Episode Transcript
[00:00:00] Good morning everybody. Today I want to give you some thoughts about integrated talent management. In contrast it to a much more modern approach which we call talent density. And this is a topic we've talked about for a few years and it's becoming even more urgent as we go into this AI fueled work environment where everybody's job is super powered. So the history of the word talent management goes back to the late 90s, early 2000s, when originally talent was the senior leadership and the rest of us were not considered to be talent. And around the days of the early Internet we had the digital war for talent coined by McKinsey. We realized that there were a lot of people that weren't senior leaders that were badly needed, experts in digital stuff, in tech, in data, in security. And sure enough, there were lots of pockets of quote unquote talent that we needed that were not senior executives. Of course everybody kind of knew that, but it was never treated that way. So, so there was a lot of talk about this because we really did have a shortage of skills in a lot of these areas. And we started to build this framework called Talent Management and Integrated Talent Management. In the early days of it, we looked at many of the traditional HR practices like recruiting, performance management, goal setting, succession, talent reviews, calibration, et cetera, kind of lumped them into this box that we called integrated talent management. And the purpose of the box was, was to facilitate the process of finding, locating, developing, assessing and perhaps eliminating talent. Okay. So we integrated these processes to try to build a better outcome, to find, locate, develop and move talent inside the company. We left a bunch of things out. There was no focus on talent mobility at the time. There were, there really wasn't a concept of it. And there was a lot of debate at the time about goal setting okrs, whether whether there should be forced rank, what the calibration process would look like. And I spent multiple years with many, many companies debating this. And then a whole bunch of vendors built tools for performance management. There was a ton of companies building performance management products. A lot of the LMS vendors added performance management to their LMSs because they felt it should be integrated. And that all went sort of chaotically. And companies started to buy a lot of these standalone tools. And around 2004, 5, all the HCM vendors started buying these talent management tools. It sort of started with successfactors and it all got integrated into the core HR system.
[00:02:39] So now we have this sort of strategic, functional set of practices that we're trying to implement in businesses to build critical talent capabilities. Thrown into the HCM platform. And the HCM vendors, of course, you know, they're not really experts in hr, they're experts in software and selling software. So they added more and more features and sort of threw it into this big bucket called integrated Talent Management. And meanwhile, inside of hr, we created a job called VP of Talent Management. And this job had all of these things reporting to it. And sometimes the head of Talent Management also owned Talent Acquisition, which is an enormously complex area. And sometimes it owned L and D, but none of the functions actually got integrated that much. So anyway, it kind of continued like this for about a decade. And then we had Another recession, the 2008 recession, a lot of layoffs. Then we had the transformation of the cloud, which created another set of talent skills shortages. Then we had the pandemic, which created hybrid work and all these other business disruptions. And we are now at a point in the age of AI where we are really in critical skills shortages inside of companies. The healthcare industry, the trucking industry, most software companies. We have Elon Musk now negotiated a trillion dollar pay package because of his skills. Software companies paying hundred million dollars or more for one person because they know a lot about AI. And you know, there's always been this truth that I certainly believe that one highly, highly skilled, highly talented person can transform an entire company. Remember Steve Jobs and many, many examples of this. Bill Gates, Steve Ballmer, et cetera, whoever you love. And you will find that there are situations where one very skilled, well suited person can transform an entire company or entire operation. Well, these integrated talent management processes had no concept of this whatsoever. Actually they were kind of the opposite because the rating and ranking process was actually a commoditization effect where you take a whole bunch of people and you say 10% of you guys are going to get a really bad rating, 10% of you are going to get a good rating. The rest of you are going to be in the middle. So we only. So you end up taking the people that are really high performers, and a lot of them