Commitment to Development

The commitment to development approach hires individuals who are skilled but who, above all else, are willing and able to change and develop along with the business. The advantage of this strategy is obvious: it allows organizations to make a stronger commitment to maintaining a stable workforce, and it avoids the high cost of turnover. But it has serious limitations.

The first limitation is that development is expensive and not always successful. It requires an organization to continually invest in the development of its workforce in order to keep up with change. The selection process must face the challenging task of identifying individuals who are willing and able to change.

A second limitation is that the commitment to development policy may slow change because of the time it takes for individuals to learn new skills and mind-sets. Although organizations may want to train and develop their people, often the only training programs they have time for are the ones clearly oriented toward solving immediate problems. Even when an organization wants to develop its employees, the rapid pace of today’s business world may rule it out. All it takes is for one competitor to develop a new technology to make an organization realize that it simply doesn’t have time to retrain an existing workforce. Unless it hires people who already have the skills it needs today, it will miss the market opportunity. Thus hiring talent with the right skills and knowledge may be the only way to survive.

Travel Light

Kodak’s shift to digital imaging provides a good example of the second type of human resource policy and highlights the talent challenges involved in making a major change. Moving from chemical to electronic imaging required the development of a new core competency. This hasn’t been an easy change for Kodak, but it looks like the company will be successful. One key to Kodak’s success is the decision not to retrain its chemical engineers; instead, the company went into the market and hired new ones, and in some cases it acquired companies that had the competencies it needed.

The essence of the travel-light approach is to acquire and discard talent as needed. In a turbulent world, this approach has some clear advantages over the commitment-to-development strategy. It gives b2change organizations great flexibility in recruiting and allows the organization to shift competencies relatively quickly.

The radical changes in today’s business environment are altering the relative attractiveness of buying versus developing talent. Hiring someone who already has the new skills may be cheaper and less risky than trying to develop an existing employee. Further, most organizations have little room for redundancy in resources, particularly human capital. With the relentless pressure to improve shareholder value, it is unlikely that organizations in the future will ever have a great amount of slack.

Before we conclude that the travel-light approach is usually best, it is important to consider its very serious limitations. First, management and leadership skills are always in short supply, and how people are led is a key source of competitive advantage. So even a travel-light organization may have little choice but to have a core group of leaders who are there for the long term.

Second, travel-light organizations may simply not be able to find the talent they need because there are few people in the labor market who have the necessary skills. This is more likely to happen to organizations that are technology leaders, such as Intel and Applied Materials. These organizations often have no choice—they have to train and develop existing employees.

Finally, the travel light policy calls for employing people only as long as they can meet the current needs of the organization. It means there will be large recruiting and orientation costs as well as heavy workforce churn. It also leads to a workforce that is not loyal, and the very real possibility of a culture of “haves” and “have nots.” Traveling light sounds like a “cool” approach until you encounter these very real problems.

What is the best approach, a commitment-to-development policy that emphasizes stability and learning in order to adapt to change, or a travel-light one that emphasizes employee mobility? The right approach depends very much on the rate of environmental change, the organization’s identity, and its strategic intent. The more radical the expected changes, the more the organization should lean toward a travel-light strategy. The major rationale for this is the high cost and time commitment required to significantly reskill a workforce.

The Employment Contract

As we hope we have made clear, choosing an HR employment strategy for a b2change organization is an important strategic decision. It has many serious implications, and the whole organization, not just HR, needs to clearly understand what those implications are.

The approach or approaches to skill acquisition and development an organization takes must be stated in its employer brand and contract. An organization’s approach to skill development very much shapes the way people look at their work situation and needs to be made clear at the time people join the organization. In all cases, the contract must make clear that change, either through development or hiring and firing, is part of the deal. They need to be “contingency” contracts that make continued employment dependent on performance and having the right skills.

The commitment-to-development contract needs to stress the organization’s commitment to its people and conversely demands flexibility and even sacrifice on the part of the employees to keep changing with the organization. The travel-light contract will be similar to that given to a contract worker: “We have this work that needs to be done; this is the reward package, and if all goes well, there is a chance we’ll have another project for you.”

