For many companies, the weak economy is presenting some of the toughest struggles in the company’s history. On top of decreasing sales, organizations are left to battle inflation, exchange rate issues and regulation shifts. CEOs and executive teams are working hard to create the most solid strategies by putting their heads down and working diligently. However, according to the Harvard Business Review, this strategy simply isn’t enough to survive in today’s marketplace.
Executives need to brainstorm fresh new strategies to tap into hidden opportunities. They need to expand thinking to include broader and more creative approaches to business. Even in the most challenging market conditions, there are still untapped opportunities. Finding these opportunities is a little like striking gold; it allows you to prosper during difficult times. The Harvard Business Review studied companies that struggled with difficult market conditions. The study found there are several attributes successful companies have in common.
Missing the Best Opportunities
Some companies are overlooking some of the most valuable opportunities. The most effective way to find these opportunities is reviewing real time data. Share data trends throughout the organization. Encourage the management team to generate creative ideas for finding new opportunities based on the trends.
Front line employees are also valuable for uncovering new opportunities. These employees are in contact with customers every day. The employees are listening to the customer’s product needs every day and can anticipate new trends in the market. When you combine employee feedback with real time data, executives have an opportunity to identify some valuable trends.
For example, a retail store can anticipate which items are selling and which aren’t. Employees may share what customers are asking for when visiting the store. The organization can boost production on the best selling items and cut back on items that aren’t successful, allocating resources and time better.
Reward High Performance
Some organizations are moving away from traditional bonus structures. However, results from study conducted by the Harvard Business Review indicate that these organizations should reconsider. The strategy behind discontinuing bonuses is that it fosters teamwork. This strategy appears to hamper productivity and long-term success. Companies need to reward employees for a job well-done. A bonus structure or pay increases are the easiest way to accomplish this.
Create measurable goals for employees. Employees who meet and exceed these goals should be rewarded. The company should also tie rewards to long-term performance. By recognizing long-term performance for employee’s contributions, it will train staff to think about the long-term implications of actions.
Update Core Values
A company’s core values need to be updated to strengthen the organization. Values need to focus on recognizing employee leadership, ownership for results, teamwork, creativity and integrity. Most companies hang core value posters throughout the company. This is fine, however, it’s even more important for executives and managers to live and breathe the values. Leadership must act as an example to create the right company culture.
Promote employees based on their ability to demonstrate the company’s core values. Performance reviews should weave core values into the evaluation. When human resource departments interview new job candidates, select individuals with a track record of acting in accordance with the company’s core values. This will create a culture that is true to the organization’s most basic goals. Employees who aren’t willing to accept and incorporate the company’s values into daily activities should be reconsidered.
Create High-Impact Conversations
Executives and managers spend approximately 75 percent of their time in business discussions. Leading effective discussions will assist in strengthening the company. Conversations need to have execution requirements, deciding which actions need to be taken to accomplish success.
Each manager has a specialty. For example, a manager who is excellent in leading conversations on strategy may struggle with effective execution conversations. Give managers the skills needed to develop in all types of conversations and experience the best results.
Avoid Getting too Comfortable
It’s easy to get stuck in a business rut. When the economy is struggling, however, you simply can’t afford to do this. Some employees and managers will cling to safe strategies. Among your management team, you need some people willing to explore new territory, brainstorm new ideas and pioneer new strategies. Having these key players will assist in keeping your company stable and growing during difficult times.
Stick to Core Values
When the economy is struggling, leaders often go into panic mode, rushing around to put out fires. Leaders must be involved in solving these problems, but it shouldn’t consume all of their time. Organization leaders need to be focused on building and guiding the company’s core values. A leader must be willing to walk away from an attractive opportunity when it isn’t a good fit for the company’s core values. A leader can accomplish this by hiring plenty of creative talent to look for new opportunities that are a good fit for the organization. This will keep your company relevant in the current economic condition and boost performance.
