Optimize Magazine > Executive Briefing > Are You Managing Your Company's Talent?

Are You Managing Your Company's Talent?

An interview with HR-IT consultant and author Allan Schweyer

Optimize
February 2004, Issue 28

The jobless recovery. Offshoring. A predicted IT-skills shortage. These are putting pressure on the computer systems that help companies recruit, develop, and retain staff. Those systems are the IT component of an overall process known as "talent management." To learn more, Optimize contributing editor Peter Krass spoke with Allan Schweyer, executive director of the Human Capital Institute in Washington, D.C., and author of a new book, Talent Management Systems: Best Practices in Technology Solutions for Recruitment, Retention and Workforce Planning (John Wiley & Sons, 2004).

Schweyer has been involved in HR IT since 1994, when he pioneered E-recruitment solutions for Human Resources Development Canada. He later directed the National Graduate Register, Campus WorkLink, and SkillNet.ca projects, which introduced the concepts of applicant tracking and advanced screening to job boards and career networks. In 1999, Schweyer co-founded the On-line Recruiters Association of Canada. Today he is a contributor to HR.com and a consultant who helps large organizations develop HR and E-recruitment strategies. Schweyer is based in Montreal.

Q: Let's start by defining our terms. What is talent management? How does it differ from HR?

A: Talent management is a strategic way of selecting, recruiting, developing, and retaining staff. The term "talent-management systems" doesn't necessarily mean systems in the software sense, but it certainly encompasses that. The difference between talent-management and HR systems is that the former is a strategic process, while the latter is administrative and tactical processes. For example, HR is still heavily skewed toward administrative processes, like benefits administration. Talent management is skewed toward thinking about workforce optimization, development, and strategic recruiting and retention. The more a premium is placed on human capital and talent, the more companies become reliant on highly skilled knowledge workers, and the more they have to infuse their organizations with the concept of talent management.

Q: What should CIOs' role be? Should they lead talent management or mainly support the HR function?

A: CIOs should both lead and support. They should lead in the sense that the company is selecting the infrastructure, which is usually an SAP, Oracle, or PeopleSoft type of application. They're adding elements to the ERP system, and they're selecting the priorities. HR says, "We need tools to help us manage our talent. We've found a few companies out there, best-of-breed solutions, that seem to be better than the one that's offered and tacked onto our ERP system." Then the CIO will have the natural instinct to use just one vendor: "We bought into SAP, Oracle, or PeopleSoft because we wanted one platform, and we don't want to get into tying together best-of-breed point solutions for everything we do."

In terms of leadership, the CIO should play a strong role in helping the HR department decide whether it makes sense to go with the ERP or be open to the best-of-breed solution. HR doesn't really understand the technology and the larger implications; they'll say, "Integrate the best-of-breed solution for us." The vendors say they're capable of integrating with any one of those ERP systems, but only the CIO understands that if a change is made in the financial module, it could affect the HR module. How integrated can a best-of-breed be? That's where the CIO needs to step up and figure out how best to both support HR and guide the organization.

Q: The move from pure HR to talent management has been a historical process, hasn't it?

A: Yes, we've seen the evolution from the personnel department to the human-resources department. This reflected the changing attitude toward people. At one point, people were commodities; basically, you could replace them fairly easily, and, with the exception of a thin tier at the top, they all had generic skill sets. Gradually, after World War I, people began to bring more refined, more specialized skills to the workplace. The idea of the knowledge worker was coined in the '60s. It has really accelerated since then.

Today HR is undergoing another transformation. If you're going to get your MBA so you can become a leader in an organization—a CIO for instance—then you might specialize in four or five things: finance, marketing, IT, and so on. But there's very little available to let you specialize in human-capital management. But this is becoming an essential skill for every leader in a company. In fact, as HR transforms itself, it might shrink or even disappear, because strategic talent management isn't something you can let reside in one department. It has to be a skill of the CIO, the CFO, the CTO, and down to your VPs and managers. They all have to understand that talent is the only thing that will make them successful. They also need to understand that the only way that will happen is to manage talent effectively, motivate it, develop it, select it properly, and release it when appropriate.

For example, your retention effort shouldn't treat every employee the same. Instead, you have a target retention effort that caters to your top performers. They're typically responsible for two or three times the output of the average performer.

Q: The Web has become a huge component of talent-management systems. How, and why, did the Web become so important?

