Why Not Trade Surplus Talent with Other Firms? A Lesson Learned From Sports

From ERE Net by Dr. John Sullivan Aug 31, 2009, 6:00 am ET

If
you want to be strategic and make quantum steps in performance, look
outside your familiar zone. Step beyond the best practices in your
industry and find new ways to leverage your resources, including talent.

In fact, the best way I know to learn about radical new approaches
and innovations is to examine the best practices from organizations
operating completely outside your industry. I call this practice of
adapting "unheard of" practices from other industries parallel
benchmarking.

It is known as parallel benchmarking because you are learning from
completely different industries that still, however, share a parallel
problem. The practice that I am suggesting that your firm consider is
from baseball and involves "trading" surplus talent with other firms.

If you want to make dramatic improvements in
business practice, you need to study how best-performing firms in
completely different industries attack your problem.

If you want to go beyond merely talking about outside-the-box
solutions, consider changing your approach and focus on "likely to be
laughed at" talent-management solutions like those emerging around
Twitter and YouTube, and developing a "talent trading" program.

Almost all firms at some point have a surplus of employees that
results from changing business conditions. Unfortunately, the typical
approaches for getting rid of surplus employees are cost-containment
approaches that provide no payback to the firm.

The most common approach, where corporations lay off surplus talent,
is a lose-lose approach. You release talent and get no remuneration for
it, despite having invested in it for years via salaries and training.
At the same time, you also incur huge costs because you pay for
severance, outplacement services, and damage to your employer brand
reputation.

But what if there was a solution where instead of releasing talent,
you could exchange or "trade" talent with other firms and get something
of value in return? Now that would be a talent-management breakthrough
that would make any CFO smile.

Trading Employees Is Not Uncommon

Firms routinely loan employees to initiatives with their strategic
partners and joint ventures; not-for-profits periodically exchange
talent when their funding priorities or levels change; and federal
agencies exchange employees on both a short-term and permanent basis
using interagency exchanges and loans.

The military also periodically exchanges talent among the different
branches of the services in order to fill talent needs or to acquire
knowledge or best practices.

While the practice is common in each of these instances, the
benchmark industries to study with regards to the practice are
professional sports and entertainment, where trading is a required
business practice.

Sports Trading Is a Perfect Model

If you managed the Yankees or Manchester United and you had an
excess of skilled players in a particular position, you would make a
deal and trade that talent to another club for players in a skill area
where you had a significant need (or for cash). In professional sports,
managers who simply release talent are considered as failures because
they got nothing in return.

In Major League Baseball, for example, trading between teams in the
same league and between different leagues is such an integral part of
the talent-management process that trading isn't given a second
thought. Incidentally, the most desirable and high-impact trades don't
involve "losers," but rather, top performers. These sports franchises
are just like any business enterprise - they are for-profit
corporations striving to maximize their talent ROI by always getting
something of value ... for something of value.

A Business Example: The Value of Trading Employees

Let's assume you were a computer firm like Apple, and you wanted to
get into the music business by developing a music player. You could
train your current employees who have computer backgrounds, but that
would be time-consuming, expensive, and difficult because no one at
your firm really knows the music industry.

At the same time, another firm, like Sony, that was going through
tough times might have surplus talent with extensive knowledge of the
music industry. Because Sony might be interested in gaining a better
understanding of Internet video transfer and the process of innovation
at Apple, Sony might be willing to trade some of its excess music
talent for individuals involved in the Internet video transfer or
innovation process at Apple.

Because the traded employees from Apple's video-on-demand set-top
box division would be going into a high-priority area at Sony, they
might be excited and willing to accept the trade. The Sony employees
facing a layoff would probably be thrilled, both with the chance to be
sought out by experts and with their renewed job security at Apple.

Advantages to the Corporation

In addition to the obviously higher-talent ROI, there are other
benefits that can accrue to an organization that develops a trading
process, including:

• Expanded talent acquisition opportunities - mutually agreed-upon trades can be easily made with large customers or strategic partners. In contrast, direct recruiting
  from them is simply out of the question because it would damage the
  relationship. As a result, trading gives you an opportunity to acquire
  talent from organizations that were previously off-limits.


• You may get the entire team - in recruiting, you
  acquire individuals who are independent and haven't worked together as
  a team. However, in cases where a company is closing down a facility or
  a particular area of business, trading might provide you with an
  opportunity to acquire or "lift out" an entire intact team. Bringing on
  a cohesive unit might enable them to get up to speed almost immediately.


• Acquiring best practices - because you're trading
  with high-performing firms, not only do you get talented individuals
  but with them, you also get the opportunity to better understand and
  learn the best practices of the "sending" firm.


• High-quality talent - because poor performers are
  generally excluded from trades, if you make accurate trade assessments,
  you will be getting quality, trained talent. This talent's shortcoming
  is that the firm has a surplus of talent or skills in that particular
  area (using a basketball analogy, you're getting a talented seven-foot
  center merely because the team already had one more seven-foot center
  than they could carry on their roster). Trades can also include a
  "return" clause or a penalty if the traded employee turns out to be
  less than they were billed as.


• Delaying is possible - in the case where an
  organization doesn't currently need more talent of any kind, the two
  exchanges of employees need not be simultaneous. The "sending" firm can
  delay their selection and receipt of their talent to a more opportune
  date (an employee to be named later).


• Fewer negatives - there are fewer retaliation
  issues and legal problems associated with trades because they are
  negotiated and all of the parties involved have agreed. In contrast,
  direct recruiting from competitor firms can result in back-and-forth
  raiding, which can generate lawsuits and drive up salaries.


