Using Value-chain Analysis for Effective Talent Management

Would you like to maximize the value impact of your talent-management process? Consider conducting a value-chain analysis of your organization’s logistical activities for recruiting, hiring, retaining and growing your human capital.

Companies most often think of the value chain as it relates to manufacturing and technical processes, but seldom do they consider their value chain when designing talent-management processes. However, to maintain a competitive advantage, especially during hard times, managing the human resources value chain is a critical component of an organization’s future success.

The term "value chain" was first introduced by Michael Porter in the book Competitive Advantage: Creating and Sustaining Superior Performance. Typically associated with manufacturing firms in the past, value creation and subsequently competitive advantage through value-chain analysis and management provides an effective strategy for all businesses seeking streamlined, efficient operational processes that contribute to overall competitive strategy and therefore the bottom line of an organization.

Simply put, a value chain refers to the chain of activities within a firm’s operations. Constructed at the business unit level, the value chain is a horizontal look at a firm with a process-product perspective vs. the departmental view used for the budget.

Products and services pass through all activities of the chain, and ideally, at each activity, the product or service gains value. Porter’s value-chain model describes the components as having primary activities and support activities, with the human resource management functions of recruiting, hiring, retaining and growing right-fit human resources as a key part of the support component.

Value-chain Analysis

Value-chain analysis refers to the activities within and around the organization and relates them to an analysis of the organization’s competitive strengths. Capturing the value generated along the chain is an approach popular with management strategists and can be looked at from an external and internal perspective.

The external perspective, often referred to as the "value system," includes internal factors as well as all external factors that impact the chain (e.g., vendors, vendors to the vendors, external corporate partners, outsource partners, etc.). A value-chain analysis from the internal perspective looks only at the in-house processes and policies of the value chain with consideration for how external factors may impact the internal activities.

Analyzing Your Talent-management Value Chain

The purpose of analyzing the value chain of your talent-management process is to identify how each business activity within the process contributes to your overall competitive strategy and where there may be efficiencies and cost savings to be gained within the process.

An organization may create a cost advantage through value-chain analysis by reducing the cost of the individual activities within the value chain or by reconfiguring the value chain.

Steps in the Talent-management Value-chain Analysis

1. Identify or clarify your overall competitive strategy: This may mean revisiting your vision and/or mission, or reiterating the firm’s short-term and long-term goals, ensuring that everyone within all departments in the organization is on the same page.

2. Activity analysis: Identify each activity undertaken in the talent-management process (recruiting, hiring, retaining and growing of human capital). This can be accomplished by conducting a brainstorming session or a business process review (BPR) with key individuals who are responsible for carrying out these activities and those who are impacted by these activities.

3. Value analysis: For each activity, assess the value that the activity brings to the process. Evaluate the pros and cons of making changes to the process. You must also consider how the changes may affect other departments within the organization and evaluate the overall impact of proposed changes.

4. Planning: Design and implement a strategic plan to reduce the costs of the activities within the talent-management value chain or the cost to reconfigure the value chain.

For example, you can apply these steps to the recruitment component of the talent-management value chain. The first step is to ensure that the recruitment process supports the activity of attracting right-fit employees who will deliver on the competitive strategy of the organization. This may mean attracting people to the organization who have proven customer-service skills.

How the organization attracts right-fit employees is directly related to the recruiting activities. During the activity analysis, consideration must be given to the activities within all departments that are or should be involved in recruiting efforts (e.g., marketing, operations and communications).

Marketing may determine the types of ads to be placed, such as print ads for magazines and newspapers, electronic ads posted online, radio ads, etc. The marketing or communications departments may individually or collaboratively determine the verbiage and the aesthetics of the ads, ensuring that the culture of the organization is clearly represented to potential candidates.

Operational departments may communicate their labor needs to human resources, clearly outlining the particular requirements of the candidates, such as educational level, experience requirements, physical requirements, etc.

