Organizations, and arguably the human species in general, systematically strive to avoid risk and uncertainty. We like to know what to expect, so we can plan and be well prepared for the opportunities and challenges on the horizon. However, the world and market climate today is highly uncertain, and this state will not change any time soon.
Long-arch strategic plans, including long-range talent plans that have been an essential part of corporate talent management for decades, are not very useful within today’s climate. Instead, agile, data-driven models and plans are required.
To better prepare ourselves to thrive in an unknown world, it is useful to understand the critically important difference between risk and uncertainty.
Risk analysis and risk management are highly useful constructs for known probability. For example, based on historical data analysis, we know an X percent chance exists that a maintenance engineer will be injured while repairing a given piece of equipment on the factory floor on any given day. Or perhaps we have calculated the likelihood of key employees quitting after an announcement of a vacation policy change.
Risks are identifiable and manageable. Risks are not necessarily easy to manage, and some- times we get it wrong. But, they do involve known factors influenced by a set of inputs, and we can strategically work to lessen the likelihood of adverse outcomes.
Uncertainty, in contrast, is quite different from risk. Uncertainty can involve “known unknowns” or “unknown unknowns.” For instance, we may know that a competitor is working on a product that will make our current product offering obsolete, resulting in our engineer team being behind and possibly lacking the knowledge or skills to catch up. However, we may not know when the competitive product is scheduled for release, the likelihood of the product making our product line obsolete, consumer rate of acceptance of our competitor’s new product, etc.
Thriving within uncertainty requires very different approaches from those used when the world and market climate were more predictable and did not change as fast. An “uncertainty-optimized” organization will develop ways to quickly respond to changing market conditions and is especially good at strategically operating based on “known unknowns”—cases where it is known that the market will change. Still, no one is sure how quickly it will change.
“Unknown unknowns” do occasionally pop up—cases where we did not know what we did not know. Maybe a new manufacturing material was in secret development by a key market player, released to the surprise of everyone, and drastically changed a segment of the manufacturing industry seemingly overnight. While this type of uncertainty is difficult for any organization to manage, uncertainty-optimized organizations are agile enough to respond promptly.
Risks can be managed, and tools like project and quality management are excellent risk and overall process management tools. Positioning an organization to thrive within uncertainty, however, requires very different approaches. An uncertainty-optimized organization will develop ways to quickly and seamlessly respond to several different possible future scenarios.
21st-Century Talent Management—Optimized for Uncertainty
The concepts of both risk and uncertainty are critical for twenty-first-century talent management. Risk can be calculated and managed for organizations, for example, questioning if they have enough team members possessing specific skills. Addition- ally, organizations must have talent management, and talent acquisition practices that facilitate quick and efficient action once uncertain talent needs become definitive.
A Supply Chain of Talent
Supply chain practices have been perfected over recent decades and are very useful for responding to uncertain market needs. The characteristics of today’s uncertain markets (e.g., uncertainty like specific product and geographic product demands) have a great deal in common with the uncertainty of sourcing needed talent. Therefore, applying supply chain concepts and practices to talent management and acquisition—creating a supply chain of talent—provides many opportunities to learn.
The job of a first-rate supply chain is to manage the flow and transformation of goods from raw materials, often through global and complex production processes, to the end-user. As mentioned, an effective supply chain must be optimized for uncertainty, such as changes in demand for a product, shortages of materials, changes in regulations, disruptions in transportation, and many other factors.
The role of a supply chain of talent is similar—transform skill sets within the organization to meet needs (training/development), acquire needed skillsets from the outside (talent acquisition), or supplement the current workforce with possibly temporary sources (e.g., contract workers). Because talent requirements are much more uncertain and fast-moving than they used to be, organizations often do not have years to execute traditionally constructed succession plans. Instead, an agile supply chain of talent—like supply chains for goods and services—is needed.
Because the future is uncertain, many organizations err on the side of too much high-priced talent sitting on their payrolls. Or they err on the side of very risky shortages of talent in critical areas. For instance, many HR organizations focus on reducing open requisitions, and any open requisition is viewed as a failure of sorts.
However, if you consider the issue of inventory through the lens of supply chain management principles, supply chain practitioners often don’t think that way about inventories of goods and materials. Generally, supply chain experts accept occasionally running short of noncritical materials. However, specially designed contingency plans are built for essential materials that might put the entire operation at risk.
The same holds for talent within organizations. Different roles have different risk structures. Some roles are easy to fill when vacancies arise, while other positions can be open for some length of time without significant disruption to the organization. But some roles are critical to the present or future livelihood of the organization.
HR professionals within this talent supply construct accept when acceptable, open requisitions, or unfilled positions. Therefore, fill time, a historically key metric of HR departments, may or may not be an appropriate metric in all cases when working to optimize talent supply. A better approach is to compare the benefits of filling given positions with the costs of making sure they are filled all the time.
Preparing for More than One Possible Future
Many organizations try to reduce the risks of gaps in leadership or key positions by urging employees down a designated development path. Traditionally, this grooming often takes the form of a job rotation program that lasts for a given number of years so that the promising future leader is well prepared to assume management responsibilities. Development programs for future executives are relatively standard across an organization and are not built to respond to changing market conditions.
However, supply chain practitioners think in terms of the flow of goods and materials through a system that often consists of different paths based on demand and other factors. They also tend to think about the risk of bottlenecks in the system and are comfortable with some components skipping certain stages, depending on demand. For example, maintaining a stock of unfinished goods that are quickly finished only as the market demands may be one aspect of the system.
In an uncertain world, most organizations will benefit by having a selection of succession and talent supply options ready for more than one future. That might mean waiting until the future is clearer to take some people’s training to the next level. The objective is to be ready for the future as it unfolds, and that may mean that some people in line are not completely prepared for the future, but we have a way to get them ready quickly as needed.
Talent Acquisition Fuels the Talent Supply
Many organizations might wait until their talent acquisition needs are more evident to bring someone in from the outside for a given role on a just-in-time basis. Just-in-time talent acquisition or fast-tracked training and development might be more costly when the scenario is considered in isolation. Still, it might be more cost-effective in total.
For example, maybe a company knows that, based on likely market movements, they will probably need to acquire three additional embedded software engineers in eighteen months. These additional embedded software engineers are not critical or even needed by the organization today but will likely be critical in eighteen months. They determine that in this job market, it will take four to six months to fill these positions given their budget; they know they have a six-month ramp time for junior engineers to be fully productive. They then weigh these factors against waiting fifteen months to begin recruiting, which will likely require paying premiums for highly experienced engineers that can ramp faster and may require paying recruiting agencies to find the engineers. Based on the overall analysis, including financials, the decision is made to begin the process now rather than wait.
If waiting and filling positions in a more just-in-time manner is the selected approach, internal and external recruiters and contract staffing organizations will be essential talent acquisition resources to supply needed talent quickly.