Why companies have to rethink in view of the ‘War for Talents’

BY THOMAS LUCAS-NÜLLE

(Published in The Produktkulturmagazin issue 4 2016)

The emerging generation of working people has changed just as strongly as the working environment itself. The classical office or industrial workplace has in many cases disappeared and been replaced with flexible structures and tasks. At the same time, the requirements of young people in terms of their life goals have been subject to considerable change. In conjunction with a shrinking population, the search for the ‘right’ talent is no longer just a search but has quickly become – due to the high demand – a battle that can no longer be decided solely by the level of remuneration. We spoke about this with IBM in-house consultant Dr Markus H. Dahm.

Dr Dahm, what does the term ‘War for Talents’ mean exactly?

Buzzwords such as falling birth rates, demographic change, lack of skilled workers and managers or ‘War for Talents’ have become increasingly louder over the past ten to 15 years. They describe the changing age structure within our society and the associated changes in the requirements for personnel management within companies. The ‘War for Talents’ within the labour market is currently being waged full-on. Employees increasingly assess their chances of securing a new job as positive. A quarter of those interviewed as part of a Gallup survey meanwhile view their chances as very good. Increasingly fewer employees intend to still be with their current companies in the next one to three years. This is, above all, due to the fact that employees lack any sufficient emotional bond to the company they work for. This kind of bond to an employee’s own company is achieved, above all, by those enterprises who sustainably promote and support engagement among their staff. 

What do you mean by ‘engaged employees’? 

Committed employees are characterised by a range of behaviours that decisively support the performance of an organisation. ‘They speak out’ and therefore promote the company vis-à-vis their colleagues, potential recruits and customers. They remain within the company and actively decide not to accept offers from outside. They strive for more by taking the initiative and not shying away from going the extra mile to make a contribution towards the success of their company. 

According to the current Chief Human Resource Officer Study of the IBM Corporation dating from 2014, the topic of employee engagement is – in addition to developing talent – presently one of the top priorities of Chief Human Resource Officers. And not without reason: companies that manage to master employee engagement as one of the key requirements are among the financially most successful organisations within their respective sectors. A study conducted by Towers Watson underlines the huge influence of employee engagement on the profits of companies. According to this, enterprises with sustainably high levels of engagement among staff have three times higher operating margins than comparable businesses with historically low employee engagement. Above all, this is down to the fact that employees who have a strong bond to their companies have considerably fewer absentee days than those colleagues with a low emotional bond to their employer, they remain loyal to the enterprise for longer and – as a brand ambassador – actively promote the services and products of their own company.

In your opinion, what is the correlation between the ‘War for Talents’ and current demographic change?

The number of births has been continually falling since 1964, the year with the highest birth rate in Germany. In fact, only about half as many children were born in 2000. For this reason, society is ageing more than ever before. The fact that the population is both ageing and also falling in terms of numbers therefore has repercussions for companies. The personnel management of companies are being faced with a labour market with limited resources. This means there will be fewer potential employees available. Labour market specialists assume that the number of unemployed in Germany will settle at an average of around two million over the next ten years. The labour market of the future will therefore have fewer qualified, skilled workers and managers at the disposal of companies. But it is precisely these specialists and these high-potentials that the personnel departments within the organisations have to recruit in order to be successful within the market in the long term. One of the most important entrepreneurial tasks in the future will be building a qualified, loyal and motivated employee base. To acquire potential employees and to inspire the staff to develop a bond with their own company, business leaders must get to grips with the values and expectations of the new generation of skilled workers and managers.

What solution does the so-called ‘values-based leadership’ model offer here?

This is a form of management that orients all its actions on the values of the organisation. These values define the individual personality of the company. In the current age of virtually endless product diversity, individuality is a decisive strategic success factor within the competitive arena. An enterprise can no longer differentiate itself exclusively through its products, sales channels or IT infrastructure, as these factors can be easily duplicated. To be unique and to offer real added value for customers and employees, the characteristics of the company must transcend mere material things. One of the decisive features is the trustworthiness of the organisation. If the values are actually lived up to within the company, each member will communicate the principles of a potential collaboration to third parties. This tells the stakeholders of the commitment of the enterprise, ensuring sound and trust-based foundations for business relationships.

What is the decisive feature of this kind of leadership? What parallels or overlaps are there in hierarchy-dominated management structures?

The importance of the word ‘trust’ is definitely growing, above all because employees are the most important group of stakeholders with regard to the significance of corporate values. They have to understand – they have to sense – that these are also lived up to by the executive board and the management and they must be able to identify with them. If these factors are given, then values-based leadership offers the ideal working environment for employees who are motivated over the long term.

How do I motivate my staff? What drives them?

There have been countless attempts to answer this question correctly. A perennially very popular approach is performance-related remuneration. In the case of this system, part of the employee’s income is flexible. The payment of this part of the employee’s remuneration is linked to achieving certain goals. It is an attempt to increase the performance of the employee using monetary incentives. However, I question the long-term impact of performance-related remuneration. Numerous empirical studies have been unable to determine any correlation between performance-dependent remuneration and company success. The forms of motivating employees are a decisive explanatory approach for a lack of impact within the system.

