War For Talent

War for Talent –
How to find, keep and

manage talents?
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Estonian Leadership
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Conference
This material was used by McKinsey & Company during an oral
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September 9, 2004
HEL-ZYN093-20040909-War-for-Talent-Estonian-Leadership-Conference
Long-term forces fuel the war for managerial/executive talent in large

corporations
Unit of measure
Demand for
talented
managers
Viewpoint:
• Focus on
managerial/”Top200”
executive talent in large
Demand for War Demographic

corporations
• Survey data and cases
knowledge
workers
for constraints
on supply
from the USA
talent However, most principles

can be applicable to other
knowledge professions as
well
Talent is
more
mobile
* Footnote
Source: Source 2
Companies are generally poor at managing talent

Unit of measure
Percent of top 200 executives who strongly agree it reflects their company
Brings in highly talented Knows who the high

people and low performers are
23 16
77 84
Retains almost all high Develops people quickly Removes low performers
performers and effectively relatively quickly
3 33
10
90 97
* Footnote
Source:Source: McKinsey War for Talent top 200 executive survey - 5,679 respondents
Source 3
Companies acknowledge that they often fail when making key people
decisions
Unit of measure COMPANY EXAMPLE
Success in people decisions

Percent
Marginally
Favorable
acceptable
outcome
performance “In no other area of
corporate
management would
we accept such
deplorable results”
– CEO
Unmitigated
failure
* Footnote
Source: Source 4
Building a globally competitive workforce

Unit of measure
Globally competitive
workforce and
improved company
performance
Instill
talent nurturing
mindset
Create a Strengthen
great EVP recruiting
Develop Reward and

outstanding recognize
leaders performance
* Footnote
Source: Source 5

Unit of measure
Instill a talent nurturing mindset at all levels of

the organization
Create a great employee value proposition
Strengthen recruiting by making it a top team priority
Develop outstanding leaders by developing people

to their full potential
Evaluate performance and differentiate actions

accordingly
* Footnote
Source: Source 6
What is a ‘talent mindset’?

Unit of measure
1 Belief in the importance of

talent
2 Link between business strategy

and talent requirements
3 Accountability for talent by

senior managers
4 Leadership by the CEO
* Footnote
Source: Source 7
Strong belief in importance of management talent is essential

Unit of measure
“If we don’t get the people thing right, we lose; it is the most important thing
in all our businesses.”
– Jack Welch, ex-CEO, General Electric
“Not having enough leaders to grow our business…is the biggest single
issue that we face.”
– Ralph Larsen, CEO, Johnson & Johnson
“People are the primary source of competitive advantage.

At the end of the day we bet on people, not strategies.”
– Larry Bossidy, ex-CEO, AlliedSignal
* Footnote
Source: Source 8
Managers are not held accountable for talent

Unit of measure
Percent of corporate officers
99
6
Somewhat important
54
Very important
35
39 32
Somewhat agree
3
Critical
Strongly agree
Believe line managers Think their

should be held companies
accountable for the actually do this
quality of their people
* Footnote
Source: Source 9
Four levers need to be addressed to change mindsets

Unit of measure
Role-modelling Communicating
Have the formal Has the who, what,
leaders and the why, when, and how
informal opinion “. . . I see my leaders “. . . I know what is been communicated
leaders embraced behaving differently” expected of me” throughout the
the change by organisation?
role-modelling?
“I will change
my behaviour if . . .”
Have training and Have the formal and

development informal policies and
programmes been “… I have the skills “. . . the system procedures (including
altered to reflect to behave in the reinforces the compensation and
the new desired new way” desired culture” appraisal) been
skill set? changed to reinforce
Developing talent Reinforcing with the new desired
and skills formal mechanisms behaviours?
* Footnote
Source: Source 10

Unit of measure
Instill a talent nurturing mindset at all levels of the

organization


accordingly
* Footnote
Source: Source 11
What is an EVP?
Unit of measure
1. The experience employees have every day at work
2. The sum of the “gives and gets” that makes up the

relationship an employee has with a company
3. A special blend of challenge, connection, professional

growth, respect, satisfaction, opportunity, and reward
4. The company’s fingerprint that uniquely reflects the culture,

business model, leaders, management style, compensation
structure, and career paths
Delivery is crucial!
* Footnote
Source: Source 12
What is an EVP?
Unit of measure  Most critical
Great company
•• Culture and values
Company industry reputation
• Meritocracy
• Advancement
• Lifestyle
•• Work content

