The risks of buying talent

Buying talent is a complex process. An analysis on 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. 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.

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 and 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 or ethics, HR strategy and so on. However, at the grassroots 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 sets a 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 or no-notice” compensation borne by the candidate to his last employer.

Getting your money’s worth

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. Muralidharan acknowledges that while the person hired could be appropriate, if the work related ambience and the product offering is not up to the mark, it may still not work. “To give an analogy, you might have a popular celebrity endorsing your product but if the offering is not appropriate the returns do not match expectation,” he says.

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.

Talent that is procured directly from the market comes with proven experience, but is 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.

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 may change 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 mismatch is in fact one of the key problem areas, particularly at management levels.

Build or buy

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 talent within the company has greater benefits. “The advantage of building talent is that it gives organisations the ability to mould skills the way 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 downside is 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 skills assessment company).

Lack of a career roadmap

It is 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 outside since the company is also not clear as to who can take charge of the roles effectively.

There is also an interesting new development in the market. 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.