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ll» ll‘llt ii “(iii llx ARTICLE UNI‘

SUMMARV
in today's challenging economy and
hypercompetitive business environment...
I-1*. -Tl. ll{l~'l) «R I nus _/  RTICLE ONIi

IMPROVING BOARD OVERSIGHT OF TALENT-RELATED
RISKS

Improving the oversight o...
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Demystifying Board's Role in Talent Management MINDA Boardview - Issue No. 12 September 2014 Issue

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Demystifying Board's Role in Talent Management MINDA Boardview - Issue No. 12 September 2014 Issue

  1. 1. ti ll» ll‘llt ii “(iii llx ARTICLE UNI‘ SUMMARV in today's challenging economy and hypercompetitive business environment. CEOS and senior executive teams are facing enormous challenges when it comes to achieving and sustaining breakthrough operating results. intensifying war for Talent, globalisation, economic change, more stringent regulation, and tougher governance make realising shareholder value increasingly aifflcult. But, there is a tougher challenge: identifying and developing new leaders which is critical for developing the sustainable competitive advantage for the organisation and its eventual success. Talent management and retention is perennially at the top of CEO's most pressing worries, A company's leadership pipeline is expected to deliver its “next generation" of ready-now leaders. The key to ensuring an organisation has the leaders it needs when it needs them, is to accelerate the performance of future leaders including high potential employees, so that their skills and leadership abilities are as strong as possible when they are needed particularly as leaders transition from role to role. According to Ram Charan in his article published in the 2005 Harvard Business Review, as CEO tenure continues to shrink, with two out at every five new CEOS failing in their first 18 months, it has become absolutely critical far companies to cultivate intemol candidates tor top positions. Yet corporations are beginning to realise that executive geographic and organisation culture succession pipelines are broken and will adversely atlect the ability to identify and nurture future leaders SIEPT 1014 DEMYSTFYING BOARD‘S ROLE IN TALENT MANAGEMENT by Professor Sattor Bawany This can be alleviated however by establishing on- going programmes that correctly ascertain the high potential executives and provide them with meaningful and measurable development. A company‘s leadership pipeline is expected to deliver its "next generation" of ready-now leaders. The payoff is a supply of leadership talent that simultaneously achieves targets, bolsters and protects ethical reputation. and navigates transformational change in pursuit of a bright competitive tuture. Unfortunately, some Boards and CEOs neglect their talent management accountability — consequently, their pipelines run dry. When this occurs. the downward spiral of competitive capability becomes discernable, the edge is lost, and the "magic" disappears. The competition begins to outwit, outttank and outperform these companies. BOARITS ROLE IN TALENT MANAGEMENT In most organisations, talent is the essential resource — In fact, your talent is the one thing that can distinguish you from your competitors. Without the right people to execute and deliver the organisation's strategy and objectives at all levels, the business will tail to reach its full potential. A board's oversight responsibility is well understood in the areas of risk governance, ethics, and corporate responsibility. but less otten mentioned with regard to talent. Yet, talent is an intrinsic part of the risk culture of an organisation. Instances where talent is at the core of major organisational risk are increasingly prevalent. Talent is, however, an area of organisational risk where boards often tail to implement comprehensive controls. . 3. What plans are in place to bring about srnoot - A. How can we strengthen our talentvrelated du Oversight of an organisation's talent clearly tails within the board's responsibilities. Traditionally, talent had been focused on hiring the chiet executive otficer. determiningexecutivecompensation, planningsenior executive succession, and recruiting and developing board members. Yet the board's responsibility for talent extends well beyond those duties. The ability to attract, develop, and retain talent, particularly at the leadership level, has become a major factor in all capital investments, business strategies, and organisational growth. As a result, it is an important consideration for boards of multinational and owner- managed businesses alike. HOW CAN THE BOARD HELP THE ORGANISATION ATTRACT, DEVELOP, AND RETAIN TALENT? Boards play a key role in overseeing that talent strategies are in place to execute on the overall business objectives as well as manage the talent related risk inherent in the commercial world today. in this role, the board should confirm that its organisation has an etfective and robust talent management programme capable of delivering value for shareholders, Talent is one of the five critical governance elements over which the board provides active oversight. Executing active oversight with regard to the five elements—perTormance. strategy. governance, talent, and integrity—cannot be delegated to management. , Questions tor Board Directors to ask: 1. What is the key talent risks associated with our car business strategies? With our major investments’? 