A View from an Executive Search Firm “Talent Is the Name of the Game”

By Tom Nelson

Jun. 1, 2004

Hal Johnson has a view from the inside. As an executive-search consultant from the recruiting firm Heidrick & Struggles International, he confers with companies searching for CEOs, senior vice presidents and other human resources leaders.

    Johnson, who maintains offices in Denver and New York, is the practice managing partner of the Chief Human Resources Officer practice of Heidrick & Struggles. Prior to heading executive searches, he spent 18 years in senior human resources positions at INA Corp. (which includes CIGNA Corp.), Federated Department Stores Inc. and the Travelers Cos.

    Workforce Management recently asked him for his take on the state of human resources.

How is workforce management perceived by CEOs?
    I don’t like “workforce” as a term. It’s not a workforce issue as much as a talent-management issue–how can we find, retain, grow and reward talent? Most CEOs want human resources to focus on those issues and build human resources plans, programs and vision around talent.

How are sophisticated companies different from the companies that aren’t so progressive?
    When companies come to us, there is a fairly substantial hole to be filled. If it is necessary for them to do a search, it’s because of some new or unplanned activity of the company or, most often, it’s because they don’t have great people on the bench to ensure internal succession.

    Since CEOs are waking up to the implications of this “war for talent,” it is no surprise that they are reaching out to executives at Pepsi and GE to lead their talent initiatives. Of the top 200 human resources jobs, at the largest employers in the country, 30 to 35 are held by a human resources executive who has come out of Pepsi. Pepsi people know how to grow talent.

    A lot of old-time human resources organizations have been focused on the classic old-time “human resources stuff”–comp, benefits, labor, keeping the union out, getting people paid, worrying about this year’s merit budget. Pepsi and GE have always focused the human resources people on talent. You focus everything you do in human resources on attracting, growing and retaining talent. For example, that changes the compensation job. The classic compensation person worries about this year’s merit budget and distributing performance appraisals. The new-breed compensation person says, “How are we going to change organizational behavior with compensation, and what does that do to grow and retain the talent that we have in the company?” [Those are] very different kinds of jobs.

A few companies have great reputations, some have good reputations, but most have just muddled through.

    Sophisticated companies, led by sophisticated CEOs, attract sophisticated human resources leaders who can help the company grow. If you don’t focus everything you do on growing and keeping the best talent in your business, you will lose the war [for talent].

Do some companies have “good” reputations as being progressive in workforce management and others have “bad” reputations?
    A few companies have great reputations, some have good reputations, but most have just muddled through. By that I mean they’ve paid lip service to the question of differentiating performance, differentiating compensation based on performance, differentiating rewards based on performance and leadership, as opposed to aggressively doing whatever they have to do to attract and retain talent. The non-imaginative companies have sort of one-size-fits-all programs and activities designed to keep order in the company, as opposed to those that ferret out, reward and retain the best talent in the company. And those are very different approaches: one’s passive, the other’s aggressive.

    A company can be perceived as having a good reputation because of the quality of the management and what that management does. Look at GE. They’re four deep at every senior leadership position in the company, and they’ve been working like that for 20 years. The CEO spends two weeks a month on the issue of people, succession and leadership. As a result, GE’s performance is superior. Any company regarded as a high-performance company has generally got a high-performance human resources organization.

Are companies–when doing CEO searches–more and more looking for people with workforce-management experience, or who have a special interest or viewpoint about talent?
    Talent is the name of the game. Companies want to see what [the prospective CEO] has done. What have they built? What is the quality of groups and teams and organizations left behind? Boards want leaders who can recognize, grow and retain talent.

    There is a growing awareness that it’s the quality of management teams that makes companies great. If I’m filling a new CEO job and I’m on the board, I want to know what this person has done in the last two or three jobs. Has he or she built great teams? What have they accomplished? What have they done? What did they inherit? What did they change? That’s what I’m looking for in a CEO. Most people aren’t hiring CEOs to maintain. They want to grow. They want something different or they want to change the direction of the company or change the mix of the company.

A senior VP of human resources at The Limited, Len Schlesinger, went from senior human resources to an even higher position: vice chairman and chief operating officer. Is this a sign of things to come–human resources professionals recruited to other departments?
    No, this is not a major trend. Hiring human resources people from the line has been done, and it has not been done successfully in most areas. Generally, line people have not been exposed to the science of managing talent, change, vision and values, creation, etc.

There are exceptions. Schlesinger has done a good job. He’s a very strong guy. He was uniquely positioned because he was keyed in as a member of the board of directors. He spent two or three years on the board. He was an adviser, an observer and confidant of the management of the company on the direction of the company. He had a unique, personal, deep experience with the company. He is a very big-picture human resources guy; he doesn’t spend a lot of time worrying about the small stuff.

Are there still sectors of the economy–utilities, perhaps–that really haven’t kept up with the Joneses when it comes to workforce management?
    Historically, there have been sector differences. Utilities have been thought of as stodgy and not very imaginative. With deregulation, all of a sudden they have to think of themselves as marketing companies, market-share companies, advertisers, marketers–they have to get the product to market in a whole different way.

    It’s had an enormous impact on the culture, values and pace of those kinds of companies. And in the better companies, human resources has played a significant role in leading those kinds of changes. A power company in Omaha can be selling power in New England, in a competitive environment, as opposed to a public-utility environment. That is a very dramatic change.

What makes a great human resources leader?
    He/she has to be a businessperson first who understands people and human/organizational behavior. But first he/she has to be a businessperson, coupled with–not secondarily–but coupled with an understanding of human behavior and organizational behavior, and of how workforces are motivated and driven. Just doing “personnel stuff” is a recipe for failure…. Everything you do should be in the context of building, keeping and retaining great talent, and if you’re not doing it on that basis, it’s probably not worth doing.

    Building a day-care center is a wonderful idea, but doing it because it is going to help you retain great talent is the right idea. The human resources person who does it because it’s a “good” thing to do is not going to be very successful. If it helps reduce the potential loss of the great talent you have, then you ought to do it. Then the line organization will pay attention to you.

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