There was a terrific article in last month’s Harvard Business Review in which a pair of Harvard Business School grads, Matthew Breitfelder and Daisy Wademan Dowling, shared the story of why they had, gasp, “gone into HR” after graduation. It presented a powerful argument for the increasingly important role that talent management professionals play in business today. But the most telling thing about the story was what it said between the lines – that Matthew & Daisy’s classmates at Harvard, and likely business schools everywhere, continue to view HR as an administrative, non-strategic role and that there remains a lot of work to do to change that perception.

That may be because the perception is born in reality. Many HR people really do spend a significant amount of their time keeping track of details instead of thinking through business problems, and while risk mitigation is certainly an important issue, didn’t we learn from Enron (and others) that the onus for compliance and corporate social responsibility belong to everyone in today’s organizations, not a specific department?

Imagine if sports teams managed risk the way that many companies do - if we put the people that are in charge of enforcing rules in charge of developing talent. Baseball umpires would never advance anyone that didn’t throw strikes exclusively, regardless of how fast they threw, because of the risks associated with walks and the increased likelihood that they could get hit. Pitchers that threw predictable, soft-toss pitches right over the middle of the plate would have long, if not particularly effective, careers. Basketball referees as talent managers would opt for non-confrontational shooters that would hover around the perimeter of the court instead of risking a foul in heavy contact under the basket. Needless to say, this team would have trouble rebounding (and winning.)

But in the world of business, even in the Talent Economy, many talent decisions are made through a lens of risk avoidance instead of one of potential. So I’m on the lookout and over the course of the next several posts, we’ll be highlighting some of the risk takers in talent management and the rewards they have enabled for their organizations.

Follow the talent.  You can learn more from seeing where talent chooses to go than from any research study or expert opinion.  The free market of talent is worth watching.

So, the latest issue of the Harvard Business Review presents a very different picture from conventional reality:  two very bright and capable MBA students purposely chose to go into HR.  They chose to enter into the arena of “Why we hate HR” and a staid, bureaucratic profession with roots in industrial relations and personnel.  They made this choice because they see the transformation that is taking place, and the incredible opportunity that it provides.  In their own words:  “In business school, we were trained to seek out underappreciated investment opportunities and to create value in surprising places….We see an undervalued and under priced asset in the HR function and one that is poised to appreciate significantly.”

The transformation of HR to human capital opens up new and exciting challenges, and it is starting to attract a new generation of world-class talent.  More talent will follow”

I just returned from another trip to India but this one was a little different. It was the first time (on business) I’ve gone off the beaten path of the large cities and big hotels. I spent a week in the Punjab - in India’s North West - in the up and coming city of Chandigarh, where HCI has established its first office in India. Chandigarh is a wonderful city, all planned into more than 70 squares over a tri city area.  Wikipedia describes it as follows: “Known internationally for its architecture and urban planning, Chandigarh is home to numerous architectural projects of Le Corbusier (see courthouse right), Pierre Jeanneret, Matthew Nowicki, and Albert Mayer. The city boasts a high standard of living with the highest per capita income in the country and tops the list of Indian States and Union Territories with a Human Development Index of 0.674”.

Compared to Delhi and Bombay, Chandigarh is Zurich; parks and green space abound and commercial districts are kept strictly apart from residential areas. The downside is cost. A nice 2,000 square foot house in a safe suburb of the city will cost at least $300,000 U.S., putting it out of reach for even the middle classes.

On the other hand, five star hotels in Chandigarh, such as the new, architecturally renowned Taj Hotel (below right) run at about half the rate of similar hotels in Delhi, Mumbai and Bangalore (India’s biggest commerical hubs).  We chose Chandigarh for the depth and quality of talent available in the city. When we decided to set up a secondary research office in India to support our senior research team in the US, we could have outsourced to any number of organizations that would have hired the staff for us, supervised them, paid them and billed us monthly. Many organizations, especially when entering India for the first time, go this route and for good reason.

But HCI is very familiar with India and we were fortunate to have an experienced employee already in place (Raman Singh at left). So we chose to build what is called a “captive” operation. To minimize the risk, we started very small. We chose a newly constructed office large enough for up to fifteen staff in Mohali, a suburb of Chandigarh. Inside four weeks, we went from a hollow, empty shell, to a fully functioning office - mainly thanks to Raman’s savvy and expert project management.

