Feature

The risks of buying talent

Buying talent is a complex process. Sudipta Dev analyses why organisations need to be cautious

For a knowledge intensive industry like information technology, the ability to recruit, retain, motivate, and develop the people resources is the greatest competitive strength for any organisation. Companies often resort to aggressive recruitment strategies to meet the demand for talent resources. Buying talent is a common phenomenon when organisations have to suddenly procure skill sets from the market in response to urgent business needs. The question is: does an organisation always get what it has paid for? The answer is as debatable as the issue whether it indicates lack of career roadmap for key positions within the organisation.

"When an organisation enters a business late and has no time for building talent from scratch, poaching from competition is the best option. This of course comes at a price" -N Muralidharan Managing Director & Vice-president Jobstreet.com India

An organisation needs to buy talent when it is in an evolving stage. N Muralidharan, Managing Director & Vice-president, Jobstreet.com India, lists the three situations when such a need arises:

• There is an expansion and urgency to hit the market soon and needs “ready-made” staff; “go to market” pressures
• It is entering the business late and has no time for building talent from scratch, so poaching from competition is the best option. This of course comes at a price
• When internally an organisation does not have the kind of talent that it is looking for and there is an urgent need.
  

There are a few like Sadhana Somasekhar, Director & Chief Marketing Officer, Future Focus Infotech, who believe that most organisations with a mature recruitment/hiring model do not opt for the “buy” route. “They attribute this to the organisation’s business conduct/ ethics, HR strategy, etc. However, at the grassroot level, the reasons that go against buy-outs, appear to be the instability associated with such ‘bought-out’ resources. Both, with respect to the candidate and within the team. This also goes to set precedence with new hires.” Somasekhar adds that when there is a buy-out, it is often masked in the guise of a “joining bonus”, which is in truth the reimbursement of the “short/no-notice” compensation borne by the candidate to his last employer. Buy-outs happen discretely, and is normally resorted to when there is a project specific resource demand that has to be met at any cost. Buy-outs also happen at very senior levels, although it is preferred to be referred to as a “strategic hire”. This is basically driven by a specific business interest similar to that in an acquisition or merger.

Getting your money’s worth

"Expectations and culture matching are perennial risks applicable to all employment engagement scenarios, only in this case, the cost impact tends to be higher" -Monisha Advani CEO EmmayHR Services

Buying talent is not as easy as buying a commodity, it is a complex process. An organisation does not always get its money’s worth. It is in fact a two way process. Muralidha-ran acknowledges that while the person hired could be appropriate, if the work related ambience and the product offering is not upto the mark, it may still not work, “To give an analogy, you might have a great celebrity endorsing your product but if the offering is not appropriate the take off does not match expectation.”

Vikram Bhardwaj, Managing Consultant, Redileon executive search, insists that more than the monetary cost vs benefit comparisons, one has to view this more strategically—the opportunity or hidden costs need to be accounted for both ways. Many times due to the factors at play, optimum results are not obtained.

Despite the fact that organisations try their best to get the right person, Kris Lakshmikanth, Founder CEO & Managing Director, The Headhunters India, claims that about 70 percent to 80 percent of lateral hires succeed.

Talent that is procured directly from the market possesses proven experience, but is naturally expected to differ from the organisation’s own situation, requirement and culture. “Such cases will give rise to differentials in expectations and deliverables. What really rides the moment out is the maturity of the hiring organisation in recognising and expecting such events, and preparing to manage interests accordingly,” says Monisha Advani, CEO, EmmayHR Services. She adds with optimism that time is a great leveller and eventually the match does come about in cases where the effort to bring about the marriage is mutual between an employee and his employer.

The risks involved

Buying talent is not as easy as it seems. There are many risks associated with the process. Advani lists a few key factors:

• Price: You can land up paying over market indicators for a specific skill purely on the basis of a short-term analysis of your need to procure; and land up with a long-term cost impact that can become difficult to sustain
• Compensation expectations alter organisation or department wide on account of this external lateral introduction, leading to employee cost escalation
• Expectations and culture matching are perennial risks applicable to all employment engagement scenarios, only in this case, the cost impact tends to be higher.

Culture mis-match is in fact one of the key problem areas, particularly at management levels. “For instance, a person who has been very successful in a MNC need not do so in an Indian entrepreneurial set-up. Similarly, a person who has worked in a very large Indian group need not succeed in a small Indian entrepreneur owned/run company,” points out Lakshmikanth, adding that one of the key tasks of headhunters like him is to ‘match’ people and companies so that the marriages work.

