McKinsey's idea of a 'war for talent' turned out to be flawed and misleading. Why did anyone fall for it?
For years now, "the war for talent" has been a catchphrase used to describe the urgency with which smart companies need to work aggressively to find, recruit and retain the best people--while being just as determined to weed out the weaklings. Less well known is that the jargon derives from McKinsey consultants who, in a 1997 article and 2001 book, argued that this what leading companies do. Any firm that didn't follow this prescription had to be a laggard. Central to their argument was a belief in talent: Some people had it, others did not. Great companies needed to be expert talent-spotters and ruthless at eradicating everything else.
Almost immediately the questions started, and they haven't gone away. Enron was among the companies using forced ranking--here it was called "rank and yank"--and those results speak for themselves. Now, follow up research (not conducted by McKinsey) suggests the original argument was fatally flawed by the way McKinsey defined "leading" and the firm's predictable tendency to flatter its own clients. Companies that were heroic in their identification and nurturing of talent haven't proved especially resilient: 33% vanished, 18% have proved disastrous, 16% have proved disappointing, 10% have done okay and only about a quarter have proved the thesis.
Out With 'Up or Out'
It isn't news that consulting companies produce books that are designed to flatter their clients and attract more. What is perplexing is that anyone fell for this nonsense in the first place--and that they continue to do so. Many companies--by some estimates, over half of the Fortune 500--practice some form of forced ranking, advancing the top tier while eliminating the bottom. Former GE CEO Jack Welch always argued that this was kind to those who were in need of re-positioning their careers.
Why does anyone believe in the system? Fostering internal competition necessarily and inevitably produces two disastrous consequences: It disables collaboration (if your advancement costs me, why should I help you?) and it foments managerial narcissism: a focus on politics over paying customers. Little wonder that, when journalist Kurt Eichenwald explored Microsoft's innovation problem, its stack-rating system was blamed by everyone he spoke to. Microsoft announced this week that is ditching its performance-review system that rated employees on a bell curve. Yahoo CEO Marissa Mayer is now drawing criticism for that company's rollout of its new ranking evaluation system.
The idea of a war for talent played to all the prejudices and most deeply held beliefs of people who did well out of it. Winners in these companies have always, in my experience, always been blind to the obvious observation that they're bound to believe in any system that anoints them winners. What's more, the language and metaphors deployed by McKinsey implied some warped social Darwinism according to which a company full of super-stars was bound to triumph. No one with any serious understanding of evolution would fall for his mangling of science. But then business metaphors are rarely famed for their rigor.
According to New York Observer writer Duff McDonald, McKinsey was wrong because the use of data was biased and pre-determined. While it's easy to blame the consultants, they just put the idea out there. No one was forced to buy it, and many --like Stanford University professor Jeffrey Pfeffer and author Malcolm Gladwell--challenged it the minute it surfaced. But the idea became entrenched because it played into a whole mindset that sees the world as one gigantic market in which only the meanest, toughest, most paranoid survive. It played to 19th century English philosopher Herbert Spencer's (not Darwin's) idea of survival of the fittest. It flatters survivors. And it fails to see or quantify waste. The war on talent is merely part of a larger narrative in which heroic soloists singlehandedly lead companies to triumph.
The truth, as usual, is far more complex and less susceptible to simplistic recipes. You need many different kinds of people to build a successful business. Some will excel at one thing, many at many things. What matters most is their ability to draw the best from one another, to communicate effectively and to pool a rich array of ideas and perspectives. To do so requires a climate of safety and appetite for experiment. Popularity isn't the issue but honesty always is.
Such issues are close to my heart not just because of what I've seen up close when running businesses. They're central to my new book A Bigger Prize, which examines why and how it is so hard to foster collaboration. Towards the end of writing it, I was asked whether I couldn't provide a simple blueprint. But that of course is exactly the point: The blueprint books are always wrong because they're designed to reinforce biases and foster simplistic thinking.
We might all like to think that business can be reduced to a few simple truisms but at heart we know it can't, because it is human. Companies don't have ideas, people do. And getting the best from the full range of human capability isn't simple and it isn't a war. It's life.