AIF International Symposium 2011
Talent Development: The New Paradigm
Closing Remarks
Y Bhg Tan Sri Zarinah Anwar
Vice Chairman, AIF Board of Directors and
Chairman, Securities Commission Malaysia

Ladies and gentlemen,

Thank you very much for still being with us this late Friday afternoon. I hope the last two days have reinforced the critical importance of continuing investment in the development of human capital to meet the needs of the financial services sector.

Although well worn, the phrase “our people are our greatest assets” has never rung truer for the financial services sector, which today faces an environment of great challenge and unpredictability, requiring high levels of knowledge and skills to navigate and overcome. The quality of human capital is key to the growth and continued success of the financial services sector, and the confidence of our stakeholders in the competence and integrity of its participants.

I am pleased to note that many among this Symposium’s participants are CEOs and members of senior management teams. Indeed, it is heartening to note that increasingly, CEOs have taken on personal leadership of people issues in their organisations, and are not just leaving this core responsibility of management entirely in the hands of their HR professionals.

Today more than ever, it has become absolutely critical that human capital development is integrated into a business’ long term strategy, accorded the highest level of top management attention and allocated adequate resources.

Human capital is a critical asset
Nearly fifteen years ago, McKinsey and Co conducted a year-long study and published their report “The War for Talent”. The study concluded that the most important corporate resource over the next 20 years will be talent: smart, sophisticated business people who are technologically literate, globally astute and operationally agile.”

Today, fifteen years later, this finding remains more true than ever. As competition becomes global, and capital more accessible, the demand for talent intensifies while supply continues to remain a challenge. In the financial services sector, this means investments required to build capacity to ensure lasting competitive strengths and superior business performance that will ensure long term sustainability. It means investments in human capital needed to build capacity to sustain a strong knowledge base and to transform such knowledge into growth through the development of innovative products and services that meet the needs of a wide spectrum of investors and customers.

Inevitably, companies embracing the right human capital strategies can grow their value by mitigating impending risks, capturing profitable opportunities and strengthening internal controls and governance.

Changes to the global financial landscape especially in the aftermath of the global financial crisis have brought about important developments that are shaping human capital development. Today companies are subject to more intense regulatory and public scrutiny and shareholders can be more unforgiving.

Given the changing landscape therefore, no company can thrive without quality and skilled people at all levels. As the financial services sector increasingly focuses on developing and sustaining enduring and profitable relationships, the future will demand an even greater need for cross-border, stakeholder and risk management capabilities. As profiled by the McKinsey study, today’s workforce must be highly qualified, equipped with technical capabilities and knowledge, and importantly, have the agility to respond quickly to challenges and opportunities that may arise.

The global financial crisis is revealing in how few firms have really thought through their talent development strategies, resulting in the facilitation of multiple and reinforcing governance failures that ultimately led to damage and destruction of colossal proportions. Firms lacked proper risk management systems, and too many compensation schemes incentivised short-term results. This point was amplified by the Honourable Minister in his speech yesterday when he stressed the need to embed a culture of ethics and morality in human capital management in parallel with the pursuit of technical skills and knowledge. Indeed the weaknesses in standards of ethical conduct and governance was a key lesson of the crisis and demonstrated the importance of investing time and effort in developing a culture of discipline, integrity and good governance in the management of talent.

Prof Charles Sampford, Director of the Institute for Ethics, Governance and Law observed that basic lessons need to be re-learnt by the work force of the financial sector in the wake of the crisis:

  • that honesty and integrity in financial transactions do matter;
  • that providing information that is complete fair and accurate preserves the integrity of the system;
  • that boards should not allow the erosion of due diligence because the costs are just too high; and that
  • a more effective system of ethical safeguards should be developed.

In the new paradigm on talent development therefore, a holistic approach to building capacity is needed where technical skills and knowledge is complemented by a strong base of values, ethics and morality. It is clear that inspiring and ethical leadership and human capital are key to superior business performance. Good governance is ultimately about performance and accountability, and good governance is good business; simply because companies with good governance are likely to be better at achieving operational efficiency, improved sales and customer loyalty and are also better able to attract and retain quality people.

In this regard it is important that the tone is set at the top. Clearly this is a challenge for which the CEO has a pivotal role to play. The challenge becomes even more complex as globalisation, mergers and acquisition, and the expansion of business across borders intensify demand for talent with global capabilities, and the ability of talent from different cultures and backgrounds to combine into an effective talent pool that best serves the needs of the business and industry.

