Ouch! McKinsey Survey Says HR Can't Manage Talent

Realigning the HR function to manage talent
Although McKinsey surveys show that business leaders around the world are deeply concerned about the intensifying competition for talent, few companies make it an integral part of a long-term business strategy, and many even try to raise their short-term earnings by cutting talent-development expenditures. Other factors compound the difficulties of recruiting enough appropriate talent: minimal collaboration and talent sharing among business units, ineffective line management, and confusion about the role of HR, not to mention challenges such as Generation Y employees seeking greater work/life balance, expansion into global markets, and the specific needs of the fast-growing category of knowledge workers.

The exhibit below focuses on another problem: the declining influence of the human-resources function. Yet only HR can translate a company’s business strategy into a detailed talent strategy. HR professionals should assert their influence and provide credible and proactive business counsel and support for individual business units.

To find out more about how companies can bolster the HR function and successfully recruit and manage employees, read “Making talent a strategic priority” (January 2008).

"The HR department’s declining impact and the dearth of talented people willing to serve there haven’t helped at all. McKinsey’s global organization structure database and work by the Saratoga Institute separately found that less than two-thirds of all HR directors report directly to the CEO. Recent UK salary surveys show that senior sales, finance, marketing, and IT managers earn up to 50 percent more than their HR counterparts. Our research confirms the idea that HR’s influence is declining. The executives we interviewed criticized HR professionals for lacking business knowledge, observing that many of them worked in a narrow administrative way rather than addressing long-term issues such as talent strategy and workforce planning (Exhibit 3). As one HR director explained, senior executives “don’t see us as having business knowledge to provide any valuable insights. We’re doing many things based on requests, and they don’t see HR as a profession.

Bolster HR
Ten years ago, HR specialists were preoccupied largely with formulating and managing standard processes—notably, recruitment, training, compensation, and performance management. We believed then, as we do now, that human resources should assert its influence over business strategy and provide credible and proactive counsel and support for the chiefs and line managers of individual business units. Only HR can translate a business strategy into a detailed talent strategy: for instance, how many people does the company need in order to execute its business strategy, where does it need them, and what skills should they have?"