2. What is our talent bench strength’? How is ou organisation mitigating succession risks? succession or substitution of our key talent, it th need arises? diligence in joint venture and M&A situations of any of our holdings or subsidiary en ' ies? ll -i ilizi llllll RTl( LI" UNI’ THE BOARD OVERSIGHT OF TALENT MANAGEMENT IN ORGANISATIONS The Talent-lntelllgent Board Risk oversight is the foundation for the board and management to govern the organisation and make sound business decisions Organisational nsks include talentrelated risks and are frequently identified by organisations as some of the most critical issues they face TaIent—related risks traditionally include lack of succession planning: planned or sudden loss of key personnel; lack of return on leadership investment or senior external hires: and failure to attract, develop, and retain talent. These risks can extend to poor talent planning to support capital investments and business strategy; for example, limited leadership bench strength reputational exposure, productivity risk, and inability to execute due to lack of workforce planning, To more effectively oversee risks related to talent, boards should periodically and proactively consider the following ta| ent—reIated risks identified in a Deloitte report- - Repulational risks: Financial missteps, ethical breaches, legal problems, or even poor performance by executives can have an impact on a company's revenue, profits, and market value foryears to come, particularly when publicly reported in the media. This is particularly important because decisions are otten made by one or more key individuals in an organisation. - Crisis mcnagement. “Black swan“ events— low—probability events that have tar—reoching impact—are increasingly common. Does senior management have a detailed crisis management plan that governs how the organisation addresses these issues? Risks include changes in economic and market trends, the sudden departure of business—critical talent, poaching of whole teams by external sources, and health and safety incidents. - Business and regulatory risks: Boards should satisfy themselves that their talent strategies. compensation, and incentive plans are aligned to create a culture that supports the pursuit of business goals within regulatory constraints. - Broader HR risks: HR risks have expanded beyond compliance with labor regulations, While those remain important, companies now lace a broad range of talent—related risks that can undermine organisational performance. These range from security, intellectual property, employee fraud, and financial risks to the risks of incompetence, pooriudgment. and lack ot loyalty. M. -’L. i‘YSlz-N DIRECTORS ACADEMY 7
  2. 2. I-1*. -Tl. ll{l~'l) «R I nus _/ RTICLE ONIi IMPROVING BOARD OVERSIGHT OF TALENT-RELATED RISKS Improving the oversight of talent risk begins with understanding those risks and management's approach to addressing them. Here are five key steps for boards to consider in their talent oversight role: - Review talent-related risks: _~Many boards have adopted a twice—a—year talent review in which the chief human resources officer (CHRO) summarises the external talent trends, and workforce and talent strategy for the business, including a comprehensive review of talent, HR risks and the associated mitigation strategies. - Develop measurable outcomes: It is also wise to request a benchmark analysis that covers employee engagement, top performer and executive attrition, and other factors related to talent retention at the senior levels and for other critical positions. This can be accomplished by leveraging industry or HR data and/ or using historical organisational data as comparisons. - Assign the responsibility: More and more boards designate a director and/ or members of the remuneration committee to address talent— related issues and risks (often a former or current CHRO), and ask for frequent “in camera" sessions with the board on talent—related risks. The head of HR could report to both the CEO and the board. For the board, this designated director can help raise awareness of talent issues; moreover, this individual has the appropriate background to question management and inform the board about talent—related risks and how management is addressing them. - Monitor the talent pipeline: Talent supply and demand data should be reviewed as part of capital investments and business strategy reviews at least annually, and ideally more frequently. In addition, the need to develop new products, enter new markets, or combat new competitors will dictate the demand for specific experience and skills. The board should ascertain that management and the HR team have plans in place to meet that demand. - Align the talent and business strategy: In reviews of strategy, the board should ask management how it aligns the talent strategy with the business strategy. Forward—looking talent strategies maintain this alignment while helping target investments in talent development for optimal efficiency and effectiveness. The board should also be aware of talent issues related to any initiative that comes up for its review or approval. 8 I! SEPT 2014 For example, in merger and acquisition (M&A) situations, talent due diligence is often neglected and talent the organisation intended to acquire on Day 1 may be lost. CONCLUSION In general, sound talent management strategies and programs can greatly reduce risk, improve sustainable performance, and improve the organisation's ability to attract external talent. Board oversight into this process can not only provide experienced insight, but help to identify and reduce the risks and take talent management to the next level. BIBLIOGRAPHY Bawany, Sattar, "Maximising the Potential of Future Leaders: Resolving Leadership Succession Crisis with Transition Coaching“ in ‘Coaching in Asia — The First Decade'. , Candid Creation Publishing LLP, September 2010. Available as e—download at: http: //www. cee»global. com/6/publication Bawany, Sattar, "Winning the War for Talent“, Human Capital. Singapore Human Resources Institute, (September—October 2007); 54-57. Charan, Ram. "Ending the CEO Succession Crisis“. Harvard Business Review, (February 2005); 83-86. Charan, Ram. “Leaders at All Levels“, Jossey—Bass, Wiley, San Francisco. California, (2008): 14. Deloitte Human Capital Trends 2012: Leap Ahead, Published by Deloitte, www. deloitte. com OIIIIOOIIOOICIIO0IOU! OOOOIIOOIOOOOOCOOCOOOCO ABOUT THE AUTHOR Professor Sattar Bawany is the Chief Executive Officer and the C—Suite Master Executive Coach of the Centre for Executive Education (CEE Global). He is an astute advisor and Executive Coach especially skilled at helping senior executives work through leadership transition issues, whether individually or systemically. He has coached a range of leaders. from CEOs, to senior vice presidents, and high potential managers across various industries globally. RELEVANT MINDA PROGRAMMES - CDAP: Human Capital @ 13-14 May 2015, KL

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