5
DEVELOPING TALENT

Developing the right talent and doing so in the right way is critical to the effectiveness of every organization. For a long time the iconic talent development and management organizations were the career-oriented ones; human resources (HR) articles and books were full of reports on the programs run by AT&T, General Electric, IBM, Procter & Gamble, and other corporations that had well-developed career development models. These organizations did an outstanding job of identifying the talent that needed to be developed, specifying what skills needed to be learned, and providing the kind of learning experiences that would develop the skills they needed. They provided the benchmarks against which many companies evaluated their talent development programs.

To say that things have changed with respect to what should be done in the area of talent development is an understatement. No longer are the talent models that were considered benchmarks looked to as best practices. Today they are seen as outdated and, in most cases, inappropriate given today’s work and workers. The major reason for this is the many changes that have occurred in the workforce, as well as the development of new technology and the need for organizations to be agile. Simply stated, long-term company-wide career development programs like those that dominated the best practice literature in the last half century simply do not fit today; they fail to provide the talent motivation and agility that organizations need. This, of course raises a key question: What is the right approach today, and what is likely to be the best practice in the future?

STRATEGY-DRIVEN TALENT

The best starting point for thinking about the best talent development practices is to examine the organization’s business strategy and the rate of change it expects to experience. It should determine what kind of talent development activities an organization engages in, who should be developed, and what kind of development candidates will receive. The focus needs to be on the identification of the skills an organization needs to be effective and how it should position itself with respect to obtaining those skills.

The strategic analysis should begin by identifying what the key levels and kinds of performance are for the organization and how long they are likely to be needed; it should then, based on this analysis, identify what key skills the organization needs. The analysis should focus on determining the business skills, technical skills, and customer service skills that are key to the execution of the business strategy. Clearly these skills should get the highest priority with respect to development.

Once an analysis has been done that determines the needed skills, it is important to look at the pool of individuals with those skills. It is likely that some of the skills can be easily obtained in the labor market while others cannot, either because they are idiosyncratic to the organization or because market demand for them is strong.

After an organization has completed an analysis that looks at the skills it needs and the degree to which they are available in the labor market, it can then proceed to working on a plan for developing and obtaining the talent it needs. This is easier to say than it is to execute, but the key here is that an organization should commit to developing only skilled talent that cannot be easily obtained in the labor market. Further, the focus should be on skills that are critical to the overall success of the organization and implementation of its strategy.

THE TALENT MIX

A key strategic issue for any organization is what mix of talent development and employment models it should have. What kind and how many, if any, employees should be treated as development candidates and core employees of the organization, and what kind and how many should be treated as “traditional” employees? How many and what kind should be part-time, temporary contractors, or gig workers? The answers to these questions depend on what kind of business strategy the organization has and the environment that it faces. Making the right choices is critical to an organization’s ability to be effective in the long term. Wrongly investing in talent is a sure route to unsustainable costs and economic problems, as is not investing in developing skilled talent that is not readily available in the labor market. Having the right kind and amount of talent is the road to organizational effectiveness.

The key issue for an organization is identifying and positioning itself where it should be in terms of the number and type of employees that it has in its different talent development, retention, and employment models. It must decide which kind of skills and competencies fall in the active company development area and which can be obtained in the labor market. This is where supply and demand in the labor market becomes critical and the issue of the core competencies of the organization comes into play. A general rule is that if talent can be obtained in the labor market, it should be.

Correctly positioning an organization with respect to its talent mix strategy increasingly requires it to have multiple talent models. Talent segmentation is required to reflect the realities of the labor market, the changing nature of skills the organization needs, and the agility demands that the organization faces. This is not a new situation; most organizations have operated with several different types of talent development models for decades. Organizations typically have approaches for their salaried employees that differ from what they have for their hourly ones. What is new is the reasons for having segmentation and the types and extent of segmentation that are needed.

In the future, segmentation needs to be practiced by most organizations and be based not on hierarchy but on an organization’s strategy, the labor market, and its needs for agility. This will mean that hierarchy and tradition will be much less important in determining the types of employment deals an organization offers, and it most certainly will lead to it offering multiple deals. The segmentation may be like that in the motion picture business and construction industries, which have always had multiple, very different, development models for their talent. They invest in some employees (e.g., producers or senior managers, respectively), while others (e.g., actors or building contractors) are “on their own,” and in some cases rely on unions for training and benefits. Strategic segmentation of talent management is a major change for many organizations; it requires a well-articulated strategic message and strong leadership on the part of HR and the senior management leadership team.

