Creating sustained competitive advantage in an organisation requires more than just focusing on the talent you have, it’s what you do with this talent that counts, writes Wayne Brockbank
Over the past decade or so, the talent paradigm has gained considerable momentum. Many dozens of books have appeared. Talent management consulting practices have proliferated. Many HR departments have established talent management functions. And, in some cases, HR departments have changed their titles to formally recognise the centrality of talent to their HR paradigm.
Might I suggest that if the focus on talent becomes overly emphasised, it might very well be counterproductive to HR’s ability to optimise its impact on business performance?
In 1776, Adam Smith published The Wealth of Nations. In addition to other brilliant insights, Smith argued that economic organisations come into existence because of their ability to coordinate the division of labour so as to make the economic whole greater than the sum of individual labour parts.
The essence of organisation is to coordinate and enhance the effectiveness and efficiency of individual efforts. The alternative to organisation is a series of individual contracts with owners of the organisation. The transaction costs of establishing, maintaining and evaluating the value of individual contracts become prohibitive, leading to the creation of industrial organisations.
“The critical issue is not the individual talent that you have; the competitive advantage is what you do with the talent once you have it”
The vulnerability of the talent paradigm is that it focuses on optimising individual contributions. The term “talent” inherently focuses on ensuring that companies have the individual talent necessary to achieve their purposes. Certainly this is a critically important agenda for any organisation?
However, by focusing primarily on individual contributions, the talent movement, by definition, succeeds in making the organisational whole equal to the sum of the parts. This overlooks the central contribution of organisation to make the organisation whole greater than the sum of its parts. It is this integrating and leveraging function of organisation that creates sustained competitive advantage.
Every year in dozens of forums around the world, I ask groups of line and HR executives, “How much time and effort do you spend trying to hire really good people?” They uniformly respond, “Quite a lot.” I continue, “And how good of a job do you do?” They again uniformly respond, “Reasonably good.” I continue, “Now all of you leave the room and have your exact counterparts from your most aggressive competitor take your seat in the room. Now I ask your competitors the same two questions. How do they respond?” The executives confirm, “Our competitors will respond just as we did.” Then I ask, “So who is right, you or your competitors?” They respond, “We are both right.”
With that response, they confirm what labour economists have known for many years – over time, major competitors will have roughly the same raw talent. In your hiring processes, you will win some and you will lose some. The critical issue is not the individual talent that you have; the competitive advantage is what you do with the talent once you have it. And that is an organisation issue. This is not to say that you can let up for one minute in striving to have the best talent. But if HR focuses primarily on talent, its ability to create competitive advantage is limited.
Obviously, the tools, practices and processes that create effective organisation are substantially different from those that create optimal talent. For example, if optimising talent is the agenda, then a HR department may tend to hire HR professionals with individual-oriented psychology backgrounds. If optimising organisation is the agenda, then a department is more likely to hire HR professionals with backgrounds in business and economics. It is these latter two disciplines that focus on making the organisational whole greater than the sum of its parts.
In conclusion, HR must ensure that the foundation of talent is in place. That puts HR in the game. But the game is won by creating competitive organisations that can beat the competition. With this latter focus, HR then creates sustained competitive advantage.
Action items for HR
- Examine the focus of your HR department. Is there a balance between HR’s focus on individual talent and organisation capability with recognition that much of competitive advantage is at the organisation level?
- Ensure that the baseline skills and knowledge of acquiring, developing and retaining individual talent are in place in your HR department.
- Ensure that your HR department has skills and knowledge to conceptualise the kind of organisation that is required for your firm to be an optimal competitor.
- Ensure that your HR department has skills and knowledge to create and sustain the optimal organisation through cultural management, work process design, information architecture, organisation structure and systems thinking.
