Think About Talent Like a Financial Planner

I’m a planner; I have to juggle a career and a family, so my home calendar is my family “book of reference.” It helps us all to know who is where, doing what, at what time, and which parent is responsible.

I am a planner financially too because I have responsibilities and I also have dreams. I have a responsibility to create a financial nest-egg for retirement, my children’s education, and maybe … just maybe … the country house I dream of buying someday.

To help me plan, I engage with a financial planner who works with me on my portfolio, the degree of risk, future plans and responsibilities, as well as current needs. Granted, none of us know how the stock market will look in 20-plus years, but I feel comfortable knowing my current financial plan, and my path.

I am not a financial expert. I work in the business of talent, specifically talent acquisition. It is a domain I enjoy continue to learn in an ever-changing environment where it can be difficult to plan. But it recently dawned on me that how I plan my future financially could also apply to how my organization looks at its talent. After all, without your talent, products and services as well as new ideas and innovation would not exist. If talent is your equity, then (to quote a branded credit card company in the United States) “Do you know what’s in your wallet?”

Create the Portfolio: Current State

Similar to my first meeting with my financial planner, I look at workforce planning as the necessary step to pull all relevant information together to define your current talent portfolio.

When my financial planner showed me my portfolio (displayed as a pie chart, no less), on some points I was surprised at how much I had let myself get exposed to risk without intentionally doing so. If we apply this same process to talent, some of the areas of risk exposure could include: lack of succession pools, growing need for skills without a defined plan on how best to develop or attract those skills, or even a changing workforce hierarchically or geographically. When it comes to talent, if you start investing in your talent asset early and often, it is not something you want to lose quickly. Unless we take this time to sit down and gather the data, it’s unlikely we would really know just how exposed to these risks we really are.

Define Your Goals and Your Appetite for Risk

When I understood my portfolio, I talked about my objectives with my financial planner; I liken this to business strategy. What is your organization’s short- and long-term strategy, and how will your talent help you achieve it? Once these ideas are brainstormed, the task then becomes how to build a talent portfolio to help you get there while balancing the degree of risk you are comfortable with. Financial options are numerous, but each comes with a risk/reward. In many cases, the money is not insured; you can win or lose your investment. When it’s gone, you will simply need to rebuild it. My financial planner’s question to me was: “What level of risk will allow you to sleep at night?”

If you apply that same question to your talent portfolio, you must recognize that high-risk exposure could leave you with talent shortages but save on short-term costs. If this reality keeps you awake at night, you might want to consider a diversification strategy.

In which areas of your talent portfolio are you willing to build, borrow, or buy to mitigate your risk?

Managing Your Portfolio and the Fuzzy Future

Managing your portfolio does not have to be complex. Keeping it simple, staying the path, and documenting your portfolio each year as a health-check are all suggestions my planner has given to me. When it comes to more long-term planning, like my retirement needs, which I’m not slated to hit for a few decades, no one knows the future of the markets. So, while I have that goal, it’s in my “fuzzy future” (my financial planner’s term).

Again, a talent portfolio can (and should) be health-checked and we must accept that it too will have some “fuzziness.” When we start to think long-term on talent, we’re not looking to plan and execute today on projections so far ahead that we can’t see them clearly. The “fuzzy future” of your organization’s talent needs can be a target point. While a pinpoint “crash” might cause some panic, you can hedge your portfolio to offset a short-term loss and still maintain course for your long-term objectives.

As long as your talent portfolio is documented and reviewed regularly, you’ll be able to change direction when needed while staying the long-term path.

Like the markets, talent evolves; it changes, it has peaks and troughs. Be careful not to fall into the trap of trying to time the talent market. In portfolio management, investors generally earn a lesser return on their assets using this strategy than the market over the long term. If you end up chasing market performance, you are often too late (and the same is true with talent).

Becoming a Portfolio Manager

While I would not recommend calling my financial planner for talent strategy support, we can apply the portfolio methodology to talent planning and acquisition. We can work with line managers, HR business partners, and colleagues, which specialize in various genres of recruitment. We can develop a view of our current portfolio, use analytics to understand the contextual market, align business strategy to define a talent projection, and then manage and monitor the portfolio along a pre-determined degree of risk.

Managing a portfolio is a daily job, requiring input from a variety of sources, and will ebb and flow with the market.

Applying this everyday thinking to talent helps us see things more clearly. It helps us develop our portfolio (i.e. workforce planning), determine our path (i.e. business strategy), analyze the diversity of our portfolio and the level of risk (i.e. talent strategy and human capital needs). Perhaps most critically, it also helps us monitor and manage our portfolio by performing annual health-checks as per our needs.

Applying sound financial management logic to talent will pay a lot of dividends.