Talent Intelligence

What You Need to Know to Identify and Measure Talent

Nik Kinley, Shlomo Ben-Hur

• Publisher: Jossey-Bass
• Year: 2013
• ISBN:
  9781118640289
• Edition: 1
• Topic: Business
• Subtopic: Human Resource Management
• Index: Business

The challenge with most companies' talent intelligence is that it is just not that intelligent.

Having good talent intelligence—an accurate understanding of the skills, expertise, and qualities of people—is essential for the people decisions that all businesses make. Yet despite its vital importance, most organizations appear to be failing at this critical task. The reason lies in talent measurement: how companies produce their talent intelligence and then use it.

Written by Nik Kinley and Shlomo Ben-Hur—two experts in the field—this book draws on the latest research to show how businesses can transform the value and impact of their talent intelligence to make sure they get the right people in the right roles. When that happens, all their talent management and development activities are built on an accurate understanding of the talent available to them.

Filled with illustrative examples, the book shows how to overcome the stumbling blocks that stand in the way of successful talent intelligence and reveals step-by-step what organizations need to measure, how they can best do so, and how they can successfully implement measurement and use the results.

As the authors explain, knowing what methods and tools to use is just part of the challenge: the bigger issue for many firms is ensuring they know how to use them and make the best use of the intelligence they provide.

1

Talent Measurement

Is It Measuring Up?

The challenge with most companies' talent intelligence is that it is just not that intelligent.

Having good talent intelligence—an accurate understanding of the skills, expertise, and qualities of people—is essential for the people decisions that every business makes. If they are to avoid randomly hiring and promoting people, all companies need to evaluate and gauge individuals' talents. It is a basic and fundamental task, one that every manager and organization does, and one that everyone agrees needs to be done well. Yet all the available evidence suggests that it is not.

The reason lies in talent measurement—how organizations go about gathering and using information about the talents of their people—because it seems that this crucial task is often taken for granted, not well understood, or undertaken in ways that limit its value to firms.

This book is about why this is so, what has gone wrong, and what organizations can do to rectify the matter. And they do need to rectify it because the world is changing in ways that mean they will no longer be able to get away with not doing it well. To thrive in the coming decades, firms are going to need good talent intelligence, and they are going to need to use it in ways that deliver real value and competitive advantage for them. And to achieve this, they are going to have to get talent measurement right. The good news is that they can.

The Hidden Role of Talent Measurement

Talent measurement is the use of various methods and tools to gather and use information about individuals' talents. There is no one way of doing it. Some organizations rely on the intuition of their leaders and simple interviews; others employ sophisticated online tests. Both, though, have the same purpose: to identify whether job applicants and current employees have the abilities, expertise, and characteristics they need to help both them and their businesses thrive and be successful.

As a task, talent measurement is often hidden away, part of bigger and broader processes. Yet it is there. It is key to recruitment, promotion, high-flier identification, restructuring layoffs, organizational design, individual development, competence as­­surance in technical roles, and due diligence for mergers and acquisitions.

Unsung it may be, but talent measurement is a fundamental foundation of modern talent management. It is a basic building block in successfully managing workforces, helping identify who adds value right now, and who could do so going forward. And although it may have been a low-profile activity to date, it is about to have its day in the sun.

Why Talent Measurement Matters More Than Ever Before

Talent management is changing, and as it does so, it is leading businesses increasingly to focus and rely on talent measurement.

Almost fifteen years ago, McKinsey declared that a “war for talent” was coming, and it seems they got it right.¹ Globalization and shifting population demographics are causing competition for talent to rise steadily and persistently and making it harder than ever before for businesses to find the talent they need.

In the West, only 18 percent of firms say they have enough talent in place to meet future business needs, and more than half report that their business is already being held back by a lack of leadership talent.² Worryingly, 75 percent of businesses report difficulty in filling vacancies too.³ The temporary increase in available workers created by the downturn is not helping either, as there is evidence that all the choice is making it more difficult to spot the best people.⁴

The situation is generally not as critical in emerging markets, but this will change. In China, for example, the predominantly manufacturing base of its economy has largely protected it from these concerns up to now. Yet as service industries and the use of knowledge workers grow and the impact of the country's one-child policy is felt, China too will face these challenges. The war for talent is going global.

It is not actual war, of course, but there will be casualties and there will be winners. We know that businesses that are better at talent management and better able to find and keep the best people tend to outperform their industry's average return to shareholders by around 22 percent.⁵ In fact, making good hiring and promotion decisions can have a bigger impact on market value than creating a customer-focused environment, improving benefits, or having good union relationships.⁶ And amid stronger competition for talent, these performance advantages for companies that are effective at identifying and managing talent are likely to increase.

