The Best HR Departments Don’t Just Focus on People
Over the past decade or so, the talent paradigm has gained considerable momentum in the HR field. Think of all the books out there on the subject, all the talent management consulting practices that have proliferated, and all the talent-management functions now operating within HR departments—not to mention the HR departments that have renamed themselves to focus on talent.
The trouble is that “talent” focuses on optimizing individual contributions, and the more we emphasize individuals over the organizations, the more HR will lose the very impact it’s taken 25 years to build—as a strategic enabler of organizational performance.
Among the many brilliant insights in Adam Smith’s Wealth of Nations is that economic organizations come into existence because of their ability to coordinate labor to make the whole greater than the sum of individual laborers’ parts. The essence of organization is to coordinate and enhance the effectiveness and efficiency of individual efforts.
“Talent” focuses on ensuring that companies have the individual talent necessary to achieve their purposes. Certainly this is a critically important agenda for any organization. However, by focusing primarily on individual contributions, the talent movement, by definition, succeeds in making the organizational whole equal to the sum of the parts. This overlooks the central contribution of organization to make the whole greater than the sum of the parts. It is this integrating and leveraging function of organization that creates sustained competitive advantage.
Labor economists have long known that over time major competitors will have hired roughly the same raw talent. In your hiring processes, you will win some and you will lose some. The critical issue is not the individual talent that you have; the competitive advantage resides in what you do with the talent once you have it. And that is an organization issue. This is not to say that you can let up for one minute in striving to have the best talent. But if HR focuses primarily on talent, its ability to create competitive advantage is limited.
Obviously the tools, practices, and processes that create effective organization are substantially different from those that optimize talent. For example, If optimizing talent is the agenda, then an HR department will probably hire HR professionals with individual-oriented psychology backgrounds. If optimizing organization is the agenda, then a department is more likely to hire HR professionals with backgrounds in business and economics. The latter two disciplines are the ones that focus on making the organizational whole greater than the sum of the parts. To be truly effective, most HR departments need to balance the individual and organizational focuses.
Yes, HR must ensure that the foundation of talent is in place. That puts HR in the game. But the game is won by creating competitive organizations that can beat the competition. With this latter focus, HR then creates sustained competitive advantage.