The concept of 4E and 4R in Talent Management

Leadership in a VUCA world

One the questions I am always asked when I run an industry event (like the one I ran last month) is how do folks ensure they remain ‘employable.’ Simply because jobs and job functions change dramatically in the knowledge age and one needs to be constantly identifying the next best set of alternatives to remain relevant in the rapidly changing market demands. As one of my professors at IE Business School said, it is far more essential to have the innate ability to un-learn: learn-ability is an in-built attribute to most people. And this poses complexities to people managers — how do you manage talent that is often more talented than the leaders, far younger and far more intuitive. Is there a simple way to manage talent?

A few years back, I was privileged to run a start-up firm and had to build up a product development & engineering team from scratch — in India, Europe and Jakarta — with the associated constraints of funding pressures, rapidly changing sales/marketing pipeline and customer demands. We hit upon a simple idea of ensuring we are able to attract and retain talent — so critical at any time but more so a decade ago when attrition was the most hotly debated topic in the IT industry. We called it the 4E and 4R philosophy and was based on a simple premise that transparency (and obvious transparency) breeds loyalty — more than anything else including tangible rewards. We calculated the monthly salary of every individual on the basis of the 4 Es and posted them on the intranet site every month — the salary could vary from month to month & everyone knew what the other earned and more importantly the salaries folks like us took home was made equally transparent. Every people leader was expected to be honest in his dealings with his team and focused as far as possible on the principle behind recruiting talent for attitude & skill, retain for their ability to learn (& un-learn), re-train them in the relevant skill sets and re-deploy them into the necessary programs. Simple philosophy and perhaps as someone said when we proposed this to our Board, too simplistic and won’t work! Well, we had an attrition rate of less than 2% when the industry rates was well over 20%!! And we were rarely able to pay half of what the industry could possibly offer!!

So the 4 R’s are clear though rather subjective in their intent and execution — Recruit, Retain, Retrain, Re-deploy.

The 4E’s were a little more complex to define and develop into an objective metric. The 4E’s stand for Expertise, Enterprise, Education & Experience. At the firm, we had given certain weightages to each of the 4 areas and these could differ from time to time but would be consistent across the team. As an example the first quarter of a new employee will have an increased allocation towards Education (& enterprise as these are the two most obvious one which a People leader can decipher and rate against) while Expertise (in a particular skill or technology) plus Experience (in similar situations) becomes more critical during certain SDLC phases. We developed an excel based system with rating (a number on a 1–10 scale — 10 denotes exceptional competence and this was decided along with the employee), weightage (1–5, 5 denotes critical) for each of the 4 E’s — arithmetic assists us in arriving at a certain number. This number was then multiplied by a base number (we assumed US$100,000 as the base salary number) and every employee received a monthly salary of: the rating number multiplied by 100,000 divided by 12. My friends in HR would think this is too simple and inconvenient to work with, but really it is actually a very elegant way of taking a significant amount of subjectivity out of the HR process and rewards system.

The proof of the pudding as they say is in the eating — we lost a grand total of 6 employees in a period of 30 months — in a team of over 200 FTEs while paying a salary roughly 65% of the market rates.

I rest my case.

So what are the key conclusions I can draw upon with this experience — more than the 4Es and the 4Rs, I think the lesson is one of transparency — the easiest way to manage talent is be transparent, open and listen to what they have to say. Once again good old fashioned philosophy of honesty, transparency and objectivity works! And works very well indeed!!