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When talent is important: five next practices

If talent is truly your most important asset then it's time to adopt these five practices, says University of Southern California's Edward E Lawler III

How many times have you heard CEOs and HR executives say that talent is their organisation’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 organisations. Technology and social change have clearly altered that situation. Most organisations 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 organisations need to implement in order to reflect the importance of talent. Here, I would like to focus on five next practices which every organisation 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 organisation 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 organisation. 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 centre and an important driver of the business strategy of every complex, talent intensive organisation.

2. Pay the person

In traditional bureaucratic organisations, it makes perfect sense to pay people based on the job that they are doing. However, it does not make sense in an organisation 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 organisation to attract, retain, and develop their critical talent, they need to pay individuals based on the market value of their skills. Organisations are increasingly doing this in the case of their technical contributors and knowledge workers, but it needs to become the institutionalised 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 organisations are increasingly being criticised 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 from the traditional performance appraisal systems in most corporations.

4. Individualise, do not standardise

In bureaucratic organisations, there is always a strong emphasis on treating talent in standardised ways, which is often based on the job they have or their level within an organisation. 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 individualise the way people are treated. Often the best way to individualise work is to let people choose where they work, when they work, how they are rewarded, and even whom they work for. While this can be complex, modern information technology has made it increasingly possible to customise how work is done in an organisation, 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 organisation’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 organisation needs.

Essentially, organisations need to tell individuals that their continued employment depends on their willingness and ability to change, adapt, and perform in ways that support the organisation’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. Organisations 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 organisation or startup organisation, but it can be done in many existing organisations. Clearly, it must be done in order for organisations to thrive in today’s rapidly talent centered business environment.

 

Edward E Lawler III is a distinguished professor of business and director of the Center for Effective Organizations, Marshall School of Business at the University of Southern California. https://ceo.usc.edu/when-talent-is-important-five-next-practices/

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