Resources
Donald Sull. “Are you Ready to Rebound?” The Harvard Business Review, 2010.
--------------------------------------------------------------------------------
Mark Jordan is the Managing Principal of VERCOR, an investment bank that creates liquidity for middle market business owners. He is the author of “Driving Business Value in an Uncertain Economy”, “Selling Your Business the Hard Easy Way”, “Enhancing Your Business Value…The Climb to the Top” and co-author of “The Business Sale…A Business Owner’s Most Perilous Expedition” and “Selling Your Business The Practical Guide to Getting It Done Right”. For more information, contact him at 770.399.9512 or by email.
Monday, September 20, 2010
Anticipate Competitors More Effectively
Successful businesses are able to accurately identify the most threatening competitors. Having this ability allows your company to defend its place in the market. However, many managers make the error of overlooking some of the most threatening competition. According to the Harvard Business Review, there are several forces that are often missed when shaping competitive strategies.
Companies need to look beyond typical rivals. They need to focus on prospective new entrants, suppliers, customers and substitution threats. Creating strategies to address these threats will allow your company to sustain and grow market share.
Risk of New Entrants
A new company entering the market causes ripples in the industry. For example, when Pepsi entered the bottled water market, competitors were taken by surprise. The company leveraged assets from complementary products to secure a prominent position in the market. Apple used the same strategy when capturing the music distribution marketplace. These large companies quickly capture market share, even when competitors didn’t see it coming. The entrance of a new player in the market puts pressure on pricing and the return on investment necessary to compete. For companies already struggling, this is a serious challenge.
Industries have different risks for new competition entering the market. This risk depends on the barriers the new company faces when entering the playing field. If barriers are high, your company can expect a low risk for new entrants. If barriers are lower, however, you should pay attention to companies that may pose a threat.
Bargaining Power of Suppliers
Powerful suppliers are a hidden threat to your company. Suppliers charging high prices and limiting products or services can threaten your business model. If suppliers increase pricing, this puts the squeeze on companies who can’t afford to pass costs along to customers. For example, if the marketplace is saturated with competitors, the company may have limited ability to raise prices, fearing customers will chose the competitor’s product instead.
When a supplier is used by many companies in the industry, the supplier is usually powerful. For example, Microsoft is a large seller of operating systems. Companies have very few options when deciding to make a change, which makes the supplier a threat. Switching suppliers is also expensive. If a company can’t afford to pony up the resources to make the switch, the supplier gains power. Suppliers that offer a unique product, which can’t be easily be substituted, also have more leverage.
Bargaining Power of Buyers
Buyers are another force that is often overlooked. Powerful buyers have the ability to drive down prices, increase quality and play industry competitors against each other. If a single company makes up a large portion of your business, the company is usually a powerful buyer. A customer who has large fixed costs and low margins usually puts more pressure on your business.
Powerful buyers are aware of their leverage. Some of these buyers are willing to play your company against the competition to find the best deal. Buyers who don’t lose much money when switching vendors also have more power. If the customer can secure lower pricing elsewhere without a penalty, the organization doesn’t have anything to lose. Some buyers with significant resources may leverage better pricing with your company by threatening to take the service in-house. For example, soda companies have threatened packaging manufactures by showing they can produce the items in-house, if needed.
Substitution Items
The final threat to consider is substitution. A substitution product or service provides the same function to the customer, but is a different item. For example, online travel companies are a substitute for old fashion brick and mortar travel agents. Videoconferencing is a substitute for business travel. Businesses often overlook substitution products when planning for potential threats. However, these items can surprise a business and substantially affect the company’s success.
If your products and services have many prospective substitutes, profitability may be at risk. Substitute products may also interfere with your company’s pricing strategy. For example, once the product’s price exceeds a certain level, the customer may prefer the substitute which is less expensive.
Combat substitute products by differentiating your product or service. This can be accomplished through marketing campaigns, product quality or other strategies.