get a two or a three, so they're kind of irritated. The really low performers get a 4 or a 5 and they don't know what to do except maybe quit. And then the small number of people maybe get a one and they're happy, but they feel a little bit odd because they know that there's other people around them that are just as capable as them. It's kind of a dumb approach in my mind to create this normal distribution of model of performance because that's not the way humans are. I mean, humans are actually almost the opposite in terms of distribution. Every human being actually is a high performer in his or her unique way. So I might be a fairly good but not great salesperson, but I'm a really good analyst. And I might be a really good communicator and a pretty good head of marketing. You know, if I'm in a job as a salesperson, I'm going to look like a three. If I'm in a job as an analyst, I'm going to look like a one. So do I fire the person who's the salesperson or do I assess their capabilities and move them into a job as an analyst? And that changes over time because people have different skills and different abilities that they develop at different rates and speeds. None of this really was incorporated in the talent management model. The talent management model was a supply chain model. It was the pre hire to retire supply chain of human beings. And we developed it around a job architecture which was intended to be fixed. The idea of a job architecture was that you only change it once every decade or so and we interchange and replace the humans into the architecture. The architecture is the fixed part of the arc of the company and the humans are the variable part. So we use talent management, quote unquote, to fill the slots with the best possible people. And then we use performance management to continuously weed out the low performers. And if we have a lot of voluntary turnover or just natural turnover, we crank up the speed of the talent management supply chain and make it go faster and faster and faster. So if you're a McDonald's or Chipotle or a hotel chain or some company that has high turnover for normal reasons, you just do the process faster so that you can get more people in and more people out. Now static, stable situation. That all makes perfect sense because the company's kind of operating along and you know, the process more or less kind of takes care of itself. But no companies are static anymore. There's peak periods, there's slow periods, there's business areas that are exploded with growth. Business areas that are really falling apart and need to be called back. There's M and A, there's global expansion, there's just, you know, it's not that simple. So what you end up with is layoffs. You have cycles of growth and cycles of layoffs. So you know, we bought a new company, now we have too many people in marketing. Let's lay off half the marketing people. We're doing an HR transformation. Let's get rid of a bunch of them. You know, we just bought a tech company, so we got a bunch of new engineers. So the old engineers are no good anymore. We don't like them anymore. So let's get rid of a bunch of them. We're going to divest from the metaverse, so let's get rid of the people that worked on the headset, et cetera. And you see it in the press all the time, almost every day. If you read Challenger and Christmas, I think that's their name, they monitor layoff notices. And, you know, you can go there every week and you can see who's laying off who. And that's more or less normal business behavior. So we can kind of anticipate that as being normal. But is it really the right way to run a company? I think the answer is kind of no. Because if you take a reverse idea, which is that the value of your company and the growth and potential of your company is the capabilities and dynamic ability to adapt inside your company, then the supply chain is a small factor in that equation. The big factor in talent, in talent density, as we call it, is developing people, moving people, assessing people, coaching people, and giving people honest and realistic but developmental feedback about what they can do to improve their performance through training, through new responsibilities, through new skills, through new certifications, through new behaviors, and coaching them to leave when they're not a good fit for some reason, either personally or professionally. That is not the same as integrating together all of these HR processes like we did before. It's a completely different concept. And one of the things that, you know, is implicit in talent density is that the manager does not own the talent. And this is a big problem that, you know, in a traditional talent management model, the manager does the performance appraisal, the manager decides on the succession and argues for pay, or does talent review. And maybe the manager, him or herself, is also underperforming and doesn't know how to do this very well or doesn't have a lot of experience.
