If CIOs could easily identify the qualities that determine highly productive staff members, they would hire more people with those qualities. Knowledge-intensive companies are focusing on a mix of measures to enable more effective human capital accounting. META Trend: The continued labor and skill shortage will result in 40%-45% of IT personnel being externally sourced by 2004. As a result, CIOs will be pressured to develop on-demand sourcing relationships and enterprisewide sourcing strategies. Throughout 2002\/03, CIOs will build talent\/skill pools and develop IT product portfolios with internally and externally consistent pricing. Human capital management (HCM) has long been a number-one priority in company vision statements, but because individual performance drives revenue and profitability in a knowledge-based economy, leading-edge companies are actively seeking ways to leverage their human capital for strategic advantage. Even when hiring slows, the drive to leverage existing talent will remain high. HCM is moving beyond departmental focus on headcounts, staff turnover rates, and employee job satisfaction surveys. IT managers have been focusing on identifying and acquiring talent while delaying internal training. A more holistic management approach (e.g., human portfolio management) will help managers shape behaviors that drive profitability and growth. Despite recent staff layoffs, IT managers worldwide still have vacancies of 600,000 jobs waiting for the economy to revive, but half of these are frozen until 2Q02. IT staff shortages are projected beyond 2004 in specific areas. Through 2002, 80% of Global 2000 (G2000) firms will assess and monitor capital assets that extend beyond financial assets. IT staff recruiting will remain a critical management focus while retention will raise less concern and retraining budgets are being closely scrutinized. IT training has dropped from 12 to 7 days average in the past four years. Turnover is acceptable at 10%-15%, but e-business, network, Java, and emerging technology skills are still in demand. By 2003\/04, market leaders will focus on attracting highly talented people and complementing vacancies with consultants and business partnerships. By 2004\/05, e-learning and incentive programs that apply to virtual teams will evolve to workforce staff members that operate as "free agents." Managers must re-evaluate recruiting expenditures by valuing the impact of training. IT skill investment will also improve retention and lower recruitment needs. Our research shows that only 33% of G2000 firms believe that their companies attract highly talented staff. In 75%, HCM processes for reviewing hiring and staff skills do not clearly distinguish among high-, medium-, and low-performer characteristics. The attributes include skills, knowledge, and social behaviors, and the most productive employees do not necessarily possess similar traits (e.g., IQ does not imply high productivity, self-confidence does not imply a team player). Similar performers do not demonstrate common behaviors (e.g., driver personalities are not consistently high performers, average performers can be very creative). High performers have learned how to transform their potential strengths into effective performance strategies, and successful performance depends on how well those strategies complement the organizational strategies and culture. Only 7% of companies felt they adequately develop their people and effectively move low performers out or on to more suited tasks. Nurturing Is Not Natural. Employee nurturing from recruitment, to retention, to retraining is an encapsulation of a valuable asset life cycle. This most important asset is often being handled improperly. IT managers focus on "buying" skills rather than "growing" them for many reasons - most of the reasons are "nearsighted." This policy is one reason for the vacancy level. CIOs and IT executives must promote and grow employee value from within and hire entry-level workers that can pick up the slack from the layoffs. Corporate HCM strategists must set development standards, performance targets, measurements, and rewards. They must help companies assess opportunities, weigh risks, and determine what types of HCM technologies, services and solutions are worthy of investment (e.g., advertising and recruitment, benefits administration, learning and development, performance management, HCM systems integration). Everything from e-learning, to telecommuting, to virtual teams, to stock options must be re-evaluated from an HCM value perspective (i.e., value of intangibles that are not recognized through traditional accounting and valuation techniques). Recognizing and leveraging HCM value (i.e., managing it more productively) for competitive gains and growth is a significant challenge when the measure of IT productivity is also changing. Doing More With More. Managers throughout an enterprise are responsible for the quality of their talent and, therefore, are accountable for HCM, but top HR executives and CIOs will in fact provide strategic leadership as companies move in this direction. HCM must transcend not only departmental boundaries, but also organizational ones. This new leverage also draws on the networks of talent from strategic partnerships. Involving resources that lie beyond immediate corporate boundaries extends the effective scope of opportunities (e.g., collaborative environments) and presents new risks (e.g., managing free agents, access security). Clients should do the following: Know all the available assets ? not just inventory, but also their strengths (e.g., customer preferences, vendor services, employee characteristics, product costs) Keep track of employee training needs and plan for personal growth as part of their individual performance evaluations Monitor training results to know which methods and topics improve behaviors Provide rewards and incentives that link to department and company goals Measure performance of employees, customers, and partners (e.g., service-level agreements, surveys, scorecards) Quantify which products and services build total value Manage "intangibles" by expanding understanding through scenario planning and innovation programs Build effective relationships based on reliability, responsiveness, service, and trust (i.e., build key performance indicators for every relationship) Cut expenses and salaries before eliminating human capital Integrate early warning systems, streamline data entry, and evolve knowledge databases to extend the organization's capabilities to model and manage HCM assets Building personal values into business values means nurturing talent. This refocused policy (i.e., retrain, retain, then recruit) maximizes the total HCM asset value. Cutting back on efforts to build a more productive workforce may help the balance sheet, but the consequences may leave some companies out of the next wave of growth. Valuable assets, especially hidden in the minds and experience of employees, exist in many different places and are not being nurtured to their fullest value. Organizations that recognize the inherent HCM value will find strategies for turning value flow into cash flow by monitoring HCM impact on the corporate balance sheet. Business Impact: Customers, employees, and strategic partners are attracted to companies with a reputation in effective human capital management (HCM). HCM generates benefits from developing a reputation for recruiting excellence, prudent resource use, clear rewards\/accountability, training opportunities, and a collaborative\/flexible workplace. Bottom Line: Roles and responsibilities are in flux, and this provides an opportunity to focus on recruiting, retaining, and retraining highly skilled people. As companies explore new ways of building and leveraging talent, high performers must be identified and cultivated from internal and external sources. Copyright \u00a9 2002 META Group, Inc. 208 Harbor Dr., P.O. Box 120061, Stamford, CT 06912-0061 \t\t\t\t\t\t\t\t\thttps:\/\/www.metagroup.com \t\t\t\t\t\t\t\t\tTelephone (203) 973-6700. Facsimile (203) 359-8066. \t\t\t\t\t\t\t\t\tAll rights reserved.