Understanding some of the most overlooked threats will assist in developing more effective strategies. A company should always consider these risks when evaluating potential strengths and weaknesses. If a new company is entering the market, evaluate the organization’s largest threats to identify their weaknesses. Taking a detailed look at the industry will also uncover potential opportunities. These opportunities are important to boosting performance and gaining market share. Your company will be positioned better in the market and have a more effective strategy in place.
Resource:
Michael E. Porter. “The Five Competitive Forces that Shape Strategy.” The Harvard Business Review 2006.
--------------------------------------------------------------------------------
Mark Jordan is the Managing Principal of VERCOR, an investment bank that creates liquidity for middle market business owners. He is the author of “Driving Business Value in an Uncertain Economy”, “Selling Your Business the Hard Easy Way”, “Enhancing Your Business Value…The Climb to the Top” and co-author of “The Business Sale…A Business Owner’s Most Perilous Expedition” and “Selling Your Business The Practical Guide to Getting It Done Right”. For more information, contact him at 770.399.9512 or by email.
Companies need to look beyond typical rivals. They need to focus on prospective new entrants, suppliers, customers and substitution threats. Creating strategies to address these threats will allow your company to sustain and grow market share.
Risk of New Entrants
A new company entering the market causes ripples in the industry. For example, when Pepsi entered the bottled water market, competitors were taken by surprise. The company leveraged assets from complementary products to secure a prominent position in the market. Apple used the same strategy when capturing the music distribution marketplace. These large companies quickly capture market share, even when competitors didn’t see it coming. The entrance of a new player in the market puts pressure on pricing and the return on investment necessary to compete. For companies already struggling, this is a serious challenge.
Industries have different risks for new competition entering the market. This risk depends on the barriers the new company faces when entering the playing field. If barriers are high, your company can expect a low risk for new entrants. If barriers are lower, however, you should pay attention to companies that may pose a threat.
Bargaining Power of Suppliers
Powerful suppliers are a hidden threat to your company. Suppliers charging high prices and limiting products or services can threaten your business model. If suppliers increase pricing, this puts the squeeze on companies who can’t afford to pass costs along to customers. For example, if the marketplace is saturated with competitors, the company may have limited ability to raise prices, fearing customers will chose the competitor’s product instead.
When a supplier is used by many companies in the industry, the supplier is usually powerful. For example, Microsoft is a large seller of operating systems. Companies have very few options when deciding to make a change, which makes the supplier a threat. Switching suppliers is also expensive. If a company can’t afford to pony up the resources to make the switch, the supplier gains power. Suppliers that offer a unique product, which can’t be easily be substituted, also have more leverage.
Bargaining Power of Buyers
Buyers are another force that is often overlooked. Powerful buyers have the ability to drive down prices, increase quality and play industry competitors against each other. If a single company makes up a large portion of your business, the company is usually a powerful buyer. A customer who has large fixed costs and low margins usually puts more pressure on your business.
Powerful buyers are aware of their leverage. Some of these buyers are willing to play your company against the competition to find the best deal. Buyers who don’t lose much money when switching vendors also have more power. If the customer can secure lower pricing elsewhere without a penalty, the organization doesn’t have anything to lose. Some buyers with significant resources may leverage better pricing with your company by threatening to take the service in-house. For example, soda companies have threatened packaging manufactures by showing they can produce the items in-house, if needed.
Substitution Items
The final threat to consider is substitution. A substitution product or service provides the same function to the customer, but is a different item. For example, online travel companies are a substitute for old fashion brick and mortar travel agents. Videoconferencing is a substitute for business travel. Businesses often overlook substitution products when planning for potential threats. However, these items can surprise a business and substantially affect the company’s success.
If your products and services have many prospective substitutes, profitability may be at risk. Substitute products may also interfere with your company’s pricing strategy. For example, once the product’s price exceeds a certain level, the customer may prefer the substitute which is less expensive.
