By Kim E. Ruyle, PhD
NOTE: This is an early draft of an article that was revised and published in Talent Management in 2010.
Talent management leaders are tremendously important contributors to the success of their organizations. They have primary responsibility for creating a talent pipeline to serve the organization’s long-term goals by:
- Planning for the strategic workforce needs of the organization
- Shaping the organization’s employee value proposition to attract the right talent
- Assessing and selecting the best applicants from the candidate pool
- Onboarding and aligning talent with the goals of the organization
- Developing critical competencies in the workforce to drive organizational performance
- Strategically rewarding the workforce and driving engagement
- Planning for succession and strategically deploying talent into positions that not only serve immediate business needs but also provide key development opportunities and exposures that strengthen the talent pipe
Just as it’s important to design and structure the complete organization to drive strategic intent and support the core processes of the business, it’s important for talent management leaders to design their functional organizations to enable the primary objectives listed above. In large organizations, in global organizations – in any organization that is inherently complex – designing the optimum talent management organizational structure is not an easy task.
Tension comes from several directions. There are benefits and drawbacks from centralizing. There are other benefits and drawbacks for decentralizing. And there are constraints created by the design of the overall organization that make it difficult to stretch the design of the talent organization so it looks much different than the broader organizational structure. Although we can make some empirically-supported generalizations, there is no best approach to the design of talent management organizations. As Craig Debo, recently retired Director of Global Talent Management and HR Operations at Deere & Company states, “It is important to differentiate the various functions of talent management in order to fit unique business needs and to deliver the desired results to our business partners. Global talent management is a business-driven process and can’t be organized with a one-size-fits-all approach.” In this article, we will explore some important criteria that must be considered when designing or redesigning an effective talent management organization.
Importance of Organizational Design
In general, when creating any new business (or reviving an existing business), the first task is to identify the target customer and the unique value proposition that the business will deliver for that customer. Ideally, what follows should be straightforward and linear – design processes that will optimally deliver the unique value proposition and thendesign an organizational structure that will best support those processes. In the real world it’s neither straightforward nor linear. It’s messy. It takes talent to design and manage optimal processes, and it’s difficult to hire talent without an organizational structure. In the real world all these tasks (and many others!) are done more or less simultaneously and with some amount of iteration.
Don’t let the design of the organization take a backseat to the other important tasks that must be done when you’re creating a new business or reviving one that’s flagging. Your organizational structure will enhance or hinder your processes. The structure will largely determine the agility (or clumsiness) of your organization. The structure will facilitate or impede the flow of communication. It will directly influence your culture, the type of talent you need, the quality of talent you can attract, employee engagement levels, and more. Don’t design your organization around particular personalities or model it after an organization with different processes or different value proposition. The design mantra first promoted by the architect Louis Sullivan applies to organizational design: form follows function! Structure your organization to drive the business strategy and support the processes that optimally support that strategy.
Pros and Cons of Centralization
No two centralized organizations exhibit exactly the same traits, but we can generalize about some important advantages resulting from a centralized organizational structure. Centralization typically leads to more process control, reduced business risk, increased strategic alignment, and greater efficiency. Bouvier Williams, Vice President of Talent Management and HR at MTV Networks, notes that centralization “reduces redundancies in the organization and enhances efficiency and scalability.” Carmen Allison, Head of Executive Development at The Gap, Inc., adds that “a centralized structure can provide important support to multiple business units that, on their own, can not afford the headcount required in areas of specialized talent management expertise.”
Pros and Cons of Decentralization
The advantages and disadvantages of a decentralized organizational structure are, for the most part, the converse of centralization. Decentralized organizations tend to be more agile and make quicker decisions. Additionally, the decisions tend to be made closer to the customer, a significant benefit. According to Anne Eadie Tice, Talent Manager for the Eastern Hemisphere at Baker Hughes, decentralization often makes it easier to “meet the complex language, legal, and political environments of a global company.”
Decentralization tends to empower and engage local managers, but that advantage can turn to a negative when those managers stray from the organization’s strategic intent. Indeed, the challenge of maintaining strategic alignment is one of the key drawbacks of decentralization. Additionally, decentralization can lead to the creation of sub-cultures and the hoarding of talent within business units.