More than 350 people applied for four initial research assistant positions. We carefully screened the applicants. Those shortlisted were put through a series of interviews and tests. We’re thrilled with the team we selected, two of which started July 21 - they are experienced, well-educated and enthusiastic about their new positions.  

This was my sixth trip to India in two years. I remain highly optimistic about the strenth of India economically and as a source for partnerships (like ours) with the West. Some of you might be thinking “oh sure, another four jobs shipped off to India with more to follow”. Fair enough, but I encourage you to look at both sides of the debate by visiting my blog from last week (directly below) and then following the link to a vigorous debate the Economist Magazine is conducting on the topic.

A lot was learned in the 7 days spent in Chandigarh. Setting up a new office 6,000 miles from home is always going to be challenging - red tape, problems with contractors, equipment to be purchased and set up, screening, hiring, and so on. The oddest challenge though was with two self-proclaimed “spiritualists” who visited the office. Both were men made up and dressed as women, their chants turned to shouts and threats as they demanded protection money from us for our new office. They claimed that they would bless the office with payment received (and curse it if not). We passed on their offer but they proved difficult to dislodge and we expect they’ll return.

On my last evening, the final touches were being put on the office. Our contractor called to us from outside the building to come downstairs to see the HCI sign rise to its new home, three stories high in front of our offices. HCI Research India is ready for business!

“A spectre is haunting the Western world. The spectre of fear. Fear that the middle classes are losing out, and while their economies may still be growing, the rising tide no longer lifts the majority of boats.” - Jacon Funk Kirkegaard, Peterson Institute for International Economics

So begins the Economist magazine’s latest online debate on the Future of Work.  According to Kirkegaard, the sky is falling on talent in the West. We cost more, we’re less productive and we are becoming less educated than the workforces in developing nations. For reasons that are less than clear, he believes that the recently freed markets of the East (namely Russia, China and India) are more than a match for those in the West:”   ”…the world economy is finally truly global and the implicit protection for Western workers from the self-imposed economic exile of billions of potential competitors is irreversibly gone.

I wasn’t aware that we ever needed protection. In this line of reasoning, wouldn’t the UK economy have contracted after Eastern European countries joined the EU? Or Canada and the US after NAFTA? As everyone knows, the opposite occured in both cases.

In my view, the proposition that globalization and the “offshoring” of work to developing countries is harming workers in developed “rich” economies is patently false. Employment levels in the UK, North America and Australia, for example, are higher than ever. And while wage rates have been mostly flat in many rich countries – buying power, mainly due to the availability of cheap manufactured goods from China and elsewhere, has grown. 

Workers in rich countries, particularly “knowledge workers” and skilled technical workers, have remained competitive despite more than two decades of globalization and inter-continental free trade agreements. Knowledge workers, usually defined as those with 4 year college degrees or better, also remain competitive despite more than a decade of easily accessible offshore talent in India and elsewhere. Their competitiveness lies largely in the advantages rich countries enjoy in language, infrastructure, technology, innovation, creativity, and in most cases, productivity. 

Since the modern services offshoring industry began in about 1997, unemployment rates for knowledge workers in the US have hovered between 2-3%, well below what economists define as “full employment”.  Employers from Dallas to Manchester to Auckland have repeatedly and consistently bemoaned the lack of domestic talent – despite higher post-secondary enrolment rates than ever – even during the post 9/11 economic downturn. For skilled technicians and tradespersons, simple demographics in rich countries have driven down their supply, increased demand for their services and greatly accelerated their wages. Even for lower-skilled workers in the services industry, employment opportunities abound – it is difficult, after all, to offshore bartending services! 

Ironically, today’s spiraling cost of energy is creating a reversal in the fortunes of rich nations’ manufacturing sectors. Because the costs of shipping have more than tripled since 2000, some of the lower skilled manufacturing jobs that were lost to China in the past ten years are returning. The manufacturing that has remained in rich countries has created competitive advantages through automation, resulting in more highly skilled (and therefore competitive) workers and by focusing on higher end manufacturing. W.L Gore with its high end manufacturing of sportswear and  advanced materials for the aerospace and automotive industries is a good example. 

