Talent management is the American management theory that concludes that the very best performing organizations are the one who have leaders obsessed with hiring, developing, ranking, and ruthlessly evaluating with candor their talent. Enron was the ultimate “talent management” organization. The demise of Enron cost shareholders more than $11 billion. The stock went from a high of $90/share to a $1/share in just one year.
You might think we could learn from this epic business debacle of Enron but some of us didn’t. I am referring to the authors of a new book confirming the value of talent management. I won’t give the title because I don’t want to promote something I believe is so clearly incomplete and nearly criminally wrong. Smart people can be VERY wrong and I believe this book confirms it. It’s another example of leadership malpractice.
McKinsey & Company promoted talent management in the late 1990’s and Enron became the poster child for its practices. GE was also a big proponent. Of course Enron and GE were both very successful for a while. We know the story of Enron. GE was also very successful and propelled Jack Welch to celebrity status for management gurus. However, GE has lost its luster too by going from a high of around $50/share in 2001 when Jack Welch retired to around $22/share today.
OK, I know there are numerous factors for these failures and one could argue that the McKinsey theory of talent management is not the major factor. However, managing talent is not the most effective management theory for today’s complex global economy and any book that tries to persuade me is a wasted read for two reasons:
- This thinking is inconsistent with systems thinking and systems thinking must be at the heart of any management orthodoxy.
- Managing talent creates a dependency on managers by employees and that damages the organizations ability to adapt to change and prevents long-term optimization and predictability.
Talent management demands the manager rank the talent and disproportionately reward the “top” performers while “yanking” the poor performers out. They often call it “rank and yank.” This policy and practice creates a high degree of competition, back-biting, cheating, hiding negative information, and all around dysfunctional behaviors. In systems thinking everyone must cooperate to optimize the system over the long-term. System thinking requires total transparency, complete integrity, and optimum cooperation. “Ranking and yanking” is consistent with short-term thinking and that often destroys the cooperation.
In a social system, which is what organizations are, the quality of the interactions between the parts in the system is more important for performance than the quality of the parts. For example, try building the very best car by taking the best parts from numerous different auto manufacturers and building a hybrid car from those best parts. It won’t work. Why? The parts don’t interact optimally.
Even so, most Human Resources managers are continuously looking for better ways to find and retain the very best talent. This is their constant quest. They are sure that if they find the very best talent it will improve the quality, productivity, and performance of the entire organization. Hogwash! The phrase “hogwash” derived in the 15th century from the left over swill that kitchen workers often fed to pigs. It was cheap and poorly made. This strategy of attempting to improve organizational performance by attracting the best talent is another example of leadership malpractice and hogwash. This must stop. Instead we must improve the system and the interactions between the parts.