The Talent Masters: Why Smart Leaders Put People Before Numbers

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9780307460264: The Talent Masters: Why Smart Leaders Put People Before Numbers
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If talent is the leading indicator of whether a business is up or down, a success or a failure (and it is) . . . do you know how to accurately judge raw human talent? Understand a person's unique combination of traits? Develop that talent? Convert what supposedly are "soft" subjective judgments about people into objective criteria that are as specific, verifiable, and concrete as the contents of a financial statement?
     The talent masters do. They put people before numbers for the simple reason that it is talent that delivers the numbers. Success comes from those who are able to extract meaning from events and the forces affecting a business, and are able to look at the world and assess the risks to take and the risks to avoid.
     The Talent Masters itself stems from a unique combination of talent: During a forty-year career at General Electric, Bill Conaty worked closely with CEOs Jack Welch and Jeff Immelt to build that company's worldrenowned talent machine. Ram Charan is the legendary advisor to companies around the world. Together they use their unparalleled experience and insight to write the definitive book on talent—a breakthrough in how to take a business to the next level:

· Secrets of the masters. The specifics on how companies regarded as world-class—GE, P&G, Hindustan Unilever (and others)—base their stellar performance decade after decade on their systems for finding and nurturing leadership talent.
· Intimate and systemic. Why deep knowledge and intimacy with your talent and a systemic rhythm of reviews are the foundation for creating a steady, selfrenewing stream of leaders for all levels of an organization—from first-line supervisors to the CEO.
· The competency that lasts. Financial results, market share, brand, and legacy products all have a half-life that seems to grow shorter by the year. Talent is the only competency that endures.
· What to do Monday morning. The Talent Masters tool kit provides the specific guidelines for assessing and improving your company’s talent mastery capabilities.

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About the Author:

BILL CONATY, long recognized as a world leader in his field, recently retired as senior vice president for human resources at General Electric, the company consistently ranked as without peer in developing world-class leaders. The management development and training programs that Conaty engineered provided GE with one of the world’s most talent-rich management benches. Conaty has served as chairman of the National Academy of Human Resources and was named as a Distinguised Fellow, the organization’s highest honor. He currently serves as a personal advisor to the CEOs of companies around the world, including P&G, Boeing, Dell, Goodyear, LG Electronics (Korea), and UniCredit (Italy).
 
RAM CHARAN is a highly sought after business advisor and speaker famous among senior executives for his uncanny ability to solve their toughest business problems. For more than thirty-five years, Dr. Charan has worked behind the scenes with top executives at some of the world’s most successful companies, providing advice that is down-to-earth and relevant and that takes into account the real-world complexities of business. Dr. Charan is also the coauthor of Execution, The Game-Changer, and Confronting Reality and the author of What the CEO Wants You to Know, Know-How, and Leadership in the Era of Economic Uncertainty.

Excerpt. Reprinted by permission. All rights reserved.:

Chapter 1

TALENT is the EDGE

No Talent, No Numbers

If businesses managed their money as carelessly as they manage their people, most would be bankrupt.

The great majority of companies that control their finances masterfully don't have any comparable processes for developing their leaders or even pinpointing which ones to develop. No matter how much effort they put into recruiting, training, and assessing leaders, their talent management remains hit-or-miss: governed by superficial criteria and outdated concepts, dependent as much on luck as on skill. These are the companies that wake up some morning suddenly realizing they need a new CEO but don't know where to start looking. More pervasively, by repeatedly putting people into the wrong jobs, they waste both human and financial capital when those people don't perform.

How did this come to be? After all, it's clear enough that people make the decisions and take the actions that produce the numbers. Talent is the leading indicator of whether a business is headed up or down. Everyone agrees that it's a company's most important resource. But a spreadsheet full of numbers is a lot easier to parse than the characteristics unique to a human being. You can control what you're doing: the numbers are unambiguous, the outputs are clear. People, not so much. Better to leave that to the HR staff or search firms, particularly since the pressure to make your numbers quarter after quarter is so great that there's no time to waste on the soft stuff. And of course the law requires financial reports.

You've no doubt noticed, however, that making money has gotten harder. It will remain so for the imaginable future. In the fast-changing global marketplace, all of the familiar competitive advantages are constantly at risk: market share, brand, scale of a business, cost structure, technological know-how, patents, and all the rest. The half- life of core competencies grows ever shorter.

Talent will be the big differentiator between companies that succeed and those that don't. Those that win will be led by people who can adapt their organizations to change, make the right strategic bets, take calculated risks, conceive and execute new value-creating opportunities, and build and rebuild competitive advantage.

Only one competency lasts. It is the ability to create a steady, self- renewing stream of leaders. Money is just a commodity. Talent supplies the edge. We can't put it any better than Ron Nersesian, the head of Agilent Technologies' Electronic Measurement Group: "Developing people's talent is the whole of the company at the end of the day. Our products all are time-perishable. The only thing that stays is the institutional learning and the development of the skills and the capabilities that we have in our people."