In principle, we distinguish between extrinsic and intrinsic motivation. If a person is extrinsically motivated, it is not the action itself that drives this person, it is merely a ‘means to an end’. In contrast, intrinsically motivated people are hugely interested in their work and their drive comes from within. If this definition is translated into the labour market, we can summarise as follows: extrinsically motivated employees are primarily interested in the level of their income and their personal status. Conversely, intrinsically motivated employees are interested in the content of their work and their focus is on doing the best possible job. Therefore, the task of the management should be focused on inspiring these people to commit to the company and keeping them loyal to the enterprise in the long term. Monetary incentives are only very conditionally attractive to this group. It goes without saying, however, that all employees should be appropriately remunerated for their work. 

Dr Dahm, what does a values-based corporate culture look like concretely?

To succeed in inspiring intrinsically motivated employees and making them loyal to the company in the long term, employers have to invest in creating a positive corporate culture based on joint values. Joint values create an environment of trust and commitment. If each and every employee can be certain that his or her colleagues, superiors and the board act in line with the corporate values, then this forms the ideal framework for a free working environment. Key terms such as respect, social responsibility and customer satisfaction give each member a certain degree of security in their every-day work. These values must be understood as action guidelines and define which things are desirable and which are not. This dispenses with the need for complex rules and regulations and constant checks by superiors. This in turn gives employees the necessary room for manoeuvre, without having to dispense entirely with certain framework conditions. Trust keeps the organisation together and has a much greater impact than stringent rules and regulations.

If the values within the organisation are lived up to and faith in the board and superiors is not abused, this creates a dynamic that radiates from the inside to the outside. It is not just the members among each other that must act in accordance with the code of values, these principles also apply outwardly – for instance vis-à-vis customers and suppliers. If customers and suppliers see that they can rely on the company, they will communicate this positive experience to others. With this, the circle of those that place their trust in the company grows. In the ideal case, the result is that the organisation acquires a positive reputation within the market.

Who has the key role when it comes to trust-based interaction?

The successful process on the path to becoming such a trust-based organisation primarily depends on the members of the organisation who have leadership functions. Due to the fact that they are role models, managers have a major influence on employee behaviour. If employees sense that their superiors are not acting in accordance with corporate values, employees will themselves not take these values seriously. The actions of managers teach the team members the significance of the values within the company. However, the role model function of leaders must go beyond this – as acting according to the values alone is not sufficient. The decisive factor is authenticity. With this, the dynamic of the values can create an organisation of trust if the board and managers act in an authentic manner. Only when employees perceive their managers as natural and committed individuals will a trust-based and cooperative relationship develop between them.

How do you assess the situation in Germany? What recommendations do you have for us?

I constantly see positive and negative examples. The Otto Group in Hamburg, for instance, has had a positive impact over the past few years. But let me give you a couple of concrete and graphic examples of things I believe need to change. Managers should see employees in their entirety. They have both vocational and private lives. Issues in their private lives, for example marital problems, can have an impact on their performance at work. By inquiring, managers get to know their employees and in problematic situations – when, for example, performance deteriorates or there are a conspicuously large number of sick days – are able to better respond to these employees. If employees sense a certain care and consideration, this will have a positive influence on the relationship between superiors and employees.

Add to this the fact that informal conversations and discussions among colleagues also permit important information to be exchanged. Whenever possible, managers should take part in such discussions and not distance themselves. This breaks down barriers and positively influences the relationship, and managers can demonstrate that they are part of the team and not strictly above their employees.

And decisions jointly made by the team are also more sustainable. Managers must provide employees with as much information as possible to ensure they are able to make holistic decisions. Project teams can be established for important decisions and extensive tasks, allowing the working environment to be more interesting and the employees to jointly develop solutions.

Unfortunately, many have forgotten the fact that nobody is perfect – therefore, mistakes must be permitted. If there is a faux-pas, the manager has to look at the causes instead of just criticising the employee. Alleviating a mistake must be viewed as an opportunity to jointly learn. Because: managers are also fallible. For this reason, it should also be possible to critically illuminate and discuss proposed solutions made by superiors. Add to this the fact that what the manager says must also correspond to his or her actions. If superiors tell their employees on their first day at work that their door is always open, then this must actually be the case. If employees turn to their superiors with issues and they are never satisfied with the response, this will inevitably have a negative impact on the relationship between them. Managers’ behaviour must reflect the corporate values. Employees are able to quickly expose untruthful statements made by managers. So, companies are increasingly required to enter into active dialogue with their staff and to analyse what their employees are saying. By accessing the collective ‘voice of the employee’, managers are able to identify innovations faster and sustainably increase productivity, for example. 

What important entrepreneurial tasks will leaders and middle management be facing in the future?

That is almost impossible to answer. What I can say is that the board and middle managers have a special role to play with regards to the values-based corporate culture, as they are the role models for employees. Their authentic behaviour and actions are the decisive success factors. The key terms in employee leadership are: care and consideration, participation, cooperation, positive culture of criticism, appreciation and recognition, respect and authenticity.

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DR MARKUS H. DAHM 

Dr Markus H. Dahm, MBA, serves as manager in IBM's in-house consulting in the DACH region. As Career Coach, he is responsible for a team of so-called New Hires. His focus lies on issues of strategy and organisation. He is the author of numerous specialist publications dealing with strategic HR topics and change management. Furthermore, Dahm holds an honorary professorship at the FOM University of Applied Sciences for Economics and Management in Essen, Germany.

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