The Future of Talent Management

I frequently read The Economist’s website called The Ideas Economy (http://ideas.economist.com/).

One of the articles I found useful is this piece by Tammy Erickson titled “The Future of Talent Management.” In it she puts forward 10 assumptions about the nature of business, society, and the workforce that she does not believe apply (or at least apply in all cases I would think) in today’s economy. Take a look at it and ask yourself which of these do you agree with (or disagree with) and why. What are the implications of each of these propositions for how we should approach talent management?

The Future of Talent Management

By Tammy Erickson

6 July 2011

Today’s organizations are ripe for change. Over the next several decades, we’ll see very different business entities take their place.

Why? Because today’s organizations are designed in response to conditions that no longer exist. They are predicated on a set of underlying assumptions that most of us recognize are not valid today – but we haven’t yet translated the new reality into our organizations’ design. The practices stemming from those assumptions are still in place.

In this and my following post, I’ll list ten assumptions that underpin organizations today. They were all true in the first half of the twentieth century, when modern organizations were designed. None are true today. All have major implications for the way we manage talent and run organizations.

1. The primary challenges facing business are quantity, quality and cost – how to make or deliver a large volume of goods at a low cost and consistent quality. In the 1900’s the companies that mastered this challenge became the icons of the 20th Century: Ford, General Electric, Sears & Roebuck. But going forward, these skills are largely commodities; the new challenge facing business is to leverage intelligence in some way. Mastering this new skill will define the icons of this century.

Many of today’s talent management practices derive from the old assumption. Our organizational structures were designed to optimize around specialization and standardization. Hierarchical decision-making and corporate strategies of vertical integration assume high transaction costs and favor efficiency.

2. The population is shaped like a pyramid, with more young than old people. This assumption is not true in many countries today and, increasingly, won’t be true throughout much of the world. The combination of longer life expectancies and lower birth rates has conspired to give us increasingly diamond- or rectangular-shaped populations.

Talent management practices derived from this old assumption include mandatory retirement, career paths that always move “up,” promotion as a standard expectation or form of reward, the use of prestige-based (rather than task-based) titles, and linear careers (companies need bell-shaped-curve career options for this century).

3. The foundation of the relationship between employees and employers is trust that loyalty on the part of the employee will be reciprocated with protection and care on the part of the employer. This relationship no longer exists; companies are clear that they no longer promise long-term protection and care, although they have been slower to acknowledge that this lessens the employees’ obligation for loyalty.

This assumption prompted talent management practices tying employee interests to long-term service: pensions, tenure-based perquisites of any type (amount of vacation, for example), training and development investments that are focused primarily on youthful new hires, and internal promotional ladders based on tenure. Many classic HR measurements (for example, measuring the cost per new hire) stem from this assumption and cause organizations to optimize around lower transaction costs (hiring, firing) rather than the economics of having the best possible skill set for each job.

4. The individual’s responsibility is to do a “good job”. Many tasks used to be fairly independent, making it sensible to gauge individual performance against individual objectives. Today, however, most tasks are highly interdependent. The quality of a colleague’s work strongly influences the quality of one’s own output.

This assumption has shaped our views of corporate etiquette, as well as specific talent management practices. Many employees have been schooled that it’s acceptable, even preferable, to mind (only) your own business. But as work becomes more collaborative, the appropriateness, even requirement, of commenting on colleagues’ work grows. Formal talent management practices derived from the old assumption include individually-based performance metrics and performance measures that strongly factor in a person’s long-term capabilities, rather than their contribution to the success of the immediate mission.

5. Something valuable can be gained from inspection of in-process work; this is a key element of a supervising manager’s responsibility. This assumption makes sense for work that involves physical or mechanical tasks. Supervision can influence productivity and quality. However, the quality of much of the work done today can only be judged in terms of output; in-process inspection is ineffective or irrelevant. Workers are essentially performing “invisible” tasks: dealing with rich content that flows through infinite links, making decisions about what to share with whom, and digging deep for innovative ideas.

