Talent Management in the 21st Century

Lifetime Employment is Dead

It’s no secret that lifetime employment is a thing of the past. The paternalistic company where an employee would trade 40 years of loyalty for a fair salary, somewhat predictable career growth (for those who played by the rules), a gold watch, and a pension is long gone. The assumption was that the larger the corporation, the more secure your job was. This has been completely turned on its feet in a world where even the largest of corporations are not guaranteed to survive. Out of the 500 companies in the 1955 Fortune 500 companies, only 61, or about 12%, survived to still make the list in 2014. The average life of a Fortune 500 company used to be 75 years and it’s now down to 15 years. As companies everywhere struggle to compete they’re restructuring at an increasing pace.  Since 2012, HP has cut 44,000 jobs under their restructuring plan. Target is letting go of several thousand people over the next two years. IBM was rumored to be cutting up to 100,000 jobs. The list is exhaustive.

In 1962, General Electric’s manager of employee benefits, Earl Willis, wrote “Maximizing employee security is a prime company goal.” When was the last time we saw a major publicly traded company put their employee’s long-term welfare as a key priority? Today, you’re a lot more likely to read about a major firm laying off 3,000 employees than one committing to maintain their entire employee force through thick and thin. In the 1980s, a survey of executives found that 56% believed “employees who are loyal to the company and further its business goals deserve an assurance of continued employment.” By 1990 only 6% agreed.


Against this backdrop of job hopping and fairly common layoffs companies, employees and managers are left dazed and confused, having to pretend that each new hire is for life, while everyone knows that the employment relationship will only last a few years. But it doesn’t have to be this way, maybe there are more honest and productive ways to handle employment relations and managing the talent in your company.

 

A Better Way – The Alliance

The LinkedIn Corporation, manages its 7,600 employees in a more honest way from the moment they get hired.  Their example can serve as a great case study on how to manage talent in the 21st century. They call their model The Alliance, and it’s designed to help employees develop their personal networks and continue growing their careers without becoming “mercenary job hoppers” while at the same time allowing companies to remain competitive, dynamic and flexible without treating employees like they’re disposable.

The alliance is a mutually beneficial deal with clearly defined terms but usually without a contract. It’s an informal agreement between the company and the employee laying out the terms of employment for a defined period of time, without the usual expectation of lifetime employment. The employee’s role is to help make the company more valuable and the company’s role is to help make the employee more valuable, more marketable, and to help him or her gain the skills they need for the next role they want, whether that is inside or outside the company.

 

Tours of Duty

The alliance is built on the concept of Tours of Duty. The term comes from the military where it means a single specific deployment and most soldiers will serve multiple tours during their military career. A tour of duty at a business is obviously different, the idea is getting the employee focused on accomplishing a specific mission in a defined amount of time. The tour of duty has some of the advantages of the old lifetime employment system especially allowing employees and employers the opportunity to build mutual trust and invest in each other while maintaining the flexibility of the modern employment system allowing a company to more rapidly adapt as needed.

A property defined tour of duty helps you recruit top talent by defining specific outcomes for both sides from the beginning. The employee knows up front what skills he will build and the kind of positions that he is being prepared for, and the employer is more secure in the knowledge that the necessary mission will be accomplished and that the employee has made a commitment to stay the course for the defined amount of time. Most importantly, it gives top talent “concrete and compelling reasons” to complete the agreed tour. You should aim to get your company to a level of such honesty that you can ask any of your employees (and even prospects you are interviewing) about what they want to do AFTER they leave your company to make sure you can create a tour of duty that will help them achieve their long-term goals.

Since companies have many different types of employees and many different levels, not all tours of duty can be designed in the same way. There are 3 basic types of tours of duty:

  1. Rotational: A type of standardized tour of duty that can be best used for entry level and operational type roles. Investment banks and management consulting companies have for decades used defined two and four year analysts’ programs where everyone comes in to the same program, and they compete to try to grow into higher level roles knowing that those who don’t move up will inevitably move out to make space for the next crop of graduates coming in. But a rotational tour of duty doesn’t have to be up or out, it could be used for example by insurance companies to give their new entry level hires six months of experience in auto claims, six months in property claims, and six months in injury claims. Ultimately, the purpose of a rotational tour of duty is to allow the company to fully assess the potential long-term fit of the employee and for the employee to decide whether the company is a good match for them and which functional area they would be happiest at. If both the employee and the company decide it is a good fit, the employee can move to one of the other more personalized types of tours.
  2. Transformational: A transformational tour of duty is personalized to the specific employee and the focus is on the completion of a specific mission, rather than on a fixed time period. It is negotiated one-on-one between the manager and the employee and sets up a formal promise that the employee will have the opportunity to develop specific skills and transform his career, preparing for the job he wants in the future (inside or outside the company) and accomplish the mission the company needs completed.  This type of tour of duty will generally be two to five years long, and towards the end, the employee and the manager can start to negotiate whether a follow-up tour makes sense. Follow-up tours can be longer than five years. A series of transformational tours allow the company to offer the employee internal mobility and growth.
  3. Foundational: A foundational tour of duty is one usually offered to very high executives whose lives are expected to become “fundamentally intertwined with the company”, people who are ready to commit to making the company their last employer and are expected to become part of the internal and external face of the company’s management. People like Warren Buffett at Berkshire Hathaway, John Mackay at Whole Foods, and Jony Ive at Apple are on foundational tours. At lower levels of the company, foundational tours are possible also, long-time managers who provide continuity and institutional memory to the company are on foundational tours. A foundational tour is best understood as something akin to a marriage where both parties expect the union will be permanent.

Tours of Duty help the company and the employee grow. In that regard, what happens when an employee does leave? If you’ve created a culture like The Alliance, then strong networking both inside and outside the organization should be encouraged and budgeted for. For example, LinkedIn supports “Lunch and Learns” where employees can expense lunches with interesting people from outside their company. The purpose of this is to network and learn from other people in different industries so you can bring it back to your company and innovate or drive change.

Another recommendation is to create an Alumni Network where former employees in good standing can reconnect and network as time goes by. Starting an alumni network early in your company’s culture is something that’s recommended because the return on investment can be huge. An Alumni Network can help you hire great people through referrals or even former employees, it provides network intelligence like emerging trends, alumni’s refer customers which grow your bottom line, and the Alumni Network become your Brand Ambassadors by creating a buzz about your company. The big accounting companies and the big management consulting companies have known this for a long time and most boost access to their alumni network as one of the major reasons to work there.

This is really just a quick summary of this great idea, we encourage you to learn more more about LinkedIn’s concept of talent management by reading The Alliance. We think this concept will be fundamental in managing talent and careers in the 21st century. Have you ever worked anywhere that supports a similar culture? How do you see it benefiting employees and companies?

Full Disclosure: We do get a small commission if you buy the book using one of the links above. All revenue is used to improve InsNerds.

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