While many developing nations in world are adopting strategies of growth and fast forwarding their cultural and business philosophies they are not even aware that a major demographic shift is about to convert their societies and their businesses drastically.  And, they are not ready for such a colossal change. The statistics are undeniable. In most developed economies in world, the workforce is progressively aging. Do you know the declining birth rates and the aging of the baby boom generation (workforce between the ages of 55 and 64), are growing faster than any other age group? The desertion of this experienced, talented and mature workforce is challenging organizations to fill their critical leadership positions.

Almost 65% of organizations in the developing countries are struggling to fill the top positions, which include positions in research & development, sales, marketing, HR, IT, logistics, law and finance. In fact, one in three organizations world-wide is struggling to fill key positions.

According to Manpower Group, India, MD Sanjay Pandit, “Businesses need to adopt a long-term approach to ensure they have the talent they need to achieve their objectives.”

The skill gaps for the higher positions are large and wide. Because most oganizations have become terribly focused on growth they have ignored the future leadership crisis. Organizations are lacking the ability or let me put it this way: organizations are ignoring investment in training and developing the future – the next generation of executives. According to Booz & Company’s (the publisher of strategy+business) recent report based on in-depth analysis of India’s top 500 companies, by 2017, 15 to 18 percent of leadership positions in some big companies will be vacant. The fact is they might be filled by people who are unfit for those jobs. This implies that companies will be missing almost one of every five leaders they need. In the absence of proper leadership, those companies can go off track and might lose out on several growth opportunities.

The Tata Group is giving its flagship leadership programme, TAS, a makeover. The group has started focusing on ’employee life cycle’ which studies the employee’s progression in the organization from joining date. The group now centers on developing, mentoring and managing the career of every manager listed under the programme. At Hindustan Unilever, the FMCG giant, the managers at all levels are occupied in identifying talent among their subordinates.

At Vodafone, sensing the need to develop talent for senior roles, the firm has extended its cross-functional induction program to 45 days which earlier was shorter. Across India Inc, companies are waking up to the need of developing leadership pipeline; they are building and harnessing in-house talent for critical roles. While organizations like Hindustan Unilever and the Tata Group have long been cited as models of good internal grooming, those like Sapient, Vodafone and HCL been known for their exuberant HR policies for leadership development are tweaking existing strategies to make their internal processes more vigorous. Some dynamic companies are waking up to the forthcoming disaster of leadership crisis. It’s becoming need of the hour for business organizations for building internal talent for significant roles.

Job rotation is a method adopted by many successful organizations in the world, as technique of developing skills of employees in a variety of jobs. When employees perform the same job functions every day without any change, they experience a feeling of fatigue, lethargy, monotony, and carelessness. They get a feeling of burnout, which decrease their productivity, increases absenteeism, and the bored employees start looking out for new jobs. This all leads to organizational dysfunction. However, when employees rotate across different positions regularly, they experience freshness in their employment.

This gives a change to the employees by helping them to learn new skills. It allows the employees to work closely with new departmental heads, peers and subordinates. By job rotation both the organization and employees can find their “fit” in a particular position; a person might be just the appropriate candidate for a position, which is not known because of his wrong posting. Often organizations have found the right candidate for various positions by adopting job ration policy. Organizations have experienced better understanding and cooperation among the employees by rotating individuals between dissimilar or contrasting business units. Increased movement helps to break down hierarchical perplexity and misinterpretations if any; this in turn reduces grapevine and politics besides talent hoarding by some business units. For example, when a sales worker is relocated in purchasing department, he understand implications and problems faced by the purchasing department staff, the guidelines under which they need to work, also how the quality of purchases influence the final product which the sales person is required to sell.

It is difficult to retain the anxious and hasty generation Y workforce in organizations. They want novelty and challenge in their job profiles and they want the best from the jobs immediately compared to their older counterparts. The new generation is in search of an “ideal” profile, fatter pay packets and quick promotions. They don’t mind changing jobs often. Many organizations are therefore experiencing challenges in employee retention.

Some leading organizations like IBM, P&G and HUL use job rotation policy moderately for retaining a mix pool of experienced along with freshly recruited talent pool. Some seasoned employees who are well versed with the company’s policies and culture befall useful to replace personnel who may leave or move up in the organization. The existing employee’s strengths and weaknesses are known and therefore, staffing becomes easier.

For a good number of years, organizations across sectors have neglected the scouting process of leadership either due to a poor practice of succession planning or insecurity among the senior leadership. According to a KPMG report, nearly a fourth of organizations have filled less than 25% of critical roles with candidates who are not fully prepared for the role. Majority of companies are most worried about having an insufficient pipeline of young leaders and a lack depth of internal candidates for critical roles. And, some companies are not even sure about the efficacy of their leadership pipeline-building mechanisms. Organizations are having a tough time to the constantly led talent fight. Post the global financial crisis, companies have been focusing on their survival rather than talent management. This critical matter might bounce back any moment.

