Caution: A War for Talent mindset may be hazardous to your results

Caution: A War for Talent mindset may be hazardous to your results

Copyright © 2007 Wally Bock

Used with permission of the author (http://www.threestarleadership.com/bookreviewpermissionform.htm) 
Author: Wally Bock 
Email: wally@threestarleadership.com
Website: http://www.threestarleadership.com
11 December 2007

Back in 2000, three McKinsey consultants wrote a book called War for Talent. They suggested two things. Companies that recruit the top talent will get the best results and they should use forced ranking systems to identify and lavishly reward top talent. But those ideas can get you in big trouble.

Stars have to Fit

Just going out and finding the "best people" doesn't guarantee top performance. One reason is that people have to be more than talented. They have to fit your culture. Take Lewis as an example.

Lewis looked like he had it all. He got great grades in school and graduated at the top of his MBA class at a prestigious university.

After graduation, Lewis took a job with a successful mid-sized company in a small town in the Midwest. The first sign of trouble came on the morning of his first day on the job. He'd had breakfast with the president and been shown around the building. He was settling into his office when the president stuck his head in the door.

"We've got a truck downstairs that needs to be unloaded," he said. "Come on, Lew, we'll get you your coveralls." The president headed off to the loading dock. Lewis sat in stunned silence.

"I knew right then I'd made a big mistake," he told me months later. In the company he'd joined, everyone participated in certain "menial" tasks. They unloaded trucks together. They cleaned up the premises together.

It wasn't that Lewis was scared of hard work. He was as hard a worker as you'll ever find. He just felt that polishing floors was taking him away from the contribution he could make to the company. He left before his first month was out.

To help you the most, top talent needs to fit your culture and values. That's why companies that are known for their strong culture have hiring practices designed to make sure there's a fit.

Google and Southwest Airlines, for example, each have a hiring process that goes to great lengths to determine if a new person will fit into the company, but they look for very different things. Google looks for brains. Southwest looks for a helpful attitude.

Whole Foods has a four week probation period, after which co-workers vote on whether a new hire should stay. At Mrs. Fields Cookie stores, candidates have to actually sell cookies and sing "Happy Birthday."

Teams Trump Stars

Business is a team sport. Almost everyone works as part of a team. Most people in business, some 90 percent according to a research study by CCL, serve on two or more at the same time. With rare exceptions, businesses succeed when they've got lots of great teams, not a few stars.

Michael Jordan is probably the greatest basketball player of all time. But he didn't win any championships in the pros until he adjusted his game to the team's needs. That's when he and the Chicago Bulls started collecting championship rings.

Or, take the experience of the Oakland Athletics baseball team, chronicled in the book, Moneyball. General Manager Billy Beane got better results than teams with far higher payrolls, by acquiring players whose specific skills fit what the team needed. He let other teams spend money on the expensive stars.

Forced Ranking Systems Erode Team Bonding

Forced ranking was originally popularized by General Electric (GE). The War for Talent authors recommend a system much like GE's where only 20 percent of workers should get top ranking, and 80 percent of the rewards available. Those are the A-rated workers.

The large group of B-rated workers should make up 70 percent of the total. They should get 20 percent of available rewards and be encouraged to improve.

Finally, the C-rated workers bring up the rear as 10 percent of the total. C-rated workers are told to improve or be fired.

This system works at GE, but GE has a unique culture of candor and competition that has grown up over years. Even at GE the strict percentage ranking and reward system has been softened in the years since Jack Welch left the helm.

At companies without GE's culture, forced ranking, what employees often call "rank and yank," creates more conflict than commitment to excellence. The consulting firm, Novations, surveyed 200 human resource professionals and found that forced ranking systems resulted in lower productivity, lower levels of engagement, and lower morale.

War for Talent Breeds Bad Habits

A War for Talent mentality also breeds bad habits that can harm your company. One of them is concentrating on the quality of talent instead of quality of performance.

The really important measures in any business happen outside the unit or the company. Results matter. If you spend your time concentrating on the quality of your people you tend to shift your attention away from the results they produce and it's those results that drive profit and growth.

A War for Talent mentality also leads companies to look for saviors from outside instead of developing the individuals and teams that are already on board. That would make sense if quality of people alone was enough, but the evidence says otherwise.

Talent isn't All it's Cracked Up to Be

If hiring the very best people was the route to success, it would seem that the very best companies would do just that. But they don't.

Southwest Airlines is one of the great business success stories. While fuel prices have soared and security risks have multiplied and other airlines have gone in and out of bankruptcy, Southwest has remained profitable.

Are the people at Southwest Airlines that much better than the people at US Airways? Did Walgreen's produce 31 straight years of record profits because it had more talented people than other drug store chains? What about Toyota? Did it hire talent that was far better than the talent at General Motors?

We don't have to guess about the answer to that question. We have an example of the results of Toyota and General Motors managing the same people.

For years, General Motors operated an auto plant in Fremont, California. On any given day, a fifth of the workforce simply didn't show up for work. The plant had the highest defect rate in the country. It cost more to produce cars there than anywhere else.

In 1985, Toyota took over the plant under a Toyota-GM joint venture named New United Motors Manufacturing, Inc. (NUMMI). Eighty-five percent of the workers in the new plant had been workers at the plant when GM ran it.

What happened? Absenteeism dropped to 3 percent. The plant turned out some of the highest quality cars in America at one of the lowest costs. The people, the talent, were the same. What was different?

Three Keys to High Performance

If it's not talent, what is it? There are three answers: systems, supervisors, and culture.

John Paul MacDuffie of the Wharton School, studied automotive plants to see what made the difference between the best and the rest. He found that top plants tend to use lean or flexible production systems. Those systems put emphasis on teams and training.

Supervisors make a difference to teams. The team leader is the most important single influence on team morale and productivity. At GM, team leaders were "bosses." At Toyota supervisors and managers have the job of helping the teams improve.

That brings us to culture or "the way we do things around here." The way things are done at Toyota sends that message that "we're all in this together and we need to keep finding ways to do things better." The way things were done at GM was quite different. That's why when Toyota took over the plant, two things that were eliminated were the executive dining room and reserved parking places for executives.

Your challenge, if you want to build long term profitability and competitive advantage is not to engage in an undifferentiated, scorched-earth war for talent. Instead you need to make sure you hire as many talented people who fit your culture as possible, then use your systems, supervisors and your culture to help them become as effective as possible.

Wally Bock helps organizations improve productivity and morale, as well as deal with the challenges of massive Boomer retirements. He is the author of Performance Talk (http://www.performancetalk.com/). He writes the Three Star Leadership blog (http://blog.threestarleadership.com/), coaches individual managers, and is a popular speaker at meetings and conferences in the United States and elsewhere. Read more about him in his own words: http://www.threestarleadership.com/learnwally.htm and contact him at email: wally@threestarleadership.com and website: http://www.threestarleadership.com .  
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