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In 1997, a groundbreaking McKinsey study exposed the "war for talent" as a strategic business challenge and a critical driver of corporate performance. Then, when the dot-com bubble burst and the economy cooled, many assumed the war for talent was over. It's not. Now the authors of the original study reveal that, because of enduring economic and social forces, the war for talent will persist for the next two decades. McKinsey & Company consultants Ed Michaels, Helen Handfield-Jones, and Beth Axelrod argue ...
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In 1997, a groundbreaking McKinsey study exposed the "war for talent" as a strategic business challenge and a critical driver of corporate performance. Then, when the dot-com bubble burst and the economy cooled, many assumed the war for talent was over. It's not. Now the authors of the original study reveal that, because of enduring economic and social forces, the war for talent will persist for the next two decades. McKinsey & Company consultants Ed Michaels, Helen Handfield-Jones, and Beth Axelrod argue that winning the war for leadership talent is about much more than frenzied recruiting tactics. It's about the timeless principles of attracting, developing, and retaining highly talented managers - applied in bold new ways. And it's about recognizing the strategic importance of human capital because of the enormous value that better talent creates.Fortified by five years of in-depth research on how companies manage leadership talent - including surveys of 13,000 executives at more than 120 companies and case studies of 27 leading companies - the authors propose a fundamentally new approach to talent management. They describe how to: create a winning EVP (employee value proposition) that will make your company uniquely attractive to talent; move beyond recruiting hype to build a long-term recruiting strategy; use job experiences, coaching, and mentoring to cultivate the potential in managers; and, strengthen your talent pool by investing in A players, developing B players, and acting decisively on C players.Central to this approach is a pervasive talent mindset - a deep conviction shared by leaders throughout the company that competitive advantage comes from having better talent at all levels. Using practical examples from companies such as GE, The Home Depot, PerkinElmer, Amgen, and Enron, the authors outline five imperatives that every leader - from CEO to unit manager - must act on to build a stronger talent pool. Written by recognized authorities on the topic, this is the definitive strategic guide on how to win the war for talent.
Based on surveys of 13,000 executives at more than 120 companies, as well as case studies of 27 leading companies, The War for Talent presents a five-part approach to managing an organization's talent resources. The authors, each a respected authority on recruitment and retention, tell companies how they can win the ongoing war for talent.
Talent is now a critical driver of corporate performance; a company's ability to attract, develop, and retain talent has not ceased to be important in the current slow economy. Managerial talent, in particular, is at the epicenter of the war for talent, and the authors write that the people with the ability to lead a company or division, guide a production team, or supervise a group of workers are the elements that differentiate great companies from merely good ones.
Why the War Will Persist
The authors point to three fundamental forces that are fueling the war for talent:
Since these structural forces show no signs of abating, the authors write that it is believed that the war for managerial talent will be a defining feature of the business landscape for many years to come.
A New Approach to Talent
The authors write that there are five imperatives on which companies must act, if they are going to win the war for managerial talent and make talent a competitive advantage:
Why Soundview Likes This Book
The War for Talent clearly and powerfully describes the best ways organizations can attract, train, assess and retain the best people using principles that make sense for both employers and employees. This playbook for human resources managers offers a battle plan that that can strengthen any firm's human capital and help it improve long-term business performance. Copyright (c) 2002 Soundview Executive Book Summaries
The Courage to Reshape Long-Standing Ethics
In the struggle to be fair and compassionate leaders, many would prefer to think of all colleagues as equally talented, and to treat them all the same. However, in reality, some people perform better than others.
Differentiation entails assessing the performance and potential of your people and then giving them the commensurate promotion, compensation, and development opportunities. It means investing in the A players, so you are sure to retain and develop them; affirming and developing the B players, so they can contribute their best; and acting decisively on the C players, either by helping them raise their performance or by removing them from critical positions. We are not discussing the D players-the clearly incompetent or unethical managers-since all companies take quick action on them.
