The Time Has Come for Upper Management to Offer Long-Term Contracts to Talent Management Pros

We've reached a very interesting inflection point in the Talent Management world today.  There is no simpler way to put it than to be as straightforward as possible: Upper Management is demanding more of HR, notably Talent Acquisition and Organizational Development.  In fact, the following visual illustrates two critical gaps in perception that are at the root of our crossroads today.

When posed with the point, "HR lacks the capabilities to develop talent strategies aligned with business objectives", only 25% of HR respondents agreed while 58% of Line Managers agreed.  This is a problem.  When posed with the point, "HR is not held accountable for success or failure of talent-management initiatives", 36% of HR respondents agreed while 64% of Line Managers agreed.  This is an even bigger problem.  The Line Managers are essentially saying, "Not only are you not accountable, but you don't even have the needed capabilities to do the job."  Wow.

As I look across the Talent Management landscape, I ask myself what is being done to counter this modern day Battle of Waterloo.  It's as if Upper Management is sitting across the table asking us this question, (not so) patiently awaiting our response.  Academia is responding in a big way - "Beyond HR: The New Science of Human Capital" (published in May of 2007) was a brave move by John Boudreau and Peter Ramstad toward establishing an actual Talent Management decision science.  "The Differentiated Workforce: Transforming Talent into Strategic Impact" (Becker, Huselid, and Beatty, published March 2009) is another audacious move toward an arena near and dear to my heart -- identifying and nurturing those roles and talent pockets that create the majority of customer and economic value. 

However, while Academia is stepping up to the plate in a big, big way, I find those of us who actually do the job moving in a distinctly different direction.  Instead of having the intelligent, strategic discussions about Talent Management that the C-Suite is demanding of us, I see our community ducking legitimate response by staying busy in evaluating more and more new technologies.  As Social Media has accelerated the marketing hype within our industry to mirror that of a modern-day bodybuilding magazine, it's as if we believe that if we stay busy enough, we'll never have to really "man up".  Unfortunately, this is an ineffective approach because the time has come to 'pay the piper'.

The result?  Articles like, "Memo to CFOs" Don't Trust HR", "Why We Hate HR", not to mention a further declining of the average tenure of the Talent Management Professional.  My own research of 100 profiles on LinkedIn shows the average tenure of a TM Pro at 18 months - and in that sense, is it any surprise that short-term reactionary thinking and focus on immediate metrics?  In my humble opinion, this further perpetuates the problem. 

So, let's talk about a potential solution.  How about asking TM Pros to sign 5-year minimum contracts in which bonuses are paid out on incentives tied to long-term economic value creation?  Given that the average economic cycle is 3.5 to 7 years, I'd say a base 5-year contract might do the trick.  As an Executive Recruiter, it's not uncommon for me to put together 3 year contracts for the V.P. level and higher, so I don't see this as that much of a stretch.  Think about it - a large majority of our industry is a contingent workforce anyway . . . so instead of signing open-ended contracts at an hourly rate that can be canceled at a whim (one of the bigger value propositions of a contingent force), why not attach to them a time period conducive to moving beyond short-term Wall Street pressures?  Hey, it might not be a perfect solution (if there even is one), but it would be a step in the right direction.

Editor's Note - Josh Letourneau is the owner of LG and Associates, a Strategic Sourcing, Executive Search, and Human Capital Intelligence firm based in Atlanta.  Prior to founding LG & Associates, Josh worked as a Sales & Marketing professional in the software biz and was a hard-charging Sergeant in the Marines.  In his spare time, Josh enjoys shooting at other sourcing and search professionals as available in random paintball games.  Like my background? Talk to Josh, because with all this talk of 5 year contracts, he's my personal Jerry McGuire.  That makes me Rod Tidwell.

Comments

[Gireesh Sharma]

That's very important discussion Josh. The disconnect between Line Managers and HR Managers is a biggest hurdle in the improvement of processes. Much of it is attributed to the fact that HR's efforts can't be measured as they could be in Sales, Manufacturing, Operations etc. and thus does not reflect on the Balance Sheet directly.

Here is an email from an HR Executive in India...

http://empxtrack.com/blog/09/human-resource-management-and-ceo/

[Todd Rogers]

Josh.
How would your proposal look with respect to performance metrics? When one considers, "long-term economic value creation" there must be a quantifiable and qualifiable set of metrics and standards, respectively, of value. Wide receivers of course are comp'd on receptions, TDs, yards advanced post-reception, and the like. That's pretty easy to measure. But value creation might be problematic. With all the variables that a company may incur over a five year time span, with only one project(!), it's nearly impossible and very likely cost-prohibitive to invest time and resources piecing together chains of events in such a way to properly compensate the recruiter who brought someone on board.

[Joshua Letourneau]

Todd, good comments - I agree that it won't be easy to identify what metrics are most relevant. For example, a CEO can be judged overall on the shareholder value that is created or destroyed during their tenure. However, even this is somewhat challenging because of risks outside the CEO's control (such as the economic cycle, terrorism, global warming, etc.) Considering whether it would be 'fair' to judge a CEO on shareholder value creation/destruction can therefore be overly 'black-and-white'. That being said, it's an outstanding place to start for 2 reasons: 1. A CEO's goal is to create shareholder value, and 2. This can be benchmarked against competitive CEO performance in the same sector.
For the sake of conversation, let's assume that I work for Airplane Company X and you work for Airplane Company Y. We compete within the same sector, but we derive our competitive advantage in different ways (to position ourselves, find niches/gaps, and to avoid head-to-head cost cutting wars). Let's say Airplane Co. X differentiates on performance/speed while Airplane Co. Y differentiates on capacity and range.
As we get further granular in terms of how we derive our competitive advantage, this allows us to associate metrics to those areas that are most closely tied to how we create long-term value. In addition, this type of approach allows us to investigate a portfolio-based approach in terms of justifying increased resources and capital geared toward those talent segments we deem to be most critical, etc. Marketing does it -- we can, too. In fact, I'm a proponent of Marketing and Recruiting working more closely because each has something to gain from the other's insights.
Ultimately, my notion of the long-term contract is to simply move Talent Mgmt away from frenziedly focusing on short-term metrics. I agree it won't be an easy endeavor, but it can be done. Just consider the pains that Finance and Marketing went through a decision science was established - it was ugly, but collaboratively, the sectors put their minds together and made it happen :)

[Mary Ann]

Forming a lengthy relationship with the company where you are recruiting is so important. It's one of the ways that I think convential recruiting agencies regularly fall down, but I hadn't thought about how TM turnover has a similar effect. That's a really good point, and I think that's one of the reasons we are able to help companies so much with their recruiting -- an lengthy, stable relationship with a complete understanding of that ccmpany.

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