connecting talent to value - shrm...started to seriously bend the value curve upwards in their first...
TRANSCRIPT
Understand theVALUE AGENDA
Factor in theROLE•TALENT RISK
Identify theCRITICAL ROLES
Begin connectingTALENT
Intervene withVALUE COACHING
Background image: agsandrew | iStock.com
Connecting Talent to ValueSandy Ogg
If you’re a CEO, chances are somewhat slim that you know exactly which roles in your organization are absolutely critical to realizing your company’s value agenda, who you have in them, and how well they are doing. Often CEOs believe their job is to set direction and strategy, to orchestrate execution and manage performance. Talent is largely the domain of human resources and the CHRO; value is predominantly the domain of finance and the CFO. Or are they? Rarely do we three C-suite leaders—the CEO, CFO and CHRO—come together to flag the specific roles in our company that drive value. And even if we do, it is even more rare that we monitor the incumbents in those specific roles for their contributions to value, their level of engagement, and their capacity. Yet their contributions are what we are relying on to secure our performance today and make future growth possible.
Historically, we have treated roles, contributions, and capacity as separate activities. Roles get reviewed under the banner of organizational design; individual contributions and engagement get assessed as part of performance management; and capacity usually gets looked at in terms of the company’s talent pipeline. CEOs also spend time talking with board members about key role succession at the top of the organization, often forgetting to invest the time and attention necessary to ensure they have the right talent wherever significant value can be created in the organization. These practices, although well seasoned, just don’t work well when it comes to optimizing the company’s performance. A very real opportunity to accelerate our returns is hidden in plain sight. Continue looking at talent in its component parts, separate from value, and we will not only miss out on that opportunity. We will also risk the future.
It’s time to get practical about how we connect talent to value.
Not having enough of the right talent where it matters is like trying to run a Ferrari®488 Pista with cheap gas in the tank. It’s a formula for frustration and poor performance.
Value Comes FirstAs CEO, you set your company’s agenda. You, with input from your leadership team, make a set of strategic choices that will focus your organization’s talent on work that will generate value over time. This value agenda intentionally identifies two sources of value: the Momentum Case and the Bend The Curve Case. The most effective value agendas artfully balance both of these cases at once. The Momentum Case defines the value expected from the company assuming it continues to do what it does well. As a part of the value agenda, this “business-as-usual” value (what I call today’s sources of value) may see either growth or contraction, depending upon market conditions and disruptions in the industry or the countries in which the company operates.
The Bend The Curve Case defines the possible value the company may realize if it correctly anticipates what people will value tomorrow and then successfully executes a few key strategic initiatives to deliver exactly that. As a part of the value agenda, this aspirational value (what I call tomorrow’s sources of value) strikingly bends the value curve upwards
Understand theVALUE AGENDA
VA
LUE
TIME
BEND THE VALUE CURVE Bend the
Curve Case
MomentumCase
VALUE OVER TIME
through the implementation of new business models, products, markets, efficiency programs and/or other improvements to the business. Leaning factories and refining procurement, for example, improve the business so that it can more efficiently deliver on both the business-as-usual and the aspirational components of the value agenda.
During my days at the Blackstone Group, I had an opportunity to really fine-tune my understanding of the impact of talent on the value agenda. When the world’s largest private equity firm hired me, they already had an enviably high success rate when it came to improving the businesses they invested in. What intrigued me was that they had specifically brought me on board to help improve their success rate on the talent side of the equation. In my previous roles with Motorola and Unilever, I’d used value-centric approaches to manage talent and the benefits had been obvious. The first thing I did at Blackstone was conduct a comprehensive assessment of what had and hadn’t worked when it came to leadership talent in approximately 180 portfolio companies. Specifically, I looked at historical data from 80 companies that had been in their portfolio in years past and approximately 100 more in which they were currently invested.
What I noticed right off the bat was that, of the companies that had started to seriously bend the value curve upwards in their first 12 months, eighty percent of them had produced successful outcomes. Quickly getting the right talent in the key leadership roles early in the game was one of the factors that helped them achieve such fast starts. Most of these early curve benders went on to generate 2.5 times or greater the return on Blackstone’s initial investment. Looking more closely, I saw that 22 of Blackstone’s most successful portfolio companies went even further. They didn’t fill those critical leadership roles with “developing” players: they interpreted them as value “hot spots” and intentionally filled them with talent that had the right capabilities and experience to generate the value everyone was counting on them to deliver. The Blackstone team, in these success cases, hadn’t hesitated to hire new C-suite talent when necessary and move senior executive leaders into roles where they were a better match with the work to be done. The financial results their companies achieved told me this was the way to go.
