To avoid ‘talent war,’ firms need to train troops within

Recently, we heard venture capitalist Tom Washing talking sense in a speech at the Boulder Technology Incubator annual breakfast. Washing’s message was that the overheated market had allowed pre-IPO companies the opportunity to flourish without regard to business fundamentals. He saw the Nasdaq “crash” as forcing companies and financiers to pay more attention to building a business, rather than telling a story.

The key question for Washing about a business was straightforward and challenging: Could the idea, the story, be translated into a sustainable and growing business? Could the business then demonstrate sustainability for at least five consecutive quarters?

If Washing is right, and, for the sake of all of our sanity, we hope that he is, then many companies are about to get another cold dose of reality as the difficulty of building a sustainable team for a sustainable venture hits home.

In a talk we gave to recruiters for Colorado high-tech ventures this year, the biggest nods came when we spoke of many companies’ predilection for going after high-performers in the same way they were going after capital.

On the finance side, many companies’ efforts seemed directed toward finding enough capital at any price to take them to an IPO, independent of efforts to build sales or profits. Such firms often take a similarly non-sustainable approach to going after talent. With an admitted labor shortage around them, and other people’s funds as funny money, these firms bid certain candidates’ compensation packages into the stratosphere – sometimes overlooking problems with qualifications or past history. So long as the candidate was available, had the right “pedigree” of past employer or school, and could help create the right look for the firm’s offering, they were considered for the position. The concept of sustainable performance, whether for the employee or the company, is all but lost.

Prominent business journals and consulting firms hyping a “war for talent” have added gasoline to the bonfire. The “war” metaphor makes virtually any hire at any price unchallengeable and creates the myth that failing to snag some dwarf star would threaten the very vitality of the business.

There’s no question that finding a programmer for a language developed only a few years ago or someone to head a strategic partnering effort is going to be hard right now, and all the more so if we “know” that the stars are going to come from this software company, that consulting firm, or certain high-visibility schools.

All this strategy guarantees is that a firm is going to pay a lot of money for someone who may stay only until the next firm with deeper pockets makes a better offer.

A firm could instead see in this shortage an opportunity to develop a sustainable business and a competitive advantage. That takes stepping back to see that the “war for talent” just bids up the salaries and mobility of a very small number of people whose talents may or may not actually be distinguishable from others.

Stop the war. Your firm’s opportunity for sustainability and competitive advantage can lie in looking around at the people who aren’t in the war and building and developing them into employees for the present and the future. In your organization right now are people with almost the right experience to fill your talent requirements. Often all they need is a course or some training to fill your talent need.

In the labor market are people with relevant experience but no credential, or credential and no experience, or good training and schooling at second-, third-, and fourth-rate schools and institutes you’ve never heard of. What they need and don’t have is a chance to show what they can do. It’s likely that many of them can’t make it past the current screening techniques that many organizations and recruiters use, so their actual talents aren’t used, while the so-called stars continue to pocket signing bonuses and ask if your company will pick up their laundry for them.

Also in the labor market are people who will come to work for your company to replace the people you develop and promote, because the job you promoted someone out of is one they can do and is better than the one they have or don’t have now.

You are still going to need to pay competitive salaries, develop meaningful compensation packages, and create working environments that people want to work in. In doing so, you can create longer-term, more sustainable opportunities for the business you are building and for the people who work for you now and want to come to work for you for just those kind of opportunities. And, if you’re lucky, it will be your competitors who are draining their cash and losing their margins to the war for talent.

On Management, written in cooperation with The Center for Human Function & Work (CHF&W) in Boulder, examines critical issues about managing the human side of a business. Joe Rosse is associate professor of management at CU-Boulder and an associate of the CHF&W. Bob Levin is director of the CHF&W. Comments, questions and topics are encouraged and can be mailed to The Business Report or e-mailed to Joseph.Rosse@Colorado.Edu.

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