Talent Management: a Great application for using Ronald Coase’s Theory of the Firm

This post will appeal to those who enjoy the “why might it be so” conceptual underpinnings of ideas and points of view. Those who are “practical focused” will likely be somewhat unsatisfied.

I have been fascinated by some work done by the recently passed away economist Ronald Coase. In particular the work on why the firm exists at all (as opposed to clusters of marketplace arrangements). His thesis to this is that the transaction of clustering processes and resources is more efficiently and effectively done within the organizational context.

I have extended this thesis to the talent management field including development. The following Power Point Presentation outlines at a conceptual level this marrying of Coase’s work and my thinking

Tal Mgmt Fundamental Econ Algorithm

The key learning for me over the years in doing work in uncertainty & risk management, strategy, talent management, decision making, etc. is that we don’t understand how to apply the dynamics of time. When I look at most OD type models they do not explicitly incorporate the notion of how time plays havoc with our best laid plans (apologies to Robert Burns).

Any person who appreciates how time permits and enables change in ourselves and our environments. The “now” is a photograph of reality, the future is an open scenario of possibilities (some of which we desire, some we fear, and others we don’t care about). The past is like a movie of what transpired over time (yore).

I view organizations as clusters of subsystems/processes with the integration of resources within them. Talent is one of the resources. Hence any one process can be arranged quite differently than any other. Also, over time arrangements within any one process can (and we would benefit from) change.

What does this mean for talent managment?

Everything. I suggest that talent can take many forms: raw – to – highly finished outcome. We hire people as employees when we want to arrange our process around doing much of the early process work ourselves (it makes sense from Coase’s perspective). We go to market when what we need/want is nearly finished and all we wish to do is to tweak or tune (think of Shelby buying Ford Mustang frames and bodies). Coase again would propose that this arrangement (for talent outcomes) is superior than doing all the work ourselves.

The (for talent outcomes) is the sneaky part here. We don’t need talent per se, we need applied talent’s outputs and outcomes. This is important for we in OD are so fixated (by “virtue” – yes – “virtue”) of our adopted humanist value set. WE have a hard time it appears to me to distinguish what is best for the person from what is best for the process.

I would never argue for “abuse” in its many forms in any decision I partake in. But I am clear that a decision that sacrifices output and outcome effectiveness is problematic too. For me it means attentive to “ends” AND “means”, they have to be in sync with values, purpose, priorities, processes, etc. As a person, I bring to the table my talents and willingness to contribute. Also as a person, I have interests and needs that extend beyond anyone process or organization. This is how I keep the moral compass “always in play”

I would argue that a highly humanist legal organization that is not successful as to its priorities is no good to anyone. It will and should disappear as it causes more harm (by its waste of effort, good will, talent, etc.) than any good it provides.

One of the mantra’s in OD is around flexibility, resilience, and ability to face change. In talent management this must surely mean that we can honestly and openly consider talent provision solutions other than just employee centric ones. For me one of the ironies in talent management centric OD is we often consultants providing a talent service that is non-employee oriented.


About 123stilllearning456

As a management consultant I am passionately interested in talent management and risk/uncertainty issues. In the area of talent management I propose that we seek strategies that look beyond the staffing/employee centric frames of reference. I have been frustrated at the "closing down on possibilities" by these more conventional staffing/employee centric approaches. I have been impressed where people have found systematic solutions to their talent management issues by going beyond the conventional approaches. In the area of risk and uncertainty, I am interested in making this topic relevant to more normal decision making situations. My conceptual foundation is to use the micro-economist's fixed/variable cost theme. I also think it is important to look at these issues for people through their emotional and psychological lens. As a premise I think risk and uncertainty only exist where there is a person who cares about possible events and its consequences. Hence, risk and uncertainty are social based concepts (no sentience, no risk and uncertainty). A major influence on my thinking in this area is Nassim Taleb of "Black Swan" fame. This BLOG provides me with an opportunity to express my thoughts on topics that interest me. As this is an online diary, content is more important to me than polish. I apologize if this distracts from readers' enjoyment and learning. Still I find this a useful way to live up to my namesake, learn more from others and hopefully provoke creative thoughts and ideas in others.
This entry was posted in Decison Making, Risk & Uncertainty, Strategy, Talent Manangement, Values. Bookmark the permalink.

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