Assessing Human Capital: The 3P Talent Framework

Dimensions of Top Talent

If the Pareto Principle is true (it is!), then 20% of your people generate 80% of your outcomes. Every organization (especially those which depend on people) need to nurture its top talent. But how do you measure top talent in your org?

We propose three dimensions to look at to identify your best talent.

Performance

One way is to measure Performance. Performance is the metric every single organization uses to assess their talent. It is the most objective (or at least objective-seeming). It looks backwards and therefore gives a lot of comfort as you can conjure up a lot of data to justify a rating. This also feels most important because most firing decisions will be based on this. If people do not meet the job’s expectations – what’s the point of paying them? This makes regularly assessing performance paramount to running a people driven business. This itself is tricky, since it’s often hard to understand who is “performing” well especially in knowledge work where the work is unique to individuals and largely incomparable (how do you compare apples with F-16s?). Let’s say we got that down to a T. Top performers whose performance is maxed out are going to face the problem of diminishing returns. This is the idea behind the Peter Principle which states “an employee continues to receive promotions to work in higher ranks up to that point where he reaches a level of incompetence“. You’ll eventually have people in positions they are dramatically unsuited for.

Potential

Many great HCM systems (such as the super-powerful Oracle Fusion HCM) will give tools and processes that help measure an employee’s potential over and above their performance. This looks ahead rather than backwards. This is slightly more subjective and has some biases involved, so a great way to handle this (in Fusion) is using Talent Assessment questionnaires which use proxy questions to assess what potential looks like in your company’s context. Based on answers, the score for potential should be adjusted. Designing these questions takes skills, patience, and testing. Design Thinking helps. The Performance vs Potential matrix is typically a 9-box matrix, where the High Performance, High Potential folks are typically considered your top talent. The challenge here, however, is that you may have excellent performing, highly versatile high potential talent that is going to leave you in the next 3 months as soon as the appraisal cycle is over. All they are waiting for is the pay hike, so that they can get a bigger pay hike down the road. Goodbye, greatness!

Permanence

The final dimension we suggest that should be considered over and above the Performance vs Potential is permanence. How long is someone likely to stay with you, given that the you continue to reward them fairly as per the business’s context. This is the hardest to measure. This is what many people would call “Employee Loyalty”. Oracle Fusion’s Risk of Loss vs Impact of Loss framework is a good start. However, a robust off-system process must be designed, implemented, and regularly followed so that acts both as an Early Warning System to identify high risk of loss, high impact employees as well as measure likely “long runners” in the organization who come from the High Performance, High Potential pool. These people are in for the long haul.

Note that Permanence is a measure of ownership not inertia.

The combination of these three will most likely give you your top talent. Remember that this box (High Performance, High Potential, High Permanence) is one with some churn. We need to nurture the people in this group, and continue adding more people to it. Any organizational, market, or work changes can trigger a change in people’s performance, potential and permanence. Personal issues can diminish performance, purposeless can dampen potential, and perceived slights can damage permanence. People need to be treated as people and supported to ensure they unlock their whole self and bring it to work. It’s very important to keep measuring all three regularly and take appropriate actions, give necessary support, and stage interventions wherever necessary.