To Win the Talent War, Beat Your Swords Into Ploughshares
Americans have been borrowing martial terms to gain support for civilian causes for over a century. It’s a bipartisan tactic: Liberals launched the War on Poverty in the 1960s, conservatives the War on Drugs in the 1980s. So when, in the late 1990s, Steven Hankin wanted businesses to understand the competition for talent in terms of life-or-death urgency, he called it the “War for Talent.”
Like the civilian causes that preceded this one, companies responded to the rallying cry with really good intentions, somewhat hazy notions of “victory,” and wide-open wallets. In the past few decades organizations have deployed battalions of recruiters and thrown a Manhattan Project’s worth of sign-on bonuses, relocation benefits, and heavy salaries at new hires, all searching for those storied “A” players that will take their companies to new heights of conquest and glory.
The progress report is rather mixed. If there’s no substitute for victory in real wars, the talent warriors seem pretty to be conceding a kind of stalemate. For one thing, all that money isn’t buying most companies a lot of tenure. According to the BLS’s 2018 survey, the average tenure of the current employee is all of about 4.2 years. Let that sink in. So a company whose typical time to productivity is a year is probably about breaking even on recovering the cost of acquiring that talent.
Not only is longevity not there with new hires, but apparently, neither is the quality. The University of Pennsylvania’s Wharton School of Business published a study showing that, within two years in a role, new hires scored lower on performance appraisals than did their comparable counterparts who had been hired internally – although they earned 18% more on average than did the internal hire. Let that sink in, too.
This finding raises a critical point. The default strategy for acquiring talent is often to buy it; but in the midst of authorizing all those relo payments it’s easy to forget that it’s not the only strategy, and in fact it’s probably not the most effective one.
But surely that’s not true when it comes to hiring the real stars, right? Those killer performers out there who can just plug in to the business, hit the ground running, and turn everything around – they are the targets of all that Pattonesque recruiting, right?
If they are, you’re probably seeking unicorns. That’s the upshot of a dense but fascinating book by HBS professor Boris Groysberg, called Chasing Stars: The Myth of Talent and the Portability of Performance. Groysberg asks the basic question, “Is talent portable?” After his multi-year study following over a thousand top Wall Street investment analysts who changed jobs to different firms, he shows that the answer is, “not usually.” Even really exceptional talents who blow the doors off of a job in one situation move on to a higher salary and bigger office, but often can’t replicate their previous successes. How can that be?
It’s not that the supposed “star” was overhyped: It’s that an individual’s success on a job is a much more complex matter than we thought – or, to be honest, it’s much more complex than we wish it was. Talented people learn to apply their gifts by leveraging their particular teams, the tools provided by the organization, and their knowledge of how to get things done in that culture. Exchange the team, tools, culture, and processes they know with ones they don’t, and they frequently struggle as much as any mortal.
Just in terms of direct costs, hiring from without is way more expensive than promoting from within – 1.7 times more, according to the Saratoga Institute. When you promote from within, you don’t incur the referral and sign-on bonuses, relocation, recruiter fees, and there’s usually a lot less training. Promoted people may have to learn the job, but they already know the culture, which Groysberg demonstrates is invaluable.
He also shows that companies that focus on developing people have almost one third less turnover than companies that don’t. So just imagine what the latter are contributing to that meagre BLS average employee tenure finding.
Getting the right talent in place is basically a make vs. buy proposition. Of course, substantial investment in the right outsider is frequently successful. Just bringing in a fresh perspective is often invaluable; however, the data show pretty conclusively that organizations get better talent for less money that creates greater organizational value over time when they focus on developing the people they have rather than constantly taking expensive flyers on new ones from the outside.
In other words, it seems the most effective strategy for meeting your organization’s talent needs is not to view the imperative as a “war” for anything. Maybe the most effective course is not to gear up for a contest of competitors armed with wealth for the acquisition of limited human capital; rather, it’s to nurture the talent you already have. In other words, perhaps the wiser course is to quit the battlefield and take up gardening.