The Competition for Talent: The Challenge Facing Irish Organisations to Identify, Hire and Retain High Performers.
Executive Summary of White Paper published in July 2007.
This research was conducted in the context of a number of issues that have presented themselves in recent times. There is evidence that the ICT sector globally has been constrained in recent years due to a lack of talent within the sector and poor management of that talent. Looking beyond the ICT sector, it is clear that the success of the Irish economy in the last ten years has resulted in unprecedented growth in employment. Inward migration has taken place at an extraordinary rate to address the demand for workers in a range of industries. Looking at the statistical evidence, however, it is hard to escape the perception that Ireland must be suffering from a lack of talented people such is the competition within the jobs market. These are the people who are the high performers in companies and they are the subject of this research.
We wanted to examine two key sectors, ICT and Finance, to see how difficult companies in these sectors were finding it to locate high performers and what programmes they had in place to develop and retain these high performers within the organisation.
This survey was conducted by Market Dynamics, an independent market research company, on behalf of Talent Partners. Interviews were conducted by telephone at the major organisations in the Finance and ICT sectors. A mixture of job titles were interviewed including the following:
- Financial Controller
- Sales Director / Manager
- Marketing Director / Manager
- Human Resources Director / Manager
On the ICT side, companies interviewed include 12 of the top 20 multinational ICT suppliers as well as a number of the major indigenous software firms. Among the Financial Services firms interviewed were many of the top banks, building societies and insurance companies who, combined, employ many thousands of people.
Competition for high performers, people with a proven track record of success in their careers, is tough and, in the view of a majority of senior executives at major Irish and international organisations, will only get tougher. The aspiration that a downturn in the economy will be enough to ease the pressure is dismissed by many. This is one of the main findings of a research project conducted by Market Dynamics on behalf of Talent Partners and focusing on organisations in the ICT and Financial Services in Ireland. This is the first in an annual survey of talent management in Ireland. Though research has been conducted in this area around the world this is the first time that such a study been done in Ireland specifically. The research is based on interviews with the biggest names in the ICT and Financial Services sectors and provides an authoritative account of their views and the difficulties they face.
Among the other findings are the following:
- Over half of the companies interviewed could point to the loss of a high performer in the last year or so which had an impact on their company. The effects included the loss of customers and intellectual property, the loss of skills and knowledge, the cost to recruit and train a replacement and the demoralisation of the staff remaining. When asked to quantify the impact in financial terms, the cost to each company of the loss of the high performer in question averaged €237,000.00 For a number of companies the figure was in the millions.
- Though many companies claim to treat high performers differently, in practice this is just reflected in higher salary, commission or bonus structure. Indeed, few companies even claim to use other methods of differentiation. However, about a third of companies have found fast-tracking them to promotion a successful method of retaining high performers in their organisations. Few companies have a policy or programme for attracting and retaining high performers.
- The degree of difficulty in finding high performers is higher now than it was two years ago, in 2005. The majority of organisations think the situation will be harder still in two years time.
- High performers leave companies mainly due to perceived problems within their current own companies rather than the attractiveness of the new employer. These include instability within the organisation, conflict and frustration on the part of the high performing staff member. More leave to find new opportunities and challenges than for better compensation packages.
The vast majority of respondents believe that Irish organisations need to improve the way they go about identifying, hiring and retaining high performers. Only 21% rated Irish companies good or very good at these activities. However, very few consider they are worse than other similar organisations in this regard. This is the most probably reason why so few are addressing this area with conviction.
In summary, Talent Partners believes that there is an opportunity for Irish organisations to properly address the issue of the identification, hiring and retention of high performers.
Key Research Findings
The following are the key findings of the research as identified by Talent Partners:
High performers are hard to find now and it will get harder rather than easier in the future
The key finding of this research is the level of difficulty that companies in both financial services and ICT sectors have in finding high performers for their organisations. The biggest cause for concern is not just that this degree of difficulty is perceived to be greater than it was two years ago, but that more companies expect it to be harder two years into the future. This is very significant. It is clear that the Irish economy has been performing at unprecedented rates in the past ten years. There is no doubt that the degree of difficulty in hiring high performers is largely because the high level of activity places enormous demand on available resources.
What is significant is that respondents don't believe that the expected slowdown in the economy will be enough to make high performers easier to find. This suggests that, potentially, there are just not enough high performers available in the first place. This is a major concern and one which suggests that companies need to place greater emphasis on retaining the high performers they already have. It also suggests that companies have to make do with fewer high performers than they actually need.
