BY JOSH BERSIN

TALENT SHORTFALLS ARE HITTING MANY INDUSTRY SECTORS.
>> In three to five years, the impact will be widespread.
>> Learning organizations must map strategies for transformations, now.

The “war for talent” is realigning the corporate learning focus from skills development and performance improvement to building and supporting talent across the organization. As employee talent becomes scarcer and more valuable, corporate learning is becoming more focused on supporting talent management processes such as recruiting, on-boarding, performance management, compensation, skills development, succession planning, and leadership development. This significant shift will require changes in organizational structures, technologies, priorities, and programs.

THE BATTLE LINES
Demographic changes, business growth, and worldwide expansion are just a few of the drivers behind the predicted talent shortage. These are just a few indicators of what’s ahead:
>> The 500 largest U.S. companies will lose 50% of their senior managers over the next five years to retirement, according to an IBM study.
>> An increase of 50% in workers aged 55 to 64 will occur from 2004 to 2014, as reported by the Bureau of Labor Statistics.
>> By 2010, the US will face a 10 million workforce shortage.
>> A 2% unemployment rate for U.S. workers with graduate degrees.
>> Replacement costs for managementlevel positions can now exceed 150% of an employee’s annual salary, estimates Booz Allen.
>> The average turnover time for U.S. employees is three years; for those employees 18 to 24 years old, the average turnover time is 18 months.

The bottom line is clear. Highly talented employees are going to be in short supply. In order to continue growth and maintain competitive advantage, businesses must begin now to evaluate and cultivate current employee assets, plan nearterm workforce needs, and increase the effectiveness of recruiting and other talent management processes.

The talent shortage is especially critical when considering the contribution employee talent makes to market capital growth. According to a Brookings Institute study, back in 1982, 62% of U.S. market capital growth was directly related to physical assets (such as investments in tangible assets such as property, facilities, and products) and 38% was related to intangible assets (such as intellectual assets, patent rights, and employees). By 2003, these numbers had changed dramatically, with 80% of growth related to intangible assets and only 20% related to physical assets.

The talent crisis is not limited to the United States. Employees with skill-sets in IT, engineering, sales, and construction are already scarce worldwide, reported a 2006 survey of 33,000 employers worldwide conducted by Manpower, Inc. In fact, 40% of respondents indicated they were currently experiencing difficulty in filling open positions. Some sectors will be harder hit than others. At-risk sectors include government, energy, oil and gas, telecommunications, manufacturing, and utilities. Through detailed workforce planning, one global aerospace firm has identified that without significant investments in hiring and training, the firm will be short 45,000 skilled professionals by 2010.

CHANGE ACROSS THE RANKS OF HR AND LEARNING
The two corporate support functions that will be most impacted by the talent crisis are human resources and learning. Research is already showing a shift in priorities for these two functions. The areas requiring immediate focus, according to a study of HR managers are:
>> Skills and competency management (46%)
>> Succession planning (41%)
>> Performance management (40%)
>> Leadership development (39%)
>> Learning management (32%).

In most organizations, HR has moved beyond its initial role of providing personnel- related support primarily in payroll and benefits management to a more strategic role involving recruiting, employee development, compensation, and organizational design. Cuttingedge organizations are further broadening HR’s role to encompass competency and performance management, succession planning, and leadership development. These same organizations are also recognizing that talent management functions can no longer be viewed separately as silos of information and discrete processes.

Learning organizations are similarly evolving. Learning managers identified integration with performance and talent management as their second-highest upcoming challenge — above increasing learner usage, reducing training costs, faster training deployment, and other traditional priorities, according to a Bersin & Associates study. Learning departments are well on their way in evolving from centralized corporate universities to organizations providing shared learning services to business units through performance consulting, course development, and LMS and other technologies. Now, leading learning organizations are tightly aligning themselves with HR – sometimes even becoming part of HR itself – in order to become a participative partner in developing talent management strategies.