Fast forward a few years to shortly after I began working with McKinsey and they also began noticing the benefits of the rapid redeployment of key talent. A 2017 McKinsey survey found that public companies who moved quickly on reassigning high performers to work on the organization’s most critical strategic priorities were 2.2 times more likely to outperform their competitors in terms of total returns to shareholders than respondents who moved slowly.*
“The List”Knowing this approach to leadership talent could bend the value curve exponentially upwards, I began introducing other Blackstone companies to the concept of “The List”, a collection of 25 to 50 of the most important roles in a company, the ones that really drive value. What was a “most important” role? If the work to be done by a person in a role either creates or enables a material chunk of value to be created, then that role connects to value and could be on the List.
Why not have 75 or 100 roles on The List? When we began to evaluate where value was being driven in a company, there typically weren’t that many spots unless we were going to go really “micro” on value. Depending on the size of the company and its global reach, rarely would there be more than 50 roles that were mobilizing the bulk of potential value. More often it was between 25 and 40. That’s not to say it couldn’t be more. When I was working at Unilever, for instance, we had done this exercise and ended up with 56 roles on our List. When we began looking at roles in the context of the value agenda at Blackstone, we found two types were associated with crucial points of leverage. Value-creating roles were responsible for generating revenues, lowering costs, and increasing efficiency. Value-enabling roles were responsible for helping us manage value at risk. While value-creating roles focused on generating revenues and lowering costs, enabling roles typically lowered risks associated with the work of value creation. That is, they performed work which overcame hurdles like talent shortages, cybersecurity issues, regulatory compliance, and legal issues.
Identify theCRITICAL ROLES
In focusing on roles rather than hierarchy, I broke with the traditional approach of using the top tier of the org chart as a proxy for value creation (as in the Traditional Talent Map below). We discovered that value-creating roles and value-enabling roles existed much deeper in the enterprise than might at first be suspected. Both types were showing up for us not just one layer below the CEO, but more often two and three below.
TRADITIONAL TALENT MAP TALENT-TO-VALUE MAP:ROLES First, Then Talent
Before we even thought about what specific talents to place where, we got even more explicit about role requirements. We would sketch out a rough map of the value-creating roles in the company, including relevant value-enabling roles (see Talent-to-Value Map above). Next we quantified the specific contribution expected of each of these critical roles. This allowed us to identify the value “hot spots” (blue dots in the map) as places in the talent-to-value hierarchy where the roles really matter. Next we quantified the specific contribution expected of each of these critical roles. Then we’d assign each one a number based on the value we expected from that role (for example, $50M in EBITDA times the multiple). To deliver that particular chunk of value, we articulated a specific set of jobs to be d ne™. Value-creating roles got 100% of the value they were aiming to create and value-enabling roles got a percentage based on the value at risk they were mitigating, plus an
Both types of roles involved jobs that needed to be done to successfully deliver a significant portion of the value agenda; therefore, The List always included some of each.
increment for value levers they would influence. If we had someone who couldn’t or didn’t get the job done in any of these roles, these numbers would give us clarity about how much value the company as a whole would have at risk.
What about those three dots forming the triangle at the top of the Talent-to-Value Map? They represent three roles that deserve special consideration: the CEO, the CHRO, and the CFO. This triumvirate forms what I call the “Golden Triangle” (our practical friends at McKinsey simply refer to this as the G3). When you have to run a company and change it—fast—these three roles must be filled with the absolute best talent you are capable of attracting, talent that must be able to do what needs to be done. Whether that’s leading a turnaround, a pack of M&As, or an accelerated growth spurt, you need people in these three roles who have not only the right experience and skills, but also the ability to lead together as a team. A lot of our time and energy at Blackstone was spent identifying and assembling the right triangle of CEO, CFO, and CHRO for each portfolio company.
Now we were ready to begin connecting the rest of the critical roles to the right talent.
TalentThe rigorous process we used at Blackstone to match talent to roles was evidence-based. We would get as clear a picture as possible of the capabilities of each candidate to fulfill the requirements of a role by looking at them through multiple perspectives. Since no role operates in isolation, we did this for a series of roles at a time.
