John Chaisson was originally a lawyer before he got interested in the human capital side of things. John has always been someone who is at the cutting edge of thinking and his real focus has been on this general issue of talent management. Recently he has been working on the issue of Global Talent Management. There are a lot of global companies, but not too many who have already got their heads around how to manage a global workforce.
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DC: What is a talent management organization?
JC: I think the best way to describe it is probably with a quote, "Labor is prior to and independent of capital, capital is only the fruit of labor and could never have existed if labor had not first existed. Labor is superior to capital and deserves much higher consideration." And I think it´s interesting because that quote could have been made by any number of folks, it could have been Peter Drucker, it could have been the chief talent officer at a technology firm here in the United States, but it actually turns out that quote is from our 16th President in the United States, Abraham Lincoln, discussing the priority of people in any enterprise, any venture, in any undertaking.
I think that quote really captures the spirit of talent management and the spirit and passion that has to be resident inside in what we are calling a talent management organization. Even though there is a lot of conversation going on around talent management, we are still struggling in the marketplace to try to get an actual definition for it. I actually pulled a definition from The Institute of Management, which is broader than an HR organization or an HR association. This is an institute of all management professionals and folks that are tasked with managing all of the operations of the enterprise and they defined talent management as a means of identifying, releasing and guiding untapped potential in people.
Now I think that´s an exciting definition. It´s certainly one that can be inspiring, but it begs the question of whether or not it actually helps us on a day-to-day basis as talent management professionals get our job done. It also begs the question of whether or not if we say that we are talent management enthusiasts we are actually provided with the data, the information and a blueprint that´s actually going to help us transform an organization from an HR organization to what we are defining as a talent management organization.
DC: As soon as we are talking about a talent management organization we are not talking about the HR department and what the HR department does, or how the HR department thinks. We are talking about an organization that believes in talent.
JC: That´s exactly right. Here what we are talking about is an entire enterprise that´s embracing what many have called the talent mindset and I suppose that if you want to put it even simpler you would just say that we are managing people for the benefit and survival of our organization. And the question that´s begged is, what's the blueprint or the road map for doing that? I would say first off that we didn´t discover the talent management organization. The concept of valuing talent strategically has been around forever.
What we were engaged in, and I have been engaged in for the past five years, is trying to identify if in fact there is a model for talent management and we kind of stumbled across it accidentally. I had been involved in this area for some time, I actually got into this market because I was very interested in talent management, I was a lawyer in Silicon Valley and moved into the position as General Counsel at an applicant tracking company called Resumix, which has just been acquired by a big human capital company, Ceridian. I moved into this field because I was so fascinated with the concept of the importance of people within the enterprise and how managing people and talent management could actually impact those enterprises.
So, our work began in that area, really looking for what an evolved talent model might look like for an enterprise and we were particularly interested in finding out what the traits might be for companies with the best talent track records. In other words, which companies were doing the best job of managing talent and what were the traits of those companies? Our research was actually initiated by a much simpler project. We were working with PeopleSoft, they asked us to pick a research project and we decided we would try to find out what the top 10 challenges were for corporate recruiting. So, we really weren´t aiming for something sort of highbrow or lofty, we actually weren´t really focused on talent management per se, that term was something that was really just emerging in the industry.
It was more lingo and a buzz word than anything else and it really didn´t mean a whole lot except that you thought that talent might be a strategic asset and you were going to set about creating a set of practices and principles around that. We identified 75, mostly large companies, and I think 50% of the companies that we surveyed and interviewed were actually global organizations and we didn´t just provide an online survey to these companies, we actually started with an online survey, a very detailed survey, and then from the responses we picked about 40 companies that we interviewed in depth about their talent management practices, their recruiting practices and we were actually able to gain a perspective on what the top 10 challenges were.
Some of these top 10 challenges were to be expected. We found conflict between hiring managers and the hiring process. We found a challenge of people trying to get recruiting to be more strategic, but what was surprising was the number one challenge identified was evolving the entire enterprise to focus its mind and its resources and its attention on elevating talent within the organization, and this really became what we started to call the talent management organization. We had to pick a label for it, we had to define this pattern, this operational pattern that we were observing and we decided that the talent management organization would be a good label for it.
