Evidence shareholders are being short-changed by traditional board composition is mounting with every research report linking the participation of women in senior management and on boards to positive business outcomes.  In Canada, diversity is being given an extra push by the Ontario Securities Commission’s ‘comply or explain’ policy.  Companies will need to publicly release information about how they are promoting and actively managing gender diversity.  Board diversity is more than just about rectifying bad optics.  It is about getting the best talent around the table.  To do that will require more than good, heartfelt intent, which I believe we have a lot of in corporate Canada.  Underlying the existing board composition patterns are a set of beliefs and attitudes that drive board recruitment and selection decisions.  To change the outcome requires some fundamental shifts in how we think about and recruit board members. 

Board Recruitment Attitudes and Practices Help Maintain the Status Quo

Historically, board members have been drawn from the pool of retired CEOs, COOs and CFOs with experience in a similar or related industry and often with a connection to one or more influential members of the board.  Board recruitment was, and in many cases still is, informal and personal.  The introduction of recruiters to the process has broadened the search, but the ideal candidate profile has remained relatively consistent.  The traditional recruitment model poses a number of challenges when the goal is to diversify.

1. To identify diverse candidates, boards will need to reach beyond their existing networks.  Last month my not-for-profit board launched our 2015 recruitment strategy.  We asked current board members to identify potential candidates from amongst our networks.  This is a strategy most organizations employ.  When existing directors don’t have a strong network of diverse candidates, the recruitment process stalls.  The ‘lack of awareness of potential diverse candidates’ and ‘belief there are not enough diverse candidates’ have been identified as two of the top 3 obstacles to increasing board diversity (Spencer Stuart, 2013).  It turns out directors know potential candidates just like them, but not so many who are not like them.  To be successful in achieving diversity, boards will need to re-think their recruitment strategy.
2. Expanding and diversifying board candidate criteria would significantly increase the pool of director candidates.  As long as director talent pools are defined in a way that excludes a majority of women and minorities, diversity goals will be difficult to achieve. The number of women and other under-represented groups who have been CEOs or COOs in any industry is minuscule.  A recent study of 3000 global companies found a mere 3.9% of current CEOs and 8.5% of business unit heads are women (Credit Suisse, 2014).  As long as CEO or operating experience remains a key criterion for board selection, the pool of potential female candidates will be breathtakingly small and continue to reinforce the belief there are no qualified women.   
3. Board directors need to value broader, more diverse expertise.  One solution to the board diversity dilemma is to broaden the kind of background and expertise boards typically seek.  For example, expanding the candidate talent pool to include those who have served in any senior executive role would increase the number of female candidates by 400%.  The global Credit Suisse study reports 17.5% of top finance and strategy roles and 19% of top legal/HR/marketing/administrative jobs are held by women.  But to make this recruitment strategy work will require a fundamental shift in attitudes at the board table around the value of different kinds of expertise.  While 93% of board members rate financial expertise and 68% rate operational experience as ‘very important’ only 22% rate HR or legal expertise in the same way (PwC, 2014).  For diversity initiatives to take hold, sitting directors will need to re-think the value they place on the types of background and expertise they need around the board table.  

 
Diversity as a Strategy to Build Talent on the Board

Increasing diversity is more than just good PR.  It helps boards and organizations better address key business and governance issues.  There is tremendous breadth and increasing complexity in the issues facing organizations today.  For example, according to Deloitte, the top board concerns for 2014 included: enterprise risk management, executive compensation, corporate strategy, shareholder activism and sustainability.  The Conference Board (2014) identified the top five challenges for CEOs as: human capital, customer relationships, innovation, operational excellence and corporate brand and reputation.  While former CEOs will continue to form the nucleus of corporate governance, boards made up of members who bring deep and diverse expertise are probably better equipped to help organizations anticipate, tackle and solve their most pressing problems.  Diverse boards bring a more comprehensive collective view, are more attuned to risks and opportunities, and are in a better position to provide guidance and oversight to the organization.  When talented people across multiple domains with diverse experience and perspective come together in the pursuit a common objective, good things can happen. 