ONBOARDING AND RETAINING TALENT

An organization’s talent development principles should be obvious to job candidates at the time of hiring. As noted, most organizations need to offer multiple employee development arrangements that are strategy driven. These can range from almost guaranteed lifetime employment with continued development and growth opportunities to short-term, no-training, and no-employment-guarantee deals. The key is making it clear to all potential and existing employees what the arrangement is for them. The arrangement does not have to be a permanent one; it can change, and talent may move to a new arrangement after hiring. Further, the arrangement can change based on the needs and skills of talent, and the needs of the organization, but it is important that at all times individuals know what their current talent development arrangement is and what they can count on from the organization.

A leader in making its talent arrangements clear to employees is Netflix, which has an extensive website that makes it very clear to employees what the development model is. Most of Netflix’s employees are covered by a model that places most of the responsibility for development on the employees and gives them no guarantee of a job or of further development. It does not feel it can guarantee long-term employment or a career with the organization, but on the other hand, it offers employees interesting work and high pay. The reason for this is that Netflix’s business is changing rapidly (it has gone from merely renting DVDs to streaming and producing content) and the company does not feel it can make a reasonable long-term commitment to either employment or to developing the skills individuals need to be successful in the future. What Netflix can commit to is telling individuals where it thinks the business is going and what the key skill and talent issues are likely to be in the future.

The Netflix model fits the industry that the company is in: entertainment, an industry that is always and increasingly changing. Thus Netflix is, in many ways, just reflecting the realities of the business world it faces. It has a business strategy and talent development strategy that fits the rapidly changing environment it is in and the kind of technology and management skills it needs to be successful.

The onboarding process can only go so far in terms of getting the right retention message to talent, but it is the right stage at which to take a first step. From the beginning, employees should be given a clear message about what kind of future they can expect. This is particularly important for talent that makes a difference in organizational performance. These employees should receive a clear indication of the organization’s commitment to their development and be given promises of regular ongoing career advice and encouragement. Employees who are not seen as pivotal or making a significant performance difference should be given a clear commitment concerning how they will be treated as long as they are with the organization. For example, an organization can say to them that they will be fairly paid and rewarded as long as they are needed by the organization and perform well. They also can be promised that they will be told as soon as possible about any changes that will affect their employment status.

Of course, a strong onboarding program is not a substitute for the ongoing, day-to-day, effective management of talent, but it is the critical first step in establishing the kind of relationship that an organization needs to have with its employees. The onboarding process should begin before the individual is actually hired, and a realistic job preview should be the first step in the process. Once individuals join the organization, it is time to further develop their understanding of what career options are available, make sure that they know how to get career advice and input, and provide an environment that has meaningful and appropriate development opportunities.

All supervisors should be trained and rewarded for their work on developing and retaining individuals. All too often this behavior is not measured and rewarded, and as a result managers do not do what they can and should to coach, direct, and develop their talent.

One key determinant of onboarding success is the initial work environment that employees enter. It is important that key employees, in particular, enter a positive work environment. Placing them in the right group with the right supervisor is a key step in their development and retention.

One thing that can help individuals get on board in a way that avoids early turnover is to put them in a socially friendly group. This can be a virtual group or a company-sponsored in-person socialization group that helps them feel a part of the organization and can give answers to their questions. A lot of early turnover of talent is a result of individuals not making any social connections and thus not feeling they are a part of the organization’s social network and relationships.

TARGET TALENT DEVELOPMENT

Developing most skills is costly: training time is lost production time, and trainers are expensive, so it is often not a good investment to train people when others with comparable skills can be obtained in the labor market. Even if hiring a skilled individual from the outside requires a somewhat higher salary, it can often be less expensive from a total cost point of view to hire a skilled individual than to train someone. There are advantages to organization-supported development that have been demonstrated, including increased loyalty to the organization and increased retention of employees; but often in today’s environment these advantages are outweighed by the costs associated with developing and training individuals who are already with the organization.