Great job • Development
Job security
opportunities
Why would a • Freedom and autonomy
talented person • Coaching, feedback and monitoring
want to work for
your company?
Great leaders
• Employees
management
opinion of senior
• Employees relationship with boss
Attractive
• Total compensation package
– Base pay
compensation – Short term incentives
– Long term wealth creation
* Footnote
Source: Source 13
Why executives join, stay with, or leave a company

Unit of measure
% of top 200 executives rating statement ‘essential’ or ‘very important’
There is significant freedom

Total compensation is high
and autonomy to do my job
The position has exciting Company is very good at developing

challenges people
Company is well managed Company mission inspires me
Strong respect for lifestyle issues

I like the company’s values
and willingness to help me manage
and culture my work/family balance
Future career advancement and

Job security is high
growth opportunities are strong
Company has many highly The company tells people where

talented people they stand relative to their peers
Compensation is structured to
differentiate significantly between Reasonable pace and low stress level
high, average, and low performers
* Footnote
Source: Source 14
Overview of company X’s current employee value proposition

% of Level 3 and Level 4 respondents
McKinsey clusters: What matters in a job

Company 100
effectiveness ‘Strengths’
Meets/exceeds
Interest
expectations 80 of work
Ambitious goals
60 Well
managed
Culture/values
Senior Autonomy
management Company
commitment performance Trust in sr. mgt.
40 Annual
comp.
to growth
Reward/
Promotion of recognition Open
Career high commu-
advance performers nication
Mentoring -ment Wealth creation
20 Politics
Training Differential
compensation Processes/
red tape
‘Problem areas’
0
0 50 60 70 80 90 100
Importance
Absolutely essential or very important
* Footnote
Source: Source 15

Unit of measure

organization
Strengthen recruiting by making it a top team

priority


accordingly
* Footnote
Source: Source 16
Levers to consider when rebuilding the recruiting strategy

Unit of measure
From To
•Grow your own talent •Pump talent in at all levels
•Recruit for vacant positions •Hunt for talent all the time
•Go to a few traditional sources •Tap many diverse pools of talent
•Advertise to job hunters •Use creative channels to reach passive

candidates
•Specify a compensation range and stay •Pay what it takes to get the candidates
with it you want
•Recruiting is screening •Recruiting is also selling
* Footnote
Source: Source 17
Use many creative channels to find people

Unit of measure
Personal networks
Executive search firms
Company Web site
Searching resumés on the Internet

Rich flow of
Advertising on job boards, other media
candidates
Long-term relationship databases
Direct mail campaigns
Experiential or educational events
* Footnote
Source: Source 18
Be creative about talent sources

Unit of measure
Hewlett-Packard provides summer internships and part-time

Earlier jobs for hundreds of high school and college students
Amgen hires entrepreneurial “refugees” from the R&D

Later departments of big pharma companies
Different General Electric hired 650 military officers in the past 2 years
One company hired 50 of 300 graduating students from an

Global elite Indian high school and brought them to the U.S.
* Footnote
Source: Source 19
Retention tactics
Unit of measure
% corporate officers who say company is “very effective”
Mid-quintile Top-quintile Gold standard

companies companies companies
Tell them they are

our best people
Create a sense of
belonging
Give them exciting

jobs
Pay them more than

average performers
* Footnote
Source: Source 20

Unit of measure

organization
Develop outstanding leaders by developing

people to their full potential

accordingly
* Footnote
Source: Source 21
Jobs and feedback drive development

Unit of measure
Percentage of top 200 executives
80
70
Stretch/
60 developmental jobs
Company effectiveness
Excellent or very good
Way jobs
50 Special projects
Speed structured
of job moves
Formal training
40 Formal Role models
Traditional training performance 360-degree
Told strengths/
outside evaluation feedback
30 weaknesses
Being Informal
Traditional training inside Individual Job coaching/
20 learning mentored
Non-traditional rotation feedback
learning programs
Development Feedback/mentoring
10 Outside testing plans
0
0 10 20 30 40 50 60 70 80
Importance to my development
* Footnote Absolutely essential or very important
Source: Source 22
Promote your best people early, often

