Planning for the future is crucial, particularly when markets have contracted. But have you stopped to consider what your organisation will need to look like in five years time? And — perhaps just as importantly — whether your workforce will have the skill sets necessary to meet your organisation's needs?
Recognising that strategies to co-ordinate talent retention differ between companies, and that they may not always be as forward-focused as they could — or should — be, we surveyed nearly 400 senior life sciences executives to find out more. The study asked them to describe their approach to talent management.
The current approach
According to the survey, the global life sciences industry entered 2010 with cautious optimism, with nine out of ten executives identifying talent management as a key strategic priority for this year. Following the economic downturn, businesses are looking beyond short-term cost cutting and are, once again, focusing on longer-term routes to profit. However, the results of our survey indicate that bouncing back from last year's downsizing and recruitment freezes may be more of a challenge than some life sciences executives imagine.
Many of the executives we surveyed said they hadn't considered their company's changing skill requirements when reducing headcount last year. Three quarters (76 per cent) downsized at least once in the last 18 months and, of these, over a quarter (27 per cent) identified employees for redundancy without first assessing them against the organisation's future skill demands. What's more, 62 per cent didn't use formal talent assessment exercises to decide which of their employees would face redundancy or reduced working hours.
The evidence suggests that many businesses approach headcount reductions virtually blindfolded — without a clear understanding of the skills or talent that will be lost as a result. At worst, "talent issues" appear to arise in isolation, or as part of the annual cycle that has no long-term strategic vision behind it.
In some areas of the life sciences sector, the recession seems to have accentuated this short-term approach to talent management. Despite claiming otherwise, too many organisations view people purely as 'human capital': something that can be requisitioned at will and dispensed with when no longer needed.
The problem is illustrated by the senior managers in our survey, who, in discussing their most recent experiences of downsizing, commented: "It was more a case of looking at how much revenue individuals and their functions/roles were adding to the business," and "Eliminating a position leads automatically to that employee's departure, without regard to his/her skills or performance potential."
These statements represent the extreme end of the spectrum. Over two thirds (69 per cent) of the senior managers are nervous that they will lose valuable competencies when their businesses make redundancies. But while the majority of executives are aware of the risks of downsizing, they may not have a clear understanding of either their future skills needs or the potential of existing staff.
The life sciences industry needs to strike a balance between the immediate pressures of keeping costs down and the long-term skill demands necessary to sustain competitive advantage.
An uncertain future
Looking ahead, the global life sciences industry is likely to face continued uncertainty caused by mega-mergers, shrinking R&D budgets and market access challenges. Each of these issues has major implications on future staffing demands; some could even threaten the life science industry's traditional business model. Thus, while the sector strives to cope with an ever-changing market environment, many businesses are being forced to do so with a recently depleted staff or under-resourced R&D department.
As executives prepare for this uncertain future, it's clear that they will have to work more closely with their HR teams to retain vital talent and maintain a competitive advantage for the long term. Asked to identify four key areas where HR and line managers need to improve their ways of working in order to retain competitive advantage, executives identified:
• Leadership development (78 per cent)
• High potential employee identification and assessment (67 per cent)
• Performance management (60 per cent)
• Succession planning (60 per cent).
Executives' comments further indicate their desire for a more strategic approach to people management. Senior managers identified a mix of steps they would need to take in order to remain competitive in the face of increased outsourcing, new market opportunities and continually evolving models for delivering treatment to patients.
These steps include 'continuous training', 'active and focused management of top talent', and 'a complete focus on personal development, including succession planning and talent management'. Seven out of ten (71 per cent) of the senior managers we spoke to said that over the next five years they will rely on their HR teams to re-define long-term skill and resourcing needs. However, of these respondents, 76 per cent are not convinced that their HR teams understand the businesses' medium- and long-term strategies or staffing needs.
These figures highlight an important issue. While talent management is often cited as important, investment in a solid strategy behind it is paradoxically low. Could it be that some organisations begin to believe that their brands have an inherent value that exists without the individuals who embody it?
With little focus on the board's vision and strategic plan, it seems a big ask to expect HR teams to develop job descriptions and plan future resourcing needs based on skill requirements that do not yet exist.
More than 70 per cent of the executives we interviewed have found that senior management vacancies can take six months or longer to fill. Half confirmed that their recruitment typically costs the organisation 20 to 30 per cent more than the position's annual salary.
While recruiting outside leaders is necessary and often valuable for any business, successful life sciences businesses are sharply focused on the recruitment benefits of strong internal talent management programmes. Despite the challenges of finding the right external candidate for a leadership role, in four out of ten life sciences businesses we spoke to, less than 20 per cent of their senior managers were appointed via internal promotion.
Leadership development was identified by an overwhelming 78 per cent of respondents as key to success in the life sciences industry over the next decade. Programmes that identify and assess high potential talent were nearly as popular, with 67 per cent of respondents citing them as critical to long-term success.
When it comes to formal succession planning, however, 55 per cent of life sciences organisations do not have a process in place. The result is that a significant segment of the industry is unintentionally losing competitive advantage by failing to nurture future leaders and technical experts from within.
Many life sciences executives are aware that there is an opportunity to bring more senior leaders up through the ranks. However, this won't happen on its own; it hinges on having the right processes in place to identify and foster existing talent within the organisation.
The number of training courses available in the pharmaceutical and healthcare sector proves that organisations are willing to invest in their workforce, but staffing structures, business objectives and activities must be suitable to realise the potential of such initiatives. Without constant attention, these strategies can suffer from an inertia that, over time, could mean they cease to reflect the needs of the business, its customers and stakeholders.
Bridges to the boardroom
Today the sector's leading businesses are looking to identify the strategies and leadership styles they will need to have on board to maximise opportunities post-recession. But do you have the time or internal resource to do this effectively?
Predicting a business' future skill requirements is no easy feat. When building a post-recession leadership team and preparing for a new competitive climate, modern organisations cannot afford to rely on outdated job roles and assessment techniques that risk losing top talent, or worse, leave your organisation without the right range of skills to exploit new market opportunities fully.
Our research indicates that there needs to be closer alignment between the board's vision and the HR team's techniques and processes when it comes to leadership development, high potential employee identification and assessment, performance management and succession planning. Organisations need to look at best practice, encourage objective third party analysis and feedback, then act on what they learn, honestly, bravely and on an ongoing basis.
Optimising your workforce
Leadership assessment, talent retention and the cost of recruiting senior executives were all identified as pressure points for today's life sciences executives. Our study of senior managers confirms that in today's highly competitive global drugs market, well-managed talent is a key success factor. As businesses in the life sciences sector grow, it is critical that they obtain the maximum value from their human resource, now and in the future.
About this research
This research was conducted among 397 senior executives and HR directors working in the global life sciences industry: 80 per cent of respondents were either CEOs or senior members of their organisation's leadership team. Data were collected in January, 2010.
Nick Stephens is chief executive officer of RSA Talent Management
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