The Future of HR Is Already Here — Dominate Your Industry by Adopting These Silicon Valley Principles
If your CEO expects your firm to lead your industry, he/she will eventually realize that this can only happen if the firm adopts a “continuous innovation” model. That means that CEOs in all major industries will eventually have to look to the bastion of innovation in the Silicon Valley for ways to increase innovation through superior people management. The Silicon Valley already has an established set of proven principles for effectively managing people and innovation. “The Future of HR” already exists, and it can be found today in the Silicon Valley.
I get to travel the world sharing how Silicon Valley manages talent. And during that travel, I also get to learn how hundreds of firms in other regions and countries manage their talent. And when I make a side-by-side comparison, I am instantly reminded of the quantum difference between the two. It’s like night and day.
Silicon Valley Business Results Reveal the Power of These Principles
We know that our talent management principles are incredibly effective, because in the Silicon Valley we have firms like Apple, Google, and Facebook that serially innovate at a breathtaking speed. As a result, these firms are literally the most valuable firms in the world in market cap value (Apple is No. 1, Google/Alphabet is No. 2, and upstart Facebook is already No. 6). Firms like Apple, Google and Facebook also have incredibly productive workforces (each worker on average produces $2.12 million in revenue each year at Apple; it’s $1.41 million at Facebook and $1.19 million at Google).
If you’re curious about how your firm compares to these amazing results, go to MarketWatch.com and enter the firm’s stock symbol in the search box to see how any publicly traded firm compares (also the box on the left hand side states the revenue per employee).
Which Model Represents the Future?
I would wager that firms that want to lead their industry (no matter where they are located) will have to learn to follow our Silicon Valley principles of talent management. Even if you don’t believe my contention that “The future of HR” is here today, quickly note how the talent principles that we operate under are dramatically different from the traditional risk-adverse approach that your firm probably uses in HR. So after a quick scan, you should simply ask yourself, which model represents the future and which approach represents the past? And my guess is that you will then have a follow-up thought, which is not if you will make the shift, but when.
Silicon Valley Talent Management Principles That You Can’t Afford to Ignore
These Silicon Valley talent management principles are separated into three categories.
A) Talent management principles that apply across every aspect of the firm
The most impactful talent principles in this section are listed first.
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- Quantify talent management’s impact on strategic goals — talent management needs to shift away from an overhead function mentality and to begin focusing on having a direct impact on strategic business goals like revenue and innovation. Because the language of business is money, talent management needs to work with the CFO to determine how to best measure and quantify in dollars its impact on the targeted strategic goals. Talent-management leaders must also focus on solving business problems, rather than its historically lower-level focus on tactical “HR problems.” A talent-management focus on revenue-generating jobs is also justified because of its direct impact on the strategic goal of increasing corporate revenue.
- Innovation dominates — innovation becomes the top strategic goal at most firms. It not only creates exponentially higher business returns, but it also creates disruption, which hurts competitor firms. As a result, increasing innovation in products, processes, and people needs to be the primary goal. Because people create innovations, talent management, rather than product development, needs to take the lead in using data-driven methods to increase innovation. Being an innovative firm also has the side benefit of attracting and retaining top talent.
- Speed contributes to innovation — innovation means being first and in most cases that yields higher margins and a first-mover advantage. Being first requires speed capabilities in employees, managers, and decision-making processes. In order to get everyone’s attention, the dollar cost of “a delayed decision” or “doing nothing” must be revealed.
- Collaboration contributes to innovation — purposely increasing serendipitous interactions among employees outside the team increases sharing and learning, which in turn increases innovation. Talent management needs to scientifically determine how to increase collaboration.
- Rapid learning contributes to innovation — innovation, collaboration, and speed all require rapid learning and data shows that learning on the job has the highest impact. So “learning ability” should be the No. 1 hiring competency across all jobs.
- Freedom must be expanded — expanding employee choices and freedom motivates them, and it creates customized dream jobs. Employee freedom also provides time to think, learn, and experiment, which taken together increase innovation.
- Learning from failure is essential — in a rapidly changing business world, when striving for innovation, taking calculated risks allows you to take large jumps forward. However, failure is only valuable if you learn from it, so failure analysis and acting on the provided feedback is essential in order to get that rapid improvement (i.e. move fast and break things).
- Adaptiveness is essential — an increasingly volatile business world means everyone will encounter double-digit rates of hard-to-predict change. This means hiring and retaining people who are highly adaptable. And this uncertainty will force new talent-management programs to be scalable in capacity, to have assumed obsolescence in their design, and agility in their processes.
