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Investing in a pipeline of top talent and grooming them for leadership is the number one concern of both business and HR heads. Aditi Sharma Kalra asks how HR leaders are nurturing their internal talent pipeline and developing worthy successors.
The average tenure of a manager has shrunk to less than four years on the job. With companies having to replace key personnel so often, this can lead to a drain on the senior team’s time and financial resources to fill vacancies. What is more important is these costs – be they monetary or non-monetary – are avoidable.
Both line and HR managers can nip the problem in the bud with a strong succession pipeline and structure around identifying and developing talent. This not only saves you external hiring costs, but also helps organisations to comply with the recent government thrust on the development of local talent.
Investing in the pipeline of middle managers and grooming them for future leadership positions is cited as the number one concern of HR heads. Hay Group’s 2012 study on Next Generation HR listed “developing future leaders” as the top priority for HR leaders, not just then, but for at least the following five years.
“Developing our leadership pipeline remains one of HR’s critical risks; the revolving door keeps spinning and the competition for the best talent is only getting more intense. It is therefore imperative we keep a healthy pipeline of leaders,” says Mohd Fauzi Bin Wahab, director of human resources for ASEAN/MENA at Fonterra.
Wolfgang Lirk, director of human resources for Asia Pacific at Waters China, agrees.
“In Asia, where you have a shortage of talent, you have no other way, but to develop the pipeline. There is a lot of talent in the market, but it is a matter of a lack of experience. I believe in building up your own people.”
In Asia, where you have a shortage of talent, you have no other way, but to develop the pipeline.
– Wolfgang Lirk, director of human resources for Asia Pacific, Waters China
Who takes the lead?
But here lies the catch. Developing leaders is not just HR’s priority. Another study earlier this year by Right Management found that across 24 industries, both business and HR leaders echo the same talent management challenge – “having a lack of skilled talent for key positions”.
“The first thing in career path development is it has to start from the top. If the top management is not clear about their own career path, they would not have any natural interest in grooming somebody else,” points out Debashish Chatterjee, director of human resources at Bombardier Transportation Singapore.
At Bombardier it’s the management’s role to groom successors, so much so it’s a parameter of their own evaluation.
“It is a top-down process in which they have to create the bottom part of the pyramid, as part of the talent review process. On the organisation chart for each manager, there is a timeline-based evaluation. It will be very difficult for a manager to say that none of their people will be ready to take over their job even in five years.”
Though Bombardier is a company with a tight seal on succession, it’s this area of leadership commitment that often proves to be the hole in many organisations, leading to a leaky pipeline. What’s more, this predicament often trickles over to functional heads and line managers as well.
And the reasons could be plenty, including a lack of direction or motivation, an unsupportive organisational culture or inaccessibility to a solid development framework across the company.
Succession Planning Case Study: DBS Bank
Start at the source
The last aspect, company frameworks and processes, is something Lirk feels strongly about.
“The process needs to be stringent and solid, and it starts right from hiring. That is the source of screening talent for the entire organisation.”
Hiring, he says, is only about assessment and identification, but companies can extend that concept to a succession pipeline by screening potential new recruits just as strictly.
“Managers tend to hire for the current job. They want someone who can do it right away. They are not trained to assess potential, and they also lack the motivation to do it,” he says.
“Companies have to train their line managers to be able to identify and assess talent, and build strong development plans for them.”
In essence, identification of high potential talent should go beyond current job performance.
“High potential managers are defined as those who have showed consistent high performance history, as well as the potential to succeed in increasingly demanding roles,” Bin Wahab says.
If a company has 50 expatriates, and HR is able to replace them with competent local talent, then the function can create a direct impact on the bottom line.
– Debashish Chatterjee, director of human resources, Bombardier Transportation Singapore
Bring in the experts
This is where the HR function steps up to deliver solutions to this business problem.
“Everyone knows they need to have talent management, but to really push the organisation and tell the management that it’s part of their job performance – that’s HR’s role,” Lirk says.