• Fewer turnover surprises - employees may see
  layoffs coming and go to another firm with little notice. In contrast,
  if they see that you're actually trying to help them find a better
  opportunity at another firm, they may be a little less active in their
  job search. And with a trading process, you have sufficient advance
  notice of who is leaving and when, which makes it easier to prepare for
  any vacancies as a result of lost talent. When large-scale raiding is
  going on, corporations need to put significant resources into retention.

Questions about the Process

If you're skeptical, you probably have some questions about the trading process.

Here are some typical questions and their answers:

• Who would want these surplus employees? - in
  baseball for example, the highest quality talent are the most frequent
  trade targets. Surplus in this case merely means you have too much of
  it, not that there's anything wrong with it. In almost all cases, these
  are valuable employees with important skills; they just happen to have
  skills (or work in a job) where the firm has more than enough labor
  available. In the case of a facility closing, these may be exceptional
  individuals who are just not willing to relocate.


• Why not just recruit them away? - traditionally
  when a firm sees "talent" that it wants at a firm, it merely attempts
  to recruit that individual or team away. Unfortunately, recruiting can
  be expensive and time-consuming. If your firm has a weak recruiting
  team, it won't be able to acquire the same quality of talent as it
  could get from trading. It's also important to remember that if you
  focus exclusively on recruiting individual talent, you still have done
  nothing to limit the millions in losses that occur when you lay off
  surplus talent that you've invested in over the years, without getting
  a penny in return.


• Won't employees refuse the trade? - obviously
  your employees could refuse the trade because employees cannot be
  "owned" by their employer. But it's important to note that it's fairly
  common for key baseball players to have formal "no trade clauses."
  However, all that these restrictive causes really mean is that you have
  the burden to make a convincing case to the employee that the new
  situation will be better for them. In other cases, obviously employees
  who are facing layoffs wouldn't require much convincing, while others
  could be given a bonus for accepting the trade. Incidentally,
  traditional recruiting of "currently employed individuals" always
  includes a significant "convincing" element (to convince them to leave
  one firm for another), so that same convincing process just needs to be
  adapted to this trading approach.


• Who should be involved in the trading effort? -
  normally the trading process should be managed by the recruiting
  function. You should start by making the business case to get managers
  and the CFO on board. The trading process itself requires managers and
  a personnel function that can accurately identify surplus talent within
  your own organization. It also requires a trading team with the
  capabilities of assessing the quality and the value of talent that is
  located within other organizations. The head negotiator must be capable
  of putting together a "win-win" trade, where both teams and the player
  are clearly convinced of their direct benefit. Managers should be
  rewarded for successfully trading away surplus talent and for acquiring
  excellent talent in trades.


• Who should we offer in trade? -
  firms should develop surplus talent or redeployment lists that "look
  forward" at the firm's talent needs at least one year out. In addition,
  a component needs to be added both to the workforce planning
  and to the performance appraisal processes to identify individuals who
  we cannot afford to keep or retrain. The retention, redeployment, and
  development teams should also be asked to identify individuals that are
  likely to leave (and thus offered for trade) because of the restricted
  opportunities within our firm.


• What should we ask for in return? -
  obviously the key to a great trade is that both sides perceive that
  they are getting great value (and this is even more important when
  trading with customers or strategic partners). The key to success here
  is to work with your trading partner to get them to pre-identify what
  they would consider to be the most desirable talent and skills. If you
  target firms that are in trouble and they can't handle more employees,
  the trade might include a significant cash settlement rather than an
  equal "talent for talent" trade.


• Which firms should we trade with? -
  start by looking at "best practice firms" within your own industry.
  Then look at "parallel industries" that use similar technologies, that
  have similar customers, or that have equal or faster innovation and
  growth rates. Also target firms that are seeking to expand into your
  industry.


• Are there typical "sports trading" options that I should utilize? -
  many managers are big sports fans, so they almost instantly understand
  the "sports trading" mentality, and because sports coaches are
  experienced in arranging difficult "trades" for outsiders, it's a good
  idea to try some "sports" trading options to improve your trading
  success. Here are eight ideas to consider:

1. 2 for 1 exchange - propose a two "B" players for one "A" player exchange.


2. For a player to be named later - propose accepting a surplus
   employee now in exchange for an opportunity to have one of equal value
   (but unnamed) at a later date.


3. Offer a slate - instead of offering a single employee trade, instead offer a slate of candidates from both firms.


4. Pay a fee - offer to accept a fee in cases where the firm is
   willing to accept your talent but it has little desirable talent to
   offer in return.


5. Delay the transfer - offer to keep the traded employee on your
   payroll for a limited period of time until the "receiving firm" is
   ready to orient and train them.


6. From major league to AAA - if you are a well-known firm, seek out
   second-tier firms or smaller sized firms that would be thrilled to get
   anyone from a top firm for the prestige or in order to learn their best
   practices.


7. Ask for deal sweeteners - when negotiations are stuck, directly ask
   their team to propose a list of potential "deal sweeteners" to move the
   negotiations on. Also try to identify in advance any deal-breakers.


8. Best practice for talent - offer the firm the opportunity to learn
   one or more of your firm's "best practices" in exchange for their
   surplus talent.

Final Thoughts

Large-scale layoffs are a negative ROI business practice because you
are giving away a resource in which you have invested millions. Not
only are you giving them away, but you have no control over where they
go.

In fact, released employees might go directly to your competitors,
further compounding your losses. A better approach would first provide
you with some control over where they go, as well as provide your firm
with a direct quid pro quo for this released investment.

Initially, the idea of trading surplus talent with other companies
might seem outrageous, but the practice has proven to be a winner. If
you want to make a quantum leap in performance, it only makes sense
that you need to make a quantum change in your business practices.

As crazy as it might initially sound, if you're in a labor-reduction
mode, a formal talent-trading process may be the highest ROI activity
available to you!