When was the last time you took a two-week vacation? Would you even feel comfortable being away from your business that long? For many owners and executives at manufacturing firms large and small, the idea of an extended vacation seems impossible. There’s too much work to do, and they just don’t completely trust their company in the hands of others for more than a few days. It’s an often unrecognized gap in a business strategy.
Companies plan for growth, for new markets, for new products, and for new purchases and equipment, but they often forget to build a strategy for managing talent to achieve their business goals. Yet having a business strategy focused on talent management and engaging employees is vital to achieving your firm’s goals.
Not having a talent management strategy can be costly. A 2024 survey by Gallup found that employee engagement worldwide had declined to 21%, the lowest since COVID at a cost of $438 billion in lost productivity. In the United States, only 52% of workers said they were thriving in their jobs, which is better than the 33% globally but still a drop of 4 percentage points from the previous year. Older managers and women managers reported the most significant declines in satisfaction and engagement.
Having a business strategy related to talent and leadership development is the first step in building an employee base that gives you the confidence to grow your business, plan for retirement, and maybe take a long vacation. Your company will move toward that goal when you understand and optimize the talent management cycle and create a leadership development plan that gives potential new leaders the tools they need to grow.
Business strategy pillars
As a business consultant with Enterprise Minnesota, I visit a lot of manufacturers. I often can see the character of the culture as I walk around a facility. At many companies, I see engaged employees. They enjoy their jobs and find them interesting and challenging. The entire facility has a positive energy that communicates that people feel valued and are moving toward a common goal. At other plants, the mood is heavy. I see that workers are keeping their heads down, doing their jobs, and just getting through the day.
Culture is the first pillar in a successful business strategy. I believe a positive culture grows from intention and commitment from the company’s leaders. They’ve shaped the company culture, and they live it day-to-day. Successful cultures build a sense of belonging among employees. Workers are trained effectively and see that they have the autonomy to do their jobs well. Company leaders articulate the values of the company in a variety of ways and demonstrate those values through their own actions. Employees understand the mission of the company and know its values and objectives. They see that the company acts on its values through how it treats its employees. It ensures the work environment is safe. It provides employees with tools and time to ensure their well-being.
Transparency is also remarkable in companies with effective business strategies. Leadership transparency involves plentiful and effective communication. Leaders avoid ambiguity about the strategic direction of the company and how it is performing. They have the courage to have difficult conversations, whether that is privately holding a worker accountable or addressing a company-wide issue. Recently, I worked with a manufacturer whose workforce included a large population of non-English speakers. These were legal immigrants but recent federal policy changes had fueled concern about their status. Rumors started to spread. Rather than let that fester and false information flourish, the managers held a townhall with all employees where they discussed the policies and addressed the fear clearly, transparently, and in the open.
This kind of clear communication style produces a sense of stability. Meetings are meaningful and feedback is given individually and honestly. Employees who are closest to the work have an outlet to share concerns and ideas and know they will be heard.
One of the best managers I ever had was a man named Richard. I worked for him when I was much younger and felt intimidated by my position leading workers who were 30 years older than me. He encouraged me through timely feedback about what I could do better as well as praised me for what I was doing right. He seemed to care about my career and gave me leadership opportunities and assignments that were challenging for me.
Performance development is the third pillar of a business strategy — and once the other two are in place, it is the pillar where most of your attention is given. It requires accountability — for yourself and your employees — and recognition of successes. Excellent leaders hold themselves accountable as the people who set the tone in the workplace. If you don’t like what you see or how your team is doing, start by asking yourself whether you are providing the integrity, accountability, and respect that inspire excellent performance.
As you approach performance development, it helps to understand the talent management lifecycle. It includes four phases: recruitment, development, retention, and transition.
Recruitment. This initial phase is where the company and employee decide if the fit is right. Does the potential employee have the skills, the right attitude, and the growth potential that the company is seeking? At the same time, applicants consider whether the job specifics, work environment, pay, benefits, and other aspects of the position work for them. If everything aligns, the employee is hired and trained.
Development and retention. The second and third phases of the talent management lifecycle are the productivity zone — the sections where there is the most benefit to employers and the greatest learning and development by employees. In these phases, the employee learns the job and decides to remain with the employer; then the employee learns more skills and still decides to stay on the job; then the employee may learn even more skills, be promoted, and decide again to stay. In the best circumstances, the cycle of development and retention continues for many years as the employee acquires more and more skills and grows in understanding and even affection for the business and its mission. Breaking this cycle, where the employee stays only for a short time, is disruptive and costly. Some estimates are that it costs between $100,000 and $150,000 per person for a short-timer who is hired and trained by you but leaves the position before achieving true competence. Alternatively, if you hire good employees who grow on the job and are excited to spend their careers in your organization, the final phase is a happy transition.
Transition. In this phase you and your employee separate, hopefully with a big retirement party and a newly hired employee, who is as excited about the job as your former employee.
But how do you continuously achieve the productivity zone? It helps to understand how skill development occurs as a system and to embed it in daily work.
