Talent Management Column

Talent Management Cycles: Part II

Organizations dismantled some great talent-management programs of the past because economic conditions precluded the need for them. With the talent shortage growing, should there be a concerted effort to revitalize such programs?

Monday, September 17, 2007
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Last month, I explained that most of the "hot" practices in talent management, such as coaching, succession planning, rotational assignments, etc., were actually well-established by 1950. Most of these practices are being described now as novel. 

Why is this interesting? Recognizing that these practices were once popular, then became so uncommon that within a generation even experts in the field had forgotten about them, and now are hot again suggests something about the changeable nature of best practices. 

The best practices in talent management fell out of favor in the 1970s because the economy changed in ways that made them dysfunctional. 

The 1950s practices of long-term manpower planning, extensive management-development practices, and succession planning were premised on two important assumptions. The first was that businesses could forecast with reasonable accuracy what their business needs would be a decade or more in advance. Second, they could be reasonably sure that the talent in their developmental "pipelines" would be there a decade or more into the future.

In the 1970s, those assumptions proved false. 

Economic forecasts anticipated corporate growth rates of about 6 percent per year, but following the oil price shocks, actual growth rates turned out to be close to zero.

As a result, the manpower and development plans ended up turning out much more talent than was needed, year after year, because the "pipelines" were set in motion years in advance and could not easily be turned off.

When the 1981 recession hit -- the deepest downturn since the Great Depression -- employers began a process of "restructuring" that cut the jobs and the people that had been created to hold the excess talent that had been produced during the 1970s. 

While they were at it, they cut the programs that developed and planned for talent and the staff that supported them. After all, if the priority had shifted from growing talent to cutting talent, why should we spend the resources to keep growing it?

Eventually the economy recovered and the demand for talent picked up again. Instead of growing talent from within, however, employers could now find it on the outside market. This was a lot cheaper. The supply of well-trained talent that had been laid-off from corporations was abundant. There was still no need to grow talent from within. 

The 1990s offered the longest economic expansion in U.S, history, eventually running down that surplus of talent. Concerns about "talent shortages" became common as did frustration with outside hiring. The demand for alternative approaches grew.

By the end of that decade, however, it had been 20 years, almost a generation, since the traditional talent management practices began to unravel. Virtually everyone who had been a champion of that older system was now retired. 

And that is why the old practices could resurface as something new.

What do we take away from this? Were the executives who built the earlier system crafty or profligate? Were those who dismantled it in the 1980s efficient cost-cutters or shortsighted? Are those who want to reinstate the earlier system charlatans or visionaries?

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The system put in place for managing talent in the 1950s made perfect sense in an era where forecasts were accurate and where all talent had to be developed internally. 

Dismantling it made sense after 1980 because uncertainty in business was so great that long-term planning no longer worked. 

The first lesson, therefore, is that the idea of best practices independent of the economic and business environment in which they operate is mistaken. 

How about those proposals to reinvent the 1950s practices? Here, we have to ask ourselves a simple question: Do we think the economy in 2007 and into the foreseeable future looks more like the 1950s or the 1980s? 

Are we in an environment where companies can forecast and plan their future, as in the 1950s, or is the world such that uncertainty is the rule -- and the ability to respond to changes, rather than long-range planning, is the key to success?

There may be a few organizations that can still plan accurately for the future (government, for example), but most businesses cannot. 

The error rate on one-year business forecasts in the United States is about 30 percent, and the accuracy deteriorates quickly further out. Organizations that assume they can plan away uncertainty are engaging in wishful thinking.

That leaves us with a big challenge that I will write more about in future columns. Most organizations want some alternative to relying on outside hiring for their talent, but simply reinventing the 1950s models with their emphasis on long-term planning isn't likely to work, either. 

We need a new model.

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