Retaining skilled or talented staff can be the basis of developing real competitive advantage in your markets; it can also be a complete waste of management effort if your market strategy is not based on the use of rare or scarce skills and is simply used as a ‘mantra’ for progressive HR or employee relations practices. The issue of ‘talent management’ was first raised in the mid 90’s (in its current form) through an article in the Harvard Business Review. The ‘War for Talent’ framed a competitive marketplace where those companies that could attract and retain the best ‘talent’ would eventually out-perform their competitors. McKinsey &Co, the strategy consulting business whose people wrote the article went on to develop a whole new line of business in consulting on talent management and developed numerous methodologies and techniques to make it a reality with their clients. The notion that ‘talent’ should be retained and rewarded was best embodied by two large American corporations: GE and ENRON, both of which were long standing McKinsey clients. GE’s position on talent is perhaps the most well known though the publicity which was attracted to Jack Welsh, the Charismatic CEO. He ran a system whereby the top 10% of the staff in the company were seen as ‘talent’ and where promoted rapidly and exceptionally well rewarded. The bottom 10% were actively ‘performance managed’ and quickly moved up the rankings (everyone in the company was placed in rank order based on their perceived performance) or were ‘managed out’ of the business. Being ruthless in applying this principle was seen as a way of constantly improving the ‘DNA’ of the organisation. ENRON ran a system very similar to the one at GE – though observers have commented that it was even more ruthlessly applied than the GE model. For a number of years the spectacular growth of ENRON and GE, as well as a number of other large corporations employing this model, has encouraged the take up of similar talent management processes in many businesses; however the dramatic collapse of ENRON has created a serious and distinct problem with talent management systems. In fact many commentators have suggested that the use of talent systems was a major contributor to the ENRON collapse. The documented activities of the ENRON ‘talent’ - operating without restraint, encouraged to experiment and be exceptionally entrepreneurial but never having to face the results or consequences of their actions because of the policy of rapidly developing them by constantly moving them to new and bigger challenges, helped to create an organisational culture where charismatic but inexperienced managers could ‘try anything’ and the normal financial and management control systems were rebuilt to tell a good story rather than monitor reality. In the aftermath of ENRON, it became clear that many talent systems where selecting their ‘talent’ using criteria that look like: ‘perception of future potential by bosses’ and ‘I like this person, so he must be good’ rather than on criteria which is based on real underlying performance and this tended to select people who had very good interpersonal and verbal skills, but not necessarily those who were doing the best job. Interestingly, one development out of this is the potential launch of a number of ‘class action’ law suites in the USA by people who were in the bottom 10% of talent systems who now feel they have been unfairly treated by their company through the systematic use of ‘unfair systems of performance management’.
So what Now?
The clear lessons from ‘the war for talent’ saga are:
➢ Retaining talented staff is not a panacea – the strategy of the business may genuinely not need talent except in a few key roles. Let your business strategy determine your retention programmes. You need to be very clear why you need to retain people – it may be for many...