- Next, maximize workforce productivity — after increasing innovation, increasing the productivity of the workforce to where it is the highest in the industry is the next most important talent-management goal. The average revenue per employee is the accepted assessment ratio for comparing workforce productivity.
- A focus on top performers — measuring the performance differential between top performers and the average demonstrates that exceptional performers produce exponential returns. So a focus on top performers is justified in recruiting, retention, internal movement, and development. Talent management must customize this approach to ensure that their unique needs are met and that they are rewarded unequally, based on performance.
- Prioritize talent management’s targets — there are never enough available resources, so everything must be prioritized based on its potential business impact. Prioritize high-value projects, business units, key jobs, and innovators/top performers. And then provide them with the highest quality and the most talent-management resources.
- Talent management provides a competitive advantage for your firm – Talent management is not exempt from being highly competitive. Everything in talent management must be measurably better than your firm’s competitors. So conduct a competitive analysis and compare “us to them” to make sure that your firm is superior in its talent-management approaches and results.
- Have a War for Talent recruiting mentality — you must be talent centric because it is the No. 1 business success factor when continuous innovation is the primary goal. Recruiting has the highest business impact of any people-management function. So use the most effective recruiting tools and sources (i.e. employee referrals) and realize that the war for talent (due to low unemployment ) requires aggressiveness, so boldly poach the best from your competitors.
- The two brands both emphasize innovation — the most powerful long-term attraction strategy is a combined product brand and employer brand that both emphasize innovation. The most impactful brand pillars to attract and retain innovators and top performers include offering great work, having a high impact, and working with great managers and coworkers.
- Influence over command and control — no one likes to be ordered, so “nudges” and “influencing” must replace ordering. Influence employees and managers with data, proof of “what works,” and revealing the financial consequences of making a bad decision.
- Transparency is essential — providing broad employee access to information improves decision-making and innovation. Open information access and sharing also reveals your level of trust in your employees.
- Teams dominate — innovative ideas can’t be successfully implemented by individuals acting alone, so teams become essential. In addition, most work will shift, so that it becomes more like project work. Numerous small ad hoc teams will be needed and they will be successful if they share two common characteristics, members speak in roughly the same proportion, and members on average have a high level of “social sensitivity” to each other.
- Best-practice sharing — widely sharing what has proven to already work internally costs little, so it has the No. 1 ROI in talent management. However, a formal process along with sharing metrics are needed to best facilitate rapid internal best practice and problem sharing.
- Global capabilities — with numerous global variations, the typical talent management “one-size-fits-all” approach actually reduces overall productivity. Instead “a one-size-fits-one” avocado approach, which allows for some local customization, is best.
- Aim-ahead benchmarking – be careful because traditional benchmarking where you match current practices may only help you catch-up. Instead, if you want to lead, aim one year ahead of what others are currently planning.
B) TM principles that apply primarily within the HR function
The most important talent principles in this section are listed first.
- Success in talent management is defined as maximizing productivity and innovation — talent management’s primary focus and measure of success should be optimizing the dollar value resulting from employee productivity and innovation. Rather than a focus on processes and compliance, talent management should be considered and act like “The Productivity and Innovation Consulting Center.”
- A shift to data-based talent decisions — shifting away from an intuitive and past-practice model in talent management, relying on data results in faster, more accurate and more credible talent decisions. Analytics are superior to historical HR metrics because they reveal “why” things work, trends, and effective action steps to take. Distributing talent-management metrics widely dramatically increases awareness and internal competition.
- Manage a performance culture — talent management must take responsibility for building and maintaining a powerful performance culture, where everything emphasizes performance. Communications, metrics, recognition, and rewards must be closely tied to job performance. And effort, years of service, job titles, education, and political connections should have their influence minimized.
- Prove talent-management programs work — in a fast-changing world, talent-management programs quickly become ineffective. So proactively calculate correlations, and use pilots and split samples to prove which programs still work. Also, correlate hiring selection factors and sources with quality of hire data, to determine which ones currently predict on-the-job performance. Adding an R&D team allows talent management to experiment with new approaches.
- Prioritize talent programs, based on their impact — after determining which talent-management programs actually work, gather data to determine which talent programs have the highest business impacts on important goals like revenue and profit. And then prioritize and focus on those highest-impact activities (e.g. recruiting, retention, and the manager).