Employees also need to be told who is responsible for their careers, how they can develop their careers, and what rewards they can expect as a result of their work. Having an employment contract that expresses what rewards and treatment individuals can expect is critical to attracting employees who will be satisfied with and motivated by their work. It is the foundation on which the relationship between an organization and its employees should be built.

Most large b2change organizations won’t be able to adopt just one employment contract; they will need two somewhat different contracts. The commitment-to-development organizations will find there are parts of the organization where they need the flexibility to rapidly hire and fire people to respond to change. For example, the IT staff may comprise independent contractors who come and go depending on the current needs of the firm.

The travel-light organizations will find that they need the stability of a core group of leaders, and the capability to develop skills when they cannot buy them in the labor market. In consulting firms, the junior consultants are often hired and fired in a classic travel-light strategy, but the partners are likely to stay and develop themselves to respond to ongoing change.

Employment Contracts and Rewards

Different employment contracts attract people with different needs and therefore require organizations to utilize different kinds of rewards. The rewards that satisfy lower-level needs are tangible, or extrinsic, rewards. They usually are given by someone or some system, either directly or indirectly. Maslow’s higher-level needs remind us that people can also give themselves rewards in the form of self-esteem as well as feelings of achievement and growth. Individuals can literally reward themselves for certain kinds of behavior because they feel they have accomplished something worthwhile, achieved a personal goal, learned a new skill, or experienced excitement or intellectual stimulation.

The reward strategy of a b2change firm will depend very much on which employment strategy it follows. A travel-light organization needs to stress rewards that it can deliver in the short term, such as pay, interesting work, and fair treatment. A commitment-to-development organization can offer security, personal growth, promotions, community, and development.

The important thing is to be clear about the employment strategy and to match the reward strategy to it. Once an organization has chosen its employment strategy, it has bought into the corresponding reward system. You cannot get the payroll flexibility of a travel-light organization without weakening the value of promotions as an incentive.

Willingness to Change

Because of their needs, individuals differ greatly in their desire to experience change. Some people prefer stability, security, and predictability, and a situation where they are in control and feel a high sense of competency as a result of their mastery of that situation. These are people who do not fit a b2change organization. Fortunately, not everyone finds change threatening and disruptive. Some individuals prefer change and enjoy the learning opportunities it creates. They see it as exciting and find stability and predictability boring and stagnating. Individuals who prefer change thrive in b2change organizations. One obvious implication of this is that b2change organizations should recruit them.

There is no good research evidence on what percentage of the population prefers stability and what percentage prefers change. What evidence there is suggests that individuals are probably distributed along a continuum that is anchored on one end by individuals who fear change and resist it, and on the other by people who seek change at every opportunity. Our guess is that people are distributed along the continuum in somewhat of a normal distribution. That is, there are a small number of outliers who always prefer change and a small number who strongly prefer stability. In the middle is the largest group of individuals. Their reaction to change is very much a situational one—which is the critical point.

In the case of workplace change, one factor that influences how people respond to it is their own desire to experience change. Another, and, in the case of most people, the overriding one, is how the change will affect them. An organization can exert a lot of control over how change affects its members, so it’s not essential that selection systems do a fabulous job of finding people on the extreme end of the “willingness to change” scale. By creating the right environment for change, an organization can greatly enhance it’s employees’ willingness to change.

If people perceive that change will have a positive impact on their future, they will not resist it—in fact, they will seek it out. If, in contrast, change appears to be disruptive and to cause the end of what is a good situation for them, they are most likely to resist it. In other words, most people take a rational approach to change and ask the self-interested question, “What’s in it for me?” If what’s in it for them is negative, they resist it (not surprisingly). If what’s in it for them is positive, they welcome change and embrace it.

A commitment-to-development firm has to work particularly hard to ensure that no one who has a development deal suffers serious losses due to the ongoing changes in the organization. This means people must keep their jobs, their compensation, and their status—as long as they are willing to change. The extra effort this takes is an investment the organization makes in maintaining a change-ready workforce. It is an investment that is simply not an option.