One alternative to company development programs is the use of Internet-based training and development programs. CrossKnowledge and Lynda.com are among the many vendors that provide organizations with programming that is targeted at developing employees. Organizations can make development available to individuals and allow them to self-develop. With this approach, organizations do not have to direct individual talent development or promise anything as a result of it occurring. Thus, it is a low-cost, low-risk development activity that may pay off if it leads to individuals acquiring the right skills. It may also make working for the organizations more attractive and less “risky” because of the development that is available.

It often makes sense to base development decisions on an individual’s performance, but not to target only or primarily poor performers. It should be a meaningful reward for good performance and targeted at talent that wants to develop. In any case, before a commitment to skills development is made, it is important to analyze whether it is worth the cost. When an employee is performing poorly, particularly in an important position, the best solution is often replacement. Investment in training and development can be costly and may only lead to slower performance improvement than could be achieved by talent replacement.

Overall there are exceptions, but in most cases if a skill set can be obtained by recruiting somebody new, it is better to proceed in that direction than to train and develop an existing employee. This does not mean that organizations in today’s and tomorrow’s environment should not have some career paths that include training and development opportunities. There are skills for which it may make sense for an organization to build a career development approach, but these are becoming increasingly rare. It is generally true only for skills that are unique to the organization.

When an organization has a technology leadership position in a particular area, it makes sense to focus on skill development. There also may be operational approaches that organizations take with respect to management and customer relations that are unique and provide a competitive advantage. Developing these skills in talent is important because they cannot be obtained by getting someone from the job market and they provide a competitive advantage.

Finally, it is important for organizations to remember that development can be a great talent retention tool. Due to expense, it might not be the right tool for employees whose relationship to the organization is for the short term, but for situations where retention is a key issue (e.g., work and skills that make a difference) development can be a powerful retention device.

CAREER MODELS AND AGILITY

Once an organization has identified the skills it needs, the potential labor market for those skills, and where the organization stands with respect to its ability to gain a competitive advantage, it can develop the correct career and talent development model (or models). Depending upon an organization’s need for talent, the possible approaches it can use can range from what might be called an app or gig talent development model to a traditional commitment to employee development.

AT&T is a good example of a company that has had to change its career and talent development models. As mentioned earlier, AT&T was once an exemplar of best practices with respect to career development; it used a model that fit the slowly changing, regulated phone business. But today it operates in a rapidly changing communications industry. It still talks to talent about careers, but stresses that individuals must own their development and continuously develop themselves. AT&T supports development by offering financial support for online degrees, socalled nanodegrees (individual online certifications), and individual courses. It has also made an effort to identify the skills it will need in the future and to make existing employees aware of what those skills will be.

Organizations that face very rapidly changing work environments, need skills that are relatively available, and have few skills that make a significant difference in their performance are strong candidates for temporary, contract, and gig employment relationships. Some organizations facing this situation have used a tour-of-duty relationship that is characterized by no commitment to long-term employment and little employee development but full-time employee status for as long as the “tour” lasts.

Gig and tour-of-duty organizations need some core individuals who maintain the culture and norms of the organization and develop the long-term strategy of the business. But the bulk of their employees have an employment deal that keeps them as long as they have the right skills and are needed for the operations that the organization engages in.

In a gig or tour-of-duty organization, who are likely to be the critical employees? Typically, they are the senior managers who are working on the long-term strategy and survivability of the organization and any employees that are doing things that are uniquely important to the organization’s product development and delivery activities. The career talent development model for individuals who are doing important, high-value-added work should include long-term employment deals and development opportunities. Such an employment and career development relationship may look very much like the old General Electric and IBM models or perhaps the newer AT&T model. These individuals are likely to be a very small percentage of the total employees in an organization, and they are likely to be the most expensive employees because of the cost of their development. In comparison, most of the employees will have relatively low talent costs because of low development expense and little focus on talent retention.

What organizations fit into the gig/tour-of-duty category? Certainly organizations that actually provide temporary labor to other organizations and those that offer many services fit in this category. They include temporary employment agencies like Upwork, as well as on-call service firms such as Uber. These organizations keep their development costs at a minimum by simply making available a platform for individuals to make deals with customers for their services. In the case of gig work, there is the legal issue of whether the talent should be treated as employees of the company; but even if they are employees, which in many cases they are not, it does not make sense for the employer to invest heavily in their development. Other types of organizations that use the tour-of-duty model include firms that develop and utilize rapidly changing technologies, do project work or construction work, are in the entertainment industry, or offer seasonal services.

