How to Link Talent to Value

There is a better way. Good governance focuses on optimized alignment of its structures to your overall strategies. We view these structures collectively as "governance chains.” You need to ensure that all resources increasingly contribute to achieving your mission and vision. Our analytics enables you to align your organization for success objectively.

GAP™ connects talent and their opportunities to create value through governance chains. GAP™ define the contribution of jobs with clarity. To ensure that top performers with the appropriate talent stack fill the roles, we offer a Best-Fit Staffing process. Also, we assist organizations succession planning.  We use our Ladder of Leadership for management roles and our Development Plan for critical staff functions.

We achieve goal alignment through governance chains. Each chain begins with a board strategy. The “chain” is made up of all the goals that contribute to the strategy. They are linked together by your various organizational levels. Historically, several methodologies used governance chains. These methodologies have faced two overwhelming challenges:

1. Complexity: Organizations have evolved to encompass a sophisticated This adds much complexity as goals contribute both to those of the next higher level and to other parts of the organization.
2. Magnitude:Each unit typically has at least 5 or 6 goals. The number of chains escalates quickly. For example, an enterprise with 12 V.P.’s, each with 12 Directors, and in turn, each with 12 Managers with six goals apiece – would have more than 3 million governance chains!

These factors constrained the use of governance chain methodologies. We developed a tool to model, assess and optimize enterprises of all sizes rapidly. We call our technology and methodologies the “Goal Alignment Program" (GAP™).

Progressive leaders understand that reallocating talent to the highest-value initiatives is as essential as redeploying capital. This is not an annual exercise: it is a never-ending, highest-priority discipline. GAP™ provides for the allocation of capital and talent in a singles tool.

The talent-related practice most predictive of winning against competitors was a frequent reallocation of high performers to the most critical strategic priorities. In fact, “fast” talent reallocators were 2.2 times more likely to outperform their competitors on total returns to shareholders than were slow talent reallocators.

The concept is not new

Securing the Future, by Gerald Kendall uses the Theory of Constraints, a breakthrough improvement methodology, to provide solutions to management problems. Kendall documents the step-by-step approach to achieving a strategic vision of long-term competitive advantage, employment security, and customer satisfaction. His book presents an in-depth management roadmap to an exponential improvement in any organization using a combination of parable, methodology, and case studies.

One of the chapters of the Securing the Future featured the work my team at Scarborough Public Utilities Commission did with Kendell in the mid-1990s. This thinking lead to the creation of GAP™. We went through some iterations. However, it was all focused on allocating talent to the highest-value initiatives. We treated as being far more critical than reallocating capital. In the utility business, there are two priorities reliability of supply and rates. We had a triple win — improved reliability, increased our reserves by $100 million and reduced both water and electric rates to the citizens of Scarborough. A real team accomplishment.

These accomplishments lead profound understanding that all organizations exist to create shareholder value and that there are two necessary conditions: satisfied customers and engage employees. The linking-talent-to-value process accomplishes all three.

1. Your best people in critical roles that fit their talent stack – they are engaged,
2. Your customers are satisfied, as goals that ongoing support revenue generation will rise in importance in your organization.
3. Your profit grows, and shareholder value increases.

You may be interested in my post the Goal Alignment Program (GAP™) and the Theory of Constraints (TOC) to better understanding the thinking that helped drive the above accomplishments.

Sandy Ogg, a former operating partner at the Blackstone Group, observed that 80 percent of those talent-centric portfolio companies hit all their first-year targets. They went on to achieve 2.5 times the return on initial investment. Ogg also noted that the 22 most successful portfolio companies out of the 180 he evaluated managed their talent decisions with an eye toward linking critical leadership roles to the value they needed to generate. He recalled using similar value-centric talent-management approaches in his positions at Motorola, Unilever, and Blackstone, and he now has even more definite evidence of their impact.

Identify and clarify critical roles

Identifying and quantifying the value of functions in an organization is a central step in matching talent to value. GAP™ does it automatically. With GAP™ we identify four to six outcome-focused goals for the upcoming period.

These critical roles fall into two categories: value creators and enablers.

• Value creators generate revenue, lower operating costs, and increase capital efficiency.
• Value enablers, such as leaders of support functions like cybersecurity or risk management, perform indispensable work that enables the creators.

