How to Design an Internal Talent Marketplace

Idea in Brief The Problem Companies with traditional hiring and promotion processes struggle to retain high-achieving workers. Why It Happens Employees prefer to work for companies that allow them to choose their own roles and assignments. The Solution Internal talent marketplaces give employees and managers some measure of control over whom they work with and what they work on, increasing satisfaction for both. In 2012 the U.S. Army faced a humanitarian crisis in Southeast Asia. It needed an engineer to lead an urgent relief mission in the region—someone with relevant linguistic, cultural, and professional experience. Neither a review of army officers previously deployed to the region nor a simple résumé search yielded many good options. But the army also looked at its internal talent marketplace (ITM), Green Pages, where soldiers create profiles listing relevant personal and professional information and may apply for vacancies, and where units post open job descriptions and evaluate available officers. Like a dating app, Green Pages notifies both parties if a match exists. When the army posted the position on Green Pages, the ideal candidate happened to be searching the platform for a new job. His résumé didn’t mention his previous experience working in the hot spot, nor did it disclose that his culture shared many aspects with that of the region’s population. But his Green Pages profile included both details. He applied for the position, the two sides agreed to the match, and the army deployed him to lead the crisis response. Companies use internal talent marketplaces to delegate job assignments and match employees with supervisors. ITMs increase job satisfaction and engagement, reduce turnover, and allow executives to access diverse perspectives about key assignments. They simplify the matchmaking process and give workers and managers some control over whom they work with and what they work on. Thus users have an incentive to share skills, interests, and ambitions, along with valuable personal information that people tend to omit from résumés. Companies that fare the best with internal talent marketplaces are in industries with high worker-replacement costs and have employees who tend to be generalists. ITMs can take two main forms. One functions like the job board of a social network. Think of LinkedIn, but for internal candidates only. Employees browse job listings and managers browse profiles. If the selections match, the two parties can go on to discuss next steps. The other form is automated and less personal. Candidates create profiles, browse openings, and rank their preferred assignments. An algorithm analyzes the profiles and rankings to find optimal matches for the employees and the company. The matches are then communicated to the candidates and the relevant supervisors. Not every company is ready to adopt an ITM. Matching talent to opportunities requires balancing several factors: business objectives, the need for agility, workers’ preferences, and continuity in existing work. Achieving that balance confounds organizations in every sector. Our research team has designed, implemented, and evaluated ITMs for more than a decade in the private, nonprofit, and public sectors with partners across the globe. We’ve worked with Google (Disclosure: Bo is a former Google employee), Teach For America, and the army on its updated version of Green Pages (ATAP, launched in 2020), and we’ve shared our findings with students and researchers at the world’s leading business and policy schools. In this article we describe the pros and cons of ITMs and explain how to build and optimize one. We connect their successful adoption to best practices and recommend ways to align employees’ preferences with the company’s needs. The Four Prime Benefits of ITMs Most companies can succeed with ITMs. But those that fare the best are in industries with high worker-replacement costs; have large eligible workforces; have employees who tend to be generalists; and struggle to aggregate insights from around the company. They can benefit in four ways. Reduced replacement costs. The retention benefits of an ITM translate into significant savings. For talented employees, a lack of growth opportunities can be a deal breaker. A Gallup poll shows that 48% of U.S. workers would leave their jobs for access to better upskilling opportunities. ITMs address that by creating new avenues for career growth. They reveal new means of internal mobility and lateral transfers. They provide access to new skills and experiences. They give employees opportunities to grow within the company. Teach For America recruits high-achieving college graduates to teach disadvantaged youths. In 2014 it used an ITM to match high school teachers with schools in Chicago. Whereas the army’s Green Pages informally delegated decision-making to managers and workers, Teach For America used an algorithm to match teachers with schools on the basis of preferences submitted by principals and teachers. Eighty-eight percent of participants preferred the algorithm’s matches to previous placement mechanisms. Retention increased by as much as 12%. Schneider Electric was concerned about retention among its 135,000 employees. Jean Pelletier, its vice president of digital talent transformation, says, “The number one reason people left is that they didn’t see a career path forward.” Indeed, almost 50% of defectors said they’d left because of few growth opportunities. There was cruel irony in this: Schneider’s global footprint is enormous, spanning multiple industries across 113 offices and more than 100 countries. Workers could probably pursue whatever they aspired to somewhere within one of its many lines of business. Composing from the back of the stage, the photographer Klaus Frahm focuses his series Fourth Wall on the mechanical complexity of show production, which is typically hidden behind the scenes. Schneider’s executives decided to implement a new system that would give employees visibility and choice in their next assignments, with the goal of improving retention. In April 2020 the company launched an ITM in partnership with Gloat, an ITM software provider. Participation is optional and guided by employees’ preferences. Users sign up for projects that will help with personal growth and thus open professional doors. A project might add a critical skill to a résumé, help find a mentor, or improve a network. Within two months of the platform’s launch, 60% of Schneider employees had used it. More than 80% of users say they’d recommend the ITM to a colleague. Better placement within a large workforce. The U.S. Department of Defense (DoD) is one of the world’s largest employers, with 1.34 million active-duty service members, about 743,000 civilians, and