Some time before Jamie Dimon’s Bank One acquired JP Morgan, then Morgan CEO Bill Harrison described himself as the firm’s chief culture officer. But culture didn’t protect Morgan despite its 200 year history. In fact, it was Morgan’s culture of slow, reluctant, change that made the firm so vulnerable a target for acquisition.
Culture wasn’t a friend to Enron either. Its leadership created an environment that encouraged rampant greed and shaky business ethics, leading eventually to Enron’s destruction. GM’s 2008 crisis was similarly culture-connected. As the NY Times wrote: “Having such a dysfunctional culture had direct and disastrous consequences for the quality of decision-making, perhaps most notably the way the company had careened off a financial cliff.”
Earlier in my HR career, culture was regularly described as a secret sauce for business success. This view persists, as a recent article pronounced: “A work environment that possesses organizational culture is driven by purpose and clear expectations. This motivates and inspires employees to be more engaged in their work duties and interactions with others. It also leads to high levels of workforce engagement, which drives productivity.”
But, culture becomes a limitation, not the solution, when leaders create a closed talent culture. According to Bertalanffy, the father of general systems theory, closed systems do not learn or adapt well to external events and trends. They are internally focused and do not listen or respond effectively to changing outside forces. In a closed talent system there’s too little circulation of talent, not enough coming and going. For example, I joined Exxon as a young professional. It was then the most valuable company in the world, famous for a culture of “cradle to grave” employment; senior external hires were unheard of. And, as a consequence, the Exxon echo chamber filtered out growing public concerns about climate change. The closed talent culture helped turn a highly respected company into a social pariah, significantly impairing its ability to attract future talent.
BCG founder Bruce Henderson explained the problem of a closed talent culture this way:
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“All organizations, like all organisms, must adapt to changes in their environment, or die. All organizations do change when put under sufficient pressure. This pressure must either be external to the organization or be the result of very strong leadership. It is rare for any organization to generate sufficient pressure internally from the ranks to produce significant change in direction. To do so is likely to be regarded as a form of dissatisfaction with the organization’s leadership.”
As Morgan et al learned, a closed talent culture worsens as the speed of change quickens. And, its quickening faster than ever. The half-life of medical innovation has shrunk to 18-24 months. Nanotechnology knowledge doubles every 12 months. Stanford researchers recently announced that prior to 2012, AI results tracked Moore’s Law, with compute doubling every two years but,“Post-2012, it has been doubling every 3-4 months.”
Yet, most organizations, even those in fast changing fields, remain committed to a traditional workforce model – the permanent employee – that cannot any longer keep up with the magnitude of informational and technical change to which it must respond, at the speed to which it must respond.
This is a profound mistake. Organizations are more likely remain responsive to external challenges, and more innovative, when they implement a flexible, blended workforce – an open talent culture – which keeps the windows wide open, and talent circulating. Here’s why:
1. An open talent culture opens up the organization to new thinking. An open talent culture is change adaptive by learning from its temporary members. It can’t help itself, it is constantly bathed in the new information, best practices, and innovations that its newcomers bring with them. A closed talent culture challenges newcomers to be respectful of internal history and hierarchy: Don’t rock the boat. By contrast, an open talent culture encourages freelancers to share what they know and have learned elsewhere. As Lee and Lai point out in their influential article, an open talent culture recognizes, seeks and values the insights of new permanent and temporary members on organization learning and performance.
2. More inclusion means better talent selection. A closed talent culture too often leads to a workforce of people who went to the same schools, studied the same subjects, and have similar profiles. We needn’t look far for examples. A recent HBR article found that organizational culture was often standing in the way of greater opportunity for women and other marginalized groups. That happens far less in open talent cultures because the stakes are lower. Freelancers are brought in to do a job, and project requirements rather than culture guide selection. And, because freelancers are temporary, leaders are more likely to rest their biases and open the spigot to greater diversity.
3. Open talent cultures are more agile and dynamic. Why don’t most organizations invest in ongoing agile experimentation of their products and processes? According to recent research by Stefan Tomke, the problem is a closed talent culture. He writes, “As companies try to scale up their online experimentation capacity, they often find that the obstacles are not tools and technology but shared behaviors, beliefs, and values. For every experiment that succeeds, nearly 10 don’t—and in the eyes of many organizations that emphasize efficiency, predictability, and “winning,” those failures are wasteful. By contrast, open talent cultures are rich in the suggestions and experiences of freelancers who, as a global community, provide a Johnny Appleseed approach to sharing new tools and methods, for example, the Stanford Fast approach to product design and prototyping.
4. Open talent cultures drive strong performance management. HBS Professor Gary Pisano points out that innovation demands high performance and competency standards. But, he writes, most organizations don’t meet the challenge of exiting employees that don’t meet requirements: “One senior leader confided to me that short of ethics violations, the company rarely terminated anyone in R&D for subpar performance. When I asked why, he said, “Our culture is like a family. Firing people is not something we’re comfortable with.” That’s a problem as requirements change. Open talent cultures avoid this problem by engaging more professionals in project work, and fewer permanent employment relationships.
5. Open talent cultures encourage greater collaboration with external organizations. A study of government and corporate research labs found that research organizations with open talent cultures were more encouraging of cross-organizational cooperation, and were more successful in generating entrepreneurial success. It’s no surprise that organizations that both value and welcome external experts would be more open to joint ventures and would enjoy a greater network of possible opportunities.
6. Open talent cultures are better able to refresh their capabilities. The toughest problem for any leader is recognizing what skills their organization will need in future, what will become obsolete and how to ensure that required skills are deployed where they need to be. An open talent culture driven by a flexible, blended workforce solves that problem. There are fewer and smaller legacy functions, so the organization needn’t wait until crisis to plan for change. And, many marketplaces provide the talented professionals companies need anywhere in the world, on demand. In many cases the project can be staffed remotely by freelancers, saving time and expense. As the Fieldengineer.com blog commented, by resourcing for the project rather than full-time, engaging professionals with the exact skills and experience needed, and by bringing the right resources onboard in weeks rather than months, an open talent culture leads to a better solution.
The open talent culture isn’t new in concept. But, the drivers of open talent culture make it possible for the blended, flexible workforce to scale at a rate that wasn’t possible until now.
Viva la revolution!