Sources
Spencer Stuart Board Index.  Spencer Stuart, 2013.
Governance Trends Shaping the Board of the Future: Board Performance and Diversity.  Annual Corporate Directors Survey, PwC, 2014.
The CS Gender 3000: Women in Senior Management.  Credit Suisse, 2014.
Deloitte Center for Corporate Governance, 2014.  www.corpgov.deloitte.com/site/us/board-governance/.
The Conference Board CEO Challenge® 2014: People and Performance.  Conference Board of Canada, 2014.

“Find us someone who will be ready for a VP job in 12-18 months but who is prepared to come in and prove it.”  Those in the recruitment business will recognize this request as a growing trend.  As demographics kick in and retirements loom, organizations find themselves with talent holes and a lack of ideal internal candidates to fill them.  Asking recruiters to find and secure high potential talent willing to make a job change on the possibility of bigger things to come is certainly ambitious.  And unlikely to be successful as a talent building strategy.

Why recruiting high potential talent works better in theory than in practice

When organizations have the opportunity to go outside for talent, they take it very seriously.  The goal is, always, not only to attract the best possible candidate for a role but to increase the talent pool.  Then reality sets in:

1. The odds of finding a needle in a haystack.  What are the odds of finding a future star at exactly the right moment, for the right job, with the right culture fit, for a manager who will inspire them, who is willing to relocate companies/cities/countries for the compensation you are willing to offer to work for you?  You have to get awfully lucky.  And the more senior the role, the smaller the pool, the lower the odds.  More than likely, by the time you’ve checked all the boxes, you have hired a very capable individual and left your search for the elusive high potential talent for another day.
2. Recruiters source candidates with experience, not potential.  Sitting in the HR executive chair gave me an immense respect for the work search professionals do.  But they are fundamentally set up to identify and validate past experience, not future potential. 
3. Highly talented people are rarely out looking for new opportunities and if they are, they are probably getting better offers.  The high potential leader is very fussy.  She probably has a short-list of companies and roles she wants to pursue.  Unless your organization is a leader in its space, can guarantee ongoing career growth and provide an inspiring environment, boss and management team, you are probably not on her short-list.  Top-tier talent want to work for top-tier organizations with other top-tier talent.  My 20-something nephew graduated top of his class with several notable professional awards under his belt and was recruited by his dream company to do his dream job for less money than he was currently making.  He took it, packed up his car, and headed east.  Unless you are someone’s dream company offering their dream job, successfully recruiting high potential talent as a way to bolster your pipeline is a tough proposition. 
4. Success is contextual.  People are not successful in a vacuum.  It is often difficult to know how much of someone’s previous success has been tied to the environment and context.  Whether they will be able to transfer their capability and potential to a new setting is unknown.  For an interesting look at this phenomenon, see The Risky Business of Hiring Stars (Harvard Business Review, May, 2004).

Strategies to increase your odds of success

For many organizations, the necessity of using external recruitment to bolster the talent pipeline is a reality.  Here are a couple of suggestions to make this a more successful endeavour.

1. Target aggressive and proactive talent recruitment at lower levels and focus on retention at upper levels.  The earlier you can recruit talent, the better your odds of finding and getting them - the numbers are working in your favour and some of the hooks that grab and hold high potential talent haven’t yet been established. 
2. Introduce the ‘special projects’ role.  It is a mystery to me why organizations don’t simply hire talented people when they bump into them, regardless of whether they have anywhere logical to put them.  Every department has more on its plate than it has the resources to accomplish.  Consider establishing a special projects role and using it to place new recruits and untested talent.  Imagine what your life would be like if, every time there was a vacancy, you had a high potential you knew and had nurtured you could slip into the role.  
3. Make talent scouting a leadership expectation.  The best candidates don’t come from the recruiters.  They come from your own leaders who are out interacting with customers, suppliers, competitors and other stakeholders.  They are also the best people to be out there selling your company’s value proposition. What are you doing to ensure leaders are actively scanning, identifying and hiring talent? 
4. Hire or retain a professional talent scout.  There is a reason hockey scouts travel around the country, sit in arenas, and watch kids grow up and play.  Many companies are making the move toward supplementing external recruiters with internal recruiters.  Social media has significantly eased the task of finding and phoning talent.  But rather than simply focus on filling existing vacancies, this function should be proactively scanning the environment for potential talent and actively recruiting them well before they are in demand.  
5. Make data-driven decisions.  Hiring is always a gamble.  However, there are very sophisticated assessment tools and strategies designed to help you understand, identify and predict potential.   Building these into your recruitment process will significantly increase your ability to pick a rising star who can operate effectively in your organization.