Companies are not differentiating between high performers and other staff in any significant way
Our survey showed that though the majority of companies claim to treat high performers differently to other staff, in practice, this was mostly done through greater compensation, either by means of or higher commission / bonus or higher salary. While compensation is obviously important there is considerable evidence that this is not the only thing that motivates high performers and that they need to be presented with challenges appropriate to their talents. Only 12% of companies claimed to provide high performers with greater opportunities while 10% offered shares in the company. A third of companies claimed that fast-tracking high performers for promotion had acted as a positive means of staff retention in the past. However, this was not mentioned by anyone when respondents were asked how their company treated high performers differently. This suggests that fast-tracking may be one of the methods used to hold on to high performers when they threaten to leave.
Furthermore, only 17% of companies claimed to have a policy or programme for attracting and retaining high performers and while nearly a third of companies claim to have someone responsible for talent management in only a small number of cases did the company have a dedicated Talent Manager. In short, though it appears that companies are aware of the difficulty in finding high performers, and aware of the problems that occur when one leaves, nonetheless they don't seem to be doing enough, proactively, to ensure that their high performers are not lured away.
Companies pay a heavy cost when they lose a high performer, estimated at an average €237,000 per company.
Over half of the companies interviewed in the survey were able to think of a high performer who had left their company in the past year or so whose departure had had a major impact on the organisation. Among the effects on the company were cited the loss of customers and intellectual property, the loss of skills and knowledge, the cost to recruit and train a replacement and the demoralisation of the staff remaining. In summary, each of these departures had a very significant impact on the company in question. When asked to quantify the loss in financial terms, there were significant variations with some companies quoting figures of €25,000 and others saying estimating the cost at €1,000,000 plus. The average figure quoted was €237,000 and when one includes the cost of lost production of an employee, the recruitment process in hiring a replacement, reduced staff morale, and the time for a new employee to get up to speed on the company and its solutions we can understand why the cost estimates were often very high.
High performers primarily leave companies to find a new challenge not for better compensation
When respondents were asked what had attracted the high performer in question away from their company there were some very interesting findings. Firstly, the biggest reason was not related to compensation at all with the prospect of a new opportunity or challenge being cited as the factor that attracted away most high performers. In fact, improved compensation was cited by less than a quarter of companies. In many cases, companies mentioned issues within their own companies that had the effect of driving the high performer out of the company. These include instability within the organisation, conflict and frustration on the part of the high performing staff member. If, as this suggests, many high performers leave because of disenchantment with their existing company rather than any particular attraction of the new company then surely the solution is in an organisation's own hands. They need to act with more conviction to provide new opportunities for high performers within the company and to remedy internal issues that might hasten the departure of a key colleague.
Though by its nature it cannot be quantified, nonetheless, Talent Partners believes the research suggests that there is an undercurrent of acceptance of the fact that people leave companies and move to others. Of course some people will leave regardless of what efforts are made to improve their situation by their existing employer. However, this level of acceptance is failing to acknowledge that more could be done to improve retention and reduce the turnover of high performers. The research demonstrates that activities aimed at retaining high performer are too reactive.
Irish companies don't rate themselves highly on their treatment of and dealings with high performers
Only half of the respondents interviewed consider their own companies to be good or very good at identifying and hiring high performers. They consider themselves to be better at retaining high performers than they are at identifying and hiring them in the first place. Indeed, 15% rate themselves as poor or very poor at hiring high performers. Over a third of companies however, rate themselves as neither good nor bad. There seems to be a suggestion that this is an issue that companies realise they have not addressed in a meaningful way with the result that they don’t rate themselves either highly or lowly. Perhaps the key to this is best seen in the way they compare themselves to their competitors. While 29% consider themselves to be better at dealing with high performers than their competitors, only 13% believe they are worse while the vast majority put themselves on a par. When we finally asked companies to rate Irish organisations overall on their abilities with regard to identifying, hiring and retaining high performers only 21% gave a rating of "good" or " very good". This means that 79% of companies believe that Irish organisations need to improve the way they go about identifying, hiring and retaining high performers.
Recommendations for Irish Organisations
This research paper, commissioned by Talent Partners Ltd, shows that it is getting harder to identify and hire high performers in Ireland and that this is likely to continue in the coming years. This viewpoint is supported by 93% of the respondents interviewed. We have also found that the vast majority of Irish organisations admit that they are deficient in their approach to high performers. This is despite that fact that many companies surveyed can point to the high cost of losing a high performer.
We believe that a Talent Management strategy needs to be integrated into a company's business planning and there needs to be the support and buy-in of the senior executive team to deliver on this strategy. The following are the recommendations of Talent Partners based on the research we have carried out.
Address the Issue of High Performers with a Programme
It is clear that the demand for talented professionals in the Irish marketplace exceeds the supply of available talent with only 11% of companies saying they were easier to find than two years ago. Now is the time for Irish organisations to address the fact that the search for high performers is always going to be a challenge. This can best be done by setting out a programme to address the issue.
