Monday, January 02, 2006

A portfolio approach to HRM

Companies can not afford to have "A players" in all positions. So businesses need to adopt a portfolio approach to workforce management, systematically identifying their "strategically important A positions", "supporting B positions", and "surplus C positions", then focusing disproportionate resources on making sure A players hold A positions.

Mark Huselid, Richard W. Beatty and Brian E. Becker say in the HBR of Dec 2005 that it is necessary to take a portfolio approach to HRM.

A Positions differ from B and C Positions in:

  • Strategic impact (big vs. small)
  • Scope of authority (make autonomous decisions vs. little discretion)
  • Compensation (performance vs. market price)
  • Effect on value creation (big - small)
  • Consequences of msitakes (very costly vs. not)
  • Consequences of hiring the wrong person (very costly vs. easily remedied)

"Today's competitive environment requires a shift from treating everyone the same (equality) to treating everyone according to his or her contribution.

Such a HRM approach would mean that positions and also people are categorized, primarily for the strategic impact they have. A People then get A Positions and their evaluation, development, compensation and succession are adjusted to their special status.