Stay tuned for my next article Talent on Board: How Traditional Board Recruitment Practices Help to Maintain the Status Quo.

Sources
The Risky Business of Hiring Stars (Harvard Business Review, May, 2004).

In the last issue of The Talent Blog, I talked about how and why organizations with more diverse workforces will have more robust talent pipelines.  In this issue, I look at the second of three organizational habits that sabotage the talent agenda: the retention problem.

Organizational Sabotage: Things Organizations Do That Keep Them on the Talent Treadmill

One organization I know looked back at what happened to their cadre of senior leaders identified as high potential - specifically, those ‘ready for a promotion within 2 years’.  They found 40% had actually been promoted in the last 3 years.  Unfortunately, 58% of those promoted were in more senior roles in other organizations.  In other words, they did a fair job identifying potential and a lousy job retaining it.  And I don’t think their experience was unique.  

Why you have to retain talent

The reality is, many organizations do a pretty good job of recognizing talent but are less successful in retaining it.  Since everyone is on the hunt for these elusive resources, if you don’t pay attention they will slip out from under you.  Per employee, talent management is an expensive proposition.  If you regularly lose 40-50% of those you have already identified as promotable leaders, you are playing an extreme game of ‘catch up’.  

Over time, talent will naturally drift to organizations with the best value proposition.  And while ‘exchanging’ talent with other organizations may not be the worst thing ever,  it is a very expensive way to bolster your pipeline.  The only people who win that particular game are the recruitment firms.  Solution?  Get serious about hanging onto your talent.

What is at the root of talent drift?

A lot has been written about high potential talent over the years.  Let me summarize, very briefly.  High potentials are defined by two very different predictors of success: past performance and future potential.  A high potential leader is someone who outperforms his or her peer group and possesses the ability, motivation and commitment to perform at the next level (Corporate Leadership Council, 2007).  You measure these two dimensions very differently.  One is relatively straightforward - look back at what they have delivered and compare it to peers with similar tenure and goals.  Predicting future potential is the tricky bit, and we’re not always going to get this exactly right.  So what are we looking for?  

Defining characteristics of high potentials are, in a nutshell: an over-developed drive to excel, a keen ability to rapidly and proactively translate new learning into tangible action, an ‘enterprising spirit’, and an innate sense of timing (Ready, Conger & Hill, 2012).  This article isn’t about how to identify talent; it’s about how to keep it when you think you’ve found it.  Can understanding what drives away  high potentials help us retain them?  Looking at their defining characteristics provides some insight.  

1. Boredom.  No matter how interesting something is at the start, jobs become routine.  Talented people get bored.  If you want to keep them, you have to mix things up.  Appeal to their drive to excel by setting different or more challenging goals or tap into their capacity for learning and risk-taking by adding accountability in an area new to them.
2. Having ideas and innovations suppressed.  Talented people often see things others don’t and are energized when they are given the opportunity to translate ideas and insights into tangible actions and results.  When they aren’t allowed to do that consistently, their commitment flags and they will look for more fertile pastures. 
3. Lack of perceived opportunity.  If you let your high potentials sit around wondering when they will get a kick at the next can, they will probably leave to kick someone else’s.  These are individuals who need to feel progress at a pace that aligns with their internal sense of readiness.  One of the reasons high potentials are successful is because they seem to have a sixth-sense about what they are ready for, and when.  Their timing might not jive with yours.  And there is a very good probability that you may be wrong and they may be right.  Organizations were not designed for high potentials - with modest, logical and step-wise progressions every 3-5 years spiced up by the occasional professional development course - they were designed for the rest of us mere mortals.  To keep your high potentials, you are going to have to take some risks with them.
4. Left to fail without a recovery plan.  You don’t send a manned rocket to the moon without a plan to get the the astronauts home.  The probability that high potentials will struggle and sometimes fail is higher than average.  That is the consequence of being compelled to aim high, take risks, and push against the status quo.  When you put them in ‘growth opportunities’ to test and develop them, the potential for failure increases.  High potentials won’t always get it right.  And human nature being what it is, there will be lots of people standing on the sidelines watching and hoping they will fail.  Instead of quickly providing them with an opportunity to recover, they can be left to flail away or sit on the sidelines waiting for their high potential status to be debated at the next talent review.  High potentials know when to cut their losses.  If you don’t help and support them do that, they will find a way to do it for themselves.  
5. Thinking its all about the money.  Organizations often equate money with retention and it is certainly one of the easier motivational threads to pull.  Using compensation as a way to communicate you value employees can be helpful, particularly when growth opportunities aren’t immediately or easily available.  But it has its limits.  Most high potentials do not list compensation among their key motivators.  So while you can use it as a proxy to tap into their real motivators for a while, you will need to deliver the goods sooner rather than later.

