Agility has become critical to the survival of most organisations. There is a clear consensus among business researchers and executives that organisations must be able to change rapidly and effectively, in order to survive. As the world becomes more complex, more interdependent, and more demanding of sustainable organisational performance, the extent to which they need to change is likely to increase even further.
Although there is great agreement that organisations have to get better at changing, there is much less agreement on what organisations need to do in order to become more agile. In our recent book, The Agility Factor, Chris Worley, Tom Williams, and I provide an answer. We argue that organisations need to change their approach to talent management. Like many others, we point out that the career model of employment does not fit with the need for organisation agility, nor with the expectations of many 20-35 year olds, for that matter.
It simply creates too many obstacles to rapid organisational change. Organisations need to be able to quickly add new technical skills and levels of performance. This requires a workforce that is willing and able to do new things in new locations – with different technologies and with different organisation and job designs.
Organisations need a new approach to talent management that creates a workforce that supports changes in what individuals do, where they do it, when they do it, and how they do it. One extreme approach to achieving this is to depend heavily on contract or cloud-sourced labour. Desk and other firms that match individuals to firms on a web-based contract basis are an example of one type of talent management that makes organisations highly flexible in terms of their workforce. The oDesk approach undoubtedly fits some of the work that rapidly changing firms do. However, it falls short of being a general talent management model that fits most organisations. It simply does not create enough organisational continuity nor does it take into account the ongoing relationship that many organisations need with their customers, suppliers, communities, and governments in the places in which they operate.
What is needed is a talent management approach that attracts, retains, and motivates highly talented individuals for as long as they are needed by an organisation. It also needs to minimise the transaction costs and disruption that is produced by changing the members of a workforce. It is an approach that is being used by a number of Silicon Valley firms in the US, including Netflix, Google, and LinkedIn. LinkedIn calls it “the alliance model” and talks about individuals taking “tours of duty”. In our book, we call it the “travel light approach.”
On its website, Netflix outlines its approach, whose key characteristic is “guaranteeing” employment to individuals for as long as they have the skills that they need to perform at a high level. Netflix states that, when either of these two conditions no longer exist, individuals will be terminated. Where there is no guarantee of employment, there is also no commitment to developing employees. It is up to each individual to be sure that they have the skills that the organisation needs. Netflix promises to help employees figure out what skills are needed, but it does not guarantee that they will turn out to be the ones that the organisation needs. Development and career management decisions are left up to the individuals. All the organisation offers is the best information available on what is happening to the business. It is important to emphasise that employees are not told that they are temporary or contract workers, on the contrary, they are employees but they are told not to expect a long-term permanent relationship with the organisation.
It is one thing to specify what this new relationship is like, it is quite another to create an organisation in which it leads to effective organisational performance. The danger with this can be that individuals will spend most of their time only looking out for their self-interest and making little or no commitment to the organisation and its performance. This clearly is a danger; and in order to prevent it from becoming a reality organisations need to attract and retain talented individuals who accept the deal and perform well while they are employed. With that in mind, let’s turn to some key management practices that will make this happen.
Creating an effective talent management system for a travel light organisation must begin with the recruiting, selection, and onboarding process. It needs to be based on an accurate employer brand. There is no substitute for utilising recruiting practices that accurately reflect what individuals will encounter once they become full-time employees. Thus, the information that is provided to recruits should emphasise that employment is very much dependent on the skills that individuals have, the organisations need for those skills, and their performance. This is a key theme in the information that all job applicants see when they apply for a job at Netflix.
It is important to look for individuals who have either changed jobs relatively frequently or changed their skills and competencies frequently. They are much more likely to be able to adapt to the changes that will be required as the organisation changes, or to look for another job when the organisation no longer needs the skills they have. Past behaviour is the best predictor of future behaviour.
Pay and reward systems
In order to be effective, the pay and reward systems of an organisation need to reflect what the organisation is focused on, with respect to gaining a competitive advantage. In the case of agile organisations, the focus is on performance, skill development, and change. The obvious implication for the reward system is that it ought to focus on the skills individuals have and on their performance, not on jobs they have. A traditional pay approach that focuses on jobs and paying individuals based on what their job is worth is inappropriate for an organisation that wants to be agile. It motivates individuals to protect and grow their jobs, rather than to develop their skills and do what is needed for them to fit the changes occurring.
In most cases, performance rewards need to be relatively short-term and focused on individuals rather than groups. In some situations, group or team rewards are appropriate but they are less likely to be appropriate in a situation where rapid change is occurring. The reason for this is straight forward. In traditional organisations, there is likely to be a longer relationship between individuals and organisations. Individuals, particularly if they are rewarded for organisational performance, may be committed to helping the organisation perform well, even if they are not rewarded individually for their performance. In the case of the more transitory relationship that exists in a travel light organisation, individuals need to be motivated by relatively immediate and clear rewards for how they are performing. In the absence of rewards for their performance, individuals may have little motivation to perform their job well and instead of doing it, they are likely to focus on looking for their next job. In addition to being based on performance and for retention purposes, pay rates need to be high because job security is not being offered.
Performance management, a frequently criticised practice in traditional organisations, needs to be prominent in agile organisations. An effective performance management system is fundamental to making the talent management systems of an agile organisation effective. The travel light approach must have valid performance and skill information about everyone. Without it, the organisation cannot make good decisions about who should be retained.
Leadership is a critical element in any organisation but it is more important in an agile organisation than in traditional ones. Agile organisations need frequent updating of their strategy and direction, and individuals need to understand the changes that are taking place and the implications for where, what, how, and when they should be performing. Part of this can be communicated to individuals through work design changes, reward systems, and performance reviews. Some of it is best communicated by articulate leaders who explain why the changes are necessary, what they involve, what their implications are for individuals, and how they should be implemented. Traditional “do-what-I-tell-you” type leadership simply will not work in an organisation where individuals are not motivated to work towards the organisation’s success because their future does not depend on it.
Travel light talent management systems are particularly popular in technology businesses. One of the characteristics of technology organisations is the complex nature of the work they do and the need for talented individuals. This type of work often has an intrinsic motivation character. People work hard and effectively because of the satisfaction they get from meeting challenges and producing significant products. Not everyone can have a highly challenging job, but it is important for organisations to pay attention to the structure of the work that all individuals do in order to see that each role is as motivating as possible. This means work that gives feedback, challenges the skills and abilities that people have, and has tangible outcomes.
Agile organisations need talent management models that emphasise talent agility. In order to be effective, they have to do more than frequently churn their workforces so that they have the right skills. They need to be designed and structured to operate with low labour change transaction costs, assurances that individuals are performing well, and motivating job designs. Those organisations that can create talent agility are likely to be highly effective in today’s rapidly changing world.
About the author
Edward E. Lawler III is Distinguished Professor of Business and Director of the Center for Effective Organizations in the Marshall School of Business at the University of Southern California. He has consulted with over one hundred organizations on employee involvement, organizational change, and compensation and has been honored as a top contributor to the fields of organizational development, organizational behavior, corporate governance, and human resource management.
The author of over 360 articles and 46 books, his articles have appeared in leading academic journals as well as Fortune, Harvard Business Review and leading newspapers including USA Today and the Financial Times. His most recent books include Management Reset: Organizing for Sustainable Effectiveness (2011), Effective Human Resource Management: A Global Analysis (2012), and The Agility Factor (2014).
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