Under what circumstances should you get rid of a group of your best talent? You might think the answer is “Only in dire circumstances!” but there are other possibilities. One situation is when a successful small firm outgrows the skills of its current managers. That is indeed an important moment in a firm’s history, but replacing good managers with better managers is not as dramatic as the case I want to investigate. One reason you may want to replace your best talent is because the strategic structure of the industry has changed.
Understanding strategic change in industries
Imagine you are in the biotechnology industry and your success has been driven by a high powered R&D department. However, now the industry is changing, the big technical advances have been made and now the way to capitalize on them is to ramp up manufacturing. Excellence in R&D becomes less important than excellent in production. This kind of strategic shift is not uncommon. Manufacturing firms may face a shift where efficiency in production becomes secondary to excellence in design. Advertising firms are facing a situation where their traditional mastery of creative TV advertising is less valuable than analytically driven digital marketing.
You might think that the kind of strategic shift does not create huge problems: you just keep your top performing old talent and add in top performing talent in whatever discipline is ascendant. However there are several problems that arise.
The first problem may be cost, if you have a team of the world’s top biochemists chances are that it is expensive. Since you only need average biochemists there will be pressure to eliminate the expensive people.
Secondly, the culture will need to change so that, as in our first example, manufacturing and not R&D is top dog. The R&D stars will not be happy about this; they will fight the needed change in corporate direction. You will need to push them down or push them out. No one likes it when the rules suddenly change, but they do. We need to face up to the unpleasant fact that, when faced with strategic change, a company may find themselves no longer needing some high performing but expensive talent that is no longer pivotal.
Implications for HR
Everyone likes talking about ‘strategic HR’ but it is not always clear what they mean by it. Big shifts in how an industry makes money is a good example of where strategic HR can make a difference: changes in the industry have implications for talent, culture and where power lies. HR that understands this and can take the tough but needed lead in re-aligning the organization with the new realities.
How aware are you of what drives profit in your industry and how it is changing? Unfortunately, this topic is normally far outside the HR curriculum. Take a look at the book Profit Patterns. 30 Ways to Anticipate and Profit from Strategic Forces Reshaping Your Business by Adrian J. Slywotzky et al. It gives you a good sense of what can and does happen. Understand the forces that drive an industry are essential to being a strategic HR leader.