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IT Skills Challenges… Learning what not to do from the US
Peter CappelliGeorge W. Taylor Professor of ManagementThe Wharton School
The development of the original IT workforce…
Came from within companies – based on training, development, and experience– IBM execs staffed executive roles across the
country – Fairchild staffed most Silicon Valley start-ups
Route 128, Boston, loses to Silicon Valley– Digital, Data General, Wang give way to Apple,
Sun, Oracle
With the Silicon Valley model came the outside hire
Restructuring for flexibility – layoffs and outside hiring
Reliance on the market to produce IT skills, especially Universities
The rise of the IT professional– Compartmentalizing tasks, project work,
outsourcing Companies largely abandon systematic
development of IT workers
The Boom and Bust Cycle and the Crisis of Supply
1991 downturn – collapse of enrollments– Decline of graduates in 1995, ’96, ’97 when IT boom begins
Real problem lies within firms:– Number of IT workers quitting the field exceeded total
number of new IT jobs! – IT grads twice as likely to change fields as graduates of
other programs– Older IT workers reporting can’t find jobs– Yet employers reporting a shortage of IT workers
What’s Going On?
Everyone chasing the same “best” grads, ignoring others– The “best” truly matter, but employers can’t predict who will be
best. Relying on an expensive proxy – Most important factor predicting success is actually interpersonal
skills, not technical skill Job requirements escalate to match pay demanded by “best”
grads– But then almost no one meets them = shortage
Boring work disconnected from context and lack of career paths = quits
No retraining, so older workers are displaced No investment in substitutes for short-supply skills
– Remember IMS programming shortage
Moral of this story…
IT employers gave up control over the supply of their IT talent
Never developed skills at recruiting but relied on recruiting to solve everything
Ignored management of employees – treated them like a commodity – paid the price in turnover
Why did this happen?
How to strike a balance between flexibility and planning…
By developing talent more carefully
Changes in the Context for Managing Talent…
Much harder to forecast business and talent demands in the future
To meet immediate needs, we hire from outside and then disrupt career paths…
Don’t own the talent, they leave unpredictably Old model too expensive
– Required “training” jobs – rotation, longer job ladders– Big up-front investments – Big commitment from line mgmt
Three Fundamental Questions to Answer in Talent Mgmt….
1st – When should you “make,” when should you “buy”– For which jobs? (Don’t have to do it for all)– If lack scale, “make” is hard to do– If competencies are likely to change, hard to do– If want to change culture, “buying” helps
Costs of “buying” – mistakes selecting, fit issues, expensive up-front
2nd…how much control should employees have in process?
Remember: They now have veto power – good ones easily leave
Opening the internal labor market – 1/3rd of companies have open online bidding– Dow Chemical story
How much direction to give on career planning?– Raise expectations vs. losing control– Fidelity approach
3rd… will talent be a local or corporate asset?
Where divisions have operating autonomy and P&L responsibility, who pays?
Big disincentives for local operations to develop and identify talent if it costs them and they lose the assets
Job posting systems help solve the problem by letting employees self-identify
Where developing talent internally, what’s the best way to do so?
The big returns come from giving internal candidates opportunities before they would get them on the outside
How to spot talent and give opportunity?– Can try to assess/predict who will succeed– Give it a try–P&G motto “Fail quickly and cheaply”– GE model: Keep small P&L for screening
Q: What was your best developmental experience?
How could you replicate it?
(The Boeing experience)
Other approaches…
Develop broadly – “talent pools” Share costs with employees
– Tuition assistance Promote and then develop – DuPont
– Just-in-time training Make development cheaper – o.t.j.
– “Outsource” it– Bidding for project work
Some hard questions
Do you want “hi potential” programs?– Can you predict who will succeed?– Effect on non-hi-potentials– How will candidates get in and out, is it
better to use potential or performance?
Should you hire for potential?– Legal issues in some countries
How formal should the process be?– More formal is less flexible
Improving Return on Talent Investments through Retention
“Poaching” of intellectual capital by competitors– Why this is not going away:
The need for speedBetter information about opportunities
Outside hiring drives internal candidates away
Poor “fits” leave quicker in tight labor markets
Retention Problem
Hiring Directly From College into Management Training Program
50% now leaving within 5 years Mainly for competitors elsewhere Q: How Do you Know if This is a Problem? Q: If it is, What Should You Do About It?
Online Recruiting Changes the Context
Opening up the labor markets Making information free, shifted the balance of power
to employees– Will employees continue to believe management?
The “passive” applicant now SO easy to find and hire– Wetfeet survey – 36% happy with their job but willing to
move within 6 months!
Some will leave… At least Shape Who and When….
Manage the flow of the river – who, when, where Can you pay them to stay?
– Differentiating among employees– Tailoring to their needs
Social relations hold employees– The power of social ties– Reorganizing work
Project work -- help them build their C.V. Using development for retention – Fleet Bank story
Alternatives: When you Can’t Keep Everyone
Accommodate it -- what’s the real problem?– Maybe retention isn’t the only answer– Redistribute turnover and manage flows better– Greater reliance on procedures and systems
Keep the intellectual capital– Even if the people leave
Final thoughts
Think of managing talent as another important business decision
It is strategic in the sense that one has to make choices, place bets
Persuade top management that there is a skill in managing people – real consequences for doing this well or badly