Over the last two years, Bersin & Associates has conducted research into all aspects of corporate talent management. In addition to identifying and analyzing market trends, we've studied the business impact of a wide range of talent-related processes.

Among the processes with greatest business impact are those related to career planning. In fact, of 62 talent processes examined, performance and competency management and coaching — fundamental elements of any successful career-planning strategy — top the list in terms of business value.

But just as compelling as the quantifiable data that support the importance of career planning are the best practices we discovered during our extensive interview process. We found companies that have adopted a strategic approach to career planning see significant business results. Organizations that take the long view (that is, recognize the need to develop and cultivate employee talent over years) are winning the war for talent.

The Nature of the Talent Shortage

Let us first set the stage. Our research indicates global corporations report universal talent shortages: 53 percent of organizations have severe shortages in midlevel managers, 48 percent in technical professionals, 44 percent in director-level managers and 39 percent in sales and service personnel. We estimate that by 2012, the shortage of skilled workers in U.S. corporations will exceed 10 million. These statistics do not reflect a shortage of available workers — they reflect the scarcity of skilled workers.

To address this talent shortage, many companies fine-tune their recruiting processes and incorporate sophisticated analytics to help them target a shrinking pool of available talent. Some organizations, such as Raytheon and the North Shore Healthcare System, work closely with colleges and universities on programs that will help prepare graduates with the skills needed to enter the workforce.

Such tactics can help get talent through the door, but the best companies invest significant effort to construct career paths that keep employees interested, engaged and retained — and that provide qualified candidates for crucial midlevel management and director jobs.

The Pinball Approach to Career Development

The pinball approach is one of the two philosophies of career development. If companies take this approach, employees are expected to manage their own careers. Although they might have vast learning resources at their disposal, employees often receive little or no direction beyond the specifics required to do their jobs.

In such environments, most employees bounce from job to job like pinballs. One senior vice president of HR said employees sometimes bounce into the right job. But more frequently, employees drop through to the bottom of the machine and leave the company.

The pinball approach is based on a belief in rugged individualism — employees who work hard will intuitively know how to develop themselves and seek out appropriate career opportunities. The approach is based on these assumptions:

• The organization has a continuous stream of new people joining the company. The approach also assumes employees will naturally and successfully seek out better jobs on their own.
• Those employees who are not selected for promotion will find rewarding positions that yield enough satisfaction to ensure retention.
• Managers naturally will act on behalf of employees and support their search for better positions that leverage their strengths.
• Managers will spend time trying to develop employees for future roles and not just coach and manage them to drive performance in their current job.

We all probably have worked in environments with a pinball approach to career development. For instance, I once had a manager who was an excellent leader but offered no advice about career opportunities — any information I could find was through my own contacts. After nearly 10 years of work in sales and technical service, I finally decided that company was not for me.

Companies can get by with the pinball approach in times of workforce surpluses or in economic downturns, when unemployment rates are high. In current conditions, however, where skilled workers are scarce, and businesses are growing, companies that continue to use this strategy (if you can call it a strategy) will find themselves increasingly compromised by a lack of skilled employees and managers.

Deterministic Approaches to Career Planning

The alternative to the pinball approach is deterministic career planning. Deterministic approaches take a more formal approach to employee development and incorporate methods to move employees into the most business-critical and appropriate positions.

For instance, when a company foresees shortages in engineers or nurses, it develops specific career-planning programs to fill these talent gaps.

Deterministic approaches can be implemented at the managerial, business-unit or enterprise level. Programs can be quite complex, and at higher levels, they can take several years to fully implement. They typically include the following elements:

• A ladder of potential positions for both management and technical career paths over many years.
• A set of competencies and skills required for each position. Such information helps condition employees to look for the right positions, and it provides a coaching foundation for them to move up.
• Defined training and development programs to help employees prepare themselves for various positions in the career path.
• Self-assessments and job descriptions to help employees understand whether they are qualified or suited to the positions available.

