The late Steve Jobs of Apple summed up talent’s importance with this advice: “Go after the cream of the cream. A small team of A+ players can run circles around a giant team of B and C players.”
In their book Leading Organizations, McKinsey & Company senior partners Scott Keller and Mary Meaney address the ten most basic issues facing business leaders:
- Attracting and retaining talent.
- Developing the talent you have.
- Managing performance.
- Creating leadership teams.
- Making decisions.
- Reorganizing to capture value quickly.
- Reducing overhead costs for the long term.
- Making culture a competitive advantage.
- Leading transformational change.
- Transitioning to new leadership roles.
This blog focuses on proposition (1) – attracting and retaining talent – though as we go forward, we will likely investigate some or all of the other issues raised in this list.
We live in an era that espouses the virtues of equal opportunity and meritocracy. Talent drives the former and defines the latter.
The importance of superior talent
Superior talent is up to eight times more productive than its more lethargic counterparts. The authors of the McKinsey report cite the work of Ernest O’Boyle Jr. and Herman Aguinis, whose 2012 study The best and the rest covering a sample of more than 600,000 researchers, entertainers, politicians, and athletes found that high performers are as much as 400 percent more productive than average ones.
The McKinsey report goes on to conclude: “Studies of businesses not only show similar results but also reveal that the gap rises with a job’s complexity. In highly complex occupations – the information-and interaction-intensive work of managers, software developers, and the like – high performers are an astounding 800 percent more productive.”
Most companies don’t get it right
Since business leaders know that talent is valuable and scarce, you might assume that they would know how to find it. Apparently not:
- 82 percent of companies don’t believe they recruit highly talented people.
- For companies that do, only 7 percent think they can keep it.
- Only 23 percent of managers and senior executives active on talent-related topics believe their current acquisition and retention strategies will work.
Focus on the 5 percent who deliver 95 percent of the value
Most corporate executives only pay superficial attention to their talent acquisition processes. They aren’t sufficiently analytical, preferring instinct and intuition (gut feeling) over performance metrics. The McKinsey report offers the following example:
“Let’s consider American football. If you asked people who is the most highly paid player on a team, they would correctly say the quarterback, the key person in the vast majority of plays. People would probably say that the second most highly paid player was the running back or the wide receiver, since they work directly with the quarterback to advance the ball. These people are wrong. It’s the relatively unnoticed left tackle, who protects the quarterback from things he can’t see and could injure him.”
A similar conclusion can be drawn from the advertising agency world, which is obsessed with “creativity.” People in agency creative departments are typically rewarded far more lavishly than their counterparts in the media department.
Trouble is, you can’t sell a snowblower to someone living in a Montreal high rise, however brilliant the advertising behind it. Targeting (which is what media departments do) can make or break a campaign. Advertising – however cleverly produced – that sails off into the night is an expensive mistake.
It comes down to understanding the true economics of value creation in specific roles.
The employee value proposition
The McKinsey report has identified the fundamentals of the employee value proposition (EVP): or what employees get for what they give.
“Gives” come in many flavours—time, effort, experience, ideas. If your EVP is truly stronger than the competition’s, you will attract and retain the best talent.
As the following chart demonstrates, the acquisition of corporate talent is a two-way street.
The executive recruitment business refers to this as a great fit, where the assets – both tangible and intangible – of employer and employed are aligned.
The role of analytics
Much has been written (though perhaps not quite enough) about the role analytics plays in sourcing and retaining talent in competitive sports. The Dallas Cowboys pioneered the concept of player performance statistical analysis as a determinant of talent selection many years ago, an issue we discussed in a blog posted some time ago.
Michael Lewis’s book Moneyball took the idea a step further by pitting the collective old-time wisdom of baseball players, managers, coaches, scouts, and front offices against rigorous statistical analysis in determining which players to recruit. Analysis wins, changing the game forever. Could the same be true for recruiting top talent? Observe the McKinsey report:
“When the National Bureau of Economic Research looked into this, it pitted humans against computers for more than 300,000 hires in high-turnover jobs at 15 companies. Human experience, instinct, and judgment were soundly defeated: people picked by computers stayed far longer and performed just as well or better. This wasn’t the only such finding. University of Minnesota professors analyzed 17 studies and found that hiring algorithms outperform humans by at least 25 percent.”
It appears that this approach is applicable in any talent recruitment situation involving a large number of candidates, regardless of their job status. Front line, middle management, or C-suite – the findings are the same. Analysis wins.
Though still in its infancy, people analytics is gaining speed. According to the McKinsey report, as recently as 2016, only 8 percent of companies reported that they were fully capable of using predictive modelling for talent recruitment purposes, though that was up from 4 percent in 2015.
David Ogilvy, the founder of iconic advertising agency Ogilvy & Mather and widely regarded as the father of modern advertising, observed: “Talent I believe is most likely to be found among non-conformists, dissenters and rebels.”
Attracting and retaining exceptional talent is the single most important challenge all organizations face. Casting – finding the right individual for the right role – is crucial. One size fits all solutions don’t work, in talent scouting, wealth management – or life.