Perhaps the best evidence to close this argument once and for all is the fact that the US, Canada, the UK and other rich, Western European countries themselves rank among the top 40 worldwide destinations for offshore work. The US, the world’s richest country by a wide margin, is 11^th on the list according to a 2005 evaluation by A.T. Kearny.  

Evidence must always trump hysteria. Populist politicians and TV commentators earn easy platforms by stirring up anti-trade sentiment and the media is often quick to join the chorus. Time and again, however, the benefits of free trade, to economies and their workforces, are so compelling that even the skeptics must concede, if only in private.

Please join the debate. What future do you think awaits the workforce in rich countries?  

Day one of the Learning Innovation Network Forum (see previous blog post) focused on new, mainly technology-based, learning tools and techniques. Day two began with John Boudreau from USC expanding the discussion beyond learning and into broader talent management. He delivered a compelling presentation on the intersection of talent management and social networking, including the identification of pivotal positions and pivotal employees. He discussed social networking analysis as a tool to understand how information flows through the organization and how to connect critical employees to others in order to accelerate learning and change management.

As Dr. Boudreau demonstrated and described the latest methods and technologies in SNA, roundtable participants stopped him to question and discuss nearly every point. The presentation extended well past its allotted time as Dr. Boudreau and the group debated the possibilities for learning and broad talent management through the combination of examining pivot points and conducting social network analysis.

Andrew Wolff of PricewaterhouseCoopers was next. His discussion of metaphorical learning took us back from cutting edge technology to the realities of what can be accomplished using a low-tech but highly imaginative approach. Andrew’s team at PwC has created more than a dozen real-life metaphorical experiences ranging from Crime Scene Investigations (CSI) to Court Room Arguments to Archeological Digs. Teams take on characters, actors are hired, costumes are used – no details are left unattended to in order to make the experience as realistic as possible. Obviously, PwC hopes that realistic but metaphorical experiences will translate to real work situations and equip participants with lateral problem solving skills and creativity in their approach to client challenges.

Next, Sharon Torgenson of Suncor, a Calgary-based energy company, shared her organization’s use of realistic learning scenarios. Using a courtroom scenario based on Suncor’s future (threats posed by environmental and political pressure, lack of talent and leadership, etc.) the defense and prosecution argue opposing sides. Senior executives play roles along with hi-performers who have been identified as future leaders. Hierarchical barriers are eliminated as junior executives argue their point aggressively with the company’s senior leaders.

Andrew and Sharon’s presentations generated a lengthy discussion of metaphorical and reality-based scenario learning, its costs vs. benefits and how organizations can measure the impact it has on performance.

The forum ended with a presentation from HCI’s Allan Schweyer and Jeanne Meister from the New learning Playbook on the outcomes of research conducted for the event. The research was focused on the four generations in the workforce and their preferences in learning. As the findings were shared, the group discussed whether the differences between the generations are real and significant enough to warrant action (they are) and to what degree organizations must tailor learning options to appeal to various age groups.

The first LIN Executive Forum meeting was stimulating and thought-provoking. It also connected peers from dozens of organizations who are facing similar challenges. Much was shared and learned.

HCI and the New Learning Playbook, with partners Sun Microsystems, Duke CE and Kaplan University intend to expand the group from 50 to a maximum of 100. The next meeting and event will be in October 21-22 at Merril Lynch Corporate HQ in New York. In between, the partners will launch a collaborative portal community and will embark on new research to share at the next event.

Readers interested in more information or in joining LIN should contact Allan Schweyer at: aschweyer@humancapitalinstitute.org

On June 16-17, the Human Capital Institute, Sun Microsystems and the New Learning Playbook hosted the inaugural meeting of a new executive roundtable focused on learning innovations and managing Millennial talent. The event was held at Sun Microsystems University in Santa Clara, California and included expert partners Duke Continuing Education and Kaplan University.  50 senior learning and talent management professionals from a dozen industries and three countries assembled to review and discuss the latest technology-enabled approaches to learning.