Experienced managers will tell you there is a catch to this rational argument: people are frequently inaccurate in their judgments about whether a change is good for them or not. Their trust of the organization and their trust of management both strongly influence whether or not they believe that the change will be positive for them. Of course, their previous experiences with change also play a major role in determining what they expect the impact of the change will be on them.

If a person’s previous experiences with similar changes were negative, they are going to be very prone to rejecting change. If, however, they have trust in management and have had good experiences with change in the past, they are likely to embrace it and, in fact, may advocate change. The b2change organization should note the implication: when it hires employees with whom it wants a long-term relationship, it must avoid hiring change-damaged individuals. People who have had a negative history when it comes to organizational change are particularly likely to resist change and mistrust management.

Performance Motivation

The third issue that needs to be considered when recruiting individuals relates to their motivation to perform. There is an overwhelming amount of evidence concerning what motivates individuals to perform well. As will be discussed further in Chapter Nine, the research establishes that individuals are motivated to perform well when they perceive that good performance leads to rewards they value.³ When recruiting and selecting employees, a b2change organization needs to take into account the kinds of rewards it has available and whether or not these rewards can be tied to performance. If an organization cannot give out meaningful bonuses, it shouldn’t focus on recruiting individuals who value money. If it can’t offer performance-based promotions, it shouldn’t focus on recruiting individuals who value promotions.

In addition to focusing on rewards and performance, a b2change organization must consider what rewards can be tied to change. Tying important rewards to change is one of the best ways to reduce resistance. From a motivational perspective, therefore, the ideal recruit for a b2change organization is an individual who values the kind of rewards that the organization uses to motivate performance and change. Stated another way, an organization needs to recruit individuals who value the type of rewards that it is able and committed to using to motivate performance and change.

The Development of Skills and Knowledge

Recruiting individuals with the right skills and knowledge is critical to an organization’s ability to develop and execute its competencies and capabilities. It is difficult to state any generalizations about what skills and knowledge organizations should look for. Each organization needs to develop its own recruiting profiles, based on an analysis of the kinds of competencies and capabilities it needs. The one exception occurs when an organization hires individuals on the basis of a commitment-to-development contract. In these cases, its members need to have the ability to grow, develop, and learn.

The critical ability to learn new skills is not equally possessed by all people. It is related to the intelligence levels of individuals, but it is not the same as intelligence. Some individuals simply are more able than others, just as some are more willing, to continue to learn new things throughout their lives. Much like the willingness to change, ability to learn is a feature of individuals that can be thought of as existing along a continuum; that is, there are some individuals who are extremely good at developing new skills and performance capabilities, and others who are extremely poor. Between them are individuals with varying degrees of ability to learn and develop new skills. B2change organizations need to be sure that they offer commitment-to-development contracts only to individuals who are good at developing new skills.

Developing an Employer Brand

To attract the right individuals, organizations need an employer brand that fits their identity and strategic intent. In many respects, attracting the right employees is no different than attracting the right customers. Employees seek to work for organizations just as customers seek to do business with them: when they feel that the organization offers what they desire.

Part of the reason for developing an employer brand is to help employees make good decisions about whether there is a fit between them and the organization. Just as there are good and bad potential customers, there are good and bad applicants for jobs. Good applicants are ones who are the type of individual an organization can motivate; who can do, or learn to do, the work of the organization; and who fit the identity of the organization.

A number of organizations have done a good job of developing their brand as employers. Who, for example, doesn’t know what it is like to be a U.S. Marine? Nordstrom’s has a clear brand for its salespeople, with the result that they are called “Nordies” because of the distinct relationship they have with the department store. Abercrombie & Fitch, Starbucks, and, in California, In-N-Out Burger have all developed the distinct brand of being a “cool” place to work. This branding has given these businesses a competitive edge in attracting sales personnel.

Basic to having an accurate, and therefore effective, employer brand is a statement of the organization’s employment contract or contracts. B2change organizations have written, visible employment contracts because they are powerful in establishing its brand and the relationship between the organization and its employees. An effective contract identifies both what the individual is expected to do and what the individual will get in return for being an effective employee.

Each organization needs to fine-tune its employment contract to fit the type of rewards it can offer and the type of skills it needs employees to have. Because of its focus on change, the employer brand of a b2change organization must be significantly different from that of traditional organizations; changing its employment contract, therefore, is one of the first things an organization needs to do when it adopts the b2change approach.

