Wednesday, June 19, 2013

A Framework of Generic Competitive Talent Strategies: An Extension of Porter’s Generic Competitive Strategies

In my last week’s blog post titled “Five Competitive Forces in Organizational Talent Arena: Porter’s Competitive Strategy Framework Extended”, Strategy Musings, June 16, 2013, I proposed that Porter’s theory of five competitive forces can be applied remarkably well at functional level too, and not merely at a firm or an industry level.  This hypothesis was formulated with specific illustration of talent management as a domain of application ( Towards the end of the discussion, I also stated that an understanding of the five competitive forces in the talent arena would need to be followed up with generic competitive talent strategies. This blog post develops a framework of generic talent strategies which can help firms to cope with the five competitive talent forces, namely, bargaining power of candidates, bargaining power of service providers, threat of competitors, threat of new knowledge and competitive rivalry in talent pool.

Generic competitive strategies are those strategies that are broadly available to firms when they face industry level competitive forces. While each firm is unique, strategies themselves tend to be generic as firms, by and large, tend to fulfill similar customer goals and have access to industry level and environment level strategic information with no particular firm level superiority. As a result, while all firms may choose one of the available generic strategies, the competitive advantage for a firm arises from how effectively it executes with reference to the generic competitive strategy chosen by it. By definition, each generic strategy would have a set of enablers, which again may not be unique, but would provide significant challenge and opportunity for individual firms to vary the emphasis and execution. For example, the generic competitive strategy of cost leadership may be derived by any or all of enablers such as product standardization, high scale, lean manufacture and integration.
Triggers for generic competitive strategies 
Any generic strategy must provide competitive advantage to the firm. Cost leadership, for example, enables a firm to be the lowest cost producer of functional products, other factors like quality being the same as industry standard, thus insulating the firm against future adversities. Differentiation, on the other hand, enables a firm to offer a diversified, feature-rich product or service range, with a premium user experience. Niche, on the other hand, enables a firm to be known for something unique to the firm. On a similar analogy, any generic talent strategy must deliver competitive advantage on the talent front. Unlike firm level competitive strategies which use factor resources including people to address markets, firm level talent strategies must address market factors to deliver people resources. An understanding of the five competitive forces of talent is, therefore, vital to construct generic talent strategies.
The triggers for that process are two questions: how can employees generate value for their firms, and how can firms generate value for their employees. In an ideal situation both these concerns are self-aligned and self-supporting. In reality, however, there tends to be misalignment between these two value objectives due to the varying influences of the five competitive forces. This blog post proposes value leadership, career differentiation and competency niche as three appropriate generic competitive talent strategies. As with generic competitive strategies, talent strategies must bear some nexus with business models pursued by firms. Generic talent strategies cannot be replicas of generic competitive strategies, however. Just because a firm pursues a cost leadership strategy it cannot pursue cost leadership in talent acquisition too; in fact, such a mimic could produce disastrous results! Similarly, for a firm it being a most differentiated employer need not necessarily translate to a generic strategy of differentiation at the firm level. Niche would be even more inappropriate to mimic.
Value leadership
Value leadership is a generic talent strategy that rewards the employees for the value they generate for the company. Value can be interpreted and quantified in various ways depending on the nature of the business and sophistication of the measurement system. It could be as simple as a rating through an annual performance appraisal system or as complex as a multidimensional analysis covering individual performance, peer evaluation, team performance, business unit performance and corporate performance. Value leadership strategy is direct and creates a nexus between an individual's perceived value to the organization and the business performance. Given the emphasis on keeping the individual happy and contended, value leadership strategy is a vital component of companies getting perceived as the best employers to work with.

In terms of the five competitive talent forces, the value leadership strategy addresses the bargaining power of candidates the best and establishes a benchmark to assess the bargaining power of substitute service providers. It responds to the threat of competitors but does not adequately address the threat of new knowledge. At a broader level, the value leadership strategy ensures that the competitive forces are anchored around tangible and visible metrics of compensation. In the overall, value leadership enhances the intensity of competition in the talent pool. The biggest criticism of the value leadership strategy is that it focuses far too much on the past track record of the individuals, their current performance and the short run performance of the businesses they are directly involved with. Long term value building for the organizations and employees is somewhat lost sight of.
Career differentiation

In contrast to value leadership which focuses on the metrics of credentials, performance and compensation, career differentiation addresses talent issues in a career prism. An organization subscribing to career differentiation strategy takes a holistic and long term view of career development of individuals as opposed to short run talent-results match. In India, Tata Group, Hindustan Unilever, ITC, L&T and a few other firms have a track record of building careers, right from the induction stage of talented youngsters. Rotating people through a number of challenging assignments in different functions, businesses and sites, such companies provide long term careers as opposed to day-to-day jobs to aspirants. It is interesting that the governments, especially the Indian Administrative Service (IAS) followed career diversification as a competitive talent strategy.

Career differentiation addresses the five competitive talent forces in a manner different from leadership. While not ignoring the importance of compensation, career differentiation focuses on other motivators such as professional empowerment, responsibility with accountability, diversified experience and leadership opportunity to inspire individuals. Career differentiation helps in a virtuous iterative cycle of fulfillment and actualization, building strong roots and loyalty between the individuals and the corporation. Over time, such companies get known as differentiated employers where careers are made rather than jobs executed. Needless to say, career differentiation works best when the corporation has a sustainable growth agenda. Career differentiation works the best when employees and the organizational ecosystem consider long term sustainable growth as being more important than short term spikes in performance.
Niche competency
Niche competency as a generic talent strategy works best when firms are highly specialized in terms of business domain. Firms specializing in drug discovery, design and development, and contract manufacture as well as research oriented higher education institutions and such other highly focused activities rely on pools of experts who can deliver on the needed goals. A standalone design studio, for example, will be quite distinctive compared to a research department located in a larger integrated company. Generic talent strategy of niche competency looks for a rare fusion of innovation with a highly homogenized talent. A design house, for example, would have doctorates in science and engineering as reflective of homogenization but each is expected to be highly innovative, breaking new ground each time.
Generic competitive talent strategy addresses the five competitive forces in a unique way. First of all, the way the entire organization is designed with highly standardized yet creative talent reduces the tendency of individual bargaining power. It also addresses the other forces such as the bargaining power of service providers (as no vendor can be better than in-house talent in such niche companies) and the threat of new knowledge (as the environment of innovation fosters continuous learning and knowledge development). It also enables a moderate level of competitive intensity within the talent pool as such organizations are managed in a collegial manner. Niche competency as a strategy, however, is susceptible to poaching by competitors who may tend to replicate the model by transplanting the talent en bloc. Niche competency requires deep attachment of the individuals to their work and results just as all great scientists were wedded to their discoveries.
Talent, the core paradigm
The talent paradigm is the most critical challenge for an organization’s progress. No wonder, therefore, that the five competitive forces of talent rank almost on par with the competitive forces that influence the evolution of firms and industries. As with generic competitive strategies, generic talent strategies offer help in coping with the talent forces. Each of the three generic talent strategies, value leadership, career differentiation and niche competition has a role depending on the firm’s strategy. Each of these strategies requires proactive and front-ended investments in talent management which will be well worth the while for organizations.
Posted by Dr CB Rao on June 19, 2013         

1 comment:

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