He always wanted to be a lawyer but ended up being a professor instead. Peter Cappelli , the George W Taylor professor of management and director of the Center for Human Resources, the Wharton School, University of Pennsylvania, had his first brush with teaching when it was part of a scholarship he was awarded while studying labour economics at Oxford.
One project led to another and Cappelli, after receiving a doctorate in philosophy from University of Oxford in 1983, went on to do research in human resource practices, talent and performance management and public policy related to employment.
The 51-year-old professor, who has taught at the University of California, Berkeley; University of Illinois; and the Massachusetts Institute of Technology, has several noteworthy papers to his credit, including Why Do Employers Pay for College? published in the Journal of Econometrics (2005), Talent Management in Harvard Business School Press, 2006, and The New Path to the Top, printed in The Harvard Business Review (2005).
In an interview with Mint, Cappelli spoke about the challenges facing Indian business leadership and the changes in human resource management worldwide. Edited excerpts:
What are the key challenges facing human resource function today?
Peter Cappelli, the George W Taylor professor of management and director of the Center for Human Resources, the Wharton School
The main challenges are recruiting, retention and internal talent development. The No. 2 challenge—which is more perhaps a generational issue in India—is performance orientation, and that’s about accountability and employee motivation. And my guess is that the extent of this is still a concern for Indian companies. Some of this is a legacy of pre-1991 reforms when there was not much of performance orientation at the company level and, therefore, not much of orientation inside the companies either.
This is true for China and most other developing countries of the world. In Europe, I would say, it’s not completely clear that they have talent challenges, yet. The companies are booming, they have high skill levels in the society.
One way to test what the talent situation is is to ask people who are leaving college about how difficult is it to get a job. In European countries, it’s still a struggle for people to get a job. If a company is really interested in talent, then you know it’s somebody who is educated and comes from a good university.
In the US, too, it’s reasonably difficult to get a job. The big difference in the US now is that employers are expecting employees to come to the job completely ready?to?start?work. And that’s really raising the bar a lot. It’s sort of like cutting the price in some ways.
Earlier, we used to hire people and expect them to contribute meaningfully only after a year or so, but now we expect them to be ready to start being productive. So there’s a lot of premium paid particularly on work experience in the US. You are expected to have a skill set which is quite focused on contributing immediately to the employer in order to get a job quickly.
The universities and colleges, thus, have become increasingly vocational in their orientation. The question is, what is best for society? Is it better if the colleges provide good general education and then employers provide more basic skill-related training? That’s more or less the way things used to work in the US a generation ago. Or is it better to push the problem on to students themselves? So not only (do) you get good education, but also acquire workplace skills before entering the workplace. It’s not obvious, but the latter is necessarily better for the overall society. It’s obviously easier for employers to impart training, but that does not necessarily mean it’s better.
How different is retaining talent in the old economy versus the new economy sectors?
The only difference is whether jobs are plentiful or not. You can make an old-economy sector look like a new-economy sector if the companies start hiring talent away from each other and demand explodes. You can make a steel company look like an IT company pretty quickly.
One of the things that is different in some of these fast-growing sectors such as financial services or IT is that skills tend to be quite transferable. For instance, a computer programmer can do what she is doing now at someplace else.
In some of the older sectors, the skills tend to be a little more company specific. The companies’ internal practices are quite elaborate, complex and unique; so you have to be with the company for a while to acquire the skills. And because some of the new sectors are dominated by jobs which are transferable, it makes them more open.
In fact, it cuts both ways. In new economy sectors, it is harder to retain people but easy to find people. In old economy companies, it’s easier to keep people, which is a good thing because it’s difficult to find a replacement.
So it’s not clear that new economy sector is disadvantaged. But yes, companies need to pay more attention to human resources and think about it more strategically.
Leadership talent is key to any business. In what ways can companies develop this critical mass?
It’s an imperative for the top level of the organizations to make leadership talent management a priority. A practical example is where you have lower-level managers and their immediate bosses who want them to stay in the job longer because they are good at their jobs and helping achieve the company’s financial performance. On the other hand, they are not being developed and their career is stagnating. Does the CEO take a longer perspective and say it’s important for the company to develop these people? For many companies the answer would be no. But if companies are worried about their talent pipeline, that’s what you have to do. It’s actually pretty straightforward and simple that people at the top have to make it a priority and put their money into long term as opposed to short term.
What are the kind of changes that future workplaces will witness?
The next big change is going to be brought about by scarce-talent situations. There will be pushing back by employees, and people will be demanding different kinds of things from employers. So far, employees have done more or less whatever they have been asked to do as long as they have been paid enough. The question will soon be whether if that’s enough. Will people willingly throw in their lives for the company’s goals for money, particularly at a pace that they have no time for life outside work? We will start to see some pushing back in this respect in the future.
If the labour market is tight, the employers have to listen. If the labour market is not tight, they don’t listen. There’s a lot of talk about work-life balance issues even in the US, but labour market in the US is not tight enough to lend employees the power to push back. But my guess is that skill shortages are big enough in India for employees to have more power.
The way business leaders in India are talking about organizational culture and mission of companies in the involvement of corporate social responsibility (CSR) is probably where things will start to move.
India is behind the West with respect to gender, and this is one area which will see huge changes. The level of discrimination would come down as it becomes more expensive to discriminate.
Whether you are open enough to think about how different groups might bring diverse skills sets to the organization is a different challenge. For that, the companies have to be really open-minded and, frankly, the more successful companies are, the less open-minded they get. At the moment Indian companies are reasonably open-minded because they are catching up. The smaller ones that are growing quickly and still competing on the global stage are the ones which are open to ideas. So the question is, how long will Indian companies be able to sustain that openness? That’s going to be the key thing to watch out for.
How will economic, socio-cultural, and environmental factors shape the future business environment?
Perhaps the most interesting aspect for India will be issues around economic inequality, which is stereotypically an Indian problem.
Alternatively, a lot will depend on the stakeholders—the customers and employees. If customers care enough about such issues by way of influencing their purchase decisions and employees in terms of hiring decisions, it will automatically give companies a competitive advantage if they do this good thing.
CEOs are talking about CSR as being important, but companies have no inherent moral positions. It is either because it is in their self-interest, or people at the top are willing to force them to take those positions. But mainly it’s because it is in their self-interest.
So the question is whether Indian society is willing to reward companies that take these initiatives or not. And I think even in the US there is some sense that companies are thinking more about CSR because they think it gives them some sort of advantage. My guess is if it’s true for the US, it should be true for India, too.