Let’s begin our discussion of b2change employment contracts by specifying what the value proposition should not offer. It should not be a “loyalty” contract that offers job security and a career employment relationship (see the list that follows).

What should the employment value proposition of a b2change organization be? The answer is obvious: it should offer change and the opportunity to be a member of a virtuous spiral organization with its accompanying risks, rewards, and growth opportunities.

Table 6.1 presents data from a national survey of Fortune 1000 corporations.⁴ It shows how these corporations describe their employment contract with respect to what individuals are responsible for, what continued employment depends on, and what rewards are for. The data clearly show that individuals are expected to manage their own careers. They also show that continued employment depends on performance and skills rather than on loyalty and seniority.

Seniority plays very little role in determining any kind of rewards. In essence, what counts are individual, group, and organizational performance. It appears that many organizations are already operating on the basis of performance-focused employment contracts; this is a good step toward being a b2change organization.

The contract used by Allstate Insurance Company (see Exhibit 6.1) is an especially attractive commitment-to-development contract. It stresses the mutual commitment shared by the individual and the organization. It identifies both the responsibilities that the organization has to its employees and what employees are expected to contribute to Allstate. Notice that the contract is not a loyalty contract. It does not promise job security, only the opportunity to obtain certain rewards and to develop skills and knowledge. This is congruent with a commitment-to-development approach. In travel-light organizations this contract might apply to a core group of employees, but not most, because of its strong commitment to development.

Contracts aid in the recruitment process by reinforcing an organization’s value proposition and thus contributing to a realistic job preview. And after people are hired, contracts establish the ground rules for performance and rewards and serve as a touchstone for the organization and the individual throughout their entire relationship.

Research shows that employment contracts can be a significant enabler of an organization’s ability to change.⁵ Organizations we have studied that clearly link skill development with employment security—and rewards with performance—execute change more effectively than others. They create “mobile” human capital, that is, people who realize that they must continue to learn, develop, and perform to maintain their positions and careers.

B2change organizations need mobile human capital because getting stuck with obsolete human capital is just as bad as getting stuck with outdated equipment—perhaps even worse. Whereas you can readily buy new equipment, you cannot always buy talented human capital. This is, of course, one of the reasons why some firms will choose to adopt the commitment-to-development approach, rather than just assuming they will be able to pick up the best talent on the open market.

Communicating the Employer Brand

Once an organization has established its employer brand (we say “brand” here because most organizations have one dominant brand, even though they may have two) through a clear and visible contract, the next challenge is to utilize it effectively. For an organization to recruit effectively, its brand needs to be known and understood. One way to ensure this is to feature it in all communications about job openings. In the case of some b2change companies, it makes sense to feature the brand in ads for products and services. Southwest Airlines does this in its TV commercials. The brand also should be featured on the company’s website, with videos that show employees talking about what it is like to work for the organization and what the brand means to them.

When individuals actually apply for a job, either online or in person, they should be given an introduction to the company that emphasizes what life will be like if they join the organization. It should be a realistic preview that tells it like it is. This type of preview not only can help set realistic expectations but can drive away individuals who are not a good fit and if hired, would not stay long.

Google, as part of its effort to attract the right type of software engineer, has worked hard to establish its brand as an employer. One of the more interesting things it has done is place ads in a number of technology journals and magazines that feature its GLAT (Google Lab Aptitude Test).

The GLAT contains a number of questions that, over the years, Google has found useful in predicting who would be a good engineer for the company. By putting the GLAT into the public domain, Google allows individuals to self-assess and see whether they are a good fit for the organization. In essence, it is a different kind of realistic job preview and branding of Google as an employer. What kind of questions are on the GLAT? Here is a sample: What number comes next in this sequence: 10, 9, 60, 90, 70, 66? … Sorry—we don’t know the answer, but if you do, contact Google. You may be right for them!

B2change organizations try to eliminate individuals who are not a good fit very early in the recruitment process. Organizations often spend far too much time interviewing and processing applications from people who are simply not a good fit. Much of this time can be saved if organizations develop a clear employer brand and make a stronger effort to acquaint individuals with it.

