Expert Commentary: Surviving the storm: Retaining talent in tough times
By Rosemary Howard,
Executive Director & Conjoint Professor, Australian School of Business, UNSW, Sydney, Australia
Surviving the GFC is not enough. We have to come out better
As an Aussie who has worked in New Zealand (NZ), I am passionate about both countries and our capacity to compete on the world stage. I have come to recognise the Global Financial Crisis (GFC) as an unparalleled opportunity for both countries to strengthen our long-term international competitive footing.
During the toughest times of the GFC in 2009, there was one particularly common concern that pervaded organisations across the world. This was the retention of talent and staff.
When the going gets tough, the tough get going
There is nothing easy about the challenges brought on by the GFC. However, tough times can be the most fertile for learning. The hardest times can force us to rise above the day to day. To get up in the helicopter and think more strategically – about where our organisation is currently, and how to ensure that its growth is sustainable in the long term. An overly narrow focus on the crisis is not healthy or helpful. We need to maintain a broader analytical perspective of what is going on around our organisations and ourselves.
In the global context
There is a great video on You Tube called “Did you know?” made by American school children. The video provides an overview of some of the massive global shifts we are currently watching unfold. Technology, the environment, competitors, customers, legal and regulatory factors, and all the changes that globalisation continues to bring. We are in a period of white water. These very significant global shifts include the fact that in 10 years, China will be the number one English speaking country. Some 25% of Americans in jobs today have been in them for less than 12 months. American school students can expect to have 10 – 14 jobs before turning 38. As relatively small countries on the global stage, Australia and NZ have to think hard about where we are both internationally and nationally. The overarching challenge will be in optimising national long-term sustainable growth and performance.
The downside to the land of plenty
For the most part, Australians enjoy a wonderful quality of life. But is this quality of life making us complacent? Australian author Donald Horne actually points out how unlucky Australia is in his book, “The Lucky Country”. He posits that when life is too good, we tend to take things for granted. This might explain why no Australian organisations named the economy as a concerning issue in 2007. By 2009, a huge 85% named the economy as their number one challenge. This stark contrast strongly suggests widespread complacency. It seems that living in ‘The Lucky Country’ doesn’t come without its downside.
OECD data shows that NZ and Australia rate poorly against other countries for productivity growth, innovation and collaboration, and the percentage of our economy that is online. We are not keeping up with global change. To some extent, this is offset by immigration and the resources boom. However, on a per capita basis, labour productivity growth in both NZ and Australia has declined or at best stalled over the last 10 years. Fundamental to our ability to drive long-term improvements to labour productivity and drive long-term sustainable growth will be our ability to hold onto our top talent.
Retaining talent – how do we fare?
Yes, we are growing and yes we are retaining talent. But are we doing a good enough job? Considering the investment being made by other countries in this area, not to mention the increasing rate of technological and organisational change, are we developing people with sufficient leadership capability? We might be top global competitors in the sporting arena, but we need to take a cold hard look at whether we are producing top leaders. To add to the problem of our lacklustre labour productivity growth, many of the most talented Kiwis and Aussies live offshore – about 1 million from each country. Many of our expatriates have done extremely well and are highly regarded in America, Europe and Asia alike. Of course, offshore experience can prove to be invaluable to individual development. But it is also good to think about how we can attract some of this top talent home to share their learning’s. NZ and Australian repatriation levels rose during the GFC, presenting a unique opportunity to deepen our globally benchmarked talent pool. The long-term benefits are sure to outweigh any short-term pressures put on the local job market.
The Change Challenge
The GFC can be viewed as a problem or as a burning platform for change. Its aftermath and the wider drivers of global change need to be recognised as opportunities. Opportunities to seize competitive advantage and reshape the future of our organisations and countries. Interestingly, change was not seen as a top issue for Australian management in 2008. By 2009, however, nearly 60% of HR managers named change management as the key learning and development challenge. As we take up the change challenge, we need to do it strategically and with a consciousness of long-term sustainability. Rather than cutting costs to survive, we need to think about competitive advantage, points of difference and customer value propositions.