roughly 773,000 reservists. Within the DoD, the army, the navy, the air force, the coast guard, and even the newly formed Space Force all use ITMs. The army has matched more than 50,000 active-duty officers since the launch of its latest system. Roughly half of them were matched with their first choice, and roughly 80% were matched within the top 10% of their choices. (Other branches of the government are also implementing ITMs. The State Department announced a pilot program in 2021.) The DoD’s success with ITMs makes sense: The larger the participating workforce, the more benefit the ITM delivers, for two reasons. First, talent marketplaces exhibit network effects. Larger markets provide more job options for participants, increasing the likelihood that they’ll find a match. And as more workers join, the market becomes more valuable to managers who post openings. Each new worker or manager increases the benefits of participation. Second, large workforces are particularly bad at central planning. No single HR department can keep track of match quality for every assignment: The number of potential matches grows too fast. There are more than a quintillion ways to match 20 workers to 20 tasks, for example. But you don’t have to be as big as a military to benefit from ITMs. We know of successful implementations in companies with fewer than 500 employees. No matter what size its workforce is, any company can decide how large its internal marketplace will be: May all employees participate, or only a few? The more employees and managers who participate, the more widespread the benefits will be. More opportunities for generalists. ITMs benefit companies that tend to hire generalists more than those with specialized workforces. The reason is simple: Without specialties, workers are somewhat interchangeable. They can select tasks they enjoy without fear of failure. Everyone can (theoretically) do everyone else’s job. But when a specialist leaves, the company has lost an asset. An engineer can be hired to write blog content, and a blogger can be persuaded to write code. But they would be more productive within their respective areas of expertise. Google has a well-documented preference for hiring “smart generalists.” It merged two divisions in 2017, one consisting of specialists and the other of generalists. Adopting a talent marketplace was a strategic management decision. An ITM had worked well for the generalists, who enjoyed the mobility and the growth opportunities. Their managers benefited from a freer flow of information and faster recruitment for open roles. But the specialist division had been using a traditional work-assignment model. Google’s leaders wondered, Could we integrate the two divisions into the same ITM? Could workers in either division transition into the other division’s jobs? They worried that workers might select experimental “moon shot” roles, leaving the critical infrastructure understaffed. Talent marketplaces exhibit network effects. Larger markets provide more job options for participants and are more valuable to managers who post openings. The divisions’ leaders pooled everyone in a single internal marketplace, but they partitioned the engineers off from the nonengineers and restricted cross-market transfers. Workers still had control over the jobs to which they could apply, but their options were limited. And Google’s leaders had confidence that anyone applying to an open position within the ITM had the minimal prerequisite skills to do the job. A year after its introduction, in a survey of Google employees and managers, 80% reported being satisfied or very satisfied. That was particularly true for recent participants. Internal mobility was up. Google’s director of technical services, Brad Wetherall, says the market seems to have improved retention: “There’s less attrition on the team because people know they have some flexibility.” Google’s executives noticed an additional, unexpected benefit: The threat of losing employees exerted discipline over managers. “Nowadays, every manager speaks regularly with employees about their needs,” one employee told us. “If they don’t, the employees will use [the ITM] to transfer out. This didn’t happen before.” The executive team also limited which managers were allowed to use the ITM, which forced it to confront and articulate priorities early and clearly. As a result, the team was more disciplined and deliberate across all business decisions—even those unrelated to the ITM. Better aggregation of insights. Workers often understand better than the C-suite does what makes their teams productive, and they know which colleagues they work well with. Collecting such information is critical when information gaps exist between executives and employees. At Google greater internal mobility also improved knowledge flow. “There was gold in the transfers,” Wetherall explains. “When someone transfers, knowledge is spread. We discovered a much better way of doing things—opportunities just jumped off the page when someone moved teams.” Leaders must determine whether such information is valuable enough to offset the costs of an ITM. Certain factors make knowledge transfer more (or less) likely. Are you in an industry where change is rapid? Is it impossible for your executives to forecast beyond the next few quarters? Are you in a business where it is important to stay ahead of trends? ITMs help tap into the valuable information that employees can provide about colleagues and processes. Building Your ITM Here are some guidelines to help you begin. Choose (or create) the right platform. Launching a custom-made ITM is an expensive, time-consuming process, but it works for companies with vast technical resources that need platform customization. Easier and faster is licensing software from a third-party vendor, such as Gloat, Fuel50, or Hitch. A vendor will guide you through installation and help integrate core HR applications, such as authentication, human-capital management, and learning systems. Most vendors make the technical aspects of adoption easy. Some can even build a marketplace in several weeks. Like most other enterprise software vendors, they charge clients monthly on a per-employee basis. Unilever, Novartis, and Mastercard all work with third-party ITM providers. Prepare your organization in advance. Employees may worry that a talent market will give them too many options for a career path. Or they may be unclear about how to proceed if they don’t get a top-choice assignment. They will want to know how managers use the ITM to promote and develop employees, and managers will want to know how the ITM helps coordinate transitions and head count. As you prepare to launch an ITM, think about programs that will complement the new system. Many companies offer career-coaching programs