Talent Management - October 2008 - (Page 40)

recruitment & retention assessment & evaluation compensation & beneﬁts performance management learning & development succession planning [succession planning] by Mark Walker Adopting a MutualFunds Model for T alent Management The connection between mutual funds and talent management is not a huge stretch. Both rely on growth and performance for success while minimizing risk. A balanced, mutual funds approach to succession planning can facilitate development of high-performing talent and seed an organization’s leadership portfolio. T here he was: the chosen one. The person everyone said was being groomed for the top spot. His pedigree was ﬂawless, if somewhat intimidating. He was being socialized across the organization, mentored by a senior executive, assigned to cross-functional task forces and well-compensated. Then, suddenly he was gone. Recruited by a technology start-up before the company’s investment in him could be capitalized. The organization learned the hard way that investing in people, like investing in stock, is no sure thing. Even the best-laid succession plans can go awry if talented individuals leave an organization before ﬁlling the role for which they’ve been primed. Betting everything on a few high-proﬁle, blue-chip stars or playing the talent futures markets may have its place. But given the volatility and uncertainty of today’s talent market, most organizations would be better off taking a more conservative and balanced mutual-funds approach to investing in their future leadership. Designed to leverage economies of scale, mutual funds mitigate the risk of individual stock ownership while offering a strong return on one’s investments — the same objective most organizations seek in creating talent succession management programs. The similarities don’t end there. The best mutual-fund managers, like the best talent managers, use the following tenets to achieve continually strong results: 1. Clearly deﬁne core criteria and values, but take a balanced approach to realize them. Mutual funds vary in risk based on the stocks they contain — equities that support their core values or criteria. They may focus on blue-chip companies, for example, or green organizations. Yet, within that framework, they provide a balanced mix to minimize their risk. Effective talent management requires a similar balancing act. Organizations typically have core selection criteria such as industry experience, graduation from elite MBA programs or a proven track record of accomplishments. Yet, the focus on these values must be kept in balance to be effective over time. Take external talent, for example: Like blue-chip stocks, it comes at a high price. According to Hay Group research, short- and long-term incentives for outside hires tends to be double that for inside hires, and total direct compensation can be a third higher for external executive hires. Given those numbers, most organizations would do well to build a stable of internal talent, seeking outside hires to ﬁll only those mission-critical positions for which they lack internal potential. The rationale for looking inside or out should be determined by considering: the time needed to ﬁll the position, availability of critical outside talent and the ability to effectively on-board and rapidly assimilate outside hires. That last point often is the most critical. According to a 2005 Harvard Business Review article, two of every ﬁve external senior management hires fail in the ﬁrst 18 months. Of course, identifying and developing internal talent comes with its own set of challenges, not the least of which is making sure everyone agrees on what the criteria are for selecting the next generation of managers and executives. If investing in a mutual fund, wouldn’t the investor want to know how and why the fund manager ranked certain investments over others? That investor also would want to know each investment’s history: how it was developing 40 October 2008 talent management magazine www.talentmgt.com http://www.talentmgt.com

Table of Contents Feed for the Digital Edition of Talent Management - October 2008

Talent Management - October 2008 Editor’s Letter Contents Human Performance Leading Edge Foundations The Three Pillars of Executive On-Boarding Role-Based Assessment: Thinking Inside the Box Who's Going to Speak Up for Health Care? Obey the Push to Automate Managing the Star Performer No One Wants to Work With Adopting a Mutual-Funds Model for Talent Management Hewlett-Packard: Simple Talent Management in a Technical World Team Effort Pays in Talent at London Business School The Employee Survey: What’s in It for Me? Why Most Managers Are Stuck Advertisers’ Index Editorial Resources Full Potential

Talent Management - October 2008

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