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CEOs fretting most over talent challenges

Human capital – how best to develop, engage, manage and retain talent – is the most pressing challenge faced by businesses today, a recent global survey of top executives has revealed.

The CEO Challenge 2014 report, conducted by research firm The Conference Board, asked executives from more than 1,000 companies around the world to identify and rank the top challenges they face and the strategies they have adopted for addressing each. Human capital emerged as the leading answer among 10 choices, followed by customer relationships. Innovation and operational excellence tied for third.

Charles Mitchell, executive director for knowledge content and quality at The Conference Board and the report’s lead author, says global business leaders realise that a lack of high-quality and highly skilled talent is probably their biggest obstacle to growth and improved efficiency in their organisations. This applies not only to managerial and leadership levels, but also to the operational level.

“Based on our conversations and the strategies that CEOs selected to meet their top challenges, there is a clear link in their minds between the human factor and innovation, as well as achieving operational excellence,” Mitchell says.

Raising employee engagement was named by CEOs as a key strategy to meet the human capital challenge. In Asia, the report also identified raising employee engagement as one of the top strategies for meeting the innovation challenge and as the number-two strategy for improving operational excellence.

“There is a clear recognition that talent is the number-one factor in moving an organisation forward. You can have great processes and a great strategy, but if you don’t have the people in your organisation to execute it, then it all goes for naught,” Mitchell says.

He further points to a growing disenchantment with the “hire more talent on the open market” strategy in filling critical talent gaps, with the focus shifting to the retention, development and skilling up of current talent.

“It is now about ‘grow your own’ rather than going outside the organisation, where talent is often overpriced. So the real challenge is developing programmes and strategies to build a talent pipeline from the inside,” he says.

CEOs in China gave the strategy of “redesigning financial rewards and incentives” the highest global ranking in meeting the human capital challenge. This indicates a movement towards better alignment of pay with individual, business-unit or organisational performance.

“CEOs in Asia, and in particular China, are also looking for improved performance and are expecting more accountability from both their senior leadership teams and middle managers. This all ties back to the need to be more efficient and productive in a slowing growth environment,” Mitchell says.

Surprisingly, sustainability as a challenge received the highest ranking – fourth – from Greater China CEOs. The challenge was ranked no higher than eighth in the US, Europe and Latin America. Yet strategies in the Greater China region to meet this challenge were more focused on the brand and reputation side of sustainability – delivering more green products and embedding social and sustainability goals within their organisations – rather than having a direct impact on the existing environment. Reducing consumption of energy, water and other scarce resources were ranked at the very bottom of the strategy list.

Gender diversity emerged as one of the top “hot button” issues in Asia, Latin America and Europe, but CEOs were found to be really looking for “diversity of thought” in their organisations that is not necessarily pegged to gender or nationality.

“They want people with a different viewpoint and set of experiences. To compete regionally or globally and to effectively serve an increasingly diverse set of customers or clients, you have to have diversity of thought and experience in your management ranks,” Mitchell explains.

Marc Breuil, president and CEO of AIG Insurance Hong Kong, is among the executives advocating the creation of a diverse work environment where people from all kinds of backgrounds, cultures and walks of life work together.

Paris-born Breuil, who does not come from an insurance background, is a good example of such diversity in play. “We promote diversity because it’s good for us. [It is] diversity not only of people, but of ideas, where people with ideas can be listened to and flourish,” he says.

Mitchell concurs. “Diversity forces an organisation to ask the right, or at least different, questions, which is critical to staying competitive in a diverse marketplace,” he says. “Diversity enhances organisational flexibility and agility as well.”