Growing Talent Management Firms: Industry Knowledge—Tacit or Implicit?

There is little question that strong leadership can turn the proverbial sow’s ear into a silk purse. Business is replete with successful takeovers that have yielded just this. Chief among the leadership traits needed in an industry represented by significant transformation and churn is having a vision capable of effectively managing change. While many industries would qualify for extreme change, talent management certainly is among these. But, perhaps more so than many industries, strong leadership in talent management also means understanding the nature of the business, its value proposition, and what business model will ensure sustainable profitability. Failure to grasp these factors is a sure formula for failure.

Take the Provant situation a decade ago, for example, mentioned in the initial blog of this series. The intended training business roll-up was masterminded by a company that had successfully rolled-up both ambulance and waste treatment businesses throughout the United States. These “visionaries” thought the same could be done with training businesses, not understanding that each one of those businesses had unique value propositions, different content, specialized content delivery, and, in many cases, international distribution. They didn’t understand the industry enough to realize that the business model for successful ambulance or waste treatment companies was based on far greater similarities than those in the training business. Attaining economies of scale by integrating back office functions such as human resources and technology were strong motivating forces to bring costs down, but integrating any other operations was the Achilles heel in putting these companies under one roof with one brand. On the other hand, IIR and Informa’s acquisition strategies recognized the unique differences in their training businesses, and while taking advantage of integrating some back office functions, kept the firms separate with their own brands.

Another example of failure to understand the business was the John Wiley and Sons’ purchase of Wilson Learning in the late ‘70s. Wiley assumed that Wilson was also in the publishing business because it printed training binders and thus could leverage Wiley’s in-house printing, warehousing, and production capabilities. But Wilson Learning was no more a publishing business than Wiley was a training business, so the intended synergies never took place. Fortunately, a generation later, Wiley has recognized what business it is in with its acquisition of Pfeiffer & Associates, Profiles International, Inscape Publishing, and most recently, CrossKnowledge. There are numerous additional examples that support this premise, some relatively recent and some yet to be assessed. To be successful, the architects and leaders of these mergers and acquisitions must truly understand the business they are in as well as the ones they acquire.

As the talent management industry continues to evolve and expand, more and more integration—whether through direct acquisitions of new businesses or mergers with existing ones—will continue to define the competitive landscape. It appears the industry is going through another bubble of these integrations as it did during the mid ‘80s and ‘90s. What lessons have been learned from many of those—most of which have unraveled in one way or the other—about how to ensure their future success?

What other examples illustrate talent management firms, or their acquirers, that failed because of a basic lack of understanding of how the industry goes to market and operates? What examples demonstrate where talent management industry understanding facilitated the success and growth of the business? Please share in the comment section below.

Check out Steve’s full series, Managing and Growing Talent Management Firms.