When demand is great and a resource is in short supply, we need to think carefully about how we nurture and protect it.  If the optimistic odds are one high potential per 10 employees, every time we lose one we need a generate a pool of 10 to replace him or her.  Or you can steal one from someone else.  In my next article I will talk about how and why recruitment as a talent building strategy is a lose-lose proposition.

Stay tuned for the next Talent Blog issue on this topic: the recruitment problem.

Sources
Realizing the Full Potential of Rising Talent: Understanding the Identification and Development of High-Potential Employees. Corporate Leadership Council, 2007. 

Are You a High Potential?  Douglas A. Ready, Jay A. Conger, and Linda A. Hill, Harvard Business Review, June, 2010.

A couple of days ago my dad was updating me on what he is up to.  For some time he has been active in his local chapter of a political organization and was just named chair of the candidate nominating committee.  And since two of the candidates are current board members and must step down, he was recruited to re-join the board as vice-president.  My father is 81.  I recount this story to highlight what we are experiencing in every organization and corner of society - a dearth of talent rising through the ranks.  My father, at 81, is healthy, quick-witted, competent, organized, diligent, committed and passionate.  He will do an excellent job, which is why his colleagues sought him out.  But where are the 60-somethings who are going to step in behind him?

Despite huge investments in identifying, hiring, developing and managing talent, most organizations are not jumping up and down complaining they are awash in it.  To the contrary, ‘talent’ consistently lands on the top 5 list of issues facing most organizations.  By all accounts, we don’t seem to be making much headway in slaying the talent dragon.  As one recent survey reports, while 60% of organizations report increased talent investment, less than 25% say their efforts are effective (Mercer, 2013).  The critical question is: are we, by continuing to invest in talent management programs and initiatives, simply throwing good money after bad?

I won’t claim to have all the insights or answers to this question.  But after 20 years working with and for organizations on the talent dilemma, I have a few observations.  The purpose of the the Strategic Talent Advisors blog series is to be constructively provocative.  I believe there is a lack of honest dialogue and intellectual rigour in many of our debates on complex organizational issues.  I look forward to hearing your thoughts, reactions and ideas on these issues as well. 

Organizational Sabotage: Things Organizations Do That Keep Them on the Talent Treadmill

Some organizations have a reputation as talent engines: GE at its peak is an example of a company with a reputation for attracting the best talent, developing talent to a high standard, and regularly pruning its branches to make room for more talent.  Fostering talent was a conscious decision on its part.  Organizations are failing to win the talent game, in part, as a direct consequence of their intentions, decisions, and actions.  Over the next few blog postings I will offer up what I see are some key contributors to talent-building failure and how they might be addressed.  Here I look at the first of three organizational habits that sabotage the talent agenda: the diversity problem.