Since that time, obviously talent management has gained in traction. People have a broader understanding of it. We have specific tools that we now wrap around or integrate into the talent management concept. We see things like the talent mindset becoming standard discourse within our industry. But what we found at that time was that there were about 17% of companies that had advanced talent management traits that we thought were beginning to form a pattern around how you elevate an entire enterprise to be able to focus its resources around strategically using talent. I want to caution that I am not proposing that there is a specific formula for becoming a talent management organization. In fact two of the first things that we realized as we studied the responses from the survey and the research were that there was no specific one trait or tool or piece of software or even business process that would make you a TMO. There was no specific secret formula that was going to get you there.
It´s true you had to have a certain mindset, a philosophy around talent, but if you don´t have a talent relationship management piece of software that doesn't mean that you are not a talent management organization. If you do have a TRM module operating in your online recruiting engine, it´s evidence that you may be moving in the direction of a TMO, but not necessarily. So we are going to get into some of the specific traits and patterns, but we are also going to look at some of the limitations. What we are hoping to do within my practice and working with other groups is to be able to further flesh out a blueprint for what we are calling the talent management organization.
DC: What strikes me about becoming a TMO is that we are all locked into the operational side of things, there are people we have to recruit, there is the new software we have to implement, there are new processes, not just recruiting, but all across the different aspects of doing talent management, but one of the fundamental things that makes a TMO different from other organizations is that they are doing that thinking at a strategic level of thinking about where this talent really makes a difference. What does strategically using talent mean in our organization? And as I said it is quite hard in business today to have those kinds of thoughts and that kind of thinking, you get stuck in the day to day to just put your feet back and think-well, the everyday workplace isn´t really conducive to that. It is interesting those organizations have somehow got beyond that, that 17% you mentioned.
JC: One of the models we are going to be looking at is the human capital management organization, which is in our definition one step before you get to the TMO phase and in the human capital phase you are looking at this as a string of integrated transactions that are trying to improve human capital, but you still haven´t crossed the barrier into talent management organizations. In other words, you are not doing some of the core things that TMOs do. You are not trying to create talent, you are not consistently elevating and leveraging talent and most importantly you are not measuring and tracking talent and treating it as a core asset of the organization.
We are going to explain that a little bit as we go, then give you some examples of how companies are tackling those core challenges to moving really to be the utmost echelon of talent management and that´s 17% that we zeroed in on.
There are the lifecycles or the predicted lifecycles of three models of talent systems within organizations. There is the emergence of the HR recruiting organization and to put it very simply, it´s just an organization that has evolved and matured to a point where recruiting is a distinct and constant function within the organization. In other words recruiting is not purely reactive, it is an ongoing business function, it´s a holistic business function. It´s well supported by the organization and we see the emergence of that well oiled recruiting organization in about 1990 and peaking really around the year 1999-2000. We found in our study that 83% of companies have managed to make it into that stage of talent system development.
The second is the lifecycle of what we call the human capital management organization and in 2001 when the first research and studies were done, we were looking at about 50% of our large companies being there (and we were surveying primarily large companies at that time.) We were looking at about 50% of organizations that have crossed over into what we call the HCM model and let me just describe some of the hallmarks. One of the biggest hallmarks is that these organizations were actually linking recruitment and retention, that´s the biggie. In other words, they weren´t just looking at recruiting as an isolated function, but they were looking at it as interwoven with their retention efforts and they saw the trade-offs between investing only in the acquisition of the talent and the investment that needed to be made retain talent, so they were constantly making those trade-offs and also balancing the equation. Much of what we see in our industry today is centered around this notion of human capital management, the integration of distinct business functions that aid the acceleration of talent within the enterprise.
HCM for all of the benefits - and there are tremendous benefits to being a great HCM company - are still tied to what we call the transactional benefits of talent management. We are speeding the plough in recruiting, we are making business processes around talent management more efficient. We are looking at the cost factors related to acquiring talent, retaining talent, deploying talent or even training talent, but it remains largely an HR function within the enterprise and it also remains largely a transactional function. Now that is a generalization of course. There are some HCM companies that certainly have gotten very strategic about talent within that organization. There are HR organizations that are leveraging human capital analytics and human capital data for the betterment for their organization overall but still with the HCM organization there are some qualities, some traits that haven't quite permeated the entire enterprise and prevented us from classifying them as a TMO organization.