The use of face time as a proxy for productivity and loyalty and the view of managers that they need to “see” their employees working, leading to fixed hours and locations, are some of the deeply-embedded talent management practices derived from this out-of-date assumption.

It’s time to step back and question our assumptions – and reshape the practices that result.

6. Paying people based on time spent is the best approach. In a nutshell: how do you define a job? For most organizations today, it’s based on a unit of time – 40 hours per week, for example – but that definition is rapidly reaching the end of its useful life. Measuring time made sense in the complex industrial economy of the mid-20th Century. But the majority of workers of the western world are now employed in service industries – and already more than half of those are knowledge workers, paid for writing, analyzing, advising, counting, designing, researching – and countless related functions. Time-based jobs make little sense for these workers.

Many talent management practices assume jobs are defined by time, including compensation systems, career ladders, and job specifications.

Going forward, many roles in our economy will be better defined by and compensated according to the task performed – regardless of the time spent achieving the desired outcome. Ironically, the switch from time to task would take us back to the way most workers were compensated prior to the twentieth century. As late as 1920, 80% of all workers in the US were paid on a piecemeal basis or in some other way that linked pay directly to the quantity of results produced.

7. If you pay people more, they’ll work harder or better. Money is important, but we know that other factors contribute heavily to motivation, particularly for non-manual tasks. Knowledge-based work requires the investment of significant discretionary effort, prompted by a sense of control, the right balance of challenge and competence, and a sense that the task is important. Meaning is the new money.

Over-reliance on monetary rewards is derived from this old assumption, as are leadership development practices that under-emphasize the skills required to create a context of meaning.

8. People have a (single) job. Increasingly, we are moving toward a “two-job norm,” in which most people have multiple sources of income – one of which may be a traditional corporate job; the other of which may be quite different (writing a screen play, selling items on eBay, farming at home). This second activity will compete with the corporate job for discretionary effort, creativity, and time.

Many corporations lack the talent management practices necessary to succeed in this new reality: the ability to “sell” the job on an on-going basis and compete for employees’ discretionary effort by offering work that is continually meaningful and challenging.

9. An organization is comprised of “employees.” Increasingly, work will be done by individuals who are not “employees.” The workforce will include individuals with a diverse array of work arrangements – some part-time, some cyclical, some employees, some contract-based – a dizzying array of relationships between businesses and those who perform work. This growing complexity will overlay the need to juggle a wide variety of individuals with diverse preferences and needs.

Today the organization and scope of most Human Resource departments are predicated on the assumption of “employees”, as is the recent trend to shift responsibility for managing people even more fully to line managers. However, as arrangements become varied, providing a home base for this eclectic pool of labor will simply become too complicated and time consuming for individual line managers to tackle. A central staff function will serve as the “home base” for the corporation’s workforce – attracting, tracking, developing and orchestrating this complex talent corps, connecting the right people with the next challenging job. Meanwhile, traditional line managers will likely evolve to roles more similar to program managers or film directors – setting direction and running the team of employees who have been assigned to the task or division at that moment in time.

10. People at the top have the most and the best information. Technology shifts the locus of information. Today it is both economically and logistically feasible to obtain input from a large number of people. Opinion polling and even democratic elections are beginning to occur in the workplace. Market-based mechanisms allow individuals to make their own mutual agreements around specific projects. Forecasting can be based on input from multiple close-to-the market sources, rather than centralized groups, using information-gathering mechanisms similar to betting.

Today, key talent management decisions, perhaps most importantly, the selection of other leaders, is made by those at the top. Increasingly, decision-making processes will solicit or even depend on input from those impacted by the decisions. Companies will conduct their governance processes in fundamentally different ways.

These are just ten outdated assumptions – and a few of the talent management practices they underlie. What would you add to the list?

Tamara J. Erickson is a McKinsey Award-winning author and widely respected expert on collaboration and innovation, on the changing workforce, and on the nature of work in the intelligent economy. She recently completed a trilogy of books on how individuals in specific generations can excel in today’s workplace: “Retire Retirement”, “What’s Next, Gen X?” and “Plugged In”.