That simple truth is at the heart of one of the most elusive goals CEOs face today: aligning talent management strategies with strategic initiatives. It’s a challenge increasingly evident to today’s business leaders. In fact, according to a recent PwC study, only 12% of senior executives feel their businesses and human resource leaders are aligned in terms of recognizing talent as a strategic differentiator and have aligned talent practices with their business strategies.
“The level of concern that CEOs reported about the ability to have the right talent in their companies to be able to further grow was at an all-time high in 2015,” Jeff Hesse, who leads PwC’s U.S. Human Capital Consulting Practice, told CEOs gathered for a recent roundtable discussion sponsored by PwC.
While recruiting and retaining top performers has long been a competitive imperative for companies, trends like globalization and urbanization are intensifying the challenge for business leaders, who increasingly face a dearth of talent in the places where they most need it. As Rob Schneider, CEO of the office and hotel furniture company Kimball International put it, “A challenge we’re very much focused on is tracking talent. How can we be the employer of choice everywhere we’re located to track the best people?”
Shifting demographics is another frequently mentioned factor roundtable participants cited as fueling the talent challenge. “We have a bit of a generational gap between the 65-year-old owners and the new talent—a lot of them millennials—coming in,” said Matthew Robinson, CEO of W.A. Robinson Asset Management. “I’d really like to know how to bridge that gap.”
With millennials making up an increasing portion of the workforce, many business leaders expressed similar concerns about attracting, retaining and developing young talent. “Our challenge is building the next generation of leadership,” asserted Ken Bram, president of the valve manufacturing company Ausco. “At 50, I’m the youngest on the leadership team.”
In grappling with all of these disparate forces that affect efforts around talent management, companies can easily lose sight of the big-picture goal of aligning talent strategies with corporate strategy—particularly if human resources is shunted off to the side.
“Giving the chief of human resources a seat at the management-team table is probably the most important thing,” said Hesse, who noted that senior-level support is critical to alignment.
Corporate culture plays a huge role in that alignment—or the lack thereof. Screening applicants for a good cultural fit can be just as critical as ensuring that they have the skills for the job. At Reell Precision Manufacturing, HR VP Shari Erdman addresses that need with a focus on “mission-driven” hiring. “We fit first to culture, then to position,” she explained. “We do cross-functional team interviews as well, but to pass through the HR gate, candidates must first be culturally aligned—we have to see the passion for our culture, our values and our purpose. We’ve had great success with that approach.”
Erdman looks for interviewees who are passionate about what they do, “not just passing the interview test.” What’s more, the company’s screening and alignment effort continues through the onboarding process, with new-hire and quality-of-hire surveys conducted after 30 days. “We survey the employee, the coworker and the hiring manager to see if we’re getting the cultural fit that we thought we had at the time of hire,” she explained.
Reell also promotes alignment within the company by “storytelling” or sharing the stories of employees who have taken action to uphold its values. “When someone takes the initiative to stop a production line because of a quality issue, gives up their time to help a coworker or gets promoted, we try to put those stories out there to demonstrate and support our culture,” she said.
Getting out in front of the hiring effort also pays off mightily in ensuring a good cultural fit. At Greenheck Group, proactive measures to build relationships with schools and to develop talent internally have helped ensure a good cultural fit, which is then strengthened as new hires move up through the ranks. “We focus a lot of attention on bringing people in out of the campuses, building really strong relationships with the schools and then doing the training to develop those people,” said Kathy Drengler, the manufacturing company’s VP of HR. “Seventy-five percent of our promotions are from within. Once you get there, the culture part is embedded.”
Hesse describes that effort as building a talent brand and points out that most companies think nothing of investing resources in promoting a brand to consumers but fail to do the same to prospective hires. “Organizations that really make a priority of their talent brand, that foster relationships on campuses and come up with creative benefit packages can attract the type of people they want.”
However, building and maintaining a culture of alignment may become even more challenging as an increasing number of workers become part of America’s on-demand workforce—self-employed workers who step in and out of roles once held by staffers on an as-needed basis. Some studies predict that such workers will comprise as much as 30% of the U.S. workforce by 2020. This, in turn, will fundamentally change the traditional employer-employee contract—and impact corporate culture. “It will be interesting to see how companies maintain their culture when a third of the workforce is made up of independent contractors,” said Azura Living CEO Joshua McClellan, who points out that many of the healthcare industry’s home health aides are independent operators on the rosters of two or three different agencies. “It’s a challenge.” The ability to cope with intermittent influxes and outflows of workers may well become a differentiator for such companies, with those able to put workers through a bootcamp training to swiftly bring them up to speed gaining a competitive edge.
In the meantime, however, culture rarely receives the attention leaders claim that it warrants. In PwC’s CEO survey, 75% of respondents reported that culture is as important or more important than strategy to a company’s success. Yet, less than 50% felt that it was an item on management’s agenda or that the organization was capably and proactively managing it.
Why the disconnect? Even companies that recognize the critical role culture plays in aligning talent strategies with business goals and the importance of that alignment lose sight of this big-picture goal in the day-to-day effort to manage a growing business. It’s also a lot harder to shape or do something about, noted Rutger von Post, a principal in the Strategy& People and Organization Strategy Practice, who defines culture as an organization’s self-perpetuating pattern of behaviors, thoughts, feelings, mindsets and beliefs and suggests identifying and leveraging those patterns.
“No culture is all good or all bad—every culture has strengths and weaknesses,” he explained. “So one can pinpoint the things that make an organization special, the plus column of the culture. What are the aspects of the cultural traits or characteristics that your organization may have that make people proud and want to go above and beyond?”
At companies like Southwest Airlines, culture is embedded throughout the entire talent management process. Employees identify with the company’s commitment to the customer experience and their own roles in fulfilling that commitment. That culture is so deeply embedded that it now self-perpetuates—which is ultimately the holy grail of a corporate culture that aligns talent and corporate strategy, noted Amy Ross, CEO of HumanKind HR.
“At companies that do it really well, culture is embedded throughout the entire talent-management process,” she said. “It’s how they bring people through the door, it’s reinforced through performance management and it’s how they develop leaders.”
As many business leaders are all too aware, 2015 marked the first year that millennials surpassed preceding generations to make up the largest part of the U.S. workforce. Despite their increasing prevalence within corporate ranks, the nation’s youngest workers remain something of a mystery to employers—which makes recruiting and retention all the more challenging. “For me, it’s all about increasing retention,” noted Azura Memory Care CEO Josh McClellan. “About 45% of our team members are millennials, so we need to find out what make them tick.”
The good news? There are steps that companies can take to appeal to the nation’s newest and now largest generation of workers. PwC, which is now a year into an organization-wide talent
transformation effort, found that offering up-to-date technology experience was important to its youngest employees.
Millennials also expect real-time feedback rather than annual performance reviews, which is actually a plus for the companies that provide it. “If the only feedback that a sports team gets is at the end of the season, it’s probably not going to be a very good sports team,” noted Hesse, who reports that the company’s efforts have been fruitful. “Our retention is the best it’s ever been and, most recently, we were named the No. 2 ‘employer brand of choice’ by millennials, coming in just behind Google—not bad for a stodgy old accounting firm.”