Flipping the Coin for Talent: How Well Are You
"Having the most talented people in each of our businesses
is the most important thing. If we don't, we lose." Jack
Welch while CEO of GE
How do great leaders of successful companies spend half of their
time? They spend it on people: recruiting new talent, picking the
right people for positions, grooming young stars, developing global
managers, dealing with under-performers, and reviewing the entire
Everyone agrees that talent is an important competitive advantage,
but surprisingly, three out of four companies do not make their
talent management programs a high priority. Hiring practices often
are random and decisions often are based on intuition. In many
cases, hiring decisions have success rates similar to flipping
Executive turnover is at an all-time high.
Fifty-eight percent of large and medium-size companies changed
CEOs between 1998 and 2001, according to an international study
of 481 corporations conducted by Drake Beam Morin, a management
consulting firm. The median tenure of CEOs is now 2.75 years, down
about a year from 1999. Only 12 percent of CEOs have held their
position for 10 years or longer.
Low-performing companies have nearly twice as much turnover among
top-performing employees as high-performing companies, according
to the consulting firm, Watson Wyatt Worldwide. These low-performing
companies will soon be in great jeopardy because a large personnel
shortage is looming. The U.S. Bureau of Labor Statistics projects
151 million jobs in the U.S. by 2006, but only 141 million people
will be employed.
Yet despite all the rhetoric about
the war for talent, most companies don't have effective hiring
practices. A McKinsey & Company
survey of talent management practices from 1997 to 2001 surveyed
7,000 managers and only 26 percent strongly agreed that talent
was a top priority at their companies.
In this comprehensive survey, ( The War for Talent , 2001), what
distinguished the high-performing companies from the average-performing
firms was the fundamental belief in the importance of talent, and
the actions they took to strengthen their talent pools. But without
this talent mindset, recruitment is an activity with less than
favorable outcomes, attrition rates are high, and performance suffers.
Companies that scored in the top quintile of the talent management
index earned, on average, 22 percentage points higher return to
shareholders than their industry peers.
Even in a slower economy, the war for top
managerial talent is persisting. The way that companies have managed
talent in the past will not be sufficient in the future. Talent
is a critical driver of corporate performance. A company's ability
to attract, develop and retain talent will continue to be a major
competitive advantage in the coming years.
Three factors contribute to the growing need for improving an
organization's talent reserves:
1. The irreversible shift from the Industrial Age to the Information
2. The intensifying demand for high-caliber managerial talent
3. The growing propensity for people to switch from one company
The Increasing Demand for Talent
The war for talent began in the 1980s with
the expansion of the Information Age. Companies' reliance on talent
has increased over the last century. In 1900 only 17 percent of
jobs required knowledge workers; now over 60 percent do. More knowledge
workers means it's more important to attract and retain great talent,
since the differential value created by the most talented knowledge
workers is enormous. The best software developers can write ten
times more usable lines of code than average developers, and their
products yield five times more profit. A world-class engineer with
five peers can out-produce 200 regular engineers.
The demand for talent is made more
challenging because globalization, deregulation and rapid advances
in technology are changing the game in most industries. In
the McKinsey & Co. surveys, in
2000, 99 percent of the corporate officers said that their managerial
talent pools needed to be much stronger three years hence. Only
20 percent agreed that they have enough talented leaders to pursue
their companies' business opportunities.
Although the size of the total workforce
in the US will grow a total of 12 percent over the ten years
from 1998 to 2008, the number of 25 to 44-year olds ¨C the segment that will supply companies
with their future leaders ¨C will actually decline 6 percent
during the same period . Similar statistics are evident outside
the U.S. To some extent companies will be able to rely on older
managers, as the number of 55 to 65-year olds will increase 45
percent during the same period; but they will leave a large gap
after they retire.
The propensity to switch jobs is increasing, and the ability for
people to search for jobs using the Internet has helped make it
easier. The old taboos against job-hopping have disappeared. Portability
of retirement plans helps facilitate this.
Today, many managers have become passive
job seekers with their antennae up all the time for other opportunities.