Managing people with precision is without question harder than managing numbers, but it is doable and gets easier once you know how. Companies such as GE, P&G, Hindustan Unilever, and many others analyze talent, understand it, shape it, and build it through a combination of disciplined routines and processes, and something even rarer and harder to observe from outside: a collective expertise, honed through years of continuous improvement in recognizing and developing talent.

These companies have disproved the myth that the judgment of human potential is a "soft" art. Their rigorous, iterative, and repetitive processes convert subjective judgment about a person's talent into an objective set of observations that are specific, verifiable, and ultimately just as concrete as the analysis of a financial statement.

They have embedded in their culture the habits of observing talent, making judgments about it, and figuring out how to unleash it. They draw from their large toolboxes and creative imaginations to accelerate each leader's growth. Their executives are expected to make developing, deploying, and refreshing leadership talent an everyday, top-of-the-mind part of their jobs, and they are held accountable for how well they do it.

These companies are building for the long term. We call them talent masters, and this book will show you how they do it.

SEARCHING FOR THE SPECIFICS

One reason hardheaded managers disdain the "soft stuff" is that it so often reflects soft thinking. Take some of the criteria human resources staffs commonly use to evaluate leadership competencies. They'll rank people on a scale according to labels like these: "strategic," "innovative," "master communicator," "very bright," "analytic," "intuitive," and so on. These cryptic descriptions so broad that they are worthless in the real world of managing. They cannot even predict whether a person is a good or poor fit for a given job, much less capture the unique abilities of an outstanding leader.

An exercise in a course at Wharton's advanced management program exposes the futility of buzzword descriptors. The instructor at a recent session asked the participants to explain Steve Jobs's distinguishing talent. Put aside his controversial personality and behaviors for the moment, the instructor advised. What we want to know is why he has beaten all expectations in his second act at Apple. (Including his own; when Apple's market value overtook Microsoft's in June 2010, Jobs called the development "surreal.") In the dozen years since he reclaimed the failing company, he has turned it into a hard- driving, cash-generating machine. He doesn't just develop new products; he changes games. The iPod, iPhone, and iPad, along with iTunes, have created massive disruptions, forcing players in the music and telecom industries-among others-to change their business models.

There's enough information available about the way Jobs thinks, behaves, and makes decisions that anyone who cared to could assess his real talent in several dimensions and describe it in clear language with specificity and nuance. Most people don't even try.

When the instructor at Wharton asks participants the question about what Jobs's talent is, hands shoot up all over the room: he's creative, innovative, entrepreneurial; he's a master of communication; he breaks the paradigm, creates new businesses; he changes the game of other people. After a couple of minutes the instructor calls a halt. "You can't do it in buzzwords," he says. "To really define a person's talent, you need to express your full thought about a human being in whole sentences with nuances that are specific to that person. And you have to get the information by closely observing the person's actions, decisions, and patterns of behavior." He shows the way by asking some probing questions: "How is he creative?" Somebody replies, "He figures out what will be a great product." Okay, but how does he do that? "He interacts with consumers." Fine, but how does he interact with consumers? Somebody has read that he hangs out with young people. Another observes that he is always looking for upcoming technologies ahead of others. Still no cigar.

The instructor next gives the executives information they can use to drill down and get to the real nature of Steve Jobs's talent. For starters, they hear a tale from one Apple director about the special board meeting held after Jobs accepted the post. Jobs walked up to the wall of the conference room where Apple's roughly two dozen current products were on display and began taking them down, one at a time. When he was done, only four were left. Those were the ones, he said, that would give Apple new life by differentiating it in the marketplace.

The story provided two observable and verifiable facts about Jobs: he understands what appeals to customers, and he acts decisively. Now the instructor asks people to explain what the creation of the iPod reveals about his talent. The first replies from the group point to his grasp of technology. But the technology already existed, someone else notes-other people were making MP3 players. The discussion that follows leads to a more meaningful conclusion: the success of the iPod was the result of a great insight coupled with brilliant execution. At the time, Napster had created an uproar in the market for recorded music with its file-sharing service that allowed users to swap downloaded MP3 files with each other. Napster's game was ultimately found illegal (it was essentially based on theft), but Jobs saw that the technology could create a legal market by ensuring the music industry a stream of revenues. And the market would be huge-a new social phenomenon, in fact-because it would liberate music lovers by enabling them to make their own buying choices legally and affordably, at any time, in any quantity. Then he created a product that was so easy to use and stylish that he could sell it at a high price, with fat margins. And we all know the rest of the story: by far the best- selling MP3 player ever, the iPod lifted the Apple brand to unprecedented heights, giving Mac sales a boost and reestablishing the company's reputation as a leader in innovation.

