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?
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The ability for companies to move quickly is more important than ever before. Change is constant. Uncertainty is a reality. Complexity is on the increase, and the need for agility is rising as a core organizational competency. We’re living in a new business environment being shaped by shifting talent patterns, increased competition, shorter business maturity cycles and lower barriers to entry, just to name a few. These are the elements shaping today’s and tomorrow’s business ecosystem and your organizational talent capability. Your organization’s ability to shape an adaptive talent strategy and proactively develop response capability will allow you to harness these influencers and gain the upper-hand.
An adaptive talent strategy provides you with an architecture to meet the evolving needs of business and develop a value-oriented talent function. Complex? Actually, it’s simpler and more streamlined than what you may have today. Expensive? Developing an adaptive talent strategy is more cost-effective than not developing one. Will it mean we’ll have to change how we do things? Oh, yes! But, what doesn’t require change? The cost of “standing still” or not adapting may be less expensive in the short-run but over the long-term the cost of not adapting will cost you considerably more, and quite possible even the survival of your talent function or organization. And, more often than not, change is good. The hardest thing about dealing with change is getting over the initial shock that you need to change. Once your open to new ideas and new ways of thinking an entirely new set of possibilities emerges.
Adaptive talent strategies are based on alignment and clarity around the organization’s strategic business directives. They succeed when there is active dialogue between the business units, finance and talent acquisition leaders during the strategic business planning process. In too many instances, recruiting becomes a just-behind process. If the talent acquisition leader is not part of the business planning discussion then the organization is already at a disadvantage and successful implementation of the business strategy is compromised. Now, granted, its up to the talent acquisition leader to ask the right questions and then develop an effective plan to ensure support and success. The key here is involving talent acquisition early enough in the conversation to shift from reactive tactics to value-oriented strategy development and implementation. When the talent acquisition leader has sufficient information early enough in the planning process they’re able to effectively allocate resources, structure their team, make investment decisions, and guide the company’s strategic directives by providing critical insight into the availability of talent. This conversation becomes the pivotal point in developing an adaptive talent strategy. From here, the company can benefit from increased clarity.
Three other key components that shape developing an adaptive talent strategy -
Know the talent you have
Visibility into the company’s existing workforce should be easily accessible for the recruiting function. Knowing where the strengths, weaknesses and gaps exist informs external recruitment. When the talent acquisition leader has this information they can more effectively develop a recruitment strategy and direct resources by partnering with their organizational development peer to identify the key skills and competencies needed to support the organization. An internal talent management system can deliver a number of benefits. It brings efficiency to the talent planning process and facilitates the movement of talent throughout the organization to meet the needs of employees and businesses. If employees know they have opportunities to pursue elsewhere in the organization chances are your going to improve retention. External recruitment should always be informed by the internal gaps and talent plans to make smarter investments and decisions when pursuing new talent.
Develop a talent plan
Clarity around workforce structure guides how the organization shapes thinking about talent today and in the future? Which roles need to sit in a specific geographic location and where do you have flexibility to pursue the best talent regardless of location? Where can you infuse elasticity in your workforce through part-time, contingent and job share roles? When do you build and when do you “buy” talent? How do you broaden reach by identifying where work can be done outside the organization and engage collective collaboration to generate ideas and drive innovation? What is your plan for knowledge transfer? How will you prepare for a maturing workforce with different needs? What does the supply and demand look like for the talent you need to support the strategic business directives? For which functional areas and roles do you have a recruiting core competency and where will you outsource recruitment to a third-party? These are just a few of the key questions that should be asked in developing a talent plan to guide recruitment. Without having clarity around these types of questions and the resulting impact on your organization, chances are you’ll experience significant talent pain points over time rather than operating as an adaptive, value-oriented talent function.
Leverage technology
In addition to an internal talent management system, a CRM tools is a key component to building an effective suite of recruiting technology solutions. The CRM serves a number of critical needs. It supports the recruitment function’s ability to manage communications, build relationships, integrate state-of-the art sourcing capability and provide visibility into the readiness of your talent pipeline. This last benefit, visibility into the readiness of your talent pipeline, is key to supporting an adaptive talent strategy. You’ll be able to provide better guidance to the business partners and make smarter decisions around how and where you allocate resources to external recruitment. The Reports screenshot to the right, courtesy of Avature, provides an example of the benefits gained when you have visibility into your talent pipeline. You know the readiness of talent and the depth of your pool by type of talent needed.
This will begin to provide you with an idea of what shapes an adaptive talent strategy. The benefit to the organization is enhanced support of the strategic business directives by improving alignment, opening up an active dialogue early enough in the planning process, and anticipating the types of talent needed. The benefit to the talent function is improved clarity around strategic business directives, the ability to be more planful in developing and implementing a supporting strategy, and the ability to deliver greater value to the organization. The ROI can be significant. You’ll realize the benefits of reduced third-party recruitment fees, reduced time-to-hire, increased recruiter productivity, reduced marketing / job posting costs, and increased efficiency in the movement of internal talent. The remaining elements - employment brand and networks, metrics, and internal communication will be covered soon. You might also want to take a look at the model on the home page to get a visual image of the framework for an adaptive talent strategy.
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