Ethos Issue 5, Nov 2008

PETER CAPPELLI: Talent management is about anticipating needs which are going to be in the future and then setting out a plan to deliver on the human capital required. That requires, in part, that you anticipate what the future will be like. That proves to be an impossible thing to do. So instead, we have to assume we know the things that are going to be, rather than learn to manage the uncertainty seriously.

There are two approaches that companies have in managing talent. The approach in the US is to try to plan your way around the problem and assume you know what will be required 10 to 15 years later. The other approach, which is a sort of just-in-time strategy we see more often in Asian countries, is to rely more on outside hiring and less on formal development programmes. Both approaches have problems. The problem with the US approach is that you assume you know what changes will take place in the future. The problem that Asian companies have in outside hiring is that it can be very expensive when you need it. We want to think of an alternative strategy.

The first step begins with recognising uncertainty. We need to step away from forecasts: don't bother to try and project what things will be like in five years, because the forecast can be so wrong it can do more damage than good.

Instead, there are several things you can do. We have a choice between hiring from outside—which has no lag time but is more expensive, or developing talent internally—which can be cheaper and more attractive but it also requires a certain amount of predictability. But we should really be thinking about the mix of "make" and "buy". Mixing "make" and "buy" allows organisations to leverage uncertainty as narrowly as possible. But what is the right mix to use?

One consideration has to do with succession planning, which I believe is worthless because it does more harm than good. In a survey on US companies, only one in four efforts in succession planning actually works. Here’s why: succession planning relies on two assumptions. The first is that we know who will take the job and that the person will be there to take the job in five years. The second assumption is that the job will remain unchanged in five years. Typically what happens is when the chair is vacant, the person comes in, looks at the succession plan, doesn’t like it and leaves.

Instead of doing that, we see companies moving more into talent pooling. This means they are not trying to predict who will take this job, but instead, are using the principle of portfolios to manage risks. They look at a group of jobs and the common requirements of those jobs and then develop a group of people to fit into those five or ten jobs.

The third approach is perhaps the most important and this is to manage the question of investment in employees. Here’s the problem, which I believe you face in Asia. You invest in the employee, develop him for five years and they leave and they take the investment with them. Your competitor who poaches them can afford to pay more because they don’t have to recoup the investment of grooming them. So how do we deal with this problem?

One of the ways to do this is to think about ways to develop them more cheaply. For instance, virtually everyone agrees that the experiences in which they learnt the most from were not planned as formal training but those which were thrust upon them. So one key idea is for the supervisor to find opportunities to push people into these formative roles and assignments. Many companies in India especially seem to have found better ways to help employees learn from work-based experience.

The last point is improving the internal job market and making it into a real job market. We should move from a model where the boss tells people when it is time to move and where to go. Sometimes, employees don’t want to go and will quit instead. The question is: how we can change the model that works for the employer to one that works for the employee, and how can we strike a balance between the two to make it work? The key to retention is being able to offer your employees better opportunities for advancement inside than you can find some place else. And the way to do this is to know who your best employees are and find opportunities to move them around internally.

ISRAEL BERMAN: At Hay Group, we do a lot of research around the world. When you talk about investment in talent, you can see that the gap between the top 50 most admired companies in Fortune and the other 500 is enormous on the returns in the first year. When you look at the differentiator in their ability to attract talent, it’s leadership development. It’s about spending time with people.

So what do we do in the downturn? We worked with many companies in the crisis in 2000/2001. Many companies dealt with it by cutting staff and after the downturn, they started recruiting again, but some could no longer afford it and fell behind.

The best people are always wanted. Recruiting in Asia is not easy. But what is good in Asia is that talent management is an issue on the CEO and C-suite table much more than elsewhere in the world and the results show. People are taken better care of and you get more out of the investment. At the end of the day, it’s about aligning people management to what we want to achieve as an organisation. One of the best examples you see in talent management is perhaps the Singapore Government, and how they invest in talent over the long term.

Now is the time to step up and demonstrate courageous leadership. In a downturn, you have to invest in the right people, and you learn to link reward to performance and prepare yourself for the upturn. If in difficult times, the first thing we do is to cut staff, then we will not grow.

This article was adapted from a plenary session on "Leadership Perspectives-Talent Management in Asia: What Works?" held at the Singapore Human Capital Summit on 23 October 2008. The plenary was facilitated by Professor J. Stewart Black, Associate Dean, Executive Development Programs, The Americas, INSEAD and Executive Director, INSEAD Centre for Human Resources in Asia.

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