- A continuous updated talent-management business case — because the top factor that limits HR effectiveness is often a lack of resources, work with the CFO to build a continuously updated business case. Quantifying your results and their financial impact on revenue will influence executives and provide you with significantly more resources which will allow talent management to innovate and move faster.
- Talent management must take calculated risks — after a lack of resources, having a risk profile that doesn’t match the business environment is the No. 2 failure factor facing talent management. HR must learn to take up to 50 percent more risks with bold proactive but calculated actions that produce a measurably higher payback, ROI, and competitive advantage.
- Talent management must be forward-looking — predictive analytics, trendlines, and projections warn managers about problems when there is still time left to act. In addition, forward-looking data-driven workforce and succession planning can accurately project the career trajectory of key employees.
- Team/manager performance must continually improve — because teams will dominate, talent-management professionals must become experts in team management. So talent management must identify the factors that increase team performance, productivity, and innovation and the factors that increase a manager’s performance (e.g. Google’s Project Aristotle and Project Oxygen).
- Borrow from business functions – Talent management can decrease its failure rate and increase its speed and rate of innovation. It can accomplish that by proactively borrowing and then adapting already operational practices from other business functions and industries.
- Managers do most HR — perhaps the biggest shock to traditionalist in HR is the changing role of the manager. People-management decisions will be made closer to the employee because line managers will have access on their mobile phones to real-time people management data and the recommended actions. As a result, managers will “do most HR” at a higher level of quality, without the help of generalists or central staff.
- In-house consulting — because technology allows managers to do most HR work, HR shifts to an in-house management consulting firm model. It offers advanced advice and proven data-driven solutions.
- Employer brand management — because it is the No. 1 long-term attraction and retention factor, talent management must take ownership of the brand. The employer brand can be most effectively built by increasing employee referrals through providing employees with a story inventory of WOW company stories. Encouraging managers and employees to be highly visible on social media and through writing and speaking about your firm’s best practices is also essential.
- A focus on quality — move away from HR’s traditional exclusive focus on costs and volume, and instead focus on quality and results. Quality can be indicated by advanced program features, high satisfaction rates, rapid response rates, accurate answers, low error rates, and a measurable improvement in performance. Quality is the No. 1 metric that is most frequently omitted from the metrics set for an individual talent-management program.
- Diversity because of its business impact – talent management supports diversity not because of legal requirements, but because data demonstrates that when your workforce in key jobs reflects your desired customer base, business results improve.
- A whole career focus — when you focus on top performers and innovators, you quickly realize that career-long retention is simply not a realistic goal. Instead, develop a plan to get the most out of them whenever you can during parts of their entire career.
- Respect a manager’s time — minimize the amount of time that managers must spend on talent-management activities. Also include the cost of employees’/managers’ time in your program cost calculations when talent management activities take them away from their regular job responsibilities.
- Technology dominates — in a global world where speed is essential, software, hardware, social media, and the mobile platform must support everything in talent management.
- Centralized talent management — a centralized, integrated, data-driven, technology supported and demand-driven approach to talent management has proven to be superior to a decentralized one.
- The capabilities of the talent-management staff must change — all of the actions described above cannot be accomplished with the current skill sets in most HR departments. Instead, all new talent-management hires must have some experience in the business itself and in consulting with clients. New hires must also have business acumen and knowledge in the financial, data, and technology areas.
C) TM must minimalize these traditional approaches
In addition to the above positive principles that must be added, in order to maximize its effectiveness, talent management must stop doing many current “low-value-add” things. It should stop inventing new HR buzzwords, stop following HR fads, and stop acting like an overhead function, where it emphasizes cutting costs over increasing revenue. HR should shift from trying just to be a business partner to setting a goal of achieving the status of business leader. And it should stop trying to merely align with strategic goals and instead to directly impact those goals.
Talent management must also stop worrying about getting “a seat at the table” and instead strive to become a proactive leader on the executive team that others listen to and follow. And finally talent management must realize that technology can often now replace employees, so it needs to consider software, hardware and robotic substitutes before it automatically hires, trains, developed, or transfers employees.
Because of constant change in the business world, whenever you are trying to predict the future of HR, anticipate radical changes in it. But there might be no need to wait because there is already an area called the Silicon Valley where talent management currently operates in a radically different way. And it is this author’s contention that our principles of talent management already reflect the way that every firm will manage its talent in the future. And that means by simply studying and matching the way that Silicon Valley firms currently operate, any firm can produce the equivalent results to firms like Apple, Google, or Facebook. The path is clear and the only restriction that I have encountered … is a lack of courage.