The Top 10 risks around Talent Management haunting most Business Leaders in India

At a time when companies worldwide are vying to succeed in a rapidly changing business landscape, most organisations in India are just beginning to understand human capital risks and think about the frameworks, tools and methodologies they need to manage them. This is because in many organisations, human capital accounts for an increasingly significant share of operating costs and is a major determinant of business performance.

Business leaders in India, therefore, are becoming more concerned about challenges like shortage of key skills, rising workforce costs, employee acquisition, retention and evolving labour reforms. "They are increasingly realising the need to move to a comprehensive talent management approach that allows them to plan for long-term business needs," according to a Willis Towers Watson-CII report on human capital risk management which has gathered the views of nearly 100 CEOs, chief HR officers, CFOs, chief risk officers (CROs) and other senior executives in India from diverse industries.

The report identifies the top 10 human capital risks faced by Indian businesses:

1. Insufficient leadership bench-strength
This risk poses the biggest danger to organisations in India, according to the research. Having unfilled key positions can lead to missed targets and disrupt business continuity. Seventy-four percent of respondents indicated that insufficient leadership bench-strength significantly impacts business performance, and 38% said this risk has been a concern for their organisation in the past. Having long-term succession plans for key leadership positions is a fundamental responsibility of the board and CEO, and should be monitored and addressed regularly.

2. Retention of critical talent segments
High attrition of critical workforce segments affects businesses in many ways: posing obstacles to business growth, raising succession/ transition risk and increasing costs associated with untrained or unprepared talent. 77% of respondents cited the impact of this HCR on business performance as “major” or “catastrophic”, while 31% reported having faced retention challenges in the past two years.

3. Capability gaps with respect to emerging business/technology
Organisations need their workforces to possess the critical skills required to maintain a competitive edge in today’s rapidly changing market, where new products and technologies emerge every other day. When skill gaps persist, the company’s talent profile goes out of alignment with its medium- and longterm HR needs, necessitating an overreliance on external talent and creating budgetary stress.

In India, the supply-and-demand mismatch of skilled workers constitutes a perennial challenge for employers. Seventy-four percent of respondents believe skill gaps significantly hurt business performance, and 28% say their company has struggled with this risk.

4. Low workforce productivity
Many studies have confirmed a direct correlation between corporate financial performance and workforce productivity. Failing to enhance employee productivity can result in unmet business targets, lower profits and higher HR costs as organisations scramble to replace less productive workers. It can also foster an organisational culture lacking in performance-oriented work processes and systems, further dampening performance levels.

For organisations in India, boosting productivity necessitates greater investments in training and skills enhancement, and in further efforts to improve employees’ attitudes towards learning new skills and enhancing productivity. 64% percent of respondents said that workforce productivity challenges have a big impact on business performance, while 28% have faced productivity challenges in their own organisation.

5. Inadequate talent attraction programmes
The inability to attract the right employees to fill open positions is a cause of concern. A lack of appropriate hiring risk controls can lead to employment of suboptimal talent — either overpaying for workers’ experience/skills or a misalignment between workforce skills and business requirements. 65% of respondents think flawed or insufficient talent attraction programmes strongly affect business performance, and 25% said their organisations have faced such hurdles.

6. Lack of compelling capability development and talent management programmes
Failing to provide appropriate learning and development programmes that enhance workforce capabilities and bridge any skill gaps poses a serious threat to organisations. Inadequate talent management can depress business performance by resulting in suboptimal career planning for employees and inadequate succession plans for critical roles.

7. Suboptimal workforce planning and organisation design
Where organisational design is ineffective, firms may lack the flexibility they need to scale-up to meet intensifying business needs. There may also be conflicts between functional and organisational roles, as well as overall obstacles to delivering the customer value proposition. Suboptimal workforce planning results in: ƒƒInsufficient resources to deliver services to targeted levels, Excess workforce in some areas that may need redeployment in the short/medium/long term, Weak linkages between workforce planning and business/functional variables (e.g., number of customers, fixed assets, number of purchase orders, full-time employee-to-HR ratio) leading to ineffective planning, A workforce model that may not achieve optimal structure in terms of insourcing/outsourcing, full/part time, and payroll/contract workers.

8. Lack of business-critical systems
62% of respondents reported a lack of critical systems, such as performance management, which can have an enormous impact on business performance. Organisations without a proper performance management system cannot develop a culture that supports the achievement of organisation-wide goals across workers, functions and teams. An inability to differentiate high performers from low performers wastes resources and results in missed business opportunities.

9. Ineffective compensation strategy design and implementation
Most importantly this leads to difficulties in attraction and retention of critical talent. It also results in inappropriate HR cost management.

10. Failure to deliver on changing business needs and ineffective change management
Whether the changes are to work methods or processes, or are major transformations like mergers and acquisitions or restructuring, companies must remain adaptable to survive. Because change is such an integral part of today’s business environment, failing to manage change effectively drastically reduces an organisation’s probability of achieving its goals.

(Image source)