The evidence we gathered would confirm how well the knowledge, skills, and experience of each person under consideration matched the jobs to be done in a role and their ability to deliver the number we had assigned to it. When the match warranted, we conducted interviews, checked references, scraped the internet, and looked at psychometric test results to assess their confidence, commitment, and motivation. With this data in hand, we evaluated each candidate and made an initial assessment of their suitability for a role or roles in which we were thinking to place them.
Begin connectingTALENT
One thing to draw your attention to here: our practices were substantially different in two ways from traditional talent selection. First, instead of starting with a traditional job description, we used a list of the jobs to be d ne to deliver the value expected. Second, instead of then looking at CVs and profiles to try and match the person with a job description, we reviewed the jobs d ne well™ by the candidates that were relevant to the role in question with an eye to matching their past performance with what we wanted them to do for us.
Rather than make assumptions about which person would be the right talent for a particular role, we checked the quality of the role • talent™ connection for every possible candidate. We assessed the capability of the person to do very specific jobs, rather than compare their historical performance in roles to other candidates’ performance of a similar, but not quite the same, role. Suddenly, there was no longer a need to evaluate people as “A”, “B” or (let’s hope not) “C” players. We could simply look at the jobs to be d ne and the number assigned to each role and go through a straightforward exercise to determine which candidate would give us the best match with that set of jobs to be d ne, a match most likely to deliver the value.
One thing we learned when assigning people to these critical roles using this process of matching relevant jobs d ne well with jobs to be d ne. Top talent was not always the right talent to have in a leadership role on The List. A “top talent” may be seen as a high flyer and may have achieved a relatively high position in the company hierarchy. We may have identified them as having the potential to contribute even more to the organization as a leader in the future, given additional support and development. But in most cases, the “right talent” already had the set of experiences, skills, and attributes to make the exact contribution
It’s much easier to match talent to roles when we understand the connection between the jobs to be d ne to deliver the expected value and the relevant jobs d ne well by the candidates.
role • talent
we needed them to make today—and tomorrow—without the need for further development.
RisksOne of the distinguishing features of this talent-to-value approach to management is that it aims to minimize value at risk while rapidly redeploying talent from points of lower return to points of higher return. So far we’ve designed The List, which connects the value agenda to specific critical roles. We’ve connected possible talent to those roles and, in doing so, seen how we can connect talent to value. Now it’s time to assess the risk in each combined role • talent and ensure that the combinations we settle on leave us with lower risk in places of higher return.
This means we have to articulate and factor in the various dimensions of risk for each role • talent combination. Any role can be affected, in differing degrees, by risks related to uncertainty, the growth trajectory of the business, capacity, decision rights, and resources. Any talent can put value at risk through their lack of willingness, relevant experience or ability, as well as through a lack of fit with the organizational culture or the jobs to be done in the role.
All role • talent combinations on The List are material to the value agenda. At Blackstone, we reviewed what the evidence told us would likely happen if each person were in the role, anticipating what the quality of the connection would be like and what value we could be putting at risk. Depending on the results of that risk assessment, we assigned the role • talent a color code and took action to mitigate the potential value at risk. These color codes illuminated exactly where the points of higher and lower talent risk would most likely be in the organization.
No science experiments here. This is neither the time nor the place for talent development. Use other roles that are not on The List for that purpose.
Factor in theROLE•TALENT RISK
Factoring in the risks for each role • talent gave us more accurate insights into potential dangers and previously unseen opportunities to raise returns.
Having ambers or reds in any role critical to value will inevitably incur inordinate risks. At Blackstone, a red role • talent on The List became an automatic “change immediately”. An amber became a “maybe”. To mitigate risk as much as possible with an amber combo, we searched for another talent who was already performing many of the jobs we needed done better than the incumbent, albeit somewhere else in the organization. If we couldn’t move that talent into the role in question and if the amber combo was the best possibility we could find, then we would look at the role to see if changing its set of jobs to be done, strengthening the team around it, or restructuring its context could
COLOR RISK ASSESSMENT INTERVENTIONS
RED
AMBER
GREEN
ULTRAVIOLET
Will incur inordinate amount of risk, deliver far below expectations, and may not bend the value curve upwards at all
This role • talent combo doesn't work—change it now!
