Just-in-Time Talent

How to develop a supply chain of people.

Two-thirds of U.S. employers are doing no workforce planning of any kind, says Peter Cappelli, and the advice they're getting about how to start is based on 1950s realities. In this month's Harvard Business Review, Cappelli, director of the Center for Human Resources at the University of Pennsylvania's Wharton School, says the best way to look at talent is through a supply chain lens. He told Kathleen Melymuka how to do it.

Peter Cappelli

How is talent management similar to supply chain management? Supply chain management is about anticipating what the organization is going to need internally to produce products or services, and talent management is the same thing -- anticipating the talent needed by the organization.

You cite several issues in supply chain management that relate directly to talent management. The first is the "make or buy" decision. How does that play out? A lot of organizations feel that they're either going to hire on the outside or develop talent from within. For some companies, it's a matter of principle that they make their own talent. Others by default hire outside. Companies ought to be thinking not either/or, but some of both. You ought to be thinking almost job by job. For some jobs, it makes sense to do more internal development, and for others, it doesn't.

You write about the issue of reducing risk in forecasting demand. How do I do that with talent? The big problem in talent management is companies don't even recognize that the decisions they're making are uncertain. This is where operations research has laid the groundwork. The first thing is to get a sense of how wrong we will be. The easiest way to look at that is to ask, How wrong have we been before? Next is to ask, What happens when we're wrong? Do we have too much talent or not enough? A generation ago, the cost was bigger if you didn't have enough talent. In most companies now, the problem is worse if you have too much talent, because you've made investments in people and you have to lay them off or you're paying them and just parking them someplace. A deep bench is inventory, and inventory is costly. So today, the bigger risk is having too much talent. So if you think about development internally to the point where you're pretty sure you will not go long; on average, you will fall short. But that's not such a crisis, because you can pretty much hire from outside. It's expensive to do it, but you need to do only a little bit if you don't end up too far off [in your estimate].

Another parallel issue is improving the return on investment. How does that work in terms of developing employees? One of the big problems companies have when they invest in employees is that people walk out the door. It's hard to make any investment in people [pay off] if they leave after you invest. There are lots of solutions to that. Maybe the most important is to get employees to share some of the costs of development, because they get most of the benefits because they can walk out with them. The best way to do that is to get them to do [developmental assignments] in a way where a lot of the work is done on their own time in addition to their own assignments. Tuition reimbursement is a great example. They do it on their own time.

Copyright © 2008 IDG Communications, Inc.

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