It’s not the big that eat the small. It’s the fast that eat the slow! –-Author Jason Jennings
If the rate of change inside your firm is slower than the rate of change occurring outside your firm, your end is in sight. –-Jack Welch’s philosophy
Even the most optimistic business leaders have begun to realize that the incredible business turbulence that we have been undergoing for the last decade isn’t going to end. In fact, turbulence, volatility, and continuous rapid change are likely to become the “new normal.” Recently an excellent research study by the leading consulting firm BCG effectively identified and then quantified this high level of turbulence. A summary of some of their key findings include:
- Turbulence strikes more often than in the past — More than ½ of the most turbulent quarters over the past 30 years have been in the past decade.
- Turbulence has increased in intensity — Volatility in revenue growth, in revenue ranking, and in operating margins have all more than doubled since the 1960s.
- Turbulence today persists much longer than in preceding periods — The average duration of periods of high turbulence has quadrupled over the past three decades.
- Turbulence in key business results — key business areas including revenue growth, profitability, and industry rank have all shown triple-digit percentage increases over the last few decades.
The Goal Is to Become an “Adaptive Firm” and Function
Firms that are attempting to adjust and eventually thrive under this new turbulent environment must adopt the goal of becoming an “Adaptive Firm.” BCG defines an Adaptive Firm as one that “adjusts and learns better, faster, and more economically than their rivals.” The overall goal of an adaptive firm is to build an “adaptive advantage.” This is where you build a competitive advantage by proactively developing the adaptive capabilities of the firm and then by taking a series of adaptive actions, so that the firm can measurably improve its business results. BCG also developed an index that allows them to accurately identify “Adaptive Firms.” Some of the well-known benchmark firms include Apple, Google, 3M, Target, and Amazon.
Existing Tools Don’t Work in a VUCA World
Major firms like GE have already begun to plan for this new turbulent world, which some call “V.U.C.A” for the four factors that define this environment (VUCA is an acronym for Volatility, Uncertainty, Complexity, and Ambiguity). Unfortunately, using existing tools and methods to try to predict and effectively respond to what will come next in this turbulent world may be equivalent to guessing which “mole” will pop-up it’s head next in a carnival “whack-a-mole” game. So if you are an executive or if you work in a leadership role in the area of talent management or recruiting, now may be time to begin shifting your approach, so that you can successfully handle this permanent state of volatility and turbulence
The Key Capabilities of “Adaptive Firms”
My own research has identified 10 key capabilities that must exist throughout an adaptive or agile firm. All new processes, programs, plans, and actions at that firm should have most of these capabilities.
- Forecast the likely range of change — rather than forecasting a single number, they forecast the range of likely change in each of the business or environmental factors that impact them.
- Respond rapidly — adaptive firms move fast and respond “just as” environmental factors begin to shift.
- Identify precursors/signals — identify what occurs right before a problem or opportunity and what it’s readable signals are.
- Plan for every growth mode — they have a written plan for all four growth modes (retrenchment and cost-cutting mode, slow/no growth mode, rapid growth mode, and innovation and startup mode) as well as a best and a worst case scenario for each growth mode.
- Include a scalable capability — all actions and programs must be scalable, meaning that they have a plan for easily increasing or decreasing their capacity (and their cost structure) by reasonable amounts.
- Experiment and take risks — you need to continually try pilot tests on new products and features to find out what works and what doesn’t (Larry Page: “I’d rather make the mistake in moving too fast than make no mistakes and move too slow.”)
- Move simultaneously — programs and processes must have the capability of moving in multiple directions at the same time.
- Include the capability to reverse direction — all programs and actions must be capable of quickly reversing direction by as much as 180 degrees, when the environmental factors or competitors unexpectedly shift.
- Learn fast — continuous rapid learning is needed to successfully move into uncharted areas. In addition, realize that learning is difficult because there is little available information in emerging areas.
- Have cross-industry movement capability — “super adaptive” firms have the added capability of moving into and dominating in new high-margin product areas that may be in new industries (Apple is the benchmark example here).
14 Talent Management Goals and Action Areas
Now shifting to the functional areas of talent management, here is a list of the top goals or action items that are required to successfully become “adaptive” in the different areas of talent management.
Goal #1 — Increase innovation as well as productivity – while productivity is still important, because of its higher business impact, continuous innovation must eventually become the #1 talent management goal. Executives won’t let you focus your talent management actions on innovators (because of the extra cost and effort) unless you have first calculated the performance differential of innovators (over average workers) and their added business impact (at Apple it is 25 times higher).
Goal #2 — Increase the rate and speed of change in talent management — CEOs expect the most change in talent management. So, its leaders must increase the average rate of change and improvement in talent management functions until it matches or exceeds the rate of change in the firm’s products and services.