Combat substitute products by differentiating your product or service. This can be accomplished through marketing campaigns, product quality or other strategies.
Understanding some of the most overlooked threats will assist in developing more effective strategies. A company should always consider these risks when evaluating potential strengths and weaknesses. If a new company is entering the market, evaluate the organization’s largest threats to identify their weaknesses. Taking a detailed look at the industry will also uncover potential opportunities. These opportunities are important to boosting performance and gaining market share. Your company will be positioned better in the market and have a more effective strategy in place.
Resource:
Michael E. Porter. “The Five Competitive Forces that Shape Strategy.” The Harvard Business Review 2006.
--------------------------------------------------------------------------------
Mark Jordan is the Managing Principal of VERCOR, an investment bank that creates liquidity for middle market business owners. He is the author of “Driving Business Value in an Uncertain Economy”, “Selling Your Business the Hard Easy Way”, “Enhancing Your Business Value…The Climb to the Top” and co-author of “The Business Sale…A Business Owner’s Most Perilous Expedition” and “Selling Your Business The Practical Guide to Getting It Done Right”. For more information, contact him at 770.399.9512 or by email.
Tuesday, June 29, 2010
VERCOR's New Books
Selling Your Business: A Practical Guide to Getting It Done Right
Whether it is the unpacking of the life cycle of a deal or helpful Common Pitfalls sections, this book illustrates how business owners can achieve the business sale they deserve.
Driving Business Value in an Uncertain Economy
How can you ensure your company's financial solvency and value during an economic rollercoaster? This book reveals the key factors that drive business value in any economy
Enhancing Your Business Value...The Climb to the Top
This valuable resource is a strategy guide that inspires you to take action. Use it as an idea generator or a launching pad to guide you in your next steps for improved business growth.
Selling Your Business the Hard Easy Way
From important points to consider prior to selling along with critical pitfalls to avoid during the process, this is the one guide that businesses owners cannot afford to be without.
For more details, to purchase a hard copy Click Here
Whether it is the unpacking of the life cycle of a deal or helpful Common Pitfalls sections, this book illustrates how business owners can achieve the business sale they deserve.
Driving Business Value in an Uncertain Economy
How can you ensure your company's financial solvency and value during an economic rollercoaster? This book reveals the key factors that drive business value in any economy
Enhancing Your Business Value...The Climb to the Top
This valuable resource is a strategy guide that inspires you to take action. Use it as an idea generator or a launching pad to guide you in your next steps for improved business growth.
Selling Your Business the Hard Easy Way
From important points to consider prior to selling along with critical pitfalls to avoid during the process, this is the one guide that businesses owners cannot afford to be without.
For more details, to purchase a hard copy Click Here
Strategies to Improve Back-Office Efficiency
Companies often struggle with back-office productivity challenges. Figuring out the right way to group tasks and enhance customer value can be complicated. Some managers opt to have employees perform several transactions while others choose a specialization strategy. Understanding which strategy yields the best results can help boost back-office efficiency and the company’s bottom line.
Back-Office Inefficiencies
Back office staff faces a variety of struggles when improving operational efficiency. Customers need change, new products are developed and other situations occur which interferes with production cycles. Companies involved in finance, health care, insurance and other service organizations appear to be at highest risk for back-office efficiency challenges.
Seeking to solve this problem, some companies are investing heavily in training all back office employees to handle numerous types of transactions. This training is expensive, but many companies feel it’s worthwhile, providing more flexibility among employees. For example, when times get really busy, employees were cross-trained to handle back office functions that needed the most help. This approach however isn’t always successful. Despite the large investment, efficiency often continues to decline.
Challenges with Production
When executives studied why efficiency was declining, they found several problems. Employees with dozens of tasks to complete, rather then just a few, experienced difficultly meeting customer’s service expectations. It also made it difficult for management to accurately track and measure employee performance.
There were also other problems when front-line employees were generalist instead of specialists in specific tasks. Employees weren’t encountering specific tasks enough to handle them efficiency and correctly.