Build or buy

"The flip side is dangerous while buying talent. Identifying the right people from the talent pool is challenging and a bad recruit might prove to be expensive" -Madan Padaki Co-founder & Director MeritTrac Services

The debate over building vs buying talent has been in existence for a long time. While buying talent has its just-in-time significance, from a long-term organisation development perspective building the talent resources within the company has greater benefits. “The advantage of building talent is that it gives organisations the ability to mould skills the way that they want it to be. The other factor is loyalty—you will have this pool locked in with the organisation for a longer period of time as compared to the ones that you buy. The chance that they share the long-term vision of the organisation is high. However, the down sides are that there is a huge investment in terms of cost and time required to build talent. Then there is also this uncertainty of losing the talent after investing to build it,” says Madan Padaki, Co-founder & Director, MeritTrac Services (a leading skills assessment company).

Padaki adds that the distinct advantage of buying talent is that the company has the option of choosing people with the right skill mix who will fit its requirement, rather than trying to build a talent pool that can perform diverse roles, which with the changing dynamics of the business environment is extremely difficult. With the right sources identified, buying talent can help an organisation gear up for growth plans and expansions. “The flip side is dangerous while buying talent. Identifying the right people from the talent pool is challenging and a bad recruit might prove to be expensive. The time required to align this acquired talent with the business objectives could be longer as compared to building your talent pool within the organisation to handle the role.”

The focus on talent building has led to the creation of corporate varsities and tie-ups with prestigious academic institutions. “They manage their exposure/risk via some financial agreement with the candidate, which could be part of the cost-to-company or recoverable in nature,” says Somasekhar, adding that this has become an integral part of the process of creating ownership. It is also a major selling point in the hiring process, but needs to be backed by strong HR processes and involvement.

While building is always a better option, organisations cannot always afford it, particularly at an exponential growth rate. “One has to be careful, particularly the Indian companies in the software space, since they are now hiring ‘expats’ globally at key managerial positions. The ability to handle the ‘locals’ in the US or UK or Germany or Japan is what will differentiate the ‘men’ from the ‘boys’,” states Lakshmikanth.

The fact remains that both modes of engaging talent are relevant to any organisation in today’s highly dynamic environment. Explains Advani, “Building talent is a more planned and proactive mode where the investment in development must be recovered/ sustained through the ability to retain, deploy and derive optimal productivity. Buy options are best exercised in situations where the skill sets desired does not exist and the cost and time to develop are not luxuries that a company wishes to experiment with. Also, in situations where inorganic growth demands introduction of new talent, it is best to buy expertise rather than build as the need for remedial or decision-oriented approaches will not allow for the time to develop a ‘build’ talent.”

Lack of career roadmap in organisations

It is generally believed that buying talent indicates a lack of career roadmap for key positions within the organisation. Experts are divided over this issue. Bhardwaj concedes that despite most companies progressively implementing robust performance-management systems, this always does not translate into effective career planning that lets people see and evaluate where they could go in their careers, which leads to attrition and then follows the urge to replace from outsite since the company is also not clear as to who can take charge on the roles effectively.

Refuting this, Padaki states that it can in fact send positive signals to the marketplace and can be interpreted as an indicator to the aggressive growth of the organisation. However, the recruitment branding of the company plays a crucial role in managing the perception.

Advani asserts that introducing a new skill or new expertise within an organisation should not be viewed as a threat to existing key personnel, “Positioning the new incumbent(s) as reinforcement to existing capabilities must be effectively championed by the organisation’s leadership and the HR department. One way to achieve this is to involve existing key personnel in the final decision-making process of making such appointments. Such accountability often inspires an unconditional buy-in and automatically makes the integration of the new talent a success.”

There is an interesting new development in the scenario. Explains Bhardwaj, “With the increasing business demand for a timely and consistent HR support, what used to be only the ‘build’ vs ‘buy’ decision has been expanded to include the ‘build’ vs ‘buy’ vs ‘borrow’ to include the option of temping. The HR matrix and decision support mechanisms have evolved considerably to account for this change.” The “build” vs “buy” phenomenon is all set for change with temping becoming the third alternative.

sudipta@expresscomputeronline.com