These roles are often in counterintuitive places within the organization. Typically, about 60 percent are two layers below the CEO, and 30 percent are three layers or more below the CEO.

The ability to achieve role clarity is tied to overall organizational performance and health, according to McKinsey research. In the pursuit of such clarity, it is critical to think first about roles rather than people. The initial goal is an assessment of where the highest potential value is and what skills will be necessary to realize that value—not identification of the top performers. This approach allows leaders to think strategically about matching talent and value rather than merely focusing on an individual’s capabilities. In my post, How to Predict High Performers – The Science of Best Fit Staffing, I show you how to accomplish this. Once you know what you want, pour analytics finds the best talent for the role.

Traditional recruiting is reactionary

It is about putting out fires or filling positions as quickly and as best you can. Talent management is forward-thinking – anticipating business needs before they arise and planning for those needs.  This creates an environment where “fires” are far less frequent. Talent management is deliberate and strategic.

Contrary to the belief of many corporate executives, talent management is not a stand-alone HR function. For talent management to efficiently function, it must directly connect to and flow from the company’s mission, vision, values, and goals. We call this organization alignment.

However, how can you change the mindset of the powers-that-be and encourage them to incorporate talent management into the overall business strategy? How can you convince them that talent management is every bit as important as budgeting, quality control, engineering, and customer service?

Defining the value agenda

Business-unit leaders need to determine their value agenda and identify the most critical roles. In each unit, leaders should address the following series of questions:

• Where did the value for this unit come from?
• Which roles have been most critical?
• Would the new strategy entail new roles?
• What significant disruptions might change role responsibilities?

Through the GAP™ fact-based process, leaders identify critical roles across all business units and corporate functions. While GAP™ identifies the relative contribution of every position, the Executive team needs to focus on the highest-value tasks. We recommend that they pick a number that represents about five to ten percent of the workforce. It is hard for a CEO to have clear visibility into more than about 100 roles. Also, in our experience, the top 10% roles can typically orchestrate the bulk of a company’s potential value. The hiring, retention, performance management, and succession planning in these critical roles should all be of personal interest to the CEO.

Every employee has four to six outcome goals. These goals should represent how the spend over 80% of their time. Their key performance indicators (KPIs) are hard-wired to the outcome-based goal. The employee’s performance pay is based on the weighting of their goals in GAP™.  This process drives focus. It ensures that each goal is well defined and achievable. These goals are used for resource allocation and employee performance pay. Leaders articulate the role’s requirements objectively, such as extensive sales and negotiation experience, demonstrated financial acumen, proven results as a strong team leader, experience in a corporate staff function, and a history of profit-and-loss ownership in a specific setting. This objective articulation of requirements enabled both a fact-based assessment of incumbents in the role and a clear set of criteria against which to select new managers. It is good for the company and good for the individual.

Role identification and clarification is a process that works with any organizational structure, including those based on agile principles. In fact, the potential rewards of value-based role clarity might even be more significant in agile organizations, because flatter organizations build themselves around the belief that empowered talent in the right roles is the key to unlocking value. Pinpointing where a critical role sits in an organization chart is not essential. What matters is knowing the potential outcomes of any given position, anywhere in the organization.

Match talent to roles

Business leaders need a rigorous approach to find the right people for the more clearly defined critical roles. The search process needs to more efficient and effective than those associated with traditional “high potential” talent reviews.

First, the articulation of value and roles for the organization allowed for objective comparisons between candidates across a variety of specific dimensions rather than relying on subjective hunches or a perfunctory succession plan. When a company uses such an approach, the talent-selection process becomes an evaluation of particular evidence.

Second, the specificity of role requirements encourages a more objective view of incumbent managers. Rigorously assessing incumbents against value-linked role requirements typically leads a company to realize that many of those in critical roles are not well matched. The data-driven process based on behavioral traits makes it hard to ignore the uncomfortable realizations that some incumbents might not be up to the future demands of the job and that leaving them in place would put a significant amount of value at risk.

