INNOVATION PROFILE/Talentism – the vital new ammunition for business success:AT THIS YEAR'S World Economic Forum in Davos the event's founder, Charles Schwab, spoke of a new dynamic in the global economy, saying that the fundamental engine for growth in the future would no longer be capitalism as it is understood at present but a new concept he dubbed "talentism".
He argued that the countries with access to the most highly skilled and creative people would be the most successful in future.
“He described talent as a new currency in the global economy with the countries holding the greatest stock of it being the most successful,” says PwC consulting partner Ann O’Connell.
This has already been recognised by the Government with the Special Assignment Relief Programme, which offers favourable tax treatment to certain individuals coming to work in Ireland.
“People have asked why you need a special tax regime to attract seasoned executives and talented people to come and work in Ireland, but the fact is that it is necessary if we are to get the people who are critical to building a business around them,” says PwC human relations services partner Mark Carter.
This is where the issue is most critical for Ireland. It is not a question of simply having people available to work in companies that establish here, or indeed in growth-oriented Irish companies; it is getting the right people at the very top that matters. And with the new, more heightened focus on regulation and compliance, the composition of company boards is very much in the spotlight.
As a result, the quality of and contribution made by non-executive directors is now a matter of concern for many firms. “Companies are now asking themselves questions about the size and composition of their boards and the qualities and expertise required of their non-executive directors,” Ann O’Connell says. “As a result, many of them are taking an executive search approach to finding non-executive directors. They are conducting exhaustive research, interviews and psychometric tests in the same way as they would for an executive appointment.”
This is a major change from the days when non-executive directors would turn up once a month for a hearty lunch and then grunt their assent to whatever was proposed by the chairman and chief executive.
“Life has moved on since then and companies are doing a lot to ensure that their non-executive directors add value,” O’Connell says. “They are given specific roles to perform and are being evaluated against them.”
She also points to another trend, which is seeing non-executive directors being used to make up for specific skills or experience gaps in companies. “We are seeing SMEs do that. They are finding that one or two good board appointments can bring in expertise that they wouldn’t be able to afford at executive level.” This demand for more hands-on non-executive directors who make real contributions to company activity is in turn leading to other changes. “Increasingly, we are seeing people who are still of working age opting for careers as non-executive directors and they are training up for it,” says O’Connell.
“There is also a reduction in the number of boards that it is acceptable for people to serve on at the same time. The increased commitment required of non-executive directors suggests that the days of people being represented on more than a few boards are well gone.”
This change, coupled with more exacting selection processes, has resulted in a reduction in the number of non-executive directors available and created something of a talent shortage.
“To be a value-adding non-executive director is exciting and fulfilling if you are up for it, but it comes with pressure from various sources such as the media, shareholders and the company itself – particularly if you are on the board of a State body,” says O’Connell.
“This means that candidates are becoming a lot more discerning when deciding to go onto a board. They are assessing the companies and taking fewer positions, but putting more time into them.”
The challenge of finding non-executive directors is being addressed partly by companies engaging in executive search style processes, but also more informally. “At PwC Executive Search we are generally seeing a more rigorous and professional approach being adopted, with organisations widening the gene pool and territory in relation to such appointments,” O’Connell says. “We also run a programme of PwC events for non-executive directors to help them keep on top of developments.”
The challenge of finding the right people extends to the senior executive level. “The attractiveness of doing business here is a key issue for Ireland Inc in terms of foreign direct investment,” says Carter. “There continues to be a lot of goodwill towards Ireland internationally in places like Silicon Valley. And a lot of this goodwill is because we have always had a talented, highly flexible workforce here. It’s what we’ve always said – tax, talent and ease of doing business are the three critical elements of our proposition to inward investors.”
But in a world where talent is increasingly sought after, we cannot afford to be complacent in terms of our ability to cultivate the right people.
“CEOs around the world tell us that despite the current economic challenges in many countries, talent shortages and skills gaps are likely to become ever more prevalent,” says Carter. “Only 30 per cent of CEOs are very confident they will have access to the necessary talent over the next three years. We have to ask ourselves how Ireland can foster the skills required for future success and if we have the right education system for that. There will be intense international competition for talent in future years and we’ve got to prepare for that.”
He explains that it is not just a question of Ireland producing the people with the required skills in sufficient numbers; it is our ability to keep them and attract others.
Irish people will be attracted to move abroad as a result of the competition for their skills. This means Ireland must not only be attractive for capital, it must be equally so for talented people.
So initiatives such as the Special Assignment Relief Programme are vital for inbound talent. But equally tax reliefs such as the foreign earnings deduction, designed to incentivise Irish-based people to open up the Bric countries, are also essential to stimulate overseas trade efforts.
And it’s not all about money. “We have done a lot of studies on the millennium generation – the people who’ve come into the workforce since the turn of century – and their career motivations,” says Carter. “Apart from competitive wages, the big things that attract them to working for companies are interesting work, flexible hours and work/life balance, first-class training, good career development opportunities, and international exposure.
“The London School of Economics and PwC carried out other studies into the psychology of executive pay. What we found was that fairness in pay rather than the actual level of pay was fundamental. People don’t work just for money. Indeed, 30 per cent of Irish executives questioned in one of our surveys said they would take a pay cut for their ideal job.”
He also notes that some would argue against complex incentive pay schemes for executives because they take up a lot of management time to administer and “nobody understands them and they don’t make anyone happy anyway. While one size does not fit all, complexity and ambiguity destroy value”.
According to Carter, getting the right people in these circumstances comes down to employer branding. “It’s really about a range of factors, including opportunities for career progression and international experience, top class training and development, learning from great mentors, good communications and strong corporate values are also important. The companies that have a reputation for having these will win. The ability to engage, develop and retain talent will be a key competitive differentiator in the future.”
