The Marriage of Talent and Organizational Design

By: Mike Prokopeak | Talent Management

With the economy still shaking off the effects of a record recession, growth remains a top priority for many organizations. It’s also one of the greatest challenges. Integrating talent management and organizational design may be the solution.

The current business environment requires executives to take calculated, calibrated risks, said Gregory Kesler, co-author of Leading Organization Design: How to Make Organization Design Decisions to drive the Results You Want and managing partner of Kates Kesler Organization Consulting.

“The luxury to be able to spread resources, to spread investment, is largely gone,” he said. “We’re in an era where the winners will be those who have the courage to concentrate – use facts and use genuine insight to get to conclusions and then place fewer, bigger bets.”

This challenge gives talent managers an opportunity to help build agile business models that lead down new paths to growth, particularly in emerging markets. Traditional organizational design with multiple layers of hierarchy and sometimes conflicting business units fails to capture those growth opportunities and creates talent roadblocks.

“It’s too complicated to work in those structures,” Kesler said. “Decision making is slow. Roles are confused. These overlaps are very destructive to the motivation of high-potential people. They just won’t put up with it.”

This dual problem – how to stimulate growth while developing talent – is forcing some companies to simplify structure and create more agile environments likely to retain great players. In this effort, talent management and organizational design are two sides of the same coin. “Either is limited if I’m not paying attention to both,” Kesler said.

Kesler said the growth agenda, driven by things like product development, requires smaller, cross-functional business units or teams focused on a category or customer group. Companies such as Cisco, Nike and Procter & Gamble are leveraging these kinds of semiautonomous, integrated small teams to get closer to customers and create new products or services, as well as develop, motivate and retain great people.

“The greatest developer of great talent, certainly leadership talent, is still experience,” Kesler said. “Companies that are doing the most around creating these development experiences for high-potential leaders are actually using organizational design to design in developmental roles.”

Another strategy – setting up incubator business units inside the company – acts like a talent factory. High-potential talent can try out new ideas, create new products and take on progressively more challenging management responsibilities in a controlled yet motivating environment.

“It’s a great place to put high-potential players,” he said. “You’re simultaneously developing high potentials for future, larger general management assignments with these kinds of jobs.

IBM and Coca-Cola are examples of what Kesler called the “marriage between the talent agenda and the organizational design agenda.” IBM no longer defines job readiness in terms of years, but rather in terms of the number of positions and experiences to readiness. Coca-Cola develops its succession pipeline through geographic business units, so managers undergo a natural progression from small to large units.

There are downsides to this approach. Smaller cross-functional teams are not effective for developing functional excellence in technical skills, such as design or engineering. Those kind of functional experts benefit from being “homeroomed” with others like them in a functional organization, Kesler said. Setting up a matrixed structure with a functional overlay allows small business units to focus on a target market or customer and tie back to a center of expertise.

“You get this sort of trade-off between the benefits of small, business-aligned units that motivate people to get close to customers and create exciting cross-functional ideas with the benefits of keeping functional people tethered to these functional centers of expertise,” he said.

Whatever the appropriate approach may be, not many HR professionals have deep, integrated experience in both talent management and organization effectiveness. Traditionally, they have been treated as separate areas of specialization.

“Let’s break that down and let’s think about a different profile for senior human resource executives that treats these two pieces as two highly interactive and interdependent sets of tools and know-how that need to mastered,” Kesler said.

About the Author:

Mike Prokopeak is editorial director for Talent Management magazine.

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