By Joe Mullich
Succession planning is crucial to an organization — and historically has been standard operating procedure. Yet these days, according to Jill Altana, chief global talent & development officer at ADP, organizations tend to fill only a quarter of their open executive positions with people on their internal succession charts. Indeed, some organizations are opting out of this type of people planning altogether. A 2017 study by the National Center for the Middle Market shows that fewer than half of middle-market firms do any talent planning.
These organizations may be putting themselves at a competitive disadvantage. A Boston Consulting Group study indicates a correlation between effective talent planning and financial performance. It says that companies with the strongest leadership and talent management capabilities increased their revenues 2.2 times as fast and their profits 1.5 times as fast as so-called talent laggards.
That organizations place too little importance on talent planning often stems from a misunderstanding of how to approach this critical practice — especially in the current business environment, one in which many companies are working through digital transformations and reimagining their business models.
But successful organizations aren’t casting aside planning so much as taking a new, three-pronged approach to it. That approach is based on a forward-looking attitude, rigorous use of data, and high-level commitment.
Focus On Business Strategy
Traditionally, talent planning centered on identifying high-potential workers. While that’s obviously an important aspect of talent planning, it’s just a fraction of an effective talent plan.
A comprehensive plan begins with the organization’s business strategy. “A lot of companies disaggregate their business planning efforts from their talent planning,” Altana said. “So the talent plan never supports what they’re trying to do strategically.”
To solve that problem, talent planning should directly link to a company’s strategic plan, taking stock of what type of talent the company will need to meet both short-term and future business goals. How many workers will the organization require? What skills should they have? What should the breakdown be between full-time employees, part-timers, contractors and other “gig economy” workers?
Companies must adopt a more agile talent planning process commensurate with their changing people needs, Altana said. Rather than focus on filling roles in accordance with traditional job descriptions, she added, they should emphasize matching people’s skills, experiences and traits to desired outcomes.
Employ Rigorous Analytics
Talent planning goes hand-in-hand with the presence of strong leaders who can guide and maximize that talent. ADP takes a rigorous data-driven approach to evaluating how effective employees are as leaders, gathering data from a wide variety of sources, including performance appraisals, talent reviews and engagement surveys. The data set also includes information pertaining to the quality and diversity of the talent each leader has developed.
ADP develops a comprehensive profile for each leader based on that data, facilitating richer, data-driven discussions about the company’s talent. This detailed analytics approach has been “instrumental in ensuring that we’re putting the right people in the right roles at the right time,” Altana said.
ADP has also developed a leadership assessment tool called Compass, which focuses on two critical dimensions of team effectiveness: how the manager leads direct and matrixed employees and how the leader collaborates with key peers and stakeholders. Among other things, Compass encourages team members and peers to give leaders real-time anonymous feedback. The leaders then receive customized coaching based on their individual results, so they can continue to develop as leaders.
Develop A Talent Culture
Organizations that perform effective talent planning cultivate a top-level commitment to the practice that goes beyond rudimentary talent actions. At ADP, for example, the CEO and senior executives engage in a monthly talent discussion in which they review critical openings as well as what skill sets the organization requires in key areas like technology and client service.
The focus at the top stimulates senior leadership teams throughout the company to hold similar data-based conversations.
“We’re building a strong, talent-focused culture, providing our managers with effective and agile tools so that they can continue to grow and develop as leaders,” Altana said. “This, in turn, creates a highly engaged and productive employee population.”
The benefits of rigorous talent planning? Greater retention, better engagement, higher productivity and, ultimately, significant growth.
“Many organizations struggle in the execution of their strategy, because the talent they need to execute that strategy has been an afterthought,” Altana said. “Fast-growing, successful companies have a commitment and focus on talent equal to their focus on business results, because they realize the two are inextricably linked.”
For more information and for more articles like this, visit adp.com/spark.
Joe Mullich is a Los Angeles-based freelance writer on finance, economics and other topics for top publications and Fortune 500 companies.