Attracting IT Talent: The Human Factor

By Edward H. Baker  |  Posted 10-06-2006

Attracting IT Talent: The Human Factor

You've probably already heard it all: The baby boomers are all going to retire, and corporations of every stripe will face a sudden dearth of both labor and top-level executives to manage it. There aren't enough younger workers to make up the shortfall, and anyway, they don't have the experience their older colleagues have. Meanwhile, future productivity gains expected from business process automation and other IT efforts will not be sufficient to make up the difference. The resulting brain drain will send shock waves throughout corporate America, as organizations compete more and more fiercely for the talent they need to survive and grow.

Like all such dire predictions, some of it is true, and some of it isn't. Yes, it's true that the baby-boom generation has already begun retiring, and will continue to do so for the next 20 years. But the effect on the labor supply will not be as dramatic as expected. Says Peter Cappelli, director of the Center for Human Resources at the Wharton School: "Lots of people of this cohort have already retired early, partly because companies are trying to get rid of them. Another significant percentage of them simply don't want to retire." If companies want to hang on to older workers' expertise, he says, it's not hard to do: "Hire them on as consultants, use them when you want them, set up alumni programs. It's a piece of cake."

Meanwhile, younger workers pose a far more confounding problem. Lofty expectations and a near total lack of loyalty have conspired to make younger workers entirely unpredictable. All of which is sending CIOs and other executives into a near panic. In the latest survey of IT professionals by the Society for Information Management, for instance, "attracting, developing and retaining IT professionals" ranked No. 2 for the second year in a row on the top ten list of IT management concerns in 2006, ahead of security and strategic planning.

But through careful planning and management, these younger employees can become valuable, highly productive, even loyal members of the corporate workforce. And IT should be able to take up some of the productivity slack—business automation and other technologies conducive to the creation of a flexible workplace will certainly march on.

So the real issue for corporations becomes the continuous, ongoing effort to identify and keep all their top performers, whether they are old, middle-aged or young. Experts agree that while the bogeyman of baby-boom retirement may be overblown, companies face a variety of challenges in their efforts to maintain a top-level workforce—from the breakdown of the longstanding contract between employers and employees to the restlessness and high expectations of younger workers. Doing a better job of employee retention is critical to solving the problem. Employee churn is the same as customer churn: It's a lot cheaper to keep the ones you have than to acquire new ones.

Now, more than ever, it is incumbent on corporations to marshal all their forces—information technology as well as human resources—in the service of determining three critical elements of the human equation: What does your workforce look like now, what should it look like, given your business goals, and how do you retain that optimized workforce once you've acquired it?

Next page: Why Keeping Top Talent Is a Challenge

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Why Keeping Top Talent

Is a Challenge">

Why is retaining employees so difficult for American companies? The reasons, experts say, are many. First of all, the historical relationship between company and employer, in which corporations offered what amounted to lifetime employment in return for a high degree of loyalty on the part of employees, has essentially broken down in the face of the financial reengineering and downsizing of the 1980s and early 1990s. Closing pension funds and mass layoffs have resulted in employees who are deeply distrustful of their employers.

Says Robert Morison, an executive vice president and director of research at the Kingwood, Texas-based Concours Group and a co-author of Workforce Crisis: How to Beat the Coming Shortage of Skills and Labor (Harvard Business School Press, 2006): "Young employees are even more inclined than their parents are to job hop. They've seen what corporations have done to their parents, and they assume no loyalty, because corporations haven't shown them any.

"We call this the evolution of the employment deal, which involves putting more and more burdens on the employee—for healthcare premiums, pension contributions—with fewer guarantees. These components of the deal have become less important—they're essentially the same from one company to the next—and other parts of the deal become more important: How congenial is my workplace? Do I have a chance to learn things on the job? How exciting is my work?"

Not very exciting, apparently, and that's another problem. In 2004, Concours, together with the Harris Group, surveyed almost 8,000 corporate employees on their attitudes toward work and life, and the results were not encouraging. A third of respondents said they were in dead-end jobs, while 42 percent said they felt burned out in their jobs. Just 28 percent said their work made them feel energized.

Says Morison: "Feeling dead-ended is the variable that correlates most closely with low engagement scores. There's an enormous amount of energy and capability pent up in the American workforce. If we could make jobs more interesting, give people more opportunity to move around the company, to grow on the job, the result would be extra discretionary effort."

So corporate America has a great deal of work in store to stem the restlessness of U.S. workers and repair the pact between employers and employee. But to do so, as Morison points out, companies can't simply offer more money and benefits; workers don't see benefits as a differentiator among prospective employers and companies remain reluctant to throw money at the problem of retention. Instead, companies need a carefully thought-out workforce strategy that specifically links the makeup of their present and future workforces to the company's business strategy and goals. And IT can help.

Next page: IBM's Survival Strategy for Talent Retention

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IBM

's Survival Strategy for Talent Retention">

As the vice president of global talent at IBM Corp., Karen Calo's job is to make sure the $91 billion computing behemoth stays on track in planning for its present and future workforce, and to make sure those plans are clearly aligned with the company's business strategy. As a 26-year veteran of IBM, she too has seen the changes that have taken place among employees, especially younger ones. "People coming off college campuses when I joined IBM 26 years ago were interested in a career with a company for life. But that's changed. Companies can no longer guarantee employment for life, and employees don't expect it. Young folks today are interested in working in a place that offers cool work where they can develop their skills, but I don't think they expect to be at the same place for 10 or 15 years. So the challenge for IBM is to figure out how to get the top performers to stay longer than they might think they want to."

