Managing Talent In Trying Times
Wharton professor Peter Cappelli, the closing speaker at this year's HR Technology Conference®, offers a few contrarian views on talent management.
By Ed Silverman
Managing talent is one of the biggest challenges facing any company today. The fast pace at which the global economy is moving has made it harder than ever to effectively find, retain and grow employees, not just for crucial jobs, but for many other positions in an organization.
Yet, in a new book entitled Talent On Demand: Managing Talent in an Age of Uncertainty, Peter Cappelli, a professor of management at the University of Pennsylvania's Wharton School and director of Wharton's Center for Human Resources, argues that most of corporate America continues to rely on practices that worked 50 years ago but are, by and large, no longer applicable today.
The model he calls the "Organization Man" was well-suited for an earlier era, simply because large companies were able to nurture talent over an extended period of time without too much concern that employees would pick up and leave.
At that time, the obvious rewards for the employee -- opportunities for advancement and additional compensation and benefits -- outweighed the challenges, such as less job flexibility and mobility, and the need to adjust to a corporate culture in an era when many people worked for significant numbers of years for the same employer.
Moreover, companies generally dealt with more stable markets, which made long-range planning possible and, often, skills needed to do certain jobs were unique to each company.
But that's no longer the case today. Too many variables now make long-range planning much more difficult. The expectation of lifetime employment has largely disappeared and, simultaneously, the Internet has made job hopping much easier. Companies increasingly believe it is simply more pragmatic to poach employees from rivals than invest in the development of homegrown talent.
Cappelli, who is also a research associate at the National Bureau of Economic Research, suggests that HR leaders step back and view talent as a supply-and-demand problem. As he sees it, talent management is very much a goal worth pursuing, but it must be seen through a macroeconomic lens.
In his book, he advises companies to examine their talent needs in the same way that a state-of-the-art supply chain is managed. He contends that having the right talent requires a hybrid approach that is equal parts outside hiring and inside nurturing.
Cappelli, the closing keynote speaker at this year's
HR Technology Conference and Exposition
® in Chicago, Oct. 15 through 17, also offers some interesting ideas about viewing talent management as a way to generate a return on investment -- how to lower development costs and maximize the value of internal development programs, for example.
And he encourages the creation of an internal job market that allows ambitious or restless employees to pursue opportunities within their own organizations, rather than permit an environment where someone contemplating a move automatically turns to opportunities elsewhere.
A regular columnist for HREOnline.com, Cappelli recently chatted with writer Ed Silverman about the ideas in his book and the need to rethink talent management in a more demanding and uncertain world.
Given the increasingly fast pace at which events seem to move, why should a company seriously invest in talent management except, perhaps, for a few easily identifiable, crucial positions?
Well, you can imagine there are some jobs in a company where they might not bother to consider internal development. And so they'll look to hire from the outside market. But companies are getting interested in this stuff again. Why? Simply because it's not always so easy to hire on the outside.
Most employees want career development and you run the risk of losing someone -- or perhaps more than one employee -- when you bring a person in from the outside. There's the immediate effect and it may also send a wider signal.
Which industries, do you think, are more likely to require talent development more than others? And why?
We ought to distinguish talent development from succession planning. Talent development can be done anywhere. With succession planning, you're trying to predict which skills are needed in the future and which individuals may be suitable and how to grow them. That's hard to do in most situations. Perhaps if you're with a utility, succession planning can work, because the environment may be more stable.
But talent development can be done even in a more fast-moving environment. And talent development is necessary, unless you're shrinking and not going to need any new talent. Otherwise, if you're worried about people leaving, you've got to do things to keep talent. And if you do it right, it can be cost-effective.
There actually aren't too many organizations, in any industry, where talent management doesn't make sense.
You discuss the make-or-buy debate, in which a company either hires from the outside or grows talent from within, and you suggest that both are actually a necessity given the rapid pace of change. But for which type of work or industry would you strongly recommend one or the other specifically?