No doubt developing and managing talent is a complex endeavour, and requires vast investments in time and effort of the CEO and his top management. Companies that are best known for producing quality talent often have one trait in common; and that is the CEO’s assiduous involvement in talent management. Proctor & Gamble’s A.G. Lafley takes time to coach his regional leaders one-on-one to be “courageous and inspiring”. GE’s Jeff Immelt personally teaches leadership style to their young talents. And, Steve Ballmer, CEO of Microsoft captured this commitment when he said: “Nurturing and developing the top talent; for me, that ends up being the number one thing I spend time with.”

It will be an inspiring moment when a CEO from the financial services sector stands amongst these leaders in a citation of CEOs who have achieved outstanding success in the development and management of talent.

The global war for talent means that talent has choices. Scarce talent goes where it pleases and can be easily enticed to leave. Thus adequate recognition and motivation must be offered, including proper career planning – a fair expectation I must say, given that an individual who joins an organisation is making an investment in the firm by learning and training for the job and doing the job well. The scarcity of talent makes it even more imperative that adequate investment in talent is made on a sustained basis. The development of a deep and broad talent bench is a steady, ongoing effort that requires a clear, well-defined strategy and disciplined execution.

There is no room for short-termism in talent development. Many financial firms throughout the world found this to their detriment during the global financial crisis. Many firms had taken the opportunity of the crisis to restructure, to trim fat in order to achieve a leaner organisation, but these same firms discovered soon enough that they had cut too deeply and were not well positioned to take advantage of the business opportunities that arose from the sooner than expected growth which had returned. Short-termism is a real threat to a firm’s competitiveness, and this applies equally to strategies for talent development as it does to a firm’s other business imperatives. Long term, sustainable value can only be derived from clear strategies on building for the future. There cannot therefore be any complacency in the development of talent. Those who do not plan and invest, risk losing the most because as competition for talent intensifies, the gap between the winners and losers will become wider.

Finally, I would like to make a point on reporting. I believe there is great interest amongst shareholders and other stakeholders to understand the talent management strategies of companies and the impact of such strategies on performance, both current and future.

Indeed there is great value for companies to undertake such reporting. Human capital development and management is a critical part of a company’s business strategies, and failure carries significant risks including the loss of key people, high turnover of staff and difficulties in recruiting the right talent. No balanced and comprehensive analysis of a business’ performance and its risk profile will be complete without an analysis of its talent management strategies and the attendant risks to its potential to execute its business plans.

A company’s human capital is part of the company’s intellectual capital; and the quality of its human capital can have a great impact on the difference between a company’s market value and its book value. Thus the proper management of its human capital has a great bearing on its ability for value creation. This is of course of considerable interest and concern for shareholders. There is no reason therefore why the management of such an important asset is not reported on.

I am extremely heartened that a quick review of the Annual Reports of more than 20 top public listed companies in Malaysia reveals that more than 90% are already reporting on human capital development issues. Apart from general training, learning and development, staff benefits and labour practices, many go further to talk about people as assets, and showcase efforts on career development, leadership development, talent management and succession planning. This would seem to indicate a common interest and acknowledgement particularly among major PLCs of the importance of properly reporting on the management of their human capital. It would seem to me that they advance their value proposition as an employer of choice by putting people as a key driver of performance. Such voluntary disclosure is perceived as in the best interests of a company and its people, and provides a good assessment to stakeholders and shareholders of the company’s potential to execute its business strategies successfully1.

In other words, the performance of our employees impacts all aspects of the business, and going forward, I would imagine that stakeholders with an interest in such information will help shape the reporting on human capital management.

Ladies and Gentlemen,
The financial services sector is going through many changes. Against the background of such a dynamic landscape, there will be an increasing need to adapt to a changing workforce, a diffused working environment and the pervasive use of technology in many aspects of financial market activities. The infrastructure for the development of human capital management will become an increasingly important element in defining the potential for future growth. CEOs and senior management need to embrace these changes. In a knowledge-intensive, skills-based industry, success will increasingly be an outcome of how well we integrate human capital with other critical business strategies, develop our employees and grow the talent bench in order to build a world class workforce that will enable us to penetrate new markets and grow the business through competitive advantage, differentiating strategies and innovation.

Ladies and gentlemen
On that note, on behalf of AIF, I want to thank all of you for your participation, all the speakers and resource persons for willingly sharing their knowledge and expertise, the sponsors, and last but not least, the staff and management of AIF and its affiliated institutes for making this Symposium a reality. Judging by the attendance and interest, it seems to me that this inaugural Symposium has been a resounding success.

Thank you.

1 Reporting on Human Capital Management, Hartley V, Robey D. Report 423, Institute for Employment Studies, 2005. ISBN: 978-1-85184-353-4.