Performance development
While we often think of skill development as a course or a certification, 70% of the development of employees is done on the job. They learn how to set up, operate and repair equipment, how to deal with unexpected problems, how to manage workloads, improve efficiency, and more from their direct supervisors as well as team leads and fellow workers. This is the most important learning situation, which is why it’s crucial to have a culture where employees feel comfortable asking questions and making suggestions.
Another 20% of development is accomplished through active coaching and mentoring, usually by front-line supervisors. Finding supervisors who are skilled at coaching is crucial. The best mentors have a passion for teaching, understand the skills they are teaching completely, and have the patience to work with people who have a variety of styles and abilities. The best front-line leaders are not necessarily the star performers. Many times, our highest production team members are NOT good in leadership roles and companies create a lose-lose outcome.
The final 10% of skill development is through formal training — the courses, conferences, and certifications that we usually think about as employee development.
Whether done on the job or through courses, intentional talent management starts with buy-in from organizational leaders. This type of program requires effort, and the entire leadership team needs to be on board.
Those driving the change should have one-on-one conversations with all leaders to make sure they are committed to changes in talent management programs.
Identifying which skills and competencies employees need at each level clarifies when employees are ready to be promoted. It may be specific technical skills or it may be things like accountability, difficult conversations, or leading change. Some companies use a leadership skills matrix to quantify which skills are needed at which levels. You also need to identify each individual’s gaps in skills and knowledge. With 360-degree feedback, employees learn what others think about how they do their jobs.
With skills and gaps identified, the next step is to create an individualized development plan. Development activities can include things like learning experiences, chances to mentor or coach other employees, formal learning, or stretch assignments.
Filling the leadership pipeline
Recently I met an enthusiastic young man who had been promoted into a leadership role in his company. He had many of the qualities that companies look for in the next generation of leaders: a passion for the work and great technical skills. He found himself supervising other employees who were not only as old as his parents but as old as his grandparents. Communication was a challenge. Coaching these older workers required him to change how he thought about his peers and subordinates as well as how he talked with them when coaching.
For his company, promoting this talented individual from within was a significant benefit. Growing leaders internally is more cost-effective than hiring outsiders. Internal applicants are already fully versed in your company’s mission, products, and values. But growing leaders internally requires effort and intention.
When I work with companies on performance development, I ask them to think about their leadership pipeline. The most successful companies develop it from the bottom up, focusing on training front-line leaders and ensuring that each potential leader is working at the highest level for their current skills. Ask yourself, does this individual have the skills, time, and values to be leading where they are?
Managing self. At the base of the pipeline is the workforce where the largest number of employees are individual contributors who need to manage their own work well. These individuals should have the skills and confidence to think about how best to do their jobs, to spot errors and correct them, and to contribute ideas to the company’s continuous improvement. Employees identified as potential leaders should be given opportunities to stretch their skills and move to the next level.
Managing others. The next level consists of people who are still working on production but are also coaching and directing others. Making the transition from managing only yourself to managing others while also doing the work is one of the most difficult transitions in talent management. It requires new skills, such as planning and assigning work and holding others accountable. It also involves changes in attitude. Criticism of upper levels of management needs to be tempered. New supervisors need to be allotted the time to coach and teach others rather than just doing the job themselves. It may also involve changes in personal relationships among employees as a buddy moves into the boss role. Supporting these new leaders with mentoring and formal skill development can help ease the transition.
Functional manager. When moving into a department manager role, the employee’s focus shifts to developing skills related to the big picture, such as aligning company strategy with department and individual goals, selecting and developing front-line leaders, and managing resources and workflow. For some new managers, moving away from doing any hands-on work can be a challenge. Others welcome a chance to stretch their strategy, analysis, and leadership skills. New functional managers must adopt an organizational perspective and embrace the value of other functional areas to be successful.
Business leader. Toward the top of the leadership pipeline is the business leader. For this leader, strategy, analysis, long-term thinking, assessing core competencies, and communicating with customers are essential skills. They spend their time delegating work, coaching others, and being the face of leadership to employees, customers, and other stakeholders. For top leaders, time management and balancing the many elements they are responsible for is a significant challenge. We know from talking with many company owners and C-suite executives that peer groups, such as Enterprise Minnesota’s Peer Councils, provide business leaders with a comfortable place to share the challenges they face and get ideas and advice from others in the same position.
What’s your next step?
Do you have a talent management strategy that supports your business strategy? Have you built the pillars of culture, leadership transparency, and performance development as your solid foundation? A failure in any of these areas can be devastating for a company if there is a sudden loss of a key leader. As you develop your own talent management plans, consider these three things.
Talent management is as important to your business strategy as new markets or new equipment. Pursue talent management with the same intention that you would other parts of your business.
When you seek to influence how others in your organization practice leadership, look first at your own style. If you model what you want to see, others will follow.
Once you have given other leaders the skills and power to do their jobs, let them go. Little is gained by micromanaging. If you have leaders in your organization who you trust, who have the skills and attitudes you’ve shown them, maybe you can finally schedule that nice long vacation.
Return to the Winter 2025 issue of Enterprise Minnesota® magazine.