But this is where company like HUL stands apart. Managers in the junior and mid-stages of their careers have gone on to assume leadership positions across sales, media, IT, finance and infrastructure. Under its ‘post graduate scheme’, young professionals are trained over 15 months in different functions like customer development, finance, marketing and supply chain. HUL believes in the job rotation in its global MBA recruitment channel. The job rotation gives a feel about the candidates; each exposure tests the capability of the candidates in each functional area.

In its cross-function induction, Vodafone has included elements like market visits, peer investigation, cultural assimilation and select classroom sessions. At HCL, one of the talent harnessing programs is designed around Dr Michael Watkin’s ‘First 90 days’ principle. During the five-month programme, called ‘HCL Certified Leader’, leaders learn to diagnose situations and apply skills developed through real-time experiences. Their ‘Top Gun’ programme enables high performers to work on real business situations with the senior leadership team. Through such innovative programs HCL has over 1,000 positions with a named list of potential successors across all levels of responsibility. Now, that’s really noticeable move!

Smaller companies are also working on improving leadership processes. Over the past few years, there has been a big shift in how the company looks at talent reviews and succession planning. To conclude, organizations must understand the reality; that is – there are no “ideal” candidates and there is a highly limited supply overall. They can adopt “boomerang” hiring. Former employees who left the organization can be invited back. They will bring fresh viewpoints back into the business which might give a push to the expansion. They may have left as mid-level managers but they can return at senior-level.

It’s better to set the basic requirements for senior positions, what minimum standards are and what “nice to have elements” the company is looking for. I think organizations can compromise a bit. They need to determine how important qualifications are. They must resist the haste of defining ‘qualified candidate’ made without careful inputs and without taking the business environment into account. Most importantly, if organizations refuse to adapt to reality the challenge of shortage of talent will blow out of proportion.

]]> https://drvidyahattangadi.com/close-those-talent-shortage-gaps/feed/ 0 https://drvidyahattangadi.com/core-competence-and-competitive-advantage/ https://drvidyahattangadi.com/core-competence-and-competitive-advantage/#respond Thu, 07 Aug 2014 07:43:20 +0000 http://drvidyahattangadi.com/?p=1190 Core competence and competitive advantage

Core competency: Organizations with core competencies enjoy global leadership. It represents the organization’s will to harmonize their multiple resources and skills. It distinguishes the firm in a market place because of its products and service’s uniqueness and because they become difficult to imitate by others. In such an organization, all business strategies revolve around the core competency. Core competencies give a company one or more competitive advantages, in creating and delivering value to its customers in its chosen field. Organizations which believe in spending generously on research and development can and the ones which experiment and investigate the processes can develop core competency. Core competencies lead to the development of core products. Core products are not directly sold to end users; rather, they are used to build a larger number of end-user products. For example, let’s take the example of Honda’a expertise in engines. Honda was able to exploit its core competency to develop a variety of quality products from lawn mowers and snow blowers to trucks and automobiles. Honda can boast of its sharp and competitive engineer’s team who can be credited for its core competency. In another example, Microsoft has expertise in many IT based innovations where, for a variety of reasons, it is difficult for competitors to replicate or compete with Microsoft’s core competences in building software.

The term was popularized by Hamal and Prahalad, back in 1990 in the Harvard Business Review. Peter Drucker was one of the first to mention it in 1964 when he focused on ‘strength analysis’. A core competency comprises of reliable processes, synergy with customers & suppliers, a patent, an industrial design, know-how, unique product development, a brand/s, marketing strategy, business strategy, supply chain etc.

Core competencies are a pack of skills and technologies that are very difficult or impossible to copy or match; skilled employees, tacit knowledge, organizational endowment, collective values, supreme technology, and organizational ethics culture – these are some features which add to the core competency of an organization. The primary reason for 3M’s success is its people. 3M has always motivated its employees to innovate, think different and progress in their relative careers. This company has been blessed with generations of imaginative, industrious employees in all parts of its enterprise, all around the world.

Globally leading organizations are realizing that one of the components of core competency is people. A study was conducted on three hundred and fifty-eight Managers across the Johnson & Johnson Consumer & Personal Care Group (JJC&PC Group) globally to assess if there are specific leadership traits and competencies that distinguish high performers from average performers. The company did not stop only at conducting a study, it designed and organized educational and developmental programs for its employees across different ranks globally, to familiarize employees with the concepts of emotional, social and relational competency, and to share strategic leadership process. These sessions also served as the launch for the newly enhanced leadership models. As usual many other organizations have already replicated them.

Companies with core competencies identify their key business processes, manage them centrally, and invest in them heavily, looking for a long-term payback.

