Leading the Way is a column written by PwC's professional staff. It appears in the Business section of the Bangkok Post twice monthly. The column provides specialised advice to corporate decision-makers in Thailand on global and local business trends.
This article appeared in the March 20, 2012 issue of the Bangkok Post.
By PwC Thailand
The gap between growth objectives and the talent to make it possible is having a very real impact on growth. For example, one in four CEOs in PwC's 15th Annual Global CEO Survey say that talent constraints affected their ability to pursue a market opportunity and a third said it affected their ability to innovate.
CEOs across industries say it's become more difficult to hire. Therefore, CEOs are determined to be more strategic in the way they manage their workforce today and plan for future needs. Up to now, the assumption was the market analysis element of a strategic plan was paramount, and how a business "resources up" to meet the plan is something that's worked out later.
Now leading businesses are looking beyond the next budget round to plan talent needs. A longer-term strategic view is needed if they want to close the gap today and map how talent needs will change. As part of this effort, more CEOs are now integrating HR with business planning at the highest levels of the company: 79% of CEOs say the chief human resources officer is a direct report.
They are also seeking a better understanding of the scale and effectiveness of their investments in talent.
For many CEOs, the information they receive tells them how the business is performing today, but not how investments in employees will generate future growth. Such measurements can't isolate skills gaps and struggle to identify the pivotal jobs that drive exponential value; they do not measure employee engagement or team performance. These measurements are much harder to do, which is one reason they've been neglected.
Employee engagement analysis can give business leaders a clear link between engagement and improved performance measures like retention and discretionary effort. Forward-looking businesses are coupling a clear view of the pivotal roles within their business _ the roles that create (or destroy) disproportionate business value _ and applying data mining and predictive modelling to gain insight into retention, recruiting or productivity analysis. For example:
Skills constraints are not likely to go away soon. As economies evolve, workforces need to evolve as well. It's an issue for CEOs, who recognise that talent is vital to competitiveness at a time when business success relies increasingly on knowledge capital and innovation capacity. One-third of CEOs saw reduced innovation as a consequence of talent constraints. It's also an issue for governments, which increasingly see the need to compete on talent.
India and China have invested heavily to upgrade skills and widen access to education, and they are cultivating their substantial diaspora of students and entrepreneurs to encourage their return. Singapore and Malaysia are taking comprehensive, long-term approaches to attract highly-skilled foreigners to enhance their economies. In short, policy makers are seeing the effects of talent mobility on economic competitiveness and acting to attract and retain talent. This is likely to encourage more global talent mobility, which will impact business talent management strategies.
Leading companies are taking the long view and partnering with their governments to invest in workforce development. Most CEOs believe that business has a role to play in upgrading skills outside of their own companies and 78% responded they are making direct investments in workforce development. This is part of a wider trend of businesses reaching back further into the talent pool and seeking to "grow their own" with employer-led universities.
So how can companies become more strategic about talent?
One place to start is by getting better data. CEOs consistently say they don't have enough information to improve decision-making in areas such as returns on investment in human capital, staff productivity, or employees' views and needs.
That's an information gap that needs to be bridged.
The challenge is also to identify what skills are needed where in order to deliver on future growth strategies _ not just for the next quarter but for the next three years and beyond.
Just as important is the challenge of making workforce planning part and parcel of business planning from the start, rather than just a way to carry out the strategy.
This calls for strong board support on what's needed to manage talent, and for HR and the business to work closely together in planning and decision-making.
What does all this mean for your business?
Cost-focused measurements around talent strategy need to give way to measurements around returns on investment, as leaders increasingly implement new approaches to solve their talent shortage problems. Two-thirds of CEOs are seeking better analysis to make and inform investment decisions around people. Implementing strategic workforce planning will help leaders look beyond the talent shortages today to align the talent needed to fulfil business plans.
This article was prepared by Prasan Chuaphanich, the executive chairman of PwC Thailand. We welcome your comments or questions at firstname.lastname@example.org.