The third is our predicted lifecycle for the talent management organization and at the time we were doing it, we were looking in 2000 and about 17% of companies were becoming TMOs. These were companies where the talent strategies were integrated throughout the enterprise. There were companies where that talent strategy and that embracing of talent, that passion of the value of talent within the enterprise, really is embraced in hiring managers throughout the organization. Those companies are tracking talent as an asset, they are actually measuring the impact of talent, they are looking at talent as the driving force of the success of the business. What was really interesting to me here are a couple of things:
We actually interviewed in 2001 three specific TMOs - HP, Cisco and US Bank - and these companies really provided us with some of the earliest indications of what the business practices of TMOs were. We saw inside of these companies talent strategy not just being an intellectual process or an academic process. We saw it being operationalized at every level of the enterprise. One of the mistakes that we made in our early research is that we assumed that this TMO phenomena was really going to take off much faster than it actually did. Today our estimates are that TMO still only accounts for less than 20% of large corporations. In other words, it has gained some traction but it is a very slow lifecycle as companies begin to do this. What's really interesting to us is that when we look at market leaders today that are TMOs, the percentage is much higher than the general population of large corporations.
DC: I would expect that in terms of general understanding, if you had interviewed a bunch of CFOs before 2000, not too many would have any comment about talent at all, whereas now I think most CFOs would make some comments about talent. So I think there has been a lot of progress on getting us into the discourse so that not just HR people but across the organization people are aware of this. But it´s still a big step from having people be aware of it to putting it in place in the organizational systems and culture to actually do something with it.
JC: David you made an excellent point and you are zeroing in on sort of a breakthrough point generally around talent management and whether or not it becomes operationalized. I think before 2000 you would have heard a number of CEOs in soundbyte say things like people are our number one assets. After 2000, 2001 as analysts began to actually study the impact of talent more closely and we began to measure and certain organizations really began to look at what these metrics were, how they were impacting financial results, profitability, and looking at more evolved financial measures like EVA, we then had analysts asking CEOs and C-level executives at the corporations, if people are your number one asset, how does that impact the business?
Today we see work that precisely shows that sort of uptake in the amount of human capital reporting and the impact that it is having. So I think CEOs were in a sense a little bit forced by the analysts or nudged by the analysts to not just say people are our number one asset but actually begin to operationalize it, measure it and manage it.
DC: Okay, let´s move on to your definition.
JC: We heard the definition from the Institute of Management and that´s the type of definition that we typically see in our industry. And I think it's useful in terms of encouraging interest and passion and inspiring people to be better talent management organizations, but I am not sure it´s a definition that actually gets us to the point where we can begin to strategically operationalize this thing. You made a point earlier David that there are so many day-to-day practices and activities around talent within the organization but getting that work done can be pretty significant and trying to get people to think strategically about it can be a huge challenge for practitioners.
I think the TMO model that we have been able to identify, and the one that´s becoming a little bit clearer to us over time, is at least the beginning of a blueprint to help organizations say Hey! Am I moving along the path that is slowly helping my company emerge along the lines of this TMO life cycle. Am I doing the sort of things and making the sort of commitments that are actually going to help me become a TMO? There is a set of methods, practices, metrics and tools for leveraging the strategic value of human capital that organizations are using. As I said before, there is no one formula, it´s going to be a unique set of practices for your organization that fit your organizational goals and at the same time I think there is a lot to learn from those companies that have been incredibly successful.
One of the key points I want to leave our audience with is this; you can say all day that we treat talent strategically. As talent managers within our organizations we can get on the soapbox and talk about the strategic value of talent, but I really believe after studying the evidence that we cannot say that we are managing talent within an organization unless we are actually measuring the returns of that talent. Unless we are actually measuring talent as an investment within the organization, I think it´s incredibly difficult to say that we are truly a talent management organization. So I would say that while there is no required element, I think one of the first places that any organization that strives to be a TMO should look at is to see whether or not they in fact are tracking and measuring the real impact of talent within that organization.
We are going to give a couple of examples of how organizations can do this, but I think this is really an area that to me is one of the key hallmarks of the TMO and it´s part of the very definition, it´s part of the operational definition of what a TMO is. Integration into the operation of the enterprise, this is where we can see talent strategy and talent best practices operating outside of the sphere of influence of HR, where project managers within an organization really are being compensated on their ability to drive talent, to place talent within that organization and to actually discover and leverage talent within the organization. We are going to look at a couple of examples and practices at some TMOs that are also market leaders on how they have done this.