Investment in leadership
Effective leadership can result in a 25% lift in workforce utilisation and a 65% lift in capital utilisation. Working smart is the way to future success. Investment in our people needs to be directly connected to business results so this investment is justified, and we can measure and demonstrate the resulting outcomes. When considering how to drive effective leadership, we need to think broadly. Beyond functional and technical skills, we need to think seriously about cross-disciplinary, strategic and leadership capability. Learning and development must be ongoing at individual and organisational levels. We can and should learn on the job. However, we can accelerate learning through exposure to theory and research about best practice, gaining an understanding of what works and why it works. Importantly, we also need to continually review and reflect on our own performance as we practice new ways of using the knowledge, skills and behaviour that we learn.
There are no longer plenty of fish in the sea
The world is full of people but short on talent. It is estimated that in 5 years time, the global talent gap will total about 23 million. And the ageing workforce will be a huge contributor to this talent gap. For example, by 2015, half the senior executives of American Fortune 500 companies will be lost to retirement. The consequences of taking staff retention lightly are potentially disastrous, for the short term and the long term. Hiring, training and knowledge management costs of a new staff member can total 1.5 times a departing employee’s salary. Global staff turnover costs US$500 billion. Given the increasing global talent gap and the steep costs of rehiring, the issue of staff retention has never demanded more attention.
Will they stay or will they go?
On average, Australian workers stay in a job 2 years and despite the GFC, more than 50% of employees in Australia say they are looking for a new job this year. Despite the hefty costs of staff turnover and a widespread consciousness of the talent shortage, only about 1/3 of employees are truly engaged with their work and only about 1/3 feel valued. Engagement is critical – not only for avoiding the costs of staff turnover, but also for the ultimate end of building a sustainable organisation. Only when employees are engaged, encouraged to develop and armed with support to be innovative can an organisation develop the agility to adapt to succeed in any economic climate. For leaders to drive employee engagement they need to be committed to extensive management leadership development.
Leadership and productivity
The HR community holds a crucial role in professional leadership development, not only for employees in individual organisations but for NZ and Australia as nations. We need to step up and ensure that our executives and managers understand the need to invest in people as much as in systems and assets.
We can do it!
McDonalds in Australia is a success story in labour productivity and one that can teach us about what can be achieved through investment in education and training. Australia is McDonald’s world’s best practice for labour productivity. Why? Due to the significant commitment to training and development. No less than 22 country managers for McDonald’s across the world are Australian. The GFC and its aftermath are a challenge to be managed, but they are also a great opportunity for each of us - as individuals, teams, companies and countries. The tough times have given us impetus to reflect on our long-term shared purpose, our investment in people and the fundamental relationship between the two. As CEO of TelstraClear in NZ from 2001 – 2005, I was required to merge two large telco entities. In 2010, in the aftermath of the GFC, I’m reminded again of the challenges I faced in these years, and the challenges faced by NZ and Australia. I believe we can emerge from the GFC stronger and with a common focus on moving ahead on the world stage.
Or as we used to say at TelstraClear, “Together a better way”.
Bio: Rosemary Howard
Rosemary commenced in November 2007 as Executive Director & Conjoint Professor at AGSM Executive Programs, part of the Australian School of Business at the University of New South Wales. Rosemary holds a Bachelor of Science from Sydney University, Masters of Science and Society from UNSW and Graduate Diploma of Management from AGSM. Rosemary was awarded an Australian Government Centenary Medal in 2003 for ‘Service to Australian Society in Business Leadership’, and won an Eisenhower Fellowship in 1991. She brings a wealth of management experience to her role with over 15 years corporate leadership experience with Telstra in Australia and New Zealand, 12 years senior management experience in economic development and innovation in the NSW public sector and 10 years experience in public and private education and health sectors in Australia and the US. Rosemary is responsible for the leadership and growth of AGSM Executive Programs and for deepening client partnerships and the alumni network. The school’s aim is to partner with individuals to meet their lifelong learning goals with organisations to build leadership management capability, through the delivery of world class open and custom executive education program and related Executive Development Services.
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