How companies can grow by supercharging their talent

This advisory is a summary of a keynote presentation delivered by Arne Gast and Liesje Meijknecht, managing partner and senior leader of McKinsey & Company’s Organisation Practice in Asia Pacific respectively, at a breakfast on Capturing Value from Talent. This event was co-organised by the National Human Resources Development Council, the Association of Human Resource Professionals, and the International Chamber of Commerce Sri Lanka on 19 June.

Across the globe, the pace of change is accelerating. For many established companies, particularly in developed nations, this spells the threat of decline or stagnation. Throughout Asia, however, momentum is trending in the opposite direction. By 2025, more than half of the Fortune Global 500 companies will be based in Asia, up from 17% in 2010. But to capture this enormous growth potential, Asian companies will first have to wrestle with several crucial challenges. Among them: the difficulty of finding and nurturing good leaders; the mismatch between the capabilities employees have today vs. what’s needed for the future; the shift to a predominantly millennial workforce; and organisational inefficiencies stemming from unproductive levels of staffing and hierarchy.

The commonality among all these issues is, of course, human capital. Some2,000 leading CEOs from around the world have told McKinsey that managing and reallocating human capital is their number one challenge, ahead of operational excellence, innovation and customer experience. However, only 65% of them said that leadership development and succession management is a clear priority for their organization. An even smaller percentage stated that they are taking action against it.

To fuel growth, companies must start thinking about how to reallocate talent in a way that fully captures the value of an organisation’s most important resource – its people. A McKinsey survey found that organisations that quickly and strategically allocate talent have a 63% chance of outperforming their competitors – more than double the chances of those who cannot reallocate talent quickly. Here are six building blocks companies will need in order to build a talent-first organisation.

1. Identify and nurture your top 2%. Often, the leaders most valuable to an organisation will not be in the C-suite, but instead several layers below. This A-team will be comprised of the roles most important to a company’s goals and strategies – the small core of people who deliver outsize value. Once identified, a high level “G3” team – consisting of the CEO, CFO, and chief human resources officer (CHRO) – will need to stay constantly involved by getting to know these leaders personally, sponsoring them, and looking outside the organisation to add to their ranks.  

2. Give your workforce the skills they need tomorrow. Across companies, automation is projected to dramatically shift the skills employees need to be successful. High demand will exist for people with expertise in IT, data and analytics, customer experience, marketing, and product development. Although recruiting might be the first thought for acquiring such skills, retraining existing employees will be a far bigger part of the solution, given the investments companies have already made in their workforce, the scarcity of available talent, and the beneficial effects of reskilling on company morale. 

3. Make people decisions based on data, not intuition. By using advanced analytics, organisation can dramatically improve the way they identify, attract, develop, and retain talent. Using such ‘people analytics’, one company found out that lateral hires from different sectors were more successful members of the team than industry veterans. Another company learned that money is rarely a driver of employee motivation, satisfaction, engagement, or performance. Instead, what matters is the training employees receive, the quality of their manager, their relationships with others in the company, and the distance of their commute. 

4. Create an agile organisation. Agile isn’t about structure. At its core, it’s a new way of working – a shift from a top-down hierarchy to a network of teams. Silos are liquidated and employees work in cross-functional teams to achieve specific goals and also drive toward a company-wide, customer-centric north-star mission. This agile way of working not only drives productivity and customer satisfaction, it leads to more motivated and engaged employees, giving a 30% boost to engagement levels, as measured by polls taken after agile introductions.

5. Create a purpose driven organisation. People who have purpose or meaning at work are 2.8 times more likely to stay at their company and 2.3 times more likely to feel engaged in their job. Between 1998 and 2013, purpose-led companies outperformed the S&P500 by a factor of 14. Companies can “level up” their mission with any number of aspirations – positive societal impacts, excellent customer experience, industry leadership, a caring, humane work environment, high performing teams, and the potential for personal learning or financial growth. 

6. Reimagine HR as a value creator instead of a service provider. With talent an integral piece of a company’s future growth, the role of HR is going to shift to that of a value creator. In this new paradigm, the CHRO is an essential part of the high level G3 team, devoted to creating value and driving strategy. HR will shift its operating models to deliver high tech solutions and behaviour-based interventions. Moreover, it will conduct predictive people analytics to understand customer demands and competitors’ moves, and then shift its talent management strategies accordingly. To do all this, HR staff will require different skills and backgrounds. One leading high tech company wants only one-third of its HR staff to have traditional HR backgrounds; the rest will be talent from business and technology. 

(Arne Gast leads McKinsey’s organisation practice in Asia Pacific, and previously led the firm’s practice in Europe. Originally from Amsterdam, he is now based in Kuala Lumpur and serves clients across Southeast Asia, India, China and Australia. His work focuses on ‘Organising for the Future’, both the hard side (i.e., people analytics, organisation design, people systems) and the soft side (i.e., culture change, leadership development).) 

 (Liesje Meijknecht is an Expert Associate Partner and a leader of McKinsey’s Organization Solutions for Asia Pacific. Originally from the Netherlands, Liesje is based in Bangkok. In her 14 years at McKinsey, she has served a large number of companies globally across industries on their human capital agendas, organisational health, top team effectiveness, and talent dynamics.)