The group engaged in vigorous debate throughout the day and a half event. First on the agenda was Sun’s new beta learning platform. Sun is determined to push its LMS system (currently the heart of its learning system) to the periphery of a new, strategic (and open source) tool that will allow flexible, web-enabled learning from anywhere, including mobile devices, and will encourage employees to contribute to course content creation. Sun has devised new roles for instructional designers. The team is developing video games to impart Sun culture and to assist new, mainly “Millennial” hires in understanding how work gets done in the organization.

Sun’s presentation, by CLO Karie Willyerd and CTO Charles Beckham, led to a fascinating discussion of the future of learning platforms and LMS (uncertain) and the practicality and costs of video game-based learning. Not all were convinced that video games have a place in corporate learning but all were impressed with the possibilities of Sun’s new learning platform. A demonstration of how technical training is being delivered globally to field engineers on their iPhones was particularly eye-opening. The possibilities, especially as mobile phone technology improves, were obvious and exciting.

Credit Suisse’s Rachel Fichter was next up to demonstrate Suisse’s  “Virtual Learning Communities”, built on Microsoft’s Sharepoint platform. Similar to Sun, Credit Suisse aims to integrate their LMS into a broader, web and mobile device-enabled platform that will let learners choose content from a range of integrated sources - on-demand and on the device of their choice. The system also connects employees to others in the organization based on their skills and knowledge sets. It makes it easy to find expertise, to “know what Credit Suisse knows”, in other words.

Whatever doubts the group was harboring about video-game learning were set aside by a powerful demonstration from Colonel Steve Visco of the US Air Force. Col. Visco walked us through a sophisticated, first person virtual reality game set in a fictional African country. The game immerses the learner in a highly realistic set of scenarios in which they command a relief mission. Characters include uncooperative UN brass, corrupt local officials and menacing warlords. The realism ratchets upward as the learner makes mistakes and, depending on their choices, the U.S. press corps or senior Pentagon staff get involved. The subtleties of the game and the attention to detail – both in design and in creating realistic, complex scenarios - impressed everyone. The learner, if female, for example, encounters very different interactions with several of the characters than the male learner. This prompted one participant to suggest that males also be required to play the female role.

Colonel Visco demonstrated the usefulness of well-designed games and also their practicality. He conceded the high costs of production, but justified it in terms of cost per person and the impossibility of creating a safe and realistic experience in any other format. He also made the point that the game is especially effective for officers from the Millennial age group.

Duke CE’s Steve Mahaley presented on the future of learning technologies and techniques. His no nonsense, business-focused discussion of gaming and other web-enabled innovations in learning demonstrated the certainty that these tools will find a central place in the future of corporate education.

The day concluded with a hands-on laboratory in which participants tried the Sun, Credit Suisse and US Air Force applications first-hand. Afterward, we visited the Sun Mansion for a networking reception with speakers and participants.

Stay tuned for Day two …

So, the question is, (see Part II): does HR have the skills and aptitudes to lead the strategic talent transformation required to compete successfully in the global era? Recent research from HCI and Vurv Technology, shows that HR executives and professionals themselves are ambivalent. But they do agree across the board on one thing: Talent Management is the most difficult, least understood and most important focus for their organizations.

A key finding of the report is that “Across multiple measures of business proficiency and knowledge, there is an alarming lack of expertise among senior HR leadership.” This fact alone explains two additional findings:

1. HR is not systematically involved in global strategy, even when it affects the workforce
2. Fewer than 20% of the 800 HR leaders surveyed considered their organizations “prepared” or “well prepared” to address key future challenges.

The first shows that line executives continue to dismiss HR’s value in strategic planning, and the second demonstrates that HR realizes the landscape is shifting quickly under its feet. Both are symptomatic of the knowledge gap that HR now faces. To remain relevant and grow in influence, HR must readjust its functional definition to include the core business skills required of line executives, with a specializion in strategic talent management. This is a fundamental shift away from the self-defined “HR profession”, towards an integration of talent-centric skills and capabilities across the line.

Our research is free to our professional members (and in this case, to readers of this blog). To download a copy of the full report, click here.

