“Talent will be the big differentiator between
companies that succeed and those that don’t”
Bill Conaty and Ram Charan, authors of TheTalent Masters 1
In an age of global competition, rapid innovation and technological change, product proliferation and price sensitivity, and urgency of sustainability, the need to optimize talent and drive up the value contribution of human capital in organizations has become the universal differentiator, separating winners from losers. Talent is not a one-dimensional concept. It is not just skill or capability or smarts. Rather, it is the collective competencies, values and attitudes, experiences, and behavioral dispositions of all sources of labor.
The playing field has changed significantly since the outset of the Great Recession. Executives are beginning to realize that the emerging “new normal” is quite different from the past. One lesson they have learned — and it is a lesson that forms the fundamental principle of this book — is that the most effective way to fight your way out of the recession or to conquer competitive challenges is not to retreat but to optimize every asset under management, especially an organization’s human resources.
Whether you run a local convenience store or a global behemoth such as Intel, Lenovo, or Daimler, global and local changes are occurring in the sourcing, development, and utilization of talent. The “new normal” will be anything but normal, especially in terms of how talent is viewed, managed, and measured. Don Tapscott, author of Macrowikinomics, said recently: “We are at an inflection point in human capital as well as economic history.”2 It is a different game.
Change will reach unprecedented levels, with many traditional firms closing shop, while new emerging players will become household names. Firms like Facebook, Skype, and Zappos did not exist 15 years ago, and yet they are major players today. Metrus Institute research suggests that many firms are struggling with retaining top performers, acquiring talent that “fits” the firm, or attempting to “fit the firm” to the new talent marketplace. The Institute’s evidence suggests that many firms are looking back to the prerecession glory days to regain what has been lost, rather than looking ahead at the new marketplace realities and the implications these hold for the adroit deployment of human resources. The global retailing behemoth Walmart has been through this struggle, at first standing its ground regarding outdated labor practices, leading to an enormous public outcry for reform. This period was followed by small and then larger efforts to treat and leverage talent in more effective and respectful ways.
When we talk to executives — for this book the researchers at the Metrus Institute and I interviewed over 75 executives from around the globe and conducted research that involved over 3,000 organizations — we hear with disturbing regularity stories of insufficient bench strength, the loss of top technical or sales talent, poor onboarding, hiring too many people who do not fit and never hit the performance bull’s-eye, or applying dated approaches to performance management, mergers and acquisitions, and training.
This book is about breaking the chain of historical assumptions about how talent should be managed and how human capital should be thought of. It is time to toss away the old rule book in favor of broader, more strategic and systemic ways of thinking about how labor and talent make or break organizational success. This book will challenge many tried-and-true assumptions, including the value of planning, employee engagement, and “need to know.”
The Talent Optimization/People Equity Connection
Leaders who were interviewed for this book shared fact-based research and real-time experiences that will inform readers about trends and gaps, provide examples of Great Practices across a variety of industries, and illustrate some emerging approaches to optimizing — and not merely managing talent. While we found a few stellar organizations that have learned to optimize talent, no single organization seemed to be putting it together and doing it all.
In our quantitative and qualitative research, we have found that despite all the attempts to deal with corporate bloat through downsizing, outsourcing, and budgetary slimming, a level of excessive complexity continues to stifle many organizations. This complexity increases the hang time of decisions, especially for those involving investments in human capital.
But we have also found truly effective leaders who think clearly and incisively about the talent in their organization while avoiding complexity. They tend to rely on core values and consistent approaches to leveraging human capital and to possess a near obsession with fact-based decision-making. Most of the best leaders we found think about the big picture — about big talent issues: Are we optimally using the talent we have acquired? Are we bringing in, developing, and retaining the right talent? Are we sourcing talent strategically? Are we developing leaders effectively? Can we measure talent optimization and improve areas where we are not optimal? They have realized that in this world of constant change, having a workforce that is aligned with the business strategy, that is fully engaged, and that possesses the capabilities to execute is crucial to optimizing that talent investment, as well as their success.
Taken together, these three factors — Alignment, Capabilities, and Engagement (ACE) — form a “People Equity” framework for optimizing, managing, and measuring the value contribution of human resources to the strategic and operational success of an organization. I will address this People Equity framework in greater depth throughout the book, including research behind the framework, many case examples of its application, and ways to measure it.
Optimizing Your Organization’s Talent in the New Normal
The People Equity framework will provide a powerful lens with which to examine historical assumptions about talent in a world of new realities. The research for this book, as well as other published literature and cases, helped our team identify, examine, and tie together the critical factors that must be managed if talent is to be truly optimized.
A high People Equity or ACE organization is a talent optimizer. In it, talent outperforms that of peer organizations because this talent becomes the best it can be, given existing resources and market conditions. A high People Equity organization represents an organization that obtains the greatest leverage from its labor and talent investment today — and continuously creates sustainable talent for tomorrow. You have heard the expression, “Be all you can be.” That is what optimized talent through high People Equity helps an organization and its individuals to achieve. As Dave and Wendy Ulrich have said, “As employees find meaning, they contribute to the broadest purposes for which organizations exist: creating value for customers, investors, and communities.”3
While my previous book, Reinventing Talent Management, discussed the People Equity framework, the focus in this book is more on how to become a high and sustainable ACE organization. I will discuss the seven critical ingredients for becoming a high ACE organization, ranging from awareness and education to specific manager behaviors to redesigned talent processes to new HR roles and requirements. The book will also address — given the changing business context — how People Equity enables leaders to effectively grapple with a host of issues that transcend economic cycles.
Finally, this book will address the role of HR professionals and the other catalysts of change. In this new normal, these folks sit at a crossroads. They either become a force for talent optimization or a defender of the status quo. If it is to become a driving force for talent optimization in the new environment, HR will have to rethink talent assumptions and many talent and management processes.
Recent studies have shown HR to be rated unfavorably regarding the value it adds compared to other functions.4 But some HR organizations are receiving high marks. In our research and experience at Metrus, the People Equity framework helps understand why some HR organizations are having far more success in today’s new marketplace. Many successful practices will be highlighted in this book. The new dynamic marketplace needs strong HR professionals with good strategic business and talent acumen. A number of these capabilities will be illuminated in this book, along with Action Tips to put into practice.
Let’s now turn to some of the key factors that are shaping this new talent world.