- Practical Tip 1 – Develop a Talent Management Strategy internally and allocate specific ownership of the Strategy to a Senior Corporate Executive. This maybe but does not necessarily have to be in the ownership of the HR department.
- Practical Tip 2 – Identify the key roles within your business and the key performers in your organisation who are capable of fulfilling these roles. Benchmark the experience and potential of this “talent pool” against internal career opportunities with the company and grow and develop it through training and professional development, both internally and externally.
- Practical Tip 3 – Meet with the “talent pool” of your company on a regular basis and discuss with them the key criteria to grow into the next level opportunities within the company.
Recognise Features that Attract and Help Retain High Performers
Irish organisations have the opportunity to investigate what features of their own companies attract high performers and what things will help retain them. This research has shown that new challenges act as a bigger attraction for high performers than compensation. While recognising that not every company can provide challenges to meet all tastes, nonetheless, all Irish organisations should recognise that it is the lack of new opportunities and challenges internally that prompts key people to leave. Once organisations understand that the means to retain key people lies largely within their own hands they can then go on to devise and implement policies to address this fact.
- Practical Tip 4 – Know the goals and motivations of your “talent pool” internally and the external market talent you are interviewing. The research we have carried out tells us that companies seem to focus on paying higher commissions, bonuses and salaries to top performers but yet they believe that the primary motivation for top performers to leave their company is due to better opportunities and challenges in the marketplace.
- Practical Tip 5 – Hire the best regardless if they are internal candidates or from the external marketplace. Use additional tools such as psychometric testing and personality profiling. The research, commissioned by Talent Partners Ltd, shows us that organisations that use these tools experience lower staff turnover gain a deeper understanding of employees' personality and motivations and, as a result, can invest significant time and money in other areas of the business.
- Practical Tip 6 – Partner with an external recruiter to gain a deeper understanding of the external market. This will also allow you to benchmark your internal talent against external market talent and make better hiring decisions. Your external recruitment partner should be seen as an extension of your company and your talent scout in the marketplace. It should be communicating a consistent message about your company and “employer brand” to potential hires and keeping you informed of key external market talent.
Make High Performers a Component of Competitive Advantage
All organisations are on the lookout for new ways of gaining a competitive advantage. We have seen in this research project how many organisations consider themselves and other Irish organisations to be deficient in the way they identify, hire and retain high performers. There also seems to be an acceptance of the inevitability of this difficulty without a commitment to do anything about it. There are ways that this situation can be improved and Talent Partners recommends that this is done as a means of gaining competitive advantage. Indeed, having implemented a policy, organisations could go on to set targets for the recruitment and retention of high performers as an important component of its competitive strategy.
- Practical Tip 7 – Create an “Employer of Choice” value around your company. Position your organisation as the company to work for in your specific niche. Get your internal “talent pool” to support this positioning. The company needs to share its goals and visions with this "talent pool" and a consistent message needs to be communicated throughout the organisation to ensure the strategy will be delivered successfully.
- Practical Tip 8 – Make sure that your company has a consistent interviewing process and that the individuals who are involved in the hiring process are aware of the importance of attracting and hiring top talent and deliver a message that positions the organisation as an employer as choice.
Recognise the Importance of Providing Opportunities and Challenges
Irish organisations can learn from this research project that the best method of keeping high performers within the organisation is to provide them with real opportunities and challenges and not just improved compensation. We have seen that a third of organisations considered that fast-tracking the promotion of high performers has worked well as a method of retaining key people. However, there is little evidence that this is done proactively. In fact, it is clear that many organisations use the fast-track approach only as a last resort, when a high performer has threatened to leave the company. A total of 42% of organisations, as we have seen, claim to use higher salary as the means to retain high performers while 39% use higher commission or bonuses. While this may work to solve the immediate problem, it is not the best way to proceed under normal circumstances.
About Talent Partners & MRINetwork Worldwide
Talent Partners, founded in Dublin in 2003, is led by Stephen Kennedy who has over 9 years experience within the executive search field. Working at both a national and international level for both clients and candidates, their extensive knowledge of their industry sector allows them to operate in a highly specialised manner for clients predominantly within the IT, Telecoms and Financial Services sectors. Talent Partners were recently awarded for being one of the fastest growing offices within the MRI Worldwide Network in 2006. MRINetwork comprises over 1,000 offices and 3,500 search professionals in more than 35 countries specialising in mid to upper management/technical positions and offering a full range of customisable solutions including permanent placement, contract (interim) recruitment, advertised selection and recruitment outsourcing.
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