Why Talent Management Investments Generate Poor Returns and What to Do About It

A couple of days ago my dad was updating me on what he is up to.  For some time he has been active in his local chapter of a political organization and was just named chair of the candidate nominating committee.  And since two of the candidates are current board members and must step down, he was recruited to re-join the board as vice-president.  My father is 81.  I recount this story to highlight what we are experiencing in every organization and corner of society - a dearth of talent rising through the ranks.  My father, at 81, is healthy, quick-witted, competent, organized, diligent, committed and passionate.  He will do an excellent job, which is why his colleagues sought him out.  But where are the 60-somethings who are going to step in behind him?

Despite huge investments in identifying, hiring, developing and managing talent, most organizations are not jumping up and down complaining they are awash in it.  To the contrary, ‘talent’ consistently lands on the top 5 list of issues facing most organizations.  By all accounts, we don’t seem to be making much headway in slaying the talent dragon.  As one recent survey reports, while 60% of organizations report increased talent investment, less than 25% say their efforts are effective (Mercer, 2013).  The critical question is: are we, by continuing to invest in talent management programs and initiatives, simply throwing good money after bad?

I won’t claim to have all the insights or answers to this question.  But after 20 years working with and for organizations on the talent dilemma, I have a few observations.  The purpose of the the Strategic Talent Advisors blog series is to be constructively provocative.  I believe there is a lack of honest dialogue and intellectual rigour in many of our debates on complex organizational issues.  I look forward to hearing your thoughts, reactions and ideas on these issues as well. 

Organizational Sabotage: Things Organizations Do That Keep Them on the Talent Treadmill

Some organizations have a reputation as talent engines: GE at its peak is an example of a company with a reputation for attracting the best talent, developing talent to a high standard, and regularly pruning its branches to make room for more talent.  Fostering talent was a conscious decision on its part.  Organizations are failing to win the talent game, in part, as a direct consequence of their intentions, decisions, and actions.  Over the next few blog postings I will offer up what I see are some key contributors to talent-building failure and how they might be addressed.  Here I look at the first of three organizational habits that sabotage the talent agenda: the diversity problem.

Shrinking the talent pool by limiting diversity

Let’s set aside research suggesting diversity leads to a wide range of positive outcomes and drive it down to a pure numbers game with a little help from our Statistics 101 course.  For the sake of simplicity, let’s say there are 2 equally sized pools in the world from which you can fish for talent - the red pool and the blue pool.  The law of averages kicks in: all things being equal, the number of ‘talented’ fish will be the same in the red pool as the blue pool.  If you only fish from the red pool, you have the opportunity to catch all the talent from that pool.  But you will miss the opportunity to catch talent from the blue pool.  By fishing equally from both pools, you double the number of talented fish you can catch.  The normal distribution curve sets limits on the percentage of a population that is ‘exceptional’ on a trait at <10% of any pool.  So trying to get more absolute talent by increasing the number of fish you extract from the red pool won’t solve your problem.  The top 20% of the red pool will not be as “talented” as the top 10% of the red pool + the top 10% of the blue pool combined. 

This argument holds with human talent, and can be applied to any subset of the population.  In general, nature does not discriminate in awarding traits - the percentage of those in the population who possess inherent talent for leadership is the same regardless of subgroup (ie, men, women, aboriginals, people with disabilities, visible minorities, etc.).  If you are doing most of your fishing from one pool, you are setting artificial limits on supply and you will never win the war for talent.  It is hard to imagine another situation where a business would limit its search for an optimized solution.  For example, when an organization looks to borrow money, does it limit its search to three of the big banks or does it scour the market for the cheapest and most flexible source of capital?  The selection and management of human talent is probably one of the least strategic and most idiosyncratic efforts an organization undertakes.

We often apply the diversity argument to advocate for change in situations where women or visible minorities are under-represented.  But organizations and teams over-represented by women or minorities suffer the same fate - a smaller pool of potential leaders.  The only way you can maximize your talent is by maximizing the diversity of your pool.

Winning the war for talent by breaking with the status quo

Intentionally tapping into and leveraging diversity is one way to make significant gains in increasing the availability of talent in your organization.  And I’m not talking about the broad, newly-trendy definition of diversity as encompassing all potential points of difference between people (ie, thinking style, life experience, leadership approach).  I’m talking about the hard-core categories of human demographics (gender, age, ethnicity, etc.) that, statistically-speaking, have the highest probability of presenting you with more top-quartile talent to choose from. 

Strategies for success

Some organizations are well down the path in recognizing the strategic opportunity and competitive advantage diversity brings in the war for talent; for others, it is a work in process.  And it is not easy - if it were, we would not be struggling so hard with this issue across so many domains.  Many people much smarter than I am on this topic have addressed it at length and developed strong recommendations and solutions for enhancing diversity.  I have three suggestions for tackling this issue in the context of building the talent pipeline.

1. Have clarity of purpose.  Driving for diversity without a clear and compelling rationale around why leads to insipid efforts and lacklustre results.  If you feel the pain around not having enough pure talent somewhere in your organization, take a look at your demographic make-up to assess whether your pipeline is constrained or optimized.  Do you have the opportunity to increase the amount and quality of your talent by fishing from more pools?  It is okay to say you are hell-bent on diversity because you want to surround yourself with the best talent. 
2. Resist the siren call of ‘diversity in all its forms’.  As someone who stands out as a little bit ‘different’ (or so I am regularly told!), I am all for embracing diversity in its many and various forms.  But in an effort to be inclusive, when we broaden the definition of diversity too much we risk watering down its power as a talent-building strategy.  If the goal and purpose is to increase the pure talent of an organization, focus on demographics.  More expansive ways of measuring diversity are better utilized as part of a talent deployment strategy once you have the most capable teams at your disposal. 
3. Embrace monitoring and accountability.  As a society we tend to resist other people telling us what to do.  It is funny that ‘quota’ is a good thing when you are talking about maximizing sales but a bad thing when you are talking about maximizing diversity.  Establishing expectations, measuring progress and monitoring results have a long track record of success in shifting workplace demographics at all levels in organizations, from the sales floor to the board room.  I am not advocating for external bodies imposing standards.  But I would advocate for organizations setting their own standards and holding themselves accountable.  The board has a powerful role to play in helping diversity initiatives succeed - setting expectations, overseeing strategies, monitoring progress and celebrating success.   

Stay tuned for the next Talent Blog issue on this topic: the retention problem.

Sources
Talent Barometer Survey.  Mercer, 2013. 

Inspiration
My dad, who taught me to stand up for what I believe no matter what other people think, and for proving you are never too old to lead.