The Talent Development Challenge

June 5, 2008

The effective development of talent, beginning with consistent onboarding processes and extending to leadership development and succession, is the key ingredient that companies need to endure the vicissitudes of an uncertain economy.

That was the consensus offered by learning leaders during a roundtable discussion at a recent conference, Impact 2008: The Business of Talent, held in St. Petersburg, Florida. Participating were learning leaders from Aramark, Caterpillar, Honeywell International and Northrop Grumman Corp. Each company has a workforce of more than 100,000 people, and all are forecasting financial and employment growth that flies in the face of an economy in recession.

The conference was organized by Bersin & Associates, an Oakland, California-based company that specializes in research on corporate learning.

In opening remarks, company president Josh Bersin explained that globalization, rising labor costs and the need for organizations to run with fewer management layers make it imperative for companies to be more efficient about how they recruit, hire, evaluate and manage people. Yet only about 20 percent of organizations have well-defined talent strategies in place, Bersin told the gathering of 250 learning leaders.

Changing industries, changing learning
   Ongoing talent challenges beset Los Angeles-based Northrop Grumman, a global company with 2007 revenue of $32 billion. Its 120,000 employees are spread across four lines of business: defense, information services, aerospace and shipbuilding. They include thousands of the world’s best engineers, research scientists and other highly skilled specialists.

"We really do have rocket scientists," and additional brainpower will be needed to sustain the momentum, said Kathy Thomas, Northrop Grumman’s vice president of learning and development.

Northrop Grumman has been formed over time through the acquisition of about 30 different marquee companies, including such household names such as Westinghouse, Litton, Newport News Shipbuilding and TRW. Melding those different corporate cultures into a cohesive operating company is essential, Thomas said.

"The shopping spree is over and the challenge for us is to continue our growth, along with [sustaining] financial performance," Thomas said.

Given its sophisticated products and services, Northrop Grumman has to be very choosy about its hiring. At the same time, it can’t sacrifice growth opportunities by failing to have key positions filled.

"Our huge challenge is building a pipeline of technical talent," Thomas said. Among Northrop Grumman’s potential competitors for technically skilled people talent is Honeywell, a $36 billion conglomerate that specializes in aerospace and controls systems. Based in Morristown, New Jersey, Honeywell employs 135,000 people globally, almost equally split between its U.S. and overseas operations.

Honeywell’s aerospace group designs engines and other hardware for large aircraft. Its automated controls systems group provides equipment for running refineries and chemical plants. Smaller segments of its business include transportation systems and chemicals, each of which accounts for about $5 billion in annual revenue.

Honeywell International was the top-performing company on the Dow Jones industrial average in 2007, but sustaining that momentum will require additional effort, said Steven Teal, who until November served as the company’s chief learning officer.

"We are very focused on organic growth, as well as extending our international markets. That’s driving a lot of our thinking around innovation," Teal said.

Exemplifying that innovation is Honeywell’s software-based design for glass cockpits. It represents Honeywell’s evolution into "a software company, not a products company," which likewise prompts a re-evaluation of how it designs and delivers learning, Teal said.

Learning investments and metric-watching
Despite woes in the stock market, Caterpillar’s share price of remains consistently strong. Investors obviously are buoyed by the heavy equipment maker’s long-term growth prospects, especially in booming economies in China and India. By 2010, the heavy equipment maker, which is based in Peoria, Illinois, is projecting revenue of $50 billion, up 11 percent from its 2007 sales of $45 billion.

Achieving those revenue targets requires a massive infusion of new blood, said Frederick Goh, the director of strategic learning at Caterpillar University, the company’s in-house learning organization. Caterpillar expects to hire at least 10,000 new employees during the next few years, and already is broadening the learning resources it makes available to employees.

More than $1.4 billion is being invested in research and development of new products, Goh said. Caterpillar also is launching Vision 2020, an initiative whose success depends on having an engaged, well-trained workforce. It represents Caterpillar’s goal "to be the global leader in every segment we choose to serve," Goh said.

Monitoring the effectiveness of training and development initiatives is of mounting importance too. An example is Aramark, a $12 billion company that provides facilities maintenance and food to prisons, hospitals and schools. It also specializes in providing uniforms and career apparel.

Aramark operators will be providing food and beverages to athletes staying at the Olympic Village this summer in Beijing. At the same time, there are threats to Aramark’s financial performance: contentious labor issues and spiraling costs for fuel and food.

With jobs ranging from chefs to janitors, Aramark isn’t able to use a one-size-fits-all approach to employee development. For instance, Aramark technicians do more than make sure hospitals are sanitary.

"We have the ability to repair everything from a blood pressure cuff to a CAT scan," said Liviu Dedes, the Philadelphia-based company’s vice president of organizational development.

Dedes said Aramark has introduced analytical measures—adopting standardized onboarding processes, performance scorecards and individual job competencies. Periodic engagement surveys also are being carried out with the help of Gallup Corp.

Aramark takes an "entrepreneurial approach" to serving its distinct market niches, Dedes said.

The company went private last year in an $8.3 billion acquisition by a consortium of investors, including Goldman Sachs Capital Advisors, CCMP Capital Advisors, JPMorgan Partners, Thomas H. Lee Partners and Warburg Pincus.

The "patient capital" enables Aramark to execute methodically over time, making sure the "pace and cadence of change is palatable to our operators," Dedes said.

And the company will need plenty of patience. Aramark employees have picketed and threatened to strike to win better wages and benefits. Most recently, workers at Aramark-run cafeterias in New York staged a protest at Goldman Sachs’ corporate offices in Manhattan.

Learning priorities
Consolidating learning resources and improving the tracking of results is a growing priority for companies across all sectors. One of Northrop Grumman’s goals for 2008 is to allow the needs of autonomously run business units to guide development of corporate learning. At the same time, the company is grappling with the potential loss of highly skilled veterans to retirement, which puts further pressure on the development of new leaders and the creation of succession plans.

"Those are the things that will propel Northrop Grumman to being a top-tier industry leader," Thomas said.

Teal spoke candidly about Honeywell’s efforts to shore up weaknesses in its human resources function. For years, Honeywell has outsourced most of its transactional functions within human resources. More strategic HR roles have languished, however.

"Our HR council last year made a conservative estimate that only 15 to 20 percent of our generalists had the skills, knowledge and abilities to make the transition to a strategic business partner," and the numbers could be even lower, Teal said. Honeywell has been undergoing an "HR transformation" designed to make strategic use of long-established performance and succession plans.

Teal shared his experience when taking over as head of learning at Honeywell. The company was in the good habit of measuring performance and planning for succession, but wasn’t firing on all cylinders.

"We had strong performance management and succession plans, but they weren’t linked to anything" that boosted skills, Teal said.

Setting priorities can be daunting, Caterpillar’s Goh said, but it’s critical if organizations want to get the most out of their training dollars. Each business unit within Caterpillar is required to develop a strategic learning plan, including a three- to five-year outlook for future talent needs.

Those various training blueprints are folded into Caterpillar’s larger plan for enterprise learning. Goh said the structure enables executives at individual business units to influence which learning resources get funded and developed as part of Caterpillar University.

But successful learning occurs only if top brass sets the tone, Aramark’s Dedes said. Each of Aramark’s business units is expected to complete a scorecard that tracks how well equipped employees are to carry out business objectives. The human capital scorecards top the agenda when executives meet to review quarterly performance.

It’s the most important assessment tool within Aramark, "because we don’t have patents or products. We cook food and clean facilities," so the quality of its people is a make-or-break issue, Dedes said.