Several years ago, Fast Company Magazine published an infamous article entitled “Why We Hate HR”. It made the case that HR was a hopeless, uninspired bureaucracy sitting squarely across the road to progress. Predictably, that hit a nerve.

It also spawned dozens of articles, hundreds of blogs and probably a book or two arguing one side or another of an issue that is for the most part, beside the point. In fact, HR was designed to be a low cost, risk-avoiding source of policies and procedures designed to hire fast, resolve labor issues and keep everyone in their seats (see Part I). It does these jobs very well, and they are still relevant, in fact increasingly important, for industries moving east and being born in emerging economies.

But here in the West, the explosion in HR outsourcing is proof enough that many traditional HR activities are simply adding no strategic value today. One company’s benefits plan rarely makes the difference between market leadership and failure. Okay, what about recruitment, performance management and retention? These certainly are critical activities, and ever more important to market success.

Yes, true. But these activities in their traditional form are not working the right competitive levers anymore. Fast, cheap, standardized recruiting is not the way to hire high performing talent. Summer barbecues and employee rewards are less effective when two thirds of the workforce are spread around the globe. And measuring retention instead of financial return on human capital investment does not reward performance, it simply discourages turnover.

I don’t hate HR. In fact, I respect and appreciate all the hard work that human resources professionals do every day to improve our cultures, workplace and companies. But there is a sea change underway, and the right question to ask is not whether industrial-era  HR is a bureaucracy, but whether HR has the skills and aptitudes for strategic talent management?

The 20th century industrial complex required a supply chain of cheap, standardized resources, a growing body of policies and procedures for rounding away defects, and a system for disposing of excess inventory. It’s no surprise that HR has evolved along similar lines. Hire fast and cheap, round to the interchangeable middle, weed out the disaffected, retain as many of the rest as possible. Except of course, in a downturn, when it is important to get rid of excess parts.

Now we’re asking HR to think and behave in accordance with a very different, startlingly new paradigm (all the while being managed and rewarded in the old way). In an age of global competition, we’re not looking for interchangeable skills, we’re looking for break-away creativity. We don’t want everyone to sit down and be quiet, we want them to speak up and help us figure out the future. And we don’t want to keep everyone on board, we only want to keep the RIGHT people, who are in the RIGHT seats, facing the RIGHT direction.

Instead of managing risks, administrative procedures and costs (where they have proven competencies), HR is now expected to hire only high performers (a risky proposition), create a workplace that encourages innovation (probably not cheap, and certainly not prone to orderly procedures), and measure people’s performance as if they are a portfolio of equities, continually counseling out the underperformers and doubling down on the winners. This is akin to turning risk managers into fund managers overnight.

The great majority of HR people that I’ve come to know are bright, professional and eager to contribute. But they are not students of business strategy, nor trained to think outside the box that has been defined for their function by academia, corporate expectations and their own professional associations. As we define the new science of strategic talent management, we can’t assume that HR professionals are equipped to step smoothly into the role of Chief Talent Officer, nor that their HR experience gives them much of a leg up.

Like the blind men and the elephant, it seems to be an entirely different beast to many different stakeholders. Usually it’s snarled up with the notion that human resources, human capital and talent management are somehow extensions of one another, or the same thing stated differently. Actually they are three very different concepts:

Human Resources is a function, a department, arguably a profession. Born in the 1930’s alongside Max Weber’s theories of bureaucratic management, for the past 50 years it has been grown increasingly administrative, while struggling to become a relevant voice in business strategy.

Human Capital Management is a theory that considers the sum of a person’s knowledge, talents and motivation to represent an asset, that should be acquired and developed to yield a measurable (and maximum) return on investment. For the decades of human resources executives who’ve been rewarded for hiring fast and cheap, this is a major paradigm shift.

Talent Management is a new decision science created to deliver the results promised by human capital theory. If talent represents the most powerful and sustainable competitive lever in a global economy (as most economists, academicians and executives agree), then knowing how to acquire, align, engage, deploy, develop, advance, retain and measure the contribution of great talent is critical knowledge for leaders throughout any organization.

Just as finance has grown into a foundational strategic practice, so will talent management. Imbedding the DNA that compels leaders to consider talent as fundamentally as they consider finance is a core challenge for this generation of business leadership.