Four Principles to Execute Today's Talent Management -
June 23rd, 2008
Four Principles to Execute Today's Talent Management
by Agatha Gilmore
With an aging workforce, a growing talent shortage and an uncertain economy, a lot of emphasis has been put on developing new and exciting tools to help organizations navigate their talent needs. But while technologies might be revolutionary, the best practices behind them aren't groundbreaking.
According to Peter Cappelli, professor of management at the Wharton School and author of Talent on Demand: Managing Talent in an Age of Uncertainty, the talent management models being championed today were developed in the 1940s and 1950s.
"Everything that anybody is talking about doing now was done arguably better in the early 1950s," Cappelli said.
Techniques such as 360 feedback, ranking systems, assessment centers, executive coaching and sophisticated workforce planning all were popular during this time. Ninety-six percent of big companies in the U.S. even had dedicated manpower-planning departments, Cappelli said.
"But that whole approach was based on the assumption companies knew with very great certainty what they were going to be doing years in advance," he explained. "If they had a 10-year business plan, [they] more or less stuck to that 10-year business plan. And if you know what the company is going to need in 10 years, it makes workforce planning much simpler."
Additionally, talent managers in the 1950s knew exactly where their talent was going to come from. There were virtually no lateral hires in those days, as most organizations hired entry-level workers and then promoted from within.
These same models are applied today, but change is more rapid - thanks in large part to technology - and the economy is volatile. That means organizations must continually modify their business plans to reflect demand and remain competitive. Additionally, as talent moves in and out of organizations faster and more frequently than ever, organizations have a harder time accurately predicting talent needs and end up lurching between too much and too little, Cappelli said.
"The problem we've got in talent management is managing risk and uncertainty, " he said. "How do we do talent management when we can't accurately forecast in the long term what businesses are going to be doing - when we can't accurately forecast in the long term or know with certainty who is going to be inside the company [or] what our internal talent supply is going to be like?"
To answer this question, Cappelli used his extensive knowledge of business, specifically of supply-chain models, to devise a set of four principles for successful talent management.
Principle 1: Make and Buy to Manage Risk
With all this talk of a talent war, companies might be overshooting their needs when it comes to hiring. This is more expensive than underestimating because retention costs - especially when it comes to idle, likely-to-leave employees - far outweigh the higher cost per hire, Cappelli said. Companies should undershoot their estimates and plan to hire from outside to compensate for any deficits, he said.
Principle 2: Adapt to Talent-Demand Uncertainty
A variety of factors including technological advancements and societal changes have made people more mobile. Organizations must accept that talent comes and goes and adapt their programs accordingly. For example, rather than put high potentials through a three-year functional program, talent managers could bring them together in an 18-month course that teaches general management skills and send them back to their functions to specialize, Cappelli said.
Principle 3: Improve the ROI of Employee Development
Investing in employee training and development is crucial for any organization, but talent managers are aware that workers easily can take their new skills elsewhere. Thus, organizations should get employees to help cover the investment, Cappelli said. While it's illegal to charge employees for training required for their jobs, companies can take advantage of their newly honed skills by offering them experience-rich stretch assignments on a volunteer basis.
Principle 4: Balance Employee-Employer Interests
Talent managers can preserve their development investment by getting employees involved in the process, as well. Factor in employee goals with business needs, then have a third party mediate.
[About the Author: Agatha Gilmore is an associate editor for Talent Management magazine.