Photo: Flickr/Casey Serin
Why isn’t talent on your shopping list now that your company is flush with cash?With more than a trillion dollars on the collective balance sheet, U.S. companies are poised to spend again. It’s great that they’re starting to spend on everything from M&A to new store openings. It’s too bad they’re not using it to snap up top talent.
Sure, quite a few companies are putting out their “help wanted” signs again, but it’s mostly to replace workers they’d laid off. And some do get the value of shopping for talent now: Engine maker Cummins Inc., now with about 14,800 U.S. employees, plans to add about 2,500 U.S. jobs in 2011, many requiring engineering or other technical skills.
But most continue to sit on cash that’s worth much more in brainpower than in face value. That’s a problem in the making. At a minimum, it has to be a big opportunity lost. If employees’ skills and competencies were fuel and oil for an industrial economy, they’re platinum and diamond for the knowledge economy.
Our longtime studies of the world’s most successful companies tell us that differential investment in talent is a critical element of high performance. Whereas most companies work to reduce their payroll as growth slows and competition intensifies, the best maintain and even grow their investments in talent as their core businesses mature.
The big difference in perspective: The high performers think of their expenditures on top-notch employees as investments in building the next great business. Most other organisations still see their workers in industrial-era terms. The reality is that most business leaders still put their employees squarely on the cost side of the ledger.
So we think it’s time for a reality adjustment. With so much cash on hand, many companies have a rare opportunity to splurge on a host of new hires without having to compromise on other investments. Here are a few ways in which the best companies invest in talent early, building a surplus of human capital talent before it’s absolutely necessary to do so — and before the best and brightest are snapped up by their rivals:
Make room for visionaries… The best companies place a premium on having world-class visionaries — dreamers, even — in their businesses. Xerox’s transition from copier and printer maker to document management conglomerate owes much to the thinking of cognitive scientist John Seeley Brown, a leading figure at Xerox’s famed Palo Alto Research centre. With access to Xerox’s corporate office, Brown was able to engage senior management and help them see the power of the idea that the document was, as he puts it, “the most beautiful manifestation of a knowledge-sharing device.” Similarly, Sony gave sound labs engineer Ken Kutaragi enough latitude to progressively develop the Sony PlayStation gaming platform. Top companies give stars like Kutaragi and Seeley Brown room to do their best work, without overemphasizing teamwork.
…and cheer on the “business runners.” Top companies also set great store by having talented “business runners” who ensure that the business runs like a clock and who adeptly manage the business through its lifecycle, squeezing out costs as it scales and matures. The top shops also excel at developing their leaders. They encourage their managers to work in other regions of the globe and they readily assign them to new ventures as a path to promotion. That calls for a surplus of trained and qualified managers beyond those needed to run the business today. Companies like Procter & Gamble and Johnson & Johnson do this as a matter of course.
Hire for no obvious reason. You don’t need a job vacancy to justify hiring great talent. It’s out there and available right now — often at bargain prices. Millions of workers in developed countries are out of a job, so this is a perfect time to acquire talent targeted at fostering tomorrow’s business ideas and early activities. The best companies realise that the right people with the right motivations will develop and drive new ventures without worrying about job titles and carefully worded job descriptions. So they stock up with skills when they can — not when they have to. Oilfield-services leader Schlumberger invests heavily to obtain a steady flow of engineering talent. It provides scholarships and internships at top universities to cultivate relationships — without specific vacancies in mind.
Buy new businesses for the people, not the products. Just ask young Mr. Zuckerberg about that. Facebook has bought a slew of startups, snagging their top talent but usually killing off their products. Facebook’s chief technology officer, Bret Taylor, was a co-founder of FriendFeed, one of those acquisitions. He had previously been a bright star at Google. We’ve noticed that the most successful M&As are small tuck-ins — deals made to acquire skills and capabilities rather than large-scale acquisitions designed to enlarge market share or to diversify. Given that M&A will remain high on the agenda for companies that are sitting on plenty of cash, business leaders should view M&A as opportunities to hire talented new business builders and new leaders.
You already know all the other reasons why top talent is good for both top and bottom lines. Now you have to convince your organisation’s penny pinchers of the wisdom of those reasons.
The good news is that with cash at such heady levels, investments in talent need not detract materially from investments in plant and equipment or from M&A bids. The not-so-good news? Cash won’t be at those levels forever.
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