Is risk avoidance adding more risk to your company’s talent strategy?
Written by Susan Burns
Managing a financial portfolio takes increasing skill, risk tolerance and foresight. Whether you’re working with a financial advisor or not, active participation is required. Decisions are not easy but one thing is clear when it comes to good financial planning – diversifying your portfolio is a smart thing to do. In uncertain times it’s even more important.
Similarities can be drawn between portfolio diversification and designing smart talent strategies to develop a diversified talent portfolio. Most importantly, it’s the absence of risk that adds risk. In a financial portfolio, risk avoidance can lead to missing out on significant gains or realizing significant losses. Taking the time to clarify your goals, be honest about the level of risk your willing to assume, design a diversified portfolio, make ongoing contributions, pursue a long-term strategy, periodically reassess and rebalance the portfolio, and leave room to play (so you can take advantage of interesting opportunities) will help to ensure you realize your financial future and keep you engaged in the journey.
Risk-smart of risk-averse
Now, let’s look at the similarities in how talent strategies are designed. In an effort to avoid risk, companies make narrowly defined decisions about how, where and when they invest in talent. Developing clearly stated goals around talent acquisition is often the first obstacle to overcome. Without an integrated workforce planning capability, decisions are often reactive, expensive, and lead to either not enough of the right talent at the right time or too much of the wrong talent at the wrong time. But, lets assume there is a workforce plan in place. Is the plan risk-smart or risk-averse? Here’s the difference. A risk-averse plan would identify the talent needed to support attrition, succession planning, growth, reinvestment in existing talent, and decisions around when, where and how to invest in talent acquisition. If the strategy is progressive, there’s also a talent-pooling component. Keep in mind that very few organizations pursue this level of strategy and planning. The risk-averse plan sounds pretty good, right? So what’s the risk-smart plan? In the risk-averse plan the talent function is doing many of the right things to deliver value to the organization. The key difference? The risk-smart plan includes a very important distinction – diversification.
Talent portfolio diversification
Identifying a goal for the percent of talent you’ll recruit in to the organization that will come from varied backgrounds, skills, and experiences moves the organization towards a risk-smart talent portfolio. This same thinking can and should be applied to internal talent movement. The advantage a risk-smart approach brings to the organization is a subset of Talent who have the potential to bring different perspectives to the business and can help fuel innovation and breakthrough thinking. Too often, hiring managers and recruiters pursue people who have been in the exact job that is open. That’s fine, to a point, but often it results in applying the same thinking, which doesn’t always help to inspire new ideas, broaden perspective and drive innovation. Recall the Einstein quote, “You can never solve a problem on the level on which it was created.” By not diversifying the company’s talent portfolio organizations can impede their own progress and assume a riskier trajectory over time in their effort to reduce risk.
Here’s an example from the HR space. Many technology companies only want to hire HR leaders who have come from technology companies. The same story can easily play out in healthcare, entertainment, financial services, consumer package goods, retail……get the picture. The main point is this – someone who has experience in other industries, or even other functional areas, brings a more expansive knowledge-base that results in something many technology companies cherish – innovative practices. Diversified, creative thinking has often been at the heart of the company’s birth. Yet at some point they become increasingly risk-averse, especially in HR. As I’ve heard the “why” described it is often not that different than how other companies would describe their unique challenges. Will there be an initial learning curve? Yes! Are there specifics to the business that are unique? Yes? But, the right person can get up to speed quickly and new skills can be developed. Along the way, if the person brings the required leadership skills, has a proven track-record and is a cultural fit, the individual, team and company are transformed and all will benefit. It’s through this immersion and learning process that amazing things can happen. New questions are asked. New insights are made. New discoveries unfold and new opportunities are identified. Current thinking and processes are challenged. The world is looked at through a new lens and the opportunity for transformational change is enhanced. Operating in an uncertain world undergoing dramatic change requires a diversified perspective fueled my fresh thinking. Holding on to “what is” while everything around you is changing will not help the organization realize its potential.
Diversifying a talent portfolio requires building strong partnerships and trust with business leaders and the CFO. Start small and find internal champions. Help prepare them by developing a strong on-boarding process and immersion to enculturate new talent. Partner with the CFO to gain support and mitigate risk. This is one aspect of defining an opportunity cost of talent, which focuses on the benefits derived by the business rather than on expense. Take the time to think about talent adjacencies, how to assess experiences that led to differentiated business results, benefits gained through work on special projects, and demonstrated ability to ramp-up quickly. Each of these are indicators of future potential and can be quite valuable to the overall talent portfolio. Looking at each of these indicators and then mapping talent to the organization’s cultural will help ensure success.
The end game
What better time than now to think more broadly about talent and begin developing a risk-smart portfolio. The breadth of talent on the market today and your company’s ability to capture attention and engage a diverse mix of prospects can align more easily than during highly competitive environments. You’ll also be helping to position your company for long-term success. Start slow, identify your champions and demonstrate how you’ll support the strategy. In the end, by being risk-averse there is potentially greater risk in the talent strategy, which ultimately transfers to the business strategy and the organization’s long–term success. After all, is your talent strategy focused solely on today or where the company wants to be tomorrow?