Drilling further, the instructor brings out another important observable fact. Jobs spends almost all his time internally with roughly a hundred experts in software, hardware, design, and the technologies of metal, plastic, and glass. Every Monday morning he brings them together to review products and the challenges of designing and executing them. It's one of his social processes for connecting multiple disciplines to create compelling products, and he's been doing it rigorously for a dozen years. Four hours a week, fifty weeks a year, for twelve years equals 2,400 hours spent building mental and relationship capital by connecting the newest ideas of diverse brilliant and passionate minds. It's the kind of approach that turns an athletic team into an unsurpassed champion. Jobs is one of the few CEOs with such a disciplined practice of connecting the dots.

Now the discussion gets rolling in earnest as the class begins piecing together the specific traits that define his genius. Somebody says, "So that's the real process of connecting with the customers, through his own mind and expertise." Somebody else raises her hand and says, "It's interesting that more than once he was able to identify an opportunity others didn't see." Another person: "It's more than that- he creates opportunities, like the iPhone."

Aha, the iPhone. What did he really do that has made it such a phenomenon? "He broke the paradigm." What does that mean? "He was able to figure out a new business model." Now eyes are lighting up. Until that point, the margins and brands of handset makers were controlled by the carriers. It not only won Apple the largest share of the smart- phone market but also generated new revenue streams enjoyed by no other phone maker. Jobs produced the most functional and elegant handset ever. Always tremendously protective of his brand and margins, he gave the iPhone to one carrier exclusively, AT&T. In exchange, Apple got the price it wanted and-for the first time in telecom history-a share of the carrier's revenue from the usage of a phone (supported by the higher rates users willingly paid for their service). This was groundbreaking. Finally, it made money on the sale of its countless apps. Most of the new revenue streams flow straight to the bottom line, producing cash every day and making the iPhone Apple's biggest moneymaker. Jobs's verifiable action shows not only by his business acumen but also by the audacity and courage he exercised to reverse the power balance between a mighty carrier and a lowly handset supplier.

CALIBRATING STEVE JOBS

What does deconstructing Jobs have to do with developing talent? Just this: the Wharton exercise mirrors on a small scale what talent masters do, which is to develop precision of observation, thought, and expression. Working with the instructor, the class wrapped up its exercise with this concise summary:

Steve Jobs's natural talent is to imagine not only what consumers want now but also what they will want in the future-and pay a premium price for. He searches for discontinuities in the external landscape. He figures out trajectories of new opportunities. Then he conceives and executes not only differentiated products that yield high margin and high brand recognition, but also business models that will exploit them most profitably.

He views a product as an experience, not just an object. He can visualize what it will look and feel like, and can then execute it to near perfection. He makes advanced technology friendly to consumers based on his uncommon talent for connecting it to user experience. He has an innate feel for design, convenience, simplicity, and elegance in the product. He connects the best ideas from widely diverse disciplines to create the consumer experience he's striving for. He figures out precisely what problems need to be solved, however impossible they may seem, and searches for the best people to solve them, regardless of their status.

He is a master of communications. He crafts simple messages that connect with audiences, leveraging his record of innovation to create buzz and build demand for a new product even before it is launched. He relates with consumers, employees, and partners, and turns them into fans. He builds their trust in him, in Apple, and in the Apple brand.

Bear in mind that these individual items combine to form a blend unique to that individual. It's how the traits blend together that matters.

Talent masters do not resort to vague clichés or rely on batteries of mechanistic tests to assess talent. Instead they study the behavior, actions, and decisions of individuals, and link these to actual business performance. Their observations are rigorous, specific, and nuanced. Over time the observations become verified as facts as other leaders discuss them openly and candidly. They dig to understand an individual's unique combination of traits. The purpose is to know what the person is, describe his characteristics in complete thoughts using full sentences, and learn how the key items combine into a unified whole.

In a word, they work to become intimate with their talent-that is, to know the essence of each individual. Intimacy is what makes the soft skill of judging people as hard as the skill of interpreting numbers. In fact, it's similar to the relationship top financial people have with their subject matter. Their total command of numbers, both their own and those of competitors, comes from a knowledge so intimate that it becomes intuitive: they live with the numbers.

Masters of talent build a similar depth of knowledge about people: a database in their minds. They make detailed, specific, and accurate observations about them and compare them with other people they've observed. Every encounter invokes an observation. Accumulation of these observations, done consciously, produces a complete picture of the whole person. This deeper, more accurate knowledge is the key to high-quality decisions about leaders.

PUTTING SUE IN THE RIGHT JOB

Here's an example of how important deep knowledge of an individual is to both the person and the organization. Disguised but true, it's the story of an up-and-coming star in one global company.

Sue's past performance and experience s...

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