Talent Management in the Era of Lean
Creating a lean organisation is a long term strategy that most pharmaceutical companies are pursuing with great urgency. Nick Stephens, CEO of RSA, draws on new research that suggests talent management may be suffering in the process.
The introduction to Emerging Pharma Leaders 2011 highlighted three critical talent management issues for the pharmaceutical and life sciences industries in the era of lean. First off was the magnified impact of losing any productive worker; second was a recognition that talent is now a truly global pursuit; finally a belief that the ‘human’ needed to go back into HR with a focus on soft skills to create an engaged and creative organisation.
Coincidentally these key issues also featured heavily in research which RSA undertook to gauge the impact of the recession on the life sciences industry. RSA, a leading global life sciences executive search and interim management specialist, conducted research amongst 551 senior executives and HR directors with the aim of identifying what executives can do to improve talent management.
The results suggest that companies do not manage talent in a strategic way. In fact, talent management is becoming less planned and more ad-hoc mainly due to the continuing impact of market change and sluggish economic conditions. Not only do fewer organisations have a formal talent management strategy, they are also not using recognised processes when cutting jobs.
The life sciences industry rates people as its biggest asset and understands that it is imperative that they are developed and retained. However the continuing pressures of the recession and major market change are forcing businesses and their HR departments to focus on short-term fixes, rather than long-term strategy.
Interestingly, the impact of the recession seems to have generated a swing of the pendulum back towards buying in, rather than developing talent. And given the sense of ‘urgency’ that is within the sector, it’s not that surprising to find that senior recruitment is now much faster. Whereas in 2010, it took six months or longer to fill senior vacancies in 71% of cases, this had plummeted to 11.5% in 2011, with 41% now in place in less than three months.
One of the reasons for the increase in recruiting may be that it has become a lot more economical than before. Fee levels have also dropped with 39% of respondents confirming that recruitment costs between 20-30% of the position’s annual salary, down from 50% in 2010. While we dispute these figures (they certainly do not reflect our fee structure), this may be a big factor in the focus on buying in talent rather than promoting it in-house. In four out of 10 life sciences businesses, less than 20% of senior managers are appointed via internal promotion.
Ideals and Reality
Our research reveals a large ‘disconnect’ between ideals and reality when it comes to HR priorities that executives set. Some 66% saw leadership development as a key aim, but only 44% felt that HR would be focused on this, with areas such as restructuring (27%) and downsizing (13%) taking up much of the HR department’s time over the next year.
Given the belief amongst emerging pharma leaders that HR had a real role to play in enabling an engaged and creative organisation, it is perhaps dispiriting to discover that fewer executives in 2011 believe HR teams will have a key role in redefining long-term resourcing needs as the life sciences industry undergoes fundamental changes to its business model.
Long-term planning has also taken a back seat. Seven out of 10 admitted that they still don’t assess employees against the business’s medium and long-term goals, a dramatic increase from 47% in 2010; and 60% of life sciences executives don’t believe the HR team has a clear understanding of skills needed in five years time.
This lack of confidence in the HR function is concerning and is reflected in companies turning away from strategic talent management and embracing quick fix tactics to meet recessionary pressures on the business. Our research shows eight out of 10 life sciences executives use no formal talent assessment exercises to identify which employees will face redundancy, while 38% don’t consider future demand for skills when making staff cuts.
There is also a gap between best and actual practice when it comes to reducing headcount. 53% believe that formal talent assessment exercises should be used to identify which employees are affected by restructures, but this method is only used in 21% of cases. In three out of five cases, decisions are based on the company’s future demand for skills, but also encompass factors such as voluntary redundancy (20%) and last in, first out (5%).
Talent Management
In today’s highly-competitive life sciences industry a critical success factor for executives is to fully understand the talent they have within their business and how they organise and supplement it for the future. There does seem to be general recognition that companies need to align their HR strategies with their key business objectives, focussing on identifying, retaining, developing and engaging talented individuals.
This is borne out by the results of survey. Nine out of 10 life sciences executives identify talent management as a key priority for 2011 but over three quarters of their organisations are not delivering this in practice; they are operating without an active strategy in place. In fact over half (55%) of respondents say the industry does not give adequate consideration to retaining top talent and they recognise that improving talent management processes is vital if they want to remain competitive.
Critically, respondents believe they must improve procedures around active management of high potential individuals (64%) to stay on top. This is an interesting point and may intuitively point to the fact that finding and acquiring talent has changed considerably. It has become much more complicated and sophisticated, requiring, in the words of William Looney ‘the ability to initiate, analyse and execute around a global approach that can accommodate diverse cultures and perspectives on doing business.’
That said, there are also some positive changes since 2010. While last year 78% felt they needed to improve how they developed leaders, in 2011 this had dropped to 62%. Future planning is also improving slowly – although 47% had no clear leadership succession plan in place, this had reduced from 55% in 2010.
The key thing is for businesses to understand the impact of leadership behaviours on the culture and the motivation and delivery of their teams. Paying attention to the quality and capability of leadership talent is vital to ensuring sustainable growth and execution of strategy. Assessing and developing that capability through bespoke training and coaching are key investments for organisations in changing times.
From the outside it appears that the pharmaceutical and life sciences industry have been ineffective in talent management. Now more than ever, it is time to review the current effectiveness of performance management systems, liaising closely with key stakeholders to ensure understanding and buy-in.
These are challenging times and in many cases the recession has required executives to act now and strategise later. However there is obvious recognition that talent management is the key to a bright future and now is the time to put some work into making those beliefs a reality. Otherwise there is a danger that the era of lean could go too far and starve the business of the talent that delivers creative energy.
RSA is a global leader in the provision of Executive Search and Interim Management services to the Life Sciences industry with offices in China, Germany, Singapore, Switzerland, UK, USA and partners in the emerging markets.
In addition, through its Talent Lifecycle Services, RSA works with clients to help them maximise the value and contribution of all their employees.
We specialise in ‘C’ level and senior executive searches as well as Non-Executive Directors.
Clients include global industry leaders through to start up businesses.
RSA operate in Pharmaceuticals, Biotechnology, Medical Devices, Diagnostics, Generics, Consumer Healthcare, Animal Health, Service Organisations, Venture Capital, Charities and Academic Medical Research.