This is another hallmark area where any enterprise that wants to be a TMO really has to focus its attention. Again I said earlier that the measurement of the impact of human capital on the overall enterprise performance, not just human capital metrics, like ´Are we improving our quality of hire? Are we getting a higher number of candidates? Is the company´s perceived employment brand improving?´ These are all great human capital metrics, but those metrics really have to be tied to overall business performance. We have to look at a definition of performance results that actually impacts the entire enterprise and typically that involves some kind of profitability measure. We are going to talk about other ways of measuring and defining profit that include the human capital factors of an enterprise and that´s a critical thing for our audience to remember as well.
DC: Sometimes I encourage people to think in terms of assessment rather than measurement because measurement may overly narrow your thinking. One thing I do know is what the GE annual report says about human capital, that they always try to have some kind of measure, something quantitative so that they don´t just say ´we are doing this,´ they try to make it more concrete by saying ´we are doing this and here are some of the metrics around that.´ That provides a good discipline to make sure you really are managing it. John, maybe you can take us into some of the specific practices you have been mentioning.
JC: The first set of widely adopted talent management practices we would see being executed today is what we would call human capital management enterprises.
TRM: Talent Relationship Management has certainly taken off. In 2000, 2001 when we first started the research, it was a fairly new concept for talent managers and HR departments. Today almost all of the leading recruiting companies that we are aware of are using some form of TRM. I think the real question is, what kind of TRM are you using? In the last couple of years we have seen an emphasis on social networking and referral-based recruiting kind of making what was old, new again but the idea that we have to treat talent as part of a life cycle in a relationship and that we cannot simply engage and disengage with talent at whim as we need to fill positions, this is really taken root within companies. I would say that any company that certainly wants to be on the cutting edge or the TMO edge of talent management should be looking at talent relationship management and embracing it.
One of the cautions that I would give is that when we tend to look at TM practices today, and I am a little discouraged by this, we go from this high strategic level of saying we are leveraging talent strategically and we sort of water it down to a process or worse, we water it down solely to a technology initiative. I think that is a disservice to the potential gain that most organizations can have. Technology is wonderful, we have to look at this initiative as being way beyond a simple technology initiative. It really has to be an enterprise, an operational enterprise initiative where we are seeking to leverage talent as a core and strategic asset and not simply engage technology to create some sort of efficiency gain within our organizations. If this stuff is going to work, it´s got to work and be both effective as well as efficiency driving and it also has to be not only transitional in the sense that we are improving discreet transactions through technology, but it also has to be transformational and that is at the very heart of what a TMO is.
Paperless recruiting, I said six years ago we would never eliminate all paper, we haven't eliminated all paper but I would say that the industry has made tremendous progress through online technology and digital technology of reducing unnecessary paper within the talent management process and so the industry really should be applauded for that. It´s created huge cost savings and lots of efficiency and has allowed us the freedom and the resources to move on to maybe other activities, higher return activities within talent management, that really what the evolved talent management department needs to be looking at today. Flexible workforce concepts, again even five years ago I think, this was really just limited to a few buzzwords.
You know maybe we should make our workforce a bit more flexible and what we have seen come out of that is not just the evolution of technology that now allows us to see non-contingent workforces, we have systems coming out like Market10 which are using meta data within the industry to tell us a lot more about the availability of types of workforces, both contingent and non-contingent, also helping companies make trade-offs among whether or not they are going to be staffing with a contingent worker or a non-contingent worker. I think that that has really been a tremendous gain within our industry. Most human capital professionals today have a far greater understanding of their options, of the tradeoffs, of the tools available to manage this and I think that that phenomena is related to the next phenomenon, which is staffing management.
Back in the days when I was working at Ceridian really we were just beginning. I think Resumix even had a dedicated version of its software that was aimed at recruiting and staffing firms, to help them improve their business processes so that they could transfer those advantages over to their corporate clients. Today, we have certainly had leaps and bounds in terms of technological performance and efficiencies, but also just in the concept of how staffing companies should be working with their corporate partners in order to improve not just the efficiency of talent processes, but the effectiveness of those processes. I think we are slowly developing effectiveness tools and helping these companies improve the quality of talent within their organization.
