The War for Talent Is Back

In my opinion, one of the more important responsibilities of an organizational leader is to find and nurture talent. I found this post on the war for talent at HarvardBusinessOnline. And, to be honest, I'm not sure I agree with what it suggests. The article deemphasizes "great" talent, and seems to suggest "managing to the mean" - by reducing the wage gap, emphasizing systems over superstars, etc.

I found it interesting enough to dig a little deeper into the evidence supporting the argument. Thought you might find it interesting, as well.

-------------------

The War for Talent Is Back
By Bob Sutton, From Harvard Business Online, April 23, 2007




Last week I did a workshop with a group of about 20 CIOs from large companies. Our discussion focused on what they could do to build a more civilized workplace. In the course of our conversation, each of these executives emphasized--as I’ve read recently in The Economist, The New York Times, and BusinessWeek--that building a workplace that attracts and keeps great people is especially important now because the job market for skilled people is so hot. I also have heard similar messages at other companies I’ve visited recently, including eBay, Microsoft, Google, SuccessFactors, and Yahoo!, as well as from managers at companies including Procter & Gamble and Fidelity Investments.

A lot has been written about the war for talent, and--if you actually take an evidence–based perspective--much of it is nonsense. There are a lot of consulting firms and management gurus out there giving bad advice. My colleague Jeff Pfeffer and I spent a lot of time reading and weaving together overall patterns in peer review studies when we were writing Hard Facts, Dangerous Half-Truths, and Total Nonsense: Profiting from Evidence-Based Management. Recently Jeff testified to Congress about many of these lessons--especially about the implications of research on incentives for civil service reform.

If you want to “win” the talent wars in your firm, five lessons stand out for me:

1. Superstars are overrated. It may seem like you can’t live without them, but you probably can. Check out Boris Groysberg’s research. Boris and his colleagues have some compelling evidence that, when superstars leave, there is little evidence that they do much damage to their firms. There is, however, a lot of evidence that stars aren’t very portable--that unless you can hire the star and his or her team, it likely is a waste of money. Boris tells me that he has some evidence that this finding may not apply to women, that if they have been a superstar in their last firm, they will be a star in their next firm. So it seems that if you hire a man who is a star at another firm, you better steal the whole team, but if you hire a solo woman, odds are it will work.

2. Great systems are more important than great people. The notion that you are doomed to mediocrity if you can’t hire the very best people has little empirical support. Yes, there are big differences between the most talented people and the next level down in most occupations. But systems are more important. Toyota beats the competition as a result of a superior system; Men’s Wearhouse and McDonald’s don’t hire people that are much different from their competitors, but their systems explain their long-term dominance more than their people. As Jeff Pfeffer says, many organizations seem to have “brain vacuums” to turn people who seem to be smart into bumbling fools. Even the most brilliant person is doomed to fail in a bad system, and seemingly mediocre people can become stars in a great system.

3. Create smaller rather than larger pay differences between “star” employees and everyone else. Jack Welch doesn’t believe this; he wants you to give 80 percent of the bonus money to the top 20 percent of your people. And there are a lot of other experts out there who want you to throw most of your salary and bonus dollars to your stars. But Jeff Pfeffer and I have reviewed this literature very carefully and every article that we can find in a peer-reviewed journal--of top management teams, baseball teams, academic departments, manufacturing organizations--finds (controlling for the level of pay) that performance is better when there is smaller distance between the best-paid and worst-paid people. This isn’t an argument for socialism--there are still big differences between the best- and worst-paid people in even the baseball and top management teams with the most compressed pay. But it does suggest that the widening pay gaps between the “best” and “worst” may run contrary to the best evidence.

4. The law of crappy people is probably a myth. I have read of several famous executives (e.g., Steve Jobs) and consulting firms (e.g., McKinsey) that have advocated the law or “rule of crappy people,” which is an assertion that great people will hire other great people, but mediocre people will hire even worse people because they are threatened by competent people. I spent many hours reviewing published research on employee selection, and could find no evidence that it was true. There is evidence that people like to hire people like themselves. And there is some evidence that the most competent people prefer people like themselves, and that less competent people are less picky. But I can’t find any evidence that “B players” or people of average skills and talent levels are afraid to hire people with the same or greater skills.

5. The no asshole rule helps. I was struck by how vehement those CIOs were about how Generation X and Y employees simply weren’t going to put up with nasty bosses and peers. One executive was especially striking as he explained how he learned the wrong lesson from one his first mentors, that a demeaning boss was a good boss. And that he had changed his management style dramatically after figuring out that every time he or one of his colleagues drove someone out and had to replace him or her, it cost them about $100,000--and more for senior people who were driven-out. Indeed, another CIO told me that he had left a higher-paying job for his current one because he just couldn’t stand his boss's demeaning and self-aggrandizing style. And there were several CIOs who emphasized that such bosses and work climates not only drove people out, but they created environments were people devoted too much energy to avoiding blame and the wrath of others, and not enough time to actually doing their jobs. I had not made such a strong connection between the no asshole rule and the war for talent. I was a bit worried about using such blunt language and talking about a “soft” subject with senior people who did such technical work, but they turned out to be one of the most forthcoming and enthusiastic groups that I’ve spoken to.