Toward an HR Decision Science

Long gone are the days of data shortages in HR. In fact, if anything, there’s just too much data to make sense of. John W. Boudreau of the University of Southern California and Peter M. Ramstad of Personnel Decisions International write that information overload “is now a greater threat to HR effectiveness than a lack of measures” (2004, p. 28).
What’s really missing, they argue, is a cognitive framework that helps organizations make sense of all that workforce-related data. That is, there needs to be a stable and reliable set of methods – or “decision science” – that allows managers to improve their ability to make choices.

HR in its present form is more of a professional practice than a decision science. That is, HR has continued to evolve and improve, but it’s still focused on the traditional paradigm of delivering services to customers. In a way, it’s a lot like accounting and sales in the days before those practices gave birth to the decision sciences of finance and marketing (Stolz, 2003).

To help create a decision science for human capital, Boudreau and Ramstad have coined a new term. “In several companies, we have labeled it talentship,” they explain, “because it focuses on decisions that improve the stewardship of the hidden and apparent talents of employees” (2005c, p. 131).

Among their most compelling ideas is that employees can be segmented into talent pools in much the same way that marketers segment different groups of customers. They explain: “Sometimes a talent pool is completely contained in one job, but usually talent pools combine elements from several jobs or skill sets. Examples of talent pools are ‘those with customer contact at the point of service,’ ‘those who integrate product lines to support cross-selling’ or ‘leaders’” ( Boudreau & Ramstad, 2005b, p. 22).

The purpose of this segmentation is to determine which talent pools are most pivotal. After all, not all talent pools are created equal. An investment in one – especially if its importance has been underrated in the past – may pay off much more in terms of strategic success than an investment in another. The ones with the biggest potential payoffs are “pivotal talent pools,” and management can’t always predict which pools they are without a decision science framework (2005a).

Disney, for example, discovered that in its theme parks, the street sweepers perform important jobs because they have a relatively high amount of contact with customers. By selecting and training this pivotal talent pool for more than just sweeping streets, the company was able to significantly contribute to the customer experience (Manville, 2003). In another example, Boudreau and Ramstad investigated the operations of Federal Express Asia Pacific. They discovered that “some of the largest opportunities to improve on-line performance and on-time performance and customer satisfaction might lie with a relatively ‘undervalued’ talent pool: couriers and dispatchers” (Boudreau & Ramstad, 2005b, p. 24). HR strategies geared toward couriers and dispatchers might well give the organization a strategic advantage over the competition.

Borrowing notions from marketing decision science, Boudreau and Ramstad (2002) note that marketing “clearly distinguishes between three important questions that we call ‘Impact,’ ‘Effectiveness’ and ‘Efficiency’” (p. 17). In talentship, impact is the degree to which improving a given talent pool leads to greater strategic success.

By comparison, effectiveness is the degree to which a given practice actually does what it was supposed to do. For example, a training program might well help salespeople do their jobs better. But, if the real problem is that the company can’t deliver the product quickly enough, then just training salespeople won’t lead to much strategic success. That is, the training would be effective but it wouldn’t have much of an impact. Meanwhile, efficiency is basically how much it costs to deliver a program or benefit. All three of these elements are “anchor points” in Boudreau’s and Ramstad’s HC BRidge® Decision Framework. (For more on this framework, go the link at the end of this TrendWatcher.)

Time will tell whether the term talentship catches on in organizations, becoming as common as finance or marketing. But even if it doesn’t, the idea of segmenting the workforce by talent pools and then determining which pools are ripest for a high-return investment seems a fine and even inevitable idea. After all, information technology gives companies more workforce-related data than ever before, and – given the market’s growing focus on intangible assets – it makes sense for companies to analyze their human capital with the same vigor and rigor with which marketers analyze customers. It also makes sense to use the flexibility of information technology to craft specific HR and management initiatives to serve specific talent pools. Whether firms can make a true science of all this remains to be seen, but at least they can improve today’s state of the art.

For much more information on the HC BRidge® Decision Framework, click here.

For a Workforce Insights interview with John Boudreau, click here.

For an article called “HR Evolution: Following Pattern of Sales, Accounting Functions?”, click here.

For a PDF copy of the paper “‘Professional Business Partner’ To ‘Strategic Talent Leader’: ‘What’s Next’ for Human Resource Management,” click here.

For more on a book about strategic HR, click here.

Documents used in the preparation of this TrendWatcher include the following:

Boudreau, John W. and Peter M. Ramstad. “‘Professional Business Partner’ To ‘Strategic Talent Leader’: ‘What’s Next’ for Human Resource Management.” Center for Advanced Human Resource Studies. Working Paper 02-10, 2002.

Boudreau, John W. and Peter M. Ramstad. “Talentship Ahoy.” People Management, Wilson Web, October 13, 2005a, pp. 32-35.

Boudreau, John and Peter Ramstad. “Talentship and the New Paradigm for Human Resource Management: From Professional Practices to Strategic Talent Decision Science.” Human Resource Planning, Vol. 28, No. 2, 2005b, pp. 17-26.

Boudreau, John W. and Peter M. Ramstad. “‘Talentship’: A Decision Science for HR.” Strategic HR Review, January/February 2004, pp. 28-31.

Boudreau, John and Peter Ramstad. “Talentship, Talent Segmentation, and Sustainability: A New HR Decision Science Paradigm for a New Strategy Definition.” Human Resource Management, Summer 2005c, pp. 129-136.

Manville, Brook. “Making Sense of Human Capital Economics.” November 2003, pp. 40-48.

Stolz, Richard F. “HR Evolution: Following Pattern of Sales, Accounting Functions?” Human Resource Executive, August 21, 2003.