Shrinking the talent pool by limiting diversity

Let’s set aside research suggesting diversity leads to a wide range of positive outcomes and drive it down to a pure numbers game with a little help from our Statistics 101 course.  For the sake of simplicity, let’s say there are 2 equally sized pools in the world from which you can fish for talent - the red pool and the blue pool.  The law of averages kicks in: all things being equal, the number of ‘talented’ fish will be the same in the red pool as the blue pool.  If you only fish from the red pool, you have the opportunity to catch all the talent from that pool.  But you will miss the opportunity to catch talent from the blue pool.  By fishing equally from both pools, you double the number of talented fish you can catch.  The normal distribution curve sets limits on the percentage of a population that is ‘exceptional’ on a trait at <10% of any pool.  So trying to get more absolute talent by increasing the number of fish you extract from the red pool won’t solve your problem.  The top 20% of the red pool will not be as “talented” as the top 10% of the red pool + the top 10% of the blue pool combined. 

This argument holds with human talent, and can be applied to any subset of the population.  In general, nature does not discriminate in awarding traits - the percentage of those in the population who possess inherent talent for leadership is the same regardless of subgroup (ie, men, women, aboriginals, people with disabilities, visible minorities, etc.).  If you are doing most of your fishing from one pool, you are setting artificial limits on supply and you will never win the war for talent.  It is hard to imagine another situation where a business would limit its search for an optimized solution.  For example, when an organization looks to borrow money, does it limit its search to three of the big banks or does it scour the market for the cheapest and most flexible source of capital?  The selection and management of human talent is probably one of the least strategic and most idiosyncratic efforts an organization undertakes.

We often apply the diversity argument to advocate for change in situations where women or visible minorities are under-represented.  But organizations and teams over-represented by women or minorities suffer the same fate - a smaller pool of potential leaders.  The only way you can maximize your talent is by maximizing the diversity of your pool.

Winning the war for talent by breaking with the status quo

Intentionally tapping into and leveraging diversity is one way to make significant gains in increasing the availability of talent in your organization.  And I’m not talking about the broad, newly-trendy definition of diversity as encompassing all potential points of difference between people (ie, thinking style, life experience, leadership approach).  I’m talking about the hard-core categories of human demographics (gender, age, ethnicity, etc.) that, statistically-speaking, have the highest probability of presenting you with more top-quartile talent to choose from. 

Strategies for success

Some organizations are well down the path in recognizing the strategic opportunity and competitive advantage diversity brings in the war for talent; for others, it is a work in process.  And it is not easy - if it were, we would not be struggling so hard with this issue across so many domains.  Many people much smarter than I am on this topic have addressed it at length and developed strong recommendations and solutions for enhancing diversity.  I have three suggestions for tackling this issue in the context of building the talent pipeline.

1. Have clarity of purpose.  Driving for diversity without a clear and compelling rationale around why leads to insipid efforts and lacklustre results.  If you feel the pain around not having enough pure talent somewhere in your organization, take a look at your demographic make-up to assess whether your pipeline is constrained or optimized.  Do you have the opportunity to increase the amount and quality of your talent by fishing from more pools?  It is okay to say you are hell-bent on diversity because you want to surround yourself with the best talent. 
2. Resist the siren call of ‘diversity in all its forms’.  As someone who stands out as a little bit ‘different’ (or so I am regularly told!), I am all for embracing diversity in its many and various forms.  But in an effort to be inclusive, when we broaden the definition of diversity too much we risk watering down its power as a talent-building strategy.  If the goal and purpose is to increase the pure talent of an organization, focus on demographics.  More expansive ways of measuring diversity are better utilized as part of a talent deployment strategy once you have the most capable teams at your disposal. 
3. Embrace monitoring and accountability.  As a society we tend to resist other people telling us what to do.  It is funny that ‘quota’ is a good thing when you are talking about maximizing sales but a bad thing when you are talking about maximizing diversity.  Establishing expectations, measuring progress and monitoring results have a long track record of success in shifting workplace demographics at all levels in organizations, from the sales floor to the board room.  I am not advocating for external bodies imposing standards.  But I would advocate for organizations setting their own standards and holding themselves accountable.  The board has a powerful role to play in helping diversity initiatives succeed - setting expectations, overseeing strategies, monitoring progress and celebrating success.   

Stay tuned for the next Talent Blog issue on this topic: the retention problem.

Sources
Talent Barometer Survey.  Mercer, 2013. 

Inspiration
My dad, who taught me to stand up for what I believe no matter what other people think, and for proving you are never too old to lead.