A: Because the systems themselves have evolved. Around 1994 we started seeing job boards like Monster.com, Career Mosaic, and many others. The proliferation of the job board was the first major step for recruiting. People realized that the Web could get them a lot more applications and, in many cases, better-qualified applicants. So they started looking at tools that could help them manage that influx of resumés and make better selections. Today these systems prescreen candidates and then present to the hiring manager or recruiter a small subset of the people who applied. So now the time to hire and cost of hire are lower, while the quality is higher.

The Web can help the talent-management continuum after recruiting, too. You can use Web-based technologies to help you develop the people you hire, and to develop and retain them strategically. So the whole process is wrapped in workforce planning, which is made possible because we have more powerful databases and tools like Business Objects for analytics. We can capture all that recruitment and workforce data using synchronized and integrated Web-based tools that feed into those analytic engines.

If you do proper workforce analytics and planning, then you know who to recruit, who to develop, who to redeploy and where to redeploy them, whether you should hire someone externally or promote someone from within, and whether you should look for a contingent worker, contractor, or full-time worker. Workforce-planning analytics can help you make the best talent-management decisions and align those with your corporate objectives.

If this weren't on the Web, it would be much more difficult to integrate. You would have a client-server application for managing resumés, but how would you leverage that into an analysis engine or tie it to a performance-management tool that was also client/server-based? Now, with Web services and XML, it's more possible to share data between these solutions and leverage them into an end-to-end talent-management system, rather than a set of silo applications.

Q: But don't the Web job boards also create problems? You write that today's No. 1 staffing problem is not sourcing candidates, but screening, sorting, and processing the flood of applications. Is this as a temporary problem or is it something that we're going to be dealing with for a long time?

A: It's something we'll be dealing with for a long time, but not necessarily because of the volumes. Everybody, from government economists to futurists, is predicting labor shortages and skill shortages based on demographics. That, combined with a renewed business cycle and an upswing in the economy, would definitely reduce the number of applicants you get per posting. But the problem is likely to swing back toward sourcing. Today I'm getting too many applicants. I need tools to manage these applicants, but in the future it will almost certainly swing back to not getting enough applicants. Then I'll need tools to help me source and get me more applicants. No matter what the situation is, the constant will be: "Give me every tool you can to help me pick a needle out of a haystack, an excellent candidate out of a pile of not so excellent candidates." That's not going away.

Q: What can companies use now to sort through all those resumés from the job boards? Is there a set of best practices or best tools?

A: Yes, but the tools, the technology, are only part of the talent-management equation. To use the screening software that's usually bundled into any applicant-tracking, hiring-management, or account-management system, you have to do a lot of work up front defining what will make a person successful in the job. For example, if I'm hiring for a software engineer who's going to be working on a specific project, I have to do the up-front work of defining that in a defensible way. The job may require a combination of hard technical skills and soft skills.

I might have a thousand unique jobs in my company. So before I can use automated screening tools, I must be able to tell that system how to screen my candidates. I can't do it in an arbitrary way just to reduce my applicants; I have to do it in an ethical and meaningful way. For example, I must be able to tell the system that my software engineer for this particular job needs to have at least three years of C++ experience, the ability to present in front of small groups, a track record leading small teams, and experience in developing applications of this sort. Then I can turn that description into an effective, automated screening tool on my system. If I get challenged by someone who was screened out, I can prove that I screened them out in a defensible way. The bottom line is you want to get those highly qualified candidates as fast as you can. You don't want to have a person go through a thousand resumés when you can have it in a microsecond with a tool like this.

Q: Is there really a labor shortage or skills shortage on the way later this decade?

A: The term "perfect storm" describes the potential situation very well. In the late 1990s we had an across-the-board, general talent shortage. It wasn't just in IT; it was in a number of different industries, and it went all the way down to service workers who could pick and choose job offers. Everybody seemed to be able to find a job in 1998 and 1999, and they probably could choose among two or three offers. The demographic profile in the late '90s was fairly evenly distributed; we had a strong number of youth entering the workforce, we had a strong middle layer of people in the prime of their careers between the ages of 30 and 49, and we had a growing but normal-size group that was approaching retirement.

But by the time the economy gets back into full swing, say 2005 or 2006, most people are saying that the demographic profile will have shifted quite dramatically. Gradually, there will be fewer youth entering the workplace. And by 2020 and beyond, there will be drastically fewer youth entering the workplace. In the years 2010 through about 2030, there will be a big gap in the middle. There will be a dearth of people who are in the prime of their careers, filling middle-management and getting into senior-management roles. And you'll have a large and growing group of people who are in the later stages of the career and would typically be looking at retirement.

