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Talent in a changing world
Lucia Rahilly: Everyone’s talking about the future of work and the potential for automation and artificial intelligence [AI] to transform working as we know it. But talent and talent shortages are not new issues. Why this disconnect in making human capital as high a priority as financial capital?
Bill Schaninger: It’s an interesting conundrum. When we ask people if they have enough talent, they almost universally say no. Then they go back to looking at KPIs [key performance indicators] for that quarter’s performance.
We’ve created a managerial system and reporting mechanism that disproportionately focus on financial capital, not human capital. Leaders haven’t spent nearly enough time asking, “What are the critical roles? What are the critical skills?” They need to reboot how they lead, with equal, if not greater, emphasis on the scarce capital—human capital.
Lucia Rahilly: How do digitization and AI compound the challenge, and what’s at stake for companies that don’t get this right?
Bryan Hancock: When we’ve worked with CEOs on setting the value agenda and determining where new value will come from, 70 to 80 percent might involve building a digital business or capability. That’s where we find gaps. When we do that analysis, we’re looking at the top 25 to 50 roles that drive disproportionate value. We break down the value agenda and ask, “How are we going to make money in the future?” Some parts will be new. Others will be sustaining. What’s new is disproportionately in the digital space.
Bill Schaninger: Bryan mentioned “value agenda.” It’s important to understand what that means. There’s a basic way of asking, “What’s our business as usual? How does the business make money today?” You could take an organization chart and write the revenue or profit number in the boxes all the way down. That’s protecting the core.
“It’s a unique opportunity when you recast how you’re going to make money … to maximize it, you should acknowledge that, of the people who got you here, some of them are just not going to get you there.”
—Bill Schaninger
Companies trying to improve might say, “We have three or four things going on across the company—procurement, pricing, lean management. They’re relatively small numbers for each unit, but when we add them up, that’s a big number. Should we think about a role there?” That’s improving the base business.
Then you get into the interesting thing Bryan is talking about: “net new.” Look at the company today, draw a box, and say, “That one is consumer into China. This one is the new digital platform.” They don’t yet exist, but if you have money, write the numbers in. Because the minute you ask for capital or make a commitment to the board, you’re on the hook for that number. That’s what the role should count for.
From roles to returns
Lucia Rahilly: You’re a CEO, and you ask yourself, “What does my supply–demand ratio look like: Am I long, am I short on talent?” What’s your first step?
Bryan Hancock: We sometimes look at value levers and initiatives individually, figuring out where roles and value are. But CEOs, or CFOs, or CHROs [chief human-resources officers] think at a different level of aggregation, different chunks.
One leadership team was recently talking about this in three ways. First, “Hey, I have this new attacker business I need to create. Over time, it may take over. But I want it to be unconstrained by current processes, current IT platforms. And I need somebody to lead that business.” That’s the net new.
Second, “I’m interested in digital, automation, and the future of work. To make that happen, I need more people in digital areas and fewer people in routine work. Most important are the people designing new tech tools, and maybe one or two driving implementation.”
Third, “There’s a part of the business that’s not net new, that’s not being hit by the future of work. Procurement is my number-one value capture. I need to make sure I have the best procurement person in the world.”
By breaking it into those three chunks, you can say, “OK, I have the value agenda, plus the enablers and pieces and how they fit with the three parts of my agenda.”
Bill Schaninger: One point here is that we regularly confuse people with roles and confuse talent with broad skill pools. In many organizations, roles today bear no resemblance to what they’d look like if you were designing them from scratch. Get clear in your head: What are the few critical roles? There are probably a couple dozen. That’s it.
Everything else probably sits in a skill pool, a clustering of common skills deployed in different ways. That starts looking more homogeneous. If it starts looking more homogeneous, you can start finding types of people, not a person. One of the toughest conversations happens if you find out you’re long—that you have too many people.
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Bryan Hancock is a partner in McKinsey’s Washington, DC, office; Lucia Rahilly is the global editorial director of McKinsey Publishing and is based in the New York office; and Bill Schaninger is a senior partner in the Philadelphia office.