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.

Although there are many benefits to this new approach, one drawback for employers is that they havemuch less control over their internal talent. Programs that attempt tomitigate that risk by negotiating a balance between the employee’s and the employer’s interests in career advancement are one of the truly new developments in talent management. Some of these efforts involve simply providing information about career paths, descriptions of how individuals have advanced in the past. Others go much further, attempting to negotiate compromises between the preferences of the organization and those of the employee. It is fair to say, though, thatmost organizations have not yet thought through how to handle the challenge of managing amore open internal market for talent.Whether employers are willing to let it become a real market, where internal hiring managers are allowed to compete for internal talent by raising wages or making their jobs more attractive, is an open question.

• Right now, companies across the globe are facing the daunting task of keeping their payrolls intact. Many companies are downsizing, in most cases notwithstanding the talent. In such demanding conditions of keeping the flock together and business uncertainties, what would be your advice to companies on managing their talent? What should the companies do to manage their talent in such hard times? How should the right talent be told of the wrong news?
  It is important to think about these possible restructuring decisions as business decisions, not just rules of thumb or following what everyone else seems to be doing. These are much like decisions involving capital: What are the costs of retaining people in a downturn, what are the benefits in terms of future commitment but also reduced start-up time and costs when business picks up? Companies should come up with different solutions that fit their own circumstances.

• Let's for a moment look at the US (now presumably Global) financial crisis. Where was the talent that was supposed to preempt all such catastrophic events? These talents came with a high price too. But in the final analysis, is it correct to conclude that it was that overrated talent that pushed the US and rest of the world into this unwarranted mess?
  Talent is overrated. The issue was not a lack of s marts. It was systems for managing it and particularly the incentives that guided behavior that caused people in leadership positions to take risks that made sense for their own compensation but not for the companies and surely not for the economy.

• One of the often quoted arguments in the press has been the talent shortage with the regulatory authorities (may it be SEC, Federal Reserve, Treasury Department or other overseeing bodies) overseeing the US financial system. After all, the argument supporters argued, the best of the talent was with the investment banks and other banking giants, who in their drive to bolster their bottomline, were always after financial engineering or coming out with innovative financial products. However, the regulatory authorities were behind those financial innovations bereft of the necessary talent to detect the possible wrongdoings. Is there a merit in this argument?
  Yes, there is a lot to this argument. The private sector paid a lot of money for people to be creative, and that got very creative people as a result. But it also mattered that the structure of regulation put the burden on regulators to argue that new practices were violations, rather than require novel practices to be approved in advance.

• Professor, in one of your research reports (co-authored with Monika Hamori), published in Harvard Business Review (January 2005) as, “The New Road to the Top”, you have highlighted how, even in the largest and most stable companies, the route to the executive suite and the attributes of the individuals who get there have changed over the past 20 or so years. Can you take us through the background of this researchstudy, the key findings of this study and the relevance of those findings for highlyaltered corporate world in 2009?
  We compared top executives to those holding similar jobs a generation earlier. Even in the biggest and oldest companies, top executive jobs are much more likely to go to outsiders now, and the people who hold those jobs are younger. They get to the top with fewer years of experience. Some of what we are hearing now about the financialmeltdown is that there was a lack of experience among the people making the important decisions inside the institutions, and that is consistent with this younger, less experienced theme.

• It is commonly believed that someone would wear the garb of CEO when it is ‘given’. Is it also not true that everyone is a CEO from the day one? When observed very minutely the organizational life of an executive is a metamorphosis from managing oneself to managing many. As an executive climbs the corporate ladder, his responsibilities get widened – first, he is responsible for the task, then for the department, then for the major functional area, and finally for the company – with similar qualities in exhibition all through?
  No, I don't think this is true. Especially in modern organizations, prior jobs don’t necessarily prepare one for leadership positions as people tend to stay within functions and many positions now, even well-paid and high status jobs, are often individual contributor/specialist roles. The skills of general management are not learned in one’s corporate career without special development assignments.

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