Every day, market-oriented ecosystems operate at the edge of the known world. They strive to push into the unfamiliar. Their mission is to create new ideas, new technologies, new customer experiences, new designs, and new ways of solving problems.
Not only do they think through opportunities, but they also rethink possibilities. Keeping this passionate, inquisitive outlook requires having extraordinary people at the helm and on the team to push forward into the unknown. There is no question that organizations with better overall talent are more likely to succeed than those with inferior talent. Why? Organizations don’t think, but the people do.
But individual talent alone is not the full story. Organizations shape how people think, act, and feel. Managing talent is about making sure that the right people in the right places think and act in the right way. The buzz about “winning the war for talent” implies that it is talent alone that enables organizations to win. But talent is only part of the story. The right talent needs to be in the right place at the right time, must fully understand the mission, and must be armed with the best tools — that is what helps market-oriented organizations succeed. These requirements for optimizing the talent in your organization are so fundamental that we even have a joke about it:
Question: What is the most important strategic action a leader can make?
Answer: Place your lowest-performing employees with your competitor, and encourage them to keep doing exactly what they are doing … for a long time.
Talent has many definitions and foci. For the very top leaders of a company, talent focuses on their visionary skills, succession planning, and performance as a team. For the next generation of leaders (often the square root of the number of employees), talent requires a leadership brand that connects leader actions to customer expectations. For the high-potential employees (often 5 to 15 percent of the workforce), leaders manage talent by defining who has high potential and then investing in them to prepare them for the future.
These selected high potentials often spend 5 to 15 percent of their time engaged in learning opportunities. And managing talent for all your employees means helping them be competent in, and committed to, their work, and find meaning from it.
In response to these talent demands, companies have tried a multitude of programs and investments to attract, retain, and upgrade talent. Yet, sometimes after stipulating that talent matters, companies can get lost in the myriad of efforts and lose sight of the basics.
At the risk of grossly oversimplifying, we propose a deceptively simple formula for talent:
Talent = Competence × Commitment × Contribution
Competence means the knowledge, skills, and values required for today’s and tomorrow’s jobs. This means bringing the right people into the organization, moving them through it, and, depending on their performance, either removing or retaining them over time. In today’s world of free-agent work, competence may be accessed without ownership, because contingent workers might make up a significant part of the total workforce. Competence also refers to how the connections between people, robotics, and other technology will be a source of future talent. Competence inside the organization is also tied to customer expectations outside the organization.
It is not enough to be the employer of choice, but the employer of choice for employees whom our customers would choose. Hiring, training, and paying employees should increase their ability to serve customers. Sometimes, you need to involve your customers in these traditional people practices. Customers can help set hiring criteria, attend and deliver training, and collaborate in determining performance and compensation.
Competence clearly matters, but without commitment, competence loses its impact. Committed or engaged employees work hard, put in their time, and do what they are asked to do. Commitment shows up in an employee value proposition: employees who give value to their organization (through insight, hard work, and performance) get personal value back. Employee commitment, or engagement, has been linked to delivering strategic goals and to customer commitment. In the last decade, commitment and competence have been the expected components of talent.
But despite the competence and commitment of the next generation of employees, we have found that unless they are making a real contribution through their work (finding meaning and purpose in it), their interest in the work will diminish and their talent will wane. Contribution comes when employees move from behavioral commitment to emotional connection because they believe that the organization’s purpose will help them fulfill their personal values.
When this connection is made, employees become better by acquiring new skills from their work and by belonging to a group of like-minded individuals.
Simply stated, competence relates to the head (being able), commitment relates to the hands and feet (being there), and contribution to the heart (simply being). In this talent equation, the three terms are multiplicative, not additive. As a governance mechanism, the right talent reduces risk and increases your ecosystem’s chances of success. A CEO once told us that his primary strategy was talent. If he put the right person in the right job with the right skills and commitment at the right time, the executive did not have to worry about strategy, because it would take care of itself.
Reprinted by permission of Harvard Business Review Press. Excerpted from Reinventing the Organization: How Companies Can Deliver Radically Greater Value in Fast-Changing Markets by Arthur Yeung and Dave Ulrich. Copyright 2019 by Arthur Yeung and Dave Ulrich. All rights reserved.
