Another view on Services and Talent Management
I had several comments and email discussions after my review of Ricketts' book, Reaching the Goal. The most interesting - and difficult for me to wrap my head around - is the application of TOC principles to the people management question. Essentially, Ricketts guides people to use a supply chain metaphor to manage.
This idea turned up again in the most recent HBR IdeaCast with Peter Cappelli, author of the March 2008 HBR article, "Talent Management for the Twenty-First Century." He has a related article in the April 2008 issue, focusing on uncertainty.
A number of the ideas discussed in the article should be very familiar to anyone who is familiar with the issues of supply chain management. Interestingly, he claims that it is generally advisable to run lean, meaning that there will almost always be a talent shortfall that will be filled by outsourcing or contracting to other groups. The claim was that keeping too many people around is expensive (salaries) and creates frustration on "the bench." But are "the bench" people really just sitting there? Don't they take the opportunity during down time to grow and do internal development activities? I got the impression from reading Ricketts that it is better to keep a bench, and to keep that bench sized according to all the market factors of resupply, variability, upcoming work, etc.
In reality, it's a balancing act. Carry too many people on the bench, and the company is sluggish. The same as if you carry too much inventory. Carry too little, and the company can't respond to consumer demand. The thing I liked about the Ricketts approach to talent management is that it explicitly recognizes that there are different resupply times for different resource types (whether that is physical resources or people). And then Ricketts applies the TOC methodologies to those resources.
5 Comment(s)
said:
Henrik- Please, don't hold back your opinions! :-)
The "pay for your development" thing is totally worded the wrong way. The way he talks about it made sense, other than how he introduced it. Ask people to take on new and interesting projects (to them) with the explicit statement that success will lead to better things in the company. Don't put on this mantle of "I'm helping you, so don't expect to get a reward."
said:
Yes, I am known for my tact and subtlety. (Note how I didn't declare Capelli the winner of the award.)
I listened to the podcast again, and I just realized Capelli uses the word "talent" as a substitute for "person".
For me, when somebody talks about "talent", it means "talented people", which is usually a scarce resource. I believe most people have a great deal of potential. Unfortunately, their work environment is rarely designed to develop it effectively.
I have worked with companies that have tried to manage people the way Capelli suggests. It hasn't worked out. One of the reasons, is that it is very hard to get talent that way. What companies get for their money is bodies.
The "bodies" aren't stupid. For example, they know that the longer a project takes, the more secure their income is. They also know that a successful improvement initiative is likely to cost them their jobs. And they develop a range of tricks to make them, as individuals, hard to replace. (Incredibly complicated code bases with no documentation aren't always the result of poor management, planning pressures, or programmer incompetence.)
With a workforce like that, developing a competitive edge is very difficult.
Anyway, I wonder if the supply chain metaphor is the right one to use. It may lead to a focus on reducing cost instead of on improving Throughput.
I have to read Rickett's book to get a handle on how he uses the same metaphor to get a much more appealing result. (I just ordered it from Amazon.)
Or, maybe the metaphor isn't taken far enough. If we use a supply chain metaphor for managing people, what happens at the end of the chain? People are "sold", i.e. they leave the system under consideration. What is the Throughput the company gets? Their contribution to the company's revenue stream minus the totally variable cost. What is the totally variable cost? The value of the knowledge the person carries out of the company.
Tom DeMarco wrote about the cost of managing knowledge workers this way in Slack (2001). The revenue is small because the company will in effect have a workforce with a large proportion of newbies all the time. Newbies are often not very productive. There is further productivity loss because teams won't gel, and for a host of other reasons.
In other words, the Capelli Chain will not be able to maximize the revenue stream, and it will pump valuable knowledge out of the company. The Throughput may be, is even likely to be, negative.
Capelli is right about the need to manage uncertainty and variation. However, treating people as if they are inventory to be bought and sold is not the solution.
One thing I see all the time is managers who say "we are in the business of producing X, so when the demand for X fluctuates, we must grow or shrink our capacity with it."
What I very rarely see is managers who say "We produce X. Given the knowledge and resources we have, what can we do in addition to X that will increase Throughput."
I believe the latter attitude is more effective.
Though anyone familiar with supply chain management will see similarities with Replenishment for Services, no one should assume that Replenishment for Services is designed to treat people like interchangeable or disposable parts. That would be taking the analogy way, way too far.
In a professional, scientific, or technical services business, skilled people are vital. So it's no accident that Reaching the Goal starts with Replenishment for Services. Nothing else in TOC for Services will work without it.
Furthermore, just as there's a lot more to resource management than Replenishment for Services, there's more to project management than Critical Chain for Services, more to process management than DBR for Services, more to finance and measurement than Throughput Accounting for Services, and so on.
Reaching the Goal focuses on changes needed to adapt TOC for Services. But that's not all there is to good management.
said:
Well, now I don't need to respond. Thanks, John. I was just going to say that the replenishment model has to be revisited in consideration of people resources that don't vanish when the job is over. And Ricketts goes into good detail on how to make this work.
Cappeli skips a couple of problems:
A company can't just plug-in externally hired engineers and software developers in projects and have them be effective immediately. There is a significant startup-time. It may take a knowledge worker several months to get fully productive.
The productivity loss during the startup-time can easily cost more than the money saved by keeping the resource capacity low.
A second problem is that the very concept of a "bench" is all wrong. People have to recuperate, and they must have time to develop their skills. I haven't seen a knowledge company yet that could not have benefited greatly by letting their employees do internal projects, and educate themselves and others during low periods. I have been fortunate enough to have worked at one or two companies that have done just that, and it was very profitable.
He also misses a major reason people leave companies: bad (or not very good) management. People leave because managers design their companies so that the employees cannot connect with them socially. (In other words, people quit because they are treated like crap.) Telling employees they have to pay for their personal development in order to keep their job hardly solves the problem. It makes it worse.
I have worked in a company where employees went to the management to get support for a self-improvement program, and got it. It worked beautifully. The cost was very small. The company sprung for pizza and Coca-Cola. The employees did everything else, because they were interested in learning things. It would not have worked if management had tried to impose the program, and had charged money for it.
Summing up, I agree with you and Ricketts. I cheerfully nominate Capelli's ideas for the Worst Management Awards 2008!