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May 08, 2007
Targeting and Retaining Talent: Four Steps to Segmentation

By Lynda A. Rizzo, J.D.

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WorldatWork's 2007 Total Rewards conference kicked off with a humorous take on the workplace through the eyes of cartoonist Scott Adams, creator of Dilbert, one of the best known syndicated comic strips of our time. But for the more than 1,600 registered attendees at this year's conference, total rewards and the quest to attract and retain talented employees is serious business.

James R. Otieno, Vice President, Executive Compensation & Services for Hewlett-Packard and Will Ferguson, Worldwide Partner with Mercer Human Resource Consulting tackled the issue of strategies to attract and retain top level talent in their presentation entitled Beyond One Size Fits All: Drive Better Business Performance by Segmenting Your Approach to Talent.

The presentation focused upon transitioning to a segmentation approach to talent. Talent segmentation means a company's ability to differentiate talent management practices to meet the requirements of specific profit models, employee needs, and external talent markets. By focusing on these three factors, companies can use the segmentation approach to optimize their business performance.

Most companies operate under several profit models. The presenters pointed to various profit models commonly used by companies, including the customer solutions, innovation led, and brand profit models. The segmentation approach seeks talent based upon the specific needs of the particular models used by a company. Employees, especially those just graduating from college, are more likely to remain with a company based upon the challenges presented by their jobs and assignments rather than loyalty to the company. The segmentation approach and customized total rewards may prove to be an effective way to retain and attract top talent by placing them in the jobs most suited to their abilities.

According to Ferguson, companies too often consider segmentation on an "as needed" or "where obvious" basis. Employers widely prefer the one-company approach, yet companies also recognize that segmentation may be valuable. The goal for companies is to consider segmentation based on profit models and analysis rather than pain points and external market conditions such as geography and the ability to retain and attract talent.

Otieno discussed Hewlett-Packard's transition over time to the segmentation approach. He pointed to how segmentation includes total rewards for employees that are differentiated by employee segments. He identified four steps for companies of all sizes to use to achieve segmentation:

  • Establish clarity on unique profit modes in your business portfolio.
  • Identify the required capabilities for the future, i.e., the skill sets needed for each of your business functions.
  • Evaluate the impact of the employment brand and external labor market on the ability to build your workforce.
  • Allocate total rewards investment.

Segmentation does have its drawbacks. Many companies favor the simple "one size fits all" and egalitarian one-company approach. Segmentation is complex, and may also limit internal employee mobility between company divisions. It can be messy and inherently creates different groups of employees. It also puts increased pressure upon managers to explain to employees the different reward packages that may be offered to them based upon the unit in which they are placed.

The ultimate question is, how much segmentation is enough? The key is balancing the factors favoring the one-company approach against those favoring the segmentation approach. Companies should assess the cost and benefits of segmenting, and develop a clear business justification for the cost of segmenting to make the transition an investment. Employers must also recognize that segmentation is a multiple year project and is a dynamic, not a static, model that must be changed to fit the current needs of a business.

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