A Better Way to Manage Internal Talent Markets

Letting your employees decide which tasks they’ll take on seems like an obvious way to boost engagement and retention. That’s one reason why Walmart, the U.S. Army, and other organizations use internal talent markets, which allow employees to explore and apply for various roles, projects, and assignments within their organization. But does giving workers more choice improve performance? Or do firms sacrifice productivity when they cede control? A recent study by Bo Cowgill of Columbia Business School, Jonathan Davis of the University of Oregon, Pablo Montagnes of Emory University, and Patryk Perkowski of Yeshiva University compared two approaches within a large organization: firm-dictated assignments, in which leaders placed people in roles according to company priorities, and a market-based system, in which employees and managers submitted ranked preferences and an algorithm matched workers to positions. The researchers examined who ended up in each role under the two systems; they also matched employees to jobs randomly as a control. Then they used a statistically validated model the company had created to predict each employee’s productivity based on how closely that person’s skills corresponded to the ones required by the job. They measured how happy the match made the workers (according to the workers’ original preferences). Using this data, they evaluated the trade-off between predicted productivity and job satisfaction. The results revealed a stark divide: Matches based on company priorities were projected to be 33% more productive than random assignments. Matches that factored in employee preferences were expected to be only 5% more productive than random ones, but employees ranked them 38% more valuable personally. In short: Manager-led assignments would maximize immediate productivity, while preference-based assignments would maximize employee happiness. This creates an interesting paradox: If happier workers are supposedly more productive, why wouldn’t satisfaction translate into more value for the organization? Researchers found that the shortfall is caused by less-than-ideal matches between the job demands and employees’ skills. This mismatch can result for a variety of reasons. In many cases, the researchers say, descriptions of projects or assignments don’t give enough detail to allow employees to fully understand how well their skills match up. In other cases, employees may choose stretch roles that teach them new skills they can use in future roles, even if those assignments don’t immediately translate into corporate productivity. For workers, this strategy can make career sense. Roughly 90% of the skills workers sought to develop in the internal market were not firm-specific, and getting that type of experience would probably increase employees’ ability to jump to another company. For managers, allowing workers to take those stretch roles helped fill empty slots needed to complete projects but was potentially risky because it made their employees more attractive to other companies. In many cases the employees didn’t realize they were choosing a task that wasn’t a great fit with their skills. “Projected productivity declined with worker-assigned matches because employees often lacked clear information about their strengths and the company’s priorities,” says Cowgill. Build a Hybrid Selection System How can companies increase employee satisfaction by giving workers a say in assignments—without accepting a big hit to productivity? The researchers suggest using a hybrid model, which allows workers to express preferences while giving firms the power to influence or even override employee-task matches. They recommend the following best practices for building an internal talent market that balances worker choice and company needs: Provide applicants with better information. Companies should give clear feedback to employees about their strengths and what the company needs for each assignment. For example, people may apply for a role because its location allows for a shorter commute or its hybrid schedule would give them more flexibility, even if their skills may not perfectly fit the job. In such instances suboptimal matches can occur if the manager’s goals and priorities aren’t clearly stated—which the researchers say is often the case. With adequate information workers make more-informed choices, improving match quality and in turn improving productivity. Offer incentives. Even with perfect information, workers may choose to apply for roles that aren’t aligned with the company’s needs. To overcome that, the researchers suggest companies consider incentivizing employees to apply for roles and projects that are well matched with their skills. Software like Gloat, Fuel50, and Workday’s Talent Optimization platform uses predefined criteria and algorithms to help companies automatically nudge desirable candidates to apply for roles. When a high performer goes to the internal talent market, she sees a notification stating that she is a top candidate for a task. She also sees that if she applies for the role, accepts the match, and completes the project, she’ll earn extra vacation days. (She receives no extra days if she’s not assigned the project.) This is an incentive that is available only to her and other equally desirable candidates. She doesn’t see the same incentive listed under the other job postings. Coordinate match decisions. When information and incentives are perfectly aligned, matches may still lead to inefficiencies. Consider this case: Five top performers apply for five open assignments on a single team. The manager wants to hire them all. But the company would prefer to spread top talent throughout the organization. In this instance the company should implement mechanisms to distribute talent across teams rather than concentrate it. That could involve limiting the number of top performers who are able to apply for a role on a single team, limiting how many top performers a manager can hire, or implementing other curated processes directing employees away from placements. Ultimately, workforce preferences and business needs evolve. An employee-led talent-matching system made sense during the Great Resignation of 2021–2023, because companies wanted to maximize employee happiness to retain workers. But today, with a weaker labor market and a greater focus on efficiency, companies should consider giving managers more say in assignments in order to optimize productivity. About the research: “Stable Matching on the Job? Theory and Evidence on Internal Talent Markets,” by Bo Cowgill et al. (Management Science, 2025) “If We Don’t Provide These Opportunities Internally, We Risk Losing Talent” Michael Fraccaro is a fellow at Mastercard. For almost nine years he served as the company’s chief people officer. He recently spoke with HBR about how Mastercard’s internal talent marketplace balances the interests of employees and management. Edited excerpts of that conversation follow. Jori Bolton How does Mastercard’s internal talent marketplace work? Our talent marketplace is called Unlocked. It’s an employee-led platform where people get matched to different types of opportunities—such as projects, mentorship, volunteering, and open roles—based on the skills they have and the ones they want to acquire or develop. Mastercard started Unlocked during the pandemic as a call to action to support critical customer and partner needs. During this time our CEO asked for volunteers for five high-priority projects addressing the most-pressing demands of our customers. The response was overwhelming. Hundreds of employees from around the world volunteered to help. In that moment we realized that employees had the capacity and willingness to contribute beyond their regular roles—and the skills to do so. How do you measure the success of the program? We have recently reached one million hours of Unlocked project work. Those are hours we would have otherwise spent recruiting new full-time hires or hiring consultants for short-term tasks. We are performing above benchmark standards, with more than 90% of our employees registered and more than 40% engaging with the platform monthly. Fifty-seven percent of project assignments are cross-functional, which helps us build bridges across the business. How are you able to balance autonomy and productivity? Employees remain responsible for their core job duties; their participation in Unlocked is voluntary and based on their capacity to take on extra work. Engagement tends to peak at the start and middle of the year, when career and development planning is brisk. Employees and their managers are encouraged to regularly discuss priorities and development goals, including whether they have the bandwidth to participate in Unlocked projects and how these experiences can support their career growth. Who is responsible for making sure the system balances everyone’s priorities? When employees propose a project, they must show how it supports Mastercard’s strategic priorities. This approach helps us focus employee efforts on initiatives that advance our business goals. Across Mastercard, an Unlocked product owner oversees the platform’s performance and provides us with insights on how to maximize its benefits for employees and the company. Employees like it. But how did managers react? At first managers were concerned that employees might spend too much time on projects unrelated to their own team’s goals. However, the managers soon recognized that they also benefited in two ways. First, they can tap into talent and skills from across Mastercard to advance their business objectives. Second, their team members gain new and emerging capabilities by working with other teams, which ultimately supports the priorities of their own group.

A Better Way to Manage Internal Talent Markets

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