Peter Cappelli

Failures in talent management are an ongoing source of pain for executives in modern organizations. Over the past generation, talent management practices, especially in the United States, have by and large been dysfunctional, leading corporations to lurch from surpluses of talent to shortfalls to surpluses and back again.

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Reprint: R0803E
Most firms have no formal programs for anticipating and fulfilling talent needs, relying on an increasingly expensive pool of outside candidates that has been 
							shrinking since it was created from the white-collar layoffs of the 1980s. But the advice these companies are getting to solve the problem&#8212;institute large-scale internal 
							development programs&#8212;is equally ineffective.
Internal development was the norm back in the 1950s, and every management-development practice that seems novel today was routine in those years&#8212;from executive 
							coaching to 360-degree feedback to job rotation to high-potential programs. However, the stable business environment and captive talent pipelines in which such practices 
							were born no longer exist. It&#8217;s time for a fundamentally new approach to talent management. Fortunately, companies already have such a model, one that has been well honed 
							over decades to anticipate and meet demand in uncertain environments: supply chain management.
Cappelli, a professor at the Wharton School, focuses on four practices in particular. First, companies should balance make-versus-buy decisions by using internal 
							development programs to produce most&#8212;but not all&#8212;of the needed talent, filling in with outside hiring. Second, firms can reduce the risks in forecasting the demand for 
							talent by sending smaller batches of candidates through more modularized training systems in much the same way manufacturers now employ components in just-in-time production 
							lines. Third, companies can improve their returns on investment in development efforts by adopting novel cost-sharing programs. Fourth, they should seek to protect their 
							investments by generating internal opportunities to encourage newly trained managers to stick with the firm. Taken together, these principles form the foundation for a new 
							paradigm in talent management: a talent-on-demand system.

Talent Management for the Twenty-First Century

Reprint: R0803E Most firms have no formal programs for anticipating and fulfilling talent needs, relying on an increasingly expensive pool of outside candidates that has been shrinking since it was created from the white-collar layoffs of the 1980s. But the advice these companies are getting to solve the problem—institute large-scale internal development programs—is equally ineffective. Internal development was the norm back in the 1950s, and every management-development practice that seems novel today was routine in those years—from executive coaching to 360-degree feedback to job rotation to high-potential programs. However, the stable business environment and captive talent pipelines in which such practices were born no longer exist. It’s time for a fundamentally new approach to talent management. Fortunately, companies already have such a model, one that has been well honed over decades to anticipate and meet demand in uncertain environments: supply chain management. Cappelli, a professor at the Wharton School, focuses on four practices in particular. First, companies should balance make-versus-buy decisions by using internal development programs to produce most—but not all—of the needed talent, filling in with outside hiring. Second, firms can reduce the risks in forecasting the demand for talent by sending smaller batches of candidates through more modularized training systems in much the same way manufacturers now employ components in just-in-time production lines. Third, companies can improve their returns on investment in development efforts by adopting novel cost-sharing programs. Fourth, they should seek to protect their investments by generating internal opportunities to encourage newly trained managers to stick with the firm. Taken together, these principles form the foundation for a new paradigm in talent management: a talent-on-demand system.

Talent Management for the Twenty-First Century

Summary.

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