I was reading the McKinsey Quarterly today and found a fascinating study by 3 principle consultants. It was a follow-up to the “War for Talent” research completed by McKinsey in 1997. McKinsey indicates that “…finding talented people [is] likely to be the single most important managerial preoccupation for the rest of this decade.” “People in this group see their professional careers as a series of two-to-three-year chapters and will readily switch jobs, so companies face the risk of high attrition if their expectations aren’t met.” To me, this is not surprising. Richard Florida, Penelope Trunk and many other experts have shown that Gen Y has a new set of requirements for personal fulfillment in our work life. The great news is that frontline business analysts like McKinsey are beginning to recognize this.

McKinsey mentions “To a considerable extent, executives must blame themselves for their current talent woes.” “Since investments in talent intangibles are expensed rather than capitalized, managers may try to raise short-term earnings by cutting discretionary expenditures on people development.” I think this shows some of the ties to Wall Street that can severely harm long-term corporate performance. High turnover hurts corporate performance but is tougher to quantify than direct training expenses. How do you quantify the cost of on the job training from year to year because your employees keep leaving?

Knowing this, executives can utilize this information and improve their respected organizations by potentially measuring their HR managers or line managers on talent retention (not only operating profit or jobs filled). My calculus professor once said "Assessment drives performance." Talent retention assessment could help include the focus on long-term performance in addition to quarterly or even monthly operating performance. Executives could also offer incentives for employees to move around within their current company if they choose to do so. The younger generation values career freedom, so while seemingly counter-intuitive, this could help increase profitability in the long term by decreasing employee turnover.

 

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