Three imperatives for Talent Management in a VUCA world

Talent management originates from the late 1960s. Since then the business environment has changed dramatically. However, talent management practices in a number of organizations have not been adapted to cope effectively with these changes. This makes these organizations vulnerable to disruptions in their environment. Talent managers should therefore do three things to ensure their businesses have the necessary adaptive and innovative capabilities to cope with disruptions.

Picture Article Talent Management

By Dirk Verburg

Almost 50 years ago, in 1968, Paul S. Ostrowski published an article with the title “Prerequisites for Effective Succession Planning”. This article is often seen as the starting point for Talent Management. The business environment at that time looked completely different from today:

  • Economic power was concentrated with a few Western countries and the members of the OPEC cartel
  • Military power was in the hands of a duopoly consisting of the USA and the USSR
  • Building a sizeable international business required serious capital
  • Average tenure of employees was long (‘lifetime employment’) and employees were not as internationally mobile as they are today
  • The Word Wide Web did not exist

It is fair to say that the business environment during this time was not exactly static (the oil crisis of 1973, the regime change in Iran and the invasion of Afghanistan by the USSR). However the business world evolved at a much lower speed than today. This made business planning a far more predictable process, not dissimilar to the 5-year economic plans used by the former Soviet Union and a number of other countries at that time.

Managerial Monocultures

In this relatively predictable environment companies could safeguard their success by replicating proven success formulas and adhering to existing business models.

At that time Talent Management was firmly rooted in the classic trait theories of leadership; the belief that successful leaders had specific personality traits that distinguished them from less successful leaders. For this reason talent managers tried to identify employees, who seemed to possess these traits, during recruitment processes and talent reviews. Once these employees were identified, they became part of ‘talent pools’, which meant they often received special training programs and regular exposure to senior leaders, whilst their careers were planned through succession plans.

As a result of this, companies were able to create strong efficient and effective ‘managerial monocultures’. These monocultures consisted of senior managers who were selected on the basis of the same criteria (traits), followed the same training programs and whose careers followed the same paths.

Although the toolbox of talent managers was refined and extended in the course of the 1990s and the early part of the 21th century (e.g. with function specific competence profiles, assessment centres and sophisticated leadership development programs), the basics have remained the same in most companies.

A VUCA world

Meanwhile, the economic, technological and political climate in which talent management originated, changed dramatically at the beginning of the 21th century. The unpredictable VUCA (Volatile, Uncertain, Complex and Ambiguous) environment of today, has replaced the relatively predictable world in which Talent Management originated:

  • The Financial Crisis showed that the unthinkable was possible: the collapse of Lehman Brothers in just a matter of days, attempts from AIG to dispose assets by fax in a fire sale type fashion and established companies like Goldman Sachs, GE, Bank of America lending money from Berkshire Hathaway against incredibly unfavourable conditions.
  • The geo-political landscape has become increasingly complex and unpredictable: from two super powers in the 1980s (the US and the USSR), to one superpower in the 1990s (the US), to three superpowers post 2000 (the US, Russia and China). Meanwhile, these superpowers operate in a world that is dealing with the aftermath of 9/11 and the Arabic Spring, territorial aspirations of Russia and China, nuclear threats from North-Korea and the unpredictable behaviour of several world leaders.
  • The development of the Internet has made it possible to start complex (international) businesses with minimal capital requirements, develop completely new business models (from CD’s to iTunes to Spotify), made national borders irrelevant for certain industries (e.g. online gambling) and enabled the creation of new companies with radically new business models like Facebook, Google, Amazon.com, Salesforce.com, Spotify, AirBnB and UBER.

In this environment most businesses can no longer rely on proven success formulas, existing business models and managerial monocultures. Instead, organizations need to develop the capabilities to either disrupt their own markets, or to be able to reinvent themselves quickly when their market is disrupted. To quote Andrew Grove (Intel), in today’s business environment ‘Only The Paranoid Survive’.

Three Imperatives for Talent Management

In this context talent management practitioners need to do three things to ensure Talent Management stays relevant for their organizations:

  • Think strategy first
  • Identify, retain and develop the crazy ones
  • Focus on teams

1. Think strategy first

Talent Management professionals will need to move away from maintaining a managerial monoculture of individuals with similar competences to cover the roles their organizations know at present. Instead they need to ensure their organizations have the necessary capabilities to compete in the future.

This means they need to initiate, or at least participate in, the strategic conversations that determine the shape of their organization in the future. Topics in these conversations should include e.g. corporate ambitions (where do we want to be in 1, 3, 5 and 10 years), scenario planning (‘what happens if’), distribution channels and technology. For instance the impact of technologies like Blockchain and Artificial Intelligence, as well as trends like the upcoming ‘Gig economy’ (in which ‘job + employees’ will be replaced by ‘work + ‘capabilities’), will force a number of ‘make’ versus ‘buy’ decisions, which will have a major effect on the workforce planning in organizations.

