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Think About Talent Like a Financial Planner

by
Jillyan French-Vitet
Jan 22, 2013, 5:45 am ET

sdsuI’m a planner; I have to juggle a career and a family, so my home calendar is my family “book of reference.” It helps us all to know who is where, doing what, at what time, and which parent is responsible.

I am a planner financially too because I have responsibilities and I also have dreams. I have a responsibility to create a financial nest-egg for retirement, my children’s education, and maybe … just maybe … the country house I dream of buying someday.

To help me plan, I engage with a financial planner who works with me on my portfolio, the degree of risk, future plans and responsibilities, as well as current needs. Granted, none of us know how the stock market will look in 20-plus years, but I feel comfortable knowing my current financial plan, and my path.

I am not a financial expert. I work in the business of talent, specifically talent acquisition. It is a domain I enjoy continue to learn in an ever-changing environment where it can be difficult to plan. But it recently dawned on me that how I plan my future financially could also apply to how my organization looks at its talent. After all, without your talent, products and services as well as new ideas and innovation would not exist. If talent is your equity, then (to quote a branded credit card company in the United States) “Do you know what’s in your wallet?”

Create the Portfolio: Current State

Similar to my first meeting with my financial planner, I look at workforce planning as the necessary step to pull all relevant information together to define your current talent portfolio.

When my financial planner showed me my portfolio (displayed as a pie chart, no less), on some points I was surprised at how much I had let myself get exposed to risk without intentionally doing so. If we apply this same process to talent, some of the areas of risk exposure could include: lack of succession pools, growing need for skills without a defined plan on how best to develop or attract those skills, or even a changing workforce hierarchically or geographically. When it comes to talent, if you start investing in your talent asset early and often, it is not something you want to lose quickly. Unless we take this time to sit down and gather the data, it’s unlikely we would really know just how exposed to these risks we really are.

Define Your Goals and Your Appetite for Risk

When I understood my portfolio, I talked about my objectives with my financial planner; I liken this to business strategy. What is your organization’s short- and long-term strategy, and how will your talent help you achieve it? Once these ideas are brainstormed, the task then becomes how to build a talent portfolio to help you get there while balancing the degree of risk you are comfortable with. Financial options are numerous, but each comes with a risk/reward. In many cases, the money is not insured; you can win or lose your investment. When it’s gone, you will simply need to rebuild it. My financial planner’s question to me was: “What level of risk will allow you to sleep at night?”

If you apply that same question to your talent portfolio, you must recognize that  high-risk exposure could leave you with talent shortages but save on short-term costs. If this reality keeps you awake at night, you might want to consider a diversification strategy.

In which areas of your talent portfolio are you willing to build, borrow, or buy to mitigate your risk?

Managing Your Portfolio and the Fuzzy Future

Managing your portfolio does not have to be complex. Keeping it simple, staying the path, and documenting your portfolio each year as a health-check are all suggestions my planner has given to me.  When it comes to more long-term planning, like my retirement needs, which I’m not slated to hit for a few decades, no one knows the future of the markets. So, while I have that goal, it’s in my “fuzzy future” (my financial planner’s term).

Again, a talent portfolio can (and should) be health-checked and we must accept that it too will have some “fuzziness.” When we start to think long-term on talent, we’re not looking to plan and execute today on projections so far ahead that we can’t see them clearly. The “fuzzy future” of your organization’s talent needs can be a target point. While a pinpoint “crash” might cause some panic, you can hedge your portfolio to offset a short-term loss and still maintain course for your long-term objectives.

As long as your talent portfolio is documented and reviewed regularly, you’ll be able to change direction when needed while staying the long-term path.

Like the markets, talent evolves; it changes, it has peaks and troughs. Be careful not to fall into the trap of trying to time the talent market. In portfolio management, investors generally earn a lesser return on their assets using this strategy than the market over the long term. If you end up chasing market performance, you are often too late (and the same is true with talent).

Becoming a Portfolio Manager

While I would not recommend calling my financial planner for talent strategy support, we can apply the portfolio methodology to talent planning and acquisition. We can work with line managers, HR business partners, and colleagues, which specialize in various genres of recruitment. We can develop a view of our current portfolio, use analytics to understand the contextual market, align business strategy to define a talent projection, and then manage and monitor the portfolio along a pre-determined degree of risk.