The other side of the perfect storm is an increasing, inexorable demand for better education, higher education, and more specialized skills. As the United States and other developed economies become more value added, they require more skills. So not only are you looking at slower labor-force growth, but you're also looking at more demands on people.

That's the perfect storm: a combination of improving business cycle and inexorable demand for higher skills, along with a difficult demographic situation.

Q: Can more training and education help?

A: We aren't seeing an equal investment in human capital among individuals. By that, I mean people aren't going back into school to upgrade their skills to the degree that will be required. There is a gap.

Companies are realizing a few things: First, that because it may be more difficult to recruit workers, they have to implement strong talent-management processes. This needs to include a strong, diversified sourcing element so they can reach into the changing population, whether it's an increasing ethnic population in the United States or the increasing older-worker population. How do you appeal to those people, get them in the door, and keep them?

In addition, we're going to have a polarized workforce. Young people want different things than older people do.

Q: How do you keep an older person from retiring if they have the means to retire?

A: A lot of people lost a lot of money over the last few years, so that problem may not as be as acute, but the higher skills you require, the more likely the person you require is comfortable enough to retire when they want to. The United States has gradually raised the age at which you're eligible for social-security benefits when you retire from 65 to 67. But who does that affect? The lower end of the workforce—mainly the people who haven't been able to save enough money to retire. It doesn't affect the people who have been in great jobs where they've acquired a lot of skills, made good money, and, in most cases, put away money to retire. You have to appeal to those people on a different level. You have to keep them engaged in the workforce with things like flexible retirement polices, shared jobs, and telecommuting.

Q: How about offshore outsourcing as a solution?

A: It's not as impressive as companies think. Some companies probably lose money and time by offshoring. Some eke out 20% to 30% savings. But no one is able to save 90% offshore just because a programmer costs 10% of what one costs in New York or Chicago.

An Indian developer's wages may be five or 10 times lower, but that doesn't translate into 90% savings. It's probably more like 20% savings—if you can make the relationship work. You can't expect to just offshore a project and have it work. You have to invest time and travel; you have to bring the overseas team up to speed on the project. You probably need to bring some of them to the United States to work for a few months, to get accustomed to what they're doing, get a feel for the culture, and build relationships they can call upon when they return to India. Also, is the productivity as high? It's a question not because the Indian programmers are less qualified, but because they may not be as well-managed and supervised.

The way offshore outsourcing affects the whole talent-management and demographic thing is that people are starting to offshore a lot more than just programming. They're offshoring radiology, investment banking, and other highly skilled work. It's not just simple coding. It's advanced coding, project management. If that trend accelerates, then it doesn't really matter that U.S. workers retire. If the outsourcing trend is strong enough, it will gobble up enough jobs and there won't be a labor shortage. I'm not saying that will happen, but if you take the argument to the extreme and companies offshore a lot more, then that could offset the potential labor shortage.

Q: Let's turn to contingent, contract, temporary, and hourly workers. Are talent-management systems ready to handle them?

A: It's a fundamental change. We see a trend toward integrated platforms for talent management, and part of that is total workforce acquisition. That means you don't have one system that helps you hire your salaried, full-time workforce; another system for hourly, high-turnover workers; and another for contractors and temporary workers. You have just one.

To do any effective workforce planning, you must have one source of data. That helps you decide when it makes more sense to hire a temp worker or a full-time worker. That helps you look at the factors that can reduce turnover among your hourly workers from 35% to 25%. That helps you refine your recruitment properly and form your retention activities. So the trend toward more unified and integrated systems will continue. Giving hiring managers the ability to do all their recruiting from just one application will also pay off in terms of ROI and cost and time to hire.

There's one caveat: You have to be careful about compliance. One system that treats all your workers the same is a prima facie case for the Department of Labor to say there isn't enough separation between the contract workforce and the full-time workforce. If you're treating everyone the same, you can incur fines. But the systems coming on-stream now separate the contract workforce from the permanent workforce in the back end. Then they roll up the data for workforce planning in a way that doesn't have a compliance impact. So you can say, "Alert me when a contractor has been on-site for more than 12 months," if that's the rule. Basically, you're saying, "Help me to comply with the rules and make sure I'm paying people on a contract basis who really are contractors, and not de facto employees." All the major software players are doing this.