Pros and Cons of a Matrix Organization
Matrix organizations combine some of the best and worst traits of centralized and decentralized organizational structures. On the positive side and when working well, a
matrix can demonstrate flexibility, effectively distribute resources, improve decision quality, and create economies of scale.
On the downside, the intrinsic complexity of matrix organizations can lead to backbreaking bureaucracy, turf wars, and dysfunctional decision making caused by ambiguity of authority and decision rights.
Considerations for Talent Management Functions
There is no such thing as a constraint-free world in organizational design. Even if you’re in a greenfield situation, you can’t design your talent organization without considering the organizational structure of the larger organization. But the centralization-decentralization decision is not a binary, either-or decision. Centralization is a matter of degree, and even in the most decentralized of organizations there’s likely some degree of centralization, and vice versa.
Matrix organizational structures are fairly common, and if your organization has embraced a matrix structure, the design will almost certainly extend to the talent management organization. HR business partners who have some talent management duties are frequently employed to support business units and have dotted- or even solid-line reporting relationships into line management. This matrix structure is common even in organizations that are not otherwise organized in a matrix.
There is nearly always some latitude, often considerable, in moving along the scale to more or less centralization. Note that this latitude applies to matrix organizations as well. To what extent do you staff a centralized talent management function? To what extent do you extend decision rights to talent management resources assigned to business units? How much authority is granted to create policy? How are financial resources distributed?
The answer to those and other questions will and should vary as you consider your various talent management functions. There are a number of key questions you need to answer for each function to inform your decision as to how much to centralize, including:
- How critical is strategic alignment to the issues addressed by the particular talent management function?
- To what extent do local regulations and customs impact the formulation and execution of talent management policy?
- How do local conditions impact general business practices and customer relations?
- What are the risks associated with increasing centralization of the function? The risks of decreasing centralization?
- How does the degree of centralization impact line management? Customers? Employees?
- How will the degree of centralization impact the development of talent management sophistication in line management?
- How will the degree of centralization enhance or impede the development of talent management professionals in the organization?
Workforce planning embodies the strategic planning process for talent management in the organization and lays the foundation for other talent management processes. By addressing the demand side of the talent pipeline equation, it lays the foundation for other activities that culminate in succession planning and talent deployment – the supply side of the talent pipeline equation. While workforce planning requires significant input from business units, it’s rare to fully (or even partially) decentralize this function. To accurately forecast workforce needs, the process also needs input from many other sources – macro-economic data, industry and competitive information, demographic data, etc. Workforce planning is inextricably linked to the overall business strategy and has major implications for enterprise-level financial planning. Talent management professionals at the business unit level may be very much involved in doing analysis, analysis that is generally rolled up to a corporate function for inclusion in the enterprise workforce planning strategy.
Employee Value Proposition (EVP)
How does your organization define its employment brand? How does it differentiate its message to attract the right caliber of talent? How much latitude can and should be granted to modify the brand to match local conditions? Who will be responsible for communicating the brand message to the labor market? The answers to these questions will vary widely from organization to organization. Consider these prime competing criteria when deciding on centralization-decentralization of this function:
- New talent, to the extent it has a diverse set of values, can have a diluting effect on the organization’s culture. Centralization of the EVP reduces the likelihood of strong sub-cultures developing in the organization. A homogenous enterprise culture will make it easier to deploy talent across organizational boundaries, facilitate strategic alignment through the organization, enhance internal communication, and provide other benefits that drive organizational effectiveness.
- Local labor markets and business conditions may require a customized approach that can best be delivered by decentralization of the EVP. Usually business units can best define the EVP for their needs and may be best equipped to deliver the message to the labor market.
Assessment and Selection
After the best available talent is attracted to the organization, those in the candidate pool must be assessed and selected. For most hires, line managers must be involved and own the selection decision. The questions to be answered include:
- How can the talent management practice best support candidate assessment?
- How can the talent management practice best prepare line managers for interviewing and selection?