[00:09:58] So you have a million points of experience bias and possible suboptimal decisions being made by managers. If I'm a sales manager in a business unit that is performing poorly, I don't know that there's another sales team in a business unit that is outperforming, that desperately needs the talent that I have, I don't know that. So I'm not going to say to one of my salespeople, you know, I really think it's better that you leave us and go work for him, because I don't even know that that opportunity exists. But ideally you would want that to happen and you would not want the manager in the poor performing group to be penalized because he or she happened to have landed in a business area that's just underperforming for maybe a bunch of other reasons. You'd want him also, if he's good and capable, to move to this new business unit and not fight it. But if you're a manager and you're paid or rewarded based on your span of control and organizational budget, you're not going to do that. You're going to, you're going to protect your turf. So the implicit problem that we want to fix in talent density is making organizational wide decisions that are good for the company and for the customer base and for the product strategy and for the investors. That may not be good for each individual manager, but you know, the managers are really just there to develop the people for the rest of the company, not just for themselves. So implicit in talent density is that every one of us is a resource that can be optimized in better ways and we have to feel comfortable with that. Now, if you've ever worked in a professional services firm, you, you know this. It's, it's very clear when you get there that you are only as good as the last project you did. Your title, your level, your political power is not really that useful. It's somewhat useful, but it's not that useful. Whereas in a typical hierarchical company, you know, you have the same job for a long time, you have your little office, you have your friends, you have your levels and all that stuff and that protects your turf and everybody knows you for your skills. So in a talent density world, even that has to be reconsidered. The second thing that's different in a talent density world is we don't recruit constantly just to fill capacity. One of the situations that I've been involved in many times in my career at different companies, and I've had this actual problem myself, is we want to grow the company, we see opportunities, we're trying to beat our competition, we're trying to win market share. So let's hire more people, let's hire twice as many engineers, we'll develop twice as much product, let's hire twice as many salespeople, we'll sell twice as many new customers, let's double the size of our IT department and then we'll fix all our tech problems. Well, I think most of you know that never happens that way because the faster you hire people, the more unproductive the organization becomes because there's a lot of new people that don't quite know what to do. The incremental value or productivity of a new person when you're hiring quickly is declining over time because the more new people you hire, the more they either get in the way or slow down the people that are already there. And you don't take the time to say to yourself, well, wait a minute, rather than hiring somebody, maybe we should reorganize the way we're doing this so we can generate more output per person in the current model. Or maybe we should reskill the people we have so that they can produce more output before we go out and hire more people. Or maybe we should fix something in the employee experience so our turnover rate goes down, and then we can decide if we need to hire more people, et cetera. We don't just hire to grow. In fact, I call it the opposite. We grow to hire. We grow first, and then at the limits of our capacity, we hire. That's kind of the way we run our company. We. We do not hire a lot of people, but we're growing just great. And we reach points where we say, you know what? This is a little bit out of control. We cannot keep up with the demand. Let's find one or two more people to do this and very carefully select. And then when we do hire people, we don't hire them to incrementally, arithmetically add capacity. We hire them to add what I would call more multiplicative, or maybe the word is exponential capacity. By bringing in somebody who's so good, so smart, so well informed, so capable that everybody else can do their job better because this person helps everybody. And that's the way Netflix does it. And so everybody we hire, we ask ourselves, if we had to lay off a whole bunch of people, would we keep this one person? That's the way Netflix sort of transitions it. And you know, what you end up with is you still hire people, but you don't do it as quickly or as sort of continuously as you would in a traditional talent management model. Now, you could question performance management, you can question talent reviews, you can question pay. A couple other things. The normal distribution curve, the forced distribution, the forced rankings thing, that goes back to George. I don't know if that's that useful anymore. I know a lot of companies still do it, and they probably will forever. But it does force, in some sense, managers to do what they should do, which is to hold people accountable and deal with performance issues. So I Always used to feel that forced rankings and forced distribution was a capitulation, that, you know, maybe our managers aren't very good at actually managing people. So we're just going to make it easy for them and we're just going to give them a rule and they're not going to have any choice. Because, you know, if you're a really good manager and I've worked for really good people at the time, and I don't know, sometimes I'm a really good manager. I suppose the behavior is you're always trying to optimize the performance of everyone and sometimes you do move somebody out of a role because it isn't good for them, or you give them some firm developmental feedback that they don't want to hear, but they need to hear. And because you're a wise, more senior person, perhaps what you advise works and they improve their performance. That coaching and development aspect to performance management, which to me is the most important part, is sometimes not really the way the process