The last widely adopted practice I have mentioned here is the beginnings of the talent management platform. And I say, it is still the beginnings because I think we have yet to see the true promise of technology within talent management and David knows for me to say that it´s a little bit shocking. I tend to be the person that says we are over investing in technology, but I still think that we are really at just the beginning stages of understanding how fantastic digital technology is and how software can aid us in improving talent within our organizations.
Despite all of those technical and efficiency gains in these widely adopted practices I think that we are also just at the beginning stages of grabbing hold and embracing the overall enterprise gains that can come out of doing a great job of managing talent within our organization. What I call early adopter practices of TMOs are practices that we have been tracking just for the last couple of years that I think are the hallmarks of talent management organizations and really the kinds of practices that are going to allow key organizations to squeeze that competitive advantage, that innovation advantage and really that talent advantage over their competitors. The first one, talent adapted management scorecards.
Not surprisingly David, as you know scorecards have really taken off in terms of organizational performance. What we are talking about here is the human capital group really taking a close look at the balance scorecard that´s being used at the enterprise and making sure that the human capital measurements that are being used are really capturing the impact of human capital within that organization. At my group we use something that we call ROTA, Return On Talent Assets, and we have a methodology for how you can capture really the impact that human capital was having within a balance scorecard. If you go to our website, people101.com, you will see in the August issue of the Journal for Global Workforce Excellence an article that really takes you step by step through the process of adapting a management scorecard for capturing all of the human capital. That´s certainly not the only approach.
We also liked Metrus Group. I have seen a wonderful approach that they are taking in terms of capturing and measuring what they call people equity within the scorecard and I think that again there are a number of ways you can approach it. The important thing for a talent management organization or a company that is striving to become one is that their human capital group looks at that scorecard and ensures that the metrics and the measurements that are being used are actually capturing the intangible value of human capital within that organization. David, the second one is one that you are very familiar with. You have been doing a tremendous amount of work on the reporting on the Fortune 50 and now I think it´s become the reporting on the Fortune 100.
You and I both know that these large Fortune 100 companies are certainly under the gun and a little bit under pressure to begin reporting more accurately the human capital impacts within their organizations and I think that trend is really going to increase over the next couple of years. I don´t know David if you want to comment on it a little bit.
DC: I think it´s really part of this whole TMO idea, but obviously if you believe that talent makes a real difference in the strategic success of the corporation then obviously it´s not just the HR people who care or even just the CEO who cares-it´s also the board and the investors who are going to want to have better information and of course the CEO is going to want to give them information because the CEO wants to say, look, this is what's important, this is why we are going to be a successful company and this is why people should be investing their money with us. It´s not just the revenue you see today, it is a fact that we have this excellent asset that we are developing all the time and that´s where our competitive advantage lies. And it´s really interesting that we as yet haven´t seen more statistics in human capital reporting than we have, given what we know about how important it really is. Pages and pages of financial data, lots of talk about strategy but not as much human capital reporting as there should be.
JC: I want to move quickly through the next two points, but they are important. Intangibles management and return on talent metrics. Here is what the heart of this measurement is and why we say that a TMO really has to embrace this and that is simply that for every dollar invested in intangibles in an organization its return is about 17%. A dollar invested in a tangible asset, a building, a piece of equipment, even software is returning about 7%. For human capital professionals not to grab hold of those returns and those intangibles (of which human capital is a large part) I think is really a huge missed opportunity for these organizations and so we emphasize that. Talent creation is looking beyond acquisition and skills development and succession and really looking to unlock potential talent within the organization. We will talk about a couple of companies and how they specifically address that issue.
The last three, just to mention real quick, unified diversity, enterprise leadership and being global not international, these are hallmarks of a true talent management organization and really our studies and research into the area is just beginning. Unified diversity is the second step. Right after you diversify the workforce, you need to figure out ways to improve interpersonal congruence and to be able to unify that diversity into teams and really there is tremendous work and research being done in that area. Enterprise leadership is looking at the entire enterprise and saying every person in this organization is deserving of being able to use their leadership potential.
And it´s very interesting as we move towards a service-based economy, the need to look at every individual within the enterprise as a potential leader is growing and organizations that are ignoring the fact that customer service is really the driving force behind the success of these businesses and if our lower level employees are not being given a leadership opportunity in training, we are just missing the opportunity to leverage our talent. We are doing a tremendous amount of research on global today, trying to understand the difference between global and international. I thought Steve Landberg of Claymore Partners, put it best, he said, "A global company sees the next great product, the next great idea and the next great manager." They know that it can come from anywhere on the globe and I think that really summarizes it. We are going to be looking at Google and HP a little bit in their practices and we are going to notice them operating as global organizations.
