Layoffs, Cash and Strategic Human Capital...The Connection

There are a number of things happening that seem disconnected, but when you dig a little deeper have impact on our profession and the role and responsibility we should play in any economic upswing.

The first is the article from Newsweek titled "Lay Off the Layoffs." Written by Jeffrey Pfeffer, he contends that the normal approach when an economic downturn occurs is corporate leadership reduces headcount. He uses the example of the airline industry after September 11, 2001 terrorist attacks, which laid off tens of thousands. One who didn't was Southwest Airlines. An airline with a larger market capitalization than the other domestic airlines combined according to Pfeffer. The former head of Human Resources at Southwest makes the statement:

"If people are your most important asset, why would you get rid of them?"

Pfeffer's thesis, backed by research, is that layoffs hurt the company and the economy. There are the obvious costs to employees who are laid off, but the research also indicates that there are impacts to the company in higher costs because of severance pay, unemployment taxes, and reduced productivity to name a few. And if the bottomline is the end goal by protecting it with layoffs...the research indicates it doesn't work.

Combine this information with a blog post and more detailed column in CLO Magazine by Dr. Michael E. Echols of the Human Capital Lab at Bellevue University. In both he references a Wall Street Journal report that companies have more cash assets on hand than in the previous 40 years. At a CLO Magazine Breakfast Club event I attended that Dr. Echols presented at in late 2009, he put a number to that cash reserve comment...$14 trillion. That's right...companies are sitting on trillions in cash assets. Dr. Echols view is that companies since 2008 have reduced infrastructure, headcount and services to develop these large cash reserves because it provided flexibility to deal with the current economic situation...it provided liquidity.

Dr. Echols makes the case that talent and learning leaders need to play a more proactive role in advocating for the investment of these cash assets in the one thing that can create competitive advantage...human capital. That we need to champion for the right investments in leadership, business-critical skills and develop new strategic human capital capabilities and capacity.

Now...to make this kind of engagement with the CHRO, CFO and CEO successful, it will take planning and data. My perspective is that you have to understand the business strategy, what the environmentals are looking like related to globalization and change and determine what strategic human capital capabilities the business needs to execute its strategy. Defining these capabilities and then determining the current workforce capacity to execute those capabilities will provide you the information to influence key decisions on resource allocations like increasing headcount by buying critical talent from the talent pool, developing new capabilities in the current workforce or renting talent through outsourcing.

While I work in the public sector at the Defense Intelligence Agency (DIA), the concept is the same. At DIA, we have a mission that is about providing the right intelligence that enables decision advantage for our customer...the men and women that serve our country in the Armed Forces. Within that mission are a number of challenges that we have to overcome by identifying the key strategic human capital capabilities related to collection of information, analysis of information and planning based upon the intelligence process. We have executed in the last year a Human Capital Development (HCD) model that enables making informed resource recommendations.

If you are interested in hearing how DIA has executed this HCD model, I encourage you to take advantage of a American Society for Training and Development (ASTD) Benchmarking Forum webinar on Tuesday 16 February where we will share our story in more detail.

Chief Learning Officer and the Chief Talent Officer - Natural Evolution or the End

I got to participate in a virtual meeting this week with two people from a leading executive recruiting firm. They shared their perspective on what firms were looking for in relation to Chief Learning Officer positions. While there were a number of interesting insights and perspectives about CLOs based upon their recruiting experience. The one that caught my attention was this one statement.

"In the last year and half, I have conducted one CLO search, but 15 Chief Talent Officer (CTO) searches."


For me, that leads to a number of questions about the profession I have chosen...

- Is the CLO still relevant?

- Is the CTO replacing the CLO?

- Is there something that CLOs are not doing that is needed?

First, I think there is still a significant role for the CLO in enabling execution of business and mission strategy. As key strategic human capital capabilities, the CLO will support those by providing business-aligned and high-impact learning solutions that enable such key capabilities as collaboration, speed, and innovation in organizations. The CLO will have to determine their role in developing these capabilities...how they leverage social networks and informal learning as other learning tools in the toolkit.

There is evidence that the CLO may need to do a better job in aligning learning to business. The current economic situation drove this home as cost-cutting became critical. But the need to do detailed planning of how to align learning resources and initiatives to business strategy has been a constant and consistent message to learning professionals. While a number of companies come to mind that are leaders in their ability to do this, like Cisco, IBM, and Bank of America, there are indications that significant room exists for improvement.

A survey report by the Masie Learning CONSORTIUM on learning governance stated:

"86% of organizations do not have an enterprise-wide plan for learning that spans the organization."

While our profession has a number of articles and conference proceedings on this topic, something prevents it from pushing forward and obtaining that position as a trusted business partner.

With this perspective in place, I don't think the CTO will replace the CLO. The CLO has their role to play supporting learning and development and the leadership development efforts at organizations. What the CTO does bring is a focus on the integrated talent management process. Developing an employee value proposition, communicating employer brand, recruiting, performance management, leadership development, succession planning, etc.

As I have discussed in my first blog post, CEOs recognize the importance of people skills in moving their organizations forward and enabling them to be successful. That requires talent. Talent that is either bought, developed or rented to execute the strategy. CEOs will continue to look for CTOs as the mechanism to position their organizations for future success. The difference between the CLO and CTO is that the CTO will focus on the integrated solution approach to developing strategic human capital capabilities. The CLO will be a part of the overall integrated solution.