A Message from the Managing Director

This edition of our newsletter endeavors to address one of the issues currently vexing the global resources industry - that of the scarcity of talented staff.

Whilst the industry catch cry is “sustainability”, only a few organisations accept that sustainability starts with people. Addressing the people issue successfully is a key and complex component of sustainability, a term that can equally be applied to projects, operations and/ or companies.

We argue that decision makers can no longer look at the quest for people in isolation and to both attract and retain good staff at all levels of an organisation now takes as much ingenuity as does the building of, or running of, large complex projects critical in the quest to attract, manage and retain  talented people.

This newsletter draws on the experience of three global practitioners who work closely with the Swann Group; Peter McCarthy, Managing Partner of AMC Consultants, Paul Pittman, Managing Director of The Human Well and Simon Hare, Principal, The HaRe Group.  It outlines just a few factors that are critical in the quest to attract, manage and retain talented people.

John Murray
Managing Director.

In a recent AusIMM Bulletin, the results of a survey of its members identified the shortage of skilled professionals as the most critical issue for our industry. Maintaining a balance between work and home life was the single most important factor in choosing a job. Put these results together with another piece of information, the history of unemployment in Australia, and an interesting conclusion can be drawn.

After World War Two, unemployment hovered around 2% until it suddenly shot up through 5% in 1975 and then peaked around 10.5% in 1994. Since then it has fallen steadily year by year, passing back through 5% in 2005 and with a current forecast for further decline toward historically low levels. If full employment is defined as 5% unemployment, as widely accepted, then we went from a seller’s market for labour in 1975 to a buyer’s market, and have just returned to a seller’s market.

What employment conditions might develop to attract professionals in a seller’s market? After I joined the minerals industry as a cadet engineer in 1969 the following conditions applied:

o I could live five minutes from the mine and work a five-day week.
o Working hours were 8am to 4pm, with an hour off for lunch, but I could take up to six hour special leave each week to attend university lectures.
o I was told and I believe, that I was one of the highest paid 17 year olds in Australia. My employer paid my university fees
o I could expect a low rent house after graduation.
o When I took an interest in flying, my employer awarded me a scholarship, which paid half the cost of  my training.
o After three years I was sent on a one-month course of bushwalking, kayaking and mountain climbing on full pay and was not required to take any leave for this.
o I contrast these conditions with the demands placed on young professionals today, particularly those on fly-in fly-out rosters and 12-hour shifts. In the new world of a seller’s market for labour there will be no alternative but to make employment conditions more attractive.

Peter McCarthy—Managing Director,
AMC Consultants

THE HUMAN WELL

Almost since work began to be organised employers have adopted approaches to reward based on principles of egalitarianism. One size fits all … no longer! Employers are going to have to change as the effects of the acute talent shortage facing all industries begin to bite.

In its efforts to retain talent employers will quickly come to terms with its two missions; firstly, to stop the baby boomers heading for the exit sign and secondly, to try and attract and retain the ‘next’ generation.

Why is this going to be so problematic?

At the top of the hour glass years of accumulated wisdom and knowledge are about to retire prompted by early retirement features and defined benefit incentives developed by employers in a different time. Now the boomer generation is about to cash in on these promises. The Economist recently quoted that 50% of the S&P’s top management will retire in the next 5 years.

Where will the talent come from to replace this drain?

Since the mid-nineties, recruitment has been selective as organisations reshaped and retooled to face the competitive challenge of globalisation. Consequently, many organisations complain about the lack of a centre to their talent pools!

The generational effect has meant that many of those coming up to retirement continue to be extraordinarily productive and will continue to work.

Employers will need to be creative to ensure that this wisdom does not join the competition. Look for new offerings such as reverse sabbaticals, pension or health care enhancements and tapping into that wisdom through coaching and mentoring programs for younger leaders to lure boomers back to the work place.

At the bottom of the hour glass is a new breed of talent for whom loyalty will not exist. Traditional reward programs including long term incentives and defined benefits just won’t cut it. A much shorter orientation toward work will become the norm. Expect limited time contracts rather than open ended offers of employment to accommodate other life style needs.

Expect too, that searches will take longer and cost more. The brightest stars will have multiple offers and quite probably a talent agent to help prioritise them – a new profession that has already begun to emerge in Silicon Valley.