When surveyed, 20 percent of managers said there is a strong chance
they will leave their current company in the next two years, and
another 28 percent said there is a moderate chance of leaving.
This is compounded by the fact that younger managers are 60 percent
more likely to leave their jobs than older managers.
The new reality is that it is becoming more critical for companies
to hire talented managers in order to maintain a competitive advantage,
but that talented people are scarce, more mobile and demanding.
The best people are those who can combine intelligence, data, and
skills in a way that enables them to synthesize data into information
and apply their knowledge to address new and emerging problems.
What can leaders do to ensure that their organizations have sufficient
talent to drive their success?
What's Wrong with Most Hiring Practices?
Most managers find employee recruitment and hiring to be frustrating
and time consuming. With this negative attitude, they hire impulsively,
basing their decisions on the feelings they experience in interviews
with candidates. However, a study conducted by John Hunter of Michigan
State indicated that the typical employment interview is only 57
percent effective in predicting subsequent success. This is only
7 percent better than flipping a coin!
In a survey by Lou Adler, ( Hiring with Your Head, 2002), 95 percent
of managers said they had made bad hiring decisions, 95 percent
indicated that hiring is number one or two in importance, and 95
percent admitted to not liking the hiring process.
As important as hiring talented people
is, not enough time or energy is being allocated to establish
a reliable process. With a 40
to 50 percent error rate, hiring processes are not much better
than random. No other processes in organizations are permitted
to be random ¨C companies
spend hundreds of thousands of dollars to reengineer flawed processes
that have only a 5 to 10 percent error rate.
A major problem revolves around the interview
itself. This is a random process that doesn't work very well, and
is one of the reasons most managers find the whole effort frustrating.
Emotions, biases, chemistry and stereotypes play too big a role.
True knowledge of the performance requirements of the job usually
is weak. There is an over-reliance on the interaction between the
candidate and the interviewer, and too little on the candidate's
ability and motivation to do the job.
A candidate is often hired because of his
or her ability to interview well; presentation is more important
than substance. The candidate is judged on first impressions of
his or her personality, social confidence, assertiveness, appearance,
extroversion, and verbal skills. Instead, the candidate needs to
be assessed for initiative, team skills, achieving objectives,
technical competence, management and organizational skills, intellect,
leadership and emotional intelligence.
It is hard work to counteract the natural tendency to judge people
based on first impressions, personality and a few select traits.
Overcoming this problem can eliminate 50 percent of all hiring
Lack of real job knowledge is another major
part of hiring mistakes. It is necessary to know the required competencies
of the position, based on the performance requirements of the job.
When an internal person is promoted,
the predictability of his or her performance is very high ¨C
80 to 90 percent. Performance predictors for an external hire
are only 55 to 70 percent accurate. Predictions about the success
rate of internal hires are more accurate because the person's
past performance is known: attitude, work habits, intelligence,
leadership and team skills, ability to learn, management style,
potential, commitment, and other intangibles such as ability
to handle stress.
But with external hires, there is often an
over-emphasis on skills, academic record, personality and first
impressions. There is insufficient analysis of what they have actually
accomplished with their skills.
The Importance of Performance-Based Job Descriptions
Effective hiring starts with a performance-based
job description that reflects what needs to get done. This is an
outcome-oriented approach. The ability to achieve measurable objectives
is a better predictor of future performance than the candidate's
level of skills and experience. Comparable past performance is
a leading indicator of future performance.
Many leading companies are now switching their job description
criteria to an emphasis on performance and potential over skills
and experience : Microsoft, Intel, and EDS to name a few . Here
is an example of a traditional vs. a performance-based job description:
3-5 years experience in controlling expenses
operating overhead by $30,000/mo. within the first six months
The goal is to achieve a better understanding of the expected
outcomes of a job. These specific job performance objectives form
the basis of the hiring interview. Candidates can be asked how
they would achieve the objectives required. Later, the performance-based
job descriptions guide the new hires as they transition into their
new jobs, and help track performance reviews and promotional processes.