The Business Impact of Career Planning

Data from the recently published study "High-Impact Talent Management" proves the pinball approach is failing. Figure 1 compares the pinball approach (labeled "individual career planning") with three levels of deterministic career planning: manager, business unit and enterprise.

The chart has two important takeaways. The first is that the data clearly show organizations using the pinball approach actually show negative returns — this approach is worse than no career development program at all.

When individuals are expected to manage their own careers, companies essentially communicate to employees that they are not interested in developing them. And to make matters worse, the organization cannot fill critical talent gaps because no one knows exactly where the gaps are most acute, what characteristics and skills are required to fill these roles and how to move people into vacant positions.

The second takeaway is that the business impact of career planning increases according to the level of centralization and business alignment. The companies that see the greatest results take an enterprisewide and long-term view of career planning.

Although management facilitation is important to career planning, managers typically do not have an enterprise view, or the resources required for career development. And although HR can reinforce adoption of career planning, it is not the most effective driver.

Career Planning at Fidelity

One of the most innovative career development programs we analyzed was developed by Fidelity. A large percentage of Fidelity employees work in call centers in a wide range of positions, including marketing, sales, advisory services, support and technical operations.

Fidelity recognized it had an ongoing talent gap in its call center operations. Analysis showed high performers who are not well-managed and working in call centers typically left the company after 24 to 30 months. The workforce planning team discovered these high-performing employees become bored or disenchanted with their work after about 18 months, started seriously looking for new jobs at about two years and soon left the company.

From Fidelity's standpoint, this talent churn had significant negative consequences. After 12 months on the job, these employees were highly trained and productive, and they created significant customer value — they couldn't be easily or quickly replaced.

The challenge was to provide a career-planning program that would retain high-performing, high-potential employees and provide them with the career opportunities they naturally desired.

A forward-thinking HR director at Fidelity came up with a powerful solution: Through a SWAT-team approach, the director's team canvassed business managers and developed a clear and consistent set of job descriptions, career paths, competencies and self-assessments for each position in a Fidelity call center.

This required significant effort and tight alignment with call center management. Responsibilities were not fully documented, job roles and titles continually changed and career paths were often sketchy at best.

When finally collected and documented, this information was then incorporated into a new career development portal. The portal showed graphical representations of various career paths and gave users access to job descriptions, competencies and self-assessments for every job within the call center.

Mimicking popular Web sites such as Netflix and Amazon, the portal also gave employees the ability to expand their searches by including features such as "People who like this job also like these jobs" and "People who don't like this job also don't like these jobs."

Employees were not given access to the system until they had been at their jobs about 12 to 18 months and had obtained a specified performance rating. This control was put in place to prevent employees from shopping around for new jobs before they reached proficiency in their current roles.

One of the biggest challenges the team faced was gaining line managers' full acceptance. Rather than hoard top employees, managers had to encourage high-performing employees to seek out new positions. They also had to publish internal job openings.

This shift required a re-education of managers and changes in their own evaluations. Managers had to be assessed on the success and mobility of their employees, not solely on the performance of their business units.

The portal was a huge success. Within a year of its launch, Fidelity saw a reduction in turnover of more than 30 percent at this particular call center.

Attributes of Successful Career Planning

The success of Fidelity's program incorporates several important attributes of effective career planning. These include:

• Aligning career planning with business-critical talent requirements.
• Taking a long-term view and a top-down approach.
• Gaining input and buy in from lines of business.
• Providing the resources and guidance employees need to identify and pursue career opportunities.
• Building career paths on competency and performance management processes.

In today's tight labor market, efficient and effective career planning is one of the sharpest tools you can use to strengthen and improve your company's talent resources. Successful initiatives require significant planning and effort, a centralized approach and an enterprisewide perspective. Companies that continue to play pinball with employees and their careers will lose the talent war and their competitive edge.