What precisely do we mean by A, B, and C players? You could think of these three levels in absoluterelative terms: In a particular company, A players are the best 10 to 20 percent, B players are the middle 60 to 70 percent, and C players are the bottom 10 to 20 percent. Whichever approach you use for defining your talent segments, be sure to install a common definition that can be consistently applied.
Many companies are uncomfortable designating people as As, Bs, and Cs. Differentiation requires a willingness to acknowledge that among the many committed hard workers, some contribute more than others in terms of performance and impact to the organization.
At the core of this discomfort is a genuine ambivalence about passing judgment on people. However, it is important to remember that you are not passing judgment. You are assessing performance. Moreover, it is not a permanent verdict. In fact, the underlying purpose of the assessment is to help people improve their performance.
Critics of differentiation argue that it promotes a star culture that undermines teamwork. This doesn't have to be the case, however. Differentiating your As, Bs, and Cs doesn't mean that you are stamping a grade on their forehead. In fact, you may choose not to tell people what their current assessment is. Furthermore, it doesn't require that all of the performance rewards be based on individual performance. You could, for instance, base all or some of a manager's variable pay on team performance.
Other critics of differentiation argue that it takes universal praise to keep everyone motivated. We don't think this is true, either. Ninety-four percent of the managers we surveyed said that recognition for their individual contributions is very important to them.2
There are some downsides to differentiation. The B players won't feel quite as attended to as the A players. There will be pain for the C players (and for the managers who must tell them that their performance is inadequate). But what is the alternative? Not investing the most important development opportunities in the people who have the highest likelihood of becoming leaders in your company? Not getting the top-flight players because you can't afford to pay them? Not putting your most talented people in your most critical jobs? Not being candid with people about their development needs so that they can work on them?
Imagine the excitement if your CEO announced that a midlevel engineer who was widely acclaimed to be a terrific leader was promoted to be head of product engineering for the entire corporation. Imagine your boss telling you that your performance was rated outstanding and handing you a 40 percent merit increase rather than the 4 percent you had expected. Imagine the buzz that would ring through your company if a long-tenured senior executive who had failed for years to provide inspirational leadership-in fact, who was a real demotivator-were asked to leave.
The enormous power of affirmation
Affirmation, on the other hand, means making people feel appreciated, recognized, and valued for their unique contributions. Affirmation helps drive an individual's performance and job satisfaction. People want and need to feel valued as a productive part of the institution. When they aren't, they become demoralized, they are more likely to leave the company, and their performance invariably suffers. As the philosopher and psychologist William James understood, "The deepest principle in human nature is the craving to be appreciated." Even C players need their self-worth affirmed-through recognition of the strengths they can leverage into another role.
In our research, two-thirds of respondents who were considering leaving their current employer cited "not feeling valued" as a reason for leaving (see figure 6-1). On the other hand, employees who feel affirmed by their companies said they are more satisfied with their jobs and less likely to leave.3
Differentiation and affirmation together form an ethic about how to manage people. For many companies this is quite different from the ethic they are accustomed to.
Invest Heavily in the A Players
Bill Boyle, Director of Experimental Biology at Amgen, knows the value of A-class talent. Several years ago, Amgen was racing against several competitors to develop a new anemia-fighting drug to help dialysis patients. "We had great people working around the clock on it. In the end we beat the competition for the Epogen patent by just a few days," he says. What was the difference that that team of high performers made? This year, Amgen's Epogen market is about $2 billion worldwide and growing. If you multiply that number by the total lifespan of the drug, it amounts to something on the magnitude of a $50 billion opportunity. "The scientists who pushed that product forward were among the best in the industry-the top layer," he says. "Their efforts created this extraordinary opportunity for Amgen."
There's no doubt that A players boost company performance. Because they create the most shareholder value, either directly or through their ability to inspire and motivate others, you should invest in them accordingly. The high-performing companies do this, as shown in figure 6-2. To make sure highly talented people stay with your company, you need to do everything you can to keep them engaged and satisfied-even delighted.
Find out what they would most like to be doing, and shape their career and responsibilities in that direction. Solve any issues that might be pushing them out the door, such as a boss that frustrates them or travel demands that burden them. Consider assigning a mentor to each A player, not only to help that person develop, but also to help resolve any problems that might cause him or her to leave the company one day.
