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?
Comment by joe gerstandt
Made Friday, 29 of January , 2010 at 8:35 am
Susan-
Great post, I could not agree more. From what I have seen there are some organizations out there that have historically been driven by innovation and they seem to get this. Organizations that have not been driven by innovation until recently seem to struggle with this and I think it has a lot to do with not understanding the value of difference. Richard Florida, Arie De Geus, Scott Page, Frans Johansson, Jeff Howe, James Surowiecki, David Pink and others have conducted and/or examined research showing the critical role that the entry of new or different individuals or ideas play in fostering the growth, learning and creativity of organizations and communities.
But difference is kind of scary especially when times are tough and the future is uncertain. And truth be told, when you increase the diversity in a given social group you are also increasing the potential for tension and fragmentation…not only do business leaders need to understand the value of difference, they need to understand that the right kinds of relationship and communication skills are in place for an organization to capture the value of difference.
Thanks for the great post!
-joe
Comment by Susan
Made Friday, 29 of January , 2010 at 10:49 am
Thanks Joe. I so admire your work and appreciate the additional context you’ve provided around diversity. You’re right! This isn’t easy. Organizations will need to define and nurture a culture that supports success. They’ll need to be clear on what they want and the type of work environment that will facilitate long-term success. The payoffs can be significant. The value and return on collective thinking and action has never been more apparent than what we’ve seen as an outgrowth form living in a more connected world. I’ve been a big fan of Innocentive and mentioned the site in this post. What I’ve also learned is that a significant percentage of the problems solved through their network have been solved by people outside of the immediate discipline of the problem itself. Organizations have the opportunity to begin to foster this same type of collaborative environment and innovative thinking. What we do know is that the future will not look like today. The pace of change is speeding up, not slowing down and business environments are growing in complexity. Building a talent portfolio that brings a more diverse and expansive base of knowledge can help the organization better navigate this new and uncertain period.
Comment by Afton Funk
Made Wednesday, 3 of February , 2010 at 8:07 am
To riff on what Joe stated, when branching out and diversifying your talent pool, not only is it about carefully selecting the aptitude of a person with a different background and their ability to incorporate their experiences into a new environment, but also about the personality of that individual.
Yes, diversifying your talent pool also means finding people with different personalities, however the role of the talent-portfolio architect is to fit these new hire pieces into the larger organizational personality puzzle that already exists. The whole point of finding new and different people is to bring new viewpoints and ideas into the mix, but this effort will be for nothing if the individual does not fit somewhat into the personality of the organization and is therefore able to effectively exchange ideas with the other employees.
Comment by Susan
Made Wednesday, 3 of February , 2010 at 9:14 am
Afton – your spot on! Cultural fit is critically important for both the company and for the individual. It requires each to be brutally honest about who they are, what they want and what their willing, ready and able to do. Making a decision to diversify the company’s talent portfolio will only be successful if there is a clear understanding of the company’s overarching talent philosophy and supporting culture. There must be a solid commitment to embrace diverse thinking, new ideas, open dialogue, collaborative practices and continuous learning. Cultural fit can be assessed during the recruitment process but its only as effective as the company is honest about their internal environment. This is true beyond portfolio diversification, though. Even if someone has the exact skills, experiences and abilities that map to a role, a gap in cultural fit typically leads to faster turnover. I love the term talent-portfolio architect. It adds an important and distinct dimension to workforce planning. Thanks for the comment!
Comment by Saleem Qureshi
Made Thursday, 25 of February , 2010 at 1:38 am
@Susan
Brilliant blogpost!
Alignment, structure and clarity of the company’s talent philosophy are three opportunity areas for companies to address that will strengthen the overall talent strategy . Companies could expand their talent pool by expanding their view and focusing on individual potential and talent adjacencies – a concentric approach that looks expands the skills and experiences to be considered.This type of strategy does require a mind-shift and supporting programs to on-board talent, and can be integrated with cutting-edge technology to leap towards success in future.
Pingback by RecruitFest! Welcomes Susan Burns as Track Leader | RecruitFest!
Made Monday, 16 of August , 2010 at 10:53 am
[...] finds some time to put her ideas to screen. Be sure to check out some of her recent thoughts on risk avoidance within talent strategy and using social networks for communication and engagement. She has made tremendous contributions [...]
