies.

This topic is apparently managed professionally only very rarely, even if the responsible individuals consider corresponding action packages to be very important.

Why could this be the case? Years of work in this area suggest the following hypotheses:

1. The operational day-to-day activities overshadow its importance - urgency overrides importance!
2. Methods and tools address the issue without genuine qualified discussion - efficiency and effectiveness in the talent and succession process miss the mark.
3. A qualified discussion about the potential and development of individuals is a central power-political issue in terms of who is promoted and who is not. Typically, winners of the "old system" hold onto the "old system." Talent and succession management addresses the core power DNA of organisations.

What needs to be done?

The core findings of the study reveal the following trends...

What would be concrete steps to take?

1. Develop a collectively endorsed overarching vision by HR, encompassing the entire topic (including power-DNA questions) in alignment with the management and the board.
2. Work on this vision with those departments and individuals who are willing – leveraging positive energy along a Talent Management Landscape (PRYSMA? fields [4]).
3. Consistently build a talent dashboard for demonstrating success in terms of the return on investment of talent and succession management.

As the results and relevant discussions repeatedly indicate, there is still a lot to be done in this crucial HR field. It is a unique opportunity for HR to step out of the often lamented "wallflower" status by proactively addressing personnel risk and making a demonstrable contribution to the long-term success of the company.

About the author:

Prof. Dr. Gerhard Graf , Honorary Professor for Change Management at the International University SDI Munich; Chairman of the Board of the Transformation Management AG since 2009, based in St. Gallen, Munich, and Vienna.

Areas of expertise: designing challenging, complex change processes, strategic talent management – from conception to practical implementation, as well as diversity management.

Contact: Transformation Management AG, Zürcher Strasse 202, 9014 St. Gallen

Email: [email protected]

Looking for opportunities? Join the upcoming Strategic Competence and Talent Management Certificate Course!

This year, together with?TU Wien Academy for Continuing Education?and?Transformation Management AG, EIT Manufacturing East is hosting the?Strategic Competence and Talent Management Certificate Course. In this compact programme, you will learn not only what strategic competency, talent, and succession management mean but also how to gain corporate success with the right talents!

Quick facts:

• Duration: 13 Online Sessions + Final Exam at the TU Wien
• Language: English
• Application deadline: 29 February 2024
• Programme start: 18 March 2024
• Certification: Academic Talent and Succession Management Certificate
• More info, registration, and fees
• Contact: Rosina Preis Competence and Knowledge Manager for EU Projects CLC East

Sources:

[1] NN (2021); ?CEO-Wechsel in Deutschland: Aufgeschoben, überhastet, untersch?tzt Warum Unternehmensnachfolge ein Führungsthema ist“; Egon Zehender study taken on April 12, 2023, from (egonzehnder.com)???

[2] Source: average from studies/surveys conducted between 2016-2018, stated as a percentage of participants, the Economist Intelligence Unit: best practice in risk management – a function comes of age (2009); white paper change leaders 2018

[3] More than 50% of publicly listed companies in the D/A/CH region are represented in the index. Additionally, energy providers in Germany such as EON, EnBW, Vattenfall, GASAG, RWE, and more, as well as companies in Austria like Energie AG, EVN, TIWAG, OMV, APG, Energie Steiermark, and more, and in Switzerland like BKW, CKW, VSE, and more are part of the index (refer to the study).

[4] PRYSMA? is an acronym that stands for Professional Competency Risk Management. The model encompasses all essential elements of strategic talent and succession management and provides an overview of the key areas of action (refer to Laske/Graf's "Talente führen, talent zu führen" 2021)