Unit of measure
% corporate officers who say this very much reflects their company
Mid-quintile Top-quintile Gold standard
We give high-potential
individuals more/better
development opportunities
We put high-potential
people in jobs “before
they are ready”
* Footnote
Source: Source 23
Use staffing decisions to drive development

Unit of measure
Five most developmental jobs
1New position with larger scope

2Turning around a business
3Starting a new business
4Large, high-profile special projects
5Working outside your home country
Most of these jobs are
scarce, so give them
your best people!
* Footnote
Source: Source 24
Making more/better feedback happen

Unit of measure
1. Value it
y ear – Kevin Sharer, CEO of Amgen
h i s
ed t
p e r f o r m
_ _ _ ____
u _
w e l l yo _ _ _ ____ _ _ ___
Ho w _ _ _ _ 2. Sharpen insights about people
_ _ _ _ ___ _ _ _ ____
____ _
_ _ _ ____ – GE: Session C notes
__
____ gths _
t s tr e n
_ _ _ _ ___
s
r g r eate _ _ _ ____ _ __ __ 3. Formal, written feedback once a year
Yo u _ _ _ _
____
__
_ _ _ __ __ _ _ __
_ _ _ _ _ _ – McKinsey & Company
1. ___ __ __
_ ____ _ _ _
2. _ _ _ __ __
___
3. ed s 4. Support in various ways
e n t n e
_ _ ____
e v elop
m
_ _ ___
_
_ __
• Train managers
ur d _ _ _ _ _ _ _
Yo ___ __ __
_ • Assess managers on coaching
_ ____ _ _ _ _ _
_ _ ___
1 . _ _ _
___ _
_ • 360-degree feedback
_ ____ _ _ _ _
2.
_ _ _ ____ Arrow Electronics
_
3.
* Footnote
Source: Source 25
Use of talent building levers in European companies (1/2)

Unit of measure
Percent
Systematic career planning Systematic job-rotation

Spain 31 Finland 36
27 31
Switzerland Switzerland
25 29
Netherlands Norway
24 24
Great Britain Spain
22 24
Average 21 Sweden 23
Ireland 18 Netherlands 21
17 20
Sweden Average
17 19
Norway Ireland
15 19
Denmark Great Britain
10 16
Germany 9 Denmark 10
Finland Germany
France France
* Footnote
Source: Source 26
Use of talent building levers in European companies (2/2)

Unit of measure
Percent
Succession planning High-potential programs
Germany 58 Norway 64
48 54
Switzerland Sweden
44 44
Great Britain Spain
34 41
Norway 33
Switzerland 31
Average 29 Average 31
Ireland 27 France 30
26 25
Spain Germany
25 23
Finland Denmark
22 23
Sweden Great Britain
19 12
Netherlands 13 Netherlands 8
France Ireland
Denmark Finland
* Footnote
Source: Source 27

Unit of measure

organization
Develop outstanding leaders by developing people to

their full potential

accordingly
* Footnote
Source: Source 28
Managers/executives perform develop differently – a performance evaluation and

management
Unit of measure system is needed for an organization to develop to it’s full potential
Evaluation
• An honest and ethical evaluation system needed
as the backbone of performance management
• Reasonable distribution along performance levels
is practical
Differentiated • Reward and provide development opportunities

actions for best performers
• Affirm and grow the solid performers (majority)
• Have a consequence management system for
non-performing executives/managers
* Footnote
Source: Source 29
Having a consistent consequence management system for non-performance

is
Unitimportant
of measure
Complacency on underperformance is damaging
By having low
performers in critical
… fewer “A” players
executive/management
are attracted to join
positions without any
the company
consequence
management…
• Large variety of options
exist for consequence
… high performers management, from
leave the company “hard” to “soft”
• In every case, the

system needs to be
consistent and aligned
…development/advancement with the culture and
opportunities are blocked values of the
…subordinates are not organization
developed
…productivity and morale
of group is low
…performance in job is low