Having to make the decision is universally applicable. There are some contexts where it makes more sense to buy. And there's a lot of focus in the supply of talent on the outside. Some folks maybe don't need to develop talent internally. But even when talent is available on the outside, it may be cheaper to develop internally. There are a lot of variables, including the cost of recruiting versus the cost of internal development.
You have to examine your needs and, very importantly, your certainty about your needs going forward. But there are always going to be differences. Some hospitals, for example, have nursing training programs and some don't. But nurses are equally available for promotion and hiring. But each hospital will reach a different conclusion. I don't think, however, that this is actually industry specific.
At one point, you write that employers would prefer to hire outside candidates with at least three years of experience. So that creates a conundrum. What does this say about the commitment to hiring and training newbies?
Generally, employers prefer not to hire people who have to be trained. Most just haven't been able to figure out how to train them in a cost-effective way and, also, they're afraid of losing them once they've made that kind of investment. That's a problem. They can't figure out how to invest in employees without losing their investment. So employers are hiring people who are already trained.
But yes, getting experience in the first place is tough. I don't think this will change unless the labor market heats up. The big issue is that when enough employers do this, an entire cohort of people have a problem.
You say it makes sense to try to predict talent demand, but that succession planning doesn't seem to make sense. Why do you think succession planning isn't worth considering?
The complication is that you're developing somebody new based on what you think you'll need, but the process doesn't play out for five years from now. It's too unpredictable, so it doesn't work well. If you don't know where your business is headed, it's hard to know what kind of CEO you'll need.
The reason this doesn't work is because the job ends up changing. Is there a company where you can be sure that you'll know what you need in five years or three years?
What if the time horizon is shorter? Say 18 months?
Then what you have is a kind of replacement program. And the problem with that is that you don't have enough time to do anything. You can make the length of time short enough, but then you don't have time to really develop anybody.
The problem with all these programs is they take time and cost money. Why not wait until the event happens? Sure, you can develop a lot of potential successors and have bench strength. But nobody wants to wait around in their current role.
If they're any good, they'll leave if they get a good chance. If somebody else offers them a job, why should they wait on the off chance that the CEO gets hit by a bus. No one wants to sit on a bench.
How is talent on demand going to change opportunities for older workers -- those over 50 years old?
The current environment ought to be advantageous for them. Companies aren't developing or planning to hire talent in this market. And these people have been through management ranks and are familiar with procedures and policies. And they're probably in short supply. So you'd think this would be an advantage. But there's also prejudice.
Although most companies do not plan, as you note, for whatever openings arise, it would seem that increasing categories of employees are vulnerable as more outsourcing takes place. So why spend time and money on planning?
Traditional employee development doesn't work. It's a big problem and it's one reason why the old models don't help anymore. You can't rely as much on long-term planning if the environment is largely uncertain. There's a lot of outsourcing going on and mergers and acquisitions.
Trying to plan assumes you've got certainty. We need to move toward something more adaptable and responsive. But you just can't do it in the way we did in the 1950s.
Given all the variables and uncertainty you describe, why should a company invest in software to forecast talent needs?
The question is: What is technology on talent management doing for you? The software and technology seems to help organize the data, but it's not necessarily pointing you toward answers about what to do with the data. I think we probably could say that technology isn't providing solutions to talent management. It's only helping them organize the information to address the problem.
You note that the Internet and job boards have transformed hiring and job seeking. How does an employer turn that to its advantage beyond just job posting?
I don't think the Internet has much to do with [talent development]. It's made it easier to hire from the outside and undermined training and development.
If you had to offer a take-away message about what companies need to know about developing talent, what would it be?
Companies are facing a lot of uncertainty and need to find a way to address it. Supply chains have been [established] to address uncertainty -- the uncertainty of product-and-service demand. In the past, companies were driven by the same idea that the overall business environment was certain.
Now, they must come to grips with change. And supply-chain techniques have helped on the production side. We're just applying the same thinking to talent development.
May 16, 2008 Copyright 2008© LRP Publications
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