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The CEO’s Role in Talent Management

Published by: Economist Intelligence Unit

CEOs around the world are aware that talent management is critical to greater productivity and more rapid revenue growth. So they spend a lot of their own, valuable time developing talent. But it is not all about ‘soft and fuzzy stuff’ according to research by the Economist Intelligence Unit, it is about ‘developing a leader pipeline.’

The Economist Intelligence Unit (EIU), in co-operation with DDI, recently interviewed 20 corporate leaders across the globe. Almost all of those interviewed were senior executives in companies that generated at least $1bn in annual revenue. The data revealed a number of key findings. The first, and perhaps most pertinent, is that all 20 leaders felt that talent management was their responsibility and they spent at least 20% of their time working on it in varying ways. The white paper also found that ‘few of the executives appear to have a strategic approach to talent management.'

The CEOs and COOs in the EIU study, universally consider that talent management is the source of competitive advantage. The importance of talent management from this respect is perhaps why it is driven from the top, with HR serving a supporting function. CEOs are realizing that talent management drives corporate performance, although for these interviewees it was rarely linked to their businesses’ overarching goals.

‘As the CEO I have primary responsibility for the issue of organizational health and ensuring that the management team remains vital, relevant and refreshed, and that we create a process to nurture and facilitate our own succession. That is one of the two or three most important things that a CEO must do,’ says John Swainson, CEO at CA Inc.

Talent management, according to these senior executives, is about creating a positive work environment and full engagement. Without these two critical factors, talent goes ‘organization hopping’ and companies can find themselves with headhunting bills that amount to over 150% of that recruit’s annual pay.

The objective for most of these CEOs was to groom talent so that it could rise up through the ranks. The Co-Operative group, for example, has set an objective of achieving 70% of its promotions internally. And most mentor their direct reports informally.

‘People follow behaviour more than they do strategy, and leadership is about mobilizing behavioural change,’ maintains Maarten Hulshoff, CEO at Rodamco Europe. Although many companies are increasingly discussing talent management with the board and holding forums and leadership classes, most CEOs deal with talent management on an ad hoc basis: having people stop by the office, meeting over a glass of wine or sending out emails with career advice.

As business strategies change, so do the particularised talent qualities. For example, First Horizon stress that their managers must have strong execution capabilities and because they have just that, the company is outperforming its competition. Others have been attempting to bring women and people from minority groups into their executive ranks. Attempting, being the operative word, according to the white paper.

The report concludes that if talent is to be retained, nurtured and even elevated to CEO positions (in line with the business’s future needs), annual performance reviews, recognition awards, and opportunities for wider business and geographical experience must be encouraged. Talent programs should incorporate both formal and informal coaching and mentoring from the top, having enlisted HR directors as the strategists and facilitators that make things happen.

However, ‘no one culture is right; they’re just different,’ explains Zesbaugh, CEO of Allianz Life Insurance Company. Regardless of the nature of your business, your culture or your location, talent management is all about treating your best leaders with dignity. ‘Breadth is important, but its breadth with the right heart,’ maintains Colin Reed, CEO at Gaylord Entertainment.

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