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Image Credit: <priceofoil.org

Image Credit: <priceofoil.org>

In mid-2013, global health services company Cigna hosted a working group session (facilitated by CAHRS) that touched upon various issues in the area of total rewards. Other participating organizations included (but were not limited to) Amazon, Caterpillar Inc., and The Hershey Company. The working group summary report is a very good read (and relatively short at just 7 pages). I highly recommend checking it out here.

With that said, this morning I want to share my thoughts on an interesting talent strategy incorporated by Cigna. From the summary report:

In the HR function, Cigna has focused on “buying talent” instead of “growing talent.” As such, the company does not do much hiring from universities.

…Okay, so I think the most obvious benefit to adopting an enterprise wide poaching strategy to backfill positions is that your organization gets a steady influx of new ideas and perspectives. Essentially, a company that routinely hires the best talent away from competitors will probably have a clearer picture of broad-based best practices across the operating environment(s) they exist in, not to mention wider (and probably deeper) technical knowledge across its talent pool. But this approach is also very expensive.

A. A company probably has to either be a pay leader (or else have incredible brand equity) to effectively poach external talent as a primary recruitment strategy.

B. This approach also probably leads to sub-optimal employee performance. Employees that have worked their way up from the entry level have deeper internal networks and understanding of their company’s cultural values, which could be part of the reason that in companies where most promotions happen internally TSR can be up to 51% higher than in organizations where less than 50% of posts were filled through internal appointment.

Additionally, when an organization routinely goes out into the external market to backfill as opposed to promoting internally, it implicitly conveys to its own people “you aren’t good enough”, which can adversely impact both employee engagement and retention (the latter of which has its own added costs).

Conversely, a homegrown talent strategy has a number of positive benefits, including:

A. Allowing for optimization of the knowledge management process through the development of continuity players.

B. The ability to more easily manage internal equity.

Sourcing externally can create salary compression issues if the organization has to pay a heavy market premium to bring in top talent from a competitor.

C. Fostering a stronger culture and more consistently practiced values across the enterprise.

…Of course, if an organization doesn’t have strong internal systems for training talent and staying abreast of best-in-market practices then a homegrown approach to hiring will leave that organization with inadequately skilled performers across all levels of the organization.

I don’t know… perhaps the cop-out here is that a balanced approach works best. But in truth, most organizations probably lean heavier towards one approach than another. Finding the right mix can be the difference between a strong talent pipeline across functions at the entry through executive levels and having chronic performance, engagement, and retention issues.

What am I missing here? What have your own experiences been with buying talent vs. growing it internally?

As always, please share your thoughts in the comments section below.