DC: On the enterprise leadership issue, IBM makes a point of reporting about how due to wide spans of control, managers can´t spend as much time taking care of individuals as they did in the past and that´s an issue that they actually draw attention to in their human capital reporting. Tell us about more about the TMO.
JC: I think we have been talking about the concept in the blueprint, we have been talking about some specific traits. Let me just point out a few more very quickly. It´s a fundamentally different approach to enterprise business. This doesn't just say that we are going to recruit people and as we lose them we are going to replace them, this doesn't just say that recruiting is tied to retention. This says that people really are our most strategic asset. If that´s true then we are measuring and managing that talent as an asset, it is showing up in our balanced scorecard, it´s showing up in the compensation plans of our managers and our hiring managers.
We are actually paying people to build a better workforce to improve the talent that is in our organization. If we are not putting our comp plan where our mouth is I doubt seriously that we have moved to the stage where talent management is really permeating the organization. If we are not measuring talent and the impact of talent, if we are not looking at human capital as driving the intangible value that´s driving the market value of our companies, then we are really not living and breathing as a talent management organization. We may be living and breathing as a human capital organization, we may be integrating HR functions and human capital functions. We may be implementing great software, but we are not living and breathing talent as the most strategic asset and these are some of the fundamental differences of the TMO.
Again I am not criticizing HCM initiatives, I think they are absolutely critical, you have to get the infrastructure right. My concern is that in trying to get the transactions right, we may be losing our passion for the transformational qualities of talent management in human capital and actually it´s those transformational qualities that increase the intangible value of a company, that increases the market value that demonstrates to business managers and even to Wall Street through the reporting that David was talking about, what the future value of these organizations is going to be.
One of the things that I noticed is that we are seeing a lot of activity in M&A around trying to understand the human capital reporting a little bit better and that may be one of the first areas that we see some of the evolved reporting that you were mentioning.
DC: I am seeing for the first time this year when people talk about the M&A they almost always spend at least some of the time talking about the people aspects of it. Whereas in the past you would focus mainly on the strategic aspects, for example, the product mix or the regional mix and how that would work. Now people are actually talking about the talent side of it.
JC: Our next one is an evolved definition for talent, earlier we heard the Institute of Management´s definition. Every organization is going to have to define what talent really is. Our old definition is ´the right talent in the right place, at the right time.´ There is benefit to that definition, but it still assumes that talent is static. That the talent that we got rid of yesterday isn't going to be great talent tomorrow. That the candidates that didn´t fit in our organization yesterday can´t fit tomorrow and that the talent that´s really successful today is still going to be successful and we know from practice in operations that isn't necessarily true. If we want to embrace TMO we have to embrace this notion that talent is incredibly dynamic and our definition of talent that breathes inside the organization has to reflect that.
DC: Let´s carry on to your next set of points around understanding the TMO.
JC: Mutual success: real simply there are two parties in this talent transaction. There is the talent and there is the employer and both of them have to feel successful in this, both of them have to feel that there is an alignment between the workers´ goals and the employer´s goals. It´s a simple concept, but it's interesting how many organizations still miss it. We still are trying to hang on to an old definition of the talent relationship that says that the enterprise goals reign and if you can´t get behind them get out of the organization. The truth is that we don´t get the benefits of our people, our workers, whether contingent or non-contingent, unless we are embracing a definition of success that´s actually mutual. We see that replicated in the work by Marcus Buckingham, where he says that the workers are not going to be loyal and committed, they are not going to produce, they are not going to give you returns unless they feel that the organization actually cares about them. That is the mutual success that we are talking about here.
