Name: Abdullah Zain Talent Demand MBA 3E Summary:

Article: The Problem of Uncertainty in

There is a changing trend about development of talent. Leaders in an organization should also be able to develop talent as this is one of the worries that a company faces. There is growing interest towards talent management to even customer facing jobs in technology companies. Cost effective internal development begins with finding new ways to forecast talent needs. In early 1960s the forecasting was one difficult task. Forecast started by examining internal supplies. Then, some companies followed statistical regression models while others studied labor promotions, demotions, retirement and dismissals for every functional area. All the work was done without computers. The method of forecasting was very sophisticated. 3 to 4 percent of error rate prevailed in those times. This amount of uncertainty or error is unacceptable now a days. Companies in modern times generally dont do workforce planning on their own. It is usually done on ad hoc basis or company history of large organizations supports independent workforce planning. Companies have advantages in forecasting now. A simple spread sheet can help prepare and manage large amounts of data. Large companies have information systems such as enterprise resource planning that can collect abundant data. In concept, forecasting generation is straight forward from this data. Despite the potential advantages in data and tools, forecasting talent needs has made little progress. There two methods of forecasting. The first one is based on statistical models to extrapolate from experience. The concept is that future will be like past. E.g. in case of better economy in the past, a large number of jobs were available. So, people left organizations. Evaluating the future change in economy, turnover rate can be assumed. Basically, this method relies on past data. This approach to forecasting can be misleading. The reason is that there are many other factors which affect turnover, not just the economy. E.g. in some parts of Pennsylvania, quit rates increase during hunting season. For designing an accurate model, one needs to capture all the direct and indirect variables affecting the turnover rate over the past years. The historical data in this case is very critical. A company that maintained historical data for last 20 years is better than one maintaining data for 5 years. Even if you can predict results with 30 percent accuracy, it is better than having no forecast at all. The second approach to forecasting is focusing on influence of factors that have yet to occur or havent been in place long enough to generate historical data. E.g. if

there is a change in strategy, the new human capital requirement will be changed as well. Ultimately experts judgments matter. Sometimes experts build an assessment from ground up. This means in case of new competitors arrival in market, the supervisors are experts. They can predict which employees are willing to quit. For talent management process you need to look at two things. First consider your current workforce and estimate what it will look like in future e.g. if you keep it unchanged, how many of people will you have in future in a certain area with relevant competencies. This number will show available supply of talent. A number of other factors such as quits, retirements or dismissals should also be considered. Its easy to estimate accurately when the unit is homogenous. Estimates conducted on the basis of geographic area or by occupation are more accurate than ones conducted across the company as a whole. Again, estimates are based on historical data. But there might be ad hoc events and developments. The second set of forecast is the demand for talent. The business environment is changing at a very fast pace, making it difficult for companies to forecast demand for talent. A little change in environment can make the company readjust its policies and strategies. The more accurate estimates are for a single business line, not the firm as a whole. The gap between forecast of supply and demand is the problem that drives the talent management process. Two examples are discussed below. Hewlett-Packard: Gerard Brossard built support for new talent management process by comparing what the business got in terms of talent and what it ultimately needed. It turned out that mismatch costs under the current system were sizable. Dow Jones Chemical Company: They have a 1960s forecasting method but with new technology advances. Their system was based on talent supply for each location. Dow Jones then used its standardized data from ERP system to produce estimates that could be aggregated for the company as a whole. Then they worked with a university to develop even a more elaborate plan and used to generate estimates for each business unit. Dow Jones also considered the site specific factors. For example political scenarios, business environment, employment legislation and labor laws were factors considered for forecasting in different countries where Dow Jones operated. Modern computers have made it easier to generate estimates. They are instantly generated and allow managers to see effects of changing assumptions. Playing around with assumptions stimulates different environmental conditions. It tells you how your talent management will be effected. CaptialOne: this company used data mining techniques, system dynamics models from manufacturing and information from companys PeopleSoft system to generate

