UPFRONT Hanging on to human capital

Kiwi companies are becoming very efficient at what they do in terms of human resource processes – but they’re still haemorrhaging top people and failing to make best use of the talent they have.
That’s according to IBM’s Global Human Capital Study 2005, which focused on how organisations around the world are leveraging their human capital to improve workforce effectiveness and organisational performance.
How talent is managed is where the battle for organisational competitiveness is going to be won or lost, says Bill Farrell, IBM’s Asia-Pacific leader for Human Capital Management (HCM).
“Some organisations do it well; others really struggle – I think the war for talent is on and lot of organisations are losing the battle.”
The bad news for companies in both Australia and New Zealand is their apparent inability to hang on to executive talent.
“One of the key findings for organisations in this part of the world is this paradox of being very efficient in terms of HR processes while having an executive turnover that is the highest in the world. In other words, we’re very efficient at recruitment but not necessarily very effective,” says Farrell.
“So you have to question where we are focusing our resource in terms of the HR function and the outcomes we’re trying to achieve. I think we’ve lost track of what we’re trying to do in terms of outputs.”
The study found that there are critical things organisations can do to keep staff engaged, says Farrell. Those that have strong philosophies around performance reviews to ensure career development and promotional opportunities tend to do very well in terms of talent retention. Organisations with strong child-friendly policies also tend to show lower turnover and higher profit – though they may suffer if there is too much focus on work-life balance.
The trick is to target individual needs rather than setting up company-wide policies – rule of thumb that also applies to management development programmes. There’s evidence that companies investing in such programmes show higher profit per fulltime employee – but there’s the risk of developing them right out of the company, notes Farrell.
“Those who do the higher volume development may cause increased turnover – people get trained and leave because their skills are more valuable in external markets. There’s nice correlation there with the Australia/New Zealand results – because we do have the highest level of management development and the highest executive turnover.”
Okay – it’s perhaps inevitable that big executive fish outgrow the relatively small trans-Tasman pond. But Farrell suggests more could be done to maintain connection with those that leave and also with retirees to start building an external community of talent to draw on.
It’s case of being more proactive about predicting talent supply and demand, agrees Ross Pearce – who leads IBM’s human capital management practice in New Zealand.
“Increasingly HR people have to think about workforce planning issues. They need to help CEOs and senior line managers look at current organisational capabilities and what’s required three to five years hence, measure the gap and come up with strategies for filling it – both from within and outside the organisation.
“So I think they need to take more proactive and holistic view of the workforce and of course that involves being much more aware of some of those demographic trends we are now having to deal with and being more focused on how to keep connected with talent and how to best use it.”