What Should HR Leaders Focus On In 2014?



The main focus for most organizations in 2014 should be on talent management and talent development, particularly the managerial and technical roles that are the difference makers.  One of the major reasons to focus on talent is that it is a great way to get the HR function into a broader discussion about what is next for the organization and what the business strategy should be. Positioning the HR function and talent management to contribute to the overall effectiveness and financial performance of the organization is the best way the HR function can add value to corporations.

The most important thing that HR should focus on in talent management is assessing the skills the organization needs to implement its strategy and the plan for recruiting and managing that critical talent. It is important to understand what the organization can do to add the right talent: Whether it is best recruited or best internally developed, and whether it is even possible to develop the right talent in order to implement business strategy. Understanding the availability of talent in combination with knowing how it is critical for the business strategy should lead to a more interactive relationship between the strategic choices of the organization and how its talent is trained and managed. Often, the reasons why business strategies fail is that they mistakenly assume that the organization can get the right talent in order to perform the way the strategy calls for. All too often organizations cannot attract or develop it, and as a result, the strategy is not feasible.

Talent has always been important, but it has increasingly become more critical because so many organizations are doing much more complex, knowledge-based work and operating globally. This has created a situation where the performance of talent has a major impact on the bottom line. The difference in many critical jobs between good talent performance and poor talent performance is 100 to 1. That reality is increasingly causing knowledge work-based organizations to focus on talent as a source of competitive advantage.

Google GOOG -0.09% is a good example of a company that has done an exceptional job of recruiting and managing people who have critical knowledge skills. It needs talented people to perform well and that translates into how they communicate about the kind of talent they are looking for and the jobs they offer. Further, they identify critical positions in the organization, where performance can differentiate them from their competitors. They make sure they fill those jobs with the right talent. This is an important and critical part of the whole recruitment and selection process. In the selection process, they ensure that they test for the ability to develop the key skills that are needed for the job.

Decades ago, Google, like 3M MMM +0.75%, began giving everybody 10-15% free time to work on their pet projects. People have used this time to come up with new business ideas and business projects. They have created work that fits the talent of the people in the organization, and they have attracted talented people to come to work for them. This allows them not only to implement their business strategy but to also grow and develop their business strategy based on the skills of their employees and their ability to attract top talent.

Why aren’t there more organizations that focus on talent? Some businessleaders think they can live without top talent. Others believe talent management is important, but they do not see it as important as finance or technology. Finally, many executives are unable to see the relationship between talent issues and the business strategy of their organization. Many executives do not have a background in talent management. They are trained in finance or engineering and they see them as the major determinants of organizational performance. The challenge for HR is not just to establish the importance of talent, but it is to link talent management to the business strategy.


Inflation in 2014

English: A comparison of three UK indexes of i...

English: A comparison of three UK indexes of inflation currently in use: the Retail Price Index (RPI), the RPI excluding mortages (RPIX) and the Consumer Price Index (CPI). It also includes for comparison the Average Earnings Index. These are derived from the Office for National Statistics reduced to a common base of January 1988=100 (Photo credit: Wikipedia)

English: Inflation rate - Iran (CPI, 1980-2010).

English: Inflation rate – Iran (CPI, 1980-2010). (Photo credit: Wikipedia)

English: This chart contrasts the difference i...

English: This chart contrasts the difference in inflation of the money supply, the M2, with inflation in a basket of goods, CPI. (Photo credit: Wikipedia)

World map showing inflation, updated for 2009....

World map showing inflation, updated for 2009. Grey means no data. (Photo credit: Wikipedia)


inflation (Photo credit: SalFalko)

English: US CPI inflation (year-on-year) from ...

English: US CPI inflation (year-on-year) from 1914 to 2010. US CPI monthly data series obtained from the Federal Reserve Economic Data (FRED) database provided by Economic Research at the St. Louis Fed.http://research.stlouisfed.org/fred2/series/GDPC96?cid=106 (Photo credit: Wikipedia)

The Only Unbiased Inflation Report

What is it about inflation that brings out only absolute black or white opinions? Depending on who you talk to, we’re either about to suffer from rampant hyperinflation — or there’s no reason to worry about it at all.

It is one extreme or the other, without real details. The conclusion is all you’ll hear about.

The odds of hyperinflation are greater than before the Federal Reserve introduced its quantitative easing programs. With a stable and globally dominant economy, chances of the dollar becoming truly worthless are very low.

At the same time — with the unprecedented economic experiment that is QE pumping $85 billion into the market every month — we’re adding a massive amount of dollars into an economy that is growing nowhere near as quickly as the monetary base.

There is a disconnect here that investors should be aware of. Anyone getting their information from the news or mainstream media is missing the real story.

If you could just get around the partisan opinions of biases talking heads and economists, you could make your own decisions about inflationary risk.

We think you’re owed a no-nonsense look at why a fear of inflation is healthy and justified, so that’s what we aim to do today…

To start, we need to ask: Which inflation rate are we even talking about here?

False Precision

The first step to understanding inflationary risks is to get a firm grasp of what inflation truly is.

It is not just rising prices, although that is certainly part of it. To have inflation, you must have an excess of money supply. The existence of excess money won’t mean much on its own if it isn’t doing anything; the currency must be circulating in the economy, chasing overall prices that are getting increasingly higher.

It is for this reason food and energy costs are often removed from inflation rate calculations: It is all too easy to have a seasonal shortage or disruption skew the numbers.

Instead, a wide basket of relatively stable goods and services are tracked over time. When weighted and averaged together using a formula, we can arrive at an inflation rate.

When you use a different list of products and services with different formulas, you get different types of inflation rates. The most commonly used measure is a weighted index of goods and services called the Consumer Price Index for Urban Wage Earners and Clerical Workers, or CPI-W. This is what Social Security uses to calculate benefit increases, even though there is a CPI-E for the elderly.