needs for each business unit. These models predict outcomes such as need for outside hires or promotions. Business unit leaders help develop models based on specific business plans and goals. The model also allowed line managers to see the options involved in any business plan. The models also allow the managers to see total compensation implications of all their choices. Employers have many choices in reducing the gap between estimates of supply of demand. EDS: It is an information technology consulting and outsourcing firm. They hired a lot of people during the boom. They later realized that technology world is changing very quickly to accurately forecast the demand for talent. The companys new approach suggested that each business leader outlines the demand he expects in terms of competencies, roles and responsibilities. The difference lies in understanding the current supply. The task is to match people with projects. Skill inventory at EDS keeps the record of the competencies of employees. The employees need to update their skill inventory after each project so that they maybe reassigned to other projects. This skills inventory keeps a record of salary information and billing to clients, thus helps creating cost effective assignments. Sibson Consulting: Line managers need to think through the true value in their operations. The idea is that how much contribution each current position or role makes. this means the value of that role and position for executing new strategies. Roles might be needed to reinforce or deployed. This approach allows managers to not only think about the future human capital needs and also asses their current supply of talent. The senior managers offer a general direction by saying what competencies they need and what are the ones that can be redeployed or subtracted from equation. It also engages business leaders to create simulations that can help develop strategies. Sometimes there are clear strategies for managing and forecasting talent. Station Casinos: when opening a new casino, the company knows which skills they need. Both in terms of industry specific and company specific. If they dont have the skill ,they begin outside hiring. There are jobs which require more company experience, so HR guides current employees which jobs they can occupy in future if they get proper training and develop require skills. Sometimes talent management itself causes mistakes to occur. The common problem that a talent management faces is called bullwhip problem. E..g like a bullwhip, changes in demand at retail level, lead to greater variation at wholesalers, greater still at manufacturing level and so on. This happened because everyone n the chain wants to be at safe side. Another problem bullwhip causes is inside organizations that have a multistage hiring process. If there is a requirement of 10 percent more senior engineers, more entry level engineers will be needed, because company cannot hire just anyone. To counter this problem, sometimes companies

hire from outside. A company develops internal employees to better manage talent instead of completely relying on outside market. A company can simply spread out its hiring process over time. The concept of minimizing uncertainty to reduce costs guides a company how to design development programs. If you have accurate estimates of demand, you can invest heavily in development programs. But if you are not so sure about accuracy of your forecast, you can go for outside hires. The problem in talent management is that many organizations are decentralized. Every business unit operates like a small business unit. The idea of moving talent from small units to corporate developmental program was considered by higher management. But there was fear for the managers that they might lose their best employees. So, the local managers began to hide their talent. A business unit that can keep its key talent away from headquarters will be better off. Usually a corporate organization manages the development and careers of managers and an executives above the director level whereas business units govern those at lower levels. Across the different divisions, the requirement of talent varies. It depends on the market they are targeting. So, the errors in the forecasting might occur when results are consolidated for the company. The concept of portfolio solves this problem. Some business divisions may face high risk and some may face relatively little when forecasting talent needs. Tradeoff may be required to control the overall risk. Some companies have decentralized operations and they strive hard to develop a developmental program. These companies usually make a common developmental program and allow decentralized business divisions to tailor them, according to needs. One of the most effective approach is to centralize talent development at corporate level. Shorter forecasts are more accurate then the longer forecasts, as the uncertainty can be easily lowered in the former than the latter. For greatest effectiveness and efficiency, the ideal approach is to treat candidates of talent management as a whole for a s long as possible. Then develop a common set of skills and delaying those that differentiate functions and jobs. It is better to have more centralized and coordinated development programs to reduce mismatch costs. Its not a good idea to leave to delegate training and development to subunits as it increases the chance of mismatch costs. Another factor to be considered in talent management is improving responsiveness. A system that responds more quickly costs less. Longer flow rates are costly, in part because they require resources for a longer period of time. Longer development times also reduce the responsiveness of the system. Another drawback is that the longer periods may take 5 years to develop an employee. Till that moment new

competencies may arise in the relevant field, making your developed employees less useful. Development time has two aspects. One is how long a specific development or training takes. A company should try to decrease the waiting time for other employees that are expecting for vacancies. Good employees in this case can go to other organizations. The other aspect of the development is unproductive waiting. E.g. a bottleneck may hinder the hiring process of the employees in a security agency as clearance takes too much time. To fix a bottleneck more capacity can be created. But this may not be useful when the no of jobs are limited. Queuing delays are most common when company growth slows, as in a business downturn. New positions that were planned to accompany business expansion slow and quit rates also go down. Those people who are at the end of pipeline have nowhere to go and no one else can move into their positions. A good idea is to work on smaller batches of candidate require less capacity, and more-frequent batches improve responsiveness. For example If you are hiring college graduates, one solution is to allow some of them to begin employment at different times. Delays also decline if the experiences can be combined. A guy who has expertise of finance and marketing, can be used in a project having both fields of study. Given our better understanding of the costs of making a new developmental plan, it is better to rework on employees. The cost of rework can be far less. The employee may only need to improve in few areas. Succession planning refers to a specific subset of general process of talent management. Succession planning is the process of identifying individuals, which can be moved to next position in hierarchy. The difference between succession planning and promotion is that in case of succession planning the determinations are made well in advance of the vacancy. The succession planning is based on replacement planning concept from the army. There are a lot of problems in traditional succession planning. E.g. employees may expect that they will be promoted when they hear about succession planning. Planning also costs money. A person, who is ready for succession planning, is sitting ideal until the vacancy is free. The problem with succession planning is creation of uncertainty and false sense of security in the organization. Not doing detailed succession is not as same as doing no planning. It is same as doing no development. It makes sense to predict talent demand, develop candidates broadly for a broad set of jobs, conduct talent reviews, assess individual skills, and identify the pool of available talent as means of updating development plans. What makes no sense is to try estimate which individual will move into what jobs years in advance. The process is so certain that it causes more problems than it solves.