alongside their ITMs. Coaches help employees create their profiles, articulate goals, and pursue openings, and they help managers craft and optimize job postings for maximum reach. Be mindful of company culture. Hiring someone from another manager’s team without warning may be taboo at your company. Managers may frown on even searching for employees on other teams. Employees may feel resentful toward colleagues who apply for other opportunities. For the ITM to succeed, you must dispel such reactions. Internal mobility cannot be a forbidden, underground topic. Formulating and communicating solutions to such concerns requires time and effort. Most companies use a rollout period to prepare employees for the platform. They create informational videos and FAQ documents. They host live Q&As for the entire staff. Klaus Frahm In our experience, workers are more excited than managers about transitioning to an ITM. They see opportunities for growth, whereas managers may see inducements for talent to leave their teams. But the best managers make their teams launchpads for employee success. Google executives hosted several Q&As explaining the company’s ITM matching process. Some employees feared that the system would force them into roles they didn’t want. Others worried that managers could see how they’d ranked open positions and retaliate. To address those concerns, Google’s leaders demonstrated how ranked choices became matches. They showed employees what information managers could access within the ITM interface. The Q&A sessions reassured employees that the system would benefit them and that their rankings were private. Leverage ITM data. Your ITM will become a rich source of insights that can uncover gaps between employees’ wants and the company’s needs. Are your employees more excited by the highest-priority projects or by career-growth opportunities? Their choices will probably reflect how you’ve communicated about the ITM. You can use these insights to nudge workers toward important roles. A successful internal talent marketplace requires constant refinement. Focus your efforts on establishing transparent policies that address common concerns. Your decisions should be adapted to your goals, strategy, and culture. Thoughtful guidance and a clear communication plan will help you in both the short and the long term. Optimizing Your ITM Employees and managers who make their own matches are more motivated and engaged by their work. That results in higher retention rates and lower replacement costs. In addition, they know the work and their colleagues’ abilities better than anyone in the C-suite does, meaning that they can make better matches than HR would by sifting through résumés. But allowing workers to choose assignments can be risky. Some employees may look for opportunities that demand the least amount of effort. Some will choose roles that have the least-challenging managers. Some will select assignments in order to develop skills they don’t yet have. That can be great for someone’s career, but the employee may be unable to succeed in the role without those skills. ITMs can lead to mismatches in other ways. Some workers are overconfident about their abilities and qualifications. For example, one employee at a company we researched used an ITM to sign up for a customer-support job. Unfortunately, the role required knowledge of a language in which he was not fluent. And even if a worker appears ideal for a certain assignment, that match may not maximize the organization’s overall performance because of the ripple effect on other employees’ choices. ITMs also tend to concentrate talent in a few teams consisting of the best workers and the best managers. That leaves other teams within the company talent-starved. If the problems aren’t prevalent enough to offset the benefits, companies may be willing to make that trade-off. The following techniques can help prevent misalignment between workers’ and companies’ goals. Nudges. Many companies provide workers with tips or nudges within the ITM user interface. At Google workers are free to apply for any role, but “recommended” icons for certain roles indicate company-preferred matches. Workers may find that kind of intervention helpful. Although they appreciate having options, “choice overload” may overwhelm them. The icons could conceivably narrow down more than 100 potential projects to a manageable 10 while encouraging employees to focus on roles for which they are qualified. Incentives. Some organizations provide incentives to select roles the company is eager to fill. They can be as significant as bonuses or vacation days or as minor as praise in a companywide email. Incentivizing employees to choose specific roles helps managers fill high-priority vacancies. At one company we studied, executives made a simple statement at a big organizational meeting: The company’s future leaders would need experience in core business areas, and promotions would begin to reflect that. The message to the internal labor market was clear. Executive and HR oversight. Most companies let direct supervisors approve anyone who chooses to join their teams. But supervisors’ oversight is no guarantee against misalignment. Managers’ own agendas may not dovetail with the organization’s overarching goals. For example, executives at Google feared that workers would flee mission-critical infrastructure projects for sexier moon-shot assignments (thus the use of nudge icons). In that scenario the moon-shot teams’ managers would gain unprecedented access to the company’s best talent. Managers whose reputations are tied to their projects’ success may favor the goals of their teams above all else. Letting them select their own teams would enable them to stockpile superstars. Roughly four out of every five companies with which we’ve consulted have experienced this kind of misalignment. Top-performing workers usually want to work with top-performing teams. But you may prefer that your talent be mobile, spread around, or placed in specific projects. A combination of nudges, incentives, and top-level oversight can help remediate talent hoarding. . . . Internal talent marketplaces generate useful data, but they loosen managerial control of employee assignments. They improve engagement and retention, but they can create conflict between workers’ and companies’ objectives. Letting employees choose their assignments makes a bold statement: Your company values them so much that it gives them agency over how they spend their days. But a talent marketplace must complement and advance your company’s strategy and mission as well. Our recommendations are designed to help you build an ITM that produces mutually beneficial results.

How to Design an Internal Talent Marketplace

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