You need to accelerate the development of your A players as much as possible, both to help retain them and to maximize their ability to contribute to the company. A players need challenging jobs that will stretch their abilities. You might think that most companies would do this, yet only 23 percent of the managers in our survey strongly agreed that their company gives high performers better and faster development opportunities than average performers.4
Make sure A players regularly receive candid, affirming dialogue about their strengths and development needs. Provide constructive, energizing coaching and assign one of your best mentors to them. Because such mentors are scarce, make sure they are spending their time where it has the most development leverage.
Differentiating development opportunities is not enough. You must also differentiate compensation. Unfortunately, most companies don't do enough for their A players. In our survey, only 15 percent of managers strongly agreed that high performers in their company make at least 20 percent more money than average performers.5
The traditional philosophy of internal equity-paying everyone doing the same job the same amount of money-is giving way to a new sense of equity, which dictates that you should pay people relative to the value they create. In fact, the corporate officers in our survey believe that top performers should be paid on average 42 percent more than average performers.6
Surprisingly, most companies do not pay top performers in the same salary grade much more than average performers. In some cases where we have done this analysis, the difference in total compensation paid is as little as 10 percent.
Paying the A players more doesn't have to create competition between people, and it doesn't have to create a star culture. The degree of the differentiation and the mix of individual and team-based incentives will determine whether you create a more team-based culture or a more individual-based culture. For example, a more team-based model might include sizable differences in salaries (depending on the individual's talents and contributions) while basing the incentive pay on team or company performance. Each company will have to determine what is suitable for its situation.
Overall, it is important to remember that A players need as much attention as the Bs and Cs. "Conventional wisdom is, 'You've got some great people working for you. So you don't have to worry about them,'" explains U.S. Marine Colonel Robert E. Lee. "But rising stars are more demanding to lead. They're more needy of your leadership. They question you all the time, constantly think about things, and are always coming up with ideas. They challenge you! But that's how your best leaders grow, and if you don't spend time with your best people, you're going to lose them."
That's the lesson that Hewlett-Packard and Procter & Gamble learned when they analyzed their "regretted losses": Many of the people who left did not know how highly regarded they were by the company's leaders.7 That's a regrettable way to lose talent.
Grow the Solidly Contributing B Players
In your effort to invest in the A players, don't overlook the next 60 to 70 percent of your talent pool-the individuals who keep the business running day after day-the solid B players. They may not stand out like the As, but without them your company would be paralyzed. You can't build a talent pool with A players alone.
"A true talent mindset cuts across the organization," Amgen's HR leader Ilana Meskin reminds us. "It's about spending your capital on strong contributors from all parts of the organization-those who exhibit learning agility and those who just seem ready and eager to grow. They're the ones who will benefit the most from the investment and from whom the organization will gain the greatest rewards." She added, "My greatest hope is that development and affirmation will not solely be lavished on superstars, but generously showered on core contributors throughout the entire organization."
With B players, the object is to increase their capabilities, energize them, and retain them with appropriate investment. You need to develop your Bs and affirm them.
Developing the B players will improve their productivity and satisfaction, and help some of them become A players. Encourage them, stretch them, and from time to time assess them to see if they have advanced. What is the value of having all your average-performing sales representatives increase their annual revenue by 3 percentage points? Or your plant managers increase real productivity from 2 percent to 4 percent a year? Obviously, the value creation potential is considerable.
So make sure the B players get the development they need. Give them helpful, honest feedback and coaching. Affirm their strengths, be candid about their shortcomings, and coach them. Some will have the motivation and capability to grow. Letting them know where they stand is the first step in helping them move their game up a notch. Show your faith in them by challenging them and giving them ever greater responsibilities. The watchword for a Catholic monastery, Conception Abbey, offers an inspiring thought about this: "The violets in the mountain can break rocks if we believe in them and watch them grow."8 You also have to make a deliberate effort to affirm the B players-to let them know they are valued and that their contributions are recognized. Admittedly, giving A players more opportunities and more pay does run some risk of making the B players feel less satisfied and less motivated. The affirming actions listed here, however, will help motivate and inspire your solid contributors, and should help offset any potential downside.