While IBM faces many of the same problems other corporations are dealing with as they confront the 21st-century workforce, Calo notes that the company has a history of strong retention. Take the baby boomers: "Our statistics today aren't showing a huge amount of brain drain from baby boomers retiring," says Calo. "I like to credit that to the fact that people remain loyal to IBM, particularly older employees." And IBM provides a fair amount of flexibility in terms of part-time work and telecommuting. "In fact, about 40 percent of our workforce doesn't even go to an IBM office every day," she notes.

In order to achieve its retention goals, IBM's HR executives work closely with IT to develop systems that give managers an end-to-end view of the company's human capital—quite a job for a company with more than 330,000 full-time employees. One such effort involves a custom-built database of the company's workforce, called Professional Marketplace, that allows managers to assess who has what skills. "That allows us to identify where we have skills gaps, and compare that with our business plans," says Calo. "Who has a particular skill? Who has most of that skill, and can we put together a learning program to give those people what they need? How many people do we need to hire from outside?"

Much of the ability to make these kinds of decisions depends on IT to set up the HR analytics systems that can generate the kinds of high-level metrics to give managers visibility into the changing nature of IBM's workforce. "We've rolled out a new initiative, in partnership with IBM's IT department, that gives us an end-to-end view of our human capital," says Calo. "In fact, some of the ideas for it come out of our supply-chain business. It's a large, complex system that gives us a suite of tools to help manage this problem."

Calo notes that HR metrics come in two flavors. There are more traditional metrics such as employee satisfaction, hiring and attrition rates. And then there are such metrics as labor costs in relation to revenue and profit per employee. Such metrics, says Calo, allow executives to assess the company's workforce mix. "Is the company optimally situated, or do we need to plan further ahead? Should we hire more college graduates, despite the cost? What about contractors?" Calo asks.

Most important, such thinking is driven by the company's strategic planning, and by what's happening—and what's expected to happen—in the marketplace. Says Calo: "At IBM, human resources has always had a place at the corporate strategy table. And as we become more and more services-based, and more global, the role of HR continues to increase in importance strategically." Every spring, IBM executives determine overall strategy, and every fall, the discussion turns to how to execute those strategic plans. "And HR is right there, along with line leaders and executives from the finance department, dealing with questions like 'What's the right workforce mix for reaching those strategic goals?'"

The problem, says Troy Kanter, president of the human capital management division at Wayne, Pa.-based Kenexa Corp., a purveyor of HR software, is that "most companies don't really measure why people are leaving, and why people stay. If you can't measure it, you can't manage it." The critical element in any strategic HR plan is to determine which are the most important job families in your company, and then to make sure you really understand what drives the top quartile of performance within each family. "Model that, validate the model, build out the business case for it, and then use that model to build the entire strategic human capital management plan," he concludes.

The key, says Kanter, is to look at what drives engagement with the job for high performers versus low performers for each job family. Kanter points out bluntly, "As long as the bottom half of performers are the ones leaving, you're okay. With HR analytics you can make sure that your retention strategy focuses on the top quartile, and then use turnover as an opportunity to increase the overall talent level in the company."

Next page: Planning the Workforce of the Future

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Planning the Workforce of

the Future">

Experts and analysts agree that attracting and retaining young talent is the most vexing challenge facing employers today. No one knows that better than Hyatt Hotels Corp., which has a young workforce and a very strong culture of promoting its own people—80 percent of all promotions on the management side of the Chicago-based hotelier come from within. It's part of their basic business strategy to retain talented young people.

About three years ago, the company installed a talent management system from Dublin, Calif.-based Taleo Corp., and it has made the process significantly more manageable, says Randy Goldberg, executive director of recruiting at Hyatt, which operates more than 200 hotels and resorts around the world. "All of our current employees have a profile of themselves in the system. And we communicate quarterly to our entire management and staff, asking them to update their profiles: Who you are, your address, current job, where located, where you would like to be, when you would like to move, what position you're interested in."

So when a new position opens in, say, Las Vegas, HR executives can look at who's interested in moving there, and start calling them. "It used to be that we had no way of telling who wanted what job. I used to get calls from people saying, 'Gee, I wish I'd known about that position in Las Vegas, because I've always wanted to go there." I don't get those calls any more.

In addition to the significant boost in morale the system has brought to Hyatt, Goldberg notes that his newest, youngest employees, those just coming out of college, particularly like the system. "It reinforces what we told them on campus—that Hyatt promotes from within, and that there's lots of opportunity at Hyatt."

The company has instituted other technologies that Goldberg feels appeal especially to younger workers, including an internal discussion board that only young managers are allowed to use. "It's amazing how much they know about what happens in the company—that plans to open a new hotel in Las Vegas, for instance, are five months ahead of schedule. The feedback has been overwhelmingly positive. It's like myspace.com without the photos," he says.

In Goldberg's view, such systems are critical to retaining good young employees. "Younger workers coming in are thrilled by how open this company is. Yet some senior managers still don't understand just how important social networking and the free flow of communication is to younger workers."

Expect to see more such platforms coming to corporations of all sizes as they look for new ways to attract, assess and keep talented young people. Companies will need to provide younger workers with an open, flexible, socially and intellectually stimulating work environment in which they can thrive. And that will require better collaboration software, e-learning systems, and a variety of social networking software—for use by both employees and managers looking to keep track of employees' whereabouts, activities and skills—even gaming and virtual worlds.

Says Goldberg: "Younger workers today expect this kind of openness. Companies that try to manage and control that kind of information are going to have a much harder time with the generation that's now coming out of school."

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