One way to think about the different types of talent development models is to contrast what the organizations that adopt them look like. With a traditional model, most individuals are long-term employees whom the organization is willing to invest in and develop. With the gig model, there is a small number of core employees, and the organization invests in their skills, but it depends on gig or contract employees to do most of the work. Both of these models are potentially effective approaches to career and talent development—as, of course, are multiple intermediary models. The key strategy issue is finding the right combination of talent development practices so that an organization can achieve a competitive advantage that is based on one or more of the following capabilities: agility, speed, technical knowledge, cost, and product quality.

RETAINING TALENT

A major issue in talent development is talent retention. Turnover is expensive from an administrative and development point of view, but its greatest expense often is the productivity of the talent that is lost. Of course, there is enormous variance in the value of talent. In some cases there may be little lost value because the individual who leaves does not have skills, abilities, or performance levels that are difficult to find in the labor market. On the other hand, if the individual had unique skills and a high level of performance, that loss of talent may be extremely costly. The implications of the costs that are associated with talent retention and loss are clear. Organizations need to carefully monitor the cost of replacing their talent and behave accordingly—that is, they need to do everything they can to retain individuals for whom the cost of replacement is high.

There is an enormous amount of theory and research on why individuals leave organizations. It starts with the basic point that job satisfaction is strongly related to turnover—unhappy employees leave, and happy employees stay. This raises the issue of what makes employees happy. There is a large body of research on this that shows that there is no one thing that determines satisfaction, but it is possible to identify some key factors. These include the nature of the work employees are doing, the rewards they receive, and how they are treated by their supervisors. It also is influenced by the type of career and development opportunities that employees are offered. The opportunity to develop and progress in an organization can be a powerful satisfaction and retention factor.

A very high percentage of employees leave their jobs before they have spent a year with an organization. This varies widely, of course, by organization and type of job. It can be 70 percent or higher, but rarely is it much lower than 25 percent. This high early turnover is a result of many factors, and seems to be increasing as a result of the attitudes of younger workers with respect to their careers. They expect to hold many jobs in their lifetime, and see no problem in changing jobs every two to three years. Of course, short tenure may not always be a problem for an organization, depending on the skills that the individuals have and the ease of replacing them. But in the case of key hard-to-replace talent, the turnover of employees—and especially new ones—is very expensive.

There is little organizations can do about job offers their employees receive from other organizations, but there is a great deal they can do about how their employees are treated and therefore how satisfied they are. As is stressed throughout this chapter, those who have key skills need to be treated very well relative to the market. What does this mean? It means that they need to be rewarded well above market levels so that it is highly unlikely they will be offered a better situation somewhere else. The same does not necessarily hold true for other employees, however, and this may lead to issues of perceived internal inequity. This is an inevitable consequence of strategically targeting skills and talent, a necessity in a talent economy. It should be explained to all talent as being strategy driven.

To identify individuals who are likely to leave, it is important that organizations undertake regular attitude surveys that measure engagement and satisfaction. As most surveys are anonymous, they typically do not indicate which individuals are likely candidates for departure, but they can indicate areas and critical skill groups within the organization that are in danger of losing employees. Frequent short online “pulse” surveys can and should be used to track satisfaction and identify actions that are needed. Action then needs to be taken based on the results, and there needs to be a clear link between the survey results and the actions.

Some organizations have found that they can predict turnover by looking at factors other than job satisfaction—for example, the kind of Internet activity that employees engage in. Looking at job websites, being active on LinkedIn, or certain postings on social media forums may indicate that employees are thinking about leaving the organization. Other indicators may be their attendance behavior and their performance. This is an area where the use of analytics and segmentation can pay big dividends.

Overall it makes a great deal of sense to monitor the behavior and attitudes of all talent, but particularly key talent, to determine whether it is likely to leave the organization. Obviously, when it is determined that turnover is likely, steps need to be taken to retain key individuals and groups—particularly those that have critical skills. In short, organizations need a targeted retention system that includes indicators of potential turnover and corrective actions to be taken.

HUMAN CAPITAL REPORTING

As already noted, human capital is an increasingly important organizational asset; in many cases, it is an organization’s most important asset. It should therefore be at the forefront of the minds and agendas of all managers, just like the financial assets and physical assets of every organization are. Yet, sadly, it is not. Managers and the public regularly get reports on the condition of the financial and physical assets of organizations. These are publicly reported, and the reports are audited by independent accounting firms. On the other hand, most organizations report very little to their employees, shareholders, and the public on the condition of their human capital and how it is treated.

