The competitive market for talent has prompted many companies to rethink how they recruit, retain, and develop employees.
Take KPMG’s UK operation. In 2014, feedback from staff suggested that it was easier to leave the firm than to move around and gain experience in other areas of it. That prompted the firm to rethink its approach to managing and developing staff.
KPMG UK launched a new strategy last year aimed at putting people and their careers at the top of the company’s agenda. Since then, the company’s attrition rate has declined.
Andrew Hessey, ACMA, CGMA (above), principal advisor of management consulting at KPMG UK, has had a central role in putting the strategy into practice in the firm’s financial management advisory team. Here, he outlines how the approach has changed. He also shares some of the lessons he has learned.
Creating people leaders
In January 2015, KPMG UK launched its “Our Deal” strategy, which aims to put people at the top of the agenda through a raft of new initiatives, from having a bonus day off on their birthdays and early finishes on Fridays in the summer to a greater focus on development and providing greater opportunities to move around the organisation.
A central pillar of this strategy was the creation of about 130 “people leader” roles throughout KPMG UK, each of whom looks after approximately 100 people. These roles were open to high-performing senior managers and directors, with candidates undergoing psychometric testing and a panel interview. The majority of the posts were filled internally, with a mixture of people taking the roles for 12- to 18-month secondments as well as on a permanent basis.
In the past, it could be difficult for people to have meaningful career conversations as these were often managed by partners, who spend the majority of their time in the market, so they often could not devote sufficient time to them. There was often little opportunity for an in-depth conversation about career aspirations or ensuring an employee was placed on projects that would help progress towards those aspirations.
The people leader role was created in part to address this shortcoming, giving the post holders responsibility for recruitment, careers, learning and development, performance management, resourcing people onto projects, as well as pay, bonus setting, and more. People leaders are separate from the human resources department but work closely with colleagues in HR. To be successful, people leaders also have to work closely with colleagues in a number of other key support areas, such as learning and development, recruitment, finance, and resourcing.
Among those appointed to the new role temporarily was Hessey. He spent the last year looking after the development needs of the financial management advisory team.
There are opportunity costs to the initiative due to the loss of potential earnings across the whole firm as previously client-facing employees like Hessey take on internal-facing roles.
But the investment is worth making, Hessey said. It gives KPMG the opportunity to further professionalise the way it manages careers, and top talent in particular. It has also been a valuable learning opportunity for those taking on people leadership roles, giving them the opportunity to further develop their people skills as well as their understanding of the business and how it operates.
Farewell to forced distribution
The company’s emphasis on talent and development is demonstrated in the move away from the “forced distribution” system of performance management to one which prioritises potential.
Under the forced distribution system, performance managers and partners would gather once or twice a year to discuss each particular grade of employee and rank those people on a curve based on the last year — with perhaps 15% of staff in the high-performance category and 15% in the low-performance category.
“That was always incredibly unpopular,” Hessey said. The difference in performance between somebody who ended up in the medium category and somebody who ended up in the low category could sometimes be a hair’s breadth.
“Now we have moved to performance development as opposed to performance management,” Hessey said. “So, people are still rated. We have to know who our top talent are. We have to know who might need a bit more support. But it’s much more of a continuum than before.”
The time frame under review has also changed. Previously, managers took into account activity over the previous six to 12 months. “Now we look at performance over a period of two to three years because it shows more of a trajectory than an absolute point in time, which has proven very useful,” Hessey said.
Ratings are now absolute rather than relative and are given on two axes: performance and potential. But the matrix used is more of a by-product than the purpose. “The purpose is to help people understand their performance, including readiness for promotion, and how they have done against the expectations, both of their role and their grade, but also the goals [both business and personal development] that were set at the beginning of the year.”
KPMG defines potential as the aspiration, ability, and engagement with the organisation required to be successful in more demanding roles in the future. Agility is one of the primary determinants of potential and could include, among other evidence, the ability to move to a different area, field of expertise, or client quickly and without needing an enormous amount of support; the person’s level of self-awareness; and his or her ability to deal with complexity and ambiguity.
Constructive appraisal conversations are not easy. Managers often shy away from, or lack experience in dealing with, difficult conversations about performance, which might make the manager’s life temporarily easier; however, avoiding the issue is not conducive to the individual’s progress.