In addition to performance-based job description,
the second tool in attracting talented people is a message that
appeals to their fulfillment needs. Talented people may want big
money and perks, but more importantly, they want to feel passionate
about their work. They seek ways to have the freedom in their work
to create something of value and meaning on a larger scale. They
want to be enriched by their career opportunities, uplifted by
the company's leaders, inspired by the company's stated mission.
Executive teams have many tools and techniques available to them
to improve their talent pools. They can hire consultants who can
help them keep objectivity in the interview process and to help
with performance-based job descriptions, job analysis, competency
modeling, and pre-employment testing. Providing executive coaches
to new hires is also a great benefit that attracts top talent.
The most important factor, however, is the realization that an
organization can not prosper in the long run without attracting
and retaining outstanding talent. This can be accomplished by prioritizing
talent management and devoting time, energy and resources to attracting
good people. According to the authors of The War for Talent , there
needs to be a talent mindset , a passionate belief that to achieve
the vision and aspirations of your business, you must have great
talent. To have better talent in the organization, every executive
must commit to attracting, hiring and retaining the best people
and accept responsibility for making this a very high priority.
Attracting Talented People: What is Your Message?
I judge my
people on two people leadership questions: Are the people in
their group happy working for them? And, do they bring in great
people? If managers can't help us attract and retain the best
people, then they aren't doing a good job. Ken Ryan, CEO DoubleClick
When surveyed, talented managers responded that they wanted the
following elements in their jobs:
1. Exciting work
2. A value-driven culture in a great company
3. A company that is well-managed by great leaders
4. Wealth and rewards
5. Opportunities for growth and development
6. The ability to meet personal and family commitments.
To create an exciting recruiting message,
a company must provide these core elements and articulate them
well in their recruitment literature. A
few more benefits or a great health plan won't make the difference
when a talented candidate is choosing between your company and
another. A strong message appeals to talented people when it outlines
the facts: work with the company is interesting and challenging,
there is a value-driven culture that inspires passion, the compensation
is attractive, and there are opportunities to develop and learn.
The authors of The War for Talent promote
the idea of attracting talent through an Employee Value Proposition.
An EVP is similar to a customer
value proposition. It is the sum of everything people experience
and receive while they are part of the organization ¨C
the culture, values, work satisfaction, leadership, compensation
and more. It's about how the company can fulfill employees' needs,
expectations and dreams. When a company has an EVP that addresses
candidates' higher needs, it is very attractive. A strong EVP excites
people by appealing to their passions and needs for fulfillment.
The EVP message is not about benefits and
perks. It is about what people experience on a daily basis in your
organization. It is a strong answer to the compelling question
Why would a highly talented person choose to work here?
Michaels, E., Handfield-Jones,
H., & Axelrod, B. (2001). The
War for Talent. Boston, MA: Harvard Business School Press.
Adler, L. (2002 ). Hire With Your Head...Using Power Hiring To
Build Great Companies. New York, NY: John-Wiley.
Resources on Hiring
Adler, L. (2002 ). Hire With Your Head...Using Power Hiring To
Build Great Companies. New York, NY: John-Wiley.
Citrin, J. M. & Smith, R.A. (2003). The Five Patterns of Extraordinary
Careers . New York, NY: Crown Business.
Deems, R. S. (1999). Hiring: How to Find and Keep the Best People.
Kaye, B. & Jordan-Evans, S. (1999) . Love 'Em or Lose Em: Getting
Good People To Stay . San Francisco, CA: Barrett-Koehler.
Klinvex, K.C., O'Connell, M.S., & Klinvex, C.P. (1999). Hiring
Great People. New York, NY: McGraw-Hill Companies.
Michaels, E., Handfield-Jones, H., & Axelrod, B. (2001). The
War For Talent. Boston, MA: Harvard Business School Press.
Resources is a Leadership Consulting, Training and Executive Coaching
Firm Helping Companies Assess, Select, Coach and Retain Emotionally
Intelligent People; Emotional Intelligence-Based Interviewing and
Selection; Multi-Rater 360-Degree Feedback; Career Coaching; Change
Management; Corporate Culture Surveys and Executive Coaching.
Dr. Maynard Brusman
Consulting Psychologist and Executive Coach
Trusted Advisor to Senior Leadership Teams
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