In the past several decades there has been an increase in the number of organizations conducting surveys to find out the attitudes of employees. The results of these surveys are usually not made public, and they are inconsistently used as levers for change in organizations. All too often the best information on how talent is treated by an organization can be found on websites like Glassdoor that survey employees and post the results.

For talent to be effectively managed, valid talent measurement systems need to be in place. Things that get measured get attended to; things that are not measured do not. Further, those things that are measured and publicly reported typically get more attention than those things that are measured but the results of which are kept private. Thus, in an era where talent is very important to organizations, it is increasingly critical that organizations measure the condition of their talent and report it both internally and to shareholders.

At the very least, an organization should internally report on such obvious human capital indicators as turnover, absenteeism, satisfaction, engagement, and money spent on training and development, and the results should be made known to everyone in the organization. In addition, managers should be held accountable for the results in their areas of supervision and rewarded based on those results.

A number of efforts have been made to develop public reporting practices with respect to corporate talent management and development. The annual reports of some companies occasionally provide limited information on the condition of their talent. Several groups have developed standards for reporting costs and activity levels in areas such as training, development, absenteeism, and turnover, but at the moment there is no generally accepted standard way of reporting these data to investors and the public. As a result, organizations say that human capital is their most important asset, but shareholders, executives, and managers typically get little if any data about the condition of this vital asset. This clearly needs to change, and in major and important ways. Organizations need to report on the condition of their human capital and on the costs associated with the management of that capital. Further, managers need to be held accountable for how they perform with respect to the development of human capital. Only if this happens will talent management get the focus that it deserves in the new world of work.

CONCLUSION

The talent development practices of organizations should be driven by their business strategy and the skills needed to successfully execute it. As noted in Table 5.1, the key is using the business strategy to determine the kind of talent attraction and development that occurs, as well as the kind of employment deals and contracts that organizations have with their talent. In most cases a strategy-driven talent development approach will lead to organizations having multiple career and development models. In these segmented approaches, some employees will receive virtually no development while others may receive extensive, long-term development support. Some will be full-time employees, while others may be part-time or gig employees.

In most cases, individuals who have key skills need to be full-time employees of an organization, and in many cases they should have a long-term employment deal. They should have employment that is dependent on their performance and they should be rewarded in ways that retain them and motivate them to develop their skills. For individuals who do not have key skills, multiple models may be appropriate. They may be in positions with little development and low job security but hold full-time status. Alternatively, they may be gig employees who have only transactional relationships with their organizations.

Table 5.1 Developing talent

Copyright © Edward E. Lawler III and Center for Effective Organizations at USC.

Agility needs to be a major determinant of the type of attraction, development, and retention that organizations practice. The more agile an organization needs to be, the more it needs to make difficult decisions about whether to train and develop employees to deal with the changes it needs to make or to deal with those changes by replacing certain members of the workforce so that it can maintain or improve its performance and capabilities. Obviously, those organizations that decide they need to be agile but cannot successfully retrain their workforce because of cost, speed, or other reasons need to take a very limited and targeted approach to talent development. They need to become experts in how to fill jobs by going to the labor market.

In today’s world, most organizations should have significantly segmented workforces. In terms of attracting talent this means that employment deals will vary from little or no development to extensive investments in individual growth and development. The key issue is making sure that the right skills and individuals are chosen for development and that retention is a strong focus for those individuals who are being developed.

It is hard to see how talent development and retention in an organization can work well in the absence of evidence concerning the effectiveness of recruiting, development, and retention efforts. The key is the development and commitment of the right individuals. Doing this on an organization-wide basis requires cost and effectiveness data with respect to recruiting, developing, and retaining talent. Cost data are particularly needed with respect to making good decisions about whether development is the best choice. This analysis requires considerable data and careful measurement, but it needs to be done; it is the foundation upon which talent development should be built.

There is also the issue of how effective talent development programs are. Many organizations spend millions of dollars on development without solid data indicating what the costs and benefits are of these programs. Good decision making about talent development requires good evidence about what works and what does not, how much it costs, and how it does or does not support the business strategy of the organization.