Prof Peter Cappelli

D. Murali
C. Ramesh

Chennai, July 4 Internal talent development programmes should focus on cost-effective plans for meeting talent needs such as assessing the skills needed, how long they will be needed and what the most effective way to secure them is, says Prof Peter Cappelli, Director of the Centre for Human Resources at The Wharton School, University of Pennsylvania.

Prof Cappelli is scheduled to speak at the forthcoming Nasscom HR Summit to be held in Chennai on July 5-6.

Speaking to Business Line on talent management and related issues, he said that talent management describes the process through which employers of all kinds anticipate their human capital needs and set about meeting them.

“Getting the right people with the right skills into the right jobs is the basic people management challenge in organisations. While the focus of talent management tends to be on management and executive positions, the issues apply to all jobs that are hard to fill.”

According to him, contracts that try to retain talent by barring employees from joining competitors are bound to fail.

“Non-compete agreements, where employees don’t work for direct competitors, are designed to prevent competitors from stealing knowledge, not so much to prevent employees from leaving. They could still leave and go to competitors in other industries.”

He added that laws against poaching experienced employees from rivals would not be feasible or desirable, as they would mean indentured servitude.

“Employers can ensure that employees are retained long enough to recoup the investments in them through contracts with incentives.”

As for employees, they can no longer rely on the employer to look after their long-term careers, he added.

“It probably makes sense to look around and see where else your skills could be used. If the answer is nowhere else or only in shrinking opportunities, it is important to upgrade them.”

On the concept of ‘incomplete contract,’ he said that in the context of labour markets, it involved employers making investments in employees and then expecting them to stay around.

“The problem is that there was nothing except incentives to keep the employees, and the incentives are largely gone.”

In Prof Cappelli’s view, concepts such as lifetime employment and employee loyalty have become irrelevant, in the US and much of Asia.

“It varies a bit in Europe because of the restrictions on laying off workers. Unless employers can commit and make obligations to employees, they can’t expect that employees will do the same for them.” According to him, tight labour markets are what cause wages to rise, as in any market.

“We need to remember that rising wages are what make employees better off. So, we shouldn’t panic as an economy at the notion that wages are rising. It is true that as countries develop and wages rise, their ability to compete based on low-cost labour erodes.”

Has the developed world come close to solving the problem of talent management? “It’s not clear what has worked in the developed world. Some countries, like the US, have turned the problem over to employers to solve.”

But that practice stopped working well when uncertainty in markets caused employers to abandon lifetime employment.

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