Supply Chain Logic for Evidence-Based Talent Management John W. Boudreau Professor, Management and Organization Research Director, Center for Effective Organizations Marshall School of Business, University of Southern California

Most organizations today are awash in evidence about talent, yet lack the logic to use those numbers for vital strategic decisions. Lots of data with little logic is why Pete Ramstad and I proposed that we need a decision science for talent, in our book, "Beyond HR."

We show that you don't always have to invent these logical systems from scratch. They are often as close as the models you already use for other resources. As an added bonus, when you use these existing models, you create collaboration between leaders inside and outside of the HR function.

Here's an example from the area of talent sourcing. Your supply-chain model applies to talent management decisions just as it does to raw materials, unfinished goods or technology (Boudreau & Ramstad, 2001; "Beyond HR" Chapter 7).

Supply-chain analysis optimizes supply chain elements, to achieve desired outcomes with the minimum resources. If the quality of raw materials drops, supply chain logic compares the value of things like switching suppliers, more careful screening of deliveries, or adjusting manufacturing processes to handle lower quality materials. Supply-chain analysis isn't about one-size-fits-all, but about making the right decision.

In "Beyond HR" (Figure 7-2) we describe talent supply-chain as a series of labor pools: (1) A "potential labor pool" of individuals who could amass the right qualifications; (2) A "labor pool" of individuals who have actually achieved the right qualifications; (3) An "applicant pool" of individuals from the labor pool, who apply to your organization; (4) A "candidate pool" of those applicants you have screened and selected to receive offers; (5) A "new-hire pool" of those that accept your offers; and (6) A "productive employee pool" of those that accept your offer and develop into fully productive employees.

When a line leader complains that they are getting inferior talent, or not enough talent for a vital position, HR too often devises a solution without full insight into the supply chain. HR often responds by enhancing interviews or tests, and presenting evidence about the improved validity, even when a more effective solution would be to keep the same validity, but recruit from sources where average talent quality is higher. GE does this when it recruits military officers, allowing the military selection and development system to build a candidate pool that matches GE's needs.

Or, consider what happens when business leaders end up with too few candidates, and instruct HR to increase recruitment. HR is often too eager to answer with more recruiting activities, when in fact the number of candidates presented to business leaders is already sufficient. The problem is that some leaders are better at getting candidates to accept offers. The better answer may be to improve the performance of the leaders who cause candidates to reject offers! This may be a difficult message for leaders to hear, and for HR to deliver. Yet, there is credibility in the supply-chain logic. It's no different from the fact that you don't fix a problem in your manufacturing operation producing too much waste by blaming the supplier!

Leaders are accustomed to a logical approach that optimizes all stages of the supply chain, when it comes to raw materials, unfinished goods and technology. Why not adopt the same approach to talent?

Now consider your own talent analysis and measurement systems. Can those systems tell you which stages in your talent supply chain hold the best opportunities to enhance end-state talent quality or quantity? Can you map the talent supply-chain stages described above? Can you tell whether better recruiting would have a bigger effect than improved testing? Can you tell which of your leaders do a great job landing top talent and which could improve?

If you can, you're ahead of most organizations, competing for and with talent. If you cannot, you may be guilty of diligently analyzing the efficiency of your talent supply-chain, but missing the opportunity to optimize it.

References:

John W. Boudreau and Peter M. Ramstad (2001). "Beyond Cost-per-Hire and Time-to-Fill: Supply-Chain Measurement for Staffing." Center for Advanced Human Resource Studies, Working Paper 01-16. Ithaca, New York: Cornell University. Also available as Center for Effective Organizations working paper #G04-16. 

John W. Boudreau & Peter M. Ramstad (2007). "Beyond HR: The New Science of Human Capital." Boston: Harvard Business School Publishing.  [Find it at Amazon]

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Posted on January 7, 2008