Managing a portfolio is a daily job, requiring input from a variety of sources, and will ebb and flow with the market.

Applying this everyday thinking to talent helps us see things more clearly. It helps us develop our portfolio (i.e. workforce planning), determine our path (i.e. business strategy), analyze the diversity of our portfolio and the level of risk (i.e. talent strategy and human capital needs). Perhaps most critically, it also helps us monitor and manage our portfolio by performing annual health-checks as per our needs.

Applying sound financial management logic to talent will pay a lot of dividends.

This article is provided for informational purposes only and is not intended to offer specific legal advice. You should consult your legal counsel regarding any threatened or pending litigation.

  1. Chris Motley

    Nice article – it offers another framework of looking at workforce planning. It also brings up a few additional points one should consider as it highlights key risks of this framework.

    The most obvious point is that people are far more complex than equities and other financial securities. If leaders want to make better decisions about their talent portfolio, then there must be a discipline to data collection and analytics that is greater than or equal to that collected in financial services. I think that we see this with the apparent resurgence of formal assessments applied in the workplace. Even so, it also raises the question of the capability and motivation of HR professionals and hiring managers alike to understand this data and to use it for better decision making.

    Second, as you state – timing is everything, and those that try to time the market do worse over time. Looking at time from a slightly different perspective, the time horizon of the HR professional, hiring manager, and the ‘equity’ must be aligned from the very beginning. Otherwise, initiatives will be taken and decisions will be made that will cause a structural problem in the talent portfolio and lead to suboptimal performance. These time horizons (as well as interests and values of those involved) are often opaque and unless the organization has a culture that supports the overall talent portfolio strategy, HR leaders will suffer the same fate as most portfolio managers in that they are not able to consistently beat “Mr. Market.”

    Finally, and similar to the first point, there is a stark difference that HR professionals face when compared to portfolio managers/financial planners. Those professionals know the impact of securities that they failed to buy and add to their portfolios. If they decided buy RIM, and not buy Apple, for example – the impact is clear and he/she could potentially be out of a job. To date, HR professionals don’t have the visibility of how the talent that they didn’t hire actually performs at another organization. Even if they did, it is not captured broadly enough to get critical information. And if it were the case that they failed to hire a “market out-performer”……no one’s job is on the line.

  2. Anthony Raja Devadoss

    Hi Jillyan, Congratulations on this superb article. Associating workforce planning to portfolio planning is an excellent value based quantitative touch. Keeping our focus on talent as we keep our focus on money elevates the credibility and focus.

  3. Andrew Gadomski

    I really like your article. It resonate, and is relevant, but it’s the also the basis for why I started my business over six years ago. Portfolio management is the cornerstone for our business model and I will admit that it is still difficult for talent acquisition leaders to grasp that concept without Having a model that is based on data and empirical evidence.

    When building a portfolio, especially if you were using financial planning, you’re able to use predictive analysis, forecasting, and research to help you make decisions and then watch the progress over time using data tools.

    I will admit that organizations are getting there very quickly, and we are starting to turn the corner from looking backwards to having predictive analysis that allows us to look forward. The ability to integrate financial data directly into talent acquisition and talent management data is also critical step, and more talent acquisition leadership needs to make this the basis of their decisions, And reduce the number of decisions that react to the needs of the customer (which consequently happens when you do predictive analysis and decision-making)

    Another element that I would add to having a talent portfolio, is the ability to have experimentation within the portfolio. Some call that risk, however having a element of the portfolio that allows for greater risk and greater reward is very traditional in a financial plan. It’s important to have that in the portfolio and be able to explain it, track it, and kill it if it is not giving the results based on certain milestones and timelines.

  4. Kumar Bhaya

    Nice one Jillyan, great analogy of looking at TA like Financial Planning. In Asia (As I’m sure it applies to other regions too) and in particular in Singapore, additional variables like tightening of immigration policies and the resulting changes to worker demographics & skills availability is also something employers have to consider in their talent planning process. This naturally bears a direct impact on the business strategy (& business continuity) as well. Especially important given that most organisations are looking at Asia for that big YOY growth.

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