In addition to discouraging bad applicants, having a strong brand can serve to attract individuals who otherwise wouldn’t apply for the job. Given an unclear image of what working for an organization is like, individuals who in fact would be a terrific fit may simply not be interested enough to go through the application process. A strong brand that makes it clear what working for the firm is like can significantly help in creating an applicant pool that is an excellent fit for the organization.

Use Interviews to Gather Objective and Subjective Data

Often the best way to determine how someone will respond to change is simply to ask him or her. Independent of its predictive value, asking is a worthwhile thing to do. It communicates the importance of a willingness to change and may indeed yield interesting information about the person. Individuals who clearly have trouble answering the question or indicate that they are not interested in change can be ruled out immediately.

The challenge for the b2change organization is in assessing the validity of applicants’ claims that they like change and regularly seek out opportunities to learn new things. Individuals may say these things even though they are not true, for at least two reasons: either they simply don’t know themselves very well or they may be consciously providing misinformation because they want the job and know the right things to say.

The key to assessing individuals is to go beyond simply asking them what they like by asking for behavioral examples from their past. Behavior-based examples provide revealing information, and they are much more difficult to fake than simple questions like “What kind of person are you?” and “What do you like?” For an applicant to fake examples of change-seeking behavior requires not just understanding what is desired but being able to come up with facts, figures, numbers, and behaviors to demonstrate that he or she has actually done it.

Most recruiting specialists are skilled at doing behaviorally based interviewing. The b2change organization needs to apply these skills to finding employees who can thrive in a change-oriented company. In the case of learning new skills, for example, asking how a job applicant responded the last time he had a chance to learn something new at work can be instructive; it is also useful to ask how many new jobs the applicant has taken on in the last several years. Other behavioral interview questions could include asking when the applicant last signed up for training courses or asking her to describe a time she was asked to change and didn’t, and why that was. In short, any series of questions that asks people to provide behavioral examples of their reactions to change are likely to yield valid and useful information about their favorableness to change.

Look at Past Behavior

When it comes to predicting job behavior, remember that the best predictor of future behavior is past behavior. The implications of this for selecting individuals who are likely to be both good performers in their present job and willing and able to change are straightforward. It is very important to look at the past behaviors of individuals for evidence of change. It is also important to check their references and to test the validity of their resumes. All too often, individuals present false data; the accuracy of any information applicants give about past jobs, pay levels, and assignments needs to be confirmed.

A background analysis needs to go beyond a validity check—it needs to look at the individual’s pattern of past behavior. A person with both positive performance reviews and a pattern of behavior that indicates a willingness to learn and take on new assignments is ideal for an organization that is trying to create a workforce that is able to change.

One note of caution here: in terms of looking at changes in jobs, a pattern of very rapid change is probably not desirable. Too frequent change can indicate poor performance in a job, or an employee’s moving on so quickly that an organization never has a chance to recoup the time it has spent recruiting, developing, and preparing the individual to perform well. How rapid is too rapid varies somewhat by job type, but as a general rule, eighteen months to two years is a good minimum time in a job. On the other hand, an individual who has stayed in the same job year after year is hardly one that would be a desirable recruit for a b2change organization.

Use Temporary and Contract Employment Where Possible

Hiring individuals as temporary or contract employees can help an organization change its staffing as the work to be done changes. This is a good reason to use temporary and contract employees, but not the only one. Employing a person for days, weeks, or months can accomplish two other important purposes.

One purpose is to determine whether the individual can do the work and whether he or she fits the motivational profile that the organization is looking for in a regular employee. Although this may be seen as exploiting the person, it doesn’t have to be if the employee is given a clear picture of what to expect and regular feedback on how things are going.

The other purpose of temporary employment is to give the person a realistic preview of what the organization is like—there is usually no better way to do this than to have him or her work as a temporary or contract employee. If the organization turns out to be a bad fit, the person avoids the embarrassment of being let go, and the organization avoids the cost of terminating a regular employee. Thus hiring someone as a temporary to see if the fit is good can benefit both the individual and the organization.