works. So it's up to you to think about this. Every company is different, but I think in high growth companies and companies that are under a lot of pressure, the performance management process becomes more competitive, more punitive, you know, more difficult. I know at some companies it's very political. You try to get your friends to rate you well so your ratings are higher. There's all sorts of strange natures to this and lots of people have worked over, over the years. There's hundreds of books on it. OKRs are an interesting way to run companies where everybody's got objective metrics. I see no evidence that OKRs are better or worse than other forms of performance management. In my experience, it's more of a stylistic thing depending on how the CEO or senior leaders were managed when they were in more line level. So those are aspects to talent density too. The thing that comes up in our dynamic organization research, which is really the fundamental research that shows you how this works, is that what you're trying to achieve in the talent management exercise is not filling slots, although that's a piece of it. It's to steadily increase the capabilities and value of the company. And so, you know, I like to think of it as a bank account in a sense that's always optimizing its portfolio to generate higher returns. And the philosophy that I use that comes from a lot of thinking from my book is this idea that human beings are the most appreciable asset in the company. People learn, people grow, people adapt, people can change. You can't change a machine. It's hard to change software, it's hard to change a process in a system. But you can encourage and develop and coach people. And yes, there are times when a person doesn't fit and usually the reason they don't fit is cultural. Usually, sometimes it's skills and backgrounds, but. And so a lot of the talent density approach is discussing your culture and living by your culture and reinforcing your culture and storytelling your culture. So people self select. Because what'll happen in a company with a strong culture is you'll attract people that want to be part of that culture and you will either reject or lose people who don't want to be part of that culture, which is fine. That's okay too. Because a dense organization doesn't have a lot of extra people. It doesn't have surplus people, it doesn't have people looking for things to do. I have a friend, let's call him, who works for a very large, very successful high tech company that grew a lot of in the last few years and he told me that a lot of the people in his business area don't have anything to do. They were just hired during a growth spurt and sure enough, you know, six to nine months later, a bunch of them got let go. That to me is just such a terrible mistake to go through. You want to prevent that now in terms of how you implement a talent density model, it is really more of a philosophical approach as opposed to an organizational approach. I don't know if the word head of talent management, with all these other functions reporting to them is necessarily important. It might be or it might not. In systemic hr, the idea is the business functional areas of HR work together. So if you're an L and D and you're the head of L and D or the clo, you're building programs to facilitate this talent density strategy. If you're the skills person worried about the skills architecture, you're focused on talent density and where are our most critical skills and what, what are our most critical skills? And then do we find them, do we develop them, do we build them, et cetera. If you're the head of TA, by the way, I've mentioned this multiple times. 75% of the heads of recruiting feel like they're not involved in any of these strategic decisions. If you're the head of TA though, you want to be asking some tough questions about why are we hiring so many people in this group? Why are we hiring so fast? Why is the turnover rate so high here?
[00:20:13] Somebody has to ask those questions. And if you're leading workforce planning or headcount planning, you also have to think about talent density and say to yourself, if we need this new skill that's maybe very rarefied or very emerging, can we find it? Should we attract it from a competitor? Can we bring it out of college or should we develop it? And in some cases any one of those might be the right answer. But you should be thinking about density too. And then inside of hr you should be thinking about your own talent density. Are people in the wrong jobs? Do we have under skilled people trying to do new things? Do we have the right tools, do we have Galileo or whatever? We need to really be great at our craft. You know, we're in some sense a well run HR organization is the fine tuning on the engine of the company. The company's running. It's got an engine, it's got, it's got parts in the engine. And our job is to look around for all the little pieces of the engine that are underperforming and really do what we can do to make them perform better. And sometimes it's skills, sometimes it's org design, sometimes it's tech, sometimes it's culture, sometimes it's something else. And that's really what talent density is about. I'm going to discuss this a bit in the predictions for next year so you can read more about it. We have a whole white paper on it. You know, you look at a really high performing, enduring company, you look at Boeing, you look at Amazon, you look at IBM, pick whatever company you admire in your industry and there's many of them and you find they're actually doing talent density. They're continuously assessing people, they're continuously developing people, they're continuously moving people, they're holding people accountable, they're being honest, they're giving people feedback. Those are just management principles of an irresistible company. It's not just being nice, it's not just following the rules, it's not just doing the year end review as defined by corporate quote unquote. It's constantly thinking about are we continuously improving as an organization? So let me stop there. It's the holiday week here in the US and I know a lot of you have turkey and family at home. So I hope you have a great week and we'll talk next week. I'm going to be publishing the podcast on the airline industry early next week and I think you'll really get a kick out of it. Thanks. Bye for now.
