Performance & Talent Management Trend Survey 2007

But this aging of the talent base and restless workforce are just two of the forces impacting today's talent war. Fundamental and rapid changes in the world economy, coupled with strong economic growth, are making it far more difficult for companies to adequately address their need for talent and growth.

Talent Management Leaders are Making Inroads
There's no doubt about it - the struggle for top talent has gotten more intense this year. As a result, more and more leading-edge companies are looking to identify, foster and develop better peformance from within. And they're making huge inroads towards winning the war. The Success Stories section of the report will explore several specific examples of these changes at work.

Survey on Trends, Challenges, Priorities, Successes
In order to study the issues affecting companies in their struggle to keep their talent competitive, the Business Performance Management Forum and SuccessFactors in cooperation with the Human Capital Institute conducted a survey of more than 725 performance and HR professionals. The 2007 Performance and Talent Management Trend Survey is a year-end audit and assessment of talent management trends and trajectories for 2007. This benchmark study examines the critical issues impacting businesses in their effort to remain competitive by acquiring, sustaining and managing talent across the enterprise.

The study clearly and compellingly demonstrates that the battle for talent is intensifying. Executives and HR professionals from large and small companies alike overwhelmingly report that increased competition for talent is leading to higher compensation packages, slower time to new hires, strains on quality and customer service, and reduced business flexibility.

As a result of rising costs and time required to hire good new talent, organizations are increasingly looking inward to train, develop, maintain and evolve their existing workforces. In other words, talent management will be an even greater strategic imperative for business in 2007.

One of the key drivers for talent management is the changing skills and competency requirements of today's business environment. Growing technical demands, new global business models and growth opportunities, shifting market requirements, new management practices - all these factors and more are intensifying the need to retrain and redeploy executives and staff in order to keep pace with the competition. Bigger companies are taking the lead in embracing formal talent management practices, processes and systems, and smaller companies are further behind the curve. However, the great majority of our survey respondents agree: talent management is now critical to better achieve business goals, stay competitive, and be global.

But there is a long way to go. Even the most sophisticated organizations and industries are just scratching the surface of the potential benefits of better attaining and retaining good talent towards better outcomes. And small businesses are lagging even farther behind in the quest to optimize their workforces. Deloitte estimates that an average company in the U.S. spends nearly 50 times more to acquire a $100,000 professional than it spends on training for that individual once employed.

Measurable Performance Gains - Better Financial Gains
All is not lost though - on the contrary. The benefits and implications of advanced talent management systems and programs go beyond just producing more motivated or better performing people. Recent research by SuccessFactors and human capital expert Dr. Jac Fitz-enz shows that smarter human capital management leads to better financial performance. The study showed that two-thirds of companies with stronger financial performance manage all managers and others with their performance management systems. And 63 percent of the high growth companies review performance more than annually. Thus, the benefits and potential for talent management are real. The nearly greenfield opportunities for organizations to embrace sound talent management solutions, methodologies, and strategies are huge. Those that do it right will ultimately win the war for talent and the land grab for global business.

Top line findings of the 2007 Performance and Talent Management Trend Survey Launched in November of 2006, The 2007 Performance and Talent Management Trend Survey includes online responses from 726 HR and performance professionals primarily in North America along with perspectives from interviews of a half dozen representative corporate executives, talent management experts, and organizational performance authorities on the concerns, priorities, drivers and predictions in the talent management landscape.

Key Findings:

• Increasing competition for talent is universal.
  98 percent of respondents say competition for talent is increasing in their industry, and 65 percent say it's increasing to a "high" or "very high" degree.
  
  
• Talent costs this year are inflated.
  Nearly 95 percent say the cost of acquiring and keeping talent rose in 2006, and two thirds say to a somewhat or high degree. One executive interviewed pegged this cost increase at 25 percent this year.
  
  
• Time to talent is growing, as are requirements for developing it in-house.
  55 percent note higher salaries were required in their organization in 2006. And 68 percent identified the need to implement internal talent development in their companies.
  
  
• Talent management leaders are achieving significant benefits in a short period of time.
  Companies that have adopted advanced solutions for improving performance and talent management have done so in as little as a month, and are reaping the benefits in the form of dramatically reduced turnover, improved goal alignment, and better engaged and peforming employees.
  