* Footnote
Source: Source 30
Consequence management should reflect the culture and values of an

organization
Unit of measure – some examples for the US
Demotion or
Immediate dismissal Dismissal for repeatedly
sideways move
for missing targets missing targets
for missing targets
Frito Lay Johnson Barrick Gold GE Microsoft AIG Hewlett Emerson Nucor
• ‘Unaccep- & Johnson • ‘(CEO) will • ‘People • ‘3 strikes • ‘Continu- Packard Electric • ‘We rarely
table • ‘Non per- not settle who miss and ous low • ‘Under • ’Under terminate
performers formance for lower the numbers you’re performers performers performers anyone for under
given 90- frequently quality and but have the out’ dismissed’ moved to moved performance,
120 days to leads to this attitude values get a alternate sideways they figure it out
improve or dismissal’ carries second position’ but not from their pay
face through to chance. usually checks’
dismissal’ the people People with no dismissed’
he hires values and no
and fires’ numbers get
fired; those
Merck Gillette SAP
who make the
numbers but
• ‘Under • ‘Un- • ‘Those who
performers successful don’t fit or don’t
don’t have the
given executives meet targets
values are now
second usually are laterally
also fired’
chance given transferred. It’s
through second the only way to
retraining or chances encourage
transfer’ and are not innovation’
dismissed’
* Footnote
Source: Source 31

Unit of measure
Globally competitive
workforce and
improved company
performance
Instill
talent nurturing
mindset
Create a Strengthen
great EVP recruiting
Develop Reward and

outstanding recognize
leaders performance
* Footnote
Source: Source 32
APPENDIX
Unit of measure
* Footnote
Source: Source 33
Employee value proposition example (1/3)

Distinctive Common practice
Company Flexible
Flexibletoto
suit Tools to do the job
suit
supports individuals’ individual
individual
needs
Personalized and Knowing what we know

Effective knowledge incentivized
sharing knowledge networks
Tailored career Transparent

“Inspired to learn, Active career Tailored career
development job opportunities
required to develop, development development
recognized for
contributing,
supported by our Personalised Individual feedback, pay Clear goals for all –
global network” performance for performance and bonus for meeting them
recognition choice of benefits
Connected, Visible leaders giving Business direction

effective timely updates shared
communication
High potentials identified Leaders who ‘walk the

Inspiring leaders early; actively managed talk’ and develop their
and developed through people
* Footnote their careers
Source: Source 34
Employee value proposition example (2/3) – Tailored

career development
Established a project matching system

• Projects posted in same manner as jobs with employees showcasing
their capabilities
• Project leaders select from bids
• Central co-ordination balances needs of employee, project, and
company
• Employees create their own CVs by bidding for projects aligned with
career aspirations
• As employees are placed on new projects, learning system informs
them of appropriate development activities
• Same system also be used for role changes
Developed and publicized expertise maps
• Maps detail potential career paths through company
• Employees follow company career paths, or create their own
On reaching the executive level, staff get a talent account to spend

on self development. What they spend it on is up to them
* Footnote
Source: Source 35
Employee value proposition example (3/3) – Creating your own

lifestyle and work environment
Introduced flexible working package

• Employees can propose own flexible working hours/location. After review with
supervisor can start flexible working on three-month review cycle
• Virtual offices provided to all working from home using a budget; interactive ordering
of tools via ‘Home Workers’ website
• Career breaks and sabbaticals actively encouraged (paid or unpaid) for: community
projects, personal development, family care, and so on
Established points-based menu of lifestyle options
Description Points
Concierge service Help with personal life 1 per hour of concierge time
Childcare Vouchers to spend on selection 4 per £200

assistance of external childcare facilities
Life planning Financial/legal planning 10 per hour
Vacation Purchase additional holiday 10 per week
Employee Online informational assistance –

assistance
*programme
Footnote
Source: Source 36
Company example – Recruiting process for senior-, mid-level professionals