Executives also found that some employees were manipulating the system. These employees would only choose the easiest tasks, which delayed the more difficult transactions and damaged customer service. Other employees became upset about this practice which negatively affected teamwork. When customers weren’t getting the more complicated problems handled, this created even greater inefficiencies. Employees had more angry customers to deal with which further affected the back-log of work. When this happens, companies spend more money on overtime to catch up which severely affected the bottom line.
Boosting Efficiency
When faced with this problem, executives knew they needed to make changes quickly to boost efficiency. Executives studied all transactions that employees were currently handling. They allocated these transactions into groups, based on level of difficulty. These groups of transactions were distributed to employee “teams” that handled the same types of assignments each day. This made employees more efficient and created specialists in each transaction type. Employee performance was also easier to track and manage with this strategy.
When developing the “groupings” of transactions, executives made sure the tasks were variable enough that employees wouldn’t become bored with their daily tasks. Executives also created a team of “floaters” who assisted teams experiencing higher than normal transaction volume. These employees helped the existing team work though their back-log which prevented burnout and customer service challenges.
According to the McKinsey Quarterly, these solutions helped companies meet service deadlines and reduce frontline staff and management by 25 percent. They also decreased overtime costs by 90 percent.
The Results
According to the McKinsey Quarterly, this strategy to manage back-office efficiency is similar to power companies using “peaker” plants to handle increases in the demand for energy. Managers creating teams of floaters to handle overflow can work the same way. It will make teams more flexible without all of the productivity “waste.” To make these plans work, the company must spend adequate time understanding how their customer demand works. This will help the company design a more efficient plan for assigning and handling overflow work.
A company must select the right tasks for each specific team. For example, executives might discover if a team takes on assignments A, B and C, they’ll be more productive then handling A and D. To accomplish this, senior managers must look at the context of the assignments. Assignments can be assigned based on the customer segment, level of difficulty, regulation issues or other important factors within your company.
There should also be measures in place that encourage career paths for front-line employees to boost job satisfaction. Those who perform well should have opportunities for more complex team assignments and opportunities for advancement. Having an employee assigned to a very specific task also decreases the learning curve for new employees. An employee can train much quicker on five transactions then thirty transactions.
Evaluating front-line activities and creating ways to streamline these tasks can boost your company’s productivity. It also improves employee moral and gives managers better ways to measure front-line performance. Creating these strategies in your own company can boost your bottom line and increase employee satisfaction.
Resources
Dan Devroye and Andy Eichfeld. “Taming Demand Variability in Back-Office Services.” The McKinsey Quarterly, September 2009.
--------------------------------------------------------------------------------
Mark Jordan is the Managing Principal of VERCOR, an investment bank that creates liquidity for middle market business owners. He is the author of “Driving Business Value in an Uncertain Economy”, “Selling Your Business the Hard Easy Way”, “Enhancing Your Business Value…The Climb to the Top” and co-author of “The Business Sale…A Business Owner’s Most Perilous Expedition” and “Selling Your Business The Practical Guide to Getting It Done Right”. For more information, contact him at 770.399.9512 or by email.
Back-Office Inefficiencies
Back office staff faces a variety of struggles when improving operational efficiency. Customers need change, new products are developed and other situations occur which interferes with production cycles. Companies involved in finance, health care, insurance and other service organizations appear to be at highest risk for back-office efficiency challenges.
Seeking to solve this problem, some companies are investing heavily in training all back office employees to handle numerous types of transactions. This training is expensive, but many companies feel it’s worthwhile, providing more flexibility among employees. For example, when times get really busy, employees were cross-trained to handle back office functions that needed the most help. This approach however isn’t always successful. Despite the large investment, efficiency often continues to decline.
Challenges with Production
When executives studied why efficiency was declining, they found several problems. Employees with dozens of tasks to complete, rather then just a few, experienced difficultly meeting customer’s service expectations. It also made it difficult for management to accurately track and measure employee performance.