Further activity analysis involves dissecting every step within each activity. Below is a hypothetical example for a recruitment process utilizing print ads:

1. Designing the ad
   • Marketing identifies pictures or artwork, if any, to be used
     • Solicit input from the hiring manager within the operations department
     • Solicit input from the general manager of the operations department
   • Marketing and communications collaboratively identify verbiage to be used: key words or culture-related nomenclature
     • Solicit input from the hiring manager within the operations department
     • Solicit input from the general manager of the operations department
     • Submit for approval to the vice president of the marketing division
   • Marketing and communications collaboratively determine the layout of the ad – the placement of verbiage in relationship to the artwork or pictures, prominence and placement of the company’s logo
     • Solicit approval from the marketing director
     • Solicit approval from the communications director
2. Choosing the appropriate print media for the ad
   • Magazines
   • Newspapers
   • Trade publications
3. Final proofing of the ad
   • Submit to the operations manager for final approval
   • Submit to the general manager of operations for final approval
   • Submit to the marketing director for final approval
   • Submit to the communications director for final approval
4. Determining the run time for the ad
   • Submit to the finance manager for approval
   • Submit to the general manager of the operations department for approval
5. Printing and distribution of the ad
   • Send to the printer (outsourced)
   • Printed materials returned to the marketing department
   • Marketing distributes the final copy to the predetermined publications for printing

The value analysis involves analyzing the value impact of each of the activities identified during the activity analysis. In this example, the value analysis reveals cost-saving opportunities by streamlining various activities. In the first step of designing the ad, it is not necessary to solicit input at each step from the hiring manager and the general manager of operations.

While it is critical to solicit input from the hiring manager at the beginning of the process to ensure that the recruitment ads will attract candidates with the skills, experience and education to fulfill all job requirements, it is not necessary to solicit input at every step in the process.

Cost savings can be realized by streamlining the activities to solicit input from the hiring manager in the beginning and end of the process. Additionally, if the organization has a culture of trust, the general manager of operations can be eliminated entirely from the approval process, trusting the hiring manager to make good decisions regarding her recruitment needs.

There are also potential cost savings related to time efficiencies by allocating one place in the process for executive approvals, such as at the activity step of final ad proofing, if it is determined that executives must approve ads before they go to print.

Again, a culture of trust can reduce the list of approvals needed to send an ad to print. If the marketing manager and the communications manager are competent and right-fit for their jobs, is it necessary to send the ad to the marketing and communications director for final approval?

Measurements may be available that show certain print publications have not generated positive results in attracting right-fit candidates. Savings can be realized by determining which publications have yielded the best results and then choosing only those publications for ad placement.

An analysis of the printing activity may reveal cost-saving opportunities if it is faster and less expensive to print the ad in-house. If the organization does not have in-house printing capabilities, the following questions should be asked: “How long since we have sourced this function? How long since we have negotiated with the provider for a better price? Are there potentially other companies from which a better price can be negotiated?”

Once the analysis of the value-chain activities is complete, a secondary evaluation must be done before implementing changes. This evaluation process scrutinizes the cost to make changes, not only in monetary terms but also in terms of the impact on other departments outside of the talent-management value chain.

One thing to remember is that all internal value chains have a relational effect on all other value-chain processes within the organization. The secondary evaluation may show that while cost savings can be realized within the talent-management value-chain process, making these changes may create hardships or additional monetary costs to the departments it impacts.

By its very title, the word "chain" is a clue that all departments within an organization are interconnected and that for organizations to operate effectively as an entity, no decisions can be made in a vacuum.

The last step involves the development of a strategic plan to reduce the costs of the activities within the value chain or the cost to reconfigure the value chain once the cost-saving opportunities have been identified. Minimally, the strategic plan must include:

• Assurance that changes will deliver on the competitive strategies for the organization

• Involvement of key players from all departments impacted by the changes

• A realistic timeline for implementing changes

• A dispersal of responsibilities based on the talents and skills of the team

• A measurement process for measuring the impact of changes made within the value-chain process

• A process for continuous improvement and ongoing management of the talent-management value-chain process

When conducted effectively, a value-chain analysis is a strategic tool that gives the organization the ability to identify how each business activity within an internal value chain contributes to the organization’s competitive strategy, creating synergy between departments and making the strategy more systemic overall.

The ability to identify and improve the logistical components of the talent-management process allows an organization to leverage its top asset, the people within the organization. The overarching result is cost savings in the forms of process efficiency, reduced employee turnover and excellent customer service leading to increased market share and customer loyalty.