Many organizations come up against a happy problem: the unexpected value that was not part of the strategic plan starts emerging. For instance, a product might enjoy a serendipitous viral uptake, or a new service might enable the delivery of breakthrough customer experiences that shake up the competitive balance. Fortuitous, significant moves such as these, which both reflect and necessitate strategic flexibility, also reinforce the power of linking talent to value. Many of your employees can do more. Do a best-fit match of their talent stack with the demands of the role benefit the organization and the employee. Using an evidence-based approach removes the unconscious bias and creates a breakthrough in the “old boys network.” Be care – the glass ceiling will shatter!

A new source of value

How so? For starters, once a source of value becomes clear, the company’s understanding of its value agenda can shift to mine the potential of this new source—a move accompanied by a corresponding shift in the company’s talent priorities. For example, a senior vice president of supply chain might have been reliable for years, but can he or she quickly activate the new set of reliable suppliers needed to get that unexpectedly hot product from R&D into the market as soon as possible? The discipline of understanding the requirements of critical roles throughout a company helps give the CEO the agility to respond to such questions with alacrity.

The concept of matching talent to value is often a precursor to breakthroughs. These innovations commonly occur in contexts deliberately set up to enable them. Consider Tesla’s effort to create a culture of fast-moving innovation, Apple’s obsessive user-experience focus, and Corning’s goal of easing “barriers to creativity and serendipitous advances.” These cultural priorities are at the core of these companies’ value agendas. The roles created to turn such priorities into value are often related to R&D (such as the chief technical officer, chief design officer, and chief technologist) and filled with talented, creative people, such as Apple’s Jony Ive, who thrive in the freedom of those roles.

The linking-talent-to-value process puts the best people in critical roles. As you try to match your existing talent to these roles, you will quickly realize that you needed to retool leadership development. Our ladder of leadership is a behavioral competency model for driving top performance at three corporate leadership levels. In our paper we share the competencies that are:

• Always On: Only two behaviors from manager to C-Suite
• Leap: “Bridging” behaviors for moving between each management level
• Lead: Unique behaviors for every stage of management
• Leave Behinds: The “once and done” list— good only for where you are, not where you are going

Future leaders would have to develop the talent stack (such as global line management or cross-functional collaboration) that would be high priorities in the new roles. Furthermore, these new leaders would need the mindset and determination to accelerate breakthrough innovation. As often happens, the rigorous effort to match talent to value led the company’s top executives to a deeper understanding of their business.

Operationalize and mobilize

Linking talent to value is not a process that stops when roles are identified and matched to the appropriate top talent. To garner the expected value, leaders must manage these roles as assiduously as they make capital investments and use real-time critical metrics. The HR team and business leaders need to assess changes in the performance of individuals in significant roles, asking questions such as:

• Is this individual delivering the value expected?
• What interventions (for instance, coaching or better-aligned incentives) can support this individual?

The leadership team might even meet daily or weekly to manage real-time talent crises, such as a moment when people-analytics software identifies an immediate risk of attrition in a critical role.

Companies must examine whether the HR team is up to the task of managing talent as rigorously as the finance team deploys financial capital. The following questions can help make this determination:

• Does the HR group have sufficient analytics capability?
• Can the department mine data to hire, develop, and retain the best employees more efficiently?
• Do the HR team’s business partners consider themselves internal service providers or are they value coaches ensuring a high return on human-capital investment and driving outcomes for the external customer?

The HR team can exemplify the necessary rigor for matching talent to value by using GAP™ to track the most important metrics for critical roles. HR needs to track progress on goals and assess if it is a gap in the talent stack or a performance issue if goals are not met. The HR leadership team needs to engage business leaders in regular talent reviews. Such a data-driven and technologically enabled analysis should ensure that the HR group provides targeted support through value-centered talent management.

Talent and strategy

Talent and strategy must have a tighter link. Talent evaluation must be constant rather than sporadic. Her organization must learn to flex its new muscle linking expertise to value continuously. At her company and every company, the set of critical roles is dynamic rather than a “one and done” process—it must be re-evaluated each time strategic imperatives change. Talent management must become a normal, agile process in which the CEO and executive-leadership team participate as actively as they do in financial investment decisions. In the survey mentioned earlier of more than 600 respondents, McKinsey found that in most of the companies identified as fast talent allocators, top business leaders met at least quarterly to review talent placement (Exhibit 2).