There were also other problems when front-line employees were generalist instead of specialists in specific tasks. Employees weren’t encountering specific tasks enough to handle them efficiency and correctly.
Executives also found that some employees were manipulating the system. These employees would only choose the easiest tasks, which delayed the more difficult transactions and damaged customer service. Other employees became upset about this practice which negatively affected teamwork. When customers weren’t getting the more complicated problems handled, this created even greater inefficiencies. Employees had more angry customers to deal with which further affected the back-log of work. When this happens, companies spend more money on overtime to catch up which severely affected the bottom line.
Boosting Efficiency
When faced with this problem, executives knew they needed to make changes quickly to boost efficiency. Executives studied all transactions that employees were currently handling. They allocated these transactions into groups, based on level of difficulty. These groups of transactions were distributed to employee “teams” that handled the same types of assignments each day. This made employees more efficient and created specialists in each transaction type. Employee performance was also easier to track and manage with this strategy.
When developing the “groupings” of transactions, executives made sure the tasks were variable enough that employees wouldn’t become bored with their daily tasks. Executives also created a team of “floaters” who assisted teams experiencing higher than normal transaction volume. These employees helped the existing team work though their back-log which prevented burnout and customer service challenges.
According to the McKinsey Quarterly, these solutions helped companies meet service deadlines and reduce frontline staff and management by 25 percent. They also decreased overtime costs by 90 percent.
The Results
According to the McKinsey Quarterly, this strategy to manage back-office efficiency is similar to power companies using “peaker” plants to handle increases in the demand for energy. Managers creating teams of floaters to handle overflow can work the same way. It will make teams more flexible without all of the productivity “waste.” To make these plans work, the company must spend adequate time understanding how their customer demand works. This will help the company design a more efficient plan for assigning and handling overflow work.
A company must select the right tasks for each specific team. For example, executives might discover if a team takes on assignments A, B and C, they’ll be more productive then handling A and D. To accomplish this, senior managers must look at the context of the assignments. Assignments can be assigned based on the customer segment, level of difficulty, regulation issues or other important factors within your company.
There should also be measures in place that encourage career paths for front-line employees to boost job satisfaction. Those who perform well should have opportunities for more complex team assignments and opportunities for advancement. Having an employee assigned to a very specific task also decreases the learning curve for new employees. An employee can train much quicker on five transactions then thirty transactions.
Evaluating front-line activities and creating ways to streamline these tasks can boost your company’s productivity. It also improves employee moral and gives managers better ways to measure front-line performance. Creating these strategies in your own company can boost your bottom line and increase employee satisfaction.
Resources
Dan Devroye and Andy Eichfeld. “Taming Demand Variability in Back-Office Services.” The McKinsey Quarterly, September 2009.
--------------------------------------------------------------------------------
Mark Jordan is the Managing Principal of VERCOR, an investment bank that creates liquidity for middle market business owners. He is the author of “Driving Business Value in an Uncertain Economy”, “Selling Your Business the Hard Easy Way”, “Enhancing Your Business Value…The Climb to the Top” and co-author of “The Business Sale…A Business Owner’s Most Perilous Expedition” and “Selling Your Business The Practical Guide to Getting It Done Right”. For more information, contact him at 770.399.9512 or by email.
Developing Talent More Effectively
Most companies know that employees are their most valuable asset. However, developing employee talents and retaining those individuals is a challenge for most employers. As baby boomers reach retirement age, this challenge becomes more important then ever. Trends suggest there will be more competition for talented workers and managers. Creating strategies to develop and retain employees can make a huge difference.
Managerial Challenges
According to the McKinsey Quarterly, there are three major challenges when developing talent, including demographics, rise of the knowledgeable worker and globalization. These challenges are forcing managers to come up with more creative strategies for developing talent.
