While U.S employers currently strike an even balance between "building" talent from within and "buying" talent in the form of new hires, the current economic climate and labor market appear to be shifting this balance, according to a new survey from Mercer Human Resource Consulting on managing and measuring reward program investments.

The Web-based, national survey of more than 300 large employers shows that half (51%) describe their company as currently having an even balance between "buying" and "building" talent.  Most of the remaining survey respondents are fairly evenly split between a strong preference for building (25%) or buying (22%).

However, when asked whether their "build vs. buy" strategy will change in the future, 40% said it will remain the same, while 37% expect to "build" more and 15% expect to "buy" more.  The remainder were unsure.  The shift is most pronounced among companies whose current strategy is to buy talent; more than half (56%) said they expect to build more in the future.  (See charts on page 4.)

"Cultivating talent from within requires a different approach to talent management," says Peter Lupo, a senior reward consultant in Mercer´s New York office.  "Because of this anticipated shift, we expect to see organizations making greater investments in such areas as training, career development, succession planning, and identifying high-potential employees."

The "build vs. buy" shift is consistent with other survey findings, Mr. Lupo notes.  The employers surveyed cite attracting/retaining the right employees as their top reward program challenge over the next 12 months (83% cite this issue as "very important" and 16% cite it as "somewhat important").  Differentiating high performers ranks second on the list of current concerns (78% and 21%, respectively), and cost control is third (75% and 23%, respectively).

Other findings

Mercer also asked survey participants to comment on the effectiveness and management of their reward programs (e.g., pay, benefits, careers, work/life).

§         Just 17% of the respondents said their current reward programs support the organization´s talent requirements to a great extent.  The majority (69%) said their reward programs support their talent needs to a moderate extent; 14% felt there was a minimal connection between their organization´s reward programs and talent needs.

§         External benchmarking is the technique most commonly used to make decisions about how to allocate reward investments (used by 75% of the employers surveyed), followed by best practices among other organizations (65%), and employee surveys or other employee feedback (48%).  Few companies (29%) assess workforce trends based on internal statistical modeling of workforce patterns to guide their reward investment decisions.

§         One-fifth of the respondents (21%) said they are "highly confident" in their current approaches to allocating reward dollars.  More than two-thirds (67%) are somewhat confident that their organization´s techniques will yield the desired results, and the remainder (10%) are minimally or not at all confident in their current methods for making reward investment decision.

"It´s clear from the survey responses that most organizations see potential for improving the alignment between their reward programs and talent needs," Mr. Lupo says.  "A major hurdle in creating this alignment is that organizations don´t always have the data they need for making effective, large-scale people decisions.  That´s why we see the heavy reliance on benchmarking and best practices - in essence, using what has worked for other employers.

"To make better decisions, organizations need to get a handle on their current investment in reward programs, what kind of return they are getting on that investment, and whether there are ways to reallocate some investments to generate greater returns," he says.

The complete results of Mercer´s new Measuring the Return on Reward Investments survey are available free of charge at www.mercersnapshot.com.

Mercer Human Resource Consulting, one of the world´s leading consulting organizations, helps organizations create measurable business results through their people.  With more than 13,500 employees serving clients from 142 cities in 40 countries worldwide, the company is part of Mercer Inc., a wholly owned subsidiary of Marsh & McLennan Companies, Inc., which lists its stock (ticker symbol: MMC) on the New York, Chicago, Pacific, and London stock exchanges.

Chart 1: Does your company currently build or buy talent?

Chart 2: How will your build vs. buy strategy change in the future?

Source: Mercer Human Resource Consulting