We have talked about measuring the intangible assets, my only point here is that it may not in fact be optional. If there is one thing that isn´t optional in terms of defining a TMO, it´s probably the measuring of the intangible assets and the human capital impact. Reporting - we have covered that pretty well along with balance scorecard. Just look for these hallmarks within the organization if they want to be along this path of becoming a TMO. My final point on technology is this. Technology is a wonderful tool, it can add tremendous impact. Just make sure that the technology that you are deploying along this talent management path is not only improving efficiency, but is proving effective. I will give you one example. I had the privilege of writing a case study on Federated Department Stores less than a year ago and they have decided they wanted to adopt a new technology tool that would help with interview scheduling and interview management. When they went in the marketplace they couldn't find a tool that actually met their effectiveness goals, their talent relationships goals as well as their efficiency goals. So they contacted the technology partner, who at the time was WetFeet, and asked them to design an entirely new tool.
The tool that they came out with was absolutely state of the art. It embraced effectiveness and not just efficiency; it was transformative, it improved the relationship between the recruiters and the perspective hires. This tool was so effective that the candidates actually contacted Federated and sent e-mails saying we love this tool, we love your 24x7 interview scheduling tool and we just want to thank you for it, which I think is absolutely phenomenal. Technology can be very powerful when it´s embraced holistically and we know that the primary goal here is to improve talent and the secondary goal is process improvement.
DC: Let´s look at some of those case studies to ground your ideas in actual practice.
JC: Let´s start with CEMEX, which is a Mexican Cement Company. You might ask the question, why cement? I mean how do you differentiate cement? How do you leverage talent within a cement company? Well it turns out that CEMEX, at least by our assessment, is really a model TMO. CEMEX is the world's most profitable and actually the largest cement company in the world. This company is more profitable than Microsoft. The company was not always successful, actually the company was falling apart about a decade ago. This Mexican company was a family business, it had been in the family since its initiation and a new CEO came on board and found the company in tremendous trouble. His grandfather had started the business and they were facing all sorts of challenges that were incredibility difficult.
They were facing trade barriers, they were facing international barriers of moving into the US market and other markets, they were facing rising costs and what a lot of companies are facing today. They were facing global competition. The CEO, who happened to be a Stanford MBA, tried every MBA trick in the book. He ran out of ideas and at the end of the process he decided that the best possible solution was to tap the entire workforce. He then began to break the workforce into teams, seeking innovation and ideas, asking low-level employees basically, how do we save this company? And what came out of these brainstorming sessions with talent were all of the ideas that actually transformed this company. One of the ideas, and that was actually sort of inaugurated at CEMEX, was our modern notion of what a corporate e-mail is.
They also reinvented how cement was made, how it was transported and how it was delivered. They were one of the first companies to use satellite GPS to try to figure out where their cement delivery trucks were. All of these ideas that really transformed the enterprise, that brought the innovation, that not only saved CEMEX but really made it a market leader in the cement industry came out of this decision that they needed to tap the asset that was the people within their company. They really embraced this notion of the talent driven organization. CEMEX also began to make tremendous investments in their workers and in their people. One of the first things they did was to provide Internet and computer capability for every family of workers within their organization. They developed scholarship programs, MBA programs, graduate, schooling and the list goes on and on and on. There is a case study on CEMEX that´s available at www.people101.com.
What's most interesting about CEMEX is that to me this is the company that really wasn't what you would call a leading talent organization but when they embraced the concept they really embraced it strongly. They began to see every individual within the organization as a potential contributor. They began to seek feedback from all members of that organization and they really began to make some investments, not just in the current abilities and skills and competencies of the existing workforce but they began to make investments in the future skills and competencies and capabilities of their workforce. Certainly that strategy has paid off tremendously, not just at the human capital level but really at the enterprise level in terms of profitability and everything else.
DC: What strikes me here is that this began with a fundamental realization at the top about how they were going to run this company. It was not introducing low-level infrastructure, that´s not where it started, improving their talent management, technology or talent management processes. It started with this idea, we are going to die if we do not think differently about how value is created in this organization.
JC: I also think it´s very telling that it wasn´t really a software driven initiative at all or technology driven. Technology was leveraged but the starting point became let´s value our workforce. Let´s get feedback and understanding that the innovation that was going to save the company is really going to come out of the talent in that organization. It was very interesting to notice, I think even this morning Intel's announcement of the release of their new laser computer chip, which the analysts are now saying is really good, is a beginning of a turnaround for Intel as an organization. And again I would attribute that to despite market fluctuations and everything else, Intel really is continuing to value the talent within that organization and to bank on talent as what is really gong to drive the ultimate success.
DC: Let´s move on to your study of Google.