Intervene with the role and/or the talent to get back to the expected value
Monitor to ensure this doesn’t slip
Be creative about the shape of the role or the size of the talent to create that spectacular outcome
Will incur unacceptable amount of risk, deliver below expected value, and may not bend the curve either
Will incur an acceptable amount of risk, deliver expected value, and push the curve upwards
Will incur minimal risk, produce spectacular outcomes, and pull the value curve upwards
effectively mitigate the risk. We would also look at the talent to see if up-skilling or coaching could help them deliver, or even possibly over-deliver, the expected value in time.
Mapping the color-coded role • talent combinations gave us a visual aid for assessing and tracking the most significant contributors to value for the company as a whole, as well as insights into the cumulative value at risk and the specific points within the organization that required our attention. We also discovered that we had many people in roles who were unquestionable “greens”: risk was low in these instances and, therefore, we didn’t
have to make any changes to the roles or the talent. The process of mapping role • talent risk also disclosed the rare “ultraviolet” situations where the combo of talent and role was producing insanely great results. This was all information we could leverage.
InterventionsBy now it was obvious to us where and what interventions were necessary. To minimize value at risk, we had to deal with the red and amber role • talent combinations. To optimize value creation, we had to take every opportunity to be creative with our ultraviolets.
We also noticed, over time, that sometimes the jobs we needed done morphed and changed and the roles we had so carefully designed no longer lined up neatly with value creation. Other times, a role • talent we had assessed as green started to turn amber or red for some inexplicable reason.
Based on this risk assessment map, we could plan where and how to intervene to bend the value curve—one role at a time.
Intervene withVALUE COACHING
TALENT-TO-VALUE MAP:Risks to Mitigate
This “value coaching” is not the same as executive coaching.
Executive coaching focuses exclusively on the talent. The objective: improve company performance through individual transformation. When called upon, executive coaches essentially intervene with individual leaders to effectively shift their perspective, adapt their behaviors and, ultimately, improve the results of those they lead.
Value coaching, on the other hand, focuses on the role • talent. What we’re trying to do is coach people to deliver in a particular role. Coaching the combination is how you bend the value curve, one role at a time. Value coaches proactively intervene at the points of risk in the organization, those red, amber, and sometimes green, even ultraviolet role • talent combinations identified in the risk assessment map. At each point of risk or opportunity, the issue may be either the talent or the role. Sometimes it is both the talent and the role. The value coach, therefore, has two points of leverage: the coach can either work with the role and/or with the talent. Interventions in the role can encompass anything from updating the role’s decision rights to changing the jobs to be done; interventions with the talent can cover anything from developing self-awareness and improving communication skills to arranging for job assignments to gain relevant experience.
One last interesting observation. After coaching a series of these role • talent combinations, recurring patterns in the challenges your talented people face may emerge. These patterns can reveal systemic problems, things that have nothing to do with the roles or the talent you have and everything to do with the business model or the organization’s design. For these, you need the guidance of a master value coach. (Stand
All these situations called for an appropriate set of interventions to improve results, reduce risk, and capitalize on opportunities. Specifically, interventions designed to coach the value into existence through the role • talent combinations we had.
by for my next article to learn more about value coaching and master value coaching.)
Connecting talent to value is not a once-and-done exercise. In a world where disruption is the norm, there are many forces at play that are beyond anyone’s control. Value agendas and talent strategies sometimes have to change overnight, testing everyone’s ability to implement change fast. We can prepare our organizations for some of this disruption by developing a pipeline of talented people who demonstrate what we anticipate will be baseline role requirements in the future. For example, it’s clear that many companies will need leaders who are comfortable with diversity, adept at cross-functional integration, agile at navigating change, and fluent with digital technology and analytics. We can also create contexts to nurture fast-moving innovation and allow talented creatives to thrive.
But the real test will be when new sources of value show up in front of us. We now know there’s a way to respond and make a corresponding shift in talent priorities to mine that value fast enough. The question is, will we?
*Results of 628 public company respondents in McKinsey survey of 1,820 participants on their talent management practices
conducted November 14 through 28, 2017. Referenced in Mike Barriere et al’s “Linking talent to value”, McKinsey Quarterly,
April 2018. Accessed May 16, 2018 at https://www.mckinsey.com/business-functions/organization/our-insights/linking-
talent-to-value.
SANDY OGG is the founder of CEO Works and author of /move: The CEO’s Playbook for Capturing Value. From 2011 to 2016, he was Operating Partner in the Private Equity Group at Blackstone. Prior to that, as CHRO of Unilever, he spearheaded the change in the organization’s framework and leadership system at the heart of the business’s transformation.
ceoworks.com
