The Differentiated Workforce: Transforming Talent into Strategic Impact

This might sound a bit cold to some people, but once you begin to dive into the details you'll see it's not so bad. Workforce differentiation is simply a new way to manage talent so that the organization as a whole gets more benefits. And this doesn't just involve profits. Customers also get greater value from the organization, and the company gets a greater competitive edge.

Here's an example of what we're talking about.

Many organizations invest in high-profile leadership development programs for their staff. But those in HR and upper management are not always clear about the value of this investment. These people know they need to be offering their staff some kind of training, but they don't really know if these investments are paying off. In reality, they're offering training courses based on demand, rather than on the benefit they're likely to deliver to the organization.

But with an action plan developed using "The Differentiated Workforce," you could greatly reduce this uncertainty. You'd know exactly what kinds of jobs and people would benefit most from leadership training, and what kind of return your organization could expect from this investment.

In short, you'd have a realistic strategy for managing your best and brightest people to deliver the greatest value for your organization.

If you work in a leadership position, then you'll want to read this book. Each chapter gives clear, actionable steps for creating a talent development strategy for your workforce. And, by the time you're done reading, you'll have an in-depth understanding of whether your organization is going in the right or wrong direction, in the way that it develops its talent. And, if it's going in the wrong direction, what you can do to help fix this.

Three authors have contributed more than two decades of research to this book. Brian Becker is a professor of human resources in the School of Management at the State University of New York in Buffalo. Mark Huselid and Richard Beatty are professors of human resource management at Rutgers University, and they both consult extensively around the world.

So, keep listening to find out why your firm's most strategically important positions might be the lowest ones on the ladder, why your company's biggest expenditure is the one that's least accounted for, and why keeping your firm's cost-per-hire low is a huge mistake.

The authors have divided up this book into seven chapters. They spend the first one explaining what they mean by workforce strategy, and why it's becoming so important to organizations that want to succeed in the 21st century.

As you heard earlier, workforce differentiation, in its simplest form, means disproportionately investing money, time and resources on the people and jobs where you can expect disproportionate returns.

But what kind of benefits can you expect from implementing this strategy?

Well, the authors give us a hefty list here. One of the biggest benefits is that leaders will be able to plan workforce investments more strategically than they might have been doing before. And, organizations will get a clear picture of which workforce investments give them the highest returns. This means they can eliminate the investments or positions that don't deliver any value.

The authors state that every workforce strategy must answer two questions. Question one is: how does the workforce contribute to the firm's competitive advantage? And question two is: how should the workforce be managed to realize that value?

We realize that these questions are hardly new in HR. But, for the authors, it's a case of going back to basics, in order to build an effective workforce strategy on the strongest possible foundations.

Chapter two outlines the first step, which is identifying which parts of the workforce make a strategic contribution to the organization, and which parts don't.

Now it's important to be clear here. All positions are valuable, or else the company wouldn't fund them. But, not all positions are strategic. We need to look at the positions that really help move the company's strategy forward, and give the firm a competitive advantage.

To start, you've got to come up with a list of your organization's strategic capabilities. The authors define these as your organization's assets that combine talent, information, technology and routine.

Once you have a healthy list of options, there's a handy table of questions you can use to narrow your list down to the one capability that gives your firm the most value. This final capability is the thing that most differentiates you from your competition and increases the value to your customers.

The next step is figuring out how your talent is contributing to the success of your most important strategic capability.

As you can probably imagine, this is no easy task. But the authors give us step-by-step instructions through this two-stage process. And they also show us how to start developing a strategy map, which forces us to look at the different dimensions of the strategy we'll be developing.

Now that we know our firm's best strategic capability we can move on to chapter three, which helps us determine which positions are helping to deliver that capability. The authors call these "strategic positions," or A positions.

And, these positions are not always what you might think.

For instance, at Nordstrom's, a large American department store, the most strategic positions there are personal shoppers. At Wal-Mart, they are the distribution and logistics specialists that make the firm's delivery systems so effective.

So, how do you find out your firm's most strategic positions?

Well again, we're not left in the dark here. The authors outline clear steps for figuring this out. We thought their best piece of advice was not to jump to conclusions. Many managers often assume that their organization's most strategic positions are the ones at the top. But don't ignore the entry-level or customer-facing positions. Often, these can be the most strategic, even though they're lower down the ladder.

Readers get some really useful lists to help them differentiate between A, B, and C level positions.

Chapter four looks at leadership accountability, and the role leaders play in workforce strategy.

The authors point out here that, on average, organizations devote seventy percent of all their spending to their workforce. This makes it the largest single expense for most companies.

