CM: Tell us about the original findings of McKinsey's 1997 "War for Talent" research …
Axelrod: Back in 1997, we had two major findings from our research of 77 companies. The first was that while many companies recognize the importance of managing talent better and building the leadership capacity of their organization, most companies were ill-prepared and did not feel that the efforts they had underway would make a substantial improvement in the strength of their talent pool. Also, we found that better HR processes were not what distinguished the talent management practices of high-performing companies versus average-performing companies. Rather, high-performing companies had a pervasive belief that managing talent better and continually strengthening their talent pool helps drive company performance.
CM: In 2000, you updated the "War for Talent" research. How did your approach change?
Axelrod: First, we surveyed individuals deeper into the organization. In 1997, we surveyed corporate officers, HR executives, and senior executives, defined as the top 200 leaders below the CEO. In 2000, we took the research down to midlevel managers to test two hypotheses: We suspected that midlevel managers may have a different perspective on their organization and its leadership capacity, and we suspected that the attrition risk with midlevel managers may be higher than with senior executives. Second, we added midsize, high-growth companies to the research on the hypothesis they would have certain talent management practices that large companies could learn from. Third, we chose to explore more deeply a number of topics from the 1997 research. For example, we studied how culture impacts an organization's value proposition to its people. We went deeper on the topic of development to understand exactly which development efforts have the greatest impact in helping individuals realize their potential. We took a closer look at mentoring to understand the powerful effort that a quality mentoring relationship has in motivating an individual and building his or her loyalty.
CM: And what did you learn?
Axelrod: One of the major findings from the 2000 research is the link between company performance and talent management practices. Most business leaders intuitively know that a stronger pool of managerial and executive talent can help drive the performance of their companies. Yet very few companies actually quantify the differential performance impact of having a stronger talent pool and having a set of talent management practices that yields a stronger managerial talent pool. We were able to demonstrate with our set of companies in 2000 a strong positive correlation between better talent management practices and total returns to shareholders. This provides a very compelling reason why senior executives can and should strengthen their talent management practices.
CM: Do you believe senior managers are now taking action?
Axelrod: Well, another major finding is that despite the rhetoric around the focus on talent, only 9 percent of respondents in our survey are confident that the actions they are taking will lead to a substantially stronger talent pool. Only 26 percent say strengthening their talent pool is a top three priority. Few companies are making the link between better talent management and business performance.
CM: And is that where the idea for a book may have originated?
Axelrod: Yes. We chose to write this book titled The War for Talent because we believe that most companies have a significant performance improvement opportunity that remains untapped because they have not yet adopted a set of talent management practices that will have a material impact on the strength of their talent pool. What we aspire to do in the book is to put forth the argument for why companies should focus on strengthening their managerial ranks and outline the set of principles they can follow that should enable them to do just that. We have drawn upon our 27 case studies to provide specific examples of how companies have impacted their performance.
CM: And where should a company start?
Axelrod: The leaders can start by making talent management a strategic priority and holding themselves and each of their managers accountable for the strength of the talent pool they build. Our survey found that only 10 percent of respondents strongly agree their companies hold them accountable for strengthening their talent pool.
CM: Please comment on the link between a company's business strategy and their talent practices.
Axelrod: When we asked our respondents if it were important to link their business strategy to their talent pool requirements, 62 percent strongly agreed with that statement. When we asked them if their company actually does this, only 7 percent strongly agreed. They clearly acknowledge the need to make sure that they've got the right people in the organization with the right skills and capabilities to deliver against that business strategy. Yet very few companies make that link explicit. Companies should as a part of their strategic planning process ask the questions, "What kind of talent do we need in this organization to deliver against this business strategy? How does the talent that we've got today measure up against what we need? What are the specific gaps in terms of skills, geographic coverage, and so forth, that we must fill to deliver against that business strategy? What initiatives are needed to close the gaps?" Answering these questions can provide a very clear roadmap for building a cadre of leaders capable of delivering against the company's performance goals. It also provides a clear set of imperatives for building the talent pool against which leaders can be held accountable.
CM: What advice should consultants offer their clients in regard to talent management and an uncertain economy?
Axelrod: One foundational element of talent management is a rigorous talent review process. It enables senior leaders to understand at any point in time the strength of the talent pool they have at the individual and the aggregate level. By "talent review" I do not mean the perfunctory succession planning that goes on in most companies. I mean a disciplined and rigorous review of the leaders of a company with an explicit focus on assessing performance and identifying the specific actions needed to improve the performance of each person. The talent review is particularly relevant now, as many companies are focused on downsizing. It's very difficult to have an objective sense for each individual's performance if the company doesn't have in place a disciplined process that yields that information. Unfortunately, the talent review that goes on in most companies does not yield true insight into the performance of each individual, does not differentiate the performance across individuals, and does not result in meaningful consequences to people's careers.
CM: First comes identification, but what's next?
Axelrod: Identifying top-, average-, and low-performing individuals isn't about being hard on people — this is about driving the performance of the company. As I mentioned, in addition to assessing the performance of individuals, the company's leaders should decide specific actions to help grow each person to this or her potential. This includes making very deliberate decisions about how to deploy people against the opportunities that will drive the performance of the company. It also includes providing candid feedback to each person. Seventy-two percent of respondents said candid feedback was important to their development,
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