Reference no: EM132838928

Talent Management at Enlarge

Employees are the biggest source of competitive advantage. This is now accepted in organizations across the world. However, organizations still do not make use of the right compensation mix to attract, motivate, and retain talent. McKinsey's study (1997) indicated the acute shortage of talent worldwide. In developed countries, such shortage has now reached an alarming level. The problem in developed countries is largely attributable to the demographic trend. In the era of emerging markets, developing countries, including India, are now facing a talent crisis. Multinational and transnational companies now attract talent from the developing world causing a huge shortage of capable executives and managers in developing countries.

Concern for the shortage of talent is also evident in the McKinsey's recent study (2007). Worldwide, organizations have concentrated on streamlining their human resource management. Talent management has not been a priority. However, the absence of talented human resources can ultimately ruin organizational plans and programs. It weakens the competitive edge of organizations and may even force them to liquidate.

To introduce effective talent management system in organizations, it is important to first adopt talent strategies, extending the focus from good performers to a wide cross-section of diverse manpower. Systematic knowledge management initiatives can mitigate this problem, but cannot act as stand-alone solutions. Cost-effective compensation strategies must be adopted: first to pull and attract the talents, then to motivate and retain them.

Innovative compensation design has always been a concern for global cement major Enlarge. The company is now on an acquisition spree and is trying to extend its reach to new emerging markets including India. In the restricted market era, cement industry in India grew very slowly. In the post-liberalization era, the industry revived due to price de-control and booming economic activity. Its current rapid growth has attracted many foreign players, a number of whom are buying and developing new cement manufacturing units in the country. Enlarge is one such organization, which is trying to find a foothold in the Indian market.

Most large cement manufacturing companies in India are owned by big business houses and managed professionally. Grasim, the Aditya Vikram Birla Group Company, has now acquired L&T in an effort to consolidate its market share. ACC, Gujarat Ambuja, India Cement, and Madras Cement now manage their units more efficiently. Apart from these, we also have many medium and small cement manufacturing companies who cater to local market needs by efficiently using their logistics and supply chain management. All this is possible because they have learnt from past mistakes. In the initial stage of India's economic liberalization, many Indian companies could not survive due to compentition from global majors. Soft-drinks= manufacturers who had to submit to global majors and even became their franchisees to survive in the market are a good example.

Enlarge's initial compensation strategy was to pay salaries above the market rate to executives and managers, while outsourcing low-key operation jobs. High compensation packages immediately attracted executives and managers across levels from local cement companies. However, Enlarge could not attract operations level workers and employees because of their unfriendly employment terms. Enlarge believed that it would be able to attract workers from cement units that had been shut down. It also believed that it would get the privilege of ready-to-use expertise at the operations level. However, it did not materialize. The failure to attract operations-level workers reduced Enlarge's cost competitiveness, forcing it to scale down its activities and restructure the organization. The problem escalated to such an extent that executives and managers started leaving the organization. Many of them were rehired by their past employers, whereas some had to shift to other Industries.

The industry believes that Enlarge's predicament is attributable to its failure to recognize the need for an inclusive approach to talent issues. Organizations cannot sustain themselves with only a few talented executives and managers. Talent should be recognized across functions and at all levels.

We have many good examples from the corporate world, where organizations have been successful in adopting an inclusive approach to talent management. One of the best examples is the international oil major Schlumberger. The company motivates operations-level technical people by providing assured time-bound promotional opportunities, status and compensation levels comparable to their senior executives. The company recognizes the life cycle needs of all cross-sections of employees.

Question:

1. Study the case of Enlarge and suggest how a suitable compensation plan can positively influence talent retention.