Lawrence Nicholson | Barriers to talent management

Since the term “war for talent” was coined by McKinsey’s Steven Hankin in 1997, talent management, or TM, has become an important strategic focus of many companies.

War for talent refers to the increased competition among recruiters in the search for ‘top talent’. This has contributed to the research in different aspects of talent management, including ways companies can leverage TM to gain and maintain competitive advantage.

Most of this research has focused on large multinational corporations, MNCs, with limited research on small and medium enterprises, SMEs, and family-owned businesses, FOBs. This limited attention is incongruent with the level of contribution of SMEs and FOBs, which have accounted for a large percentage of employment in many countries.

One of the assumptions seems to be that a common approach or framework for talent management can be used for FOBs and non-family-owned businesses, NFOBs. However, this assumption might not hold given the differences between FOBs and NFOBs, and the contention that the theoretical perspective on talent management for SMEs, most of which are FOBs, differs from large companies. One of the critical areas that must be addressed in this research are the barriers to effective talent management.

There is no consensus on a definition for talent management. In this article, it is defined as a process that involves an organisation’s ability to identify critical needs or positions in the organisation and garnering the capacity to identify, attract, recruit, develop, and retain the required human resource to effectively fill these roles to meet the objective of long-term competitiveness of the organisation.

Simply put, talent management practices focus on recruiting and retaining the right individuals to fill specific roles at the most appropriate time to meet the needs of the organisation.

In most cases, the administrative process of talent management falls within the purview of the HR department of the organisation. Talent management in FOBs faces several barriers that must be addressed to be effective in meeting the needs of the business.

FOBs are complex systems that consist of several intertwined subsystems such as ‘the family’ and ‘the business’. This interconnectedness can pose challenges in the effective management of human resources within these businesses.

talent management in many FOBs must contend with the embedded dynamics and characteristics associated with these businesses. These include the lack of formalised approaches to training and development, having less or inadequate resources and opportunities for talent development, the tendency to focus on internal employee development, having a centralised-oriented approach to business operations, a restricted view of succession planning and the interplay of familiness.

These characteristics can barriers to effective TM if they are not managed. A brief expansion of five of these characteristics will prove useful.

Lack of formalised approaches to training and development: Many FOBs suffer from the absence of a structured and formalised approach to the development of human resources. There is little or no structured training programme for capacity building. This is compounded by the absence of an ‘independent’ HR department, where those who are recruited are those identified by the founder. FOBs need to adopt structured and formalised approaches to training and development, otherwise, the full benefits from TM will not be realised.

Tendency to focus on internal employee development: A focus on internal employee development leads to narrowing opportunities for attraction of talent to current employees or family members of the business. This has the effect of FOBs not having the capacity to increase productivity and competitive advantage in cases where the needed talent is not available from internal human resources.

FOBs that focus exclusively or predominantly on internal employee development will not optimise the talent needed to create sustained competitive advantage.

Having a centralised-oriented approach to business operations: In many FOBs, the founder assumes the role of having a monopoly of knowledge on business operations. In cases where this is expanded beyond the founder, knowledge in critical areas of the business is confined to a small ‘inner-circle’ of ‘trusted’ family members.

This centralised approach restricts the attraction and development of talent, both from outside a circle, usually defined by the founder/owner. Added to this is the undocumented and reliance of oral transmission of this centralised knowledge.

Such a centralised-oriented approach to business operations can lead to a limited and restricted access to talent.

A restricted view of succession planning: For many FOBs, succession planning represents a moment in time, not a process that tracks and develops talents in preparation for a final passing of the baton. This restricted view of succession planning has not allowed the broad scope of identifying, attracting recruiting, developing and retention of talent.

In other words, talent management is usually not part of the value chain in succession planning. When combined with a centralised-oriented approach, this view of succession planning usually leads scenarios such as gender-based (for example, male only), immediate family (son, daughter) and family members only in leadership succession. This is maintained even in the case where the talent needed for the sustainability the business is not available in any of the target groups.

A restrictive view of succession planning does not provide a wide scope for TM that could benefit the FOBs in the long run. In fact, a restricted view of succession planning can stymie TM to the point where familiness becomes the sole determining factor in the management of talent.

The interplay of familiness: Familiness is a construct that refers to the set of resources available to the business because of family involvement. The level of involvement can have either: a positive or distinctive effect; or a negative or constrictive effect.

Three questions that inform the level of involvement of family are how capable, how willing and/or how available is the individual. The ideal scenario in the talent management process is to engage the family member who is capable, willing and available.

However, this is not always possible. In many cases the family member who is available is one recruited for the business. A contributing factor is the ‘moment-in-time’ approach to talent management in FOBs – there is little or no long-term or process-oriented to TM.

Persons are not trained as part of the preparation to work in the business, which in many cases leads to their unwillingness to be part of the business. This scenario invariably leads to the recruiting of the family member who is available, one who is neither capable nor willing. Talent management is therefore informed by the tyranny of the convenience.

One of the gaps in the research in TM is the absence of a framework for FOBs. The development of such a framework must address the barriers to effective talent management. This is compounded by the non-homogeneity of FOBs. It is not a one size fits all.

Each family business needs to ensure that the approach to talent management is aligned with its needs. What barriers do you need to remove for effective TM in your family business?

More anon!

Lawrence Nicholson, PhD, is a senior lecturer at the Mona School of Business & Management, University of the West Indies, author of Understanding the Caribbean Enterprise: Insights from MSMEs and Family-Owned Businesses and a director of the RJRGLEANER Communications Group.lawrence.n.08@gmail.com