The second war for talent

A storm is brewing, says Vic Speers, director of talent management at Hudson recruitment consultants, and those companies unprepared may be in for a nasty shock

When McKinsey produced its 1997 seminal thought-piece, The War for Talent, the reaction surpassed probably even its own lofty expectations. Its study, involving 77 companies and almost 6,000 managers and executives, argued that over the next decade the most important resource for business would not be capital, cash reserves or even a powerful brand – it would be talent.

In 1997 that was a radical thought. A decade later, it has become an accepted part of the management lexicon. It has taken 10 years for the notion that talent should be highly valued but, just as we become accustomed to the idea, a second war for talent looms large on the horizon.

The first war was sparked by dramatic technical shifts in the make-up of developed economies away from manufacturing and towards services and knowledge-based competencies. The main driver behind the second war for talent will be demographic change.

Consider the following statistics from the Chartered Institute of Personnel and Development (CIPD): by 2010, 47 per cent of the European working population will be aged 55 or older. By 2050, that number will have risen to 60 per cent. The result is obvious but as yet largely neglected by the wider business community: there will be a huge shortfall in available talent. There simply will not be enough people of working age to sustain our economy. This will be a catalyst for dramatic changes to the way businesses manage employee retention.

Another new challenge beginning to be felt comes from Generation Y: people born from 1980 onwards. They have a totally different outlook on professional life than that of their older colleagues. Perhaps it stems from a lack of fear having never lived through a true recession or perhaps it is a symptom of a faster-paced world. Whatever the cause, the result is they demand more from their jobs: flexibility, promotion, travel abroad and above all, a sense of purpose in what they are doing. For Generation Y, there truly is no such thing as a job for life – not because it does not exist, but because they simply do not want one.

Combine these two developments: an ageing workforce and a new generation of less deferential employees open to rapid change and the beginning of the second war for talent is easy to see. The result will be that all organisations are going to have to fight harder not only to retain talent, as seems obvious, but also to attract it.

Retaining this new generation of talent will require a new set of HR and management tools. As loyalty wanes and the job market becomes more fluid, organisations can no longer rely on employees’ fear of unemployment to keep them in their roles. People leave their jobs for a combination of two factors: pull and push. ‘Pull’ is fairly easy to understand: employees are lured away by more money, a promotion or the dream of foreign climes. Because it is easy to understand, most firms only ever try to tackle the pull side of the equation and it can be an expensive business: pre-emptive promotions, big wage increases and costly relocation fees.

Many organisations fail to appreciate that they could, through their own actions, be pushing employees away. Indeed, our own research among ‘high potential’ individuals (those most valuable to organisations) showed that ‘pull’ factors like salary mattered a lot less than ‘push’ factors such as a visible career path, ability to make real impact or even company culture. To avoid being mauled in the second war for talent, managers will need to do more to understand and work against these push factors.

There are some very simple tools in place to diagnose problems and provide quick wins. The first step is communication and that can – and perhaps should – include both open and confidential communication, the latter in the form of anonymous online surveys. Properly run exit interviews, possibly even administered by an impartial third party, are an essential but often neglected tool to help shed light on the real reasons employees might feel ‘pushed’ to leave. Simple desk research can also help to evaluate turnover data and trends, work practices, procedures and policies against benchmarked best practice and begin to provide some indication of the cost of an organisation’s turnover.

Fighting the second war for talent, however, will require more than just quick wins. Indeed, the latest thinking suggests the key to retention will be more intelligent recruitment. Intriguingly, developing this side of the equation can be far more cost-effective than trying to retain people once they have decided to leave. A simple rule of thumb here should be that the more effort spent on recruiting the right person, the greater the chance they will remain loyal.

The second war for talent is not a management catchphrase. It is real, it has started and I fear that many companies will get caught out in the same way that so many were during the first ‘war’.

My advice is, don’t be shy. Leave no stone unturned in identifying why people are unhappy. Promote talent early; spend energy on attracting, developing and retaining talent; be restless. Because as the war for talent intensifies, the gap between the winners and the losers can only get wider.