Where Do You Need to Invest in Your Talent to Win?

In continuation of the series of questions described in an earlier post, the answers to the first question – “How Does Your Talent Help You Win?” help start the process of answering the question of where to invest in your talent to win. Why is it important to know where to invest in your talent? We’re all familiar with the “peanut butter” analogy. The failure to optimize investments in talent in the context of how it impacts strategic success is referenced in “Beyond HR: The New Science of Human Capital” and Knowledge Infusion’s Neil Jensen spotted how the Navy SEALs stopped using the “peanut butter” approach in their recruitment efforts. It’s a concept that resonates with those familiar with the Theory of Constraints, which eschews trying to optimize every element in a system, but rather continually focuses on the element, in this case which role or competency, where optimization does the most to increase value to the system. Taking scarce resources and spreading them equally to all roles and competencies results in opportunity costs. That is, resources that would have resulted in greater value to the company if invested more heavily in a set of particular roles and competencies get frittered away instead on roles or competencies that don’t have as significant an impact on success.

In addition, applying the same type of investments to all talent segments results in opportunity costs to the organization. Different talent segments contribute differently to the successful execution of strategy and therefore are likely to have different needs, not just in obvious areas such as training content, but also in areas that are typically seen as standardized across the organization, such as recruitment. This kind of differentiation in programs may at first seem on the surface to be contradictory to the notion of standardized processes, etc. However, this is more about understanding where the processes, while being standardized, still need to be flexible to accommodate unique needs around talent segments that are important or pivotal to strategic success. This brings us back to understanding how your talent helps you win first in order to know where investments in flexible programs are justified.

Another example in “Moneyball: The Art of Winning an Unfair Game” shows how not investing equally in all aspects of your talent can benefit your strategy. In this case, the time had come to acquire a replacement for a player who had become unaffordable, but who had both exceptional offense (batting) as well as defense (fielding) capability. Rather than try to find an exact replacement, which likely would have been just as expensive a proposition as keeping the original player, the A’s focused on finding a player with high performance on offense and acceptable performance on defense. This was because they had found that key offense skills such as getting on base contributed more to winning games than defense skills.

“Beyond HR” has a lot to say about the impact “important” and “pivotal” roles and competencies have on strategic success. Both the “important” roles within the organization and the “important” competencies within roles should obviously get investment in performance. These are the roles and competencies that are central and essential to the successful execution of strategy. In many cases, this investment is focused around reduction of performance risk, through job engineering/design (which trades off variability, both good and bad, for consistency through repeatable process and procedure) and essential performance investment (through rigorous training, credentials, testing, and documentation). This sets the minimum bar of acceptable performance that guarantees as much as possible the correct operation of fundamental processes to achieve business results. While these important roles and competencies typically contribute the highest value to the company, once the investment has been made to reach acceptable performance, the very nature of the risk reduction efforts made makes further investment in those particular areas often result in smaller marginal improvement in value to the company.  

Therefore, authors Boudreau and Ramstad also point out how important it is to find and focus your investment to improve performance in your “pivotal” talent. That is, the roles in your organization and the competencies within those roles where improvement in performance results in the best overall increase in value to your company through strategic success. Here, the investments are also more in line with supporting the ability for talent to exercise “discretion” and not as much about reducing variability. Variability relates to discretion for talent; i.e. the ability for talent to differentiate itself in responding to circumstances. While a source of risk, this can also be a source of sustainable competitive advantage, because it is not easily replicable. Processes and procedures can be observed, studied and replicated, but the novel ways in which talent solves problems, often through collaboration, is not as easily replicated. Investing in talent here can continue to reap dividends down the road through innovation, network effects, higher customer satisfaction, etc. Also, “pivotal” talent is likely to be found interacting or in combination with “important” roles and competencies and at the “boundaries” of the organization or in the interactions of the roles. This highlights the importance of using mechanisms like social network analysis as a way to identify pivotal talent.