And yet, for most organizations, it's also the largest unaccounted resource. This is why management must make sure that the top talent is put in the most strategic roles in each level of the hierarchy. These are the roles that create the most value.

Here, we get to see exactly what managers should be doing to ensure this takes place. For instance, managers should make sure their workforce understands the status of the organization, where it's going, and what their role is in that journey. Managers should also play a key role in workforce development, assessment and rewards, and strategic human capital planning.

The authors give us plenty of tables and questionnaires to help explore these tasks. And, most helpfully, they offer up a fictional company profile that pulls all these responsibilities into one place and illustrates the change that can happen when everything works together.

By now we understand why it's important to have a workforce strategy in place. But, how do you actually start creating one?

Well, we learn about that important piece of the puzzle in chapter five. We have to start by creating a culture of accountability in our organizations.

This may seem like a strange first step. But, the authors explain that by creating a culture of accountability, everyone in the firm will focus on executing the strategy and will hold each other accountable for the outcomes. Of course, the authors freely admit this is much easier said than done.

The authors provide us with a list of 50 questions that help assess what our organization's culture is like now, and what we'd like it to be in the future.

Next, we dive into the real meat of creating a strategy. And, there are some really great tips to help us get started.

One of our favorites had to do with getting away from the mindset that all employees need to be treated equally. A classic example of this is when employees are given annual raises regardless of how they perform, which is still common practice in companies around the world.

This means that the company's top performers may be underpaid, in relative terms, while the lowest performers are overpaid. The most valuable, underpaid earners leave the company for better opportunities. This leaves the company with a higher percentage of low performers, because they're the ones sticking around – and that's not good for overall productivity. The authors say a better approach is to link annual raises to performance.

One suggestion we thought was really different was that firms should hire "choice employees," not become an "employer of choice."

What's the difference?

Well, the authors say that companies without a workforce strategy are the ones that promote themselves as a great place to work. They encourage everyone to apply, which means the firm is inundated with potential recruits, most of whom are ill suited for the job.

Companies with a differentiated workforce, however, focus their recruitment on strategic talent. Low performers are discouraged from applying, which means that the applicants who are left are more qualified for the position. Long term, this means that employees are likely to stay on board, simply because they're a perfect fit for the organization.

Chapter five is where we really start to get a sense of what our workforce strategy is going to look like. All the pieces start sliding into place and making sense here, so this is not a section you'll want to skip.

Chapter six focuses on the final aspects of rolling out a workforce strategy. Here we learn how to measure the results of our strategy, and we get tips on putting our strategy to work in real life.

There was one section in chapter six we thought especially useful, and it cautioned against common workforce measurements. The authors say many of these metrics should not be used as strategic measurements, because they can be really misleading.

For instance, many firms look at cost-per-hire, and try to keep this number as low as possible.

But why would you want to keep this number low? The more you spend on finding high-quality recruits, the higher the likelihood you'll find someone who actually fits your organization. Trying to lower the cost-per-hire means that your recruiters won't be as selective as they could be. And this only costs more money in the long run.

Another metric is employee turnover rates. Now, most organizations want a low turnover rate. But, the authors say that all turnovers are not created equal. High turnover among your C players could actually be a very good thing. But if you've got high turnover among your A players, it could be disastrous

The last chapter gives us an inside look at how this can all play out in a real organization. The authors highlight the American Heart Association, which differentiated its own workforce using many of these tips and strategies.

This last chapter will be really helpful to readers, because you can see firsthand what real workforce strategy design and execution looks like. And, you get to see some common challenges that you'll likely run into when you start creating your own strategy. This was a brilliant addition by the authors.

So, what's our last word on "The Differentiated Workforce"?

Well, it's definitely a book that can help leaders and HR professionals make some pretty big changes in their organization. The authors have done a brilliant job keeping the fluff out of this book, so all we're left with are instructions that are clear and very well explained.

We were impressed with how thorough the authors were in making sure readers would have every tool they might need to create a workforce strategy that works. This is not a book that will leave you with questions at the end.

The only complaint we have about this book is the tone. It reads like a dry textbook, which isn't surprising considering three professors worked on it. The lack of liveliness and personality can make it difficult to keep going at times, especially since some of the concepts are a bit complex. But, don't let this put you off the book. Yes it's dry, but the information is top-notch.

"The Differentiated Workforce," by Brian Becker, Mark Huselid, and Richard Beatty, is published by Harvard Business Press.

That's the end of this episode of Book Insights. Click here to buy the book from Amazon.