JC: We started tracking Google almost four years ago. We immediately noticed that Google was demonstrating some TMO traits. They seemed to be valuing every single worker within the organization. They were creating autonomies for workers that were pretty remarkable even for a Silicon Valley technology company and they were doing some of the things that are following the TMO patterns and blueprints. One of the first things I noticed was their mission statement which is "Do no evil" so really sort of an out of the box approach to business. But some of the out of the box human capital practices that Google has been criticized for have actually turned out to be really the hallmark of their success, really the foundation of the success of Google.
Google gives part of each employee´s day back to the employee so that they can work on their own selective social development projects, in other words they are given time every day or every week to make the world a better place. That is one of the workforce initiatives at Google and what that says to their workforce is that you are incredibly valued and that we are in this for mutual success. This is not just about Google being a highly profitable company. This is not just about our intangibles growing and the market analysts recognizing that, this is not just about making Wall Street happy. This is about your life, your career, your path, and we really value that and Google has certainly embraced the TMO and I would think that we have considered them really a model TMO for quite some time. One of the other thing this is really a hallmark of Google, and I think really a message to corporations, is that Google has largely illuminated inside of its walls, the concept of supervisors. The standard ratio for most corporations is about 12 to 1 and it really ranges from about 12 to 1 to 20 to 1. Google has moved that range up to about 100 to 1.
One manager that we would call a traditional supervisory manager to 100 autonomous, self motivated employees, which is really incredible and I think not only at the heart of their ability to cut workforce costs but really at their ability to thrive. There is a study that came out at Cornell that was done in collaboration with Gevity institute and if you go to www.gevityinstitute.com you will see the study, really a phenomenal study, that basically said that if you embrace three practices, you are going to see improvements to revenue, profits, and sales growth. The practices were based on a person-organization fit versus person-job fit, empower employees through greater involvement and self management versus tight control and supervision and motivate employees with family style environment versus emphasizing monetary incentives.
This study, which really was of small organizations (up to 600 employees), would also work well in larger organizations and I think that Google is a perfect illustration of that. They actually embraced all three of these best practices that the Cornell study highlighted and we think that these are three of the most important traits for an organization that really wants to see these TMO business results that they can embrace.
My e-mail address is at johnc@people101.com and actually if you go to people101.com you can see all of these reference documents that were used for today's presentation; information and data that we drew, including the original study that was sponsored with PeopleSoft. You can see the challenges and the emergence. We also have the scorecard approach and return on talent assets that were mentioned.
DC: Can you give us some idea about where people should start?
JC: Well this is the beginning point and we have been saying this now for five years. You have to take a 360 degree view of your talent organization, not just your HR organization. Any sort of survey process has to include project managers, hiring managers, alumni of the organization, even folks that were fired by the company, to get a real view of what this talent organization is. Here are some of the questions you would ask in a survey. What kind of an organization are you? Are you an HR organization or are you an HCM organization? Are you actually beginning to show TMO like qualities within your organization? Do you know what you need to do to retain talent?
That´s an old question but the new spin on it is that organizations are being forced to create talent, not just acquire it. In the latest jobs report John Challenger, of Challenger and Grey, said that corporations in America were withholding job requisitions because they didn´t feel that there were qualified and skilled workers available to take those jobs. So the pinch that we are talking about is already here, the one that has been predicted is already upon us and major corporations in the US are not opening job positions because they don´t feel there is going to be enough talent available. That makes the retention question even more prominent. Do you know what kind of experience candidates are having at your company and these include employees, contractors, alumni, and even workers that were fired, who have the ability to impact your organization, your recruiting efforts and your talent management efforts and do your managers depend on or work around HR? This is a huge question that I think organizations need to answer honestly. If managers, if the business managers and the operating managers and unit managers at your enterprise are making end runs around HR and the recruiting group and the talent group because they just have to get things done, to me that really is a huge red flag that you need to take a sober look at your talent management system and process.
You need to assess which model you are operating under, at least be aware of it, and then begin to use that information, the feedback that you get to design a current state of where you are and a future state of where you want to get to and then compare those states to your competitors. The data that we drew on today for talent management organizations, the benchmark data is available publically in an FCC filing to really anybody that wants to take time to benchmark themselves against public competitors. The ultimate goal here would be that a company would conduct a TMO audit and we have had the pleasure of working with a number of firms that do exactly that and we certainly look forward to continuing our work in understanding the talent management organization.