The traditional succession planning process should be abandoned (or handed off to risk management!) and a robust career and development process put in its place.  Any hope that employers have of retaining key contributors will depend upon the potential for new skills and competencies.

Fit will be critical. Not only because of the higher costs of search but because of the limited supply of alternatives. Employers will have to have rigorous assessment and integration programs.

If this were not enough, employers will continue to need knowledge about doing business abroad in order to compete globally. This cannot be acquired through business travel alone. Assignments will be even more critical than today. Some at the top of the hourglass may want the experience but this doesn’t help the accumulation of organisational knowledge. At the bottom the cache of travel will not exist as it did with previous generations. The next generation values community and safe environment, with children raised in support structures that can accommodate two careers.

The numbers speak for themselves. The available working populations in developed countries are projected to drop by an average of 10%. India and China cannot produce enough talent internally to fund their growth and have begun to entice back nationals from the West. Singapore (in addition to Singapore’s companies) is actively recruiting external talent. Expect Australia and Canada to do the same. Some estimates (Management Review Magazine) project this shortage to last 50 years.

Welcome to the hour glass that never runs out!

Paul Pittman
Practice Director,
Consulting
Services,
The Swann Group
& Founder
The Human Well

REMUNERATION STRATEGIES 

Too many employers agree that remuneration planning  is a  necessary evil.  The cost of employment is now so great that it must not be neglected, but making tough decisions about pay reviews can be stressful for executives who need to keep their best employees engaged.  
 

The issues that tend to weigh heavily on executives usually include:

• The egalitarian relationships they often have with the employees they manage;
• Inadequate performance planning:
  E.G. poor definition of business goals, or few meaningful objectives, giving employees feedback on their work and assessing their contributions;
• Deciding individual pay increases that reflect each employee’s overall performance;
• A limited budget for pay increases. 

1. The importance that remuneration management should have in engaging talented people;

2. The extent to which corporate, team or individual incentive should dominate total remuneration; 

3. External pay relativities and how the organisation should align its remuneration levels to market sector rates

4. Internal pay relativities and how the organisation should delineate job families and work value in each family; 

5. The degree to which remuneration levels should reflect variations in employee performance and experience.

A Reward Strategy should address all five factors.  This Strategy should always be aligned to an organisation’s dominant business style and preferred organisation culture. 

Execution of a Reward Strategy requires an approach that integrates all “base package” elements of the Strategy.

Remuneration planning should:

o Establish a Market Alliance Policy that defines remuneration targets for expected performance;
o Delineate benchmark positions that will fairly represent clusters of like jobs;
o Capture and analyse market sector pay rates that match the benchmark positions;
o Accommodate the performance of the least experienced (still developing) employees, up to the most capable (best performing) employees;
o Develop ranges around each pay target to reflect these performance differentials;
o Calculate individual pay increases based on performance and current pay position in the remuneration range. 

Where employers have a robust and well communicated Reward Strategy and  a consultant approach remuneration planning system, the stresses of remuneration reviews would be minimised and talent retention would generally improve. 

Of course, performance management will always be a major priority for employers.  While some executives may still be reluctant to judge employee performance within an egalitarian workforce, our RPS will promote greater confidence in making  objective pay decisions.

Simon Hare  - Managing Director, HaRe Group 

SWANN DIRECTION FOR 2007

Whilst neither the author nor the contributors claim to have all the answers to this conundrum, we do believe that both individually and collectively we can offer some solutions to people sustainability.

The executive search arm of the Swann Group enters a new era in 2007. With rapid changes within the company, the team is set  and enthused to continue Swann’s sustainability.

The company has opened its North American office to complement our Beijing, Shanghai and London offices (Practices). The North American Practice is run by Lorraine Meldrum who has recently been joined by Paul Pittman—a contributor to this newsletter.

The Human Well, of which Paul Pittman is the founding partner, offers clients competitive differentiation leading to superior business performance using the proprietary methodology Resourceful Performance.

In 2007 The Swann  Group and the Human Well formed a partnership. The inclusion of the Human Well for Swann signifies the opportunity to introduce  an integrated offering between two organisations that share common values and a commitment to creating value people within business.

FOR MORE INFORMATION VISIT THE SWANN WEBSITE:         http://www.swannglobal.com/