Developed countries are struggling with a decline in birthrates and increased numbers of people reaching retirement age. However, emerging markets continue to produce a large group of talented young people. Professionals in emerging markets are graduating from universities at twice the rate of developed nations. As this trend continues, managers are looking to emerging markets to recruit new talent.
When tapping into this talent pool, however, companies need to be careful about issues such as English skills, culture issues and the employee’s experience working in a group setting. Weakness is these areas could make it difficult to develop employees to take on leadership roles.
Another group that companies need to consider when evaluating talent is Generation Y. These professionals were born after 1980. They’ve grown up in a generation described as “information overload.” Human Resource professionals explain these professionals desire more job flexibility, freedom, higher rewards and a high level of work life balance. People in this generation are likely to work a few years and switch jobs. This creates a challenge for companies. If they don’t meet this demographic’s needs, they’re faced with very high levels of turnover. As of 2008, this demographic made up 12 percent of the United States workforce.
Generation Y employees are also generally harder to manage then other generations. However, working to meet their needs and develop their talents can make these individuals very valuable to an organization.
Talent Programs
In the past, companies have invested money in expensive programs to develop talent. To the surprise of many executives, these efforts don’t always work well. This is frustrating to managers. Human resources professionals aren’t always heavily involved in these programs, which frustrates these individuals as well.
When evaluating the results of talent development programs, senior managers aren’t sure what went wrong. According to the McKinsey Quarterly, the largest challenge with existing programs is managers perceive the problem as a short-term tactical issue instead of a long-term strategy that requires a large amount of resources.
Collaboration
When looking for ways to improve talent development, companies need to focus more on collaboration between business units. For example, a talented employee might be interested in moving to another business unit. If the company discourages this behavior, the talented employee may look for opportunities outside of the organization. Companies need to put strategies in place for cross-business unit collaboration.
Managers also need to rethink existing talent development strategies. Instead of focusing solely on top performers, they must consider the entire group of employees (each team member’s strengths and abilities). Developing each person, instead of just a select few will make the entire organization stronger. If a person isn’t suited for their existing business unit, perhaps the company can develop their talents in another business unit more suited to their strengths.
Target Each Type of Talent
With a diverse talent pool, it’s important that companies develop a plan that targets each individual talent group. While top performers should continue to be generously rewarded for their achievements, other employees need some attention as well.
These other players are commonly referred to as “B” players because they are capable and consistent performers (yet, not top performers). When given the proper attention, some of these employees have the potential to become top performers. This includes employees that work on the frontline, technical employees and all units of the organization.
Developing Human Resources Teams
Human Resources are an important asset when developing talent. Previously, HR departments were focused on recruiting, training and managing performance. They didn’t have much influence in developing company talent.
HR needs to serve the entire organization in regards to talent recruitment and development instead of just the top tier of management. For example, Proctor and Gamble places aspiring HR managers to work with front-line managers and employees to gain their trust and collaboration. Coca-Cola places top performing managers in human resources positions for a few years to build business skills and forge a partnership.
Senior managers who are struggling with acquiring and retaining talent need to evaluate their strategy. Making changes that focus on retaining talent, recruiting talent and developing all employees within an organization will make the company much stronger.
Resources
Matthew Guthridge, Asmus B. Komm and Emily Lawson. “Making Talent a Strategic Priority.” The McKinsey Quarterly, November 2008.
--------------------------------------------------------------------------------
Mark Jordan is the Managing Principal of VERCOR, an investment bank that creates liquidity for middle market business owners. He is the author of “Driving Business Value in an Uncertain Economy”, “Selling Your Business the Hard Easy Way”, “Enhancing Your Business Value…The Climb to the Top” and co-author of “The Business Sale…A Business Owner’s Most Perilous Expedition” and “Selling Your Business The Practical Guide to Getting It Done Right”. For more information, contact him at 770.399.9512 or by email.
Managerial Challenges
According to the McKinsey Quarterly, there are three major challenges when developing talent, including demographics, rise of the knowledgeable worker and globalization. These challenges are forcing managers to come up with more creative strategies for developing talent.
