Why is talent important?
Superior talent is up to eight times more productive
It’s remarkable how much of a productivity kicker an
organization gets from top talent. A recent study of more than 600,000
researchers, entertainers, politicians, and athletes found that high performers
are 400 percent more productive than average ones. Studies of businesses not
only show similar results but also reveal that the gap rises with a job’s
complexity. In highly complex occupations—the information- and
interaction-intensive work of managers, software developers, and the like—high
performers are an astounding 800 percent more productive. Suppose your business
strategy involves cross-functional initiatives that would take three years to
complete. If you took 20 percent of the average talent working on the project
and replaced it with great talent, how soon would you achieve the desired
impact? If these people were 400 percent more productive, it would take less
than two years; if they were 800 percent more productive, it would take less
than one. If a competitor used 20 percent more great talent in similar efforts,
it would beat you to market even if it started a year or two later. You get
even more remarkable results comparing the productivity of the top and bottom 1
percent. For unskilled and semiskilled jobs, the top 1 percent are three times
more productive; for jobs of middling complexity (say, technicians and
supervisors), 12 times more. One person in the top 1 percent is worth 12 in the
bottom 1 percent. For high-complexity jobs, the differential is so big it can’t
be quantified. The late Steve Jobs of Apple summed up talent’s importance with
this advice: “Go after the cream of the cream. A small team of A+ players can
run circles around a giant team of B and C players.” Management guru Jim
Collins concurred: “… the single biggest constraint on the success of my
organization is the ability to get and to hang on to enough of the right
people.”
Great talent is scarce
The term “war for talent” was coined by McKinsey’s Steven
Hankin in 1997 and popularized by the book of that name in 2001. It refers to
the increasingly fierce competition to attract and retain employees at a time
when too few workers are available to replace the baby boomers now departing
the workforce in advanced economies. Fast forward to the wake of the Great
Recession, and the war for talent turned into the war for jobs. In economies
gripped by financial crises, unemployment hit levels not seen since the early
1980s, so there was no shortage of applicants for many openings. When Walmart
launched a new Washington, DC, store in 2013, for example, it received 23,000
applications for 600 positions. It was harder to get entry-level work there
than to be accepted by Harvard: 2.6 percent of Walmart applicants made it
through, as opposed to 6.1 percent for the Ivy League university. Yet this
didn’t end the war for talent. In medium- and higher-complexity positions,
where stronger performers have an increasingly disproportionate bottom-line
impact, the opposite was true. In those uncertain times, gainfully employed
talent became less likely to change employers, so people who had an advantage
going into the crisis had an even bigger one. Further, pressure to reduce HR
costs made it harder to identify and attract the most talented people.
Everything suggests that the war for talent will rage on. “Failure to attract
and retain top talent” was the number-one issue in the Conference Board’s 2016
survey of global CEOs—before economic growth and competitive intensity. In more
complex jobs, this will continue to be true as baby boomers (and their long
experience) exit the workforce and technology demands more sophisticated
skills. A McKinsey Global Institute study suggests that employers in Europe and
North America will require 16 million to 18 million more college-educated
workers in 2020 than are going to be available. Companies may not be able to
fill one in ten roles they need, much less fill them with top talent. Yet in
advanced economies, up to 95 million workers could lack the skills required for
employment. Developing economies will face a shortfall of 45 million workers
with secondary-school educations and vocational training.
Most companies don’t get it right
Since business leaders know that talent is valuable and
scarce, you might assume that they would know how to find it. Not so. A
whopping 82 percent of companies don’t believe they recruit highly talented
people. For companies that do, only 7 percent think they can keep it. More
alarmingly, only 23 percent of managers and senior executives active on
talent-related topics believe their current acquisition and retention
strategies will work.
About the Authors: Scott Keller is a senior partner in
McKinsey’s Southern California office, and Mary Meaney is a senior partner in
the Paris office.
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