January 2014

Time for a moreholistic approach to talent risk

Global risk survey calls for a new take on talent management

2© 2014 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

About this research

Organizations are competing for talent on an unprecedented scale

In this context, how effectively are

organizations identifying talent risks to their current

and future business growth?

And how effectively are they mitigating against

talent risks?

KPMG International commissioned the

Brandon Hall Group to conduct a global study of

talent-related risks

1,200 Human Resources (HR), talent, learning and business executives

54 countries

Government and 15 different industries represented

Just over a quarter of respondents work in companies with 30,000+ employees

Series of qualitative interviews

5 Cs: Talent Risk Categories

4© 2014 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

The survey focused on five critical talent risk categories …

How concerned is your business?To what degree are you managing that concern?

Capability

Risks associated with building the skills an organizationneeds to compete now and in the future – the breadth anddepth of skills and capabilities present within a workforce,and how well aligned these are to an organization’s needs.

Capacity

Risks around the succession into critical roles and retentionof critical people and teams. In other words, will anorganization be able to create and maintain the size andshape of workforce needed to deliver its business plan?

Cost

What is the risk of a workforce becoming unaffordable?What will it cost an organization to recruit and retain thepeople it needs? Will it be able to afford the overall cost of its workforce?

Compliance

Risks relating to employee behavior, regulations andlaws. This category covers both the need to ensure talentprocesses comply with local laws and regulations, as wellas whether talent management is seen as a businesscritical process or an administrative process simply to ‘becomplied with.’

Connection

What is the risk of an organization’s top talent becomingdisengaged? In addition, will an organization’s talent-relatedprocesses remain sufficiently joined-up? Will it be able toshare talent between units in the way it needs to? Is it ableto connect groups of high potential people together? Areleaders able to create an emotional connection betweenhigh potentials and the business?

Key Findings: Capability & Capacity Risks

6© 2014 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

Global Talent Risk Profile

and

Highest Ranked

Capacity and Capability risks dominated both in terms of perception and mitigation of risk

Least likely to be ranked

Compliance talent risks was the most likely risk category to be listed as no risk at all by about 38% of the survey population

7© 2014 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

21%

18%

32%

20%

6% 3%

We do not have succession plans

Not at all effective, lists with no action

Somewhat effective, lists with regular action

Very effective, succession planning discussions

Extremely effective, actively work with succors

I don’t know

‘An insufficient pipeline of future leaders’ ranks as #1 talent risk and yet few organizations have effective succession planning in place...

Effectiveness of Succession Planning

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26% of organizations filled less than 25% of their Critical Roles with internal candidates

26%

22%20%

13%

10%

9%

Less than 25%

26% to 50%

51% to 75%

76% to 90&

More than 90%

I don’t know

Percentage of Critical Roles filled with Internal Candidates in last year

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8%

22%

35%

25%

7%4%

No strategic workforce planning

Basic approach

Simple approach

Detailed approach

Complex approach

I don't know

Respondents were not optimistic about their approach to strategic workforce planning ....

Approach to strategic workforce planning.

10© 2014 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

Big challenges for talent management

Organizations take a narrow view of talent management 1

2

3

■ There is a strong focus on the ‘traditional’ areas of talent management – capability and capacity

■ This is coupled with a relative lack of concern about connecting and engaging with talent as well as enabling and encouraging collaboration

Insufficient focus on total cost of workforce 2

■ There are a number of talent risks which appear in the list of top 10 risks identified but do not feature in the list of top 10 risks actively being managed:

■ Managers view performance management and talent review processes merely as something to comply with, rather than a business critical activity

■ Business leaders’ inability to engage with, motivate and nurture business critical talent

■ An insufficient budget for managing and developing talent

■ Maintaining employee engagement in the face of a less committed, more flexible workforce

Key Findings: Connection-related talent risks

12© 2014 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

A surprising lack of concern about connecting and engaging with talent…

No concern? The survey showed talent managers are relatively unconcerned about:

■ International mobility policies and processes making it difficult to transfer talent between countries

■ A lack of diversity in the workforce

■ Business leaders’ reluctance to share talent across the organization

■ Business leaders’ inability to engage with, motivate and nurture business critical talent

13© 2014 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

In addition, effort does not appear to be expended consistently in such a way as to address the top 10 risks identified…

Bottom of the list

Respondents ranked the risks of their ‘business leaders inability to engage with, motivate, and nurture business critical talent’ as a top ten critical risk – yet awarded it fell to almost the bottom of the list of risks that were least actively managed

33% Only 33 percent of respondents felt their business unit leaders were ‘incentivized to share talent across organizations for the benefit of the business and the talent – seemingly at odds with the inclusion of development, retention and several other risks within the top 10 risks.

and

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Talent Review Processes are also not used effectively as an engagement driver...

Do your organization’s formal talent review meetings result in development plans for which leaders take responsibility?

Key Findings: Cost-related talent risks

16© 2014 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

24%

38%

27%

11%

No

Yes, in a limited scope

Yes, extensively

I don’t know

Over 60% of organizations do not track total cost of workforce at all, or use it only in a limited scope...

Does your organization use 'Total Cost of Workforce' as a key metric?

What does this mean for Canadian companies?

18© 2014 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

What does this mean for Canadian companies?

■ Retention continues to be a key concern consistent with last year’s KPMG’s global survey – Canada rated this the #1 Challenge in the Rethinking Human Resources in Changing World Survey

■ Survey reports organizations are downplaying talent risks in the areas of connection, diversity and performance management

■ Lack of emphasis on “connection” is a concern given the nature of work today as well as the entry of younger generations into the workforce

■ In Canada, downplaying Diversity has increasing importance with the recent announcement from the Ontario Securities Commission requiring companies to annually publish a description of their diversity policies.   This new standard is the first of its kind in Canada and will likely be the catalyst for change in diversity in many organizations.

■ Cost as a driver/concern is best considered a more balanced view of talent needs and challenges

■ The survey points to a difference of opinion between HR and line Managers about talent needs and priorities

19© 2014 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

Hardwire talent risk into wider enterprise

risk management frameworks

Final Thoughts: Organizations must embrace a more holistic approach to talent management

Holistic Approach

20© 2014 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

Final Thoughts: Organizations must embrace a more holistic approach to talent management

Holistic Approach

Build a talent strategy based on an

understanding of what the organizations

needs to win in the future

Pause to consider whether all major

talent risks have been identified & prioritized – does the business

agree?

Work with leadership to connect and

engage with talent across the

organization

Embed strategic & holistic talent planning into

business planning – it’s not a standalone

exercise

Seek to understand and track the total

cost of workforce

Evaluate talent-related decisions

for return on investment

Hardwire talent risk into wider enterprise

risk management frameworks

Contact KPMG in Canada to continue the conversation

www.kpmg.ca/talentrisk

Visit us at kpmg.ca/talentrisk

kpmg.com/socialmedia

© 2014 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

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The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.