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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One of the key takeaways from Talent Camp was the role that HR can play in enabling and leading collaborative work environments. Not only is the time appropriate for HR to take this on but it’s critical that they step up to lead the way. By enabling collaborative work environments, HR assumes a role in advancing the organization’s innovation capabilities, which can increase competitive agility and deliver enhanced value to the bottom line. Ultimately, culture determines the organization’s effectiveness, capability and future. Before narrowing in on the role of HR it’s valuable to take a look at what comprises and influences organizational culture.
Organizational Culture
Every organization has a story to tell. How things get done. How people think. How decisions are made. What conversations sound like. Who is interacting with whom. A composite of the attitudes, behaviors, experiences, values and beliefs that influence how the company operates and accomplishes its business objectives. Layer upon layer, just like an archaeological dig, each of these threads works together to tell the company’s story. Culture is shaped and influenced over time by company founders and leaders. In some instances its shaped by a deliberate, intentional vision. In others, culture is shaped organically. Either way it becomes the DNA of the organization. As a company matures, new leaders shape culture through tangible and intangible actions. Social, technical, economic, political and global events also affect culture through related events. Awareness of organizational culture has grown over time. Culture has become a common and important characteristic to companies promoting their employment brand and to job seekers considering employment options. The latter may sound surprising during the current economic situation but I think people weigh choices differently, especially when it comes to how and where they invest time to build their careers.
Culture plays such a significant role within an organization, people will work hard to protect the company’s culture – consciously or unconsciously, sometimes not even realizing what it is they’re trying to protect. During times of transformation this can be quite limiting and costly to an organization. When culture isn’t nurtured and allowed to evolve organically it can impede growth, interfere with competitive capabilities, make it more challenging to attract desired talent – and even cloud information around the type of talent that is needed, and lead to turnover of good people. Now, it may be true that an organization deliberately chooses not to allow its culture to evolve. That’s fine as long as it’s a deliberate decision and the consequences are recognized as well. Its also important to note that culture can evolve without compromising the organization. It doesn’t have to be an all or nothing change. By identifying core components of the culture that continue to add organizational value along with where there is an opportunity for the culture to evolve and add greater value, the company and employees can be served more fully.
Time for Cultural Change – Collaboration
Are the organization’s needs and potential being met by the existing culture? As we head into a new year and a new decade, its valuable to reflect on how your company kept pace with the amount of change that has taken place over the past ten years. What are the social, technological, economic and global trends that have had a major impact on the way business gets done? What about the way people interact – personally and at work? Will the culture continue to support the company’s needs over the next 5 – 10 years? What about the people that make the business happen each day? Or, is the culture impeding progress and the ability to attract and retain the talent that will be needed to compete effectively. If the organization’s culture has not changed while everything around it has is that good? Will the culture help to prepare the company for a successful future? Maybe yes and maybe no. If the tough questions aren’t asked and answered objectively and honestly then where does that leave the company?
To be clear, I’m not suggesting that culture should be so malleable that it’s constantly changing. On the contrary, I’m suggesting that a strong culture allows for evolution and change. One of the most important questions to ask of culture in today’s organization is how effectively it supports collaboration and if the company’s leaders embrace the idea of a collaborative environment. People have more opportunities to connect, share ideas and create content than during any other time in history. They have easy access to information and can, in most instances, quickly find the answer or gain knowledge on a variety of subjects simply by typing a question into Google or tapping their networks. This is the current and evolving state of the workforce. Social networking and online collaboration is influencing the way people interact, access information and work together to make things happen. So, what happens when they go to work? Does the culture of the organization align with what people value? Does it support access to information and connections?
The Role of HR and Collaborative Environments
Where does responsibility for culture sit within an organization? Who will recognize if and when the culture has an opportunity or need to evolve? I believe the responsibility should sit with HR and will even go as far as saying its one of the more important contributions that HR can make to their organization’s health, success and longevity. What is the HR functions role in shaping organizational culture? Does HR lead the evolution of culture? Do they have the capability to shape culture and enable organizational effectiveness? Or, does HR focus on trying to protect “something” in an effort to reduce risk and maintain the status quo? My guess is that there’s room for debate!
From my perspective, this is where the value contribution from HR can soar. Leading a culture evolution can reflect HRs capacity to bring together significant trends influencing the workforce, current and future, and the organization’s need for increased competitiveness, agility and innovation – all elements of a successful future. Establishing a collaborative environment is dependent on how people interact, how work evolves, how diverse perspectives are engaged, and how leaders are developed to bring out the best in people to guide the organization to success. Each of these is at the heart of where HR adds leadership and value to an organization’s success. As a collaborative environment is shaped and embraced, the organization will benefit from increased interaction, idea generation, broader perspectives around problem solving, and a more expansive approach to planning for market and product growth, or contraction. As HR helps to shape the organization’s culture it contributes directly to its own evolution in the company and is well positioned as a key contributor to long-term success.
If culture is allowed to evolve through nurturing or unfold organically to reflect changes in broader societal and technical trends then its time to take a deep look at how things are getting done. What story does your company want to tell?
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