Friday, June 06, 2008

Human capital's Herodotus

It could have been the jetlag, or the whirlwind India lecture tour in hot May, or even the number of senior executives of India Inc. falling over each other wanting to pick Peter Cappelli’s brains and have a“two minute” chat.
Peter Cappelli certainly looks a worried man. It was probably mere coincidence that we met him a day after the US media was awash with reports of national confidence being at an all-time low, in the world’s biggest economy, since the Great Depression of 1929. Now Cappelli, the George W Taylor professor of management and director at the center for human resources at Wharton, is to human capital and talent managementwhat Philip Kotler is to the world marketing and business management. When he starts sounding more like Doctor Doom Marc Faber, you can be sure there’s something seriously wrong somewhere.

Cappelli’s biggest worry about the US industry seems two-fold. He contends that US companies are trying to deal with the new age issue of talent management in their old fashioned ways, and second, the attitude of top management in their near servility to stock markets and the concept of shareholder value.

“The US companies are losing global ground in a big way to European and Asian companies. London today has emerged as the world’s financial centre while there are several claimants in Asia for leadership in manufacturing and services,” says Cappelli. He says that US companies still have a lot of old, longrange plan models to deal with talent management developed in times when the business environment wasn’t changing much at all. “Today, it’s a very fast changing world,” he says. According to Cappelli, most companies design HR tools and practices for all employees assuming they would be company lifers.

Cappelli has addressed this issue in considerable detail in his latest book Talent On Demand where he suggests applying the principles of supply chain management and just-in-time in talent management as well to manage the unpredictable demand for talent.

“Companies are relying on outdated and ineffective strategies to develop their internal talent, forcing them to be dependent on talent they often have to buy off the shelves,” he says. In his book he has proposed a new model called the “Organization Man” where companies need to train employees in skills that are specific to their broader business needs, with the understanding that those employees will grow with the company.

Cappelli suggests that employers need to work on an “on-demand” talent management, model where they should work on developing workforce skills according to competencies that could be valuable no matter where their business is headed in the next 10 years.

“In the old models, companies made massive investments in people targeted to narrowly defined jobs, that were primarily process driven. They developed them for that particular job assuming they would remain the same even after several years. Today, with the pace of change, that job might not exist or that employee might not be part of the company even next year. Companies have to develop workforce skills without being too specific, but more as a means of handling uncertainty in the future,” he says.

That’s why he says, he admires several Indian companies such as Infosys and Wipro. “Wipro for instance has shown the ability to plan out detailed competencies for their employees. In the recent years, Indian companies have been more innovative talent managers than US firms. They are willing to invest more and spend more management time on it. Accenture is another company that has built a steady pipeline of talent in India through their tie ups with universities. The key here is to look at it as a business issue,” he adds.

Tackling Talent Management
No one would know the impending crisis for US better than Cappelli who is a co-director in the US Department of Education’s National Center on the Educational Quality of the Workforce, and an associate at the US National Bureau of Economic Research.

Recognised as one of the world’s most important authorities on human capital, Cappelli has worked extensively on analysing changes in the workplace and their effects on employers. In his previous books and research papers, Cappelli has written in-depth about the changes in the way companies recruit , manage talent, and appraise and manage performance.

He has also pioneered the idea of taking HR management out of standard performance metrics such as productivity, turnover and attrition to looking at it as source of revenue. In some of the more radical prescription he has to manage talent on demand, Cappelli suggests cost shared training where employees could pay for a part of their external training programmes and courses, by taking home a slightly reduced pay package.

What about some of the most lionised HR practices at companies such as GE or Google? “GE’s model only works for GE. There are very few companies in the world with GE’s size. If companies try to copy GE, they’re in for a lot of trouble. As for Google, their much publicised HR policies are in fact part of a massive branding exercise.

Google needs terrific test scores, and their lava lamps, free meals and massage chairs grab a lot of attention,” he says.

According to Cappelli, what Google is doing today isn’t too different from what a lot of dotcom companies did in the late 1990s. “All of them wanted people to be inside office for as long as they could. They didn’t want any flexibility,” he adds.

Despite, the Indian companies making rapid strides in the area of talent management, Cappelli says the supply side for talent would still be in favour of the US for the next few years because of the better education infrastructure.

“You can do IT jobs right out of college. In that sense it’s still an entry level job. China will produce a lot of graduates, as will India, but be-, there doesn’t seem to be much scope.The universities haven’t grown enough in India,” says Cappelli.

Another area where Cappelli has fulsome praise for India, and fears for US, is a sense of nation building, and a purpose higher than more profits and better shareholder value among Indian CEOs. “Indian CEOs seem quite different from their US counterparts. Almost every CEO I speak to here seem governed by good management principles and display a great deal of pride in their contribution towards the country’s progress. Now, nation building is a better rhetoric to charge up your employees than talking about shareholder value,” he says.

Cappelli reckons that the peculiar US CEO obsession about keeping the investor community happy could become their undoing as companies focussed less on innovation and long term vision.

He cites the example of two cross Atlantic companies Motorola and Phillips who went through their share of problems at around the same time. While a focus on innovation and long term strategy helped the Dutch Electronics giant come back on track, Motorola’s troubles seem unending. “The US companies are much more willing to give back money to investors, if they are not doing well. An extreme Street focus means they dont have the stomach for course correction and the rebuilding phase. If GE’s appliances division hasn’t done well for a few quarters, the solution seems to be to sell it. The analyst community too agrees with the idea,” he points out.

“Today there are more rock star CEOs and an unhealthy focus on compensation. That has resulted in a constant litany about executive malfeasance, corporate fraud and tax evasions,” he says.

According to Cappelli, US companies are not taking competitiveness too seriously. We are not investing enough on infrastructure and collective enterprises. It all might come back to hit the US hard, if it hasn’t already,” he says.

Author : Peter Capellil

Source : ET

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