Prompted by the convergence of two trends in the workplace — 10,000 baby boomers a day retiring between now and 2030, and 8 million Millennials entering the workplace in the coming years the question we tackled was “How are corporations managing their talent pipelines and the career expectations of their employees?”
From our survey of company executives (50% California companies and 50% companies in other states), here are some revealing results:
1) More than half (58%) of organizations identify HIPO candidates for future development through manager recommendation and 33% utilize a formal process. Companies with more than 500 employees generally use a formal process, while smaller companies manage and update their list of high potentials in a casual manner.
2) Over 70% of respondents say that less than 10% of total employees make up the high potential candidate list, a list that is given oversight mostly by a senior executive (in smaller companies) or senior human resource manager (in larger companies).
3) Career paths of the identified high potentials are managed on the basis of both eligibility for a next position and performance in their current role. 28% are not managed at all. Interestingly, 70% of medium sized companies (51 to 1000 employees) do not link their succession planning and career planning.
The three key components of developing and managing high-potential employees (HIP0) are:
1) Does the employee have a preference for the work that is inherent in that next role — called suitability, measuring whether the person wants to do that work,
2) are they skilled to do that work (eligibility), and
3) performance in their current job. For example, are they exhibiting good performance behaviors that are transferrable to the next job?
Most companies today use some human resource information and an applicant tracking system to manage employee data. However, according to Bersin by Deloitte, “86% of companies say they have no analytics capabilities in the HR function. Moreover, 67% rate themselves as “weak” at using HR data to predict workforce performance and improvement.”
Today the challenge is even greater for companies when considering how to keep Millennials engaged. A Georgetown University Report points out that Millennials switch jobs 6.3 times between ages 18 and 25, and only one out of every 10 considers their current job a career. This suggests a need beyond management succession planning to engage Millennials very early in their careers with job opportunity growth and development.
More than any group entering the workforce before them, Millennials are proving to require more attention to their future needs earlier in the lifecycle of their careers. With evidence showing that companies are struggling to manage the 10% identified as high potentials for leadership, a real concern is that if companies do not find a way to manage and support the talent readiness for the career paths of Millennials, beginning with their entry into the company, they risk losing them. This is an expensive loss due to the entry level training cost that is incurred in the first years of a person’s employment. Middle-sized companies (51 to 1000 employees) that do not link their succession planning and career planning have the greatest risk of all.
It is clear that managing a company’s employee pipeline, for high potentials and all employees, is critical to sustainable advantage and future performance. The survey indicates that implementing a more formal process involving higher management and capturing data on an employee’s eligibility, performance and assessment of suitability are necessary to properly develop and retain top talent.