An organization’s talent is potentially its most valuable asset. But this statement is only true if the workforce is made up of the right people, with the right knowledge/skills and the right motivation. In addition, it must be managed effectively. The talent management strategy provides a framework for creating the right talent pool. Staffing and developing the workforce and effectively and appropriately defining, measuring, managing and rewarding performance are the pre-requisites for success. And the profile of the optimal approach is one that will focus the right workforce on organizational objectives.
Figure 1 shows a model for deriving the human resource (talent) strategy from the organizational context and the business strategy. The context is a function of the vision/mission of the organization, the culture and the internal and external realities with which the organization must deal. Each organization must determine its context before examining alternative business strategies, since different strategies work or do not work depending on their fit to the context within which they must be executed. Then it can formulate a strategy for acquiring and managing the right talent pool.
The need to continuously evaluate the human resource strategy to be certain it is aligned with the context is particularly critical now. Technology and globalization are changing talent requirements. That type of change often demands new skills that may not be present in the current workforce. In some cases organizations have attempted to replace a significant part of their workforce with new employees better suited to the new talent requirements (e.g., newspapers replacing type setters with IT personnel when adopting automated front-end systems). Others have attempted to retrain existing employees, so they are competent to function in the new strategy.
However, there are significant costs associated with each of these approaches. Changing out the workforce has separation costs, hiring costs, training costs and potential litigation or even violence. Retraining the existing workforce can feel like repainting a commercial airliner while it continues scheduled runs, not to mention the significant training costs for the painters. Deciding which transitional approach to use should be based on a cost/benefit analysis and consider both the short and the long term.
Aligning Human Resource Strategy with Organizational Context
Staffing and Development Strategy
By profiling the types of employees fitting the current talent strategy using competency models, an organization can use workforce planning to evaluate the adequacy of the current workforce and plan for future needs. The model in Figure 2 illustrates how to continuously evaluate the workforce in light of changes to the organization’s needs.
Evaluating workforce demographics can facilitate planning for impending retirements. The Water Research Foundation did a study that concluded that half of water utility critical skill people were eligible for retirement within five years. Failure to know that early and to act on it could create a crisis in a utility. And taking positive steps, such as improving job design, doing effective performance management and investing in career management programs can increase the capabilities of the existing workforce. That productivity increase can preclude the need to hire new talent. And making a business case for employee development can help to secure the resources to invest in the current workforce.
By doing continuous environmental scanning and using scenario-based planning to plan for a range of possible futures an organization can continuously evaluate how well its talent fits its needs. As technology and globalization have provided new sources of talent each organization must decide whether the work that needs to be done can best be done by employees or if the use of contractors, consultants and freelancers can produce a better result. Both the global mobility of talent and the ability to have work done anywhere using technology have increased the potential supply. But attempting to integrate the work of outsiders and that being done by employees can be challenging. And it is often necessary to modify the value proposition to attract the best talent from the new sources.
Performance and Rewards Management Strategy
How effectively and appropriately an organization defines, measures, manages and rewards performance will have a significant impact on employee focus and motivation. If employees do not believe performance management is done poorly and/or their rewards are not equitable, competitive and appropriate that perception can reduce employee satisfaction and engagement, as well as increasing unwanted turnover.
If what is defined as performance changes over time the new criteria and standards must be clearly defined and understood by all parties. Effectively rewarding performance requires that rewards accrue to those who produce the results desired. For example, if a software provider wants to ensure its designers create products that are commercially successful, rather than just technologically superior, it might provide an incentive package that ties rewards to product acceptance by customers. Basing a portion of the awards on the product sales for the first one or two years provides a clear message that dazzling potential customers is not enough, they must be dazzled enough to buy the product.
The use of outsiders brings into question whether the performance and rewards management strategies used for employees will be effective for those working under different arrangements. This is especially true when using freelancers (gig workers). Contractors and consulting firms are typically evaluated and rewarded using pre-determined contractual agreements. But freelancers may require individualized strategies, whether they are acquired through talent platforms or they deal directly with the organization. If they are satisfied with their treatment it will increase the chance that the best freelancers will view future engagements with the organization favorably.