HR needs to do a good job of selling the criticality of the process, and make it clear how important talent development is for growing the business. In addition to being a salesperson, Chatterjee says HR is the supplier of talent.
“For every project, the choice is between internal and external talent. HR’s job is to provide systems and processes to groom internal talent and, at the same time, acquire external talent,” he says. “If a company has 50 expatriates, and HR is able to replace them with competent local talent, then the function can create a direct impact on the bottom line.”
In fact, developing internal talent, as opposed to recruiting external talent, has moved in the direction of becoming a regulatory requirement in recent times.
The Singaporean government, for example, has put in place policies to encourage the hiring of locals, such as the national Jobs Bank and the Fair Consideration Framework. In addition, companies increasingly feel a cost pressure to do more with less in a tight business environment.
Succession Planning Case Study: SABIC
The many forms of development
However, internal talent development does not only imply an upward rise in the pyramid or a promotion with a new pay package.
Chatterjee explains horizontal or lateral movement can be equally effective. This may entail a change of responsibilities, function, department or geography; but is not necessarily tied to the conventional style of the up-the-ranks promotion. Many times though, a lateral move does not come with the same perks of a promotion.
“Traditional recognition processes reward vertical movements, not lateral movements. Compensation and salaries in most companies are fixed by grade, so in the case of a lateral movement, they don’t change, since the employee has not moved up a grade,” he says.
“What they miss out on is the additional effort that an employee has to put in, while ramping up in the new domain, and the fact the company now has one additional person with that kind of expertise. It is enrichment for the individual.”
Bombardier, he mentions, has a very open policy in terms of internal movement. It is mandatory for jobs to be published internally. Beyond a certain level, external hiring is scrutinised, although not discouraged. This outlook defines its commitment to talent development.
Additionally, Chatterjee suggests lateral movements be rewarded, which could take the shape of professional support, alignment with a mentor from the senior level, a change in salary, a bonus linked to the new deliverables or performance share awards.
Developing our leadership pipeline remains one of HR’s critical risks; the revolving door keeps spinning and the competition for the best talent is only getting more intense.
– Mohd Fauzi Bin Wahab, director of HR for ASEAN/MENA, Fonterra
The rewards of development
The ability of rewards to motivate can also be leveraged in enabling line and hiring managers to develop the talent pipeline, an area Waters China is exploring.
“Right now, we are working on how we can make it attractive for line managers to bring in people who have the upward potential, and not only hire for the current job,” Lirk says.
Bombardier, which conducts twice-a-year performance evaluations to fill in competency gaps, also has a system in place to recognise the efforts of high-potential talent.
“After every performance cycle, there is a centralised talent review process that goes bottom-up – from the project team to the department to a regional level, right up to Bombardier’s leadership team. It is not only about the performance appraisal, but we also have a rewards mechanism for someone identified as a high-potential,” Chatterjee says.
Bin Wahab also affirms Fonterra has a multitude of avenues for its staff to continue to develop.
“From the learning central portal on our intranet where all staff can learn and up-skill about all parts of our business, to providing a future leaders programme for our high-performing managers to step up to the next level – at every stage of their development, we encourage all staff to participate in the available programmes.”
He takes a case example of internal talent development done right in the recent appointment of the general manager of Fonterra Brands Malaysia and Singapore, Jose Miguel Porraz Lando.
“Jose Miguel kicked off his career with Fonterra in 2003 at our headquarters in New Zealand. He started in the corporate strategy team and later had the opportunity to work as executive secretary of the Fonterra leadership team.”
He was given the chance to rotate across a variety of roles – from the Australian consumer business to the role of chief financial officer of Fonterra’s Soprole subsidiary in Chile. He was then offered an opportunity as the GM of Fonterra’s branded business in Vietnam, leading a team of 100 direct employees and 800 indirect employees.
“In August this year he took on the general manager role for Malaysia and Singapore, leading a team of 500 people,” he adds.
“By providing our staff with development opportunities across a range of markets and roles, we aim to teach them something different, provide opportunities to grow and ultimately be a part of our leadership team.”