I have been watching for what seems like years now as leaders recognize that talent has now almost wholly superseded capital as the key driver of business worldwide.
Secretary Paulson today gave an important speech regarding an interagency working group tasked with getting a handle on the ongoing credit crisis/ meltdown we are seeing. I thought the speech was well conceived although I think he laid too much blame at the feet of investors-saying that they had to do more work to understand what they were buying, and that simply counting on credit ratings is not enough. Frankly, nobody without advanced math degrees could really understand how CDO's and Credit Default Swaps eventually pan out; the essence of the problem is that it appears that nobody can know. Not to mention that the rating systems are rigged (even if the rating agencies could understand the products, which they clearly don't) being the elephant in the room.
The quote that really got my attention was this one:
"The ultimate success of any CEO is largely determined by the answer to one question: Do we have the right people in the right jobs with the right incentive structure? And these large financial institutions have a large number of key jobs to fill."
If you are in the talent business, you have to be pleased that the very highest levels of economic leadership in our society are thinking along these lines.
Reading the whole speech might be worth a few minutes of your time- he hits on a lot of the key drivers of our current crisis, without doubt one of the biggest challenges our country has faced in a generation, if not the past 50 years.
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But...
posted 3/13/2008 at 10:26 a.m. PT by Steven Levy
...why don't the actions of more CEOs echo his statement?
Where are the CEO's recruiting metrics? How can CEOs truly think this way when they are rewarded by Wall Street and the compensation committees of their Boards for layoffs?
One Word: Governance
posted 3/13/2008 at 10:38 a.m. PT by Martin Snyder
Steve we both know the CEO compensation system for public companies is totally whacked. In a way, it echoes the credit crisis- 30 years of do what you want regulation (or deregulation) or crony capitalism leads to abstraction away from simple matters of equity (and simplicty itself).
Shareholders, like voters, have been too willing to put up with self-dealing on epic scales and an irrational dependence on the star-system as a shorthand for study and oversight. There are thousands of Americans who would make a great President, just as there are tens of thousands who would make good Fortune 500 CEO's; yet we get the same tiny caste of possible choices.
I think thats what Paulson was trying to get at actually....
Thanks for the comment- always good to hear from my reader ;-)
Sad Commentary
posted 3/13/2008 at 12:39 p.m. PT by Steven Levy
It's unfortunate that we're the vocal one's along with Scott Axel when the topic turns to ecopolitical recruiting issues. I know people read our posts but so many are so fixated on that damn job board that they can't find the time to comment on the more substantive issues that impact recruiting.
Here in NYC, it has been rumored that Wall Street will now celebrate March 12 as Spitzer-Schadenfreude Day: the day someone who went after the Barbarians received his "due." Paulson may have said, "The best antidote to opacity is transparency and disclosure" but it is just this opacity that has been Wall Street's greatest weapon for decades.
I can't help but think that if CEOs were really held accountable based upon the health and innovation of their workforces as well as the financial performance, the results would even better.
GDP is the sole metric is going out the window
posted 3/13/2008 at 2:37 p.m. PT by Martin Snyder
The wheel is slowly turning Steve- never as fast as we would hope. I think the situation we are going into is going to be seen as a historic dividing line- starting with 9/11 and ending when we come out the other side- probably a much better nation- but there are many hard days ahead for many people....
Shareholder Value (Increase) Isn't Always Directly Correlated to Talent
posted 3/22/2008 at 7:21 a.m. PT by Joshua Letourneau
Like my usual self, I came across this blog 7 days after it first came out (sorry, I was recruiting . . .)
However, I must say it's a good discussion and Steve is right (although slightly sensationalized, of course).
CEOs are judged by their ability to generate shareholder value . . . period. And sometimes an increase in stock price comes from leaning out operational expenses (i.e. layoffs), through growth in revenues (the ever-cloudy EPS, which may or may not be healthy anyway), through irrational M&A exuberance (that smokescreens analysts for another 18-months, etc.), etc. There are a number of ways to skin a cat. The bottom line is that it's just easier to grow Shareholder Value (in the short-term) by dumping your talent. Again, Steve is right.
If you follow Jim Collins 'Good to Great' and can wade through the self-aggrandizement, you'll find a truism that most CEOs are not Level-5 Leaders; therefore, most are in it for themselves and increasing the mean level of talent in an organization doesn't always yield immediate results (if the ship is sinking, it doesn't matter that you have the best navigators . . . at least not until you fix what's broken). It's too bad that most exec recruiters don't realize this as the old "You need great people in every position at your company!" is indicative of little to no business acumen.
To conclude my random babblings (which, if not for blogs, would make little to no sense in the first place), here's a quote from Geoffrey Colvin of Fortune magazine that really hits home with this discussion:
“Financial capital is no longer the scarce resource in business . . . Human capital is (the key to winning).”
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