Business Case Studies, Executive Interviews, Peter Cappelli on Midlife Crisis

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Interview with Peter Cappelli on Midlife Crisis
February 2009 - By Dr. Nagendra V Chowdary

Peter Cappelli
Peter Cappelli, the George W Taylor Professor of Management at The Wharton School and Director of Wharton’s Centre for Human Resources.

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    The way to deal with the costs of uncertainty above is “make and buy,” choosing the mix of internal development and outside hiring to minimize the risk and associated costs of being wrong in our forecasts. In most cases, that beginning with the best workforce forecasts we have and then planning a level of internal development to make sure that we minimize the risk of “inventory,” or overshooting the actual demand for talent, and then making up any shortfall through excess hiring.

    Principle 2: Reduce the Uncertainty in Talent Demand

    The business needs we need to predict are more complex than any contemporary forecasting techniques can handle: markets contain more competitors that innovate faster, businesses react to their competitors’strategies more quickly, and the options for doing business (outsourcing, joint ventures, acquisitions, etc.) are greater. Long-term succession plans in particular are mistakes because they assume that we know which jobs will need to be filled in the future and which current employees will be around to fill them. Many companies update their succession plans every year to try to keep up with the fact that jobs change and individuals leave. As a practical matter, how useful is a plan if it must be changed every year? What problem is it solving? A better approach is to take that uncertainty as given and find ways to manage it. One way to reduce the effects of uncertainty is to use the principle of portfolios. To apply this concept to talent management, consider the idea of talent pools, where you avoid developing employees to fit narrow, specialized jobs. Instead, you develop a group of employees with broad and general competencies that should fit into a range of jobs. Once the candidates are developed, you can allocate them to the actual vacancies, as opposed to trying to guess years in advance where vacancies will occur and which individuals should slot into them. The fit between candidate and specific job may be less than perfect. But just-in-time training and coaching can help close the gap.

    Principle 3: Earn a Return on Investments in Developing Employees
    How can we recoup investments in employees when the need for their skills is uncertain in the long run and they can walk out the door, taking those skills with them? One way to improve the payoff fromdevelopment is to rely on shorter, more accurate forecasts and improve the odds that the investments will pay off. Lessons from supply chain management can help here as well. Consider the problem of bringing a new class of candidates into an organization. For those employers who hire people directly out of college, an alternative arrangement hires half the new class in June and the other half at the end of the summer in September. Instead of one hundred developmental assignments, now the program needs to find only fifty in June and then rotate the new hires through them in three months. The June cohort steps out of those roles at the end of the summer when the September cohort steps into them. Then rather than having to find one hundred permanent assignments in September for the June cohort, the organization need find only fifty, and so on. The more important advantage is that hiring forecasts can be shorter and more accurate. This eases the match with the first developmental assignment and then with every set of assignments along the progression of that cohort.

    An important way to deal with the problem of recouping investments in development is to get employees to share the costs. Employees are now the main beneficiaries of investments in their development because of their ability to cash them in on the open market. The simplest way that individuals contribute to the costs of their own development is by taking on learning projects voluntarily, perhaps in addition to their normal work. Assuming that the candidates are more or less contributing their usual performance in their regular jobs and their pay hasn’t increased, they are essentially doing these development projects for free. Several companies now offer promising employees the opportunity to volunteer for projects done with their leadership team, sometimes restricting themto projects outside their current functional area to broaden their experience. The employees get access to company leadleaders, a broadening experience, and good professional contacts, all of which will surely pay off later. But they pay for it. Similarly, tuition reimbursement programs in which employers pay college tuition and the employees attend classes on their own time offer another way to share the investment in development.

    The most important approach to developing employees increases the value of employee contributions by speeding the process that gets themto jobs that add greater value to the organization. This approach requires that you spot talent and potential early and then give the employees opportunities to advance faster than they otherwise might. Many companies are moving away fromthe difficult task of attempting to predict who is ready for which new job and toward a selfnomination model. The best of these provide opportunities to literally try out a role and see how they do. If you want to see who can lead a team, there is nothing better than giving various people the chance to try it. Finding opportunities like these, in which candidates can fail quickly and cheaply, is a key element of developing talent and an important task for line managers in the talent management process. That takes us to our final talentmanagement task.

1. The Birla Family Crisis Case Study
2. ICMR Case Collection
3. Case Study Volumes

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