When Talent is Important: Five Next Practices

Ed Lawler III 

How many times have you heard CEOs and HR executives say that talent is their organization’s most important asset? I have heard it many times, and I usually follow up by asking how that translates into the way they manage people. All too often that question is answered poorly or not at all.

The talent management practices of most corporations simply do not follow a set of principles that treat talent as an important corporate asset. Instead, they follow the principles of traditional bureaucratic management, which is not based on talent being critical to the effectiveness of most organizations. Technology and social change have clearly altered that situation. Most organizations are in a position where talent is their most important asset and they need to be designed and managed in ways that reflect that. My recently published book, Reinventing Talent Management, outlines a number of practices and policies that organizations need to implement in order to reflect the importance of talent. Here, I would like to focus on five next practices which every organization should adopt if talent is truly their most important asset.

1. Talent should drive strategy

There is little question that strategy should be an important determinant of the talent decisions that an organization makes. However, it should not just be a one-way, causal relationship. In many cases, the availability of talent and the ability to manage talent should drive the strategy of an organization. Creating a business strategy that cannot be implemented because the talent needed cannot be obtained or managed appropriately is a sure prescription for strategy failure. Thus, talent needs to be front and center and an important driver of the business strategy of every complex, talent intensive organization.

2. Pay the person

In traditional bureaucratic organizations, it makes perfect sense to pay people based on the job that they are doing. However, it does not make sense in an organization where talent is a critically important asset that needs to be motivated and developed.  When this is true, pay should be driven by the skills and competencies that individuals have, not the work they are doing at the moment. Increasingly, the market value of people depends on their skills, and thus for an organization to attract, retain, and develop their critical talent, they need to pay individuals based on the market value of their skills. Organizations are increasingly doing this in the case of their technical contributors and knowledge workers, but it needs to become the institutionalized driver of the compensation systems of corporations that depend on talent for their competitive advantage.

3. Manage performance, do not appraise it

The performance appraisal systems of organizations are increasingly being criticized and altered because they fail to motivate and develop people. There are multiple reasons for this, but perhaps the biggest one is that they do not create a feedback and performance culture that supports learning and development, nor appeal to talent that wants to gain skills and perform at a high level. This cannot be accomplished by an annual rating of individuals based on a supervisor’s judgment of their performance. It can only be accomplished if individuals have reasonable goals and rewards that are based on reaching goals, and receive ongoing advice and direction in terms of skill development and performance improvement. This requires a continuous dialogue among them, their peers and, their managers.  This can only be achieved by a system that is radically different than the traditional performance appraisal systems in most corporations.

4. Individualize, do not standardize

In bureaucratic organizations, there is always a strong emphasis on treating talent in standardized ways, which is often based on the job they have or their level within an organization. The assumption is that people will see this as fair and that individuals want and should be treated the same is incorrect. The reality is that we live in a world where individuals are increasingly diverse and have different expectations, different desires, and different perceptions of what is fair and reasonable. The only way to cope with this is to individualize the way people are treated. Often the best way to individualize work is to let people choose where they work, when they work, how they rewarded, and even who they work for. While this can be complex, modern information technology has made it increasingly possible to customize how work is done in an organization, while taking into account the skills, motivation, and preferences of individuals with respect to when, where, and how they work.

5. Create agile HR systems and employment relationships

The world is rapidly changing, as is the nature of the workforce. The implications of this for how talent is managed are clear. It must be agile and able to change as an organization’s business strategy, technology, and the business environment changes.  Fundamental to an agile approach to talent management is moving away from the idea of long-term employment and employment stability. These may come about, but it should be because individuals are adapting to and changing to fit what the organization needs.

Essentially, organizations need to tell individuals that their continued employment depends on their willingness and ability to change, adapt, and perform in ways that support the organization’s current strategy and direction. They need to be warned that changes are likely to take place in the skills they need, the work they will do, and how they are rewarded. Organizations can no longer and should no longer promise long-term employment and stable work. Instead they should promise to support individuals who need to change their skillsets and they should provide transparency with respect to what changes are taking place and how these might affect their talent needs.

Implementing these five next practices is not a simple matter.  It often is easier to do in a new organization or startup organization, but it can be done in many existing organizations. Clearly, it must be done in order for organizations to thrive in today’s rapidly talent centered business environment.

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