Many Middle Market Businesses Not Investing in Talent Properly, New Report Finds
December 21, 2016
COLUMBUS, Ohio, Dec. 21, 2016 -- Despite data supporting a strong correlation between talent planning and overall company growth, fewer than half of middle market companies are currently implementing critical talent planning processes in their business strategies. This finding highlights a new report titled "Mastering Talent Planning: A Framework for Success," released today by the National Center for the Middle Market (NCMM) and Vistage Worldwide.
Developed jointly by the NCMM and Vistage, the report identifies the importance and prevalence of various talent planning activities among middle market firms – defined as companies with between $10 million and $1 billion in annual revenues. It also proposes a framework middle market businesses can adopt to ensure best practices in the areas of succession planning, staffing, development, talent review and performance management.
The report's findings were compiled from a study of 400 C-level middle market executives actively engaged in attracting and retaining talent for their organizations.
Firms Acknowledge Gaps in Talent Planning Strategies
Sixty-one percent of middle market firms rank talent planning among their top business priorities, with 11 percent stating that is the most important focal point in their overall business strategy. Still, more than 40 percent of middle market organizations give themselves a grade of "C" or lower for their talent planning efforts.
"While firms recognize the importance of talent planning, there is clear room for improvement in how they implement proper processes," said Thomas A. Stewart, executive director of the NCMM. "By undertaking more activities in specific areas—namely succession planning, identification of high potential employees and identification of skills gaps—companies are likely to realize the greatest improvements in their talent planning efforts."
The benefits of a robust talent planning strategy are evident. The fastest-growing middle market companies – those that enjoy annual revenue growth of 10 percent or more – are significantly more likely than slower-growing organizations to say they perform very or extremely well at key talent planning initiatives. These initiatives include identifying critical, "can't-lose" players within their organizations as well as engaging all levels of management in the talent planning process.
The ABLE Talent Planning Framework
The report outlines a framework through which middle market firms can bring more structure and robustness to their talent planning process. The elements of this framework are:
Align talent planning with strategy: More than two-thirds of firms believe that aligning talent planning with business strategy is important, but just 29 percent of firms do this. A higher number – 40 percent – of top performing companies align the two, however.
Build processes to enable successful talent planning: Succession planning was found to be one of the most important processes companies can implement. While a solid majority of companies say that the unexpected departure of a top-level leader would cause business disruption, only half are prepared for such an event.
Lead by example: Four out of ten middle market firms regularly hold meetings among top management to discuss talent. At high performing firms, senior leadership is more likely to be involved in these meetings.
Engage the organization: In organizations where employees are committed to talent management, nearly three-quarters of firms report that they handle talent issues well or extremely well. This compares to just 35 percent of firms where employees are merely compliant with processes.
The ABLE framework is designed to assist entire organizations in implementing talent planning activities – not just the HR function. While the ultimate responsibility for talent planning rests with the organization's HR director in about half of middle market companies, management also plays a role in the process. C-level executives take the reins of talent planning in 31 percent of firms, and many other organizations have business unit leaders, President/Vice Presidents or Owners/Principals driving the process.
Processes Often Dictated by Size of Company
Talent planning programs often manifest differently among firms of different sizes, and there is no singular approach that firms take regarding the formality of their program. Large middle market companies (those with annual revenues of $100 million to $1 billion) are divided in their talent planning processes, with 27 percent employing a highly-formalized process with written rules and guidelines and 25 percent using an informal, largely-undocumented process. Small firms (those with $10-$50 million in annual revenue) steer more toward the informal approach, with 31 percent documenting little or none of their talent planning strategy and only 17 percent employing a highly-formalized set of activities.
"Middle market firms that adopt more formalized approaches enjoy better talent planning overall – and it's no coincidence that the fastest-growing firms are more likely to implement a more robust set of talent planning activities," said Stewart. "Even smaller firms can adhere to the tenets of the ABLE framework to realize benefits in the way they plan and manage talent."
Identifying High-Potential Employees
Fifty-four percent of firms state that they use talent review meetings to identify high-potential employees; however, the report notes that evaluating performance is different from evaluating potential. As such, talent planning should focus not only on an individual's current output, but the potential for that individual to rise as a leader within the organization. What's more, different people measure potential in different ways. Perhaps for this reason, 55 percent of companies noted that they utilize an approach by committee to identify high potential employees.
About the US Middle Market
A major driving force in the United States economy, the middle market delivers above its own expectations year over year. Middle market companies—those with annual revenues between $10 million and $1 billion—provide roughly one third of the United States' total employment and GDP. As an individual market segment, it is comparable to the economies of Germany and Japan.
About the National Center for the Middle Market (NCMM)
The National Center for the Middle Market is a collaboration between The Ohio State University's Fisher College of Business, SunTrust Banks Inc., Cisco Systems, Inc., and Grant Thornton LLP. It exists for a single purpose: to ensure that the vitality and robustness of Middle Market companies are fully realized as fundamental to our nation's economic outlook and prosperity. The Center is the leading source of knowledge, leadership, and innovative research on the middle market economy, providing critical data analysis, insights, and perspectives for companies, policymakers, and other key stakeholders, to help accelerate growth, increase competitiveness and create jobs in this sector.
Housed at The Ohio State University's Fisher College of Business, the National Center for the Middle Market is the first center of its kind in the nation. The Center serves middle market firms, students, academic researchers, policy makers, the media and other key stakeholders with interests in the health and well-being of the middle market. The Center is fully committed to funding and distributing the most credible open-sourced research, dynamically creating new knowledge, providing programs that drive value for middle market companies, and offering a well-informed outlook on the health and future of the middle market via the Middle Market Indicator.
About Vistage Worldwide
Vistage Worldwide assembles and facilitates peer advisory groups for CEOs and Key Executives. An exclusive community of more than 21,000 business leaders across a broad array of industries in 16 countries, Vistage helps business leaders refine their instincts, improve their judgment, expand their perspectives and optimize decision making. In fact, CEOs who joined Vistage grew their companies at three times the rate of average U.S. companies. Vistage groups are facilitated by successful leaders, who help guide CEOs and Key Executives to work together to improve themselves, their companies and their communities. Learn more at vistage.com