Realizing this, alert organizations are turning to talent management for solutions and investing in it too A recent U.S. Department of Labor report predicted that over the next ten years, the number of people in human resources (HR) and talent management professions will grow at more than double the rate of the general workforce.⁷

Driven by all this attention and investment, talent management is changing. Perhaps most notable, and arguably long overdue, it is becoming far more data led. People data have become currency, and workforce analytics is the buzzword of the moment. The idea is simple and compelling: to manage talent and make good personnel decisions requires knowing what you need, what you have, and what is available. And to make this possible, new software systems have emerged that promise to help you gather, manage, and use talent information more effectively than ever before.

You might assume that talent measurement would be at the heart of this analytical talent management revolution, but, oddly, this has not typically been the case so far. Instead, these talent systems tend to use data such as demographics and distributions—that is, workforce composition. This type of administrative information does have uses, but it is limited in terms of what you can do with it and the value you can add with it. So while many of these new talent management tools are undeniably impressive, they are, like all other systems, only as good as the data you put into them. And in this respect, they are lacking.

A few larger companies have sought to rectify this by putting talent measurement at the heart of these systems. Google, predictably, is ahead of the curve when it comes to people data. Unsure of whether it was hiring the best applicants, the company started developing a comprehensive database that captured information about current employees' attitudes, behaviors, personality, biographical information, and job performance. This database has allowed Google to develop an algorithm for predicting which applicants are most likely to succeed at the company.⁸ It is too early to judge how effective the algorithm is, and this kind of approach would not be suitable for all businesses. Yet it is clearly more sophisticated in its approach than mere demographics and has the potential to yield far more value.

Other organizations are following suit. For example, a major UK retail bank recently linked the results of its employee engagement survey to administrative data on people, measurement data, and customer service feedback scores for individual bank branches. As a result, it was better able to understand what the business and branch managers needed to do to improve the customer experience.

So businesses are beginning to realize the potential of measuring talent systematically and combining talent data with other information to produce insights of real business value. This may sound like good news and a great opportunity. And it is. But it can be seized as an opportunity only if talent measurement works and produces good-quality intelligence, which is where things get worrying.

The Ineffectiveness of Most Talent Measurement

Unfortunately, the vast majority of organizations are ineffective in how they measure talent. Even among companies that are measuring talent effectively, most are using the information it provides in ways that mean they derive only a small margin of the real value it can deliver.

For example, surveys show that less than one-third of business leaders rate their company's selection processes as effective.⁹ Indeed, while they see selection as the most important task of talent management, they also view it as the least effective.¹⁰ This is not limited to just hiring either. The results for other talent identification processes—such as promoting, benchmarking, or identifying potential future leaders—are not much better. This may be hard to hear, and your first instinct may be to dismiss it or rationalize it away. But it gets worse.

Over the past thirty years, businesses have invested heavily in trying to find the best people, to the extent that this period has witnessed the development of a global talent identification industry. There is the corporate recruitment market—the headhunting firms whose collected annual revenues prior to the downturn were estimated to be in excess of US$10 billion worldwide. And then there is the specialist talent measurement market, estimated to be worth more than US$3 billion per annum globally.

With all this investment, you might expect to find that businesses had significantly improved their ability to identify talent and hire the right people. Yet when we compare research from thirty years ago into how well new employees do with research from today, this is not what we find. Instead, the rate of failure among new employees seems to have risen. Thirty years ago, it was estimated that about one-third of all new employees failed.¹¹ Today, reported failure rates range from 30 to 67 percent, with an average of about 50 percent.¹²

What is shocking about this is not so much the high rate of failure or even the rise in failure rates over the past few decades, but that the measurement industry has had no discernible impact on these rates. Somehow, despite massive investment in measurement and the widespread adoption of sophisticated methods and tools, we do not appear to have achieved meaningful im­­provements in failure rates. There is no shortage of case studies showcasing individual organizations that have done great work in this area, but across the board, this success is just not shared.

In almost any other area of business, investing that kind of money and not making a dent in failure rates would be unacceptable—or at least it should be. As a number of commentators have noted, in a world where organizations are placing an unerring focus on results, they seem to tolerate surprisingly low success rates when it comes to hiring and promoting people.¹³ Indeed, it is hard to think of any other area of management where such poor performance would be tolerated.¹⁴

That is not to say that the task is easy. The sheer complexity and number of variables involved is often understated, and some of the reasons and circumstances that cause people to fail are not predictable.¹⁵ For this reason, we are unlikely ever to reach 90 percent of our people decisions being highly effective. But we should be doing better than we are.

So what is going on? One obvious possibility that springs to mind is that current talent measurement methods do not work or even that “talent” cannot be measured. But decades of research have unequivoca...