Flipping the Coin for Talent: How Well Are You Hiring?

July 6, 2008 by Jason Boltax.

“Having the most talented people in each of our businesses is the most important thing. If we don’t, we lose.” ─ Jack Welch while CEO of GE 

How do great leaders of successful companies spend half of their time? They spend it on people: recruiting new talent, picking the right people for positions, grooming young stars, developing global managers, dealing with under-performers, and reviewing the entire talent pool. 

Everyone agrees that talent is an important competitive advantage, but surprisingly, three out of four companies do not have as priority a talent management program. Hiring processes often are random and decisions often are based on intuition. In many cases, hiring decisions have success rates similar to flipping a coin!  Executive turnover is at an all-time high. The median tenure of CEOs is 2.75 years, and only 12 percent of CEOs have held their position for 10 years or longer. Low performing companies have nearly twice as much turnover among top performing employees as high-performing companies, according to the consulting firm, Watson Wyatt Worldwide. Yet despite all the rhetoric about the war for talent, most companies don’t have effective hiring processes. A McKinsey & Company survey of talent management practices from 1997 to 2001 surveyed 7,000 managers and only 26 percent strongly agreed that talent was a top priority at their companies.  In this comprehensive survey, (The War for Talent, 2001), what distinguished the high-performing companies from the average-performing was the fundamental belief in the importance of talent and the actions they took to strengthen their talent pool. But without this talent mindset, recruitment is an activity with less than favorable outcomes, attrition rates are high, and performance suffers. Companies that scored in the top quintile of the talent management index earned, on average, 22 percentage points higher return to shareholders than their industry peers. 

Even in a slower economy, the war for top managerial talent is persisting. The way that companies have managed talent in the past will not be sufficient in the future. Talent is a critical driver of corporate performance. A company’s ability to attract, develop and retain talent will continue to be a major competitive advantage in the coming years. Three factors contribute to the growing need for improving an organization’s talent reserves: 1. The irreversible shift from the Industrial Age to the Information Age2. The intensifying demand for high-caliber managerial talent

3. The growing propensity for people to switch from one company to another 

The Increasing Demand for Talent 

The war for talent began in the 1980s with the expansion of the Information Age. Companies’ reliance on talent has increased over the last century. In 1900 only 17 percent of jobs required knowledge workers; now over 60 percent do. More knowledge workers means it’s more important to get great talent, since the differential value created by the most talented knowledge workers is enormous. The best software developers can write ten times more usable lines of code than average developers, and their products yield five times more profit. A world-class engineer with five peers can out-produce 200 regular engineers.  Read the rest of this entry »

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