Unit of measure
• Contact execu-
tive search firm
REQUISITIO
N
• Query sourcing
database
• Post position on
RLR intranet and
internet sites
• Place newspaper
ads, etc.
1. Manager completes 2. Staffing specialist 3. Staffing specialist accesses a

staffing requisition and hiring manager plan variety of channels to identify
form and sends to strategy for obtaining qualified candidates
HR broad slate of candidates
CANDIDATES
1. Alex Smith
2. Juile Jones
3. Tom Hall
4. Sue Cook
5. Mary
4. Staffing specialist 5. Hiring manager 6. Hiring manager, 7. Hiring manager

delivers a ‘short and interview team use with input from staffing makes offer, closes the
list’ of candidates ‘Selecting for specialist, evaluates deal and begins to
to Hiring Manager Success’ to interview and selects best introduce the new emp-
* Footnote
candidates candidate loyee to the company
Source: Source 37
Example performance/potential criteria for managers/executives

Unit of measure
Performance Potential
• Resolution • Personal skills

– Responsibility
• Attainment of objectives – Initiative
– Vision
• Scope and complexity of – Flexibility
the objectives attained – Energy
– Exemplary
• Efficiency in managing
resources • Interpersonal skills
– Leadership
• Mastery of technical skills – People development
and/or education – Team work
* Footnote
Source: Source 38
Looking at the talent pool by Business Unit in a large company

Unit of measure
Percentage of individuals
…but across Divisions, there is a broad spread of talent quality
‘Outstanding’
100% = 9 8 10 4 6 7 2 13 10 3 7
11.1 16.7 14.2
22.2
28.6 33.3
40.0 38.5
50.0
33.3 62.5
High 42.9
4 2 1 50.0
20.0 100.0 33.3 55.6
Potential
38.5
Medium 25.0 71.4
7 5 3 55.6 40
42.9
37.5 33.3 33.3
25.0 23 22.2
Low
9 8 6‘Tracking’
Low Medium High
‘Issues’ A B C D E F G H I J K
Performance Business units
* Footnote
Source: Source 39

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War for Talent –

How to find, keep and

Long-term forces fuel the war for managerial/executive talent in large

Demand for War Demographic

talent However, most principles

Companies are generally poor at managing talent

Brings in highly talented Knows who the high

Success in people decisions

Building a globally competitive workforce

Develop Reward and

Building a globally competitive workforce

Instill a talent nurturing mindset at all levels of

Create a great employee value proposition

Strengthen recruiting by making it a top team priority

Develop outstanding leaders by developing people

Evaluate performance and differentiate actions

What is a ‘talent mindset’?

1 Belief in the importance of

2 Link between business strategy

3 Accountability for talent by

4 Leadership by the CEO

Strong belief in importance of management talent is essential

“People are the primary source of competitive advantage.

Managers are not held accountable for talent

Believe line managers Think their

Four levers need to be addressed to change mindsets

Have training and Have the formal and

Building a globally competitive workforce

Instill a talent nurturing mindset at all levels of the

Create a great employee value proposition

Strengthen recruiting by making it a top team priority

Develop outstanding leaders by developing people

Evaluate performance and differentiate actions

1. The experience employees have every day at work

2. The sum of the “gives and gets” that makes up the

3. A special blend of challenge, connection, professional

4. The company’s fingerprint that uniquely reflects the culture,

•• Work content

• Employees relationship with boss

Why executives join, stay with, or leave a company

There is significant freedom

The position has exciting Company is very good at developing

Company is well managed Company mission inspires me

Strong respect for lifestyle issues

Future career advancement and

Company has many highly The company tells people where

Overview of company X’s current employee value proposition

McKinsey clusters: What matters in a job

Building a globally competitive workforce

Instill a talent nurturing mindset at all levels of the

Create a great employee value proposition

Strengthen recruiting by making it a top team

Develop outstanding leaders by developing people

Evaluate performance and differentiate actions

Levers to consider when rebuilding the recruiting strategy

•Grow your own talent •Pump talent in at all levels

•Go to a few traditional sources •Tap many diverse pools of talent

•Advertise to job hunters •Use creative channels to reach passive

•Recruiting is screening •Recruiting is also selling

Use many creative channels to find people

Executive search firms

Company Web site