Act Decisively on C Players
A C player is typically someone who delivers only minimally acceptable results. C players think incrementally and rarely create something bold or innovative. They rarely inspire. No one clamors to work with them and no one learns very much from them.
C players aren't bad people. Many have worked hard during their time with the company and have tried their best. Some may have been strong performers in the past, but the pace of change has left them behind with skills that are no longer sufficient. They may have been an A or B player in another role.
Everyone knows who the underperforming managers are in their companies. Everyone knows they don't deliver and everyone knows they hold the rest of the team back.
With C players, the objective is to help them become Bs (or even As) or, alternatively, to move them out of their jobs. In some cases this means helping them raise their game. In others, it means moving them to a different position where they can be successful, even shine. In still other cases, it means asking them to leave the company.
The enormous hidden cost of Cs
When C players are kept in leadership positions, they cost the company and the people who work under them an enormous amount. Although the emotional pain and management time associated with moving underperformers aside can be considerable-and we do not trivialize them-the hidden costs of not moving them are even greater.
C performers make bad bosses. Fifty-eight percent of respondents in our surveys said they have worked for an underperforming boss. About 80 percent of them said the experience prevented them from learning, hurt their career, and prevented them from making a greater contribution to the bottom line. A full 85 percent said it made them want to leave the company.9 As figure 6-3 indicates, keeping C players perpetuates a vicious cycle. Bosses who are C players don't develop their subordinates, don't serve as good role models or coaches, and don't boost the productivity and morale of the people around them.
C players also tend to attract other C players. Netscape co-founder Marc Andreessen put it bluntly: "We hired very fast at Netscape and ended up with some groups filled with supergeniuses and others that weren't. It was very dependent on who the managers were. If you hired the right manager, that particular group was going to be great. But if you happened to hire a bad manager, that whole place was going to be horrible. We call it the Rule of Crappy People: Bad managers hire very, very bad employees, because they're threatened by anybody who is anywhere as good as they are."10
When leaders don't move on poor performers, it makes the other employees feel that the company is being poorly managed.11 The perception of how well the company is managed is a critical element of an EVP and a driver of job satisfaction.
Finally, there is also the direct opportunity cost of having a C player in a job instead of an A player. Managers who are A players create much more value for the company than C players do-80 to 130 percent more value in the cases we have studied.12 Replacing even half of your C players with A players would have a substantial impact on the performance of your organization.
Why isn't there more movement?
Almost everyone wants the company to do something about low performers, but most companies don't.
Executives and managers cite many reasons for not acting on underperformers. Some say they aren't sure enough about their own ability to form judgments about other people. Some have doubts about their own skills and are fearful that criticizing others exposes them to criticism, too. Some think that anyone can be developed. Others say that it is disrespectful to the person. Some fear they won't be able to find a better replacement. Still others fear legal action.
All of these are real issues, but they are not the greatest obstacle. According to our research, the primary reason for inaction is that managers are unwilling to fire or move aside people who have contributed to the company and "met expectations" in the past, or people with whom they have been working for many years.13 Yet high-performing companies take more action on C.
It is very painful to deliver bad news to people who have been loyal colleagues or friends for a long time. Understandably, people are concerned about being "fair" to the individual involved. They say to themselves, "Let's be fair to Charlie. He's been with us for fifteen years." However, they should also consider this: "Let's be fair to the twenty talented people under Charlie-and move Charlie out or aside."
As Debra Dunn, a senior general manager at Hewlett-Packard, told us several years ago, "I feel there is no greater disrespect you can do to a person than to let them hang out in a job where they are not respected by their peers, not viewed as successful, and probably losing their self-esteem. To do that under the guise of respect for people is, to me, ridiculous."
