Wharton professor Peter Cappelli observes that the staffing of human resources departments is cyclical[i] – staffing goes up in expanding economies and down during recessions. Unfortunately, when human resource staffs are cut back during recessions, businesses lose their talent management expertise and mindset. Currently, as the U.S. economy chugs along to full employment, businesses are pivoting from controlling labor costs to investing in talent management and building organizational capabilities. The smartest businesses in this pivot will be the ones who understand that they need a comprehensive talent management mindset, not one-off strategies of pay or perks.
Last week, the U.S. Federal Reserve gave the U.S. economy a vote of confidence and announced it will begin a policy of gradually increasing interest rates, which have been flat for the past seven years. What came along with the economic expansion was labor shortages. Labor shortages exist from San Francisco to New York and even Lincoln, Nebraska![ii] To be successful in today’s economy, businesses need to understand the importance of retaining their current, skilled workforce, as well as find ways to further improve their innovation and productivity.
The talent management pivot.
Coming out of the great recession, recruiting staffs were increased to attract employees. The need now turns to compensation, benefits, learning, and organizational development specialists.
As executives seek to upgrade their human resources departments, they will be wise to consider comprehensive talent management practices, rather than think of compensation and benefits, learning, and organizational development as independent and standalone disciplines of human resources. Finance organizations, for example, need strong and integrated accounts payable functions to compliment accounts receivable, and cost accounting and finance teams working in a well-coordinated way to maximize working capital, investments and shareholders’ interests. Similarly, human resources needs its disciplines integrated into a whole strategy, resulting in a finely tuned, flawlessly executing machine.
Talent management plans enable the success of business strategies.
I think of talent management plans as the key to successfully executing business strategy. No strategic business plan should be considered complete until it has a comprehensive talent management plan to enable its implementation. Peter Drucker famously commented to Ford executives over lunch, “Culture eats strategy for breakfast!” He knew what he was talking about. Seventy percent of business strategies fail due to a breakdown in execution. These breakdowns are often due to the failure to address the survival concerns of anxious employee cultures,[iii] or the rush to go straight to structural reorganization and neglecting to provide role clarity, clear information flows, and decision rights.[iv] Or, during times of expansion, failing to address the talent development and organizational culture needs of your workforce.
Talent management is an integrated set of human capital strategies used to attract, align, motivate, engage, recognize and develop the talented workforce that companies need to execute their business strategies and drive results. Talent management works best when its strategies and programs tie directly to the mission, principles and business strategies of the company. When this occurs, the company can see dramatic and sustainable improvement in business results—and better shareholder returns than industry peers by as much as 22%![v]
A well thought-out purpose, business model and strategies, as well as competitive wages, can attract and retain employees. It is the aligning of business purpose to employee passions and job motivators, however, that drive retention, superior performance, innovation and customer loyalty. Job motivators include: challenging work, achievement, learning and development, recognition, and increased responsibilities.
Comprehensive talent management systems have these characteristics:
- They are based on the company’s purpose, principles and performance.
- Provide a direct link between business and talent management strategies – both work hand-in-hand to achieve great business outcomes.
- Drive the creation of an employee value proposition.
- Coordinate integrated implementation of employer branding and recruiting, performance management, learning, rewards, and selecting and developing high potential employees.
- Have the backing of executives who promote the company’s principles and strategies to employees. Like a marketing campaign to the company’s customers, executives realize that they need to get their message out at least seven times!
- The company’s executives take an active part in recruiting, interacting with employees, and mentoring high potential employees.
- Managers align their teams to the company’s strategies, manage performance, and provide clarity for goals, operating norms, roles and responsibilities. More than that, managers take an active interest in each employee’s development and provide feedback and recognition.
- Leaders utilize flexible leadership styles that can adjust to employees of different personality styles, nationalities, genders, races, cultures, and religions.
- They are relevant to different business divisions (which may serve diverse customer groups, use unique technologies and have differently skilled workers) and, at a global level, applicable to the different regions and countries where the company has operations.
Is your business in the middle of business strategy development, fiscal year budgeting, and talent management planning? Are you making the pivot? I would love to hear from you!
Season’s Greetings everyone! I will not be posting blogs over the holidays, but please watch for details on an upcoming innovation workshop in San Francisco.
Victor Assad is a Managing Partner of InnovationOne.US and the CEO of Victor Assad Strategic Human Resources Consulting. He works with key decision makers and human resources leaders on talent management, innovation, accelerating change, leadership development, executive coaching, and other strategic initiatives. Please e-mail Victor at firstname.lastname@example.org or visit Victor’s website at www.victorhrconsultant.com, or for the latest on successful culture of innovation research and practices, visit www.innovationone.us.
[i] Peter Cappelli, (June 24, 2015), “Why We Love to Hate HR…and What HR Can Do About It!” Harvard Business Review.
[ii] Jeffrey Sparshott (December 18, 2015) “In Lincoln, Neb., a View of Full Employment: Workers get leverage on pay, hours, perks as a sub 3% jobless rate keeps companies on hunt for talent.” The Wall Street Journal.
[iii] Stan Slap (2015) Under the Hood: Fire Up and Fine Tune Your Employee Culture, Penguin Group, New York, NY.
[iv] Gar L. Neilson, Karla L. Martin and Elizabeth Powers, (June, 2008) “The Secrets to Successful Strategy Execution,” Harvard Business Review.
[v] Ed Michaels, Helen Handfield-Jones and Beth Axelrod, The War for Talent, McKinsey and Company, Inc., Harvard Business School Press, 2001.