Recruit, Retain and Develop

Professor John W. Boudreau – research director at the University of Southern California Business School – urges you to rethink how your human resources (HR) unit recruits, develops and retains crucial talent, that is, people. Boudreau advocates using metrics from the business side to evaluate how talent contributes to your firm and how your people’s needs vary under changing business conditions. He asks you to examine how you will muster sufficient people with crucial skills, now and in the future, and suggests strategically rethinking your workforce as the demand for pivotal skills spikes or shrinks.

Your Best Talent

As the 2008 financial crisis began, Jack Welch, former CEO of General Electric, advised companies to set aside a “bucket of money” to retain their best performers. Few of the executives listening to Welch had a retention fund, and most were unsure how to determine which staffers to work to retain.

When decisions about human capital are recast in the language and logic of proven business frameworks, leaders outside of HR can…be held accountable [for] their human capital decisions.John W. Boudreau

Some employees have greater worth to a company than others. Using proven logic from engineering, HR can assess how each person and position contributes to corporate results.

“Talent Hedging”

Firms can master and exploit certain risks. For example, when Michael Jackson became CEO of AutoNation in 2001, he assessed its range of risks, analyzing how it could thrive under various scenarios. What if North American auto sales dropped from 17 million cars sold per year to 10 million? What if a credit crunch occurred? The firm’s leaders considered many scenarios and made choices focused on the highest expected returns.

Talent risks parallel financial risks and the same tools that optimize risk in uncertain fiscal situations can help organizations build enduring talent portfolios. Boudreau advises considering your talent needs now and under different scenarios. Consider future possibilities and risks. Once you understand how your needs for the right personnel could change and what various scenarios could demand, conduct a “gap analysis” to see what skills are available.

Retooling invites HR leaders and stakeholders to embrace the underlying logic of other disciplines and apply it to vital decisions about human capital.John W. Boudreau

Talent hedging – creating a talent portfolio optimized for possible future conditions – gives you the same advantages that a well-crafted financial portfolio provides investors. To put it to work, Boudreau advises, link your “talent supply planning” with your “strategic scenarios,” diversify your staff, hedge your investment in personnel and collect the right data to monitor your progress.

The Biggest Return?

You can apply the tools your organization uses for understanding how customer segments and preferences drive business value to understand also how employee segments and preferences drive business value as well. The systems HR uses often already contain useful data, such as the way staffers choose and use their benefits. Retooling your employment brand strategy using marketing tools helps you track these patterns according to demographics and geography. Do some benefits work better in certain locations? What do younger or older employees want? Are you achieving lower turnover among the critical people you must retain to remain competitive?

Risk and uncertainty about human capital are facts of organizational life.John W. Boudreau

Marketing departments use “conjoint analysis” to study customers, define audience clusters and determine clients’ preferences. You can apply this tool to “talent segmentation” to identify the traits of sets of workers, learn each group’s potential impact on earnings, achieve good communication with each group, assess its responsiveness, and discover whether the steps you are taking to meet each segment’s needs are effective and align with your firm’s goals. Then, Boudreau explains, you are ready to create an efficient menu of perks that yields the biggest return on your expenditures in recruiting, retaining and developing your employees.

“Talent Inventory”

Companies keep enough raw materials on hand for smooth manufacturing and production, but not so much that they tie up funds in warehoused inventory. Some parts are so critical that a shortage would devastate production. Some require long acquisition lead times, while other parts – or substitutes for them – are readily available. 

Using this logic also can help you retool how you optimize your workforce. If a skill is critical, for example, have more people on hand with that talent than you immediately need.

Consider not only ‘how do we minimize or reduce risk in our human capital’ but ‘how do we more deeply learn to understand human capital risk’.John W. Boudreau

Use “turnover analysis” to determine which departures are problematic and which are not. Analyze your turnover rates to reveal departing employees’ profiles, departments, length of service and performance. Sometimes, the cost of retaining staffers is higher than the cost of hiring new ones. In other cases, the exit of crucial people means losing valuable knowledge and expertise. Identify pivotal personnel and set aside funding to keep them. You can optimize your talent supply chain by thinking the way the business side does to get the most from its inventory.

“Optimized HR”

Your workforce is a network of interacting talent. Consider how IBM recast its global workforce system using the same tools it used for its supply chain, thus optimizing workforce risks, cost and returns.

Unlike your inanimate inventories, the people who make up your workforce inventory make their own decisions about where they stay, when they move, and what they demand or require.John W. Boudreau

Direct your talent flow to support your strategy. Track how your teams work together and which cross-department coordination efforts create the most value. Give managers incentives and accountability for developing the people they supervise and reward them for supplying talent to other areas. To boost worker satisfaction and lower recruitment and hiring costs, help employees develop themselves.

In today’s business environment, Boudreau teaches, talent decisions are capital decisions. When you invest in your employees, they feel respected and appreciated, and that creates a culture of human value.

HR Relevance

Dodging most, but not all, jargon, Boudreau makes his points with sharp intelligence in this clearly written, conceptually fascinating work. He covers specific subject areas pertinent to HR professionals and offers an easy read, partly thanks to his lively examples. While HR professionals who want to play a more strategic role will receive Boudreau’s thoughts most readily, he also helps talent-focused high- and mid-level executives and managers who want more from HR and their employees. Boudreau makes a solid case for the merit of good metrics, but remains aware that HR measures people, not widgets or trends, as he underscores the many risks and trade-offs surrounding HR and measurement.