Because it is painful and emotionally trying to deal with C players, many leaders become paralyzed when attempting to do so. A recent study published in Fortune magazine noted that the single greatest reason for the failure of CEOs is their inability to deal with their own poorly performing subordinates. As one CEO admitted, "It was staring me in the face but I refused to see it." Authors Charan and Colvin summarized, "The failure is one of emotional strength."14
Two ways to do it
What's the best way to move on C players? At GE, AlliedSignal, PerkinElmer, and the Marine Corps, underperformers are given ample time to raise their game after feedback and coaching. If they don't adequately respond, leaders develop a transition plan for the C players' exit from the company. These companies believe their businesses move too quickly for these people to catch up and keep up, and they don't believe in shunting those people to other jobs within the company. They also believe that the sooner in one's career that performance issues are addressed, the better for all concerned. They see it as the most compassionate approach in the long run.
For other companies, including Intel, Arrow Electronics, and The Home Depot, an underperformer who was once a top performer will first be moved laterally or back a level, where they can at least be an average performer. At The Home Depot, for instance, district managers who are struggling might be moved back to the position of store manager-where, indeed, half become successful again. For those who continue to be unsuccessful, the company will eventually ask them to leave.
At Arrow, every effort is made to help underperformers find a more appropriate job where they can still add real value to the company. Alan Napier, Vice President of Information Technology, believes that most people really want to do a good job and it's management's role to find a place that fits them. Says Napier, "When somebody is honestly trying to do something with everything they have and still failing, I don't think any less of that person. Almost always they're just in the wrong role. I spend a lot of time talking with my people and getting to know them, so when they're floundering, I can usually help them. We'll sit down in my office and try to figure out a better situation for them within Arrow. After our discussion we'll walk out of my office, both smiling, because that person is actually relieved. They feel the pressure incredibly, too."
Of course, there are limits to how many people you can demote or move aside, and it has to be done delicately. Demoting managers has to be done in a way that preserves their dignity. When The Home Depot moves district managers back to store managers, for instance, they usually move them to a new district where their stumble may have gone unnoticed.
You also have to know when it is time to call it quits. PerkinElmer CEO Greg Summe says there have been times when he realized that he had spent too much time trying to rehabilitate a low performer. "Every time I made a personnel change, I wished I had made it sooner," he said.
Iron hand in a velvet glove
Taking decisive action on C players requires an iron hand and a velvet glove.15 Without an iron hand, leaders are inclined to avoid taking this difficult action. Without the velvet glove, the process can be insensitive and disrespectful, which can erode morale and make managers even less inclined to act.
The following actions ensure the iron hand:
These actions ensure the velvet glove:
Finally, when your resolve seems to falter, remember all the struggling employees you inherited from your predecessors and commit to never leaving underperformers for your successors.
Chapter 6 - Notes
1. WFT 2000 Senior Executive and Midlevel Surveys. For the statement "In my company, I am recognized and rewarded appropriately for my individual contribution," the percentage of respondents who indicated this factor as being "critical" or "very important" to their decision to join or stay with their company.
2. WFT 2000 Senior Executive and Midlevel Surveys. Statistical correlation between affirmation questions ("My company demonstrates a long-term commitment to me," "In my company, I am recognized and rewarded appropriately for my individual contribution," and "My company is quick to recognize and reward me for the contributions I make") and greater satisfaction / less likelihood of leaving the company was demonstrated.
3. WFT 2000 Corporate Officer, Senior Executive, and Midlevel Surveys.
5. WFT 2000 Corporate Officer Survey.
6. Procter & Gamble information from Dave Zielinski, "Mentoring Up," Training, October 2000, 136-140. Hewlett-Packard information from original McKinsey case research, 1997.
7. Brush Dance catalogue (Mill Valley, CA, 1999), 18.
8. WFT 2000 Senior Executive and Midlevel Surveys. Of the 58 percent of respondents who have worked for a C player, the percentage who strongly or somewhat agreed with the following statements: "Hurt my career development," 81 percent; "Prevented me from learning," 76 percent; "Prevented me from making a larger contribution to the company's bottom line," 82 percent; and "Made me want to leave the company," 85 percent.
