If you follow this blog, you’re going to see more content on the topic of managing talent risk as my team and I prep for my next book. So far, I’ve found that Deloitte has been the most vocal on the subject. The authors of their white paper on the topic make the case for a Risk Intelligent Enterprise ™. We’re in firm agreement that the intersection of Talent Management and Risk Management is long overdue. Deloitte would like to see an open dialog between the two groups that encompasses succession planning, rewards, ethics, compliance, health and safety, business and talent continuity, and culture. The gap I find in their thinking is the same concern we at my knowledge transfer consulting firm see with most current talent management and succession plans. They look carefully at the top leadership, and only more generally at front-line employees.
Conventional thinking stops before discovering where the most complicated and pervasive risks lie. Plans don’t address the real risk to any company with a brain trust – the risk of losing, at the skilled employee level, the technical expertise or “secret sauce” that makes any firm unique and competitive in the market place.
This quote from a Deloitte executive caught my eye, though, because of its interesting language, “…as a result, companies may be forced to consider talent and HR issues as part of their broader risk management strategies.” I don’t think companies need to be forced to consider talent issues as part of a broader risk management strategy. I think they need to be given a way to think about managing talent risk that makes sense to them. In my experience, business leaders come along very willingly once they realize this work can be done in a way that makes as much sense in the C-suite as it does on the front line.
3 Common Misconceptions About Managing Talent Risks
So, besides thinking that execs don’t want to manage talent risk, what are some of the other common mistakes and misconceptions we’re hearing out there? Here are three thoughts, and more will come in subsequent posts:
Staying too high level. Executives come and go, and while there is no denying their importance and impact, the technical experts who are inventing products, solving customer problems, and keeping a company operational day-to-day are more likely to have an immediate, direct impact on the performance of the company overall. Read my buddy Dave DeLong’s ground breaking book Lost Knowledge, if you need any evidence of that. Businesses have to have a solution that addresses front-line and technical talent risk.
Assuming that demographics is the critical risk factor. Clients call and say, “60% of our employees can retire at any moment! We’re in trouble.” The truth is that they probably are in trouble, but only partly because of their aging workforce. Younger people do not bring reduced risk. In fact, there is a very real possibility that a 30-year-old employee brought in to take over for a 59-year-old employee will get recruited away or decide to go to grad school before the 59-year-old actually submits her resignation and retires. Turnover is the new normal and reducing the average age won’t fix that. The key is to identify employees with unique critical knowledge, regardless of their age, and manage talent risk thru that lens.
Outsourcing increases or decreases talent risk. Maybe, but it depends. Outsourced resources aren’t necessarily good or bad for talent risk. How you clarify your expectations and manage the flow of information is the key to keeping a tight handle on who knows and can do what. Managers should always know (by name) who is the “expert”—the single standard setter—in a critical job function for their business, to enable consistency to a standard. And managers should know who is that person’s backup, to ensure adequate bench strength. If you can’t answer those two questions regardless of whether you have employees or contractors, your risk is likely too high.
I’ll keep an eye out for ways talent risk is showing up in the executive dialog and you do the same. More to come.
SUMMARY: Don’t make the mistake of focusing solely on talent risks at the upper management level. Your company’s long-term success may very well hinge on the bench strength and flexibility of your front-line skilled professionals just as critically as with that of your executives. Knowing who has the business-critical knowledge in your company, regardless of their age or position, will ensure that you are on target for long-term growth and stability.