Talent Management Alone Leads to Failure

Talent management is the American management theory that concludes that the very best performing organizations are the one who have leaders obsessed with hiring, developing, ranking, and ruthlessly evaluating with candor their talent.  Enron was the ultimate “talent management” organization.  The demise of Enron cost shareholders more than $11 billion.  The stock went from a high of $90/share to a $1/share in just one year. 

 You might think we could learn from this epic business debacle of Enron but some of us didn’t.   I am referring to the authors of a new book confirming the value of talent management.  I won’t give the title because I don’t want to promote something I believe is so clearly incomplete and nearly criminally wrong.  Smart people can be VERY wrong and I believe this book confirms it.

 McKinsey & Company promoted talent management in the late 1990’s and Enron became the poster child for its practices.  GE was also a big proponent.  Of course Enron and GE were both very successful for a while.  We know the story of Enron.  GE was also very successful and propelled Jack Welch to celebrity status for management gurus.  However, GE has lost its luster too going from a high of around $50/share in 2001 when Jack Welch retired to around $15/share today.

 OK, I know there are a million factors for these failures and one could argue that the McKinsey theory of talent management is not the major factor.  However, managing talent is not the most effective management theory for today’s complex global economy and any book that tries to persuade me is a wasted read for two reasons:

  • This thinking is inconsistent with systems thinking and systems thinking must be at the heart of any management orthodoxy. 
  • Managing talent creates a dependency on managers by employees and that damages the organizations ability to adapt to change and prevents long-term optimization and predictability.

 Talent management demands the manager rank the talent and disproportionately reward the “top” performers while “yanking” the poor performers out.  They often call it “rank and yank.”  This policy and practice creates a high degree of competition, back-biting, cheating, hiding negative information, and all around dysfunctional behaviors.  In systems thinking everyone must cooperate to optimize the system over the long-term. System thinking requires total transparency, complete integrity, and optimum cooperation.  “Ranking and yanking” is consistent with short-term thinking and that often destroys the cooperation. 

 In a system the quality of the interactions between the parts is more important than the quality of the parts.  For example, try building the very best car by taking the best parts from numerous different auto manufacturers and building a hybrid car from those best parts.  It won’t work.  Why, the parts don’t interact optimally.

 When managers need to provide constant evaluations with candor, they have little time for anything else.  There is never enough time to observe the talented employees to provide an accurate picture.   Secondly, if the employees rely on the manager for their feedback then they can become dependent upon the manager for an important part of what gets them engaged.  The evaluation process becomes manager-dependent. 

 Our schools are “manager” dependent and few of them are working well.  Instead of allowing students more opportunity to self-manage (track and evaluate their own progress) teachers and administrators use standardized tests, standardized curriculums, and teacher dependent systems that take away autonomy.  Schools are failing to deliver results.  This is one reason why.

 Talent management broke down at Enron and it broke down at GE.  When Jack Welch left the GE stock started a continual slide.  If talent management was the right American Management theory wouldn’t have enabled GE to continue it success?  When Welch left the results left with him. 

 A better way is to create system-dependent processes instead of manager-dependent processes.  We can do better by helping all managers and employees self-manage.  We can do better by helping all students to self-manage.  Self-management allows an organization to better respond to the accelerated pace of change.   We need a different model. We need a self-managing model. 

 We see self-management in nature.  Instead continuous evaluation by a higher power animals and plants operate and thrive in self-organizing systems.  Birds flock by self-management to hard wired principles.  Fish swim in schools following key principles of survival.  Each fish or bird manages itself according to those principles.  We can learn much from nature.  Talent management is not one of those things.