Tell me again:
Why would someone really good want to join your company?
And how will you keep them for more than a few years?
Yes, money does matter
BETTER TALENT IS WORTH FIGHTING FOR At senior levels of an organization,
the ability to adapt, to make decisions quickly in situations of high
uncertainty and to steer through wrenching change is critical. But at
a time when the need for superior talent is increasing, big US companies
are finding it difficult to attract and retain good people. Executives
and experts point to a severe and worsening shortage of the people needed
to run divisions and manage critical functions, let alone lead companies.
Everyone knows organizations where key jobs go begging, business objectives
languish and compensation packages skyrocket.
ABOUT THE RESEARCH To investigate the talent problems faced by
large organizations, we studied 77 companies from a variety of industries.
The companies chosen were in either the top or the middle quintile within
their industries in terms of 10-year total return to shareholders. We
grouped the companies into sectors as to compare high performers with
average players. We also asked the companies to provide disguised performance
data on their executive pools, grouping senior managers into 20 percent
high performers, 60 percent average performers and 20 percent low performers.
This allowed us to compare the responses to survey questions of groupings
of high-, average- and low-performing executives. We questioned corporate
officers (CEOs and their direct reports; 359 respondents) about the
strength of their company's talent pool and how it might be improved.
We talked to the top 200 executives in each company directly to understand
why they work where they do and how they became the professionals they
are (5,679 respondents). We asked senior HR executives (72 respondents)
about the way their company manages its top executive group; for some
companies that meant 50 people, for others 400 people. The quotations
in the article are taken from these interviews. In addition, we interviewed
a dozen leading academics in the field of organization and mined the
research base. As a reality check, we relied on a steering committee
comprising HR leaders, executive search, compensation and assessment
experts, and McKinsey partners with experience in organizational consulting.
In an effort to understand the magnitude of this war for talent, we
researched 77 large US companies in a variety of industries (see text
panel). We worked with their human resources departments to understand
their talent-building philosophies, practices and challenges. And to
gain a line manager perspective, we surveyed nearly 400 corporate officers
and 6,000 executives from the "top 200" ranks in these companies.
Finally, because numbers never tell the whole story, we conducted case
studies of 20 companies widely regarded as being rich in talent.1 What
we found should be a call to arms for corporate America. Companies are
about to be engaged in a war for senior executive talent that will remain
a defining characteristic of their competitive landscape for decades
to come. Yet most are ill prepared, and even the best are vulnerable.
You can win the war for talent, but first you must elevate talent management
to a burning corporate priority. Then, to attract and retain the people
you need, you must create and perpetually refine an employee value proposition:
senior management's answer to why a smart, energetic, ambitious individual
would want to come and work with you rather than with the team next
door. That done, you must turn your attention to how you are going to
recruit great talent, and finally develop, develop, develop!
Our survey reveals that some companies do all of these things, but many
more fall short of the mark.
There is a war for talent, and it will intensify
Many American companies are already suffering a shortage of executive
talent. Three-quarters of corporate officers surveyed said their companies
had "insufficient talent sometimes" or were "chronically
talent-short across the board." Not surprisingly, search firm revenues
have grown twice as fast as GDP over the past five years.
Part of the cause may be cyclical, the product of a strong economy at
the peak of its cycle. But what should keep CEOs awake at night is a
number of trends that threaten a wide-ranging shortage in talent over
the next five years.
Until now, the executive population has grown roughly in line with GDP.
This means that an economic growth rate of 2 percent for15 years would
increase demand for executives by about a third. But supply is moving
in the opposite direction: the number of 35- to 44-year-olds in the
United States will decline by 15 percent between 2000 and 2015 (Exhibit
1). Moreover, no significant countervailing trends are apparent. Women
are no longer surging into the workforce, white-collar productivity
improvements have flattened, immigration levels are stable and executives
are not prolonging their careers.
This would be challenge enough, but the numbers tell only half the story.
Large companies also face three qualitative challenges. First, a more
complex economy demands more sophisticated talent with global acumen,
multi-cultural fluency, technological literacy, entrepreneurial skills,
and the ability to manage increasingly delayered, disaggregated organizations.
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