Ticking off lists with behavioural competences and diligently completing succession planning templates is no longer enough; talent managers will also need to be able to establish what technical capabilities the organization needs, when the organization needs them and how they will be sourced.

2. Identify, retain and develop the crazy ones

In the pre-VUCA environment organizations needed ‘well-adapted corporate citizens’: employees who performed well and were able to maintain good relationships with the leaders, peers and staff in their organization. In HR speak, they needed to be ‘organizationally savvy’ (= know how to get along with senior executives) ‘team players’ (= willing to agree to sub-optimal solutions proposed by their peers) who could ‘deal with ambiguity’ (= willingness to accept the lack of appetite from senior executives to take clear decisions) and ‘fit the culture’ (= do not rock the boat).

An interesting example of this school of thought is the motivation of Jack Welch to appoint Jeffrey R. Immelt as his successor (‘keen strategic intellect’, ‘cutting-edge technological background’, ‘strong leadership skills’ and a ‘unique set of team-building skills’), which led to mixed results for GE. The reason for these mixed results might very well be that the VUCA world in which Jeffrey R. Immelt needed to operate (the Financial Crisis of 2008), was a completely different one from the non-VUCA one in which Jack Welch operated. Had Jeffrey R. Immelt faced the same circumstances as Jack Welch, he might have been equally, if not more successful.

The difficulty is that exceptional talents often do not match the standard list of traits that were developed in the pre-VUCA world which formed the basis for the managerial monocultures at that time. In most organizations Steve Jobs or Larry Ellison (‘No team players’), Jeff Bezos (‘Too demanding for his staff’), Richard Branson (‘Too much of a risk taker’) or Elon Musk (‘Unrealistic ideas’, ‘Not organizationally savvy’ and ‘Single-minded’) would never feature prominently in succession plans.

The root cause of the problem is that most competence models and methodologies used by talent management professionals are aimed at finding conformity with employees who match a standard set of competences (‘corporate mould’), not at finding originality or outliers. Most established corporations are rightfully committed to ensure diversity in terms of nationality, race, gender and/or sexual preferences, but are often less interested in diversity in terms of thinking or behavior.

This is a problem because well-adapted corporate citizens most often do not drive industry disruptions, precisely because they are well-adapted corporate citizens. Instead disruptions are often initiated by ‘the crazy ones’: single-minded individuals with a strong focus, and often equipped with a certain behavioural ‘edge’ that limits their chances in succession planning processes.

Unfortunately, however, Talent Management methodologies often follow a variation of Darwin’s law, meaning that they are aimed at identifying people who are expected to be able to adapt themselves in the best way possible to the internal environment of the organization. The question however is if this is the best way to ensure the survival of the company in a competitive and dynamic and external environment.

An additional problem in this context is that in a number of organizations HR and Talent Management professionals are good at establishing the development gaps of individuals, but are less successful in developing plans to effectively bridge these gaps. This is the reason why year after year the same names keep popping up as ‘not ready yet’ in talent reviews. This phenomenon is not only frustrating for the individuals concerned, but is also a waste of resources for the organization who does not use the full potential of these individuals.

All in all this has led to a situation that, in most industries, we nowadays do not expect established companies to come up with‘game changers’. Take for instance the urban transport industry, the car industry, the record industry, the film industry, the hospitality industry or the airline industry: which established players introduced a game changer in their industry in the last 10 years? Probably no names spring to mind. Instead the names that do spring to mind are UBER, Tesla, Napster, Spotify, Airbnb and budget airlines like Norwegian Air (London to New York for less than USD 160).

3. Focus on teams

In many organizations, talent management practitioners look for quantity instead of quality, when assessing individuals. They assume the person who possesses the most competences (‘ticks off most of the competence boxes’) has the highest potential. Most often however it is not the number of competences an individual master that makes the difference between success and failure, but the degree in which an individual masters the capabilities that really count. This is the reason why soccer teams specifically select goalies, defenders, midfielders and strikers. If a striker can defend as well, great, but they will always prefer a successful striker without good defending capabilities to a less successful striker with relatively good defending skills.

For this reason talent managers should also take the team dimension into account. They need to be thinking of teams as ‘capability configurations’, and answer the question which technical capabilities are required in the team to address the specific needs of the organization (content) and which personal competences are required to make sure the individuals work productively together as a team (process).

These needs need to be translated in a set of requirements which forms this basis to define the composition of the team. This approach makes it possible to select individuals based on outspoken strengths, whilst ensuring that weaknesses are compensated by others in the team (complimentary capabilities).

To a large extend this already happens naturally in project teams, and, given the fact that business cycles tend to become shorter, this concept could also be expanded to line organizations.

Return On Investment

Adapting Talent Management processes and methodologies to meet these three imperatives is not easy, and will be more complex and time consuming than completing the same standard templates every year. The effort is worth it however, because the best way to predict the future of an organization, is to attract, retain and develop the staff that have the capabilities to shape this future.

Originally published September 26, 2017 on LinkedIn

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