Recruit top guns, then shoot for No. 1

“The War for Talent”
Ed Michaels, Helen Handfield-Jones
And Beth Axelrod
Harvard Business School Press, 2001


On the need to prevent another Enron-like collapse, my friend Glendon Rowell of Boyden Global Executive Search pointed out that “more professionalism in recruitment is more important than tighter regulation and governance.”

(Enron, erstwhile much-admired corporation in Maerica, suddenly collapsed, throwing thousands out of a job, sending shock waves to markets around the world, and prompting government regulators to look for other organizations or practice to blame.)

What Mr. Rowell is saying is that executive talent is a very important factor in defining and directing an organization’s future, and in making it adhere to ethical principles.

An organization’s executive pool also influences a firm’s competitiveness – and therefore, viability.

The book, “The War for Talent,” declares: “Talent is now a critical driver of corporate performance.”

Based on extensive research and case studies from 1997 to 2001, the authors – all from McKinsey & Company – summarizes their findings thus: “What distinguished the high-performing companies from the average-performing was not better HR, but the fundamental belief in the importance of talent.”

Are there leadership gaps in your organization that adversely affect its performance? Are you constrained by the policy of “promoting from within,” giving more premium to seniority than outstanding performance?

Read about an overworked executive who witnessed the plunge of his company from a glorious history – because he settled for mediocre executives. And then follow him, after he heeded the advice of Jack Welch of General Electric and Wayne Callaway (then of Pepsi Co) – including Stephen Spielberg. What gospel truth did he stumble on?

They told him that they spend half of their time on people: recruiting new talent, picking the right people for particular positions, grooming young stars, developing global managers, dealing with underperformers and reviewing the entire talent pool.

The guy is Les Wexner, CEO of The Limited who built a retailing and marketing marvel which included “Victoria’s Secret,” Bath and Body Works, et al. In 1990, his stocks plunged.

But after three years hiring and using top guns, the company’s profits have grown from $285 million to $445 million, and his stock price has almost doubled.

A “new business reality” has entered the corporate scene, says the book. What happened? The authors observe that companies’ reliance on talent increased dramatically over the last century. In 1900, only 17 percent of all jobs required knowledge workers; not over 60 percent do.

The book quotes Cisco CEO John Chambers, who put it this way: “A world- class engineer with five peers can outproduce 200 regular engineers.”

What “business reality” is staring us in the face? For one, the book says, we had the belief in the past that “people need companies.” Today, “companies need people.”

Two structural forces are fueling the war, the book says. First, the power has shifted from the corporation to the individual. Second, excellent talent management has become a crucial source of competitive advantage.

In the past, executives looked at a 30-year horizon, good salary and retirement package. Now, their horizon is only five years, and retirement is remote possibility.

The old recruiting strategy of advertising for job hunters has given way to the aggressive effort to tap passive candidates. “We now reach people who are not looking.”

Something else is also happening in companies in more developed economies. They are now breaking away form the traditional “hire-from-within policy.” Even if the failure rates of senior external hires hover around 30 percent, companies still think it’s well worth the risk.

“The War for Talent” is a useful resource book, not only for CEOs needing to infuse new blood – and, perhaps, new energy in their firms – but also for all leaders who want to keep the best, train those with great potential – and deal with mediocre performers “with an iron hand and a velvet glove.”

The book also reveals the emergence of a new profession. It’s public knowledge that today’s intermediaries for recruitment are executive search professionals. Now enter “talent agents” – who are not any different from agents of superstars.

Close on the heels of the collapse of Enron (which, curiously is featured glowingly in the book – probably to the regret of the authors), Boyden’s Rowell volunteers that – aside from vision and superior strategy – organizations need leaders of integrity.

The headhunter’s comment enriches, not contradicts, the book’s thesis that the right (from ethical and precision standpoint) executives talent truly drives organization well into the future.