At KPMG, a lot of work has gone into getting development conversations right. The new system involves what are known within KPMG as “honest conversations,” in which the appraisee has the opportunity to assess his or her own performance, and the performance manager can give his or her view, setting it in context compared with peers, role description, and objectives. The manager identifies areas that need work and how both parties can improve those aspects.
To make sure these meetings are as fruitful as possible, managers are trained in how to handle difficult conversations. A fundamental ingredient is that the manager understands the individuals he or she is looking after, where they want to go in their careers, where their strengths lie, and the areas they need to work on.
Understanding the expectations of each grade is also essential. “We try to make sure that managers have a number of appraisees at the same grade, so they can see how other peers are doing,” Hessey said. The point of comparison makes the process more objective and transparent. Better understanding about how promotion and pay award decisions are arrived at also helps improve morale and retention.
The new strategy has sought to remove internal barriers to mobility that previously encouraged some talented colleagues to leave.
“If one of our junior people has done a couple years on our team and says, ‘Actually, I’d like to go and try corporate finance’ or ‘I’d like to go and try tax or audit for a year,’ we make that happen,” Hessey said. “We’d much rather they left our team but stayed with the firm than left the business.”
The approach has proved to be popular with more junior members of staff. Hessey recognises that few of them still want to be on the same team in ten years’ time, but now a ten-year career at KPMG could entail several jobs in different areas of the business.
The career transition team is another means of promoting mobility. The team of specialists is on hand to help colleagues who are thinking of moving away from consultancy to industry, and assess their skills to determine what kind of role is right for them and what opportunities might be available, whether internally or beyond KPMG.
It may seem counterintuitive at first glance — the career transition team actively helps employees leave the firm. Drawing on an extensive network of contacts among clients, the team can often identify opportunities before they are advertised.
“We’ve reached the recognition that nobody stays 30 years at one firm any more. People bounce in and out of industry, to consulting, and back to industry. So we half-expect a proportion of our people to leave. We want them to be good leavers because they might go on to become clients or they might come back,” Hessey explained.
Pace of promotions was another push factor for high-potential individuals. The firm used to conduct a single annual round of promotions, which meant that consultants might have to wait nine to 12 months, or even leave the company, to progress. That’s now a thing of the past. Candidates with the right capabilities can be promoted as soon as an opportunity arises.
Time-in-post requirements have also been removed. Historically, one had to have been a manager for about three years before he or she could become a senior manager. Now, if there is a business case for it after a year or 18 months, and the individual is ready, the promotion can be made.
The people leader role is perceived as making a positive contribution across all aspects of people management, Hessey said. “It is a role that looks set to continue well into the future.”
Four pillars of the new approach
As part of its new talent strategy, KPMG UK has:
- Created a new role with specific responsibility for career paths, development, and performance.
- Abandoned forced distribution curve performance management.
- Set up a career transition team to promote mobility both internally and outside the firm.
- Removed time-in-post requirements for promotions.
Starting off on the right foot
Candidates with the right blend of technical, consulting, and change-management skills are hard to find, so it’s important new recruits feel engaged and integrated into the business from the beginning. The importance of getting the onboarding process right, particularly when a department is scaling up quickly, is another talent retention lesson learned. Here are some key aspects of the onboarding process at KPMG UK:
- KPMG engages with new hires after they resign from their previous employer, but before they join the firm, to make them feel welcome, wanted, and excited to join. This may involve an invitation to a dinner prior to their start date where they would get the opportunity to meet other peers who are about to join the firm.
- Laptops, phones, and email accounts are all ready and waiting on day one.
- New starters are assigned a buddy who looks after them for the first few weeks. On their first day, new starters sit with their buddies and ask them all the questions they might not want to ask anyone more senior — often starting with how to navigate the firm’s systems and processes.
- Performance managers are assigned in advance, so new starters know whom to look for and can contact them straight away. In consulting, a performance manager sets objectives and monitors performance but may never work directly with the appraisee.
- Those who have made the switch from industry to consulting attend a training session which talks through some of the differences in ways of working to help them make the transition as quickly as possible. They also attend a centrally run residential training course on core consulting skills.