Mission-Critical Talent
John Boudreau, coauthor of Beyond HR: The New Science of Human Capital (Harvard Business School Press, June 2007), is professor of Management and Organization at the Marshall School of Business and research director of the Center for Effective Organizations at the University of Southern California, Los Angeles. In this interview, Boudreau discusses the concept of pivotal talent and how to identify it, and why most organizations have difficulty measuring the real value of their human resources.
You talk about the need for every organization to identify its pivot points and its pivotal talent. What do you mean by these?
Boudreau: To find your organization's pivot points, start by searching for those places in your institution that provide great leverage. One metaphor is to think in terms of a manufacturing process. You first identify all the individual components or machines involved in the process. Now, your inclination may be to say that all of them are important to the process—and they are. But, if you ask where improvements would make the biggest difference to what you want to accomplish, that reframes the question to help you find the bottleneck machine. And that's where you put your investment, because you realize that if you don't improve the process at your bottleneck, it won't make a difference anywhere else.
What then pushes organizations to think more pointedly about talent is when a visible limitation develops. This may come when leaders realize they can't increase activity in a certain area or embark on a new initiative because they lack the talent to do so. Whether that gap is the result of an inadequate pipeline from within or an external shortage due to market competition, this specific talent suddenly becomes pivotal to your organization and you understand it as something you must obtain to move forward.
Can you offer an example from higher education?
Boudreau: If you think about the evolution that took place for many institutions as they moved into delivering education online, what struck many of us involved in this process was how different it was to produce learning in a virtual format versus in-person. Many of us quickly realized that it was not as simple as taping a stand-up lecture. We had to start picking apart the essential elements. For instance, you must have faculty willing and motivated to deliver content, the technology platforms and Web presence required for delivery, and the technology people to make this happen. What many of us had to figure out was the need for a content producer—someone in the middle of the process who understood how to take our good content and repackage it to make it relevant and engaging in this new delivery mode. This was the missing, pivotal talent. In many cases, institutions did not yet have a job description for this role. Thus began the process of looking to Web companies and film companies to better understand how to create compelling content in this new format.
Once you determine your pivot point—in this case, the need for compelling online content—the next step is to ask whose job that is. Do we already have that capability internally? Do we need to hire or develop that talent? Within a university, there may be many who can do a fine job of reformulating content, but then you have to ask whether those people are seen as credible and can work effectively with faculty. This may lead you to focus on a much smaller pool of talent. If you determine you have that talent within, how might you need to change your reward system? For instance, you might assess that a month spent working on content may be worth a semester spent in the classroom. How do you educate those making resource decisions to understand this endeavor and the kinds of flexibility required such as potential changes in reporting relationships?
In your book, you suggest that the current HR function must undergo the same kind of evolution in organizational understanding that previously took place within the fields of finance and marketing. Can you explain this for readers?
Boudreau: My coauthor, Peter Ramstad, talks about the historical turning points of these two fields in great detail, which I will try to paraphrase. In essence, with regard to the world of finance, there was a turning point in the early 1900s when, as a country, we developed a collective realization that decisions about money were critical to our economy. We came to understand that the scarcity of financial resources could quickly bring our economy to its knees. And so we learned as a nation and as a world economy how to use money. Over the decades that followed, we developed sophisticated frameworks for financial analysis. We created systems and models that have evolved into our modern approaches to investment management and developed concepts and practices for mitigating risks, seeking the highest rates of returns, and so forth. All of this is now standard thinking and practice, but none of this was common knowledge around the turn of the century.
A similar evolution took place in the realm of marketing. Today's modern marketing practices grew out of the advent of mass messaging in the 1940s and 1950s, when television made it possible to communicate with millions of customers simultaneously and when we developed a stronger understanding from the field of psychology about how people think and respond to messages. If you consider today's sophisticated approaches to customer segmentation, it seems so obvious, but there was a time when this knowledge was rudimentary.
How must this same kind of breakthrough thinking take shape within human resources?
Boudreau: Human talent is analogous to money and customers in that it requires a sea change in our thinking as a business culture about how to view this resource so that we can optimize our investments in this area. This may take some time, because we've only recently entered an era in which conditions have emerged to produce a decision science related to talent. As the process matures and frameworks are developed to help us evaluate talent in nontangible ways, leaders will begin to approach talent investments in a more strategic manner.
The challenge is that our decisions about talent are much more important today because expertise is increasingly based on intellect and not only on what we do. The paradox is that while virtually everyone within an organization understands that the budget-related costs of talent—that is, compensation and benefits—represent only part of an employee's true value, the systems that we have in place to measure talent are primarily accounting-based. We are awash in numbers that measure our investments in talent, from turnover rates to the ratio of HR staff to total staff. While this kind of analytic capability and data would suggest that we have ample fodder to make better decisions about investing in talent, such measurements on their own might lead us to make the wrong decisions.
Can you give an example?
Once you become aware of the very tangible budget-related costs of turnover, you might believe that you should strive for the lowest possible turnover rates of your employees. But reducing turnover too far may actually hurt your organization. Sometimes you may want people to leave—happily, of course—so that their replacements can help take your organization in new directions. Trying to minimize the financial costs of talent does not capture how to optimally invest in talent. If you don't recognize this key point, you will inadvertently miss key opportunities in your decisions about talent since much of the value of human resources is intangible, involving attributes such as attitude, motivation, cognitive abilities, and relational and communication abilities. These don't show up on paper but turn out to be what matters significantly. Accounting systems were never intended to capture the nuances of human talent. Yet, in our very good-natured and well-intentioned attempts to evaluate talent, we turn to systems that may be efficient but are myopic to the talent equation.
How can chief business officers help others in the institution better understand the value of human resources beyond benchmarks and line items?
Boudreau: CBOs are routinely involved in discussions about institution strategy. They often come to these discussions with models to help others make sense of financial resource strategies and implications. This same kind of logic can be helpful for discussing talent implications. In addition to financial pivot points, every organization has people pivot points. The challenge is how to help a group think beyond the tangible financial implications of talent. This may require a CBO to recognize that this is territory where he or she may not be an expert. In cases where leaders identify a talent bottleneck, they need someone at the table qualified to say what the institution must do or do differently to acquire that talent. Part of the difficulty is that most institutions haven't had models in place to think deeply about talent. As institutions begin to unearth their pivot points, leaders can begin to discuss how to differentially invest in those critical areas and in the specific talent required to move forward.
Karla Hignite, principal of KH Communication, is editor of NACUBO's HR Horizons; e-mail: karlahignite@msn.com.