Developed countries are struggling with a decline in birthrates and increased numbers of people reaching retirement age. However, emerging markets continue to produce a large group of talented young people. Professionals in emerging markets are graduating from universities at twice the rate of developed nations. As this trend continues, managers are looking to emerging markets to recruit new talent.
When tapping into this talent pool, however, companies need to be careful about issues such as English skills, culture issues and the employee’s experience working in a group setting. Weakness is these areas could make it difficult to develop employees to take on leadership roles.
Another group that companies need to consider when evaluating talent is Generation Y. These professionals were born after 1980. They’ve grown up in a generation described as “information overload.” Human Resource professionals explain these professionals desire more job flexibility, freedom, higher rewards and a high level of work life balance. People in this generation are likely to work a few years and switch jobs. This creates a challenge for companies. If they don’t meet this demographic’s needs, they’re faced with very high levels of turnover. As of 2008, this demographic made up 12 percent of the United States workforce.
Generation Y employees are also generally harder to manage then other generations. However, working to meet their needs and develop their talents can make these individuals very valuable to an organization.
Talent Programs
In the past, companies have invested money in expensive programs to develop talent. To the surprise of many executives, these efforts don’t always work well. This is frustrating to managers. Human resources professionals aren’t always heavily involved in these programs, which frustrates these individuals as well.
When evaluating the results of talent development programs, senior managers aren’t sure what went wrong. According to the McKinsey Quarterly, the largest challenge with existing programs is managers perceive the problem as a short-term tactical issue instead of a long-term strategy that requires a large amount of resources.
Collaboration
When looking for ways to improve talent development, companies need to focus more on collaboration between business units. For example, a talented employee might be interested in moving to another business unit. If the company discourages this behavior, the talented employee may look for opportunities outside of the organization. Companies need to put strategies in place for cross-business unit collaboration.
Managers also need to rethink existing talent development strategies. Instead of focusing solely on top performers, they must consider the entire group of employees (each team member’s strengths and abilities). Developing each person, instead of just a select few will make the entire organization stronger. If a person isn’t suited for their existing business unit, perhaps the company can develop their talents in another business unit more suited to their strengths.
Target Each Type of Talent
With a diverse talent pool, it’s important that companies develop a plan that targets each individual talent group. While top performers should continue to be generously rewarded for their achievements, other employees need some attention as well.
These other players are commonly referred to as “B” players because they are capable and consistent performers (yet, not top performers). When given the proper attention, some of these employees have the potential to become top performers. This includes employees that work on the frontline, technical employees and all units of the organization.
Developing Human Resources Teams
Human Resources are an important asset when developing talent. Previously, HR departments were focused on recruiting, training and managing performance. They didn’t have much influence in developing company talent.
HR needs to serve the entire organization in regards to talent recruitment and development instead of just the top tier of management. For example, Proctor and Gamble places aspiring HR managers to work with front-line managers and employees to gain their trust and collaboration. Coca-Cola places top performing managers in human resources positions for a few years to build business skills and forge a partnership.
Senior managers who are struggling with acquiring and retaining talent need to evaluate their strategy. Making changes that focus on retaining talent, recruiting talent and developing all employees within an organization will make the company much stronger.
Resources
Matthew Guthridge, Asmus B. Komm and Emily Lawson. “Making Talent a Strategic Priority.” The McKinsey Quarterly, November 2008.
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Mark Jordan is the Managing Principal of VERCOR, an investment bank that creates liquidity for middle market business owners. He is the author of “Driving Business Value in an Uncertain Economy”, “Selling Your Business the Hard Easy Way”, “Enhancing Your Business Value…The Climb to the Top” and co-author of “The Business Sale…A Business Owner’s Most Perilous Expedition” and “Selling Your Business The Practical Guide to Getting It Done Right”. For more information, contact him at 770.399.9512 or by email.
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