Björn Wahlroos asserted recently that “you have to know your game”. His point was that a company must understand its industry and more specifically how to do business successfully in it. While it is true that the strategic landscape has to be known, it is equally important to match it with the right type of competence.
The HR function has been increasing its strategic role in global corporations. In terms of matching strategy and competence, talent management has become a top priority ever since the turn of the millennium. Interestingly, the war for talent has not weakened to date. On the contrary, companies acknowledge that managing talent is still today one if not the most critical success factors according to top HR executives.
In our study of strategic HR issues with 20 top HR executives in European corporations, the number one priority on the HR’s agenda was indeed talent management. Most HR executives mentioned it as being critical to the company’s future success.
What is interesting, however, is that when looking across the companies studied, the real picture is more varied. That is to say, the companies are in different playing fields or in different phases of the “game”. The playing field in the oil industry with declining prices has very different implications for managing competencies than, say, in healthcare. In addition, mergers and acquisitions necessitate restructurings that have vast consequences on talent management.
The key role for HR is to integrate the external industry and strategic challenges with the internal capability and competence development issues. Moreover, this must be done with a focus on long-term competitive advantage. In the world of shortening business cycles, most companies seem to fail to focus enough on the long term. Even the top HR executives that we studied don’t manage enough to take a helicopter view and take their focus to the medium to long term.
Nevertheless, the HR executives studied seek to find a balance between the HR development activities, such as developing competencies and leadership skills, and the activities required by the business reality, such as driving performance management systems and common business processes. The latter two were high on the HR’s priorities.
Perhaps as a consequence of the struggle to find a long-term strategic view, the companies studied had challenges identifying the impact of development activities. The most common answer to the question of how to measure impact was that “it’s difficult, we are not good at it”. In order to get out of the difficulties, the study hints at two solutions.
The first solution is to simply focus on the medium to long term, and to ask what the company is trying to achieve and why. This is basic strategic management textbook stuff, but very relevant. The second solution is to distinguish between impacts on different levels of analysis. There can be impact on individual development, on organizational development, and on business development. This requires an understanding of the complex cause and effect relationships between industry, strategy, organizational structure and processes, competencies and the management of talent. A big step forward is – at least on a rough level – to map these concepts and their relationships. That will help moving talent management forward to include a longer term strategic perspective.