Just think about how a thousand people will be robo-called, and the results of the survey are used to reflect the entire U.S. population. Except the polling isn’t random at all. And by picking and choosing which goods and services are included — and then tweaking the inflation equation — it is incredibly easy to sculpt the results.

The equations used to calculate inflation are complex, but it is only an estimate.

The official version is just one of many methods that could be used.

Take a look at how previous changes to the government methodology dramatically changes the inflation rate for the U.S. dollar by using a method our government used in the past…

SGS alternate CPI is designed to provide a cumulative look at the difference between the old official inflation methodology and what Congress forces the Bureau of Labor Statistics to use now:

sgs alt inflationchart courtesy of Shadow Stats

We should hardly trust the official inflation rate as an accurate reflection of what is truly going on…

Simply swapping the current equation for one used by our government up until the last couple decades dramatically changes the picture.

There is talk about changing how the official inflation is measured yet again. Instead of a consumer price index (CPI) based on urban wage earners, we’d be using chained CPI.

The reason politicians want to switch between CPIs is to reduce Social Security payouts by reducing the cost-of-living payment increases tied to inflation. Chained CPI will consistently give lower rates of inflation. Add that up over years, and we’re looking at a reduction of benefits in the billions.

If the government used the most accurate version of CPI for elderly Americans (CPI-E), it would have to pay quite a bit more to Social Security recipients than it does currently.

So there you have it: self-serving manipulation, regardless of intent. It shows how subjective official inflation statistics really are.

On The Ropes

While we have reason to be concerned over the inaccuracy of the official inflation rate, fear of inflation is primarily based on the potential for it to worsen…

The Fed has gotten itself in such a mess that tools and tricks to combat inflation are gone. It has no capacity to tighten the monetary supply, decrease the use of credit or increase the Fed funds rate in the next several years.

However, the Fed can reduce inflation simply by tightening the monetary base. The concept is simple:Reduce the number of dollars floating around, and they become more valuable.

But the problem with our monetary base is that we have yet to even see the inflationary effect from the Fed’s QE programs. We’re in an uneasy and weak economic climate, while international banking rules are being rewritten through the Basel III meetings. This creates an environment where there is a lot of concern about low profits from riskier loans with low yields. A whole lot of money is staying out of circulation because of it.

If the recovery picks up steam, and banks are more confident in their ability to create profits, that will change far quicker than the Fed can react.

We’d need a massive reduction to stabilize the long-term effects from QE before tightening the monetary base would have any deflationary effect, and that won’t be possible for years, if not decades…

fred monetary base apr13

On a related note, the Fed can reduce inflation by changing the reserve requirements from banks (these figures are included in the total monetary base chart above).

Banks would have to soak up more money to meet higher capital requirements and pull money out of circulation.

However, Banks are already chafing under new reserve requirements after the meltdown and following the recession. From what we see in this chart, required reserves are already going up as quickly as possible.

The Fed cannot increase reserve requirements any faster to curb inflation.

fred req reserves

The Fed has a bit more leeway with the Fed funds rate, or the interest rate banks charge each other for loans to maintain their reserve requirements.

Banks use these short-term loans to shore up reserves as they loan money to businesses. Raising the funds rate discourages this by raising the cost to banks and eroding their profit potential. Thus, the circulation of money slows.

However, the Fed is already using the funds rate a different way: It is purposely keeping it as low as possible to spur economic activity. With a rate at nearly zero, the pedal is to the metal just to keep GDP numbers in the positive…

The Fed would have to start a recession to fight inflation, which it would never do.

fred fed rate

Finally, we have the discount rate, the interest rate charged to borrow money for reserves directly from the Fed. This is like the funds rate in all regards — except the source of the capital: It has been pegged just above 0% to spur economic activity for the last several years. The choice is recession or fighting inflation once again.

The Fed has put us on the ropes. We’re not down for the count yet, but we have no way to defend ourselves if the punches start flying again.

Be Reasonable, Think For Yourself

Back in 2007 Bernanke gave a speech in which he stated, “Undoubtedly, the state of inflation expectations greatly influences actual inflation and thus the central bank’s ability to achieve price stability.”

Perhaps Bernanke’s greatest (and only remaining) tool to fight inflation has been masterfully wielded…

In spite of the evidence to the contrary and the risks the Fed has taken to date, headlines about inflation continue to follow Ben’s lead.

For your own sake, don’t let Bernanke and his standard bearers sway you with their self-serving agenda.

In my opinion, a healthy dose of fear is a good thing in our situation. It will give investors pause and make them consider the long-term implications of our distorted economy on their investments, which should prompt them to keep contingencies in place to protect themselves.

Just about anything that isn’t solely valued using a single currency, such as bonds or shares listed through U.S. exchanges, can be an integral part of that contingency plan.

Popular options are good; silver, real estate and just about anything that isn’t bought, sold, and valued in a single currency.

We certainly don’t think you should completely shun the dollar and sell off stocks or bonds you own now. There is plenty of opportunity for gains and profits from innovative and dynamic American businesses right now.

Diversity is the key to limit the long-term vulnerability of your investments.

Nothing else can match gold’s inflationary hedge and equity insurance properties. However, even less obvious choices — such as luxury goods that appreciate in value over time — have worked exceedingly well over the last ten years. As well, funds designed to pool money to buy art and wine are increasingly popular choices. With markets in Europe and massive demand in Asia, they are uniquely positioned to maximize returns for luxury goods using virtually any major currency around in the world.

Until the Fed regains the ability to fight inflation, you should consider these alternatives — no matter what Bernanke or economics ideologues proclaim…