The War for Talent never ended. Executives must constantly rethink the way their companies plan to attract, motivate, and retain employees.
Matthew Guthridge, Asmus B. Komm, and Emily Lawson
January 2008
Companies like to promote the idea that employees are their biggest source of competitive advantage. Yet the astonishing reality is that most of them are as unprepared for the challenge of finding, motivating, and retaining capable workers as they were a decade ago.
Ten years after McKinsey conducted its War for Talent research,1 the 1997 study drawing attention to an imminent shortage of executives, the problem remains acute—and if anything has become worse. Companies face a demographic landscape dominated by the looming retirement of baby boomers in the developed world and by a dearth of young people entering the workforce in Western Europe. Meanwhile, question marks remain over the appropriateness of the talent in many emerging markets.
Business leaders are deeply concerned, judging by two McKinsey Quarterly global surveys. The first, in 2006, indicated that the respondents regarded finding talented people as likely to be the single most important managerial preoccupation for the rest of this decade. The second, conducted in November 2007, revealed that nearly half of the respondents expect intensifying competition for talent—and the increasingly global nature of that competition—to have a major effect on their companies over the next five years. No other global trend was considered nearly as significant.2
The widespread belief that expensive efforts to address the problem have largely failed compounds the frustration of many senior executives. In the past decade, organizations have invested heavily to implement human-resources (HR) systems and processes, and talent issues have unquestionably moved up the boardroom agenda. Although these moves are laudable and necessary, they have been insufficient at best, superficial and wasteful at worst. Too many organizations still dismiss talent management as a short-term, tactical problem rather than an integral part of a long-term business strategy, requiring the attention of top-level management and substantial resources. “Everyone spends time on today’s business—we attribute very little value to doing anything else,” one European COO lamented recently. “Talent management puts you under strain because it stops you from doing what you are rewarded for.”
In our work, senior executives have frequently acknowledged their failure (and that of their line managers) to pay enough attention to these issues. Our research at scores of global corporations has highlighted the obstacles that executives face, including short-term mind-sets, minimal collaboration and talent sharing among business units, ineffective line management, and confusion about the role of HR professionals (Exhibit 1).
To manage talent successfully, executives must recognize that their talent strategies cannot focus solely on the top performers; that different things make people of different genders, ages, and nationalities want to work for (and remain at) a company; and that HR requires additional capabilities and encouragement to develop effective solutions. Only in this way will talent management establish itself at the heart of business strategy.
The growing challenges
Three external factors—demographic change, globalization, and the rise of the knowledge worker—are forcing organizations to take talent more seriously. But the threats don’t come solely from the outside; companies themselves have made matters worse.
External forces
While the developed world wrestles with falling birthrates and rising rates of retirement, emerging markets are producing a surplus of young talent; in fact, they graduate more than twice as many university-educated professionals as the developed world does. Many organizations have been eyeing this source of talent enthusiastically, but riding the new demographic tide won’t be straightforward. HR professionals at multinational companies in emerging markets such as China, Hungary, India, and Malaysia have told McKinsey researchers that candidates for engineering and general-management positions exhibit wide variations in suitability. Poor English skills, dubious educational qualifications, and cultural issues—such as a lack of experience on teams and a reluctance to take initiative or assume leadership roles—were among the problems most frequently cited (Exhibit 2).