  
• Most companies, though, are way behind and playing talent management catch-up.
  Though internal talent development is seen as a critical step, only slightly over half have formal plans in place to identify, grow and retain talent. Only about a quarter have formal talent scorecards, and only 29 percent can link talent performance to business value creation.
  
  
• Small business is behind the times.
  More than 80 percent of smaller companies lack any kind of talent management scorecard, and 60 percent lack formal plans to grow and retain talent.
  
  
• Shock is heard round the world.
  Organizations point to an increasing influence of globalization and easing of business boundaries as having a profound effect on talent consideration. 77 percent of all survey participants say that global factors.
  
  

KEY FINDINGS
Talent Management is Top of Mind

Respondents overwhelmingly said that talent management is a strategic corporate focus. There is a growing concern and emphasis upon developing, engaging, and harnessing the potential of the company talent pool to drive further growth, success, and sustainability. Three quarters of participants said that talent management is a high or very high priority, and over one quarter gave talent management the highest priority rating on the scale. This growing concern over organizational talent is particularly critical as a new tide of challenges and dynamics rolls on to the scene.

KEY FINDINGS
Critical Talent Competencies Changing Dramatically

Intelligence and Creativity of Little Value
Organizations across the board are realizing that there has been a seismic shift in the skills and talents required to run their business and remain competitive. This is adding significant challenges to companies in high growth mode that must adapt to the changing talent landscape. 88 percent of respondents stated that critical competencies are changing or evolving in their organization. And nearly half of participants said this change is to a high or very high degree. When we look at the competencies that are most valued, we see that management leadership (62 percent) is the highest valued, with technical knowledge (45 percent) and people skills (43 percent) also important. Interesting to note that creativity and intelligence ranked at the bottom of the value scale at 16 percent and 19.6 percent respectively. Even sales effectiveness, traditionally a critical competency for the health of a business, ranked under 30 percent.

The overarching message is clear: these companies must employ better ways to find and cultivate a new set of skills required in today's dynamic global environment.

KEY FINDINGS
Talent War Intensifying

Companies See Need to Find, Develop, Engage, Measure, Keep Strong Staff in 2007
Poll participants cited a wide range of talent management hurdles on the horizon for the new year. Top among them was the need to develop internal talent (63 percent), followed closely by talent retention and turnover (60 percent) and talent acquisition (49 percent). Employee engagement and performance evaluation ranked highly as well, underscoring the need to measure the internal workforce and keep them connected. This is consistent with executive dialogs and other survey data that point to an exacerbated struggle to find new employees and managers combined with a need to better develop existing workforces. Apparently, a growing and more global work environment is creating more opportunities for exiting talent while at the same time driving a need to nurture talent from within.

KEY FINDINGS
Talent Battle Takes Its Toll on Corporate America

Nearly everybody (98 percent) notes that competition for talent is heating up to some degree. And 65 percent say that it's increasing at a high or very high level. This talent struggle is having a marked impact on the number of organizations that need to pay higher salaries (55 percent), search longer for staff (78%), and implement better internal talent development (68 percent). Many say that they need to settle for inferior employees, less flexible business models, and poor customer satisfaction. 95 percent say the cost of acquiring and keeping talent has risen this year. And there is no sign of relief in the coming year.

KEY FINDINGS
Rapid Corporate Growth and Change Driving Talent Acquisition Needs

Surprisingly, traditional reasons for acquiring talent have succumbed to a new set of drivers. Things like company growth (50 percent), evolving internal cultures (40 percent) and changing market demands (33 percent) topped the list. Much less prominent were things like employee retirement (24 percent), lagging loyalty (19.6 percent), and poor employee performance (17 percent).

KEY FINDINGS
Workforces Gone Global

Big Business Feels the Effects
The rapid globalization of business and the expanding role of an international workforce are having a significant impact on how companies acquire and manage talent. 77 percent of all survey participants say that global factors are making a difference in their talent management and acquisition strategies, while over a quarter say that it's to a high or very high degree. As organizations look for new people and foster new skill sets, they need to take into account the challenges and opportunities posed by a more global outlook.

