Organizations of all sizes already assess and manage many types of business risk day to day, including legal, operational, financial, and insurance. As a business leader you would never dream of just going with your gut when faced with the legal risks of a big contract, and no board of directors would settle for an executive declaring, “I have a feeling our workers will be safe enough,” or “our production capacity seemed fine so I fired the analysts.” And even though in-house risk managers and vendors (lawyers, insurance brokers) may shoulder the heavy lifting, line executives are expected to have at least a basic understanding of how to address common types of business risk and where to go for help. That is, except for one of the biggest risk areas – no one methodically manages technical talent risk.
Why Executives Need to Be Concerned About Talent Risk Management
The board of directors for major corporations know that investors and financial analysts are focusing more and more on talent and human capital because it can account for up to 15 percent of valuations. Historically, boards rely on succession planning for top-tier leaders to guard against talent risks. However, for companies to experience sustained growth and profitability in a highly connected world, boards need to look beyond their top tier when looking at talent. They need a multigenerational, diverse, and highly skilled workforce. How will the board hold management accountable for making sure that talent at all levels never becomes a barrier to the execution of their strategy?
An example of a corporate strategy at risk occurred when two longtime rival companies announced to the press that they would merge their firms. These two companies had technology that, when joined, could dominate their sector. Employees from both companies groaned as they read the details online. They knew they were in for one to two years of craziness as the two former enemy organizations fought for dominant roles in the new “blended” family. Almost immediately, employees’ phones began to ring with calls from headhunters eager to lure them away from this mess. Suddenly, the potential for smoothly merging the rival technologies was at risk of failure and they hadn’t even finished the paperwork on the deal.
How will leaders manage talent risk during a merger to ensure that the best technical professionals see a future for themselves in the new organization and stay so they can be part of it? Once the merger is complete, how will management get everyone back to work, with clear job roles and expectations and within days or weeks, rather than months or years?
How To Approach Talent Risk Management
Look for talent risk in every transition. The merger example above is familiar, but so are reorganizations, new system rollouts, onboarding new employees, retirements, offshoring, outsourcing, etc. In every transition, you’ll find a mix of people with the unique, critical knowledge that is required to win in the marketplace, people who are capable but not yet prepared along with people who are never going to be successful. You’ll also find real and important gaps in your talent pool that must be mitigated through hiring, outsourcing and cross-training. We use our Knowledge Silo Matrix to assess the risk and align leaders on which risks must be addressed first, then we use a combination of executive insights and technical knowledge transfer to methodically and measurably reduce the highest risks.
What’s at stake if the risk isn’t mitigated? All you have to ask is what you hoped to accomplish by writing your strategy in the first place. If you were looking for new top line revenue, increased market share, improved cost management, etc., in the end your team will be the reason you make it happen or not. And that is a risk worth managing.