Talentism is the new capitalism

What is talentism? Simon Arcus discusses the growing relevance of talent to New Zealand boards and the critical role boards can play.

Eminent German engineer and economist Dr Klaus Schwab discussed the new notion of ‘talentism’ at the opening of the World Economic Forum at Davos in 2013. He said, “Capital is being superseded by creativity and the ability to innovate – and therefore by human talents – as the most important factors of production. Just as capital replaced manual trades during the process of industrialisation, capital is now giving way to human talent. Talentism is the new capitalism.”

Dr Schwab says that access to quality human talent is the 21st Century imperative for any business to successfully compete on a global scale. He says we are mistaken if we think technology is at the heart of disruption: people are. This simple notion, with far reaching implications, should resonate with management and boards alike.

The relevance of talentism to the boardroom is significant. A board envisages the long-term future of the organisation and determines the settings for success. If people and culture are increasingly pivotal to achieving strategic outcomes, then the board must respond accordingly.

Last month the Governance Leadership Centre at the Institute of Directors published a members’ brief on a topic we hadn’t tackled before: the growing relevance of people and culture to the boardroom. It is becoming clear that the competition to acquire and retain quality staff in the 21st Century is a greater strategic issue for boards than ever before.

The need for a modern talent strategy is growing and evidence suggests New Zealand boardrooms are increasingly concerned about access to labour quality. The IoD-NZIER Director Sentiment Survey of 2014 revealed that directors considered labour capability and quality their most significant risk.

  • In its 2015 Global Human Capital Trends report, Deloitte identified a capability gap across all areas measured.
  • The 2015 Millennial Survey highlighted the need to make changes to attract and retain a 21st Century workforce.
  • PWC’s 17th Annual Global CEO Survey reported that 80 percent of New Zealand CEOs are concerned about the availability of key skills.

Boards have, of course, always had a role in talent strategy. They are critical in appointing the CEO, as well as ensuring succession planning and senior team stability.
But it is timely for boards to question what else they might be doing to respond to modern needs. The skills gaps we are seeing are not simply about shortages in traditional skills and capabilities. They include a greater arc of capabilities such as innovation, collaboration, customer satisfaction and responsiveness to emerging customer demands.
If the board orients more toward talent strategy as a key objective then the corresponding challenge for management is how to measure and report on these matters at board level. How does management satisfy the modern reporting, monitoring and assurance processes that ‘talentism’ requires?

In 2011, our international partner the Canadian Institute of Corporate Directors (ICD) released an excellent report titled Beyond the CEO, which examined and analysed how effective Canadian boards were in their oversight of human capital risks.

Outcomes of the report included recommendations that boards discuss the issue within their organisations and build time for human capital oversight into board schedules.
The ICD report provides a useful framework for assessing the board’s role in strategic talent management. A sampler of the kind of questions boards are asking is found below:

  • Have we identified the human capital challenges and risks we are likely to encounter in the successful achievement of our strategic objectives?
  • What processes are in place to continuously measure capability gaps and overcome them?
  • Have we defined and understood the kind of culture we need to be successful and do we ensure that it is acted upon throughout the organisation?
  • Do we have a succession plan covering the selection, development and evaluation of key staff?
  • How will we manage risks associated with sudden or unexpected departures through learning and development?
  • Do we receive sufficient information from management to ensure skills are being effectively deployed in the business?
  • Do we have a learning and development approach to meet current and future capability needs?

The IoD considers that the modern discussion on talent strategy is just beginning. Organisational culture will be critical to attracting and retaining staff.
This doesn’t mean trading off productivity for staff satisfaction. Instead, we need to consider modern and thoughtful approaches to the way we conceive, share and embed our values throughout the organisation.

As always, the board can play a critical role in setting the tone from the top on culture and talent. 

Simon Arcus is acting CEO of the Institute of Directors and the manager of its thought leadership hub, the Governance Leadership Centre. He is the author of the second edition of the IoD’s foundation guide to governance, The Four Pillars of Governance Best Practice. Simon is a solicitor with an LLB/BA from the University of Otago and Postgraduate Diploma in Business from Massey University. He is a Senior Associate ANZIIF and a Chartered Company Secretary. 

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