- How can the talent manage practice best ensure alignment between hiring managers?
Although there can legitimately be a centralized assessment function, the selection process typically requires local support to ensure the quality of selection and alignment between local managers. Mary Nummelin, Vice President of People and Organizational Best Practices at Polar Electro, Inc., explains, “Candidates are often the first to know that your organization is confused. Years ago I was a candidate for a job that lacked stakeholder consensus. I discovered that the five people who interviewed me had five different sets of expectations for the job. I realized quickly that there was no way I – or anyone else – could have been successful in the role, so I declined the job.”
Onboarding and Alignment
Onboarding should be owned and driven by line managers who have received some guidance from the talent management organization, usually at a local level. Ideally, the EVP is well defined and impacts recruitment so there is already significant cultural fit and alignment between newly recruited talent and the organization. Onboarding is the next step to begin cementing that alignment, and it’s important that competent and committed line managers drive that process.
Performance management is all about the optimization of employee contribution and alignment. Performance management is also, in general, the single most important talent management practice to shape organizational culture. Since strategic alignment and culture are at the heart of performance management, there needs to be a degree, usually a very great degree, of planning and design in a high-level centralized function. The use of technology to enable the performance management process will also indicate a high level of centralization. That said, performance management must be executed by line management – it all comes down to meaningful conversations between managers and employees. Preparing managers to have those conversations may best be done by talent management professionals in the business units.
There are slices of employee development that should be developed at a high level, generally in a centralized talent management function. High-potential employees are those rare individuals who demonstrate sustained outstanding performance and possess a high degree of learning agility, the adaptability required to move successfully into new and different roles. They are your future general managers and senior executives, and they should not be concealed within a business unit. They are best developed through job assignments and strategic development programs that provide shared visibility between them and the current senior executives in the firm. This implies that high-potential development is best centralized. In addition, the creation of an enterprise-level profile of mission-critical competencies can be developed through the leadership of the centralized talent management function.
Dawn Knight, Director, Organizational Effectiveness at Graphic Packaging International, explains, “Across GPI, managers use a consistent competency model and a common matrix to assess talent. Through these tools, our managers have a shared understanding about talent development and identifying potential in our people.”
Total Rewards and Engagement
The total rewards strategy grows out of workforce planning and alignment of the talent strategy with the business strategy. While the overall strategy is normally set by a high-level, centralized talent management function working in concert with finance, there is often a need to grant some latitude to business units to meet their specific business needs.
In addition, line managers should be empowered to make compensation decisions within specified budget constraints. It’s a huge mistake to take compensation decisions out of the hands of line managers. They are closest to the performance of their employees and best able manage consequences. A centralized talent management function can support them by providing clear guidelines and policies.
Succession and Strategic Talent Deployment
This is another talent management function that requires some level of centralization. In the case of high potential and emerging talent, it requires significant centralization to ensure that high potential talent is visible to senior executives and can be deployed seamlessly across organizational boundaries to serve the needs of the firm and to be strategically deployed into assignments for development. Talent management professionals working within business units can play a key role by educating line managers on how to assess and develop talent.
As you consider the many important criteria that will impact your organizational design decisions, keep these points top of mind:
- The need for strategic alignment. As Carmen Allison notes, “Guidelines are only as good as the clear alignment and communication with all key stakeholders. I have found that if alignment is lacking or parts are unclear, the wheels will fall off.”
- The need for responsiveness. Alignment and decision quality are extremely important, but line managers will be looking for responsiveness from your organization. Soni Bassi, Director of Global Learning and Development at Merck, says that “some think the talent system and structure represent the ends to the means, but that is the wrong attitude. The system and structure only enable the process.” For line managers, that means rapid and helpful responses to address talent management issues.
- The need to continuously learn and educate. The design of your talent management organization is a key enabler of success, but it takes more than good organizational design. You need to staff your key positions with highly competent and motivated professionals that drive the talent strategy and help educate line managers. Education must be an important goal of every talent management professional. The most effective organizations are not only well-structured, they have a high-performance talent management function supporting a cadre of line managers who have their own set of well-developed talent management skills.