Research is showing that in those companies most dramatically affected by the talent crisis, learning becomes a central, common element to all talent management processes. Hallmarks of tight HR and learning alignment and a unified focus on talent management include:
>> Integrated staffing and career planning
>> Integration of learning with performance and competency management
>> Ongoing, enterprise-wide employee development initiatives
>> Sophisticated competency management spanning functional, leadership, and values-based competencies

TECHNOLOGY TOOLS
The technology market is also responding to the demand for more efficient and integrated talent management. Up to now, learning management systems have been siloed applications in most organizations. Software applications for compensation and benefits, applicant tracking, workforce planning, and performance management have also usually been separate, although technology solutions for these functions have not been as widely used. However, over the last two to three years, the market has seen a definite trend toward the convergence of performance management and learning.

More and more vendors are entering the market with automated solutions for performance management and related processes; many of these vendors have forged partnerships with LMS vendors and offer at least some level of integration. While the performance management market is still very immature (only 11% of organizations currently have automated solutions), interest is growing rapidly. Recent research shows that 30% of organizations are planning to implement a new performance management solution in the next 2 years.

The LMS market is much more mature; 56% of organizations today use some kind of learning management solution. About half of those organizations with multiple LMSs installed are planning to consolidate these systems. And, as companies seek to implement unified, enterprise-wide learning management solutions, they are also incorporating integrated performance management solutions as part of the consolidation initiatives.

Indeed, the promised benefits of integrating learning with performance management and other talent management functions are compelling. Below are the advantages hoped to gain by integrating LMSs with performance management systems as shown in a 2006 survey of HR and learning executives:
>> Better meeting workforce needs (34%)
>> Easier creation of development plans (32%)
>> Increased correlation of training to performance (28%)
>> Easier assignment of development activities (24%)
>> Better planning data (18%)
>> Creation of a single site for all processes (15%)
>> Better management of employee proficiency (10%)

ARE YOU READY?
If your organization does not yet have a talent management strategy, how should you get started?

Step 1: The first step is to Determine if your company’s learning function is organized in a way to succeed. If not, you’ll likely find the road to talent management fraught with obstacles that can’t be addressed by technology, strategic planning, or budget dollars.

Most high-impact learning departments are organized in what we call a federated model. Much in the way the United States government is structured to provide state autonomy in certain areas and federal rule in others, federated learning organizations provide performance consulting and support to individual business units while also having centralized learning services that can set enterprise standards, address common learning requirements, and provide enterprise-wide technology support. This organizational model has the advantage of increasing the support for business-specific training needs and establishing close working relationships with line-of-business managers. At the same time, the enterprise benefits from the cost and time efficiencies of standardized tools and templates and a centralized learning platform. Federated organizations usually focus more on business training priorities, rather than HR-driven initiatives.

On the other hand, highly centralized learning functions are almost always more tightly aligned with HR and tend to focus on corporate-wide learning programs. The downside of this model is that business unit support is often compromised, as demonstrated in research related to highimpact learning organizations.

Step 2:An integrated approach to talent management requires a tight alignment of learning with HR, especially in areas such as compliance, onboarding, management and leadership development, and performance and competency management. Centralized learning organizations that already have close affiliations with HR will likely find the transition to integrated talent management easier and faster. Federated organizations may have to work harder at alignment and make some structural changes – for instance, perhaps identifying dedicated resources to support talent management processes much in the same way dedicated resources are provided to business units.

Step3:A relationship between HR and learning is recommended much like the branches of our federal government. Each organization has its own central mission. The HR organization continues to focus on corporate- wide issues, and the learning organization focuses on line of business and performance issues. However, in the shared areas identified above, both functions should identify dedicated resources to work together and to provide unified, integrated solutions to address all processes involved in the talent management continuum.

WINNING THE WAR
The next three to five years will be challenging as the talent shortage requires new strategies and tactics to drive corporate performance; New platforms to consider and implement, new organizational approaches to evaluate and adopt, and new career opportunities. Perhaps most importantly, we need new ways to drive corporate value and win the war for talent.

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Josh Bersin is principal of Bersin & Associates, a consulting and research organization covering the learning and performance industry. To view the studies referenced in this article, visit: www.bersin.com.

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