Sony’s  innovations have become part of mainstream culture, including: the first magnetic tape and tape recorder in 1950; the transistor radio in 1955; the world’s first all-transistor TV set in 1960; the world’s first color video cassette recorder in 1971; the Walkman personal stereo in 1979; the Compact Disc (CD) in 1982; the first 8mm camcorder in 1985; the Minidisc (MD) player in 1992; the PlayStation game system in 1995; Digital Mavica camera in 1997; Digital Versatile Disc (DVD) player in 1998; and the Network Walkman digital music player in 1999.
Today, Sony continues to fuel industry growth with the sales of innovative Sony products, as well as with the company’s convergence strategy. The company has never compromised on persistence in R&D.

Back home, a cigarette manufacturing company ITC has got into a wide range of diversifications such hotels, processed foods, biscuits and greeting cards. How does ITC manage this unrelated diversification? Unrelated diversification will succeed only if it is based on the core competency of the firm. ITC has leveraged beautifully on its core competency of distribution, brand building capability and its strength of quality outsourcing.

Core competencies take a long time to build and practice. Organizations which continue the practice with perseverance by adding accuracy and particular sets of skills succeed in building core competency. New sets of skills and newly acquired knowledge should be steadily spread in the organization to facilitate the processes.

Competitive advantage is a business strategy where companies find ways to differentiate themselves from their competitors to attract more business. Service-based industries, such as hospitality, banks, health care use competitive advantage strategies to gain an elevated position in the field. Usually competitive advantage is sought out of one or more functional advantages. Competitive advantages give a company an edge over its rivals and a capability to produce greater value for the firm and its shareholders. The more sustainable the competitive advantage, the more complex it is for competitors to offset the advantage.

There are two main types of competitive advantages: comparative advantage and differential advantage. Comparative advantage, or cost advantage, is a firm’s ability to produce a good or service at a lower cost than its competitors, which gives the firm the ability sell its goods or services at a lower price than its competitors or to generate a larger margin on sales. A differential advantage is created when a firm’s products or services differ from its competitors and are seen as better than a competitor’s products by customers. Today India can boast of comparatively younger, English speaking low cost labour as one of her competitive advantage. This factor has given boost to outsourcing business in India.

The sources of competitive advantage have their limited life. Therefore, businesses are engaged in a never ending search to find new angles of competitive advantages. It’s all about finding some way of differentiating products and services from the competitor’s offerings. The whole purpose of business strategy is to find new sources of competitive advantage. Wal-Mart’s success lies in their cost cutting. Wal-Mart’s most operational processes are carried out in China because of their labor costs are which are much lower than many countries in world.

Toyota is Japan’s biggest car company and the second largest in the world after General Motors.   The fundamental reason for Toyota’s success in the global marketplace is its competitive advantage which lies in its corporate philosophy, the set of rules and attitudes that govern the use of its resources. The Toyota philosophy is often called as the Toyota Production System. The system depends partly on human resources management policy that stimulates employee creativity and loyalty besides Toyota has also built a highly efficient network of suppliers and components manufacturers. Much of Toyota’s success in the world markets can be attributed directly to its competitive advantage of its policies in human resources management and supply-chain networks.

One of the competitive advantages Hindustan Unilever enjoys is its edge over competitors in procuring raw material at low cost.  The company in past faced slow volume sales in categories such as soaps, laundry and tea, where rivals managed to gain market share through aggressive price cuts. But, HUL managed the price correction soon after sourcing more suppliers who offered the raw material at more competitive prices.

Warren Buffet the most successful investor of all times has always given importance to businesses with durable competitive advantage. He always relies on an extensive research-and-analysis. Buffet says that the global economy is complex and volatile, the economy and the stock market do not move in sync with it. The market discount mechanism moves instantly to incorporate news into the share price and last but not the least the returns of long-term equities cannot be matched anywhere else.

By “competitive advantage” Buffet meant a unique product or service that a business either makes or provides. Even if the employees can walk away from the business but they cannot take the business’s “competitive advantage” with them. Some examples of businesses with competitive advantage Buffet considers – are business’s brand names, for instance, Bell, Pizza Hut, Kentucky Fried Chicken or Wal-Mart. He gives importance to a business’s regional monopoly. We have plenty of brand names in India which enjoy regional monopoly such as Ghadi Detergent, Sasa washing powder, Wagh Bakari Chai, Sapat Chai, and Wai Wai noodles. The regional brands can afford to lose their micro focus from their markets. They have such a grip on their markets that national or international products need to spend tremendous resources to fight their regional counterparts. Buffet believes that durable competitive advantage companies can pass on their saving to their shareholders, and their investors.

When we think of best deal we think of Wall mart. Owing to its size it has enormous bargaining power with suppliers and sells at heavily discounted prices. They are low cost buyer and seller- Here the margins are traded for volumes; the advantage is buying at the cheapest price and selling at lowest prices to induce customers to its stores all over the world.

According to Hamel and Pralhad, the process of developing core competencies starts with the strategic intent of being a leader in the market by leveraging the resources. This thought of being a leader in the market is called strategic intentand it points at identifying various opportunity gaps.