Attracting & Retaining the Right Talent
Attracting & Retaining the Right Talent
McKinsey senior partners Scott Keller and Mary Meaney address the ten most basic issues facing leaders: attracting and retaining talent, developing the talent you have, managing performance, creating leadership teams, making decisions, reorganizing to capture value quickly, reducing overhead costs for the long term, making culture a competitive advantage, leading transformational change, and transitioning to new leadership roles. This article, drawn from the book’s opening chapter, speaks to the first of these topics. Future articles will deal with reorganizing to capture maximum value quickly and with successfully transitioning to new leadership roles.
The best workers do the best and the most work. But many companies do an awful job of finding and keeping them.
Exceptional Talent is up to 8X More Productive
It’s remarkable how much of a productivity kicker an organization gets from top talent. A recent study of more than 600,000 researchers, entertainers, politicians, and athletes found that high performers are 400 percent more productive than average ones. Studies of businesses not only show similar results but also reveal that the gap rises with a job’s complexity. In highly complex occupations—the information- and interaction-intensive work of managers, software developers, and the like—high performers are an astounding 800 percent more productive.
Suppose your business strategy involves cross-functional initiatives that would take three years to complete. If you took 20 percent of the average talent working on the project and replaced it with great talent, how soon would you achieve the desired impact? If these people were 400 percent more productive, it would take less than two years; if they were 800 percent more productive, it would take less than one. If a competitor used 20 percent more great talent in similar efforts, it would beat you to market even if it started a year or two later.
You get even more remarkable results comparing the productivity of the top and bottom 1 percent. For unskilled and semiskilled jobs, the top 1 percent are three times more productive; for jobs of middling complexity (say, technicians and supervisors), 12 times more. One person in the top 1 percent is worth 12 in the bottom 1 percent. For high-complexity jobs, the differential is so big it can’t be quantified.
The late Steve Jobs of Apple summed up talent’s importance with this advice: “Go after the cream of the cream. A small team of A+ players can run circles around a giant team of B and C players.” Management guru Jim Collins concurred: “… the single biggest constraint on the success of my organization is the ability to get and to hang on to enough of the right people.”
Great Talent is Rare and Hard to Find
The term “war for talent” was coined by McKinsey’s Steven Hankin in 1997 and popularized by the book of that name in 2001. It refers to the increasingly fierce competition to attract and retain employees at a time when too few workers are available to replace the baby boomers now departing the workforce in advanced economies.
Fast forward to the wake of the Great Recession, and the war for talent turned into the war for jobs. In economies gripped by financial crises, unemployment hit levels not seen since the early 1980s, so there was no shortage of applicants for many openings. When Walmart launched a new Washington, DC, store in 2013, for example, it received 23,000 applications for 600 positions.
It was harder to get entry-level work there than to be accepted by Harvard: 2.6 percent of Walmart applicants made it through, as opposed to 6.1 percent for the Ivy League university.
Yet this didn’t end the war for talent. In medium- and higher-complexity positions, where stronger performers have an increasingly disproportionate bottom-line impact, the opposite was true. In those uncertain times, gainfully employed talent became less likely to change employers, so people who had an advantage going into the crisis had an even bigger one. Further, pressure to reduce HR costs made it harder to identify and attract the most talented people. Everything suggests that the war for talent will rage on. “Failure to attract and retain top talent” was the number-one issue in the Conference Board’s 2016 survey of global CEOs—before economic growth and competitive intensity. In more complex jobs, this will continue to be true as baby boomers (and their long experience) exit the workforce and technology demands more sophisticated skills.
Most Companies Don’t Get It Right!
Since business leaders know that talent is valuable and scarce, you might assume that they would know how to find it. Not so. A whopping 82 percent of companies don’t believe they recruit highly talented people. For companies that do, only 7 percent think they can keep it.10 More alarmingly, only 23 percent of managers and senior executives active on talent-related topics believe their current acquisition and retention strategies will work.
These leaders aren’t being humble—most companies just aren’t good at this stuff. Gallup reported that in a 2015 survey, more than 50 percent of respondents were “not engaged”; an additional 17.2 percent were “actively disengaged.” Related surveys report that 73 percent of employees are “thinking about another job” and that 43 percent were more likely to consider a new one than they had been a year earlier.
The fact that the Baby Boomers’ decades of knowledge and experience are now leaving the workplace forever makes this state of play more unsettling. At the natural-resources giant BP, for example, many of the most senior engineers are called “machine whisperers” because they can keep important, expensive, and temperamental equipment online. If high-quality talent isn’t brought in to replace such people, the results could be catastrophic.
And the scarcer top talent becomes, the more companies that aren’t on their game will find their best people cherry-picked by companies that are. In future, this will be even more likely, since millennials are far less loyal to their employers than their parents were. The Bureau of Labor Statistics says that workers now stay at each job, on average, for 4.4 years, but the average expected tenure of the youngest workers is about half that.14 People often underestimate the cost of turnover: the more information- and interaction-intensive the job, the greater the threat to productivity when good people leave it, and the more time and money must be invested in searching and onboarding. And if competitors poach your talent, they get an insider’s understanding of your strategies, operations, and culture.
Talent matters, because its high value and scarcity—and the difficulty of replacing it—create huge opportunities when companies get things right. Let’s now turn to how they can do that.
What are the big ideas?
Focus on the 5 percent who deliver 95 percent of the value
Some employees disproportionately create or protect value, and not all of them are obvious. A navy, for example, should obviously ensure that it has the best and brightest people commanding fleets of nuclear submarines. Equally, however, it should ensure that it attracts superior talent to the role of the IT-outage engineer, who prevents catastrophes for the crew, the environment, and humanity. In a world of constrained resources, companies should focus their efforts on the few critical areas where the best people have the biggest impact. Start with roles, not processes (which create generic solutions that don’t meaningfully improve results) or specific people (who might help you in particular situations but don’t build institutional muscle).
Picking the right battles isn’t easy—you must understand the true economics of value creation in specific roles. That’s precisely why this can be one of your secret weapons in the war for talent.
Make your offer magnetic—and deliver
Leaders know the term “employee value proposition,” or EVP: what employees get for what they give. “Gives” come in many flavors—time, effort, experience, ideas. “Gets” include tangible rewards, the experience of working in a company, the way its leadership helps employees, and the substance of the work. If your EVP is truly stronger than the competition’s, you will attract and retain the best talent. But for three reasons, few companies have EVPs that meaningfully help them win this war:
Data Will be the Game Changer
Michael Lewis’s book Moneyball pits the collective old-time wisdom of baseball players, managers, coaches, scouts, and front offices against rigorous statistical analysis in determining which players to recruit. Analysis wins, changing the game forever. Could the same be true for recruiting top talent?
When the National Bureau of Economic Research looked into this, it pitted humans against computers for more than 300,000 hires in high-turnover jobs at 15 companies. Human experience, instinct, and judgment were soundly defeated: people picked by computers stayed far longer and performed just as well or better. This wasn’t the only such finding. University of Minnesota professors analyzed 17 studies and found that hiring algorithms outperform humans by at least 25 percent. “The effect holds in any situation with a large number of candidates, regardless of whether the job is on the front line, in middle management, or (yes) in the C-suite.”
In 1997, IBM’s Deep Blue computer thrashed grandmaster Gary Kasparov. Today, however, the world’s best chess players are neither computers nor humans, but human teams playing alongside computers. That will be true in business, too.
Let the team at GlobalTalent help you identify, engage and attract the best talent to your company today.