The rise of temps and part-timers has replaced traditional succession planning. Are you ready?

By Peter Cappelli

Peter Cappelli is the George W. Taylor professor of management and the director of the Center for Human Resources at the University of Pennsylvania’s Wharton School. His presentation at last autumn’s HRO Today Global Summit in Amsterdam, derived from his recently published book on the new realities of talent management, was widely acclaimed. What follows is his distillation of that thought leadership.

The model for nurturing employees has changed during the past quarter of a century. The curved line (above) represents the value of a typical worker, who often used to stay with one employer throughout a career. The organization invested in the worker while the worker stumbled along, moving up a steep learning curve. The straight line represents something like the cost of employing that worker. And in the old model a pretty whopping return on the investment was realized. But it rarely works this way anymore, because rivals have learned that they can afford to outspend competitors in order to hire workers away; they are simply capitalizing on the original employer’s investment. Do you invest in new workers and risk losing them, or do you (or an outsourcer) hire on a just-in-time basis?

Above is a 1950s GE performance appraisal along-side a contemporary kindergarten report card. Which is which? The reason that it’s so difficult to tell the difference is that companies back then weren’t actually measuring the performance—they were interested in the employee’s character. They assumed they were going to shape selected employees as they wanted to later. Today, there is a greater emphasis on responsiveness than planning. And it’s not hard to understand why. As the chart below reveals, uncertainty and turnover have spiked, and the internal model has been transformed. So while more people stay in the same function throughout their careers, they provide that function for a far greater number of employers.

I would change jobs for...?

The new uncertainty explains at least one of the above findings of a survey of employees about what it would take for them to change jobs. With an average salary of roughly $40,000, as many workers said they would leave for a one-time bonus of $1,000 as would leave for a 10 percent salary increase. It’s not bad math skills. It’s doubts about whether that 10 percent raise would truly be realized. A parallel assumption of uncertainty pervades those on the verge of entering the workforce, as revealed by the chart below that shows that the most appealing characteristic of a first employer is . . . getting a good recommendation for a second employer.

So in a world filled with uncertainty about both supply and demand, should planners “make” or “buy” employees? To decide, forget long-term business plans. Let line managers play with simulations that help them make shorter term, realistic forecasts. That brings human resources from the back end to the front of the workforce planning process. You can look at the second, third, and fourth most likely outcomes to get a more robust sense of needs. This lets HR leaders see more clearly the costs of being wrong. Which puts the lie to the need for a “deep bench of talent.” As any inventory manager will tell you, that’s very expensive to maintain. Traditional succession planning is a waste of time for most companies. Just like holding a basket of stocks instead of one, planners need to maintain a pool of talent loosely tied to a pool of needs, allowing the variables to cancel each other out. Scenario-based planning makes sense. Forecasting does not.

The new uncertainty explains at least one of the above findings of a survey of employees about what it would take for them to change jobs. With an average salary of roughly $40,000, as many workers said they would leave for a one-time bonus of $1,000 as would leave for a 10 percent salary increase. It’s not bad math skills. It’s doubts about whether that 10 percent raise would truly be realized. A parallel assumption of uncertainty pervades those on the verge of entering the workforce, as revealed by the chart below that shows that the most appealing characteristic of a first employer is . . . getting a good recommendation for a second employer.

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