By Ian J. Cook, CHRP, MA, MBA

Is the war for talent over?

With the latest economic crisis, rapid rise in unemployment and stable/stagnating business prospects, the predictions of dire people shortages seem over blown. While certain sectors and certain roles are undoubtedly feeling the challenges of finding the right people at the right price, the mass shortage of people that was being forecast has abated. However, that does not mean that the talent challenge has gone off the agenda. Far from it as the talent challenge has taken an even more complex turn.

The war for talent issue was posed as a problem of supply. When supply is scarce the price goes up. McKinsey, in their seminal paper in 2000, identified that in a general management role a top performer contributed 49 per cent more than an average performer. The demographic information suggested the supply of top performers would be getting more and more scarce. Hence, for many organizations, the war for talent led to a drive to attract and retain as many top performers as possible. This in turn led to escalating salaries, benefits and overall staff costs. These same staff costs have come to haunt organizations during the slowdown and precipitated a very rapid period of layoffs. Whichever way you look at it, the war for talent mindset was expensive. It led to increased costs to attract and retain staff and this has led to significant costs to let staff go.

In a future that is far less buoyant and speculative when it comes to business growth such costs and potential costs will not be tolerated. Smart organizations who develop and maintain a focus on value will strive to keep this type of cost and risk under control. The approach will switch from a war for talent to a “war with talent”.

A war with talent is a business competition where you intend to get the most value, contribution and innovation from your people for the lowest overall cost. This frames the talent challenge not as an issue of supply but as an issue of productivity.  It is like winning the Stanley Cup with the cheapest team in the whole National Hockey League. This does not simply mean that you pay everyone below the 50th percentile and then work them 70 hours a week. That is a recipe for disaster.

A war with talent requires a far more sophisticated view of your organization, the roles which make the most difference and, most importantly, the roles which enable others to make a difference. In a war with talent you are very aware of which specific roles contribute most to your organization’s strategy and profit. And you have ensured that the people in these roles are A players, with A level compensation and benefits. However, you do not apply the same approach to all roles. These roles will not necessarily match the seniority or management structure within your organization; not all executive roles in your organization are key to driving value. They may be important but they are not the roles that differentiate your success from the success of your competitors.

A war with talent means forming and maintaining the best work group possible for the lowest cost possible. Easy as this sounds, it will challenge a number of standard HR practices and requires us to reposition the notion of equal treatment that is the basis of many HR programs. Instead, the focus will be on developing tools and approaches which identify key value creating roles and then managing a performance and reward structure which treats people equitably – not in relation to people at the same job level but in terms of people who are contributing at the same level. The current practice of leveling jobs based on complexity, reporting structures, qualifications, scope etc will not serve. We will need to level jobs relative to their direct contribution to revenue, profit and strategic growth. Although many recruitment processes are differentiated by job level – more costly and complex for more senior roles – this too will change so that greater resource is put towards those roles which make the most difference and not necessarily the most senior ones.

The talent challenge has not gone away. We are moving from a war for talent to a war with talent. Instead of focusing on scarcity we will be focusing on productivity and this brings added complexity to the purpose and activities of the HR function. The starting point for this transition is to identify the roles in your organization that contribute most to revenue, profit and strategic growth. From here, the job is to realign your practices to support maximum productivity for the lowest cost. This transition is not easy and is likely to require a reframing of many HR norms. However, this transition will be crucial in maintaining HR as a fully strategic function.

Ian J Cook, CHRP, is the director of HR knowledge and research at BC HRMA. Ian is using his global HR consulting experience and business knowledge to grow a function which delivers informative, relevant and timely comment.