KEY FINDINGS
Most Don't Even Measure, Much Less Manage, Talent Effectively

Despite the need for better talent development, acquisition strategies and talent management processes, two out of three organizations don't have a talent scorecard in place. Over 70 percent either don't or aren't sure how they measure staff performance and productivity in terms of business value creation. For small business, the situation is even worse, where 81 percent lack a talent management scorecard. These figures paint a frightening picture of companies ill-prepared to manage a more complex talent market. The old phrase "What gets measured gets done" is appropriate here, as effective talent optimization relies heavily on the ability to measure success.

KEY FINDINGS
Best Plans Aren't Laid Yet

Small Business Exposed
Not only do most companies not have talent management metrics in place, but a significant number (43 percent) don't have formal plans in place to identify, grow, and retain talent. For small businesses, that ratio jumps to nearly 60 percent - a shocking number when you consider that nearly all of the small businesses polled are in service-related industries where people are critical to the success of the business.

Excerpts From The Experts

As an additional method of research, the BPM Forum and SuccessFactors conducted a series of executive dialogs with human resources and talent and organizational development management executives to obtain additional perspectives on top talent management issues. Through a set of consistent questions, we've gathered valuable additional insights regarding the priorities, challenges, and progress in talent acquisition and management. The results from the executive dialogs revealed that due to an intensifying competition for talent, there are huge benefits to implementing effective performance and talent management solutions. In particular, executives pointed to the following common trends.

Please download full report as PDF to view this section.

Conclusion

A clear and compelling picture emerges from The 2007 Performance and Talent Management Trend Survey. Without a doubt, the global war for talent is intensifying, and those companies that are effectively competing by acquiring and developing top talent ultimately will be the winners.

Competition for Talent Growing Even More Rapidly
In 2006, companies represented in our survey overwhelmingly experienced increased competition and difficulty in their quest for talent. As a result, compensation for top talent rose. It took more time to fill vacancies and new positions, and more often those positions were ultimately filled with less qualified personnel. The talent gap impacted business flexibility, expansion and growth. And our respondents expect more of the same in 2007. A common tendency may be to blame this talent shortage on a strong global economy. Indeed, business growth was a primary factor - both raising internal demand for new people and increasing employee departures due to a hot job market. But more fundamental changes in the economy and business landscape were also major contributors. Evolving corporate cultures and changing market demands were both cited frequently as major causes of the need for new talent. International business models and growth also played a major role. Some 56 percent of respondents said globalization was impacting how their companies managed and acquired talent.

Progressive Companies Getting Ahead in the Global Game
But wherever there is a challenge, there is also an opportunity. Better companies will further distance themselves from the pack by out-performing the competition in attracting, retaining and developing their talent. Indeed, 21 percent of our respondents said they viewed the increase of competition for talent as an opportunity to create competitive advantage through better talent management practices. As mentioned earlier in this report, that belief is supported by other recent research by SuccessFactors and human capital expert Dr. Jac Fitz-enz which reveals that smarter human capital management leads to better financial performance.

Organizations Putting More Emphasis on Effective Talent Management, And it's Paying Off
It's no wonder that two-thirds of the executives participating in this study said their organizations consider talent management to be a high or very high strategic priority. Innovative organizations - in particular large companies-are catching on to the talent management wave. With more advanced and sophisticated technology, tools and processes at their disposal and the nagging need to improve talent management practices, these leaders will not remain idle. Those that have already engaged in strategic talent management are reaping the rewards even in the early going. With growth and globalization expected to continue in 2007, these pioneers will lead the way to a more productive overall international workforce and better ways to seek and sustain the available talent in the marketplace.

Success Stories
Winning the War for Talent

A number of organizations are leading the way in implementing successful talent management solutions and processes that are making a huge difference in areas such as goal alignment, succession planning, pay for performance, employee acquisition, retention, morale, and engagement, and staff training and development.

Below is a snapshot of a few companies that have made the appropriate strategic moves to get an edge in the talent war. By implementing organization-wide change in a short period of time, these companies have taken a proactive approach and seen remarkable results.

All of these companies have recently implemented solutions from the Performance and Talent Management Suite from SuccessFactors, the leader in on-demand performance and talent management solutions.

Please download full report as PDF to view success stories from Quintiles Transnational (17,000 employees), Kimberly-Clark Corporation (57,000 employees), and Proxicom (1,000+ employees).

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