Rita Gunther McGrath, a Professor at Columbia Business School and author of The End of Competitive Advantage, considers the talent landscape of the future as changing patterns of work pose problems for companies and employees alike.
My work on the changing nature of strategy and competitive advantage suggest that advantages are less durable than we have conventionally thought. As globalization, digitization, economic participation from previously undeveloped countries and other forces combine to put pressure on organization’s competitive strongholds, our fundamental assumptions about how we manage talent have also changed.
We are now in what Reid Hoffman, the founder of LinkedIn, has called a “tour of duty” context for the deployment of human capital. Talented employees are increasingly demanding to continuously learn, build their skills and increase their value, rather than focusing on moving up a corporate career ladder. This shift calls for radically different assumptions about how one manages talent, how one motivates and incents people and how one even thinks about ‘human resources.’
Conventionally, the employment contract in most large organizations embodied tradeoffs. They made sense in a context in which organizational form and competitive advantage were relatively enduring. For example, employees might trade off the opportunity for entrepreneurial gain for the security of an established employment relationship. Employers might trade the flexibility of a market-based workforce for the commitment of years required to develop firm-specific human capital. In a tour of duty context, these tradeoffs often no longer work, and yet our theory of human resources in many cases has stayed the same.
Consider, for example, the goal of retaining employees. Conventionally retention of top talent was seen as a crucial activity for the HR department. In a transient advantage context, however, we observe that people may join, leave, and re-join an organization as the need for their specialized skills comes and goes. The stigma of having left an organization has also eroded as employers learn to embrace “returnees.” Indeed, the boundaries of specific organizations have become porous as employees find their sources of insight and stability in deep, trusting networks that extend across organizational boundaries.
A further challenge is how employers deal with the challenge of permanently upskilling their employees. Even as many employers have abandoned their investments in training and development, they are insisting that people keep their skills relevant for today’s environment and acquire new skills that might be important for the future. AT&T’s Randall Stephenson has articulated an extreme point of view on this challenge, placing the onus squarely on employees to re-tool and re-skill themselves. “Your skill set is two years in duration, max” he has been quoted as observing. Rather than the traditional view of this skills upgrade being the responsibility of the employing organization, Stephenson places the responsibility on employees, whom he recommends spend five to ten hours a week in on-line learning on top of their job responsibilities, sometimes with some corporate financial support, sometimes not.
Even as these trends have played out in the world of professional employees, a large number of people have never even achieved a starting position for a professional engagement. In many popular industries such as media, entertainment and publishing, entry-level jobs are almost entirely unpaid or very low-paid and are seen as the price of admission to full time careers in those sectors. For those who do not have the resources to accept such an assignment, such patterns effectively lock them out. Unfortunately, employers have no way of knowing what potential talent they lose due to such an opportunity gap. Such practices also exacerbate the problem of fractured societies since a great many people have no way of participating in a shared future. Indeed, the proliferation of low-paid, unpredictable service jobs in sectors such as retail is regularly held up as an example of how income inequality remains stubbornly difficult to address.
In these contexts, it is perhaps not surprising that employee engagement levels, as reported by Gallup, are at astonishingly low levels, with only 31% of those assessed in a recent survey reporting high levels of engagement, which is correlated with productivity, innovation and the underpinnings of competitive advantage. At the same time, a growing body of work suggests that making investments in good jobs, when coupled with operational excellence, can lead to top line growth, greater customer satisfaction and indeed, competitive advantage.
In 2018, organizational leaders are going to have to re-think their taken assumptions about their talent. In particular, thinking about people only as units of cost rather than potential drivers of growth is a very limiting perspective. When employees can deliver engaging and rich customer experiences because they themselves are engaged and given the right tools, a new basis for competitive advantage, even enduring competitive advantage, is possible.