Goal #3 — Allocate resources to high impact areas — in order to ensure that talent management resources have the highest impact, leaders must prioritize and focus resources on business units, functions, jobs, and individuals with the highest business impact. Leaders must also identify the talent solutions and functions with a high business impact, a high success rate, and a high ROI (i.e. recruiting, onboarding, and retention).
Goal #4 — All processes and programs must be adaptable — talent management processes and solutions must be designed to fit multiple situations throughout the firm, from slow to fast and small to large (i.e. one size fits one). Rather than a single solution, users should be given a toolkit, so that managers and employees can choose the methods or tools that best fit their situation. Every program, answer, and tool must continually obsolete itself, before a competitor does it for you. And finally leaders must realize that many skills, jobs, and solutions will eventually become irrelevant or obsolete in a VUCA world.
Goal #5 — Ramp up talent capabilities rapidly — leaders must have the capability of rapidly increasing talent capabilities through the most effective recruiting tools including referrals, boomerangs, and talent pools. Internal project websites must be made available internally so that “extra work” can get done, while simultaneously helping your employees identify “free time” opportunities to grow and learn.
Goal #6 — Reduce labor costs rapidly — leaders must set and maintain a target percentage of the labor force that is “easy to release.” They can do that by using contracts, outsourcing, technology, and contingent labor so that labor costs can be quickly reduced. Managers should be measured and rewarded for reaching their labor costs and contingent workforce targets. The performance management process must also be improved so that poor-performing and obsolete labor can be quickly released.
Goal #7 — Attract, retain, and develop adaptive employees — leaders must add adaptive capabilities and experience to the hiring, performance appraisal, promotion, and reward criteria. Leadership development must make acquiring adaptive capabilities a key leadership competency, and retention efforts must focus on keeping the most adaptable employees. Also be aware that organizational “fit” criteria for new hires might serve to limit a firm’s adaptability when it needs “innovative thinking” the most.
Goal #8 — Rapid/accurate internal movement — talent management leaders must develop plans to proactively move individuals and teams internally to where they can produce the highest ROI. Job descriptions must be continually updated, so that each job is constantly adapting. And finally, you must cross-train employees so that during slack times, they can be available for other strategic short-term needs (i.e. seasonal fluctuations, temporary fill-in work, and overflow work).
Goal #9 — Increase learning speed — organization learning speed must be measured and continually increased. Rapid and accurate learning as well as adopting new learning must be hiring, performance appraisal, and promotion criteria. The best rapid-learning approaches and sites from top performers and rapid learners must be identified and then shared with all. A formal social media driven best-practice-sharing process must be developed to ensure that “best practices” and emerging problems are shared rapidly.
Goal #10 — Accelerated leadership development — leadership development must be expanded to more levels of the organization and the whole development process must be significantly accelerated using social media, part-time projects, and technology.
Goal #11 — Data-supported decision-making in talent management — all major talent decisions should be supported by data. Relying on “the old way” and past experience may actually be harmful. In a rapid change/high-risk environment, historical metrics are of little value. As a result, metrics must be provided in real time to managers and to talent management leaders, so that they can rapidly identify problems and determine whether new talent management solutions work.
Goal #12 — Make accurate decisions faster — a corporate goal should be to make accurate business decisions faster, in order to match the faster rate of change in the environment. Increasing collaboration and transparency can help to both minimize bureaucratic roadblocks and to speed up decision-making. The average calculated risk-taking percentage must be raised so that innovation can be increased.
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Goal #13 — Meet global talent management needs — in a world where customers, employees, and operations are everywhere, leaders must avoid being headquarters’-country-centric.
Consistency and flexibility must be provided around the globe by developing processes and programs that allow local leaders to select their own best approach, within corporate wide parameters.
Goal #14 — A flexible corporate culture — a rigid corporate culture may limit adaptiveness. And because no one owns it and it is not quantifiably measured, it is difficult for a “fixed culture” to quickly adapt to the changing world. An alternative approach is to instead use clear goals, focused communications, and “what you measure and reward” as better indicators to your employees about what actions, behaviors, and values are currently expected.
The Drivers of This Increased Turbulence
The process of selling top executives on the need for a plan to manage under a VUCA environment may require you to explain the underlying factors that are causing this turmoil. Although every industry is different, I have compiled a list of nine factors which most firms will find have contributed to their new level of turbulence. These driving factors include:
Connectivity Trade liberalization
Global competition Rapid copying
Growing entrepreneurship Business model innovations
The increasing power of top talent The success rate of innovative firms
The time for wishing that a more stable business environment will return is over. Instead, we need to face the reality that the “new normal” both in business and in Talent Management will be full of rapid, volatile, and hard-to-predict change. Although many in HR have historically argued over the difficulty of implementing workforce planning in a turbulent environment, the fact is that we now know that there are company examples and models for successfully managing and even thriving in a VUCA world. Whether you adopt my approach, the BCG methodology, the U.S. military’s approac,h or your own hybrid approach, the time to develop a plan that allows you to thrive under chaos is now.