9. George Anders, "Marc Andreessen: Act II," Fast Company, February 2001, 110. 10. WFT 2000 Senior Executive and Midlevel Survey. In companies that do not manage underperformers effectively, only 35 percent of respondents think their company is well managed, as opposed to 78 percent in companies that do move effectively on underperformers.
11. McKinsey's Value of Better Talent research, 2000.
12. WFT 2000 Corporate Officers Survey, percentage of respondents citing the following as "huge" or "major" obstacles to taking action on C players: "Senior managers are unwilling to fire or move aside people who have contributed and 'met expectations' for many years," 72 percent; "Senior managers are unwilling to move aside or fire the people they have worked with for many years," 70 percent. 13. Ram Charan and Geoffrey Colvin, "Why CEOs Fail," Fortune, 21 June 1999, 68-78.
14. A phrase attributed to Napoleon, who said, "Men must be led by an iron hand in a velvet glove." It is an image of absolute firmness made more palatable and effective through courtesy and manners.
15. WFT 2000 Corporate Officer Survey.
Excerpted from Chapter 6, The War for Talent, Ed Michaels, Helen Handfield-Jones and Beth Axelrod, Harvard Business School Press, 2001. Copyright 2001 President and Fellows of Harvard College. All Rights Reserved.
Posted November 11, 2003
It's not just for HR to read! This book helps HR to help others in the organization create a Talent Mindset. All of the leaders/managers in our company were required to read it and it has been a wonderful tool to help us talk about taking our talent to the next level. I highly recommend this book! It's a must have in your library!Was this review helpful? Yes NoThank you for your feedback. Report this reviewThank you, this review has been flagged.
Posted October 16, 2001
In a market characterized by uncertainty and instability, one thing holds true for all organizations: building strong talent is crucial to success. The ¿War for Talent¿ delivers a powerful argument for why this is the case, illustrating the need for leaders to adopt a ¿talent mindset¿ and develop a strategic approach to talent management. Executives and managers will find this book a valuable guide that lays out the steps required to attract, develop, excite and retain highly talented employees. McKinsey & Company consultants Ed Michaels, Helen Handfield-Jones and Beth Axelrod translate five years of in-depth research and analysis into a clear perspective on how to develop a corporation¿s greatest asset ¿ its people. The authors artfully weave examples of success stories from such companies as Amgen, GE, The Home Depot and Enron into a comprehensive framework for addressing long-term talent management. Their approach continually challenges the reader to assess his or her own organization and to take action. Leaders from all levels of organizations will gain practical knowledge and an insightful roadmap for winning the war for talent.Was this review helpful? Yes NoThank you for your feedback. Report this reviewThank you, this review has been flagged.
Posted November 2, 2001
The War for Talent is not the only book to highlight the link between human capital and a company¿s performance, but it is the first book to provide managers with a clearly written blueprint of strategic steps they can take to 'win the war'. The sports marketing industry has always attracted a lot of applicants, and, therefore, tends to be re-active versus proactive in the recruitment, development, and retention efforts of talent employees. Reading this book has heighten my awareness of the value of paying attention to ¿people¿ issues every day. I¿m now keenly aware of the negative effects the gradual erosion of talent can have on the bottom line, particularly if a talent mindset is not pervasive throughout an entire organization at every level.Was this review helpful? Yes NoThank you for your feedback. Report this reviewThank you, this review has been flagged.
Posted October 3, 2001
Excellent resource for managers, HR executives and CEO's and anyone who is concerned about talent as a competitive strength. The compelling data and concepts on the value of talent management to the success of an organization is brought to life through fine story telling and a persuasive, easy to read style. Each chapter provides data that links the value of attracting and retaining talented employees to the bottom line of an organization. Through real life stories from their extensive research, the book highlights the 'new realities' for the workplace and describes what high performing companies are doing to attract and retain the brightest and best managerial talent in the marketplace and the huge impact this can have on the profitability of the organization. The book provides strategies organizations can take immediately to assess and improve their talent management practices.Was this review helpful? Yes NoThank you for your feedback. Report this reviewThank you, this review has been flagged.
Posted October 3, 2010
No text was provided for this review.