Platt Perspective on Business and Technology

Human Resources and adaptation to change 4: adding in the complexity of innovation and market-driven pressures to innovate

Posted in HR and personnel by Timothy Platt on February 8, 2013

This is my fourth installment to a series on business and marketplace change and on the impact of this on Human Resources as a department. And as a crucial part of that I also seek to delve into how an effective HR department and its functionalities in turn help to shape the business and its operational planning and strategy (see HR and Personnel, postings 137 and loosely following for Parts 1-3.)

I established two benchmark models in earlier series installments, for developing this type of operational analysis:

Part 2 where I outlined a startup company-based model as one type of simplest case scenario and
Part 3 with its stable strategically and operationally settled, mature business model as a second such scenario.

My goal for this installment is to begin adding in complexities to them and I begin that by adding rapid innovative change as a driving competitive imperative to the mature business model. When I developed that baseline model, I left out the factor of innovation and any significant drive to innovate in order to remain competitive. With mature markets and technologies in play and with neither the business modeled nor its competitors actively breaking new innovative ground, that makes sense in the context of the baseline model. For this posting I assume intense pressure to innovate so as to keep relevant and competitive, and with real need to develop new sources of the disruptively innovative for any business in this arena if it is to step out of the crowd. Consumer expectations and demands are very intense and the marketplace demands an ongoing stream of new and next generation.

• In my stable, mature business baseline model, I posited a long-term stable workforce with low employee turnover and with those long-term employees as a basic pattern, coming to be expert in their company over the course of their extended careers with it. This employee pattern works in that business situation for many reasons, though to cite one of them particularly relevant for this discussion: when products and services are tried and true as a defining virtue, and when well established and experience-honed skills are primarily needed in providing them, incentive is low to bring in new employees for their new skills and with new and disruptive technologies and business practices in hand. Premium value can better be found in long-term retaining employees in place and where needed, bringing in new employees who fit in and who can become long-term company experts too.
• When innovation and the rapid pace of its development, commoditization, maturity and obsolescence dominate, a premium is placed on bringing in new hands-on technical and business skills – as those are what the business’ value creating New and Innovative will grow out of. And that is in most cases where disruptively new will come from too – the outside and from new hires. So as technologies become mature and products strictly based on them are phased out and as those older hands-on technologies lose their immediate competitive relevance, new employees are needed who can bring the business that next competitive step forward. And employee turnover can be much faster and with a clear functional focus to that.
• Stepping back from there for the moment, one approach for keeping the company workforce competitively relevant in this fast paced context would be to offer ongoing training and certification upgrade opportunities to employees in place. That can be expensive, but as a hiring and retention incentive it can be the defining distinction that would help bring in and keep the most competitively sought after job candidates. That is because the prospect of gaining opportunity to stay cutting edge as a technically skilled hands-on employee can even be more important for the best job seekers, as a long term source of value, than immediate salary level offered and certainly as long as the salary offered itself is in the right competitive range. That is because long term, opportunity to stay technically cutting edge as an employee can mean that those higher salaries would continue as those employees stay in demand.
• Balancing value in attracting and keeping best employees against the costs of offering training and other related benefits to retain them, it can also in many cases be more cost-effective to find and bring in new hires who already have new and emerging core technical skills, and to not place a priority on training current employees. This is the standard and even default approach for many high-tech businesses in highly competitive industries. And it is most commonly the default hiring and staff retention policy for personnel in technically skilled design and development, and production lines for a business that operates in this type of fast-paced context.
• So in the above two bullet points I set up two opposing strategies: one oriented towards bringing in and retaining best employees and on keeping them at a cutting technology edge level of effectiveness, and the other oriented towards bringing in a steady stream of new employees with those cutting edge skills who will be let go with time as their skills age away from that cutting edge. Put that way it is easy to see why employees who are in competitive demand now might prefer the former approach to stay that way, while hiring businesses might at least through short-term analysis prefer the second with its turnover, but with its reduced personnel costs as avoidable ongoing operating expenses.

Operationally and strategically a best personnel hiring and retention policy would seek out a best balance point here, where value received would more than cover expenses paid, and with all short term and long term factors taken into account. Just listing a few possibilities here related to that point, to round out this part of the discussion:

• Which technical skills would best be brought in from the outside, and which could more effectively be developed in employees already in place who would not have to go through onboarding learning curves before effectively contributing value?
• As one set of distinguishing parameters there, skills that can be picked up and used right away and to great effectiveness could arrive at a relevant manager’s team by either route. Skills that have to mature through real world application might best arrive through new hires and with a focus on seeking out job candidates who have used those skills for real, value creating work. Skills that would work best when married to a deep understanding of the business for which they would be applied, would best be developed in-house where current employees who have that in-house knowledge and an effective ability to learn and use new technologies would be the best candidates for this training.

Operationally, Human Resource’s hiring and retention practices actually in place here will have tremendous impact on the effectiveness of any overall business-wide operational and strategic planning and execution. And if the business’ executive team is aware of that they will in turn want to involve Human Resources in their planning and execution and in making sure that HR is actually, actively pursuing the right strategy and practices – here and for the working practices example discussed in this posting, in offering the right balance of training and retention incentives and to the right employees, while actively bringing in the right mix of new faces and new blood.

I am going to turn to reconsider a second basic assumption built into my mature business baseline model in my next series installment: that headcount needs are basically quite steady, and with at most modest and highly predictable fluctuations in them (e.g. a modest seasonal need for extra hands for one functional area and for specific seasonal tasks.) I am going to challenge that assumption by considering businesses that see dramatic and organizationally very significant shifts in headcount requirements, and both on how that shapes who is brought in short-term and under what terms, and how it shapes the pool of longer-term in-house employees and managers. Meanwhile, you can find this and related postings at HR and Personnel.

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